Britain’s ‘betrayed’ white working classes believe immigrants receive better treatment

Britain’s ‘betrayed’ white working

classes believe immigrants receive

better treatment

By Steve Doughty
Last updated at 10:56 AM on 03rd January 2009

Hazel Blears warned white people’s concerns about immigration should not simply be branded ‘racist’

White families on the country’s poorest estates believe they have been ‘betrayed’ and ‘abandoned’ by politicians who favour newly-arrived immigrants, a Government report acknowledged today.

It found that people on council estates think they always come second to immigrants for housing and benefits.

Many feel they have been shoved aside by politicians who use political correctness and allegations of racism to stifle honest discussion, it said.

The report for the Department of Communities and Local Government drew an admission from Communities Secretary Hazel Blears that white working class people ’sometimes just don’t feel anyone is listening or speaking up for them.’

She said people should be allowed to talk about their worries ‘without fear of being branded a racist.’

The findings, produced by Mrs Blear’s ‘National Community Forum’, appear another step on Labour’s road away from multiculturalism, the left-wing doctrine that dominated ministerial thinking until the 2005 London July bombings.

Under multiculturalism, ethnic minority groups are encouraged to develop their own identity while critics say values associated with white groups are dismissed as racist.

Today’s report was based on interviews with 43 people on largely-white housing estates in Birmingham, Runcorn, Milton Keynes and Thetford in Norfolk.

It found that ‘by far the most frequent context for referring to ethnic minorities is that of perceived competition for resources – typically housing, but also employment, benefits, territory and culture.’

White working-class residents of some of the country’s most disadvantaged estates felt that immigrants were given priority in social housing

On the Milton Keynes estate, ‘feelings of anxiety around housing were so acute that respondents claimed they had voted against the regeneration of the estate, which meant pulling down all breeze block houses and rebuilding them with new and better materials, because they feared that their necessary displacement during building work would result in them losing their places on the estate to immigrants.’

Many residents were worried that refugees and single mothers could find council and housing association homes more easily than people whose families had lived in the area for generations.

It said they felt that if they complained they would be told the system was fair and they were racist.

The report said there was a ‘growing sense of unfairness and disempowerment among poor white people’ that was at its deepest in the most deprived areas.

It warned that the resentment could provide fertile ground for far right political groups.

The NCM report dismissed the idea that concerns about political correctness were genuine. The reason people spoke of political correctness, it said, was ’so that the white majority assume the role of victims.’

Its authors also considered that despite the lack of ‘explicitly hostile language’ from white interviewees, ‘this is still about race’.

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But Mrs Blears was more sympathetic to those who fear their interests are ignored.

She said that people were expressing ‘real complexities’ and that the Government would look closely at their concerns.

‘White working class people living on estates sometimes just don’t feel anyone is listening or speaking up for them,’ Mrs Blears said.

‘Whilst they might not be experiencing the direct impact of migration, their fear of it is acute.

‘Changes in communities can generate unease and uncertainty.

‘These changes need to be explained and questions need to be answered or the myths that currently surround the treatment of ethnic minorities “jumping the queue” will become increasingly hard to shift.

‘People who care about their communities and have lived there for generations have every right to ask questions about what is happening in their estate, street, neighbourhood.’

Labour MP Frank Field, co-chairman of the cross-party group on balanced migration, said the Government should start to answer working class concerns.

He said: ‘Hazel Blears says that people on council estates feel ignored. That is exactly our point.

‘And not only on council estates – 80 per cent of the public want to see a substantial reduction in immigration but the Government refuses to address the issue.

‘No wonder people feel the Government is riding roughshod over their wishes, and not only in the poorest areas, which are bearing the brunt of the present massive level of immigration.

‘Unless further action is taken soon, immigration will add nearly 10 million to the population of England in the next 20 years.’

Mr Field added: ‘If Labour wants to influence the outcome of the next General Election, it had better start addressing white working class concern about immigration, not simply reporting on it.’

Tory cohesion spokesman Baroness Warsi said: ‘What an indictment of New Labour that they have to have an investigation to show that over the last 10 years they have completely lost touch with their so-called roots.

‘Amongst other things this has also demonstrated the dangers of Labour’s past use of identity politics for electoral purposes.

‘This should be a call to focus on the real core problems of worklessness, debt, welfare dependency, family breakdown and drug and alcohol abuse.’

The allocation of council and housing association homes has become an increasingly difficult problem for Labour MPs and ministers in recent years, particularly in high migration areas.

Former Culture Minister Margaret Hodge complained last year that in her East London constituency migrant families were being given priority for homes over those with a ‘legitimate sense of entitlement’.

