Inter Press Service » Financial Crisis http://www.ipsnews.net Turning the World Downside Up Mon, 25 May 2015 17:06:55 +0000 en-US hourly 1 http://wordpress.org/?v=4.1.5 Opinion: Pillar of Neoliberal Thinking is Vacillatinghttp://www.ipsnews.net/2015/04/opinion-pillar-of-neoliberal-thinking-is-vacillating/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-pillar-of-neoliberal-thinking-is-vacillating http://www.ipsnews.net/2015/04/opinion-pillar-of-neoliberal-thinking-is-vacillating/#comments Mon, 20 Apr 2015 14:27:03 +0000 Roberto Savio http://www.ipsnews.net/?p=140225

In this column, Roberto Savio, founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News, argues that the latest figures from the IMF only confirm what many citizens already know – that the economic situation is worsening. However, he notes, what is new that there are now signs that the IMF has woken up to reality, indicating that “an important pillar of neoliberal thinking is vacillating”.

By Roberto Savio
ROME, Apr 20 2015 (IPS)

This month’s World Economic Outlook released by the International Monetary Fund (IMF) only confirms that consequences of the collapse of the financial system, which started six years ago, are serious. And they are accentuated by the aging of the population, not only in Europe but also in Asia, the slowing of productivity and weak private investment.

Roberto Savio

Roberto Savio

Average growth before the financial crisis in 2008 was around 2.4 percent. It fell to 1.3 percent between 2008 and 2014 and now the estimates are that it will stabilise at 1.6 percent until 2020, in what economists call the “new normal”. In other words, “normality” is now unemployment, anaemic growth and, obviously, a difficult political climate.

For the emerging countries, the overall picture does not look much better. It is expected that potential growth is expected to decline further, from an average of about 6.5 percent between 2008 and 2014 to 5.2 percent during the period 2015-2020.

The case of China is the best example. Growth is expected to fall from an average 8.3 percent in the last 10 years to somewhere around 6.8 percent. The result is that the Chinese contraction has worsened the balance of exports of raw materials everywhere.

The crisis is especially strong in Latin America, and in Brazil the fall in exports has contributed to worsening the country’s serious crisis and increasing the unpopularity of President Dilma Rousseff, already high because of economic mismanagement and the Petrobras scandal.“Progressive parties were able to build their success during economic expansion but the Left has not developed much economic science on what to do in period of crisis”

This, by the way, opens up a reflection which is fundamental. From Marx to Keynes, redistribution theories were all basically built on stable or expanding economies.

Progressive parties were able to build their success during economic expansion but the Left has not developed much economic science on what to do in period of crisis. What it tends to do is mimic the receipts and proposals from the Right and, when the crisis is over, it has lost its identity and has declined in the eyes of the electorate.

From this perspective, the situation in Europe is exemplary. All those right-wing xenophobic parties which have sprouted up – even in countries long held to be models of democracy such as the Nordic countries – have developed since 2008, the beginning of the financial crisis. In the same period of time, all progressive parties have lost weight and credibility. And now that the IMF sees some improvement in the European economy, it is not the traditional progressive parties that are the beneficiaries.

The term that the IMF gives to the current economic moment is “new mediocrity” – which is a franker way of saying “new normal” – and it observes that in the coming five years, we will face serious problems for public policies like fiscal sustainability and job creation.

In fact, every day, the macroeconomic figures, which have become the best way to hide social realities, are becoming less and less realistic if we go back to microeconomics as we have done during the last 50 years.

The best example is the United Kingdom, which is the champion of liberalism. Each year it has cut public spending and now claims to have growth in employment, with 600,000 new jobs in the last year. The only problem is that if you look into the structure of those jobs, you will find that the large majority are part-time or underpaid, and employment in the public sector is at its lowest since 1999.

A clear indicator is the number of people who visit the food banks created to meet the needs of the indigent. In the world’s sixth largest economy, their numbers have grown from 20,000 before the crisis seven years ago to over one million last year. And the same has happened all over Europe, albeit to a lesser extent in the Nordic countries.

U.K. economists have published studies on how austerity has affected growth. According to the Office for Budgetary Responsibility, established by the U.K. government, austerity blocked economic growth by one percent between 2011 and 2012. But, according to Simon Wren-Lewis of Oxford University, the figure is actually about five percent (or 100 billion pounds).

In other words, fiscal austerity reduces growth, and this creates large deficits which call for more fiscal austerity. It is a trap that Nobel laureate Keynesian economists Joseph Stiglitz and Paul Krugman have described in detail to no avail. We are all following the “liberal order” of Germany, which think its reality should be the norm and that deviations should be punished.

Now, while we can all agree that much of this is obvious to the average citizen in terms of its impact on everyday life, what is important and new is that the IMF, the fiscal guardian which has imposed the Washington Consensus (basically a formula of austerity plus free market at any cost) all over the Third World with tragic results, has woken up to reality.

Don’t get me wrong – I’m not implying that the IMF is becoming a progressive organisation, but there are signs that an important pillar of neoliberal thinking is vacillating.

Of course, those responsible for the global crisis – bankers – have come out with impunity. The world has exacted over three trillion dollars from its citizens to put banks back on their feet. The over 140 billion dollars in fines that banks have paid since the beginning of the crisis is the quantitative measure of illegal and criminal activities.

The United Nations calculates that the financial crisis has created at least 200 million new poor, several hundred millions of unemployed, and many more precarious jobs, especially for young people. And, yet, nobody has paid, while prisons are full of people who are there for minor theft, the social impact of which is infinitesimal by comparison.

In 2014, James Morgan, the boss of Morgan Stanley, cashed in 22.5 million dollars, Lloyd Blanfein, the boss of Goldman Sachs, 24 million, James Dimon, the boss of J.P. Morgan, 20 million. The most exploited of all, Brian Moynihan of the Bank of America, a paltry 13 million. Nobody stops the growth of bankers.

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

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Opinion: A Long History of Predatory Practices Against Developing Countrieshttp://www.ipsnews.net/2015/04/opinion-a-long-history-of-predatory-practices-against-developing-countries/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-a-long-history-of-predatory-practices-against-developing-countries http://www.ipsnews.net/2015/04/opinion-a-long-history-of-predatory-practices-against-developing-countries/#comments Mon, 06 Apr 2015 19:11:12 +0000 Kinda Mohamadieh http://www.ipsnews.net/?p=139820

In this column, Kinda Mohamadieh, a researcher at the South Centre, argues that the predatory practices of ‘vulture funds’ and their systemic implications represent a threat to the development of indebted poor countries.

By Kinda Mohamadieh
GENEVA, Apr 6 2015 (IPS)

The world’s attention turned to the practices of vulture funds after the U.S. Supreme Court affirmed a lower court opinion in the NML Capital vs Argentina case, which forbids the country from making payments on its restructured debt.

Argentina had defaulted in 2001 and went through two rounds of negotiations to restructure its debt, both in 2005 and 2010. In June 2014, the court ordered Argentina to pay the ‘vulture funds’ that held out and did not accept the terms of the debt swaps.

Kinda Mohamadieh

Kinda Mohamadieh

The vulture funds had held out with the aim of achieving what amounts to a 1,600 percent return on their original investment. The funds concerned had purchased the Argentinian bonds in 2008 at 48 million dollars and the court ruling ordered Argentina to pay them 832 million dollars.

Nobel laureate Joseph Stiglitz noted that this was “the first time in history that a country was willing and able to pay its creditors, but was blocked by a judge from doing so”.

While this case brought the term ‘vulture funds’ into the public sphere, the predatory practices of these entities did not start with Argentina.

According to a former U.N. independent expert on the effects of foreign debt and other related financial obligations of states on the full enjoyment of all human rights, the term ‘vulture funds’ describes “private commercial entities that acquire, either by purchase, assignments or some other form of transaction, defaulted or distressed debts, and sometimes actual court judgments, with the aim of achieving higher returns.”

Basically, vulture funds are hedge funds whose modus operandi focuses on three main steps including: (1) purchasing distressed debt on the secondary market at deep discounts far less than its face value; (2) refusing to participate in restructuring agreements with the indebted state; and (3) pursuing full value of the debt often at face value plus interest, arrears and penalties, including through litigation, seizure of assets or penalties.“The African Development Bank has reported that at least twenty heavily indebted poor countries have been threatened with or have been subjected to legal actions by commercial creditors and vulture funds since 1999”

Many developing countries have been exposed to the predatory practices of vulture funds, especially African and Latin American countries.

The African Development Bank has reported that at least twenty heavily indebted poor countries have been threatened with or have been subjected to legal actions by commercial creditors and vulture funds since 1999. These countries include Sierra Leone, Cote d’Ivoire, Burkina Faso, as well as Angola, Cameroon, Congo, Democratic Republic of the Congo, Ethiopia, Liberia, Madagascar, Mozambique, Niger, Sao Tome and Principe, Tanzania, and Uganda.

Peru was targeted by NML Capital in the year 2000. According to media reports, the fund spent almost four years in the courts to win a ruling that forced Peru to settle for almost 56 million dollars on distressed debt, which the fund had initially bought for 11.8 million dollars.

The African Development Bank has documented that up until the year 2007, 25 judgments in favour of vulture funds had yielded nearly one billion dollars. Out of this amount, 72 percent of the judgments have been against African countries. The reported number of outstanding cases against debtor countries has doubled since 2004.

According to the World Bank and the International Monetary Fund (IMF), 54 court cases were instituted against 12 heavily indebted poor countries between 1998 and 2008. The IMF estimates that in some cases claims by vulture funds constitute as much as 12 to 13 percent of a country’s gross domestic product.  The World Bank estimates that nearly one-third of countries that are eligible for debt relief and other poverty alleviation programmes are the targets of nearly 26 vulture funds.

Concerned about the extent of the threat posed by such predatory practices and their systemic implications, several international authorities and multilateral institutions have voiced their concern about the matter.

The African Development Bank has warned that by precluding debt relief and costing millions in legal expenses, these vulture funds undermine the development of the most vulnerable African countries.

In June 2014, the heads of state and government of the Group of 77 and China, in their declaration issued on the occasion of the ‘For a New World Order for Living Well’ summit held in Santa Cruz de la Sierra, Bolivia, reiterated the importance of “not allowing vulture funds to paralyse the debt restructuring efforts of developing countries” and stressed that “these funds should not supersede the state’s right to protect its people under international law.”

The IMF had cautioned that upholding the decision against Argentina would harm future sovereign debt restructuring attempts. In 2013, the IMF stated that “if upheld, [the Court of Appeals decision] would likely give hold-out creditors greater leverage and make the debt restructuring process more complicated”.

In 2007, G8 finance ministers had expressed concern about actions of some litigating creditors against heavily indebted poor countries, and agreed to work together to identify measures to tackle this problem based on the work of the Paris Club.

In September 2014, a resolution on the activities of vulture funds and the effects of foreign debt and other related international financial obligations of states on the full enjoyment of all human rights, particularly economic, social and cultural rights, was presented by Argentina and adopted at the 27th session of the U.N. Human Rights Council which took place in Geneva.

It is also worth noting that the 26th session of the Human Rights Council in June 2014 had adopted a resolution titled ‘Elaboration of an international legally binding instrument on Transnational Corporations and Other Business Enterprises with Respect to Human Rights’.

This resolution sets in place a process of negotiations towards an international legally binding instrument on transnational corporations and their liability in the area of human rights. (END/IPS COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

* This column is based on a longer version published in published in the South Centre’s South Bulletin 83 of 12 February 2015.

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Opinion: Crisis Resolution and International Debt Workout Mechanismshttp://www.ipsnews.net/2015/03/opinion-crisis-resolution-and-international-debt-workout-mechanisms/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-crisis-resolution-and-international-debt-workout-mechanisms http://www.ipsnews.net/2015/03/opinion-crisis-resolution-and-international-debt-workout-mechanisms/#comments Mon, 30 Mar 2015 08:34:01 +0000 Yilmaz Akyuz http://www.ipsnews.net/?p=139924

In this column, Yilmaz Akyüz, chief economist at the South Centre in Geneva, looks at the role of international debt workout mechanisms in debt restructuring initiatives and argues, inter alia, that while the role of the IMF in crisis management and resolution is incontrovertible, it cannot be placed at the centre of these debt workout mechanisms because its members represent both debtors and creditors.

By Yilmaz Akyuz
GENEVA, Mar 30 2015 (IPS)

Debt restructuring is a component of crisis management and resolution, and needs to be treated in the context of the current economic conjuncture and vulnerabilities.

International debt workout mechanisms are not just about debt reduction, but include interim arrangements to provide relief to debtors, including temporary hold on debt payments and financing.

They should address liquidity as well as solvency crises but the difference is not always clear. Most start as liquidity crises and can lead to insolvency if not resolved quickly.

Yilmaz Akyuz

Yilmaz Akyuz

Liquidity crises also inflict serious social and economic damages as seen in the past two decades even when they do not entail sovereign defaults.

International mechanisms should apply to crises caused by external private debt as well as sovereign debt. Private external borrowing is often the reason for liquidity crises. Governments end up socialising private debt. They need mechanisms that facilitate resolution of crises caused by private borrowing.

Only one of the last eight major crises in emerging and developing economies was due to internationally-issued sovereign debt (Argentina). Mexican and Russian crises were due to locally-issued public debt; in Asia (Thailand, Korea and Indonesia) external debt was private; in Brazilian and Turkish crises too, private (bank) debt played a key role alongside some problems in the domestic public debt market.

We have had no major new crisis in the South with systemic implications for over a decade thanks to highly favourable global liquidity conditions and risk appetite, both before and after the Lehman Brothers bank collapse in 2008, due to policies in major advanced economies, notably the United States.

But this period, notably the past six years, has also seen considerable build-up of fragility and vulnerability to liquidity and solvency crises in many developing countries."There are problems with standard crisis intervention: austerity can make debt even less payable; creditor bailouts create moral hazard and promote imprudent lending, and transform commercial debt into official debt, thereby making it more difficult to restructure”

Sovereign international debt problems may emerge in the so-called ‘frontier economies’ usually dependent on official lending. Many of them have gone into bond markets in recent years, taking advantage of exceptional global liquidity conditions and risk appetite. There are several first-time Eurobond issuers in sub-Saharan Africa and elsewhere.

In emerging economies, internationally-issued public debt as percentage of gross domestic product has declined significantly since the early 2000s. Much of the external debt of these economies is now under local law and in local currency.

However, there are numerous cases of build-up of private external debt in the foreign exchange markets issued under foreign law since 2008. Many of them may face contingent liabilities and are vulnerable to liquidity crises.

An external financial crisis often involves interruption of a country’s access to international financial markets, a sudden stop in capital inflows, exit of foreign investors from deposit, bond and equity markets and capital flight by residents. Reserves become depleted and currency and asset markets come under stress. Governments are often too late in recognising the gravity of the situation.

International Monetary Fund (IMF) lending is typically designed to bail out creditors to keep debtors current on their obligations to creditors, and to avoid exchange restrictions and maintain the capital account open.

