The Atlantic, December 2008
by James Fallows
In his first interview since the world financial crisis, Gao Xiqing, the man who oversees $200 billion of China’s $2 trillion in dollar holdings, explains why he’s betting against the dollar, praises American pragmatism, and wonders about enormous Wall Street paychecks. And he has a friendly piece of advice: “Be Nice to the Countries That Lend You Money”
Americans know that China has financed much of their nation’s public and private debt. During the presidential campaign, Barack Obama and John McCain generally agreed on the peril of borrowing so heavily from this one foreign source. For instance, in their final debate, McCain warned about the “$10 trillion debt we’re giving to our kids, a half a trillion dollars we owe China,” and Obama said, “Nothing is more important than us no longer borrowing $700billion or more from China and sending it to Saudi Arabia.” Their numbers on the debt differed, and both were way low. One year ago, when I wrote about China’s U.S. dollar holdings, the article was called “The $1.4 trillion Question.” When Barack Obama takes office, the figure will be well over $2 trillion.
During the late stages of this year’s campaign, I had several chances to talk with the man who oversees many of China’s American holdings. He is Gao Xiqing, president of the China Investment Corporation, which manages “only” about $200billion of the country’s foreign assets but makes most of the high-visibility investments, like buying stakes in Blackstone and Morgan Stanley, as opposed to just holding Treasury notes.
Gao, whom I mentioned in my article, would fit no American’s preexisting idea of a Communist Chinese official. He speaks accented but fully colloquial and very high-speed English. He has a law degree from Duke, which he earned in the 1980s after working as a lawyer and professor in China, and he was an associate in Richard Nixon’s former Wall Street law firm. His office, in one of the more tasteful new glass-walled high-rises in Beijing, itself seems less Chinese than internationally “fusion”-minded in its aesthetic and furnishings. Bonsai trees in large pots, elegant Japanese-looking arrangements of individual smooth stones on display shelves, Chinese and Western financial textbooks behind the desk, with a photo of Martin Luther King Jr. perched among the books. Two very large, very thin desktop monitors read out financial data from around the world. As we spoke, Western classical music played softly from a good sound system.
Gao dressed and acted like a Silicon Valley moneyman rather than one from Wall Street—open-necked tattersall shirt, muted plaid jacket, dark slacks, scuffed walking shoes. Rimless glasses. His father was a Red Army officer who was on the Long March with Mao. As a teenager during the Cultural Revolution, Gao worked on a railroad-building gang and in an ammunition factory. He is 55, fit-looking, with crew-cut hair and a jokey demeanor rather than an air of sternness.
His comments below are from our one on-the-record discussion, two weeks before the U.S. elections. As I transcribed his words, I realized that many will look more astringent on the page than they sounded when coming from him. In person, he seemed to be relying on shared experience in the United States—that is, his and mine—to entitle him to criticize the country the way its own people might. The conversation was entirely in English. Because Gao’s answers tended to be long, I am not presenting them in straight Q&A form but instead grouping his comments about his main recurring themes.
Does America wonder who its new Chinese banking overlords might be? This is what one of the very most influential of them had to say about the world financial crisis, what is wrong with Wall Street, whether one still-poor country with tremendous internal needs could continue subsidizing a still-rich one, and how he thought America could adjust to its “realistic” place in the world. My point for the moment is to convey what it is like to hear from such a man, rather than to expand upon, challenge, or agree with his stated views.
.....
About the financial crisis of 2008, which eliminated hundreds of billions of dollars’ worth of savings that the Chinese government had extracted from its people, through deliberately suppressed consumption levels:
We are not quite at the bottom yet. Because we don’t really know what’s going to happen next. Everyone is saying, “Oh, look, the dollar is getting stronger!” [As it was when we spoke.] I say, that’s really temporary. It’s simply because a lot of people need to cash in, they need U.S. dollars in order to pay back their creditors. But after a short while, the dollar may be going down again. I’d like to bet on that!
The overall financial situation in the U.S. is changing, and that’s what we don’t know about. It’s going to be changed fundamentally in many ways.
Think about the way we’ve been living the past 30 years. Thirty years ago, the leverage of the investment banks was like 4-to-1, 5-to-1. Today, it’s 30-to-1. This is not just a change of numbers. This is a change of fundamental thinking.
People, especially Americans, started believing that they can live on other people’s money. And more and more so. First other people’s money in your own country. And then the savings rate comes down, and you start living on other people’s money from outside. At first it was the Japanese. Now the Chinese and the Middle Easterners.
We—the Chinese, the Middle Easterners, the Japanese—we can see this too. Okay, we’d love to support you guys—if it’s sustainable. But if it’s not, why should we be doing this? After we are gone, you cannot just go to the moon to get more money. So, forget it. Let’s change the way of living. [By which he meant: less debt, lower rewards for financial wizardry, more attention to the “real economy,” etc.]
.....
About stock market derivatives and their role as source of evil:
If you look at every one of these [derivative] products, they make sense. But in aggregate, they are bullshit. They are crap. They serve to cheat people.
I was predicting this many years ago. In 1999 or 2000, I gave a talk to the State Council [China’s main ruling body], with Premier Zhu Rongji. They wanted me to explain about capital markets and how they worked. These were all ministers and mostly not from a financial background. So I wondered, How do I explain derivatives?, and I used the model of mirrors.
First of all, you have this book to sell. [He picks up a leather-bound book.] This is worth something, because of all the labor and so on you put in it. But then someone says, “I don’t have to sell the book itself! I have a mirror, and I can sell the mirror image of the book!” Okay. That’s a stock certificate. And then someone else says, “I have another mirror—I can sell a mirror image of that mirror.” Derivatives. That’s fine too, for a while. Then you have 10,000 mirrors, and the image is almost perfect. People start to believe that these mirrors are almost the real thing. But at some point, the image is interrupted. And all the rest will go.
When I told the State Council about the mirrors, they all started laughing. “How can you sell a mirror image! Won’t there be distortion?” But this is what happened with the American economy, and it will be a long and painful process to come down.
I think we should do an overhaul and say, “Let’s get rid of 90 percent of the derivatives.” Of course, that’s going to be very unpopular, because many people will lose jobs.
.....
About Wall Street jobs, wealth, and the cultural distortion of America:
I have to say it: you have to do something about pay in the financial system. People in this field have way too much money. And this is not right.
When I graduated from Duke [in 1986], as a first-year lawyer, I got $60,000. I thought it was astronomical! I was making somewhere a bit more than $80,000 when I came back to China in 1988. And that first month’s salary I got in China, on a little slip of paper, was 59 yuan. A few dollars! With a few yuan deducted for my rent and my water bill. I laughed when I saw it: 59 yuan!
The thing is, we are working as hard as, if not harder than, those people. And we’re not stupid. Today those people fresh out of law school would get $130,000, or $150,000. It doesn’t sound right.
Individually, everyone needs to be compensated. But collectively, this directs the resources of the country. It distorts the talents of the country. The best and brightest minds go to lawyering, go to M.B.A.s. And that affects our country, too! Many of the brightest youngsters come to me and say, “Okay, I want to go to the U.S. and get into business school, or law school.” I say, “Why? Why not science and engineering?” They say, “Look at some of my primary-school classmates. Their IQ is half of mine, but they’re in finance and now they’re making all this money.” So you have all these clever people going into financial engineering, where they come up with all these complicated products to sell to people.
.....
About the $700 billion U.S. financial-rescue plan enacted in October:
Finally, after months and months of struggling with your own ideology, with your own pride, your self-right-eousness … finally [the U.S. applied] one of the great gifts of Americans, which is that you’re pragmatic. Now our people are joking that we look at the U.S. and see “socialism with American characteristics.” [The Chinese term for its mainly capitalist market-opening of the last 30 years is “socialism with Chinese characteristics.”]
It is joking, and many people are saying: “No, Americans still believe in free capitalism and they think this is just a hiccup.” This is like our great leader Deng Xiaoping, who said that it doesn’t matter if the cat is white or black, as long as it catches the mouse. It doesn’t matter what we call this. It’s pragmatic.
.....
With so much of China’s money at stake, did U.S. officials consult the Chinese about the rescue plan?
Not directly. We were talking to people there, and they were hoping that we would be supportive by not pulling out our money. We know that by pulling out money, we’re not serving anyone’s good. Including ourselves. [This is the famous modern “balance of financial terror.” If Chinese officials started pulling assets out of the U.S. and touched off a run on the dollar, their vast remaining dollar holdings would plummet in value.] So we’re trying to help, at least by not aggravating the problem.
But I think at the end of the day, the American government needs to talk with people and say: “Why don’t we get together and think about this? If China has $2 trillion, Japan has almost $2 trillion, and Russia has some, and all the others, then—let’s throw away the ideological differences and think about what’s good for everyone.” We can get all the relevant people together and think up what people are calling a second Bretton Woods system, like the first Bretton Woods convention did.
.....
On what might make the Chinese government start taking its dollars out of America (I began the question by saying that China would hurt itself by pulling out dollar assets—at which he interjected, “in the short term”—and then asked about the long-term view):
Today when we look at all the markets, the U.S. still is probably the most viable, the most predictable. I was trained as a lawyer, and predictability is always very important for me.
