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

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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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

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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