The IMF imposes austerity on the debtor, expecting that it would make debt payable and sustainable and bring back private creditors. It has little leverage on creditors.

There are problems with standard crisis intervention: austerity can make debt even less payable; creditor bailouts create moral hazard and promote imprudent lending, and transform commercial debt into official debt, thereby making it more difficult to restructure; and risks are created for the financial integrity of the IMF.

Many of these problems were recognised after the Asian crisis of the 1990s, giving rise to the sovereign debt restructuring mechanism, originally designed very much along the lines advocated by the U.N. Conference on Trade and development (UNCTAD) throughout the 1980s and 1990s (though without due acknowledgement).

However, it was opposed by the United States and international financial markets and could not elicit strong support from debtor developing countries, notably in Latin America. It was first diluted and then abandoned.

The matter has come back to the attention of the international community with the Eurozone crisis and then with vulture-fund holdouts in Argentinian debt restructuring.

After pouring money into Argentina and Greece, whose debt turned out to be unpayable, the IMF has proposed a new framework to “limit the risk that Fund resources will simply be used to bail out private creditors” and to involve private creditors in crisis resolution. If debt sustainability looks uncertain, the IMF would require re-profiling (rollovers and maturity extension) before lending. This is left to negotiations between the debtor and the creditors.

However, there is no guarantee that this can bring a timely and orderly re-profiling. If no agreement is reached and the IMF does not lend without re-profiling, then it would effectively be telling the debtor to default. But it makes no proposal to protect the debtor against litigation and asset grab by creditors.

There is thus a need for statutory re-profiling involving temporary debt standstills and exchange controls. The decision should be taken by the country concerned and sanctioned by an internationally recognised independent body to impose stay on litigation.

Sanctioning standstills should automatically grant seniority to new loans, to be used for current account financing, not to pay creditors or finance capital outflows.

If financial meltdown is prevented through standstills and exchange controls, stay is imposed on litigation, adequate financing is provided and contractual provisions are improved, the likelihood of reaching a negotiated debt workout would be very high.

The role of the IMF in crisis management and resolution is incontrovertible. However, the IMF cannot be placed at the centre of international debt workout mechanisms. Even after a fundamental reform, the IMF board cannot act as a sanctioning body and arbitrator because of conflict of interest; its members represent debtors and creditors.

The United Nations successfully played an important role in crisis resolution in several instances in the past.

The Compensatory Financing Facility – introduced in the early 1960s to enable developing countries facing liquidity problems due to temporary shortfalls in primary export earnings to draw on the Fund beyond their normal drawing rights at concessional terms – resulted from a U.N. initiative.

A recent example concerns Iraq’s debt. After the occupation of Iraq and collapse of the Saddam Hussein regime, the U.N. Security Council adopted a resolution to implement stay on the enforcement of creditor rights to use litigation to collect unpaid sovereign debt.

This was engineered by the very same country, the United States, which now denies a role to the United Nations in debt and finance on the grounds that it lacks competence on such matters, which mainly belong to the IMF and the World Bank.

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

* This article is partly based on South Centre Research Paper 60 by Yilmaz Akyüz titled Internationalisation of Finance and Changing Vulnerabilities in Emerging and Developing Economies.

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Opinion: What if Youth Now Fight for Social Change, But From the Right?http://www.ipsnews.net/2015/03/opinion-what-if-youth-now-fight-for-social-change-but-from-the-right/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-what-if-youth-now-fight-for-social-change-but-from-the-right http://www.ipsnews.net/2015/03/opinion-what-if-youth-now-fight-for-social-change-but-from-the-right/#comments Sat, 21 Mar 2015 17:58:42 +0000 Roberto Savio http://www.ipsnews.net/?p=139808

In this column, Roberto Savio, founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News, takes young voters’ support for Israeli Prime Minister Benjamin Netanyahu in the Mar. 17 elections as the starting point for looking at how young people in Europe are moving to the right.

By Roberto Savio
ROME, Mar 21 2015 (IPS)

The “surprise” re-election of incumbent Israeli Prime Minister Benjamin Netanyahu in the Mar. 17 elections has been met with a flood of media comment on the implications for the region and the rest of the world.

However, one of the reasons for Netanyahu’s victory has dramatically slipped the attention of most – the support he received from young Israelis.

According to the Israeli daily Haaretz, 200,000 last-minute voters decided to switch their vote to Netanyahu’s Likud party due to the “fear factor” and most of these were voters under the age of 35.

Roberto Savio

Roberto Savio

Perhaps the “fear factor” was actually an expression of the “Masada factor”. Masada is a strong element in Israeli history and collective imagination. The inhabitants of the mountain fortress of Masada, besieged by Roman legions at the time of Emperor Tito’s conquest of the Israeli state, preferred collective suicide to surrender.

Israelis today feel besieged by hostile neighbouring countries (first of all Iran), the continuous onslaught by the Caliphate and the Islamic State, overwhelming negative international opinion and growing abandonment by the United States.

Netanyahu played a number of cards to bring about his last-minute election success, including his speech to the Republican-dominated U.S. Congress on Mar. 3, which was seen by many Israelis as an act of defiance and dignity, not a weakening of fundamental relations with the United States.

His support for Israeli settlers in the West Bank and Gaza, his denial of the creation of a Palestinian state and his show of contempt for an international community unable to understand Israel’s fears led Netanyahu’s Likud party to victory.

In Israel, being left-wing mean accepting a Palestinian state, being right-wing means denying it. In the end, the Mar. 17 vote was the result of fear.“Taking refuge in parties that preach a return to a country’s ‘glorious’ past, blocking immigrants who are stealing jobs and Muslims who are challenging the traditional homogeneity of society, country … is an easy way out”

Israeli’s young people are not alone in moving to the right as a reaction to fear. It is interesting to note that all right-wing parties which have become relevant in Europe are based on fear.

Growing social inequality, the unprecedented phenomenon of youth unemployment, cuts in public services such as education and health, corruption which has become a cancer with daily scandals, and the general feeling of a lack of clear response from the political institutions to the problems opened up by a globalisation based on markets and not on citizens are all phenomena which are affecting young people.

“When you were like us at university, you knew you would find a job – we know we will not find one,” was how one student put it at a conference of the Society for International Development that I attended.

“The United Nations has lost the ability to be a place of governance, the financial system is without checks and corporations have a power which goes over national governments,” the student continued. “So, you see, the world of today is very different one from the one in which you grew up.”

As Josep Ramoneda wrote in El Pais of Mar. 18: “We expected that governments would submit markets to democracy and it turns out that what they do is adapt democracy to markets, that is, empty it little by little.

This is why many of those of who vote for right-wing parties in Europe are young people – be it for the National Front in France, the U.K. Independence Party (UKIP) in Britain, the Lega Nord (North League) in Italy, the AfD (Alternative for Germany) in Germany and Golden Dawn in Greece, among others.

Taking refuge in parties that preach a return to a country’s “glorious” past, blocking immigrants who are stealing jobs and Muslims who are challenging the traditional homogeneity of society, country, and bringing back to the nation space and functions which have been delegated to an obtuse and arrogant bureaucracy in Brussels which has not been elected and is not therefore accountable to citizens, is an easy way out.

This is a major – but ignored – epochal change. It was long held that an historic function of youth was to act as a factor for change … now it is fast becoming a factor for the status quo. The traditional political system no longer has youth movements and its poor performance in front of the global challenges that countries face today makes young people distrustful and distant.

It is an easy illusion to flock to parties which want to fight against changes which look ominous, even negative. It also partially explains why some young Europeans are running to the Islamic State which promise a change to restore the dignity of Muslims dignity and whose agenda is to destroy dictators and sheiks who are in cohort with the international system and are all corrupt and intent on enriching themselves, instead of taking care of their youth.

What can young people think of President Erdogan of Turkey building a presidential palace with 1,000 rooms or the European Central Bank inaugurating headquarters which cost 1,200 million euro, just to give two examples? And what of the fact that the 10 richest men in the world increased their wealth in 2013 alone by an amount equivalent to the combined budgets of Brazil and Canada?

This generational change should be a transversal concern for all parties but what is happening instead is that the welfare state is continuing to suffer cuts. According to the International Labour Organization (ILO), young people in the 18-23 age group will retire with an average pension of 650 euro. What kind of society will that be?

Without the safety net now being provided by parents and grandparents, how can young people in such a society avoid feeling left out?

We always thought young people would fight for social change, but what if they are now doing so from the right?

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

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Opinion: The ‘Acapulco Paradox’ – Two Parallel Worlds Each Going Their Own Wayhttp://www.ipsnews.net/2015/03/opinion-the-acapulco-paradox-two-parallel-worlds-each-going-their-own-way/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-the-acapulco-paradox-two-parallel-worlds-each-going-their-own-way http://www.ipsnews.net/2015/03/opinion-the-acapulco-paradox-two-parallel-worlds-each-going-their-own-way/#comments Thu, 12 Mar 2015 11:57:14 +0000 Roberto Savio http://www.ipsnews.net/?p=139629

In this column, Roberto Savio, founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News, argues that the world of finance is detached from the reality experienced by the majority of people. The rich and the poor appear to be living in two completely different worlds.

By Roberto Savio
ROME, Mar 12 2015 (IPS)

The world is clearly splitting into two parallel worlds, with each going their own way, in what we could call the ‘Acapulco paradox’.

Take the official version of the image of Acapulco – a splendid Mexican resort, with horse riding on the beaches, a place blessed by nature and enriched by beautiful villas, gourmet restaurants, a place of bliss and relaxation.

Roberto Savio

Roberto Savio

Now take the version of the people living there – a place torn by criminal gangs with several deaths every day, where locals live in fear and total insecurity.

In the same way, there are now two ways to look at global reality.

One is the macroeconomic approach based on global data and, according to which, Greece has been doing better along with Italy, Portugal and Spain. In those countries, macroeconomic data are improving. Spain is even being touted as the example of how a country, which went through the bitter pill of austerity, now has growth at the same level as Germany.

Then, speak with young people, among whom unemployment is close to 40 percent, or with pensioners, or with those working in the hospital and education sectors, and you get a totally different picture. According to Caritas, the number of people living in misery has doubled in the last seven years.

The alternative model is the United States, which invested in growth and not in austerity like Europe. Its growth is running at 2.4 percent against an anaemic 0.1 percent for Europe. Again, the positive macro data do not coincide with the people’s data.

“Take the official version of the image of Acapulco, a place of bliss and relaxation. Now take the version of the people living there, a place torn by criminal gangs, where locals live in fear and total insecurity. In the same way, there are now two ways to look at global reality”
Let us take the latest example of economic recovery: the decision of the Walmart retail chain, one of the largest employers in the United States to increase the hourly wage from 8.9 to 10 dollars. This looks like very positive news, but the fact is that 60 percent of Walmart staff do not work sufficient hours to make a living – some work just two days a week, and with 640 dollars a month you are still into poverty.

Maybe it is just a coincidence, but the suicide rate rose from 11 per 100,000 people in 2005 to 13 seven years later. In the time it takes to read this article, six Americans will have tried to kill themselves and in another ten minutes one will have succeeded. More than 40,000 Americans took their own lives in 2012, more than died in car crashes, says the American Association of Suicidology.

If you start looking into the macro data, things become clearer. Profits from the financial sector are now over 20 percent of the total, double the level from the Second World War to the 1970s, and since 1970 productivity has grown by less than half. What this means is that the real economy has grown by half that of finance.

It is now clear that it is growth of the finance industry which is really holding back the rest of the economy, and far fewer people are employed in the financial sectors than in production and services.

These data come from nothing less than the Bank of International Settlements, the Gotha of the banking world, which also reports that brilliant people are trying to move into the financial sector, to the detriment of other sectors of the economy.

Looking into the figures opens up fascinating analyses. One of them from Hong Kong, published in the New York Times in the first week of March, deals with the personal wealth of lawmakers from China and the United States.

The NYT reported that according to the Shanghai-based Hurun Report, of the 1,271 richest people in China – a record 203 – nearly 16 percent are in the Parliament or its advisory body. Their combined net worth is 463.8 billion dollars, which is more than the annual economic output of Austria.

By comparison, American lawmakers are poorer. Eighteen of the Chinese lawmakers have a net worth greater than the 535 members of the U.S. Congress, the nine members of the U.S. Supreme Court and U.S. President Barack Obama’s cabinet.

We should pity the U.S. lawmakers, the 22 richest members of whom have only an average of 124 million dollars (70 percent of the senators are millionaires anyhow) and make up only four percent of the Senate, while four percent of the richest Chinese lawmakers are the country’s 203 billionaires.

Statistics in Europe also open the way to illuminating reflections. Take Spain, for example, where billionaires are in decline. In the Forbes list of the richest men in the world, Spain now has 21, five less than last year. Their combined wealth is 116,300 million dollars, and they increased their wealth in a year by only 500 million dollars, against the 3,200 million dollars of the richest man in the world, Bill Gates.

Yet, 500 million dollars is the equivalent of 35,714 average yearly  salaries, close to the population of the sunny town of Teruel in eastern Spain (around 36,000), and 116,300 million dollars is the equivalent of 8.3 million yearly salaries, equal to the combined population of Andalusia, the largest Spanish region, and the Balearic Islands.

The problem is that those two worlds are supposed to meet and relate through political institutions: Parliament, which represents everybody, and Government, which is supposed to regulate society for the good of every citizen.

Well, a good case study comes again from Spain, where it is possible to become a Spanish resident without going to Spain. It is sufficient to buy two millions euros’ worth of the country’s public debt, or buy one million euros’ worth of shares, or buy a house that costs at least 500,000 euros plus taxes, to become a Spanish resident. Since September 2013, 530 foreigners have obtained that right.

It is probable that the experience of obtaining a Spanish residence permit of the tens of thousands who crossed the Mediterranean at risk of their lives (it is estimated that over 20,000 have died up to now) looks very different. And many European countries have taken a similar path, including the United Kingdom, Cyprus and Portugal

In the United Kingdom, there is now a debate on a law from 1914 which excludes “non-domiciled” residents (‘non-doms’) from paying taxes on their foreign income or assets. It is enough to have a domicile abroad, usually by declaring permanent home in a tax haven. The number of ‘non-doms’ surged by 22 percent between 2000 and 2008 (year of the last available date), to reach 130,000 people.

This is part of an effort to reduce taxation on rich people, by creating loopholes and new regulations, to attract as many rich people as possible. President François Hollande in France has learnt at his expense what it means to speak of taxing the rich and had to make a quick turnaround. Obama is doing the same, and the only ‘leader’ who is speaking about taxing the rich is now Pope Francis.

However, one of the best examples of the ‘Acapulco paradox’ comes from the City in London.

After all the popular uprising about the disproportionate salaries of bankers, with public declarations from the U.K. government, the Church of England and the Bank of England, the announcement of an improvement in the U.K. economy by the European authorities has been taken at face value.

Barclays, for example, is increasing salaries by 40 percent, and an increase in salaries of 25 percent is expected all over the City this year. A young financial analyst, just out of university, at entrance salary could expect to take home the equivalent of 100,000 dollars per year.