We have a PR department, which collects all the comments about us, from Chinese newspapers and the Web. Every night, I try to pick a time when I’m in a relatively good mood to read it, because most of the comments are very critical of us. Recently we increased our holdings in Blackstone a little bit. Now we’re increasing a little bit our holdings in Morgan Stanley, so as not to be diluted by the Japanese. People here hate it. They come out and say, “Why the hell are you trying to save those people? You are the representative of the poor people eating porridge, and you’re saving people eating shark fins!” It’s always that sort of thing.
.....
And how should Americans feel about the growing Chinese presence in their economy? Isn’t it natural for them to worry that China will keep increasing its stake in American debt and assets—or that China won’t, essentially cutting America off?
I can understand why Americans might feel that way. But, talking with my lawyer head once again, it’s not relevant to discuss how Americans “should” think. We should discuss how Americans might think.
This concern is not really about China itself. It could be any country. It could be Japan, or Germany. This generation of Americans is so used to your supremacy. Your being treated nicely by everyone. It hurts to think, Okay, now we have to be on equal footing to other people. “On equal footing” would necessarily mean that sometimes you have to stoop to appear to be humble to other people.
And you can’t think as a soldier. You put yourself at the enemy end of everyone. I grew up during the Cultural Revolution, when people really treated other people like enemies. I grew up in an environment where our friends, our relatives, people I called Uncle or Auntie, could turn around and put a nasty face to me as a small child. One time, Vladimir Lenin told Gorky, after reading Gorky’s autobiography, “Oh my god! You could have become a very nasty person!” Those are exactly the words one of my dear professors told me after hearing what I went through.
But over the years, I believe I learned to be humble. To treat other people nicely. I learned that, from a social point of view, no matter how lowly statured a person you are talking to, as a person, they are the same human being as you are. You have to respect them. You have to apologize if you inadvertently hurt them. And often you have to go out of your way to be nice to them, because they will not like you simply because of the difference in social structure.
Americans are not sensitive in that regard. I mean, as a whole. The simple truth today is that your economy is built on the global economy. And it’s built on the support, the gratuitous support, of a lot of countries. So why don’t you come over and … I won’t say kowtow [with a laugh], but at least, be nice to the countries that lend you money.
Talk to the Chinese! Talk to the Middle Easterners! And pull your troops back! Take the troops back, demobilize many of the troops, so that you can save some money rather than spending $2 billion every day on them. And then tell your people that you need to save, and come out with a long-term, sustainable financial policy.
.....
Although Gao has frequently mentioned Chairman Mao’s maxim—“Go with the Republicans. They’re predictable!”—he obviously was hoping for a “change” agenda under the Democrats:
The current conditions can’t go on. It is time for the new government, under Obama or even McCain, to really tell people: “Look, this is wartime, this is about the survival of our nation. It’s not about our supremacy in the world. Let’s not even talk about that any more. Let’s get down to the very basics of our livelihood.”
I have great admiration of American people. Creative, hard-working, trusting, and freedom-loving. But you have to have someone to tell you the truth. And then, start realizing it. And if you do it, just like what you did in the Second World War, then you’ll be great again!
If that happens, then of course—American power would still be there for at least as long as I am living. But many people are betting on the other side.
The URL for this page is http://www.theatlantic.com/doc/200812/fallows-chinese-banker
SUBSCRIBE TO THE ATLANTIC TODAY!
Take advantage of our great rate to subscribe to a year of The Atlantic Monthly.
Go to the following Web address to sign up today:
http://www.theatlantic.com/subscribe12
All material copyright The Atlantic Monthly Group. All rights reserved.
Wednesday, January 28, 2009
Monday, January 26, 2009
Big Companies Shed Jobs
Business Week, January 26, 2009,
On a single day, tens of thousands of jobs are eliminated at Caterpillar, Sprint Nextel, Pfizer, Home Depot, and General Motors
By BusinessWeek Staff and Wire Reports
The beginning of the workweek brought another round of bad news for U.S. workers, as several major companies announced layoffs totaling in the tens of thousands. Adding to the discouragement, labor market experts said that more layoffs are likely in the near term.
"We are very early in the cycle," said Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland. "We are going to see the fury of the Old Testament for what we have done to the economy."
Among the cuts announced on Jan. 26:
• Caterpillar (CAT), the world's largest maker of mining and construction equipment, announced 5,000 new layoffs on top of several earlier actions. The latest cuts of support and management employees will be made globally by the end of March. The company says it is in the process of shedding about 20,000 jobs. The company employs 112,000 worldwide.
• Wireless phone carrier Sprint Nextel (S) said it is eliminating about 8,000 positions in the first quarter as it seeks to cut annual costs by $1.2 billion. The layoffs will trim about 14% of Sprint Nextel's 56,000 employees. The company said it is also suspending its 401(k) match for the year, extending a freeze on salary increases, and suspending a tuition reimbursement program.
• Pharmaceutical company Pfizer (PFE), which announced a deal to buy rival drugmaker Wyeth (WYE) for $68 billion, said it would cut 8,000 jobs. The cuts will begin in the first quarter and are to be complete by 2011, according to company spokesman Ray Kerins. Cuts will include most departments, from administration and sales to manufacturing and research.
• Home improvement retailer Home Depot (HD) said it was shutting down four small units—Expo Design Centers, YardBIRDS, Design Centers, and HD Bath, a bath remodeling business—trimming about 7,000 jobs in the process. The cuts represent about 2% of Home Depot's total workforce.
• General Motors (GM) said it will cut 2,000 jobs at plants in Michigan and Ohio and will halt production for several weeks at nine plants over the next six months because of slow sales. The company said the layoffs are part of its efforts to "align production with market demand."
The U.S. economy lost 2.6 million jobs in 2008, and the new year has brought no letup in the pink slips. The recent spate of layoffs represent "structural, not cyclical changes to the economy," said Maryland's Morici. "They're the hallmark of depression."
Morici said we've so far only seen a sliver of the job losses to come and that unemployment will reach 9% by the end of the year—with "no end in sight."
The gloom was echoed by the National Association for Business Economics. In a report issued on Monday, the organization said job losses accelerated in the fourth quarter, with about 44% of reporting companies cutting payrolls while only 14% added workers. The group said business conditions were the worst since it began its survey in 1982.
The group said that 39% of companies plan to reduce payrolls over the next six months, while 17% plan to increase employment. The only increase in jobs came in the services sector.
On a single day, tens of thousands of jobs are eliminated at Caterpillar, Sprint Nextel, Pfizer, Home Depot, and General Motors
By BusinessWeek Staff and Wire Reports
The beginning of the workweek brought another round of bad news for U.S. workers, as several major companies announced layoffs totaling in the tens of thousands. Adding to the discouragement, labor market experts said that more layoffs are likely in the near term.
"We are very early in the cycle," said Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland. "We are going to see the fury of the Old Testament for what we have done to the economy."
Among the cuts announced on Jan. 26:
• Caterpillar (CAT), the world's largest maker of mining and construction equipment, announced 5,000 new layoffs on top of several earlier actions. The latest cuts of support and management employees will be made globally by the end of March. The company says it is in the process of shedding about 20,000 jobs. The company employs 112,000 worldwide.
• Wireless phone carrier Sprint Nextel (S) said it is eliminating about 8,000 positions in the first quarter as it seeks to cut annual costs by $1.2 billion. The layoffs will trim about 14% of Sprint Nextel's 56,000 employees. The company said it is also suspending its 401(k) match for the year, extending a freeze on salary increases, and suspending a tuition reimbursement program.
• Pharmaceutical company Pfizer (PFE), which announced a deal to buy rival drugmaker Wyeth (WYE) for $68 billion, said it would cut 8,000 jobs. The cuts will begin in the first quarter and are to be complete by 2011, according to company spokesman Ray Kerins. Cuts will include most departments, from administration and sales to manufacturing and research.
• Home improvement retailer Home Depot (HD) said it was shutting down four small units—Expo Design Centers, YardBIRDS, Design Centers, and HD Bath, a bath remodeling business—trimming about 7,000 jobs in the process. The cuts represent about 2% of Home Depot's total workforce.
• General Motors (GM) said it will cut 2,000 jobs at plants in Michigan and Ohio and will halt production for several weeks at nine plants over the next six months because of slow sales. The company said the layoffs are part of its efforts to "align production with market demand."
The U.S. economy lost 2.6 million jobs in 2008, and the new year has brought no letup in the pink slips. The recent spate of layoffs represent "structural, not cyclical changes to the economy," said Maryland's Morici. "They're the hallmark of depression."
Morici said we've so far only seen a sliver of the job losses to come and that unemployment will reach 9% by the end of the year—with "no end in sight."
The gloom was echoed by the National Association for Business Economics. In a report issued on Monday, the organization said job losses accelerated in the fourth quarter, with about 44% of reporting companies cutting payrolls while only 14% added workers. The group said business conditions were the worst since it began its survey in 1982.
The group said that 39% of companies plan to reduce payrolls over the next six months, while 17% plan to increase employment. The only increase in jobs came in the services sector.
Korporasi Global Masih Terus Bertumbangan
Kompas
Selasa, 27 Januari 2009 | 01:05 WIB
PARIS, Senin - Bank terkemuka di Eropa, BNP Paribas SA, menyatakan, kemungkinan akan membukukan kerugian sebesar 1,4 miliar euro pada kuartal keempat 2008. Kerugian yang cukup besar ini terjadi setelah terjadi gejolak di pasar sehingga menyebabkan BNP Paribas harus melakukan penghapusbukuan sebagian aset bermasalah dan kehilangan unit bank investasi.