Waiting lists for social housing have nearly doubled since Labour came to power and are getting longer thanks to the economic crisis. There are currently around 1.7 million people on the waiting lists.

Homes are handed out on the basis of ‘need’ as assessed by officials. This means that single parents and people who can show they are homeless or workless often get priority over those with jobs and longstanding local connections.

Around one in 12 council or housing association properties – more than 300,000 homes – are occupied by people who are foreign citizens.

Out in Nevada desert, gambling runs dry

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Luis Sinco / Los Angeles Times

The CasaBlanca casino in Mesquite, Nev., is owned by Randy Black, who is planning on more cutbacks for his properties if business continues to drop.

First, a casino boom in Mesquite, now a bust. It’s bad for the city and hard for its residents.

By Joanna Lin
January 3, 2009

Reporting from Mesquite, Nev. — Two decades ago, real estate mogul Randy Black turned this blip on the Arizona border into a boomtown when he opened the first of four casinos. Nearly 1 million visitors a year followed, and hotels, restaurants and stucco homes seemed to sprout from sand.

“It seemed to be one of those things that ‘Geez, it’s just going great. It’s never going to end,’ ” said Victor Kotalion, who left Las Vegas in 1990 for this arid patch off Interstate 15.

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  Photos: Hard luck in Mesquite, Nev.

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Locals and travelers passing through have long kept Mesquite’s casinos afloat. But like the spent mines that have busted many Western towns, Mesquite’s source of wealth ran out. As the economy soured, tourists hoarded their cash, and the town’s gross gambling revenue plummeted 11%. Visitor volume fell 7.4% last year; the average daily room rate fell 35.4%.

Last month, Black laid off 347 workers at the Oasis and shuttered much of the casino. Kotalion, a 60-year-old dealer and floor supervisor, was one of the ones let go.

“As you get older, what do you do?” Kotalion said. “There aren’t a lot of options here . . . not for me. Actually, not for anybody that’s in the gaming industry.”

During the last 20 years, a number of states bet on gambling — a supposedly recession-proof business. But this downturn has wiped out even conventional wisdom: In the third quarter of 2008, revenue dropped in six of the 12 states with commercial casinos, the American Gaming Assn. said.

Resorts are typically reluctant to cut staff, experts said, because training new hires costs thousands of dollars. Yet in the last year, commercial and tribal casinos have trimmed workforces in Riverside County and on the Las Vegas Strip as well as in Michigan, Oregon, Connecticut and New York.

The industry’s losses can be seen vividly in Mesquite, whose reliance on gambling resembles a Rust Belt town tied to an auto plant. Job losses hurt restaurants and retailers, overwhelm social service providers and demoralize the remaining employees.

“If you have one, two, maybe three key industries, if one goes out, the whole town suffers,” said William Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada, Reno. “It’s like cutting one of the legs off a stool.”

Before Randy Black arrived, Mesquite was barely more than a cluster of dairy farms and alfalfa fields along the Virgin River. The Oasis was the sole casino. Black envisioned the city as a rural desert destination, “halfway between where you are and where you’re going.”

After opening the Virgin River hotel-casino in 1990, he bought the CasaBlanca, the Oasis and the Mesquite Star (since closed), becoming Mesquite’s largest employer, with up to 2,800 casino workers.

Mesquite’s population soared, to nearly 20,000 last year from 1,960 in 1990. From 2002 to 2007, yearly gambling revenue climbed an average of 8.2%.

“It was too fast, too hot and heavy,” Kotalion said from his home on the outskirts of the mountain-ringed town. “You could see things going bad, but there was not much you could do about it.”

Over the years, Black took on $200 million in debt to expand his casino business and buy out his partners; he became owner of all but one Mesquite casino, the Eureka. Like magnates in such industries as finance and real estate, he thought business would keep booming. Then the “bubble” burst, he said.

Black mothballed the Oasis in December. Its gambling tables are shrouded in heavy plastic. The buffet, bars and lounge are empty. Dozens of unplugged slot machines sit dark. On a recent afternoon, fewer than a dozen gamblers played the remaining penny slots.

“Has it hit bottom yet? No one knows,” Black said at the CasaBlanca.

If business continues to drop, Black plans more cuts; similarly, he says he’ll rehire staff if demand returns. “If everybody in the planet or in Las Vegas or in the world would say, ‘OK, things are better’ . . . we could open [the Oasis] back up in a day.”

Residents, meanwhile, are struggling. Traffic at nonprofit Virgin Valley Family Services tripled to 100 people a day. Case manager Alex Corral said about 15% of casino employees he had helped decided to leave town.