While this will be good for statistics on average incomes, the yearly incomes of the 10 percent poorest British citizens will keep them at survival level. It is likely that their view of economic recovery will be different from those in the City. (END/IPS COLUMNIST SERVICE)

Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

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Opinion: Greece and the Germanisation of Europehttp://www.ipsnews.net/2015/03/opinion-greece-and-the-germanisation-of-europe/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-greece-and-the-germanisation-of-europe http://www.ipsnews.net/2015/03/opinion-greece-and-the-germanisation-of-europe/#comments Wed, 04 Mar 2015 15:02:38 +0000 guillermo-medina http://www.ipsnews.net/?p=139475

In this column, Guillermo Medina, a Spanish journalist and former Member of Parliament, analyses the negotiations between Greece and the Eurogroup and concludes that Germany, currently Europe’s dominant power, has achieved its basic goal: the consolidation of austerity as the fundamental dogma of the new European economic order. This, says the author, is a milestone in the political tussle in the European Union since the reunification of Germany between moving towards a Europeanised Germany or a Germanised Europe.

By Guillermo Medina
MADRID, Mar 4 2015 (IPS)

At last, on Tuesday Feb. 24, the Eurogroup (of eurozone finance ministers) approved the Greek government’s commitment to a programme of reforms in return for extending the country’s bailout deal.

The agreement marks the end of tense and protracted negotiations. It consists of a four-month extension for the second bailout programme worth 130 billion euros (over 145 billion dollars), in force since 2012 and which was due to expire on Feb. 28. The first bailout was for 110 billion euros, equivalent to 123 billion dollars.

Guillermo Medina

Guillermo Medina

During this period, the European Central Bank (ECB) will provide Greece with liquidity and the terms of a new bailout will be hammered out.

The eleventh-hour agreement was no doubt motivated partly by fears that a “Grexit” – Greek withdrawal from the eurozone monetary union – would have triggered a financial earthquake with unforeseeable consequences. The result is a very European-style compromise that averts catastrophe and gains time while avoiding facing the underlying problems.

In exchange for an extension of financial support from Greece’s partners and creditors, Prime Minister Alexis Tsipras will have to submit all his government’s measures during this period to Eurogroup inspection.

But the deal promises Greece more than just restrictions. The country will have to pay its debts to the last euro, but if, as seems probable, deadlines for primary surplus targets are extended, the country will have greater ability to pay (France has just secured this for itself).

In the final document, Greece promised to adopt a tax reform that would make the system fairer and more progressive, as well as reinforce the fight against corruption and tax evasion and reduce administrative spending.“Germany has undeniably secured its basic goal: the enshrining of austerity as the fundamental dogma of the new European economic order, although political prudence and even self-interest have softened the application of the dogma, and may continue to do so in future”

If the government pursues these goals, together with the fight against contraband, efficiently and with determination (as indeed it should, because they are part of its programme and target its domestic enemies), the income will be helpful for the application of its social and economic programmes.

In view of the successive positions that Greece has had to relinquish in the course of the negotiations, it appears that the country has achieved the little that could be achieved.

The negotiations between Greece and its European partners mark a milestone in the political tussle in the European Union since the reunification of Germany in 1990, between moving towards a Europeanised Germany or a Germanised Europe.

Germany has undeniably secured its basic goal: the enshrining of austerity as the fundamental dogma of the new European economic order, although political prudence and even self-interest have softened the application of the dogma, and may continue to do so in future.

Germany has openly tried to impose its convictions and its hegemony on Europe. Greece was only the immediate battlefield. Brussels and Berlin have been divided from the outset about how to solve the Greek crisis, but Germany prevailed.

However, the masters of Europe do not have any interest in “destroying” Greece, and so cutting off their nose to spite their face. They are satisfied with a demonstration of the asymmetry of power between the two sides, and the public contemplation of assured failure for whoever defies the status quo and supports any policy that deviates from the one true official line.

The problem with a Germanised Europe is not the preponderant role that Germany would play, but that it would impose a “Made in Germany” model of Europe that conforms to its own interests. That is how it would differ from a Europeanised Germany.

The Greek crisis has highlighted the ever-widening contrast between the values and ideals that we consider to be central to the European project, such as solidarity, mutual aid and social justice, and the new values that set aside basic aims like full employment, social welfare and equal opportunities.

It is paradoxical that Europe, which is apparently absent from or baffled by threats from the opposite shore of the Mediterranean, should take a harsh, tough attitude with a small partner overwhelmed by debt. It is also paradoxical that structural reforms are demanded of Greece, without admitting Europe’s own urgent need to redesign the eurozone and reframe the policies that have led to the poor performance of its monetary union.

The Greek crisis and the difficulties in overcoming it have a great deal to do with a design of the euro that benefits financial interests, particularly Germany’s.

The project neglected the harmonisation of tax policies and created a European Central Bank that lacked the powers that permit the U.S. Federal Reserve and the Bank of England to issue money and buy state debt.

As is well known, the ECB has made loans to European banks at very low interest rates, and they in turn have made loans to states, including Greece, at much higher interest. Government debts thus mounted up, and in order to pay they were forced to cut public spending.

Why does Europe persist in following failed policies while refusing to follow those that have lifted the United States out of recession? The only explanation is stubborn attachment to an ideological vision of economic policy that is devoid of pragmatism.

How can insistence on the path of error be explained at such a time? There may well be a quota of incompetence, but the basic reason is, as Nobel prize-winners Joseph Stiglitz and Paul Krugman affirm, that the goal of the policies imposed by the “Troika” (European Commission, ECB and International Monetary Fund) is to protect the interests of financial capital. And this is because the powers of political institutions, the media and academia, are dominated by financial capital, with German financial capital at the core.

Financial interests are essentially capable of shaping the decisions of European governance institutions. In the United States this subservience is less clear-cut, allowing hefty penalties to be imposed on certain banks, as well as the development of other economic strategies.

This is because independent mechanisms of control and oversight exist, the Federal Reserve has well-defined goals (whereas the ECB has spent years fighting the insistent threat of inflation), and there is democratic administration with the political will to resist.

In conclusion: the issue is to clarify what sort of Europe the citizens of Europe want, and what institutional changes are needed to achieve it.

And even more importantly, having seen the consecration of German hegemony over the Old World, what sort of German leadership would be compatible with a united Europe based on solidarity? Is this even possible? (END/IPS COLUMNIST SERVICE)

Translated by Valerie Dee/Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

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Youth Unemployment, Income Inequality Keep Risinghttp://www.ipsnews.net/2015/02/youth-unemployment-income-inequality-keep-rising/?utm_source=rss&utm_medium=rss&utm_campaign=youth-unemployment-income-inequality-keep-rising http://www.ipsnews.net/2015/02/youth-unemployment-income-inequality-keep-rising/#comments Fri, 06 Feb 2015 23:12:30 +0000 Josh Butler http://www.ipsnews.net/?p=139060 A youth smokes diamba (marijuana) at a gang base in Sierra Leone’s capital Freetown. Credit: Tommy Trenchard/IPS

A youth smokes diamba (marijuana) at a gang base in Sierra Leone’s capital Freetown. Credit: Tommy Trenchard/IPS

By Josh Butler
UNITED NATIONS, Feb 6 2015 (IPS)

Global youth unemployment may be “six or seven times” what the International Labor Organisation’s (ILO) latest figures state, due to what a youth advocacy group calls a flawed system of assessment.

The ILO recently released its 2015 World Employment and Social Outlook (WESO) report, and presented the findings to the United Nations Friday.“In unequal societies, democracies are more likely to be corrupted, workers are more likely to be exploited and abused, and the safety net for the poor or vulnerable is weakened." -- Dr. Marjorie Wood

One of the report’s major findings is the worldwide unemployment rate among 15 to 24-year-olds of 13 percent, or 74 million youths, is set to rise.

William Reese, CEO of the International Youth Foundation, thinks that figure is significantly underestimated.

“I’m not surprised by that number, because it is probably much higher than they state. We’ve seen reports of over 70 million young people unemployed, but the real number is probably six or seven times that,” Reese said.

He said a flawed system of assessing unemployment led to employment figures far below the reality.

“Those statistics are typically assessing people who are looking for jobs, so if you’re not looking for work, you’re technically not unemployed. People in poor countries are often underemployed or underpaid,” Reese told IPS.

“Unemployment statistics don’t take that into consideration. People in poor countries do work; if they didn’t, they would die. But in poorer countries, data is even worse.”

The WESO report warns the effects of the 2008 global economic crisis are still heavily impacting nations worldwide, especially developing economies.

The report outlines a widening income and wealth inequality, as well as sluggish economic growth, but while overall global unemployment is steady, youth unemployment is tipped to increase in coming years.

“Youth, especially young women, continue to be disproportionately affected by unemployment,” the report states, saying the 2014 youth unemployment rate was almost three times higher than the overall unemployment rate.

The ILO predicts overall unemployment rates “to decline gradually in developed economies” while at the same time “many countries are projected to see a substantial increase in youth unemployment.”

Ekkehard Ernst, chief of the ILO’s Job Friendly Macroeconomic Policies Team, told IPS slow economic growth was to blame for expected spikes in youth jobless rates.

“Growth is too slow to make a difference in job creation,” Ernst said. “Economies take much longer to recover after a financial crisis than a normal recession. It makes a difference to growth acceleration.”

Global growth has risen slowly for the last two years, from 2.2 percent in 2012 to 2.3 percent in 2013 and 2.5 percent in 2014, but is still well below the pre-crisis levels of around four percent.

Reese said a mismatch of skills was also to blame for rising youth unemployment. He said more young people were gaining tertiary qualifications than ever before – backed up by ILO data saying tertiary education rates have increased in 26 of 30 countries surveyed – but that young people were not gaining qualifications relevant to a changing labor market.

“There are job openings, but companies can’t find people with the right skills. Schools are not asking what the business community needs today. They are teaching what businesses might have wanted five years ago,” Reese said.

“There are more college-educated unemployed in some parts of the world, than high school-educated unemployed. Sometimes, kids today don’t come in with the disposition to work hard or be a team player.”

The ILO reports youth unemployment was especially problematic in Europe, with rates of up to 52 percent in Greece and Spain. The ILO predicts between 2014 and 2019, youth unemployment will rise by up to eight percent in parts of Europe, South America and Africa.

Reese said education facilities needed to be more tuned-in to what the modern job force requires, and to encourage students to think and learn about what is expected from them in the labor market.

“We want young people to get and keep a job. When a middle-class flourishes, democracies flourish,” he said. “All levels of education need to be smarter, and teach academic skills through internships and apprenticeships, to help young people learn things about work that they can’t get in a classroom.”

In 2014, global unemployment stood at 201million people, 1.2 million higher than 2013. That number is expected to rise to 212 million by 2019.

“We’re seeing a huge number of unemployed. The global unemployment rate is around six percent and that won’t shrink any time soon,” Ernst said.

Ernst said, however, that rising unemployment was not necessarily a sign of a poor economic climate. He said rising unemployment in many Asian countries, especially in economies such as China and India, was a sign of a modernising economy, as workers move from stable yet low-paying jobs in rural areas to seek higher paying jobs in urban centres.

“This type of unemployment is a rebalancing of the economy. Asian countries will see an increase in unemployment as they develop, which is a normal process of development,” Ernst said.

“New technology requires jobs be shuffled from one industry to another. China is so big, if they have a higher unemployment rate then that will affect world unemployment figures.

“People are moving from low-income agricultural jobs, to middle-income jobs in manufacturing, and then onto higher incomes in the service industry.”

Rising unemployment and sluggish economic growth is predicted to further widen income and wealth inequality worldwide; the richest 10 percent of the world will hold 30 to 40 percent of total income, while the poorest 10 percent will earn as little as two percent.

Dr. Marjorie Wood, senior global economy associate for the Institute for Policy Studies and managing editor of website Inequality.org, said a suite of socially regressive measures rolled out across the United States and the world had contributed greatly to the deepening income inequality.

“It’s important to look at how workers have been disempowered since the 1970s. Union strength was high at that time, and robust taxes on the wealthy and corporations funded public investments to allow opportunity and mobility for ordinary people,” Wood told IPS.

“We’ve seen a reversal of those, into a system what was much more unequal, with wealth concentrated at the top.”

She said a deepening income inequality would have profound impacts on all facets of life, from democracy and politics to social affairs.

“In unequal societies, democracies are more likely to be corrupted, workers are more likely to be exploited and abused, and the safety net for the poor or vulnerable is weakened,” she said.

The ILO report states social unrest and possible violence is linked to rising inequality and youth unemployment. Social unrest is said to have “shot up” during the financial crisis, and worldwide, currently sits at 10 percent higher than before the crisis.

However, Wood said she was encouraged by a growing call for a federally mandated minimum living wage in the U.S., and worldwide calls for a fairer distribution of income.

“People are not satisfied with rising inequality today, just as they weren’t satisfied 100 years ago in the USA’s first ‘gilded age.’ They addressed it then by fighting back, with a robust labour movement, and I think we will do it again,” she said.

“We’re seeing worker justice movements in many places, where people collectively organise to make change. That is where true political change comes from.”

Edited by Kitty Stapp

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OPINION: Greece Gives EU the Chance to Rediscover Its Social Responsibilityhttp://www.ipsnews.net/2015/01/opinion-greece-gives-eu-the-chance-to-rediscover-its-social-responsibility/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-greece-gives-eu-the-chance-to-rediscover-its-social-responsibility http://www.ipsnews.net/2015/01/opinion-greece-gives-eu-the-chance-to-rediscover-its-social-responsibility/#comments Sat, 24 Jan 2015 14:30:34 +0000 Marianna Fotaki http://www.ipsnews.net/?p=138804 Alexis Tsipras (centre), Syriza’s charismatic 40-year-old leader, has been campaigning under the banner “Hope is on its way.” Credit: Mirko Isaia/cc by 2.0

Alexis Tsipras (centre), Syriza’s charismatic 40-year-old leader, has been campaigning under the banner “Hope is on its way.” Credit: Mirko Isaia/cc by 2.0

By Marianna Fotaki
COVENTRY, England, Jan 24 2015 (IPS)

The European Union should not be afraid of the leftist opposition party Syriza winning the Greek election, but see it as a chance to rediscover its founding principle – the social dimension that created it and without which it cannot survive.

Greece’s entire economy accounts for three per cent of the euro zone’s output but its national debt totals €360 billion or 175 per cent of the country’s GDP and poses a continuous threat to its survival.

Courtesy of Marianna Fotaki

Courtesy of Marianna Fotaki

While the crippling debt cannot realistically be paid back in full, the troika of the EU, European Central Bank, and IMF insist that the drastic cuts in public spending must continue.

But if Syriza is successful – as the polls suggest – it promises to renegotiate the terms of the bailout and ask for substantial debt forgiveness, which could change the terms of the debate about the future of the European project.

It would also mean the important, but as yet, unaddressed question of who should bear the costs and risks of the monetary union within and between the euro zone countries is likely to become the centrepiece of such negotiations.