Perusahaan produsen lampu terbesar di dunia, Royal Philips Electronics NV, juga melaporkan kerugian kuartal keempat sebesar 1,47 miliar euro atau 1,9 miliar dollar AS. Philips merencanakan pemangkasan tenaga kerja hingga 6.000 orang.
Kedua perusahaan terkemuka itu terkena dampak dari penurunan aktivitas perekonomian global. Semakin banyak orang yang tidak lagi membeli produk-produk jasa keuangan ataupun produk manufaktur, seperti bola lampu yang dihasilkan Philips.
BNP Paribas yang merupakan bank terbesar di Perancis menyatakan, unit korporasi dan bank investasi menargetkan pembukuan kerugian sebelum pajak sebesar 2 miliar euro karena tingginya risiko di pasar modal. BNP Paribas juga melakukan penghapusbukuan aset sebesar 400 juta euro pada kuartal keempat setelah kehancuran pasar modal.
Untuk kinerja keuangan selama satu tahun penuh, BPN Paribas menyatakan masih memegang keuntungan bersih sebesar 3 miliar euro. Kentungan tersebut karena kinerja pada unit perbankan ritel dan aset manajemen.
Saham BNP Paribas naik 7,1 persen menjadi 22,9 euro pada perdagangan sesi pagi di Paris. ”Pada periode pasar yang sedang bergejolak demikian pesat, saya rasa transparansi sangat diperlukan, yaitu memberitahukan kepada pasar bagaimana kinerja kami untuk kuartal keempat dan sepanjang tahun 2008,” ujar CEO BNP Paribas Baudouin Prot. Pengumuman resmi kinerja BNP Paribas akan dikeluarkan pada 19 Februari.
PHK Philips
Pengurangan pegawai di Philips yang juga merupakan produsen peralatan kesehatan dan peralatan elektronik pada kuartal keempat sudah mencapai 7.000 orang. Saat ini Philips memiliki 121.000 pegawai di seluruh dunia.
Perusahaan yang bermarkas di Amsterdam itu juga menyatakan bahwa penjualan turun hingga 9,7 persen menjadi 7,63 miliar euro.
”Perkembangan yang memburuk dari laporan kuartalan kami mencerminkan penurunan perekonomian yang semakin cepat pada akhir tahun 2008,” ujar Chief Executive Gerard Kleisterlee dalam sebuah pernyataannya.
Laba operasi juga turun di kebanyakan divisi utama, yaitu produk konsumen, sehingga secara keseluruhan hanya mencapai 22 juta euro dari 427 juta euro. Penyebabnya antara lain anjloknya penjualan televisi.
Laba operasi dari divisi lampu juga turun menjadi 143 juta euro daripada tahun sebelumnya, 170 juta euro. Pasar di AS diperkirakan masih melemah hingga tahun depan. (AP/AFP/joe)
joe
Dapatkan artikel ini di URL:
http://entertainment.kompas.com/read/xml/2009/01/27/01053182/korporasi.global.masih.terus.bertumbangan
Selasa, 27 Januari 2009 | 01:05 WIB
PARIS, Senin - Bank terkemuka di Eropa, BNP Paribas SA, menyatakan, kemungkinan akan membukukan kerugian sebesar 1,4 miliar euro pada kuartal keempat 2008. Kerugian yang cukup besar ini terjadi setelah terjadi gejolak di pasar sehingga menyebabkan BNP Paribas harus melakukan penghapusbukuan sebagian aset bermasalah dan kehilangan unit bank investasi.
Perusahaan produsen lampu terbesar di dunia, Royal Philips Electronics NV, juga melaporkan kerugian kuartal keempat sebesar 1,47 miliar euro atau 1,9 miliar dollar AS. Philips merencanakan pemangkasan tenaga kerja hingga 6.000 orang.
Kedua perusahaan terkemuka itu terkena dampak dari penurunan aktivitas perekonomian global. Semakin banyak orang yang tidak lagi membeli produk-produk jasa keuangan ataupun produk manufaktur, seperti bola lampu yang dihasilkan Philips.
BNP Paribas yang merupakan bank terbesar di Perancis menyatakan, unit korporasi dan bank investasi menargetkan pembukuan kerugian sebelum pajak sebesar 2 miliar euro karena tingginya risiko di pasar modal. BNP Paribas juga melakukan penghapusbukuan aset sebesar 400 juta euro pada kuartal keempat setelah kehancuran pasar modal.
Untuk kinerja keuangan selama satu tahun penuh, BPN Paribas menyatakan masih memegang keuntungan bersih sebesar 3 miliar euro. Kentungan tersebut karena kinerja pada unit perbankan ritel dan aset manajemen.
Saham BNP Paribas naik 7,1 persen menjadi 22,9 euro pada perdagangan sesi pagi di Paris. ”Pada periode pasar yang sedang bergejolak demikian pesat, saya rasa transparansi sangat diperlukan, yaitu memberitahukan kepada pasar bagaimana kinerja kami untuk kuartal keempat dan sepanjang tahun 2008,” ujar CEO BNP Paribas Baudouin Prot. Pengumuman resmi kinerja BNP Paribas akan dikeluarkan pada 19 Februari.
PHK Philips
Pengurangan pegawai di Philips yang juga merupakan produsen peralatan kesehatan dan peralatan elektronik pada kuartal keempat sudah mencapai 7.000 orang. Saat ini Philips memiliki 121.000 pegawai di seluruh dunia.
Perusahaan yang bermarkas di Amsterdam itu juga menyatakan bahwa penjualan turun hingga 9,7 persen menjadi 7,63 miliar euro.
”Perkembangan yang memburuk dari laporan kuartalan kami mencerminkan penurunan perekonomian yang semakin cepat pada akhir tahun 2008,” ujar Chief Executive Gerard Kleisterlee dalam sebuah pernyataannya.
Laba operasi juga turun di kebanyakan divisi utama, yaitu produk konsumen, sehingga secara keseluruhan hanya mencapai 22 juta euro dari 427 juta euro. Penyebabnya antara lain anjloknya penjualan televisi.
Laba operasi dari divisi lampu juga turun menjadi 143 juta euro daripada tahun sebelumnya, 170 juta euro. Pasar di AS diperkirakan masih melemah hingga tahun depan. (AP/AFP/joe)
joe
Dapatkan artikel ini di URL:
http://entertainment.kompas.com/read/xml/2009/01/27/01053182/korporasi.global.masih.terus.bertumbangan
Sunday, January 11, 2009
The global crisis of capitalism and its impact
Dani Nabudere (2008-12-11)
The present financial crisis afflicting the global economy should not be seen from the narrow focus of the credit crunch and its relationship to the subprime mortgage crisis in the Western countries, especially the US. The crisis goes to the very foundations of the global capitalist system and it should be analysed from that angle. What is at the core of the crisis is the over-extension of credit on a narrow material production base. This is in a situation in which money has become increasingly detached from its material base of a money commodity that can measure its value such as gold.
The expansion of the world economy from 1945 onwards was based on the US providing some kind of link between money and the gold standard, which the US tried to maintain until its collapse in the 1970s. Increasingly the dollar became the global currency but without a backing to its currency from a money commodity. The over-expansion of credit that has taken place since then, especially with the globalisation of the world economy, has meant that a lot of paper money and monetary instruments in the form of derivatives and ‘future options’ have lost any relationship to the ‘fundamentals’ in the material production of the world economy.
That is why there has been a growing outcry that the growth of ‘speculative capital’ has over-run the growth of ‘productive capital’ with large amounts of money and credit circulating without the backing of any production at all. That is also why the relationship between the ‘fundamentals’ in the economy and the new credit instruments created on a daily basis in many cases from speculative ‘short-selling’ have become narrower and narrower over time. This is also why the present financial crisis is also a reflection of the energy and food crisis, because oil and food products such as wheat, rice and other commodities have been subjected to speculative trading to back up paper money many years in the future. The British Prime Minister, among the world leaders, is the only one who has seen this connection when he brought it up in the World Bank meeting a few months ago and also when he met the US Democratic Party Presidential candidate,
Barrack Obama, when he visited Europe recently.
Thus the amount of credit floating around the world is ‘loose money’ completely run-wild, which claims a relationship with a narrow production base. This is in a situation when the US is increasingly unable to repay debts it has accumulated in its Treasury Bonds and Bills, in which the rest of the world have placed their reserves. Most African countries have millions of dollars in these US Treasury bills, which are held as the countries’ ‘reserves.’ China, India and Japan have trillions deposited in these ‘T’ bills and bonds This means that should the world economy collapse under pressure of ‘loose money’ wanting to be given a value (which they do not have) so that the holders of that ‘money’ can preserve their wealth, those holdings in US Treasury bills (or US debt to the rest of the world) will be lost forcing many weak economies to collapse along with it.
This is why it is wrong to conclude, like many people do that capitalism has the capacity, as it has shown over the years, to always reinvent itself by growing a new skin to resist the pangs of crisis inflicted on it by its own greed. That is a false conclusion. US and British capitalism are being put under pressure to stay a float only by nationalising a number of banks and the corporations that can no longer sustain their operations because of shortage of ‘liquid cash.’ These corporations and banks demand that the state should bail them out. The state is being forced to bail these enterprises out on condition that they shall sell the bulk of their shares to the state. This means that these capitalist states are being forced to move in the direction of central planning and management of the economy. For lack of space, we cannot go into this matter in greater detail.