“Right now, with the Oasis shut down, it’s really hard to decide if anything’s going to come here,” he said. “There’s no money coming into town at all.”

Kotalion is holding out for a casino job. He and his wife, Gail, a floor supervisor at the CasaBlanca, filed for bankruptcy five months before he was laid off. The couple has struggled to pay for medical care and to repair flood damage to their home. He’s stretching unemployment checks that are at least $500 less than his former monthly income. And the Kotalions are fearful that other casinos — including the CasaBlanca — might close or be sold.

Still, Mayor Susan Holecheck remains sanguine about her city of new sunset-colored tract homes. “Mesquite is going to evolve,” she said. “Gaming is not going to be as much of a focus, I don’t think, as it was before.”

The town recently built a soccer complex and softball fields, hoping to lure sporting events. A second Walgreens is on the way. The Census Bureau arrived last month to recruit as many as 150 people. But none of them can match the casinos, which employed nearly 3,000 in the spring. The next-largest employers, the Clark County School District and Wal-Mart, provided about 330 jobs each.

In fact, the town is awaiting the phased opening of another casino: The 190-acre Solstice, a high-end gambling, retail and resort complex, is slated to bring up to 1,000 jobs when Barcelona Partners fully opens it next year.

Down the street from the construction site, freshly paved roads halt at leveled dirt lots, ready for the next boom.

joanna.lin@latimes.com

Times staff writer Ashley Powers in Las Vegas and researcher Robin Mayper in Los Angeles contributed to this report.

A Spurt of Quake Activity Raises Fears in Yellowstone

By PAT DAWSON / BILLINGS Pat Dawson / Billings Mon Jan 5, 1:05 pm ET

We who live along Montana’s Yellowstone River are downstream from a simmering caldera, a geologic hot spot that has become especially active recently. Indeed, Yellowstone National Park contains the floor of a gigantic volcanic cauldron, one that rises and sinks with the forces that lie beneath – hence the picturesque geysers and steam holes. But a wave of recent earthquake activity is raising fears that have their origins 642,000 years ago, when a Yellowstone “supervolcano” exploded so violently that it created the caldera itself. Today, such an explosion – 1,000 times more powerful than the explosion of Mount St. Helens in 1980 – would not only cover most of the U.S. with ash but also throw so much dust into the atmosphere that the world’s climate could change.

Could the current activity be the warning signs of another such apocalypse? Or just a large but not world-ending earthquake, like the 7.5-magnitude temblor that happened on a summer night in 1959 and caused a mountain to slide down into a campground, killing 28 people and damming the Madison River?

Last week, geologists at the Yellowstone Volcano Observatory (YVO) announced they had recorded a “notable swarm of earthquakes under way since Dec. 26 beneath Yellowstone Lake.” The strongest tremor among the hundreds in the past week measured 3.9 on Dec. 27; most of the readings above 2.8 were felt by park employees and visitors around the lake area. The activity relaxed in magnitude early this week but then flexed upward again to top 3.0 by early New Year’s Eve. “This December 2008 earthquake sequence is the most intense in this area for some years,” YVO reported, “and is centered on the east side of the Yellowstone Caldera,” the ancient collapsed volcano beneath Yellowstone Lake. The scientists said they cannot immediately “identify any causative fault or other feature without further analysis.” (See a gallery of recent volcanic eruptions.)

This activity could have a whole range of consequences. In a study released last year, the United States Geological Survey (USGS) said possible hazards could include hydrothermal explosions, when steam breaks through the surface and forms a crater. That has happened 26 times in the park’s 127 years of record-keeping. The USGS discounted chances for cataclysmic eruption of the caldera, noting that the hot, active magma chamber below Yellowstone has turned into “largely crystallized mush.” But the same study also said: “Depending on the nature and magnitude of a particular hazardous event and the particular time and season when it might occur, 70,000 to more than 100,000 persons could be affected; the most violent events could affect a broader region or even continent-wide areas.”

Jake Lowenstern, Ph.D., YVO’s chief scientist, who also is part of the USGS Volcano Hazards Team, told TIME that a supervolcano event does not appear to be imminent. “We don’t think the amount of magma exists that would create one of these large eruptions of the past,” he said. “It is still possible to have a volcanic eruption comparable to other volcanoes. But we would expect to see more and larger quakes, deformation and precursory explosions out of the lake. We don’t believe that anything strange is happening right now.” Last summer YVO installed new instrumentation in boreholes 500 to 600 ft. deep to better detect ground deformation. Says Lowenstern: “We have a lot more ability to look at all the data now.” (See an interactive graphic depicting how scientists monitor volcanoes.)