The immense social cost of the austerity policies demanded by the troika has put in question the political and social objectives of an ‘ever closer union’ proclaimed in the EU founding documents.The old poor and the rapidly growing new poor comprise significant sections of Greek society: 20 per cent of children live in poverty, while Greece’s unemployment rate has topped 20 per cent for four consecutive years now and reached almost 27 per cent in 2013.

Formally established through the Treaty of Rome in 1957, the European Economic Community between France, Germany, Italy and the Benelux countries tied closely the economies of erstwhile foes, rendering the possibility of another disastrous war unaffordable. Yet the ultimate goal of integration was to bring about ‘the constant improvements of the living and working conditions of their peoples’.

The European project has been exceptionally successful in achieving peaceful collaboration and prosperity by progressively extending these stated benefits to an increasing number of member countries, with the EU now being the world’s largest economy.

Since the economic crisis of 2007, however, GDP per capita and gross disposable household incomes have declined across the EU and have not yet returned to their pre-crisis levels in many countries. Unemployment is at record high levels, with Greece and Spain topping the numbers of long-term unemployed youth.

There are also deep inequalities within the euro zone. Strong economies that are major exporters have benefitted from free trade and the fixed exchange rate mechanism protecting their goods from price fluctuations, but the euro has hurt the least competitive economies by depriving them of a currency flexibility that could have been used to respond to the crisis.

Without substantial transfers between weaker and stronger economies, which accounts for only 1.13 per cent of the EU’s budget at present, there is no effective mechanism for risk sharing among the member states and for addressing the consequences of the crisis in the euro zone.

But the EU was founded on the premise of solidarity and not as a free trade zone only. Economic growth was regarded as a means for achieving desirable political and social goals through the process of painstaking institution building.

With 500 million citizens and a combined GDP of €12.9 trillion in 2012 shared among its 27 members the EU is better placed than ever to live up to its founding principles. The member states that benefitted from the common currency should lead in offering meaningful support rather than decimating their weaker members in a time of crisis by forcing austerity measures upon them.

This is not denying the responsibility for reckless borrowing resting with the successive Greek governments and their supporters. However, the logic of a collective punishment of the most vulnerable groups of the population must be rejected.

The old poor and the rapidly growing new poor comprise significant sections of Greek society: 20 per cent of children live in poverty, while Greece’s unemployment rate has topped 20 per cent for four consecutive years now and reached almost 27 per cent in 2013.

With youth unemployment above 50 per cent, many well-educated people have left the country. There is no access to free health care and the weak social safety net from before the crisis has all but disappeared. The dramatic welfare retrenchment combined with unemployment has led to austerity induced suicides and people searching for food in garbage cans in cities.

A continued commitment to the policies that have produced such outcomes in the name of increasing the EU’s competitiveness challenges the terms of the European Union’s founding principles. The creditors often rationalise this using a rhetoric that assumes tax-evading unproductive Greeks brought this predicament upon themselves – they are seen as the undeserving members of the euro zone.

Such reasoning creates an unhealthy political climate that gives rise to extremist nationalist movements in the EU such as the Greek criminal Golden Dawn party, which gained almost 10 per cent of votes in the last European Parliament elections.

Explaining the euro zone debt crisis as a morality tale is both deleterious and untrue. The problematic nature of such moralistic logic must be challenged: one cannot easily justify on ethical grounds forcing the working poor to bail out a banking system from which many wealthy people benefit, or transferring the consequences of reckless lending by commercial outlets to the public.

Nor can one explain the acquiescence of creditors to the machinations of the nepotistic self-serving corrupt elites dominating the state over the last 40 years that got Greece into the euro zone on false data and continue to rule it. As I have argued, the bailout money was given to the very people who are largely responsible for the crisis, while the general population of Greece is being made to suffer.

Greece’s voters are determined to stop the ruling classes from continuing their nefarious policies that have brought the country to the brink of catastrophe, but in the coming elections their real concern will be opposing the sacrifice of the futures of an entire generation.

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS-Inter Press Service.

Edited by Kitty Stapp

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OPINION: Banks, Inequality and Citizenshttp://www.ipsnews.net/2015/01/opinion-banks-inequality-and-citizens/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-banks-inequality-and-citizens http://www.ipsnews.net/2015/01/opinion-banks-inequality-and-citizens/#comments Thu, 22 Jan 2015 13:27:17 +0000 Roberto Savio http://www.ipsnews.net/?p=138778

In this column, Roberto Savio, founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News, argues that alarming figures on what has gone wrong in global society are being met with inaction. Citing data from Oxfam’s recent report on global wealth, he says that the rich are becoming richer – and the poor poorer – in a society where finance is no longer at the service of the economy or citizens.

By Roberto Savio
ROME, Jan 22 2015 (IPS)

Every day we receive striking data on major issues which should create tumult and action, but life goes on as if those data had nothing to do with people’s lives.

A good example concerns climate change. We know well that we are running out of time. It is nothing less than our planet that is at stake … but a few large energy companies are able to get away with their practices surrounded by the deafening silence of humankind.

Roberto Savio

Roberto Savio

Another example comes from the world of finance. Since the beginning of the financial crisis in 2009, banks have paid the staggering amount of 178 billion dollars in fines – U.S. banks have paid 115 billion, while European banks 63 billion. But, as analyst Sital Patel of Market Watch writes, these fines are now seen as a cost of doing business. In fact, no banker has yet been incriminated in a personal capacity.

Now we have other astonishing data from Oxfam – if nothing is done, in two years’ time the richest one percent of the world´s population will have a greater share of its wealth than the remaining 99 percent.

The richest are becoming richer at an unprecedented rate, and the poorest poorer. In just one year, the one percent went from possessing 44 percent of the world´s wealth to 48 percent last year. In 2016, therefore, it is estimated that this one percent will possess more than all the other 99 percent combined.

The top 89 billionaires have seen their wealth increase by 600 billion dollars in the last four years – a rise of five percent and equal to the combined budgets of 11 countries of the world with a population of 2.3 billion people.

In 2010, that figure was owned by 388 billionaires, and this striking and rapid concentration of wealth has, of course, a global impact. The so-called middle class is shrinking fast and in a number of countries youth unemployment stands at 40 percent, meaning that the destiny of today’s young people is clearly much worse than that of their parents.“In a world where the value of solidarity has disappeared (Europe’s debate on austerity is a good example), apathy and atomisation have become the reality. We are going back to the times of Queen Victoria, substituting a rich aristocracy with money coming from trade and finance, not production”

It will probably take some time before those figures become part of general awareness but it is a safe bet that they will not lead to any action, as with climate change. U.S. President Barack Obama is the only leader who has announced a tax increase on the rich, although he stands little chance of succeeding with his Republican-dominated Congress.

In a world where the value of solidarity has disappeared (Europe’s debate on austerity is a good example), apathy and atomisation have become the reality. We are going back to the times of Queen Victoria, substituting a rich aristocracy with money coming from trade and finance, not production. But up to a point: 34 percent of today’s billionaires inherited all or part of their wealth, and – interestingly – “inheritance tax is the most avoidable of levies”, as James Moore noted Jan. 20 in The Independent.

The “father of modern times”, late U.S. President Ronald Reagan, saw it clearly when he said that the rich produce richness, the poor produce poverty. So let the rich pay less taxes.

Well, in a just-released report, the U.S. Institute on Taxation and Economic Policy notes that in 2015 the poorest one-fifth of Americans will pay on average 10.9 percent of their income in taxes, the middle one-fifth 9.4 percent, and the top one percent just 5.4 percent.

Now, 20 percent of the richest billionaires are linked to the financial sector and it is worth recalling that this sector has grown more than the real economy, and has regulations only at national level. At global level, finance is the only activity which has international body of some kind of governance, as do labour, trade and communications, to name just a few.

Finance is no longer at the service of the economy and citizens. It has its own life. Financial transactions are now worth 40 trillion dollars a day, compared with the world’s economic output of one trillion.

At national level, there are now attempts half-hearted attempts to regulate finance. But let us look what is happening in United States. The new bland regulation is the Dodd–Frank Wall Street Reform and Consumer Protection Act, commonly known as the Dodd-Frank, and it does not go as far as restoring the division between deposit banks, which was where citizens put their money and which could not be used for speculation, and investments banks, which speculate … and how!

This separation was abolished during the U.S. presidency of Bill Clinton, and is considered the end of banks at the service of the real economy. In any case, the lobbyists on Wall Street are intent on having the Dodd-Frank chipped away at, little by little.

There is some schizophrenia when we look at the relations between capital and politics. The U.S. Supreme Court has eliminated any limit to contributions from companies to political elections, declaring that the companies have the same rights as individuals. Of course, there are not many individuals who can shell out the same figures as a company, unless you’re one of the 89 billionaires!

Meanwhile, banks are not only responsible for the corruption of the political system, and for the illegal activities which have earned them billions of dollars, they are also responsible for funding only big investors, and leaving everybody else out from easy credit. The efforts of the Chairman of the European Central Bank,  Mario Draghi, to have banks give credit to small companies and individuals has gone largely nowhere.

But a new and imaginative initiative comes from the very stern Dutch bankers. All 90,000 bankers in the Netherlands are now required to take an oath: “I swear that I will endeavour to maintain and promote confidence in the financial sector. So help me God”.

This is not so much oriented towards the customer, and it is very self-serving; and it brings God in as the regulator of the Dutch banking system. Perhaps the Dutch bankers have been paying heed to the words of Goldman Sach’s CEO Lloyd Blankfein who said at the time of the financial crisis in 2009 that bankers were “doing God’s work”.

Well God will have to be actively involved. All the three biggest Dutch banks – Rabobank, ABN Amro and ING Groep – have been involved in scandals that have hurt consumers, or were nationalised during the financial crisis, costing taxpayers more than 140 billion dollars. In one case, Rabobank was fined one billion dollars.

New York’s Wall Street and London’s City are said to be open to the idea of introducing a similar oath.

It is probably only that kind of Higher Power which could turn the tide in this world of growing inequality and lack of ethics. (END/IPS COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

The author can be contacted at utopie@ips.org

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European Citizens Call for Increased Aid to Developing Worldhttp://www.ipsnews.net/2015/01/european-citizens-call-for-increased-aid-to-developing-world/?utm_source=rss&utm_medium=rss&utm_campaign=european-citizens-call-for-increased-aid-to-developing-world http://www.ipsnews.net/2015/01/european-citizens-call-for-increased-aid-to-developing-world/#comments Mon, 12 Jan 2015 19:12:56 +0000 Thalif Deen http://www.ipsnews.net/?p=138607 In Tapoa, Burkina Faso, a region bordering Niger, the European Commission's humanitarian aid department (ECHO) funds the NGO ACF to provide health and nutrition care as well as food assistance including cash transfers for the poorest families. Credit: © EC/ECHO/Anouk Delafortrie/cc by 2.0

In Tapoa, Burkina Faso, a region bordering Niger, the European Commission's humanitarian aid department (ECHO) funds the NGO ACF to provide health and nutrition care as well as food assistance including cash transfers for the poorest families. Credit: © EC/ECHO/Anouk Delafortrie/cc by 2.0

By Thalif Deen
UNITED NATIONS, Jan 12 2015 (IPS)

An overwhelming majority of citizens in the 28-member European Union (EU) – which has been hamstrung by a spreading economic recession, a fall in oil prices and a decline of its common currency, the Euro – has expressed strong support for development cooperation and increased aid to developing nations.

A new Eurobarometer survey to mark the beginning of the ‘European Year for Development,’released Monday, shows a significant increase in the number of people in favour of increasing international development aid."The European Year will give us the chance to build on this and inform citizens of the challenges and events that lie ahead during this key year for development." -- Commissioner Neven Mimica

The survey reveals that most Europeans continue to “feel very positively about development and cooperation”.

Additionally, the survey also indicates that 67 percent of respondents across Europe think development aid should be increased – a higher percentage than in recent years, despite the current economic situation in Europe.

And 85 percent believe it is important to help people in developing countries.

“Almost half of respondents would personally be prepared to pay more for groceries or products from those countries, and nearly two thirds say tackling poverty in developing countries should be a main priority for the EU.”

Presenting the results of the survey, EU Commissioner for International Cooperation and Development Neven Mimica said, “I feel very encouraged to see that, despite economic uncertainty across the EU, our citizens continue to show great support for a strong European role in development.

“The European Year will give us the chance to build on this and inform citizens of the challenges and events that lie ahead during this key year for development, helping us to engage in a debate with them,” he added.

Jens Martens, director of the Bonn-based Global Policy Forum-Europe, told IPS the Eurobarometer demonstrates that the overwhelming majority of EU citizens support global solidarity and strengthened international cooperation.

“This is good news. Now, EU governments must follow their citizens,” he said.

EU positions in the U.N.’s upcoming post-2015 development agenda and Financing for Development (FfD) negotiations will become the litmus test for their global solidarity, said Martens, who is also a member of the Coordinating Committee of Social Watch, a global network of several hundred non-governmental organisations (NGOs) campaigning for poverty eradication and social justice.

EU governments must translate the increased citizens support for development now into an increase of offical development assistance (ODA), but also in fair trade and investment rules and strengthened international tax cooperation under the umbrella of the United Nations, he declared.

According to the latest available statistics, only five countries – Norway (1.07 percent), Sweden (1.02), Luxembourg (1.00), Denmark (0.85), United Kingdom (0.72) and the Netherlands (0.67) – have reached the longstanding target of 0.7 of gross national income as ODA to the world’s poorer nations.

In an interview with IPS last November, Secretary-General Ban Ki-moon singled out the importance of the upcoming International Conference on FfD in Ethiopia next July.

He said the ICFD will be “one of the most important conferences in shaping the U.N.’s 17 proposed sustainable development goals (SDGs)” which will be approved at a summit meeting of world leaders next September.

Ban cautioned world leaders of the urgent need for “a robust financial mechanism” to implement the SDGs – and such a mechanism, he said, should be put in place long before the adoption of these goals.

“It is difficult to depend on public funding alone,” he told IPS, stressing the need for financing from multiple sources – including public, private, domestic and international.

Speaking of financing for development, Ban said ODA, from the rich to the poor, is “is necessary but not sufficient.”

Meanwhile, the economic recession is taking place amidst the growing millions living in hunger (over 800 million), jobless (more than 200 million), water-starved (over 750 million) and in extreme poverty (more than one billion), according to the United Nations.

In a statement released Monday, the European Commission provided some of the results of the Eurobarometer on development: At 67 percent, the share of Europeans who agree on a significant increase in development aid has increased by six percentage points since 2013, and a level this high was last seen in 2010.

One in two Europeans sees a role for individuals in tackling poverty in developing countries (50 percent).

A third of EU citizens are personally active in tackling poverty (34 percent), mainly through giving money to charitable organisations (29 percent).

Most Europeans believe that Europe itself also benefits from giving aid to others: 69 percent say that tackling poverty in developing countries also has a positive influence on EU citizens.

Around three-quarters think it is in the EU’s interest (78 percent) and contributes to a more peaceful and equitable world (74 percent).