In short, what Karl Marx called ‘the financial oligarchy’ is demanding that the state should take over their burdens and maintain the ‘value’ of their valueless credit instruments while insisting that the poor workers and the middle classes shall take care of themselves. In other world, the oligarchy demand communism for themselves while relegating socialism and capitalism for the middle class and the working class and the other poor strata of society because socialism and capitalism are the only ways through which the middle class and the working poor can ‘compete’ among themselves for survival. Remember that Marx defined communism as: ‘to each according to his needs’ and socialism as: ‘to each according to his capacities.” Capitalism can now better be defined as: ‘to each according to his own devices,’ which is a paradigm fit for the working poor.
THE CREDIT CRUNCH AND THE FOOD CRISIS
The economic crisis has also revealed the way credit over-expansion has affected food prices throughout the world. In fact when the credit crunch struck the world and the food crisis was announced, the crisis was recognised as a global food crisis. That is why the International Monetary Fund and the World Bank immediately held a special session of the Boards of Governors of their institutions to develop policies to deal with this crisis when it became clear that the food crisis was likely to stay with us until 2015 at the very least.
Immediately following the meetings of these multilateral institutions, the World Food Organisation-FAO held an urgent Food Summit on June 3-5 in Rome, in which the Summit called for an immediate response by governments. After the World Bank meeting, the British prime minister, Gordon Brown, wrote a letter to the Japanese Prime Minister Yasuo Fukuda, who was at the time the chair of the G8, in which he asked the group to act with speed to address the soaring food prices. What was significant was that Gordon also recognised that the financial market-based risk management instruments, including derivatives, had to be considered as contributing to the food price volatilities. What did Gordon Brown mean by this statement? The real problem underlying currency instability and commodity price volatilities is the fact that the dollar, which acts as a global reserve currency, is not backed by any solid money commodity such as gold or silver. These money
commodities were historically overwhelmed by the growth of capitalist wealth. As a result not all paper wealth that was held by economic actors could be changed into gold in periods of crisis when the demand for ‘real’ money became overwhelming. With the collapse of the gold standard in the US in the 1970s because of the outgrowth of Eurodollars, attempts were made to rely on other commodities such as platinum to back up the dollar, but this was a non-starter because the cost of storing platinum was too high to be borne by paper wealth holders. But financial instruments, especially future options and instruments called derivatives continued to grow in volume.
This is what led to the food commodities coming into the picture to back up future contracts and derivatives expressed in US dollars. The centre of the global commodity trade is the Chicago Board of Trade-CBOT. It is here that global trade in commodities is valued and undertaken together with other commodities markets. It is also here that all commodities, including food commodities, are ‘financialised’ in dollar financial instruments Wheat, oats, corn, rice and soybean are all agricultural products traded on various commodities exchanges, including the CBOT. Here the exchanges also trade the financial ‘products,’ as well as futures and options contracts on these and several derivative products such as bean oil. Coffee, cocoa, sugar, cotton and orange juice are all 'soft' commodities, many of which are traded on the CSCE (Coffee, Sugar and Cocoa Exchange). Interestingly, since 80% of the oranges grown in the U.S. are turned into frozen orange
juice concentrate, it's the juice that is traded as a commodity, not the fruit.
An article that appeared in the Toronto Globe and Mail of 31st May 2008 argued that it was the deregulation of financial markets and the systematic exploitation of US regulatory loopholes that had led to the upsurge of speculative investments in food commodity markets, much of it by institutional investors such as the managers of pension funds. "These funds", wrote the authors, "have ploughed tens of billions of dollars into agricultural commodities as a way of diversifying their assets and improve returns for their investors.”
According to the authors, the amount of fund money invested in commodity indexes had climbed from just $13-billion in 2003 to a staggering $260-billion in March 2008, according to calculations based on regulatory filings. There were warnings that this amount could easily quadruple to $1-trillion, if pension fund managers allocated a greater portion of their portfolio to commodities, as some consultants suggested they were poised to do. Thus, it was the progressive loosening of regulatory requirements, which made possible the enormous influx of money, much of it fleeing the meltdown in the market for mortgage-backed securities and the wider fallout, including big leveraged buyouts in banks.
Because agricultural markets are small - relative to stock markets - the amount of cash pouring into these markets gives these funds substantial clout. The authors observed that these big institutional investors controlled enough wheat in futures instruments, which could supply the needs of American consumers for the next two years. They blamed the "demand shock" from these recent entrants to the commodities markets as the primary factor behind the sudden soaring of food prices. They noted that if no immediate action was taken, food and energy prices were bound to rise still further leading to the catastrophic economic effects on millions of already stressed U.S. consumers and the possible starvation of millions of the worlds poor.
For instance, the Ontario Teachers' Pension fund, which began with a modest investment in food commodities in 1997, had by 2008 invested some 3 billion dollars in this market. With rising investor activity and increasing demand, prices began to rise. Between 2000 and 2007, the price of wheat increased 147 per cent on the Chicago Board of Trade. Over the same period, corn increased by 79 per cent and soybeans by 72 per cent. As more funds moved in to invest, speculators began clamour for more flexibility with trading limits and since there were no controls, the food commodity prices kept on rising.
It has been estimated that for every one percent increase in the price of food, there is an additional 16 million people who go hungry. In its briefing paper for the World Food Summit, the FAO Secretariat devoted two whole paragraphs to the influence of financial markets in pushing upwards the cost of staple food commodities in its assessment of recent developments. However, it had nothing to say about the matter when it came to recommending "policy options" for dealing with the problem. This was not accidental, but a reflection of the positions of the States.
This is why it was correct to conclude, as we have done above, that for the financial oligarchy who wield power in the States, the demand is that the State must guarantee them ‘communism’ (which can assure them their needs) while for the producing and middle classes the attitude of the State is only to guarantee them the conditions for ’free competition’ for the little the financial oligarchy is able to leave aside for the ‘markets’ (to compete over according to their abilities and devices). Financial markets in the global capitalist system, as well as global inter-governmental organisations such as FAO, it seems, have no ‘policy options’ to attend to the needs of the starving masses. There always are, however, ‘options’ for ‘bailing out’ the financial oligarchy while the masses are left to the devices of ‘the markets.’
THE WAY OUT OF THE CRISIS FOR AFRICA
It is clear from the above that agricultural production has become a victim of late capitalist crisis. This is as it has been because from its birth capitalism had always profited from agriculture as an ‘old industry’ in which this ‘industry’ provided the raw materials for its expanded reproduction at low cost. Capitalist crisis has therefore contributed greatly to the exploitation of agricultural workers and ultimately to its collapse. It did so first, by plundering the European peasantry and converting them into paupers through the enclosure system by using the proceeds for its ‘primitive accumulation’ of capital as one of the sources of its birth.
In so doing, it turned the peasants into workers and in its imperialist phase turned to the colonies for agricultural raw materials where the colonial peasant producers were paid prices below subsistence subsidised by female and child free labour working on land. Only after decolonisation and the establishment of the European Common Market did Europe develop a common agricultural policy to avoid being starved in case of wars in the post-colonial States.
Secondly, with the increasing securitisation of commodities, in which the central banks relied on a variety of commodities to give value to paper debt instruments, capitalists fell to agriculture in the post-colonial States of Africa to save their currencies from collapse. This as we saw above is what led to the escalation in the prices of food products leading to their destruction as commodities. The collapse of the dollar and other ‘hard currencies’ has meant a doom for those agricultural food products as their prices begun to plummet with the collapsing currencies.
This is what the economists are calling a ‘recession.’ But nobody knows when the recession will end although many of them now agree that it is already on in all the developed capitalist countries. So those who believed that with high food prices the peasant producers would earn high incomes had better rethink their arithmetic because they need to revise their knowledge of how capitalism operates in its old age. African agricultural and food production based on exports to the markets of the developed countries can no longer be assured and so the African farmer has to find a way out of this mess as quickly as possible.
What we have said above must already alert us as to what we have to do to get out of the mess. First, we have to look at how we can survive in terms of food availability. For the first time, we have to wake up to the reality that African countries need a food security policy as a matter of urgency about which leaders can no longer dilly-dally. That means African countries have first to focus on the home market followed by the regional market and finally the global market. With the home market becoming the focus for our production, we can create regional currencies because in that case we shall have no alternative but to create them to serve the regional markets, but operating under completely new conditions and principles. But we cannot develop a food security based on food crops of which people have very little knowledge, especially since with the currency crisis; we shall not have sufficient dollars to buy foreign food products with in the short and
medium terms.
This means we have to rely more on indigenous food products as the basis of our food security, which we must quickly encourage the farmers to revive. Although many of our indigenous food crops were abandoned in favour of exotic products that could also be sold on the market, there is still a reservoir of knowledge about these crops in the rural communities. So reviving these crops would not be an uphill task if we have a policy that is driven with the same zeal as that of the current production for export. The African elites will have to content themselves with consuming indigenous crops since they can no longer depend on exotic foreign products.
Secondly, we have to consider the strategy of encouraging cooperative production because with the increasing population driven by poverty and the great fragmentation of land holding, it will not be possible to sustain families on the small farm-holdings. A cooperative policy also presupposes a sound credit policy that can enable farmers to borrow for their production and hence the need to hasten the creation of a regional currency that can inform the creation of new local credit systems drawing on the experiences of the ‘informal sector.’ We should learn what the people of Somaliland have done in this respect because they have managed to create a very strong local currency that is not pegged to any global currency.