The Yellowstone Caldera – formed by the massive upheaval 642,000 years ago that spread airborne debris all the way to the Gulf of Mexico – is nowhere close to being extinct. Areas of the park’s topography inflate like a bellows because of magma infusing into volcanic chambers about 6 miles below the surface. About 1,000 to 2,000 tremors a year (mostly small) have been recorded since 2004, when interpretation of satellite imagery with GPS readings indicated the caldera had been rising as much as 3 in. a year. The past week’s number of tremors – about 400 – is considered unusual.

The 1991 explosion of Mount Pinatubo in the Philippines was the largest eruption in recent memory, and its effects on the atmosphere are still being measured. The 1883 eruption of Indonesia’s Krakatoa led to a global cooling and the deadly winter of 1886-87 that wiped out the short-lived open-range cattle bonanza of Montana Territory. In 2000, Ken Wohletz, a scientist at Los Alamos National Laboratory, postulated that an even bigger Krakatoa eruption in 6th century A.D. may have sent a tall plume of vaporized seawater into the atmosphere, causing the formation of stratospheric ice clouds with superfine hydrovolcanic ash, which literally cast a pall over much of the world at the beginning of what became known as the Dark Ages.

YVO’s alert code for the Yellowstone Caldera stands at green, but if it ever elevates to yellow or red based on seismic readings, Lowenstern says, “Ultimately it’s my responsibility to put out alerts. The National Park Service and local officials would be responsible for civil defense measures and evacuation plans. For now, life goes on. The system is generally automated, and a seismologist at the University of Utah is on call to make sure it’s a real event should it be anything unusual.”

This time of year, Yellowstone is a land of dramatic fire-and-ice contrasts, with hissing, boiling water heated in chambers far below shooting out clouds of steam over a subzero, snowy alpine landscape, where bison and elk find warm patches of open ground to browse. We who live here, it has been said, do so at the mercy of geology. In much of the West, with its long seismic faults and Yellowstone-centered hot spots, it is for humans a sublimely tenuous coexistence with the earth’s fickle tectonic temperaments.

GLOBALIZATION AND POVERTY

Globalization and Poverty Interview with Dr. Vandana Shiva
by Dr. Garry Null

GLOBALIZATION AND POVERTY:
Interview with Dr. Vandana Shiva By Gary Null Progressive Radio Network, Broadcast December 16, 2008
GARY NULL (GN): My guest today is one of the more remarkable individuals that you will ever hear speak on the subjects that we’re going to discuss: the relationship between globalization and poverty, the oil industry’s destruction of agriculture, plus other issues involving the disposition of land and power and the body politics in Africa and India. Dr. Vandana Shiva is one of India’s top nuclear physicists and an internationally renowned environmental and social activist. She has been credited as a principal founder of India’s ecological and eco-feminism movement.