For Europeans, volunteering is the most effective way of helping to reduce poverty in developing countries (75 percent). But a large majority also believe that official aid from governments (66 percent) and donating to organisations (63 percent) have an impact.

The European Commission says 2015 promises to be “hugely significant for development, with a vast array of stakeholders involved in crucial decision-making in development, environmental and climate policies”.

2015 is the target date for achieving the Millennium Development Goals (MDGs) and the year in which the ongoing global post-2015 debate will converge into a single framework for poverty eradication and sustainable development.

2015 is also the year that a new international climate agreement will be decided in Paris.

Edited by Kitty Stapp

The writer can be contacted at thalifdeen@aol.com

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Falling Oil Prices Threaten Fragile African Economieshttp://www.ipsnews.net/2014/12/falling-oil-prices-threaten-fragile-african-economies/?utm_source=rss&utm_medium=rss&utm_campaign=falling-oil-prices-threaten-fragile-african-economies http://www.ipsnews.net/2014/12/falling-oil-prices-threaten-fragile-african-economies/#comments Tue, 23 Dec 2014 22:35:42 +0000 Thalif Deen http://www.ipsnews.net/?p=138388 Soldiers patrol an oil field in Paloug, in South Sudan's Upper Nile state. Credit: Jared Ferrie/IPS

Soldiers patrol an oil field in Paloug, in South Sudan's Upper Nile state. Credit: Jared Ferrie/IPS

By Thalif Deen
UNITED NATIONS, Dec 23 2014 (IPS)

The sharp decline in world petroleum prices – hailed as a bonanza to millions of motorists in the United States – is threatening to undermine the fragile economies of several African countries dependent on oil for their sustained growth.

The most vulnerable in the world’s poorest continent include Nigeria, Angola, Equatorial Guinea, Gabon and Sudan – as well as developing nations such as Algeria, Libya and Egypt in North Africa."In the long run, governments in these oil-exporting countries should use oil revenues to support productive sectors, employment generation, and also build financial reserves when oil prices are high." -- Dr. Shenggen Fan of IFPRI

Dr. Kwame Akonor, associate professor of political science at Seton Hall University in New Jersey, who has written extensively on the politics and economics of the continent, told IPS recent trends and developments such as the outbreak of Ebola and the fall of global oil prices “shows how tepid and volatile African economies are.”

In 2012, for instance, Sierra Leone and Liberia (two of the hardest hit countries with Ebola) were cited by the World Bank as the fastest growing sub-Saharan African countries, he pointed out.

In a similar vein, countries such as Algeria, Equatorial Guinea and Gabon are considered top performing economies due to the large concentration of their oil and gas reserves.

“But the ramifications of any economic crisis will undoubtedly negatively impact the fortunes of these countries,” said Akonor, who is also director of the University’s Centre for African Studies and the African Development Institute, a New York-based think tank.

The world price for crude oil has declined from 107 dollars per barrel last June to less than 70 dollars last week.

There are multiple reasons for the decline, including an increase in oil production, specifically in the United States; a fall in the global demand for oil due to a slow down of the world economy; and a positive fallout from conservation efforts.

As the New York Times pointed out: “We simply don’t burn as much energy as we did a few years ago to achieve the same amount of mileage, heat or manufacturing production.”

There are also geopolitical reasons for the continued decline in oil prices because Saudi Arabia, one of the world’s largest producers, has refused to take any action to stop the fall.

Despite the crisis, the Saudi oil minister Ali Al-Naimi was quoted as saying, “Why should I cut production?”

This has led to the conspiracy theory it is working in collusion with the United States to undermine the oil-dependent economies of three major adversaries: Russia, Iran and Venezuela.

Besides Saudi Arabia, the fall in prices is also affecting Iraq, Kuwait, United Arab Emirates (UAE), Qatar and Oman.

But they are expected to overcome the crisis because of a collective estimated foreign exchange reserve amounting to over 1.5 trillion dollars.

The drop in oil prices, however, will have the most damaging effects on Africa which has been battling poverty, food shortages, HIV/AIDS, and more recently, the outbreak of Ebola.

The heaviest toll will be on Nigeria, the largest economy in Africa which depends on crude oil for about 80 percent of its revenues, according to the Wall Street Journal. The country’s currency, the naira, has declined about 15 percent since the beginning of the fall in oil prices.

Dr. Shenggen Fan, director general of the International Food Policy Research Institute (IFPRI), sees both a positive and negative side to the current oil crisis. He told IPS the recent decline in oil prices will help reduce food prices.

Since oil prices are highly co-related to food prices, high oil prices make agricultural production more expensive and thus cause food prices to increase, he added.

“Now that oil prices are on a downward trend, this is, by and large, good for global food security and nutrition,” he said.

Dr. Fan said poor producers and consumers in developing countries should be able to benefit from this – as long as their purchasing power increases.

However, he cautioned, oil exporting countries may lose government revenues from low oil prices.

Indeed, crude oil producing nations in Africa have felt the pinch of declining oil prices given the dependence of their economies on crude oil, he noted. In the short run, he said, poor people may suffer, if their governments reduce food subsidies.

“In the long run, governments in these oil-exporting countries should use oil revenues to support productive sectors, employment generation, and also build financial reserves when oil prices are high.”

When oil prices are low, these governments should use reserves to ensure that poor people are protected through social safety net programmes, he added.

Dr. Akonor told IPS as impressive as the current and long-term economic projections for Africa might seem, it does not change the precarious and fragile nature of the continent’s economic foundations.

“The high debt overhang and the heavy reliance on raw materials (such as oil) and minerals for exports, makes African economies susceptible to shock and systemic risks,” he noted.

Moreover, he said, the underlying human capital formation, especially amongst the burgeoning unemployed youth population, lacks the requisite skills that could lead to real sustainable growth and transformation.

“What is needed then is the effective implementation of development strategies and policies that would lead to long-term structural transformation and durable human development,” he argued.

One way to achieve this is through closer regional cooperation, given the small size of domestic markets and poor continental infrastructure. Transformative and human needs development must, amongst other things, address Africa’s poor infrastructure, said Dr. Akonor.

According to the African Development Bank, the road access rate in Africa is only 34 percent, compared with 50 percent in other developing regions. Only 30 percent of Africans have access to electricity, compared to 70-90 percent in other developing countries.

“What makes Africa’s development challenges vexing is that there has not been a shortage of autonomous development-related ideas between African leaders and interested publics,” Dr. Akonor said.

One can argue that Africa has debated and produced too many blueprints and programmes for over half a century without any tangible results or follow through, he said.

“Thus the major obstacle to durable economic performance in Africa has not been the ambitious nature of the development targets, but rather the absence of political will by African governments and the lack of consistency, coordination, and coherence at the sub regional, regional and even global levels to implement structural change,” Dr. Akonor declared.

“Transformational development will require that Africa add value to, and diversify, its export commodities. Building a solid industrial base and infrastructural capacity are also necessary prerequisites toward autonomous structural change.”

Dr. Fan told IPS that on the broader issue of the factors that influence food prices, it is important to realise the right price of food is not easy to determine.

What is important is that the prices of food (including the natural resources that are used for food production) fully reflect their economic, social, and environmental costs and benefits in order to send the right signals to all actors along the food supply chain.

“If this causes food prices to increase, social safety nets should be provided to protect poor people in the short term and also to help them move on to more productive activities in the long term,” Dr. Fan said.

In so doing, their food security and nutrition is not compromised, he declared.

Edited by Kitty Stapp

The writer can be contacted at thalifdeen@aol.com

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What the U.S. Should Learn from Russia’s Collapsehttp://www.ipsnews.net/2014/12/what-the-u-s-should-learn-from-russias-collapse/?utm_source=rss&utm_medium=rss&utm_campaign=what-the-u-s-should-learn-from-russias-collapse http://www.ipsnews.net/2014/12/what-the-u-s-should-learn-from-russias-collapse/#comments Sat, 20 Dec 2014 12:35:18 +0000 Miriam Pemberton http://www.ipsnews.net/?p=138354 Oil pumps in southern Russia. Photo: Gennadiy Kolodkin/World Bank

Oil pumps in southern Russia. Photo: Gennadiy Kolodkin/World Bank

By Miriam Pemberton
WASHINGTON, Dec 20 2014 (IPS)

After months of whispered warnings, Russia’s economic troubles made global headlines when its currency collapsed halfway through December. Amid the tumbling price of oil, the ruble has fallen to record lows, bringing the country to its most serious economic crisis since the late 1990s.

Topping most lists of reasons for the collapse is Russia’s failure to diversify its economy. At least some of the flaws in its strategy of putting all those eggs in that one oil-and-gas basket are now in full view.Moscow’s failure to move beyond economic structures dominated by first military production, and now by fossil fuels, can serve as a cautionary tale and call to action.

Once upon a time, Russia did actually try some diversification — back before the oil and gas “solution” came to seem like such a good idea. It was during those tumultuous years when history was pushing the Soviet Union into its grave. Central planners began scrambling to convert portions of the vast state enterprise of military production — the enterprise that had so bankrupted the empire — to produce the consumer goods that Soviet citizens had long gone without.

One day the managers of a Soviet tank plant, for example, received a directive to convert their production lines to produce shoes. The timetable was: do it today. They didn’t succeed.

Economic development experts agree that the time to diversify is not after an economic shock, but before it. Scrambling is no way to manage a transition to new economic activity. Since the bloodless end to the Cold War was foreseen by almost nobody, significant planning for an economic transition in advance wasn’t really in the cards.

But now, in the United States at least, it is. Currently the country is in the first stage of a modest defence downsizing. We’re about a third of the way through the 10-year framework of defence cuts mandated by the Budget Control Act of 2011.

Assuming Congress doesn’t scale back this plan or even dismantle it altogether, the resulting downsizing will still be the shallowest in U.S. history. It’s a downsizing of the post-9/11 surge, during which Pentagon spending nearly doubled. So the cuts will still leave a U.S. military budget higher, adjusting for inflation, than it was during nearly every year of the Cold War — back when we had an actual adversary, the aforementioned Soviet Union, that was trying to match us dollar for military dollar.

Now, no such adversary exists. Thinking of China? Not even close: The United States spends about six times as much on its military as Beijing.

Even so, the U.S. defence industry’s modest contraction is being felt in communities across the country. By the end of the 10-year cuts, many more communities will be affected. This is the time for those communities that are dependent on Pentagon contracts to work on strategies to reduce this vulnerability. To get ahead of the curve.

There is actually Pentagon money available for this purpose. Its Office of Economic Adjustment exists to give planning grants and technical assistance to communities recognising the need to diversify.

As we in the United States struggle to understand what’s going on in Russia and how to respond to it, at least one thing is clear: Moscow’s failure to move beyond economic structures dominated by first military production, and now by fossil fuels, can serve as a cautionary tale and call to action.

Diversified economies are stronger. They take time and planning. Wait to diversify until the bottom falls out of your existing economic base, and your chances for a smooth transition decline precipitously. Turning an economy based on making tanks into one that makes shoes can’t be done in a day.

This story originally appeared on Foreign Policy in Focus.

Edited by Kitty Stapp

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Cuba’s Reforms Fail to Reduce Growing Inequalityhttp://www.ipsnews.net/2014/12/cubas-reforms-fail-to-reduce-growing-inequality/?utm_source=rss&utm_medium=rss&utm_campaign=cubas-reforms-fail-to-reduce-growing-inequality http://www.ipsnews.net/2014/12/cubas-reforms-fail-to-reduce-growing-inequality/#comments Tue, 16 Dec 2014 22:21:58 +0000 Patricia Grogg http://www.ipsnews.net/?p=138300 Mercado Amistad, one of the shops that only accept hard currency, officially called “foreign currency recovery stores”, in central Havana. Credit: Jorge Luis Baños/IPS

Mercado Amistad, one of the shops that only accept hard currency, officially called “foreign currency recovery stores”, in central Havana. Credit: Jorge Luis Baños/IPS

By Patricia Grogg
HAVANA, Dec 16 2014 (IPS)

One of the major challenges assumed by President Raúl Castro when he launched a series of reforms in Cuba is improving living standards in a country still suffering from a recession that began over 20 years ago and has undermined the aim of achieving economic and social equality.

Inequality has been growing since the start of the crisis triggered by the break-up of the Soviet Union and East European socialist bloc – Cuba’s main trade and aid partners – in the early 1990s. The “special period” – the euphemistic term used to refer to the lengthy recession – “has even morally affected the concept of inequality,” economist Esteban Morales told IPS.

To ease the recession in the 1990s, the government of Fidel Castro (1959-2008) opened the doors to foreign investment, fomented tourism, legalised the dollar, and created the “foreign currency recovery stores”, among other measures whose economic benefits also came accompanied by greater social inequality.: “What is annoying is that people with less education and fewer responsibilities earn more than a professional. When I started studying in the 1980s that’s not how things were. People’s salaries stretched much farther.” -- Cuban schoolteacher

However, María Caridad González appreciates the sense of equality that still exists in Cuban society, which she says has made social inclusion possible for her 10-year-old son, who knows that “to do well in life he just has to study and become a professional.”

Since the 1959 revolution, free universal healthcare coverage and education have been important tools for achieving social equality in Cuba.

González, who comes from a family of small farmers, moved to Havana in the mid-1990s. “It was hard at first. There were shortages of everything, but I stayed anyway and got married here. Now there are a lot of stores and farmers’ markets, and what is lacking is money to buy things,” said the 36-year-old, who works in the cleaning service at a company that is partly foreign owned.

Other people are worse off than González, who manages to add to her monthly income working as a domestic in the homes of families she knows, which brings her another 80 CUC – the Cuban peso convertible to dollars – or 1,920 pesos.

That is more than four times the average public sector salary of 470 pesos (19 dollars) a month. “Thanks to my income we survived the months when my husband, who is a cook in the tourism industry, was out of work,” said González.

She is in a much better position than her neighbor, a 55-year-old primary schoolteacher who earns 750 pesos a month and has no source of dollars or other foreign currency – a mainstay for many Cuban families, who receive remittances from relatives abroad or who work in tourism, where they earn tips.

The teacher, who is married and has two adult children aged 20 and 25, told IPS: “What is annoying is that people with less education and fewer responsibilities earn more than a professional. When I started studying in the 1980s that’s not how things were. People’s salaries stretched much farther.”

The inequality gap has widened as the differences in incomes have grown.

Those who only earn a public salary – the state is still by far the biggest employer, despite a reduction in the public payroll as part of the reforms – or who depend on a pension or are on social assistance find it impossible to meet their basic needs. According to statistics from the Centre for Studies of the Cuban Economy, food absorbs between 59 and 75 percent of the family budget in Cuba.

A farmers’ market on Vapor street in Old Havana. Credit: Jorge Luis Baños/IPS

A farmers’ market on Vapor street in Old Havana. Credit: Jorge Luis Baños/IPS

However, Cuba’s free universal healthcare and education, social security system, and social assistance for the poor have been preserved in spite of the country’s economic troubles, and were key to Cuba’s ranking in 44th place on the United Nations Development Programme’s (UNDP) Human Development Index (HDI) this year.