The collapse of the global capitalist system will not mean the end of the world! On the contrary, it will release the bottled up energies of the people that have been suffocated by the collapsing capitalist system. We shall survive by burying the old system and creating a new one. Such a new system will have to be socialist-oriented since even the most developed capitalist countries have no alternative but to do so as we can already see with the whole sale nationalisation of banks throughout Europe and the US. Some countries such as Iceland have already gone bankrupt.
This means that even the political system has to change. The key to political rejuvenation will lie in the ‘deepening of democracy’ right from the family level, to the clan and to the traditional institutions level since the post-colonial state would have collapsed along with the dollar. New forms of political power will emerge at a local level unless new warlords try to occupy the political space. But the warlords are already doomed as the Somali situation already demonstrates. The local power structures will need a wider cooperative basis on the model of confederal or federal regional states and we should consider Southern, Eastern African or the Great Lakes region for such a partnership.
The development of local markets will need the backing of regional markets for wider exchange of commodities. Therefore, new forms of agricultural and industrial production will have to be tailored to local needs and tastes. Similarly, new local markets will emerge in other parts of the world calling for global exchanges of commodities with those consumers. Eventually a new global currency or currencies based on a basket of commodities will have to be created to facilitate these exchanges on a completely new basis not based on capitalist super-profits run by transnational corporations.
At a political level, we shall increasingly see the emergence of a global civil society along side the new global market. Hence, we can already envisage the emergence of a GLOCAL SOCIETY (a Global society based on local nationalities and global citizenship). Along side with these developments will eventually emerge a federated global State, which will be developed by the local powers. We can no longer return to the caves, we can only move forward to a new world. Yes, a New World is possible and it can now be said with certainty: A NEW WORLD IS INEVITABLE!
* Professor Dani W. Nabudere is the Executive Director of the Afrika Study Centre
* Please send comments to editor@pambazuka.org or comment online at www.pambazuka.org/
Source: http://www.pambazuka.org/en/category/features/52604
The present financial crisis afflicting the global economy should not be seen from the narrow focus of the credit crunch and its relationship to the subprime mortgage crisis in the Western countries, especially the US. The crisis goes to the very foundations of the global capitalist system and it should be analysed from that angle. What is at the core of the crisis is the over-extension of credit on a narrow material production base. This is in a situation in which money has become increasingly detached from its material base of a money commodity that can measure its value such as gold.
The expansion of the world economy from 1945 onwards was based on the US providing some kind of link between money and the gold standard, which the US tried to maintain until its collapse in the 1970s. Increasingly the dollar became the global currency but without a backing to its currency from a money commodity. The over-expansion of credit that has taken place since then, especially with the globalisation of the world economy, has meant that a lot of paper money and monetary instruments in the form of derivatives and ‘future options’ have lost any relationship to the ‘fundamentals’ in the material production of the world economy.
That is why there has been a growing outcry that the growth of ‘speculative capital’ has over-run the growth of ‘productive capital’ with large amounts of money and credit circulating without the backing of any production at all. That is also why the relationship between the ‘fundamentals’ in the economy and the new credit instruments created on a daily basis in many cases from speculative ‘short-selling’ have become narrower and narrower over time. This is also why the present financial crisis is also a reflection of the energy and food crisis, because oil and food products such as wheat, rice and other commodities have been subjected to speculative trading to back up paper money many years in the future. The British Prime Minister, among the world leaders, is the only one who has seen this connection when he brought it up in the World Bank meeting a few months ago and also when he met the US Democratic Party Presidential candidate,
Barrack Obama, when he visited Europe recently.
Thus the amount of credit floating around the world is ‘loose money’ completely run-wild, which claims a relationship with a narrow production base. This is in a situation when the US is increasingly unable to repay debts it has accumulated in its Treasury Bonds and Bills, in which the rest of the world have placed their reserves. Most African countries have millions of dollars in these US Treasury bills, which are held as the countries’ ‘reserves.’ China, India and Japan have trillions deposited in these ‘T’ bills and bonds This means that should the world economy collapse under pressure of ‘loose money’ wanting to be given a value (which they do not have) so that the holders of that ‘money’ can preserve their wealth, those holdings in US Treasury bills (or US debt to the rest of the world) will be lost forcing many weak economies to collapse along with it.
This is why it is wrong to conclude, like many people do that capitalism has the capacity, as it has shown over the years, to always reinvent itself by growing a new skin to resist the pangs of crisis inflicted on it by its own greed. That is a false conclusion. US and British capitalism are being put under pressure to stay a float only by nationalising a number of banks and the corporations that can no longer sustain their operations because of shortage of ‘liquid cash.’ These corporations and banks demand that the state should bail them out. The state is being forced to bail these enterprises out on condition that they shall sell the bulk of their shares to the state. This means that these capitalist states are being forced to move in the direction of central planning and management of the economy. For lack of space, we cannot go into this matter in greater detail.
In short, what Karl Marx called ‘the financial oligarchy’ is demanding that the state should take over their burdens and maintain the ‘value’ of their valueless credit instruments while insisting that the poor workers and the middle classes shall take care of themselves. In other world, the oligarchy demand communism for themselves while relegating socialism and capitalism for the middle class and the working class and the other poor strata of society because socialism and capitalism are the only ways through which the middle class and the working poor can ‘compete’ among themselves for survival. Remember that Marx defined communism as: ‘to each according to his needs’ and socialism as: ‘to each according to his capacities.” Capitalism can now better be defined as: ‘to each according to his own devices,’ which is a paradigm fit for the working poor.
THE CREDIT CRUNCH AND THE FOOD CRISIS
The economic crisis has also revealed the way credit over-expansion has affected food prices throughout the world. In fact when the credit crunch struck the world and the food crisis was announced, the crisis was recognised as a global food crisis. That is why the International Monetary Fund and the World Bank immediately held a special session of the Boards of Governors of their institutions to develop policies to deal with this crisis when it became clear that the food crisis was likely to stay with us until 2015 at the very least.
Immediately following the meetings of these multilateral institutions, the World Food Organisation-FAO held an urgent Food Summit on June 3-5 in Rome, in which the Summit called for an immediate response by governments. After the World Bank meeting, the British prime minister, Gordon Brown, wrote a letter to the Japanese Prime Minister Yasuo Fukuda, who was at the time the chair of the G8, in which he asked the group to act with speed to address the soaring food prices. What was significant was that Gordon also recognised that the financial market-based risk management instruments, including derivatives, had to be considered as contributing to the food price volatilities. What did Gordon Brown mean by this statement? The real problem underlying currency instability and commodity price volatilities is the fact that the dollar, which acts as a global reserve currency, is not backed by any solid money commodity such as gold or silver. These money
commodities were historically overwhelmed by the growth of capitalist wealth. As a result not all paper wealth that was held by economic actors could be changed into gold in periods of crisis when the demand for ‘real’ money became overwhelming. With the collapse of the gold standard in the US in the 1970s because of the outgrowth of Eurodollars, attempts were made to rely on other commodities such as platinum to back up the dollar, but this was a non-starter because the cost of storing platinum was too high to be borne by paper wealth holders. But financial instruments, especially future options and instruments called derivatives continued to grow in volume.
This is what led to the food commodities coming into the picture to back up future contracts and derivatives expressed in US dollars. The centre of the global commodity trade is the Chicago Board of Trade-CBOT. It is here that global trade in commodities is valued and undertaken together with other commodities markets. It is also here that all commodities, including food commodities, are ‘financialised’ in dollar financial instruments Wheat, oats, corn, rice and soybean are all agricultural products traded on various commodities exchanges, including the CBOT. Here the exchanges also trade the financial ‘products,’ as well as futures and options contracts on these and several derivative products such as bean oil. Coffee, cocoa, sugar, cotton and orange juice are all 'soft' commodities, many of which are traded on the CSCE (Coffee, Sugar and Cocoa Exchange). Interestingly, since 80% of the oranges grown in the U.S. are turned into frozen orange
juice concentrate, it's the juice that is traded as a commodity, not the fruit.
An article that appeared in the Toronto Globe and Mail of 31st May 2008 argued that it was the deregulation of financial markets and the systematic exploitation of US regulatory loopholes that had led to the upsurge of speculative investments in food commodity markets, much of it by institutional investors such as the managers of pension funds. "These funds", wrote the authors, "have ploughed tens of billions of dollars into agricultural commodities as a way of diversifying their assets and improve returns for their investors.”
According to the authors, the amount of fund money invested in commodity indexes had climbed from just $13-billion in 2003 to a staggering $260-billion in March 2008, according to calculations based on regulatory filings. There were warnings that this amount could easily quadruple to $1-trillion, if pension fund managers allocated a greater portion of their portfolio to commodities, as some consultants suggested they were poised to do. Thus, it was the progressive loosening of regulatory requirements, which made possible the enormous influx of money, much of it fleeing the meltdown in the market for mortgage-backed securities and the wider fallout, including big leveraged buyouts in banks.
Because agricultural markets are small - relative to stock markets - the amount of cash pouring into these markets gives these funds substantial clout. The authors observed that these big institutional investors controlled enough wheat in futures instruments, which could supply the needs of American consumers for the next two years. They blamed the "demand shock" from these recent entrants to the commodities markets as the primary factor behind the sudden soaring of food prices. They noted that if no immediate action was taken, food and energy prices were bound to rise still further leading to the catastrophic economic effects on millions of already stressed U.S. consumers and the possible starvation of millions of the worlds poor.