In 1982 she founded The Research Foundation for Science and Technology and Ecology in New Delhi, which led to the creation of an organization, Navdanya, dedicated to the restoration of organic farming across India and the preservation of indigenous knowledge and culture. For several decades Vandana has fought for changes in the globalized practices of agriculture and food and has traveled the world speaking against the bio-piracy of indigenous plants and their medicinal properties by large agriculture and pharmaceutical corporations. She has received numerous international awards including the Alternative Nobel Prize, UNEP’s Global 500 Award, and the UN Earth Day International Award. Her most recent book is “Soil Not Oil: Environmental Justice in An Age of Climate Crisis.” There are so many pressing issues in the world today, and I would like to start with one that is not getting the mainstream media attention that it deserves, specifically the relationship between corporate globalization and increased poverty, including the policies of the World Bank, IMF, the WTO and their western government backers. From your point of view how has the US and its aggressive push for free market economics contributed to the increase in poverty and a widening of the gap between the haves and have nots throughout the world, especially in light of Barack Obama recently stating that he is very much for globalization and free market efforts.
VANDANA SHIVA (VS): I think India is a good test case to see how globalization increases real poverty even while measurements of growth make it look like the country is booming. India’s growth these last few years has been 9 percent and it is seen as one of the fastest growing economies. And yet in this decade of high growth under free market globalization India has the largest number of hungry people in the world. An agrarian society that has all the capacity to feed itself is today unable to feed its children partly because the land is being diverted for mining, for car companies and highways, and because agriculture itself is being diverted for luxury crops for the rich. One of the greatest tragedies of the new poverty that India is witnessing is the emergence of an epidemic of farm suicides. It’s one step beyond poverty to have to end your life because you’re so deeply indebted and the debt is completely related to corporate seed monopolies, such as Monsanto’s genetically engineered BT cotton. It’s a globalized agriculture controlled by a handful of agribusiness companies-the Cargill’s and ConAgra’s-and the WTO that wrote the rules of agriculture. The combination of seed and commodity controls has denied India its basic right to food, especially for the poor.
GN: There is also 9.1 percent growth in China and still 66 million hungry, unemployed people who are now beginning to protest. Do you believe that we will begin to see protests and riots in India such as what we have seen in Pakistan where the poor were not being subsidized and where there is no infrastructure to care for the poor?
VN: Actually protests are happening. Some protests come out in the language, voice and pain of the people themselves. They protest for land. They protest for food. They protest for water. They protest for forests, for the indigenous communities. But very often, just as our food is being genetically modified protests too are being genetically modified to appear as if they concern religion or are related to terrorism and extremism. And this mutation into a new form of response is partly a manipulation of those powers in control. They do not allow a farmer’s protest to be viewed as simply a farmers’ protest. This is what was happening in the state of Punjab two decades ago. Farmers’ protests were mutated into a protest about religion. Out of it came the invasion of the Golden Temple in Amritsar, the military standoff, and finally the assassination of Prime Minister Indira Gandhi who had ordered the army to deal with the issue of the Punjab and extremism. But today terrorism is made to look like it appears by itself. I can offer two examples of conflicts about land and livelihood which have been distorted to look like they’re conflicts initiated by people on the basis of caste, religion and ethnicity. We have had a major protest among the pastoral tribes in a region of Rajasthan, a desert area where livestock is the only economy because you can’t really farm extensively with very little water. All of those common lands which are pastoral have been handed over to industry to grow bio-fuel. The pastoralists are now without land as well as livelihood. When they protest they stop the entire transport system of India. Yet the protest is not written in the language of the land and people’s livelihood. It is written in the language of caste. Caste is a name for an occupation, just as pastoralists signify a pastoral occupation. Even the large Darfur conflicts in the Sudan, which are made to appear as if they are only about religious strife, is really about collapsing livelihoods with increasing desertification due to climate change. The settled agriculturalists and the pastoralists cannot meet their own needs. So they end up warring against each other. I think it is time for us to read the narrative of the new conflict and the new violence as distorted protests that were engineered to look like something else. And of course it suits the powerful and wealthy because they can keep free market globalization going and define war economies in every society as a means to contain terrorism.
GN: A lot of that has to do with policies on Wall Street and in Washington, which today are virtually one and the same. So if you have a peaceful protest of hungry farmers who cannot afford and do not want to use the genetically modified crops, such as cotton, and who are in such personal debt that they would rather commit suicide by the tens of thousands instead of seeing their families suffer anymore, then of course they would. But when you have people sitting on corporate boards and on Wall Street and in Washington who don’t give a damn about the Indian public-in fact they don’t even care about the average American because the average American is being thrown out on the street while these individuals are reaping humungous rewards by the very people who caused the problem. These are anti-civic individuals. How do you stop that mindset so that every truly progressive movement that deserves to be heard is not just stamped with the moniker of terrorist?