The HDI is a composite index that measures average achievement in three basic dimensions of human development: long and healthy life, knowledge and a decent standard of living.

The schoolteacher, who asked to remain anonymous, said “I understand and appreciate that, but it is no less true that the differences in income differentiate us when it comes to putting food on the table or buying clothes.”

Morales agrees with the government’s aim of “equal rights and opportunities” rather than egalitarianism. In his view, the distribution of income based on work is still unequal. “It would be ethical if people received in accordance with what they contributed, and those who needed assistance would receive it through social spending, to balance out the inequalities,” he argued.

The academic defends the idea of subsidising specific people rather than products, which is still being done through the ration card system that distributes a certain quantity of foodstuffs at prices subsidised by the state, to all citizens, regardless of their income.

The system covered the basic dietary needs of families until the 1980s. But that is no longer the case, and Cubans now have to complete their diet with products sold in the hard currency stores and the farmers’ markets, where one pound (450 grams) of pork can cost 40 pesos (1.60 dollars) – the same price fetched by a pound of onions at certain times of the year.

In its 2014-2020 pastoral plan, the Catholic Church complains that broad swathes of society are plagued by “material poverty, the result of wages that are too low to provide a family with decent living standards.”

That situation, it says, impacts semi-skilled workers as well as professionals.

After acknowledging that the expansion of opportunities for self-employment and for setting up cooperatives in non-agricultural sectors of the economy has opened up opportunities for some, the church warns that the current economic reforms “have failed to reactivate the economy in such a way that it benefits the entire population.”

Not all segments of society are in equal conditions to take advantage of the changes that have been ushered in. Researchers like Morales or Mayra Espina say women, people who are not white, and young people are at a disadvantage, whether due to a lack of formal training and education, or of assets and resources for starting up their own businesses.

According to the last official statistics on poverty published in Cuba, from 2004, 20 percent of the urban population was poor. In this Caribbean island nation, 76 percent of the population of 11.2 million lives in towns and cities. Experts worry that the proportion today is even higher, and they say decision-makers need to know the exact percentage in order to properly tailor social policies to the actual situation.

But Espina and other academics say the reforms approved in April 2011 do not put a high enough priority on social aspects, ignore the questions of poverty and inequality, and contain weak measures for guaranteeing equality.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

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OPINION: Europe Has Lost Its Compasshttp://www.ipsnews.net/2014/12/opinion-europe-has-lost-its-compass/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-europe-has-lost-its-compass http://www.ipsnews.net/2014/12/opinion-europe-has-lost-its-compass/#comments Sat, 13 Dec 2014 09:43:46 +0000 Roberto Savio http://www.ipsnews.net/?p=138263

In this column, Roberto Savio, founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News, argues that, with the fall of the Swedish government orchestrated by the far-right and centre-right opposition, a symbol of civic-mindedness and democracy in Europe has fallen, and the grip of an irrational fear of immigrants tightens as Europe’s politicians seek a scapegoat.

By Roberto Savio
ROME, Dec 13 2014 (IPS)

The Swedish Social Democrat government, which took office only two months ago, has just resigned. The far-right anti-immigrant Sweden Democrats sided with the four-party centre-right opposition alliance, and new elections will be held in March next year.

In Europe, Sweden has been the symbol of civic-mindedness and democracy – the place where those escaping dictatorship and hunger could find refuge; the country without corruption, where social justice was a national value.

Roberto Savio

Roberto Savio

However, in just a short period, the Sweden Democrat xenophobic party, which wants to close the country to foreigners and is now the third-largest party in parliament, was able to topple the government on Dec. 3.

Similar parties exist in the other Nordic countries – Finland, Norway and Denmark – where they have been similarly able to take a decisive role in national politics. The myth of northern Europe, the modern and progressive Nordic Europe, has vanished.

A few days later, in Dresden (the Florence of Germany) in Saxony, thousands of demonstrators marched to the cry ”Wir sind das Volk” [“We are the people”] – the same battle cry used in protests against the Communist regime in then East Germany 25 years ago, only this time the protest was against immigrants.

A previously unknown activist, 41-year-old Lutz Bachmann, has set up the Patriotic Europeans Against the Islamisation of the West, and in seven weeks has been able to rally thousands of people. The local paper, the Sachsische Zeitung, has reported that Bachman has several criminal convictions for burglary, dealing with cocaine and driving without a licence or while drunk.“The fact that without immigrants Europe would grind to a halt and be unable to compete internationally is not matter for a campaign that appeals to politicians. On the contrary, they are flying the flag of defending Europe from a dangerous influx of immigrants”

Such details were irrelevant to the demonstrators. They “miss their country”, demand “protection of the Homeland” and applaud Bachmann’s call for a “clean and pure Germany”.

In Saxony, foreign immigrants account for only two percent of the population, and only a small fraction of those are Muslim. But the announcement that facilities would be opened for some 2,000 refugees from Syria, was the trigger in this town of 530.000 inhabitants. In the last state legislative elections, a new populist party, the Alternative for Germany, took almost 10 percent of the vote.

A similar irrational fear is gripping many European countries.

Italy, for example, now has two major parties (the Northern League and the Five Star Movement), which together account for around 35 percent of the vote, with xenophobic tones, and another major party, Forza Italia (literally Forward Italy) led by former Prime Minister Silvio Berlusconi, is flirting with an anti-European policy. The three more or less openly advocate withdrawal from the Euro.

At the same time, in 2013, only 514.308 children were born (including those of immigrants), 20.000 less than the year before. Between 2001 and 2011, according to ISTAT, the national statistical institute, the number of families formed by one person increased by 41.3 percent, while those with children fell by five percent. Of those with children, 47.5 percent had one child, 41.9 percent two and only 10.6 percent three or more.

If, as is conventionally held, the demographic replacement rate is 2.1, this means that the Italian population, like everywhere in Europe, is on a steep decline.

Of course, having child today is not an easy choice. To put it simply: in 2009, Italy had a budget of 2.5 billion euro for social interventions and, four years later, only one-third of that; in 2009, Italy’s Family Policies Fund stood at 186.5 million euro and is now less than 21 million. No wonder then that 60 percent of the population lives in fear of becoming poor.

The number of NEET (Not in Education, Employment or Training) rose from 1.8 million in 2007 to 2.5 million in 2013. And while Italy’s young people are being humiliated, its senior citizens are being mistreated – 41.3 percent of pensions are less than 1,000 euro per month.

By the way, 83,000 Italians expatriated in 2013, and the number of young people with a university degree that went to the United Kingdom, for example, was just over 3,000 – but in the same year, 44,000 foreigners also left Italy and while Italy received nearly 355,000 immigrants in 2011, two years later the number was just 280,000. And yet the campaign of xenophobia in Italy has it that there is a dramatic increase in immigrants.

This social decline is happening at different speeds and in different proportions all over Europe. In Germany, the core country, 25 percent of the population fall into the so-called “Hartz IV” category – under the Hartz Committee reform of the German labour market introduced by then Chancellor Gerhard Schroeder – and have to survive on the bare minimum of benefits.

This social decline is being accompanied by an unprecedented increase in social inequality. Two French economists, François Bourguignon and Christian Morrisson, published a study In 2002 on inequality among world citizens, starting from the 19th century, using the Gini index of inequality (where absolute equality = 0). In 1820, the index stood at 50, had risen to 60 in 1910, 64 in 1950, 66 in 1992 and 70 ten years later.

Today the ratio between a minimum wage and a top salary is very simple – the small guy must work 80 years to earn what the big guy earns in a year!

According to a number of sociologists, ‘catching up’ (or the so-called ‘demonstration effect’), is one underlying reason for corruption. It is no accident that the south of Europe has much more corruption than the north (but the Protestant Ethic must also play a role).

In just a few months, the former prime minister of Portugal, José Socrates, has been jailed, former president Nicolas Sarkozy has returned to politics in France to try to escape several accusations and Spaniards are riveted by the revelation of giant webs of corruption that the government is now trying to stymie by changing the judge in charge of the prosecution.

Meanwhile, Romans have awakened to find out that a criminal organisation has been controlling the town council and the administration, and this coming on the heels of a similar discovery in Milan, where individuals who had been already convicted of corruption got back into business and did more of the same in the public works for next year’s Expo.

It is no wonder that, as in every crisis, in a climate fear and uncertainty, there is a need for a scapegoat. The fact that without immigrants Europe would grind to a halt and be unable to compete internationally is not matter for a campaign that appeals to politicians. On the contrary, they are flying the flag of defending Europe from a dangerous influx of immigrants.

This all shows that Europe has lost its compass – and there is nothing on the horizon indicating that it can be recovered soon.

Who is going to provide an answer to Europe’s anguish when those in power escape from reality and look for scapegoats? (END/IPS COLUMNIST SERVICE)

(Edited by Phil Harris)

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

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OPINION: The Decline of Social Europe is Part of a World Trendhttp://www.ipsnews.net/2014/11/opinion-the-decline-of-social-europe-is-part-of-a-world-trend/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-the-decline-of-social-europe-is-part-of-a-world-trend http://www.ipsnews.net/2014/11/opinion-the-decline-of-social-europe-is-part-of-a-world-trend/#comments Wed, 26 Nov 2014 12:15:40 +0000 Roberto Savio http://www.ipsnews.net/?p=137963

In this column, Roberto Savio, founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News, argues that social criteria are taking a back seat to financial and economic criteria in the policies of European countries.

By Roberto Savio
ROME, Nov 26 2014 (IPS)

After the Italian sea search-and-rescue operation Mare Nostrum at a cost of nine million euros a month, through which the Italian Navy has rescued nearly 100,000 migrants – although perhaps up to 3,000 have died – from the Mediterranean since October 2013, Europe is now presenting its new face in the Mediterranean.

The European Union is launching Joint Operation Triton with a monthly budget of 2.9 million euros and funds secured until the end of the year. Its function is to enforce border controls – not to save “boat people” – and it will patrol just thirty nautical miles from the coast, which pales in comparison with Italy’s Mare Nostrum operation which saw patrols being sent close to the Libyan coast.

Roberto Savio

Roberto Savio

Even with this very limited operation, British Prime Minister David Cameron has said that the United Kingdom will not contribute because operations that save migrants make them more willing to try to cross the Mediterranean. Of course, there is a perverted logic in this: the more migrants that die, the greater will be the discouragement for others to try.

Following this logic through, the ideal situation therefore would be to reach a death rate that would stop illegal immigration once and for all!

In this context, it is worth noting that the U.K. government is considering withdrawal from the European Convention of Human Rights (something that even Russian President Vladimir Putin has never considered). The argument is that nobody can be above U.K. courts.

London is also refusing to pay its share of increased of contributions to the European Union and is considering how to put an annual cap on the number of Europeans who are entitled to work legally in the United Kingdom.“Since 1986, the year of signing of the Single European Act, Europeans have never been able to agree on a minimum social basis, which would have given them rights as workers to act collectively as Europeans in the face of a market which is economically unified, but with no common social legislation”

And finally, the U.K. government received with great uproar the sentence of the European Court of Justice, which placed a European cap on banker bonuses, rejecting Britain’s claims that it was illegal. The British argument was that pay levels (also of discredited bankers) were part of social policy and thus under the authority of member states not of the European Union.

Meanwhile, the same Court has issued another sentence under which E.U. member states are not obliged to support European citizens who do not have economic activities in the E.U. countries to which they have migrated. And the German Parliament is now preparing a law to expel European immigrants who do not find a job within six months.

Of course, this will open the doors to all other countries to reduce the free movement of Europeans in Europe, a cornerstone of the original vision of a solidary Europe. Now Europeans will be obliged to take any job, and therefore the law of market will become the primary criterion for their movements in Europe.

Since 1986, the year of signing of the Single European Act, Europeans have never been able to agree on a minimum social basis, which would have given them rights as workers to act collectively as Europeans in the face of a market which is economically unified, but with no common social legislation.

In fact, the point has now been reached where social criteria are the last to be used to judge whether a country is recovering or not, well after economic and financial criteria.

A devastated Greece is now again being considered in financial markets because its economic indicators are on the up. And, at the last G20 meeting in Brisbane, Spain was touted as the example that austerity policies – those indicated by German Chancellor Angela Merkel as the example for laggards like Italy and France – are the correct way out of the crisis.

At the same time, a very different source, Caritas, has reported that only 34.3 percent of Spaniards live a normal life, while 40.6 percent are stuck in precariousness, 24.2 percent are already suffering moderate exclusion and 10.9 percent are living in severe exclusion.

To understand the trend, six years ago, 50.2 percent of Spaniards had a normal life. Now, one citizen in four is suffering exclusion, and of those 11 million excluded citizens, 77.1 percent have no job, 61.7 percent no house and 46 percent no health care support.

According to UNICEF’s recent report on children under recession, 76.5 million children in the rich countries live in poverty, and in Spain, 36.3 percent of the country’s children (2.7 million) are living in a state of precariousness.

What is now new is that some major financial institutions have started to draw attention to social issues.

Janet L. Yellen, chairwoman of the U.S. Federal Reserve, has declared that she is concerned about the growing inequality of wealth and income in the United States, and that chances for people to advance economically appear to be diminishing. And Mario Draghi, governor of the European Central Bank, is now constantly mentioning the issues of “unbearable unemployment “and “growing exclusion”.

In the background there is the proven fact that countries which took emergency measures to reduce public borrowing have mostly had weaker growth, like most European countries (with the exception of Germany, helped by a boom in machinery exports to Russia and China), while those which introduced a policy of stimulus, like the United States, Japan and Britain, have done much better, also in reducing unemployment.

But Merkel continues to ignore calls from the International Monetary Fund (IMF), the World Bank and other monetary institutions – she is only interested in pleasing her constituency, which is increasingly looking to its immediate interests and losing sight of European perspectives.

In all this, the banks continue to be uninterested in any social perspective. A few days ago, European and U.S. regulators imposed new fines worth 4.5 billion dollars on a number of major banks (we are now approaching the 200 billion dollar mark since the crisis started in 2008) for illegal activities.

Jamie Dimon, the CEO of the largest of them, JP Morgan, declared in an interview with Andrew Ross Sorkin of CNBC that it is important that United States creates a “safe harbour” where JPMorgan’s illegal practice of hiring the relatives of political leaders “is not punished”.

In Dimon’s country, between 2009 and 2010, 93 percent of economic growth ended up in the pockets of one percent of the population, according to Nobel economics laureate Joseph Stiglitz, and the 16,000 families with wealth of at least 111 million dollars have seen their share of national wealth double since 2012 to 11.2 percent.

The last U.S. presidential elections cost 3.4 billion dollars, and most of that came from this small minority. Democracy, where all votes are equal, is increasingly becoming a plutocracy where money elects.