For instance, the Ontario Teachers' Pension fund, which began with a modest investment in food commodities in 1997, had by 2008 invested some 3 billion dollars in this market. With rising investor activity and increasing demand, prices began to rise. Between 2000 and 2007, the price of wheat increased 147 per cent on the Chicago Board of Trade. Over the same period, corn increased by 79 per cent and soybeans by 72 per cent. As more funds moved in to invest, speculators began clamour for more flexibility with trading limits and since there were no controls, the food commodity prices kept on rising.
It has been estimated that for every one percent increase in the price of food, there is an additional 16 million people who go hungry. In its briefing paper for the World Food Summit, the FAO Secretariat devoted two whole paragraphs to the influence of financial markets in pushing upwards the cost of staple food commodities in its assessment of recent developments. However, it had nothing to say about the matter when it came to recommending "policy options" for dealing with the problem. This was not accidental, but a reflection of the positions of the States.
This is why it was correct to conclude, as we have done above, that for the financial oligarchy who wield power in the States, the demand is that the State must guarantee them ‘communism’ (which can assure them their needs) while for the producing and middle classes the attitude of the State is only to guarantee them the conditions for ’free competition’ for the little the financial oligarchy is able to leave aside for the ‘markets’ (to compete over according to their abilities and devices). Financial markets in the global capitalist system, as well as global inter-governmental organisations such as FAO, it seems, have no ‘policy options’ to attend to the needs of the starving masses. There always are, however, ‘options’ for ‘bailing out’ the financial oligarchy while the masses are left to the devices of ‘the markets.’
THE WAY OUT OF THE CRISIS FOR AFRICA
It is clear from the above that agricultural production has become a victim of late capitalist crisis. This is as it has been because from its birth capitalism had always profited from agriculture as an ‘old industry’ in which this ‘industry’ provided the raw materials for its expanded reproduction at low cost. Capitalist crisis has therefore contributed greatly to the exploitation of agricultural workers and ultimately to its collapse. It did so first, by plundering the European peasantry and converting them into paupers through the enclosure system by using the proceeds for its ‘primitive accumulation’ of capital as one of the sources of its birth.
In so doing, it turned the peasants into workers and in its imperialist phase turned to the colonies for agricultural raw materials where the colonial peasant producers were paid prices below subsistence subsidised by female and child free labour working on land. Only after decolonisation and the establishment of the European Common Market did Europe develop a common agricultural policy to avoid being starved in case of wars in the post-colonial States.
Secondly, with the increasing securitisation of commodities, in which the central banks relied on a variety of commodities to give value to paper debt instruments, capitalists fell to agriculture in the post-colonial States of Africa to save their currencies from collapse. This as we saw above is what led to the escalation in the prices of food products leading to their destruction as commodities. The collapse of the dollar and other ‘hard currencies’ has meant a doom for those agricultural food products as their prices begun to plummet with the collapsing currencies.
This is what the economists are calling a ‘recession.’ But nobody knows when the recession will end although many of them now agree that it is already on in all the developed capitalist countries. So those who believed that with high food prices the peasant producers would earn high incomes had better rethink their arithmetic because they need to revise their knowledge of how capitalism operates in its old age. African agricultural and food production based on exports to the markets of the developed countries can no longer be assured and so the African farmer has to find a way out of this mess as quickly as possible.
What we have said above must already alert us as to what we have to do to get out of the mess. First, we have to look at how we can survive in terms of food availability. For the first time, we have to wake up to the reality that African countries need a food security policy as a matter of urgency about which leaders can no longer dilly-dally. That means African countries have first to focus on the home market followed by the regional market and finally the global market. With the home market becoming the focus for our production, we can create regional currencies because in that case we shall have no alternative but to create them to serve the regional markets, but operating under completely new conditions and principles. But we cannot develop a food security based on food crops of which people have very little knowledge, especially since with the currency crisis; we shall not have sufficient dollars to buy foreign food products with in the short and
medium terms.
This means we have to rely more on indigenous food products as the basis of our food security, which we must quickly encourage the farmers to revive. Although many of our indigenous food crops were abandoned in favour of exotic products that could also be sold on the market, there is still a reservoir of knowledge about these crops in the rural communities. So reviving these crops would not be an uphill task if we have a policy that is driven with the same zeal as that of the current production for export. The African elites will have to content themselves with consuming indigenous crops since they can no longer depend on exotic foreign products.
Secondly, we have to consider the strategy of encouraging cooperative production because with the increasing population driven by poverty and the great fragmentation of land holding, it will not be possible to sustain families on the small farm-holdings. A cooperative policy also presupposes a sound credit policy that can enable farmers to borrow for their production and hence the need to hasten the creation of a regional currency that can inform the creation of new local credit systems drawing on the experiences of the ‘informal sector.’ We should learn what the people of Somaliland have done in this respect because they have managed to create a very strong local currency that is not pegged to any global currency.
The collapse of the global capitalist system will not mean the end of the world! On the contrary, it will release the bottled up energies of the people that have been suffocated by the collapsing capitalist system. We shall survive by burying the old system and creating a new one. Such a new system will have to be socialist-oriented since even the most developed capitalist countries have no alternative but to do so as we can already see with the whole sale nationalisation of banks throughout Europe and the US. Some countries such as Iceland have already gone bankrupt.
This means that even the political system has to change. The key to political rejuvenation will lie in the ‘deepening of democracy’ right from the family level, to the clan and to the traditional institutions level since the post-colonial state would have collapsed along with the dollar. New forms of political power will emerge at a local level unless new warlords try to occupy the political space. But the warlords are already doomed as the Somali situation already demonstrates. The local power structures will need a wider cooperative basis on the model of confederal or federal regional states and we should consider Southern, Eastern African or the Great Lakes region for such a partnership.
The development of local markets will need the backing of regional markets for wider exchange of commodities. Therefore, new forms of agricultural and industrial production will have to be tailored to local needs and tastes. Similarly, new local markets will emerge in other parts of the world calling for global exchanges of commodities with those consumers. Eventually a new global currency or currencies based on a basket of commodities will have to be created to facilitate these exchanges on a completely new basis not based on capitalist super-profits run by transnational corporations.
At a political level, we shall increasingly see the emergence of a global civil society along side the new global market. Hence, we can already envisage the emergence of a GLOCAL SOCIETY (a Global society based on local nationalities and global citizenship). Along side with these developments will eventually emerge a federated global State, which will be developed by the local powers. We can no longer return to the caves, we can only move forward to a new world. Yes, a New World is possible and it can now be said with certainty: A NEW WORLD IS INEVITABLE!
* Professor Dani W. Nabudere is the Executive Director of the Afrika Study Centre
* Please send comments to editor@pambazuka.org or comment online at www.pambazuka.org/
Source: http://www.pambazuka.org/en/category/features/52604
Saturday, January 10, 2009
The social movements want a new development model
[12/04/08] MST Informa #157: The social movements want a new development model
We of the MST along with the central unions, student organizations, peoples’ movements, and groups from civil society, are putting together a document with concerns around the country’s current social and economic picture and proposals to overcome the worldwide economic crisis. We demand that the country change the macroeconomic policy of neoliberalism and build a new model of national development, based on income distribution, job creation, and strengthening of the internal market. In the past week, we participated in a meeting with the federal government and took the opportunity to present this document, signed by more than 50 groups with proposals for our country in the face of this crisis.
Our participation in the meeting does not mean any type of support for any candidate. “We are concerned with the future of our country, that will not be resolved from election to election, but with a new rise of the mass movement to demand structural changes and a national project”, states Marina dos Santos, of the national MST leadership, who read the document during the meeting. Ministers Luiz Dulci (General Secretariat), Dilma Roussef (Chief of Staff) and Guido Mantega (Agriculture) were present.
LETTER FROM THE SOCIAL MOVEMENTS PRESENTED IN A MEETING WITH THE FEDERAL GOVERNMENT
We compliment the Federal Government for taking the initiative to hear the social movements and union movements, the students, peoples’, pastoral, movements and the groups that are organizing our people to confront the serious crisis that we are already feeling – and everything leads us to believe will deepen in our economy, our society, and especially among the Brazilian people.
We want to take advantage of this opportunity to present our concrete proposals that the Federal Government should take to preserve, above all, the people’s interests and not just businesses and the profits of capital.
The set of these proposals is presented in the general spirit that we should confront the crisis by changing the macroeconomic policy of a neoliberal nature and start building a new model for national development, based on other parameters, above all on income distribution, job creation, and strengthening of the internal market.
Our basic concern is that our change should achieve concrete measures aimed at improving the living standards of our people, and ensure rights to free public education that is democratic and of high quality at every level, dignified housing, access to culture, and urban and agrarian reforms.
Unfortunately, the majority of our people have no access to these basic rights. We know that powerful interests of local capitalists, of transnational corporations, and above all of the financial system, concentrate wealth and more and more and prevent our people from enjoying the wealth that they produce.
We are already tired of so much capitalist domination and now we are watching the financial crises and the offensive by interests of the empire that controls the wealth of nature, minerals, waters, seeds, oil, energy and the result of our work.
Faced with this situation, we want to present to you some concrete proposals so that we can resolve, in fact, the people’s problems and prevent the transnational corporations and the banks from transferring the cost of the crisis to the people:
Proposals from the international groups:
1. As a response to the crisis we demand that the strengthening of the strategy of regional integration that is embodied in the mechanisms such as MERCOSUL, UNASUL and ALBA.
2. We support measures such as the substitution of the dollar for local currencies in commercial transactions, such as Brazil and Argentina recently did, and we suggest that this measure should be adopted by the countries of Latin America.