VN: I think the most important way to conduct resistance for a more just and peaceful society is to be absolutely committed to nonviolence. That was the bar of India’s freedom movement, and that is the bar of the civil rights movement in the United States-to challenge power and wealth strategically but also nonviolently. That is a very strong demand of our time. The second very important issue is to continue to defend the democratic right to dissent. After all what is democracy if not the right to dissent? A dictatorship doesn’t allow the right to dissent, and as I’ve written in book after book corporate globalization has become a dictatorship. It is drawing states into implementing that dictatorship, and as long as corporate globalization implements this dictatorship it will destroy democracy. It will treat every legitimate democratic action as equal to the worst form of terrorism. So we stand for democracy and democracy is our birthright and our duty.
GN: In our society, like your own, we have our own caste system. There are the have’s and have not’s. I’ve never in my lifetime seen the powerful bring in the poor and ask for their advice. So how in the world are we ever to change any thing constructively if the most powerful people in the land surround themselves with the elitists and refuse to acknowledge that the poor and those less up the ladder also may have something constructive to offer? Was it not Albert Camus who said, “We rarely confide in those who are better than we are?” What if the ‘better’ means people with more humanistic and practical views of how to solve problems, such as the advocates of the organic movement? What if all of India, Africa, and the United States were to start looking at long-term sustainability of small agriculture projects in every community using organic heirloom instead of genetically modified crops? Think of the consequences to the water, to the air, to the land, to erosion, to reforestation, to sustainability and compatibility. And yet we have no such movement except at the grassroots level. Not a single dollar in the United States goes for organic, and yet everything goes for the big and very immoral food companies.
VS: During the last 20 years I’ve worked with both a scientific realization as well as a political realization that one of the most radical revolutions of our time is adopting biodiversity, saving open-pollinated seeds and practicing organic farming. As you said it’s a solution to every problem we face. It’s a solution to climate change. Moving beyond oil returns more to the soil, and we find in an ecological and organic agriculture both the mitigation and the adaptation strategies for knowing how to deal with the mess that a fossil fuel civilization has created. Organic food is the best solution to the biggest health problem of our time. Two billion obese and ill with food-related diseases. One billion denied their rights to food. Hence three billion are denied the right to wholesome food that can be solved with a local ecologically robust food economy. Then there is the issue of water. Ten times more water is used in industrial chemical agriculture. Water is clearly a limiting factor and will become more of a crisis as climate change melts our glaciers, dries up our springs, and leaves more and more areas water scarce. It’s also a solution to the conflicts all around us. I recently returned from a long field trip in the very poor Indian state of Orissa. Culturally, in terms of peace and harmony between nature and people and between people and people, there are amazing examples. Every villager has the deepest humanity. Every villager has the deepest sense of self sufficiency and enough-ness. That is the future we have to strive for. And I think the biggest monopoly in our time is when agribusiness went into the oil economy. It is a new genetic engineering industry. They are not going to allow governments to move towards organic farming rapidly. They will try everything to force genetic engineering upon us. Two decades ago when I started the Navdanya movement in India, these companies had announced they would have all seeds patented and all crops genetically engineered by the turn of the century. They have so far only genetically engineered four crops on any significant scale: cotton, soy, rice and canola. They haven’t managed to patent everything under the sun, and we have built a movement that will not acknowledge patents. I call it the seed satyagraha just like Gandhi’s satyagraha when he told the British that nature gives salt for free. We need it for our survival. We will make our own salt. In the same way we get seeds from our ancestors and nature. We will continue to save them for future generations, and we will not obey patent laws. I believe if we keep saving our open-pollinated seeds, if we keep doing organic farming, and those in the cities commit themselves to eating only food that is genuinely free of patents, GMO’s, pesticides and toxins, and free of corporate control, we can succeed. Even if governments don’t change their policies we will have created another economy. And if you look at the growth of the movement, it has grown without policy protection in spite of adverse policies. When we combine the financial, climate and food crises, the manipulative corporate economies will not survive. The economies of care and compassion fight it by their recognition that we live on a very fragile earth and have a very high level of responsibility to protect it. If there’s going to be a future, it’s going to be found in people’s actions.
GN: I’ve always been an organic farmer, and I’ve been a major promoter of organic farming in the United States on a small scale. I’m a believer in moving back to the land, and then creating small sustainable communities. To grow one pound of organic potatoes takes 60 gallons of water. To grow one pound of meat, a 16 ounce steak, requires 12,000 gallons of water. If we’re running out of water, and we are, would you suggest that it would make sense to preserve our water by being conscious that you’re going to eat something that requires less? Now that meat has arachidonic acid. That arachidonic acid increases chemicals in the body called cytokines and tumor necrosis factors that result in inflammation. By eating organic and eating more naturally not only are avoiding these chemicals, besides many environmental toxins, but we are also saving water. Much food we buy at our corporate markets has traveled thousands of miles to reach our tables, and this leaves a large carbon footprint. So wouldn’t it be better to buy something local, support our local food crops and organic movements to lessen pollution? Isn’t it advantageous then to do everything we can to clean up the environment by going green? For those in India and other parts of the world who are principally vegetarian, and who care about life and the environment, do you imagine that at some point there needs to be a collective shift in consciousness that supersedes the power brokers and the policy makers, and says, “We tried it your way and look where we’re at. We’re now going to do it our way, and you’re welcome to join us, but we’re not going to listen to you anymore.”