Meeting leaders of social movements on Oct. 26, Pope Francis told them: “They call me a communist [for speaking of] land, work and housing … but love for the poor is at the centre of the Gospel.” Certainly, governments are doing otherwise …

(Edited by Phil Harris)

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Child Poverty in Spain Seen Through the Eyes of Encarnihttp://www.ipsnews.net/2014/11/child-poverty-in-spain-seen-through-the-eyes-of-encarni/?utm_source=rss&utm_medium=rss&utm_campaign=child-poverty-in-spain-seen-through-the-eyes-of-encarni http://www.ipsnews.net/2014/11/child-poverty-in-spain-seen-through-the-eyes-of-encarni/#comments Sat, 01 Nov 2014 05:11:44 +0000 Ines Benitez http://www.ipsnews.net/?p=137523 Estefanía reads in the top bunk while Encarni does homework on a table in her small room. This 12-year-old girl from Málaga is one of the faces of child poverty, which according to a new UNICEF report affects 36.3 percent of children in Spain. Credit: Inés Benítez/IPS

Estefanía reads in the top bunk while Encarni does homework on a table in her small room. This 12-year-old girl from Málaga is one of the faces of child poverty, which according to a new UNICEF report affects 36.3 percent of children in Spain. Credit: Inés Benítez/IPS

By Inés Benítez
MÁLAGA, Spain, Nov 1 2014 (IPS)

“I would like to have a big house, and I wish my family didn’t have to go out and ask for food or clothes,” Encarni, who just turned 12, tells IPS in the small apartment she shares with five other family members in a poor neighbourhood in the southern Spanish city of Málaga.

This girl with shoulder-length straight brown hair, brown eyes and broad forehead is one of the faces of child poverty in Spain, which has grown 28.5 percent since 2008, according to a report released Tuesday Oct. 28 by the United Nations children’s fund, UNICEF.

The report, “Children of the Recession”, which studied 41 industrialised nations, says child poverty in Spain climbed from 28.2 percent in 2008 to 36.3 percent in 2013. It includes Spain on the list of countries hardest hit by the economic crisis, along with Croatia, Cyprus, Greece, Ireland, Italy and Portugal.

Almost every day in the middle of the afternoon Encarni goes with her mother and her aunt to get food at the Er Banco Güeno, a soup kitchen run by the community in the Palma-Palmilla neighbourhood.

The soup kitchen has been operating for the last two years in what used to be a bank, which the local residents occupied for this purpose. They serve three meals a day to the needy.

“I worked in construction until the start of the 2008 crisis, when I was laid off,” Encarní’s stepfather, Antonio Delgado, tells IPS. Since then he has not found work, and has done a little of everything, ”from picking up junk to selling things in street markets.”

Antonio, with a lean face and teeth that have seen better days, brings in a few euros a day fixing things using a soldering machine and a tire pump, which he keeps in a corridor off the street, where several bird cages hang at the entrance.

Encarni explains that her mother, Inmaculada Rodríguez, found work for a couple of months taking care of an elderly person, but was fired.

The unemployment rate in this country of 47 million people currently stands at 23.6 percent. But in the autonomous community or region of Andalusia, where Málaga is found, it is 35.2 percent, according to the national statistics institute, INE.

“I really like to go to school. I especially love gymnastics,” Encarni says, with her sweet voice, although she adds that she gets sad when she feels they leave her out sometimes, “because they saw me go into the soup kitchen for food. But I just ignore them,” she adds, with a wan smile.

One of the apartment blocks in Palma-Palmilla, the poor neighbourhood in the southern Spanish city of Málaga where Encarni and her family live. Credit: Inés Benítez/IPS

One of the apartment blocks in Palma-Palmilla, the poor neighbourhood in the southern Spanish city of Málaga where Encarni and her family live. Credit: Inés Benítez/IPS

A few days ago her aunt and three cousins moved to another house nearby. But until then there were 11 people living in Encarni´s house, the family said when they described their day-to-day life to IPS.

She slept in the top bunk with her cousin Estefanía, who is a year older than her. In the bottom bunk slept her aunt Ana María and her nine-year-old cousin Juan José. Encarni’s two-and-a-half-year-old cousin Ismael slept next to them in a crib.

Encarni’s mother, her stepfather, and four other members of her family slept in the rest of the rooms of the house, which only has one small bathroom which you reach by ducking under a clothesline, where the recently washed clothes are being dried by a fan, near the kitchen.

Estefanía and Ismael suffer from epilepsy, says their mother Ana María, who is unemployed and shows IPS the box where she keeps the medications that they have to take every day.

“Is your house big?” Encarni asks IPS while petting her dog, a friendly black pup named Gordo.

She goes on to ask: “Where do rich people get their money?”

According to the report “Even it Up: Time to End Extreme Inequality” by the international relief and development organisation Oxfam, the richest one percent of Spaniards have as much wealth as 70 percent of the entire population.

The report also says the number of billionaires around the world doubled to 1,645 as of March 2014, from 793 in March 2009, demonstrating that the rich actually benefited from the economic crisis.

Spain, in particular, is one of the 34 countries of the Organisation for Economic Cooperation and Development (OECD) where inequality between rich and poor grew the most during the crisis, according to its Society at a Glance 2014 report.

Between 2007 and 2010, the income of the poorest 10 percent of the population of Spain fell 14 percent, while of the other OECD countries it only dropped more than five percent in Mexico, Greece, Ireland, Estonia and Italy, and did not drop more than 10 percent in any other country.

Encarni wants to be a judge when she grows up. But she says that for now she would be happy just to be able to “dress well” and be able to buy more things in the supermarket.

“Everything we have was given to us because my parents don’t have enough money,” she explains, pointing to the clothes folded on the shelves, the packages of rice and lentils on a high shelf, and even the backpack that a neighbour gave her for school, where she eats lunch every day free of charge because she comes from a low-income family.

Encarni has fun skipping rope, playing Chinese jump rope and goofing off on the swings near her house. She also likes it when her stepfather gives her a ride on his bike.

She likes candy too, and enhoys singing and dancing with her cousin Estefanía, who swam in the sea this summer for the first time in her life, even though she lives only a few kilometres from the beach. “The water tasted salty,” Estefanía tells IPS.

Of every 100 children at risk of poverty in Spain, 25 are in the region of Andalusía, 15 are in Cataluña in the northeast, 10 are in Valencia in the east and 10 are in Madrid and the rest of the autonomous communities, according to INE figures cited by the report “Boys and girls, the most vulnerable in all of the autonomous communities”, by the organisation Educo.

The new UNICEF study warns that 2.6 million children have fallen into poverty as a result of the economic crisis in the most affluent countries, bringing the total number of poor children in the industrialised North to 76.5 million.

With her hair loose and recently combed, sitting on a bed near a window while the TV spits out news on the latest corruption scandals in the country, Encarni hugs her little cousin Ismael, who clasps a piece of bread in his hand while they wait for night to fall.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

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Crisis Fuelled Resurgence of Horse-Drawn Carriages in Cubahttp://www.ipsnews.net/2014/10/crisis-fuelled-resurgence-of-horse-drawn-carriages-in-cuba/?utm_source=rss&utm_medium=rss&utm_campaign=crisis-fuelled-resurgence-of-horse-drawn-carriages-in-cuba http://www.ipsnews.net/2014/10/crisis-fuelled-resurgence-of-horse-drawn-carriages-in-cuba/#comments Thu, 30 Oct 2014 13:52:40 +0000 Ivet Gonzalez http://www.ipsnews.net/?p=137478 People in the city of Bayamo in the eastern Cuban province of Granma use horse-drawn carts as public transportation. Credit: Jorge Luis Baños/IPS

People in the city of Bayamo in the eastern Cuban province of Granma use horse-drawn carts as public transportation. Credit: Jorge Luis Baños/IPS

By Ivet González
HAVANA, Oct 30 2014 (IPS)

Up and down the streets of towns and cities in Cuba go horse-drawn carriages with black leather tops and large back wheels, alongside more simple carts, operating as public transportation.

This ancient means of transportation can be seen throughout this country, in urban, suburban and rural areas, where motor vehicles are expensive and there are not enough cars and buses. And in the most remote parts of the country carts are virtually the only way to get around.

As he has done every morning for the past 11 years, Bienvenido García waits for customers at the ‘piquera’ or stop in the resort town of Varadero, 121 km east of Havana, to take them in his carriage along a fixed route down the main street of this tourist town.“What are needed first of all are solutions that would strengthen and reorient the public transportation system, improve the road infrastructure and reduce vehicle emissions, which would mean upgrading the vehicle fleet.” -- Lizet Rodríguez

Depending on where, what kind of cart, and the distance to be travelled, the cost ranges from two to 10 pesos per passenger (10 to 50 cents of a dollar). But a jaunt in one of the comfortable fancy traditional carriages is much more costly, because they cater exclusively to foreign tourists.

“I used to work in the ‘guaguas’ (public buses). But with the crisis, there weren’t any spare parts or fuel. So I started driving a carriage,” García, a ‘cuentapropista’ or self-employed worker, told IPS.

Like most sectors of the economy, transportation collapsed in 1991 when the East European socialist bloc, Cuba’s main trade and aid partner, fell apart. Observers say measures aimed at recuperating transport have been slow and inefficient.

Cubans were forced to find ways of getting around that did not depend on fossil fuels – such as horses, carts, bicycles and three-wheeled pedal-powered “bicitaxis”.

In response, as part of the socialist government’s opening up to small private businesses and cuentapropistas, new trades were added by the authorities: ‘cochero’ or carriage driver, and ‘bicitaxista’ and ‘mototaxista’, who drive bicitaxis and motorcycle taxis.

In 2010, the government declared that private enterprise was key to easing the chronic public transportation shortage. Most of the country’s 473,000 cuentapropistas work in the areas of food and restaurants, housing rental or transportation.

There are no specific statistics on the number of cocheros, who are mainly men. But they abound in cities like Bayamo, called “the city of the carriages”, and Guantánamo, in the east; Cárdenas and Varadero in the west; and Santa Clara, Ciego de Ávila and Santi Spíritus in central Cuba.

 

Bienvenido García has been driving a carriage for 11 years in the resort town of Varadero, in western Cuba. Credit: Jorge Luis Baños/IPS

Bienvenido García has been driving a carriage for 11 years in the resort town of Varadero, in western Cuba. Credit: Jorge Luis Baños/IPS

Nor are there clear figures on how many motor vehicles are circulating today in this Caribbean island nation of 11.2 million people. But in July 2013 the local media reported that there were only 7,840 public transport buses – just half of the 15,800 buses serving the population in the 1980s.

And due to the lack of new vehicles, classic U.S. 1950s cars or Soviet-made Ladas are still plying the streets of Cuba’s cities.

“You can just get by on this job as a cochero because the taxes are high,” said García, whose cart carries up to eight people, “the weight that the horse can pull without it being abusive.”

“I keep the ‘culero’ (manure bag) in good shape, to avoid getting the streets dirty, and I taught my horse to make the stops, so we don’t distort traffic on the road,” he said.

But not all of the streets in towns with horse-drawn carts and carriages are as clean as Varadero’s.

“To get something done, people had to complain to the authorities about horses on the streets. There was manure everywhere,” Aliuska Labrada, a young woman who lives in the town of Cayo Ramona, 200 km southeast of Havana, told IPS.

The resurgence of this old means of transportation brought with it problems related to hygiene, the public image of rural and urban areas, traffic safety, and the welfare of draft animals.

Rules established by local authorities included carriage stands that must be kept clean by the drivers, the following of traditional ways of handling carts, and urban areas off-limits to horse-drawn vehicles. And for the drivers to obtain a license, their horses must undergo veterinary exams.

“It’s a more natural means of transportation…but at what price?” wrote a cybernaut who identified herself as Marina in an online IPS forum.

“The horses damage the paved streets and can cause accidents because the drivers don’t have total control over their animals,” she said. “There’s also the question of mistreatment of the animals. Some people exploit them to exhaustion, just to make money from them.”

That is a sensitive issue that animal rights organisations have been complaining about for years. Since 1988, the Scientific Veterinary Council and the Cuban Association for the Protection of Animals and Plants have been presenting a proposed draft law on animal protection to the Agriculture Ministry, without success.

The local scientific community is pressing for the development of green-friendly, sustainable transportation in Cuba.

In an email response to IPS, the engineer Lizet Rodríguez identified several short- and long-term alternatives, although she said the shift to a cleaner transportation system would require an in-depth feasibility study.

“What are needed first of all are solutions that would strengthen and reorient the public transportation system, improve road infrastructure and reduce vehicle emissions, which would mean upgrading the vehicle fleet,” she said.

Rodríguez, a researcher at the Marta Abreu Central University in the city of Villa Clara, 268 km east of Havana, recommended “improving communications over the Internet, to make it possible to carry out a large number of operations online that today require that people physically go somewhere.”

Few people in Cuba have online connection in their homes, most of them dial-up and some wireless. In 2013, there were 2,923,000 users, including both Internet and intranet accounts, which offer access to a limited number of local and international websites.

The engineer said “the use of the bicycle (as long as there are bike paths) would be feasible above all in small and medium-sized towns, and the use of cleaner fuels like natural gas or so-called biofuels – methanol and ethanol, obtained from biomass residue – could be encouraged.”

Last year, renewable energy sources made up 22.4 percent of the country’s primary energy production, according to the latest report by the national statistic institute, ONEI.

Up to now, renewable energy sources have only been used in a handful of industries, mainly for generating electricity, pumping and heating water, and cooking food.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

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OPINION: Rousseff Re-elected President – What Lies Ahead for Brazil?http://www.ipsnews.net/2014/10/opinion-rousseff-re-elected-president-what-lies-ahead-for-brazil/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-rousseff-re-elected-president-what-lies-ahead-for-brazil http://www.ipsnews.net/2014/10/opinion-rousseff-re-elected-president-what-lies-ahead-for-brazil/#comments Thu, 30 Oct 2014 13:31:06 +0000 Fernando Cardim de Carvalho http://www.ipsnews.net/?p=137473

In this column, Fernando Cardim de Carvalho, economist and professor at the Federal University of Río de Janeiro, looks at the challenges facing re-elected Brazilian president Dilma Rousseff and argues that in the economic sphere she must find a way out of the trap that Brazil has faced since control of inflation was achieved twenty years ago.

By Fernando Cardim de Carvalho
RIO DE JANEIRO, Oct 30 2014 (IPS)

The tight race between incumbent President Dilma Rousseff of Brazil’s Workers’ Party and her opponent, Aecio Neves from the centre-right Brazilian Social Democracy Party (PSDB) party, ended on Sunday, Oct. 26 with the re-election of Rousseff.

As happens in cases of re-election, the new government is, for all purposes, inaugurated immediately, because there is no need to wait until the legal date of January 1 to begin forming the new government and making necessary decisions.

Fernando Cardim de Carvalho

Fernando Cardim de Carvalho

Neither is there a honeymoon in a re-election: voters expect work to begin and some results to show right away.

There is no doubt that Rousseff faces a difficult period ahead. The economy has ground to a halt during 2014 and the perspectives for 2015 are not much better. During practically the whole of the first semester, inflation remained near or above the ceiling of 6.5 percent that was set by the government itself, and the perspectives for next year are not good either.

Balance of payments positions are not comfortable, marked by very high deficits in current transactions and dependence on capital inflows. Social inclusion programmes that were very successful in the recent past may be near exhaustion and will need an upgrade.