3. We demand the speediest possible consolidation of the Bank of the South, as an agent that promotes regional development and that helps the growth of the internal market among the countries of Latin America and as a mechanism for controlling our reserves, to prevent speculation by the banks, by the International Monetary Fund (IMF), and by the interests of U.S. capital.
4. We affirm that the current economic and financial crisis is the responsibility of the central countries and of the organizations directed by them such as the World Trade Organization (WTO), the World Bank, and the IMF. We demand a new international order that respects the sovereignty of peoples and of nations.
5. We ask for your persistence and commitment for the immediate withdrawal of all the foreign forces from Haiti. No country of Latin America should have bases and a foreign military presence. We propose, in its place, an international solidarity fund for the economic and social reconstruction of that country. We also present our opposition to the reactivation of the Fourth Naval Fleet of the United States in the waters of Latin America.
Proposals for internal policies:
1. Control and immediately reduce interest rates.
2. Impose strict control over the movement of international speculative capital, instituting quarantines and preventing the free movement, penalizing their earnings with high taxes.
3. We demand that all the governments use their natural wealth, from energy, oil, and minerals, to create solidarity funds to invest in the definitive solution for the problems of the people such as the right to jobs, education, land, and housing. For this purpose, the Brazilian government needs to immediately cancel the new auction of oil that is scheduled for December 18.
4. The federal government must revise the policy of maintenance of the primary surplus that is an old discredited orientation of the IMF – one of the bodies responsible for the international economic crisis. And we must use the funds from the primary surplus to make huge governmental investments in the construction of public transportation and popular housing for low income people, thus giving support to urban and agrarian reform, encouraging the production of food by family and peasant farming. Massive investments are necessary in the construction of schools, hiring teachers to provide universal access to education for our youth at all levels in public schools that are free and of high quality.
5. We demand that the government establish goals for the opening of new jobs, through a broad program of incentives for the creation of formal employment, especially for youth. To immediately readjust the minimum wage and the social security benefits as the main way of distributing income to the poorest.
6. Control the prices of farm products paid to the small producers, implementing a massive program of guarantees for food purchases, through CONAB. Today the international corporations that control farm trade are penalizing the farmers, reducing by 30% on average the prices paid for milk, corn, pork, and poultry. But the prices continue to rise in the supermarket.
7. Revoke the Kandir Law and return to taxing the exports of agricultural raw materials and minerals so that the populations is not penalized to encourage their export.
8. The Federal Government cannot use public money to subsidize and help save the banks and speculating corporations that always earned a lot of money and now want to transfer the burden of the crisis to all of society. The ones who always defended the market as the regulating god should now assume the consequences of it. In this sense the public banks (National Development Bank) should be oriented not to help big capital but to work for the benefit of all the people.
9. Reduce the work day throughout the country and in all sectors, without reducing wages, as one of the ways to create job openings. And strongly penalize the businesses that are laying people off.
10. The media continues to be concentrated in the hands of a few economic groups. This situation reinforces the diffusion of a unique way of thinking that privileges profit to the detriment of people and excludes the visions of social segments and their organizations from the public debate. To reverse this situation and place the media at the service of society, we need to broaden the people’s control over the concessions of radio and TV, strengthen public communication and ensure conditions for the functioning of community radio stations, and end the repression over them. For all of this, it’s urgent that the federal government convoke the National Communication Conference.
11. To guarantee the territories and the physical and cultural integrity of the indigenous peoples and quilombos as the Constitution specifies, the Federal Government must continue to demarcate the territories and bring about the non-interference in these territories throughout the country, without ceding to the growing pressures of the anti-indigenous sectors, which are political as well as economic. In the struggle for their territorial rights, the indigenous peoples and quilombo communities have confronted discriminatory violence that is increasingly stronger throughout the country. We call special attention at this time to the urgency of demarcating the traditional lands of the indigenous Guarani Kaiowá people who live in Mato Grosso do Sul. Currently, they are confined in small portions of land and mainly for this reason there is a high incidence of suicide among the people.
12. Hold a public hearing on the public debt to launch the technical and legal bases for the sovereign renegotiation of its amount and its payment, considering the historic, social, and environmental debts of which the working people are the creditors.
13. We demand a political reform that broadens the spaces for the people’s participation in political decisions. We need a reform that is not only electoral but which broadens the instruments of direct and participatory democracy.
14. In times of crisis, there is a predatory onslaught against our natural resources as a form of easy and rapid accumulation. For this reason, we do not accept the irresponsible proposals for changes in the environmental legislation on the part of representatives of agribusiness, who intend to reduce the areas of legal reserves in Amazonia and the areas of hillside, mountaintops and the fertile valleys that remain of the Atlantic Forest. We propose the creation of a policy of preservation and recuperation of the Brazilian biomass.
15. We are against the criminalization of poverty and of the social movements. For the end of violence and for the free right of protest of those who struggle in defense of economic, social, and cultural rights of the people.
We hope that the government helps to unleash a broad process of discussion in society, in all the segments of society so that the Brazilian people perceive the seriousness of the crisis, mobilize themselves and struggle for changes.
Sincerely,
Via Campesina
Assembléia Popular – AP
Coordenação dos Movimentos Sociais – CMS
Grito dos Excluídos Continental
Grito dos Excluídos Brasil
Associação Nacional de Ong’s – ABONG
Movimento dos Trabalhadores Rurais Sem Terra – MST
Central Única dos Trabalhadores – CUT
União Nacional dos Estudantes – UNE
Marcha Mundial de Mulheres – MMM
Central dos Trabalhadores e Trabalhadoras do Brasil – CTB
Central Geral dos Trabalhadores do Brasil – CGTB
Central de Movimentos Populares – CMP
Associação Brasileira de Imprensa – ABI
Confederação das Associações das Associações de Moradores – CONAM
Caritas Brasileira
CNBB/Pastorais Sociais
Comissão Pastoral da Terra – CPT
Conselho Indigenista Missionário – CIMI
Movimento dos Pequenos Agricultores – MPA
Movimento dos Atingidos por Barragens – MAB
Movimento das Mulheres Camponesas – MMC
União Brasileira de Mulheres – UBM
Coordenação Nacional de Entidades Negras – CONEN
Movimento dos Trabalhadores Desempregados – MTD
Movimento Trabalhadores Sem Teto – MTST
União Nacional Moradia Popular – UNMP
Confederação Nacional das Associações de Moradores – CONAM
Movimento Nacional de Luta por Moradia – MNLM
Ação Cidadania
Conselho Brasileiro de Solidariedade com Povos que Lutam pela Paz – CEBRAPAZ
Associação Brasileira de Rádios Comunitárias – ABRAÇO
Coletivo Brasil de Comunicação – INTERVOZES
Rede Brasil sobre Instituições Financeiras Multilaterais
Jubileu Sul Brasil
Movimento pela Libertação dos Sem Terras – MLST
União Estudantes Secundaristas – UBES
União Juventude Socialista – UJS
Evangélicos pela Justiça – EPJ
União nacional de Entidades Negras – UNEGRO
Federação Estudantes de Agronomia do Brasil – FEAB
Pastoral da Juventude do Meio Rural – PJR
Associação dos Estudantes de Engenharia Florestal – ABEEF
Confederação Nacional Trabalhadores Entidades de Ensino – CONTEE
Confederação Nacional Trabalhadores da Educação – CNTE
Confederação Nacional do Ramo Químico – CNQ/CUT
Federação Única dos Petroleiros – FUP
Sindicato Nacional dos Aposentados e Pensionistas – SINTAP/CUT
Associação Nacional de Pós-graduandos – ANPG
Confederação Nacional dos Metalúrgicos – CNM/CUT
Movimento Camponês Popular – MCP
Coordenação das Organizações Indígenas da Amazônia Brasileira – COIAB
Conselho Indigenista de Roraima – CIR
Federação Trabalhadores Metalúrgicos do Rio Grande do Sul
Ação Franciscana de Ecologia e Solidariedade
Instituto Nacional Estudos Sócio-econômicos – INESC
Source: http://www.mstbrazil.org/?q=node/587
We of the MST along with the central unions, student organizations, peoples’ movements, and groups from civil society, are putting together a document with concerns around the country’s current social and economic picture and proposals to overcome the worldwide economic crisis. We demand that the country change the macroeconomic policy of neoliberalism and build a new model of national development, based on income distribution, job creation, and strengthening of the internal market. In the past week, we participated in a meeting with the federal government and took the opportunity to present this document, signed by more than 50 groups with proposals for our country in the face of this crisis.
Our participation in the meeting does not mean any type of support for any candidate. “We are concerned with the future of our country, that will not be resolved from election to election, but with a new rise of the mass movement to demand structural changes and a national project”, states Marina dos Santos, of the national MST leadership, who read the document during the meeting. Ministers Luiz Dulci (General Secretariat), Dilma Roussef (Chief of Staff) and Guido Mantega (Agriculture) were present.
LETTER FROM THE SOCIAL MOVEMENTS PRESENTED IN A MEETING WITH THE FEDERAL GOVERNMENT
We compliment the Federal Government for taking the initiative to hear the social movements and union movements, the students, peoples’, pastoral, movements and the groups that are organizing our people to confront the serious crisis that we are already feeling – and everything leads us to believe will deepen in our economy, our society, and especially among the Brazilian people.
We want to take advantage of this opportunity to present our concrete proposals that the Federal Government should take to preserve, above all, the people’s interests and not just businesses and the profits of capital.