VS: Just because the corporate media doesn’t cover it, doesn’t mean it’s not happening on a large scale. I think if you add together the people who want to eat and live consciously, who want to reduce the human ecological footprint on the planet, who want to do less harm to other human beings — because every economic system that does violence to the planet also violates the rights of fellow human beings — creates a powerful force in the world. I think as this information becomes more coherent and moves more quickly a conscious shift will take place. A year ago people would never have believed those of us who were saying all these measures of financial growth are fictitious. It’s just a bubble waiting to burst. Twenty years ago I started to organize rallies of half a million farmers in the street to declare that the agra-industrial system would kill our farmers. It was a death knell for our farmers and a recipe for hunger. People didn’t believe it. Today the farmers are committing suicide. Today the food prices have risen. Food sovereignty and local food systems are back on the agenda and that reveals the incoherence of the dominant corporate system. The governance of the truth we stand by, the truth of the earth, the truth of nature, the truth of justice is our greatest strength and that will only increase consciousness. From it we’ll only grow with every step along the way. The next five and ten years will be absolutely unpredictable times, but as long as we can hold our ground and hope, I believe the shift of consciousness will turn today’s dominators into the marginals who will be enlightened to come join our table of peaceful food and of abundant food.
GN: Well I absolutely agree with you. That was a very special insight. Now to two other areas that are not getting the attention, in my opinion, that they deserve in the United States. Every US administration, Democrat or Republican, has looked at profit as preferable to people. How has the mega corporations and western administrations given us a false utopian concept regarding human and economic development and environmental sustainability for raising people out of poverty? During the elections I didn’t see a single statement that was printed or a voice spoken about the hundred million poor in the United States, the 36 million who go to bed hungry each day, the 12 million children in the United States who don’t have enough to eat, let alone the 27 thousand children who die each year, and most of them from infections, from bad water or malnutrition. Not a word about these things, and yet they blather on as if somehow they’re in touch. I’m asking who are they in touch with? Since it’s always about profit and never about people.
VS: You know as the food crisis has intensified during the last year, food prices have doubled. But we’ve also seen the corporate profits driving the food system double. I think we now have a major contest between two futures. There’s the future that you and I are talking about and living in. It’s a future of providing food security to the last child on the basis of people working lovingly with the land. More farmers growing good food, growing organic food, and this will drive away hunger and food scarcity. I really find the United Nation’s millennium goals highly un-ambitious because seven or eight years ago they talked only about halving the number of people who go to bed hungry. Well, with ecological farming and biodiversity agriculture we are not only doubling and tripling but we could increase food production five-fold and nutritional production even higher because the foods grown organically have much higher levels of nutrition. That’s the way to address the problem of hunger. That’s the way to make sure society does not neglect people. Of course there is another agenda. And that agenda will attempt to use the crisis it has created to grab more of the food and agrarian economy. Look at what happened at the June Summit on climate and food. The biggest winner was fortune’s foremost Bill Gates and his foundation who wants to sell more chemical fertilizers to Africa, and then commercialize the food supply for Africa. The second winner was the genetic engineering lobby. Of course both of these plans are completely inappropriate. The prices of fertilizers are going high. Nitrogen fertilizers are a major cause of global warming because the nitrogen oxides emitted are 300 times more lethal in global warming than carbon dioxide. To push more chemical fertilizers during this period of climate change is doubly criminal because it will force African peasants into debt, and then it will force all of humanity into an ecological debt. The genetic engineering lobby offered a false solution. They said only they can solve the problem of addressing climate change. They can’t because genetic engineering can only deal with single gene manipulations. Climate resilience in crops is a multi-genetic trait. They cannot engineer climate resilience. They can steal salt resistant seeds from us. They can steal flood resistant seeds from us. They can steal sources of seeds from us. I’m in fact preparing for our next campaign against bio-piracy-when agricorporations patent our traditional knowledge, our indigenous seeds. And when corporations are patenting, and there are 500 pending patents on climate resilience traits in crops, all of this is based on bio-piracy. Of course the real solution that we are offering is building community seed banks, building the commons for people to share as disasters happen. For example, we took salt tolerant rice down to the tsunami areas and drought tolerant rice to the areas in central India where they were having a four-year drought linked again to a climate catastrophe. The corporations will continue to seek profits. So we have to build on community. We have to build on people’s rights. And this contest is not going to go away in a hurry. But the fact that it doesn’t go away in a hurry doesn’t mean we don’t build the power of people.