Finally, a huge deal was made during the electoral campaign of corruption cases in the administration and in state enterprises, notably Petrobrás, the Brazilian oil company, raising issues that will have to be dealt with by the incoming administration.“There is no doubt that Rousseff faces a difficult period ahead. The economy has ground to a halt during 2014 and the perspectives for 2015 are not much better”

This does not address, of course, another set of difficulties related to the formation of governments in the Brazilian political system, requiring coalitions to be formed with political parties that look like being for rent rather than available for political debates around principles or programmes.

Let us be clear: the situation is uncomfortable on many fronts but is far from catastrophic, no matter how dramatic opposition speeches have tried to suggest.

Things are far better than in Western Europe, for example, where a second recession is very likely to happen in the near future in economies already devastated by the irrational adherence to austerity policies imposed by some governments led by Germany. But the problems the new government will have to face cannot be underestimated either.

Focusing only on the economic challenges, Rousseff’s first task is to try to escape the curse the Brazilian economy has been facing since it achieved control of inflation twenty years ago.

The Real Plan, named after the new currency that was introduced in 1994, was based on the access to cheap imports obtained by liberalising foreign trade and an overvalued currency. To maintain overvaluation it was necessary to attract foreign capital inflows, which required high interest rates (higher than that paid in other countries). High interest rates were also necessary to control domestic demand so that no significant pressure would be applied on domestic prices.

However, exchange rate overvaluation and high interest rates reduced the competitiveness of local producers, particularly in the manufacturing sector, which are very sensitive to exchange rate behaviour.

As a result, the Brazilian economy has lived on a see-saw in these twenty years, alternating periods where devalued exchange rates have allowed some industrial expansion at the cost of accelerating inflation with periods of controlled inflation at the cost of industrial stagnation.

Fernando H. Cardoso was imprisoned by this dilemma, as was Lula da Silva. So was Rousseff in her first term, when she, to her credit, realised that the country had to escape the trap but was unsuccessful in finding the way to do so.

With the international economy in a weak condition, and which is forecast to last, Rousseff has to find a way to promote growth without fuelling higher inflation and increasing external vulnerability, that is, without raising the volume of imports when exports are stagnating.

Bringing the inflation rate down is also needed. Societies tend to have long memories (see how the Germans still react to the hyperinflation they experienced a century ago). A large number of Brazilians still remember how unbearable life was when inflation was in the two-digit figures a month.

We are not anywhere close to repeating that experience, but it has made Brazilians alert and sensitive to any signs that government may be lax in fighting inflation. Besides, 6.5 percent a year for more than three years in a row does add to significant loss of purchasing power for fixed incomes and for those wages and salaries that are not compensated by more generous increases.

Even the greatest triumph of the Workers’ Party administration – social programmes – may be near exhaustion.

The Food and Agriculture Organization of the United Nations (FAO) has announced that hunger is no longer an issue for Brazil. Of course, this is great news but it also means that social policies will now have to be designed with higher aims, to improve the quality of life for the populations that were upgraded by past programmes.

Jobs, education and health are much more difficult to address than extreme poverty, the reduction of which could be dealt with cash transfers. Even if no other important problem was on the agenda, this is a tall order for any political leader, but it is even more so for a re-elected president.

Brazilian citizens are impatient to see how Rousseff will meet the challenge. (END/IPS COLUMNIST SERVICE)

(Edited by Phil Harris)

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

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The Invisible Reality of Spain’s Homelesshttp://www.ipsnews.net/2014/10/the-invisible-reality-of-spains-homeless/?utm_source=rss&utm_medium=rss&utm_campaign=the-invisible-reality-of-spains-homeless http://www.ipsnews.net/2014/10/the-invisible-reality-of-spains-homeless/#comments Tue, 28 Oct 2014 17:33:47 +0000 Ines Benitez http://www.ipsnews.net/?p=137423 Socially marginalised people waiting for lunch at a stand run by the Ángeles Malagueños de la Noche association, whose volunteers serve three meals a day in the centre of Málaga, Spain. Cedit: Inés Benítez/IPS

Socially marginalised people waiting for lunch at a stand run by the Ángeles Malagueños de la Noche association, whose volunteers serve three meals a day in the centre of Málaga, Spain. Cedit: Inés Benítez/IPS

By Inés Benítez
MÁLAGA, Spain , Oct 28 2014 (IPS)

“It’s easy to end up on the street. It’s not because you led a bad life; you lose your job and you can’t afford to pay rent,” says David Cerezo while he waits for lunch to be served by a humanitarian organisation in this city in southern Spain.

Cerezo, 39, lives in a filthy wreck of a house in downtown Málaga with two other people. He used to work as a baker and confectioner but his drug abuse ruined his life, and separated him from his wife and his 36 and 39-year-old brothers.

Now he is determined to undergo rehabilitation, he tells IPS in front of the lunch counter of the Ángeles Malagueños de la Noche (Málaga Angels of the Night) association.

“Most of those who ask for food here have ended up on the street because of drugs or alcohol, but there are also parents coming for food for their kids, and very young people,” he says, pointing towards the dozens of people lined up under the midday sun for a plate of rice, which is steaming in a huge pot.

Spain’s long, severe recession and high unemployment rate, which currently stands at 24.4 percent according to the national statistics institute, INE, have impoverished the population while government budgets for social services for the poor have been cut. “On the street I feel vulnerable, so inferior. You lose your dignity and it’s hard to get it back. I want out of this.” -- Miguel Arregui

According to statistics from earlier this year, between 20.4 and 27.3 percent of the population of 47.2 million – depending on whether the measurement uses Spanish or European Union parameters – lives below the poverty line.

Nor does having a job guarantee a life free of poverty. The crisis drove up the proportion of working poor from 10.8 percent of the population in 2007 to 12.3 percent in 2010, according to the Dossier de Pobreza EAPN España 2014, a report on poverty in Spain by the European Anti Poverty Network.

Even worse is the fact that 27 percent of the country’s children – more than 2.3 million girls and boys – live in or on the verge of poverty, according to the United Nations children’s fund, UNICEF.

A study published Sept. 19 by the Association of Directors and Managers of Social Services reported that public spending on the neediest this year was 18.98 billion dollars – 2.78 billion less than in 2012.

“You find yourself in the street because you don’t have anyone to turn to,” said Miguel Arregui, 40. “And once you’re there it’s really hard to take flight again.”

The tall, black-haired Arregui, who is separated and has an 11-year-old son, told IPS that he spent 15 “endless” days sleeping rough, and that two bags holding his clothes and cell phone were stolen. For the past few weeks, he has been living in a shelter, where he is overcoming his addiction to drugs.

Cerrezo and Arregui are two of the thousands of homeless people in Spain – who total 23,000 according to the last INE census, from 2012, although the social organisations that help them put the number at 40,000.

But the 2014 study on exclusion and social development in Spain by the Foessa Foundation reports that there are five million people in this country affected by “severe exclusion” – 82.6 percent more than in 2007, the year before the lingering economic crisis broke out.

The report states that although homeless people are part of the landscape, most people have no idea what their lives are like. They sleep rough or in shelters, after ending up on the street as a result of numerous social, structural and personal factors.

In Málaga dozens of poor families, many of whom were evicted for failing to pay the rent or mortgage, are living together in squats known as “corralas”, in empty buildings owned by banks or construction companies that went bankrupt.

In the first half of 2014 there were 37,241 evictions in Spain, according to judicial sector statistics.

Since 2007 there have been 569,144 foreclosures, the Platform for Mortgage Victims (PAH) reports. At the same time, there are 3.5 million empty dwellings – 14 percent of the total, according to the INE.

A number of people wake up on the stone benches near the stand where breakfast is served at 9:00 AM. “The day I went to the shelter, they told me it was full and they gave me a blanket,” says José, 47, who spent 15 years in prison and admits that he has to steal to pay for a night in a pension.

“The system could use a turn of the screw, to provide permanent and unconditional housing, in first place,” the director of the RAIS Foundation, José Manuel Caballol, told IPS.

His organisation is promoting the Housing First model in Spain. This approach focuses on moving homeless people immediately from the streets or shelters into their own apartments, based on the concept that their first and primary need is stable housing.

The approach targets people who have spent at least three years living on the streets, or those suffering from mental illness, drug use, alcoholism or disabilities.

Caballol said people with severe problems have a hard time gaining access to homeless shelters, supportive housing or pensions, and that even if they do they fail to move forward with their rehabilitation or end up being expelled from the system once again.

“The results are spectacular,” he said. “The people are so happy, they take care of their house and of themselves because they don’t want to lose what they have.”

The activist is convinced that this approach, which emerged in the United States in the 1990s, “offers a definitive solution to the problem of homelessness and spells out significant savings in costs for the state, in hospital care for example.”

Since July, a total of 28 homeless people have been living in eight housing units in Málaga, 10 in Barcelona and 10 in Madrid, some given to RAIS and others rented by the NGO by means of agreements with city governments and foundations, and with economic support from the government.

“Changes are seen very quickly in the people involved,” said Caballol, who stressed the role played by social workers, psychologists and experts in social integration, who listen, support and assist the beneficiaries, depending on what they themselves decide, rather than the other way around.

“On the street I feel vulnerable, so inferior. You lose your dignity and it’s hard to get it back. I want out of this,” says Miguel Arregui just before going into a shelter in downtown Málaga for the night.

Another local NGO, Ayuda en Acción (Help in Action), warns that one out of every five people are at risk of social exclusion in Spain.

Cerezo says the social network for the homeless falls short of meeting the current needs, and calls for other models like “casas de acogida” – halfway homes or residential-based homes for the most vulnerable, “with orientation by professionals.”

The number of people assisted in Spain by the Catholic charity Caritas rose 30 percent from 2012 to 2013, according to a report it released Sept. 29.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

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Zimbabwe’s Rich Fuel Inequality Through Illicit Financial Flowshttp://www.ipsnews.net/2014/10/zimbabwes-rich-fuel-inequality-through-illicit-financial-flows/?utm_source=rss&utm_medium=rss&utm_campaign=zimbabwes-rich-fuel-inequality-through-illicit-financial-flows http://www.ipsnews.net/2014/10/zimbabwes-rich-fuel-inequality-through-illicit-financial-flows/#comments Mon, 27 Oct 2014 12:29:24 +0000 Tonderayi Mukeredzi http://www.ipsnews.net/?p=137393 A woman poses at the front of a shack settlement in Epworth, outside Zimbabwe’s capital, Harare. Sixteen percent of the country’s 12.5 million people are deemed extremely poor. Credit: Ephraim Nsingo/IPS

A woman poses at the front of a shack settlement in Epworth, outside Zimbabwe’s capital, Harare. Sixteen percent of the country’s 12.5 million people are deemed extremely poor. Credit: Ephraim Nsingo/IPS

By Tonderayi Mukeredzi
HARARE, Oct 27 2014 (IPS)

Zimbabwe has lost 12 billion dollars in illicit financial flows over the last three decades and experts say this illegal practice is perpetuating social inequalities and poverty in this southern African nation.

A September report by the Zimbabwe Vulnerability Assessment Committee (ZIMVAC) estimates that 63 percent of Zimbabweans are poor, with 16 percent of the country’s 12.5 million people deemed extremely poor.

While the number of extremely poor households in the country has reduced from 42.3 percent in 2001, Sydney Mhishi, a principal director in the Ministry of Labour and Social Welfare, told IPS that there is an overwhelming demand for cash transfers because of rising poverty and inequalities, mostly in rural areas.

  • Inequalities are more widespread in rural areas — occurring in 76 percent of rural households compared to 38 percent of households in the urban areas.
  • A majority of Zimbabwe’s people, some 7.7 million, live in rural areas.
  • Nearly 200,000 to 250,000 households in Zimbabwe are classified as ultra poor.

In 2013, about 55,000 households received up to 25 dollars in cash handouts every month from the government under the Harmonised Social Cash Transfer Programme.

The government is supporting 20 percent of vulnerable and labour constrained households through the programme.

“The demand for the cash transfers is more in depth in urban areas. In urban areas we have also started a mix of cash [transfers] as well as electronic transfers in poor suburbs like Epworth,” Mhishi said.

A study conducted by the Institute of Development of Studies in 2013 and released last month, shows that poverty was increasingly taking on an urban face with levels higher than expected. Zimbabwe’s economy is in a fragile state subjugated by a liquidity crunch, funding constraints, and corruption, which has made the government struggle to raise revenue.

And even though Zimbabwe has vast natural resources, the blessings of its natural wealth has not benefitted its people.

The nation has of some of the largest diamond and platinum reserves in Africa and the world, and has over 40 exploitable minerals. All of this could potentially transform the lives of Zimbabwe’s citizens.

But the valuation of the country’s mineral deposits, experts say, remains unknown because of the shadowy arrangements under which most Zimbabwean mines are being exploited.

The Zimbabwe Environmental Law Association (ZELA) points to a dearth of transparency and accountability in the management of the Marange diamond mines.

Minister of Finance Patrick Chinamasa said in December 2013, during his presentation of the 2014 national budget, that the government did not receive any diamond dividends in that year.

According to ZELA, of the seven companies operating in the Marange diamond fields, only one has shown some modicum of transparency and accountability by publicly disclosing its diamond revenue.

Janet Zhou, a programmes director with the Zimbabwe Coalition on Debt and Development, told IPS that her organisation has been campaigning for a tax justice system, which exhorts big companies in the extractive sector to pay their dues to the government to enhance revenue collection.

“Illicit financial inflows cause inequalities because the government loses revenue that should in turn be redistributed to the poor through the trickle-down effect. The rich should pay taxes and subsidise the underprivileged so that they get access to social services,” Zhou said.

Zimbabwe has been affected by illicit financial flows, as money is illegally transferred or utilised elsewhere usually through criminal activities, corruption, tax evasion, bribes and cross-border smuggling.

Research conducted in August by the African Forum and Network on Debt and Development (Afrodad) and the Zimbabwe Economic Policy Analysis and Research Unit approximates that between 2009 and 2013, cash-strapped Zimbabwe lost 2,85 billion dollars through illicit financial flows in mining, fisheries, forestry and illegal safari activities.

The illicit financial flows occurred mostly through under-invoicing by multinational companies and weak legal and institutional frameworks. Afrodad policy advisor Momodou Touray says illicit financial flows deprive governments of revenue that should be ploughed into public sector investment and poverty-reduction programmes.

Zhou added that when the government failed to tap revenue from the rich, usually ordinary people become soft targets. Tafadzwa Chikumbu, an economic governance policy officer with Afrodad, agreed.

“Illicit financial flows perpetuate inequality because they are fuelled by rich multinational corporations and rich individuals who have the capacity to do tax planning resulting in transfer mis-pricing and trade mis-invoicing.

“So if the government fails to harness resources from them, it transfers the burden to weaker economic agents, who are the ordinary citizens,” he told IPS.

Chikumbu said this was demonstrated in the country’s August mid-term fiscal statement, which introduced a raft of tax measures targeted at raising revenue principally from ordinary tax payers.

Edited by: Nalisha Adams

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