The set of these proposals is presented in the general spirit that we should confront the crisis by changing the macroeconomic policy of a neoliberal nature and start building a new model for national development, based on other parameters, above all on income distribution, job creation, and strengthening of the internal market.
Our basic concern is that our change should achieve concrete measures aimed at improving the living standards of our people, and ensure rights to free public education that is democratic and of high quality at every level, dignified housing, access to culture, and urban and agrarian reforms.
Unfortunately, the majority of our people have no access to these basic rights. We know that powerful interests of local capitalists, of transnational corporations, and above all of the financial system, concentrate wealth and more and more and prevent our people from enjoying the wealth that they produce.
We are already tired of so much capitalist domination and now we are watching the financial crises and the offensive by interests of the empire that controls the wealth of nature, minerals, waters, seeds, oil, energy and the result of our work.
Faced with this situation, we want to present to you some concrete proposals so that we can resolve, in fact, the people’s problems and prevent the transnational corporations and the banks from transferring the cost of the crisis to the people:
Proposals from the international groups:
1. As a response to the crisis we demand that the strengthening of the strategy of regional integration that is embodied in the mechanisms such as MERCOSUL, UNASUL and ALBA.
2. We support measures such as the substitution of the dollar for local currencies in commercial transactions, such as Brazil and Argentina recently did, and we suggest that this measure should be adopted by the countries of Latin America.
3. We demand the speediest possible consolidation of the Bank of the South, as an agent that promotes regional development and that helps the growth of the internal market among the countries of Latin America and as a mechanism for controlling our reserves, to prevent speculation by the banks, by the International Monetary Fund (IMF), and by the interests of U.S. capital.
4. We affirm that the current economic and financial crisis is the responsibility of the central countries and of the organizations directed by them such as the World Trade Organization (WTO), the World Bank, and the IMF. We demand a new international order that respects the sovereignty of peoples and of nations.
5. We ask for your persistence and commitment for the immediate withdrawal of all the foreign forces from Haiti. No country of Latin America should have bases and a foreign military presence. We propose, in its place, an international solidarity fund for the economic and social reconstruction of that country. We also present our opposition to the reactivation of the Fourth Naval Fleet of the United States in the waters of Latin America.
Proposals for internal policies:
1. Control and immediately reduce interest rates.
2. Impose strict control over the movement of international speculative capital, instituting quarantines and preventing the free movement, penalizing their earnings with high taxes.
3. We demand that all the governments use their natural wealth, from energy, oil, and minerals, to create solidarity funds to invest in the definitive solution for the problems of the people such as the right to jobs, education, land, and housing. For this purpose, the Brazilian government needs to immediately cancel the new auction of oil that is scheduled for December 18.
4. The federal government must revise the policy of maintenance of the primary surplus that is an old discredited orientation of the IMF – one of the bodies responsible for the international economic crisis. And we must use the funds from the primary surplus to make huge governmental investments in the construction of public transportation and popular housing for low income people, thus giving support to urban and agrarian reform, encouraging the production of food by family and peasant farming. Massive investments are necessary in the construction of schools, hiring teachers to provide universal access to education for our youth at all levels in public schools that are free and of high quality.
5. We demand that the government establish goals for the opening of new jobs, through a broad program of incentives for the creation of formal employment, especially for youth. To immediately readjust the minimum wage and the social security benefits as the main way of distributing income to the poorest.
6. Control the prices of farm products paid to the small producers, implementing a massive program of guarantees for food purchases, through CONAB. Today the international corporations that control farm trade are penalizing the farmers, reducing by 30% on average the prices paid for milk, corn, pork, and poultry. But the prices continue to rise in the supermarket.
7. Revoke the Kandir Law and return to taxing the exports of agricultural raw materials and minerals so that the populations is not penalized to encourage their export.
8. The Federal Government cannot use public money to subsidize and help save the banks and speculating corporations that always earned a lot of money and now want to transfer the burden of the crisis to all of society. The ones who always defended the market as the regulating god should now assume the consequences of it. In this sense the public banks (National Development Bank) should be oriented not to help big capital but to work for the benefit of all the people.
9. Reduce the work day throughout the country and in all sectors, without reducing wages, as one of the ways to create job openings. And strongly penalize the businesses that are laying people off.
10. The media continues to be concentrated in the hands of a few economic groups. This situation reinforces the diffusion of a unique way of thinking that privileges profit to the detriment of people and excludes the visions of social segments and their organizations from the public debate. To reverse this situation and place the media at the service of society, we need to broaden the people’s control over the concessions of radio and TV, strengthen public communication and ensure conditions for the functioning of community radio stations, and end the repression over them. For all of this, it’s urgent that the federal government convoke the National Communication Conference.
11. To guarantee the territories and the physical and cultural integrity of the indigenous peoples and quilombos as the Constitution specifies, the Federal Government must continue to demarcate the territories and bring about the non-interference in these territories throughout the country, without ceding to the growing pressures of the anti-indigenous sectors, which are political as well as economic. In the struggle for their territorial rights, the indigenous peoples and quilombo communities have confronted discriminatory violence that is increasingly stronger throughout the country. We call special attention at this time to the urgency of demarcating the traditional lands of the indigenous Guarani Kaiowá people who live in Mato Grosso do Sul. Currently, they are confined in small portions of land and mainly for this reason there is a high incidence of suicide among the people.
12. Hold a public hearing on the public debt to launch the technical and legal bases for the sovereign renegotiation of its amount and its payment, considering the historic, social, and environmental debts of which the working people are the creditors.
13. We demand a political reform that broadens the spaces for the people’s participation in political decisions. We need a reform that is not only electoral but which broadens the instruments of direct and participatory democracy.
14. In times of crisis, there is a predatory onslaught against our natural resources as a form of easy and rapid accumulation. For this reason, we do not accept the irresponsible proposals for changes in the environmental legislation on the part of representatives of agribusiness, who intend to reduce the areas of legal reserves in Amazonia and the areas of hillside, mountaintops and the fertile valleys that remain of the Atlantic Forest. We propose the creation of a policy of preservation and recuperation of the Brazilian biomass.
15. We are against the criminalization of poverty and of the social movements. For the end of violence and for the free right of protest of those who struggle in defense of economic, social, and cultural rights of the people.
We hope that the government helps to unleash a broad process of discussion in society, in all the segments of society so that the Brazilian people perceive the seriousness of the crisis, mobilize themselves and struggle for changes.
Sincerely,
Via Campesina
Assembléia Popular – AP
Coordenação dos Movimentos Sociais – CMS
Grito dos Excluídos Continental
Grito dos Excluídos Brasil
Associação Nacional de Ong’s – ABONG
Movimento dos Trabalhadores Rurais Sem Terra – MST
Central Única dos Trabalhadores – CUT
União Nacional dos Estudantes – UNE
Marcha Mundial de Mulheres – MMM
Central dos Trabalhadores e Trabalhadoras do Brasil – CTB
Central Geral dos Trabalhadores do Brasil – CGTB
Central de Movimentos Populares – CMP
Associação Brasileira de Imprensa – ABI
Confederação das Associações das Associações de Moradores – CONAM
Caritas Brasileira
CNBB/Pastorais Sociais
Comissão Pastoral da Terra – CPT
Conselho Indigenista Missionário – CIMI
Movimento dos Pequenos Agricultores – MPA
Movimento dos Atingidos por Barragens – MAB
Movimento das Mulheres Camponesas – MMC
União Brasileira de Mulheres – UBM
Coordenação Nacional de Entidades Negras – CONEN
Movimento dos Trabalhadores Desempregados – MTD
Movimento Trabalhadores Sem Teto – MTST
União Nacional Moradia Popular – UNMP
Confederação Nacional das Associações de Moradores – CONAM
Movimento Nacional de Luta por Moradia – MNLM
Ação Cidadania
Conselho Brasileiro de Solidariedade com Povos que Lutam pela Paz – CEBRAPAZ
Associação Brasileira de Rádios Comunitárias – ABRAÇO
Coletivo Brasil de Comunicação – INTERVOZES
Rede Brasil sobre Instituições Financeiras Multilaterais
Jubileu Sul Brasil
Movimento pela Libertação dos Sem Terras – MLST
União Estudantes Secundaristas – UBES
União Juventude Socialista – UJS
Evangélicos pela Justiça – EPJ
União nacional de Entidades Negras – UNEGRO
Federação Estudantes de Agronomia do Brasil – FEAB
Pastoral da Juventude do Meio Rural – PJR
Associação dos Estudantes de Engenharia Florestal – ABEEF
Confederação Nacional Trabalhadores Entidades de Ensino – CONTEE
Confederação Nacional Trabalhadores da Educação – CNTE
Confederação Nacional do Ramo Químico – CNQ/CUT
Federação Única dos Petroleiros – FUP
Sindicato Nacional dos Aposentados e Pensionistas – SINTAP/CUT
Associação Nacional de Pós-graduandos – ANPG
Confederação Nacional dos Metalúrgicos – CNM/CUT
Movimento Camponês Popular – MCP
Coordenação das Organizações Indígenas da Amazônia Brasileira – COIAB
Conselho Indigenista de Roraima – CIR
Federação Trabalhadores Metalúrgicos do Rio Grande do Sul
Ação Franciscana de Ecologia e Solidariedade
Instituto Nacional Estudos Sócio-econômicos – INESC
Source: http://www.mstbrazil.org/?q=node/587
Subscribe to:
Posts (Atom)