GN: I would like to discuss the relationship between how the loss of natural biodiversity increases population growth and thereby increases poverty. If you would address the large agro-industrial players that you mentioned earlier and the destruction of biodiversity with their genetically modified seeds. I might mention that Hillary and Bill Clinton were sponsors of the Stevens Financial Group out of Little Rock, Arkansas, who was a major player in developing these genetically modified seeds. Under NAFTA and the WTO, the Clinton administration and its supporters thought it was a great idea. Little did they ever consider or care about the consequences. So if you would take a look at what it means to be forced into using seeds because your own natural seeds are no longer available. This has been true around the world where the World Bank and IMF went into almost every developing country and said, “We’ll give you a loan, but you must now give us structural adjustments. No more growing sustainable crops. No more small crops. Now you’re going to plant cash crops: cotton, soybeans, rubber and crops that you can get out of the country and sell abroad. That was also the case in India. Also speak about the contradiction between the great Green Movement, which won one person the Nobel Prize. But they weren’t looking at what this green revolution actually meant in terms of the average person.
VS: Well you know the Green Revolution was far from green. It was introduced in India in 1965 and ‘66 when we had a drought. Because of the drought we needed to buy grain, and the US government said we could not have higher imports unless we changed our agriculture to the new seeds and the new chemicals. This package of new seeds that required chemicals is what is called the Green Revolution. The seeds had been evolved by Norman Borlaug who received the Nobel Peace Prize. The assumption was that commercializing and making agriculture more dependent on purchases would create a capitalist alternative to the spread of communism. And the reason the Green Revolution was called green was because it was contrary to red. It was not called green because it was ecological. The word green did not describe any ecological movement at that time. The Green Revolution was also pushed by the World Bank, which forced structural adjustments on India. It gave loans linked to structural adjustment to move seeds, pesticides and chemicals. The World Bank financed large dams that provided the intensive irrigation their seeds and chemicals required. Within the first few years 25 percent of the peasantry of Punjab had been wiped out. They were displaced from the land. Well within a decade, agriculture in Punjab had fallen into disarray, which is what then led to the extremist movement of the late ’70s and early ’80s. That was the basis of my book, “The Violence of the Green Revolution,” because I wanted to understand why the land, which was called the most prosperous, is today the angriest and why young Punjabis were taking to guns. What the Green Revolution basically did was push farmers into debt. It left the land desertified. It destroyed variety. Punjab used to grow 250 crop varieties. Today it grows monocultures of wheat and rice during two separate seasons and a monoculture of genetically engineered cotton. Punjab is one of the areas where we have large numbers of farm suicides. Twenty percent of the Punjab is now unfit for cultivation. Ten percent is water logged by putting too much water in intensive irrigation. Now this is precisely the package upon which the genetic engineering revolution has been built. The biotechnology industry calls it the second green revolution, and Bill Gates wants to take this package to Africa as the Alliance for the Green Revolution in Africa. Gate’s, the Rockefeller’s and their corporate affiliates would like to bulldoze over Africa a green revolution like they bulldozed it on India in 1965 through conditions and through destruction of our sovereignty and democratic decision making. But the true green revolution is the ecological agriculture revolution. That’s what we are trying to build.
GN: A final question I would like you to address is the difference between what evolutionary biologists, such as the late Francisco Varella and others, call autopoetic systems as opposed to allopoetic systems. Autopoetic systems are those that are self-organized and are self renewed and such systems rely on biodiversity and are self-sustained. If agriculture, human development and economics were to think autopoetically there would be a flourishing of well being and sustainability. On the other hand, allopoetic systems are externally driven. This is what the entire Green Revolution believed in. Therefore, this revolution seized upon external stimuli to develop artificial energy and external resources. However, this is a completely mechanistic model. There is nothing holistic about it. It’s totally against what we’re talking about and requires increasing energy input like dumping more and more fossil fuels into an industry that would not be required if it was autopoetic.
VN: In my view, ecology is about self organization. It’s the ability of an eco system to clean itself up. That’s self organization, an autopoetic system. It’s about seeds being able to reproduce themselves. That’s an autopoetic system. A genetically engineered seed is an allopoetic system. It needs an external control for its reproduction. A genuine seed is a seed that needs only itself, some soil and sunshine to give you a plant. A child growing into an adult in their full humanity is an autopoetic system. Slaves live under allopoetic conditions. Chemical agriculture and industrial agriculture are allopoetic. The free market globalized economy is an allopoetic system. It’s externally organized. Sovereign local economies are autopoetic systems. Gandhi called this an economy of place, the ability to be creative and to produce for yourself and to meet your own needs. Self-organization is also the highest form of democracy. Democracy is not just going and voting. Genuine democracy is the ability to self-organize to make real decisions about how we are to live: to be able to shape our food system and our education. That means taking power back. That power will not be handed over to us by those who have taken it away. It will have to be shaped by our everyday actions. We will have to reclaim that deep democracy and that’s our autopoetic system.
GN: I want to thank you very, very much for being with us today. You’ve given us a lot of great insights, and hopefully people will read your new book, “Soil Not Oil: Justice in An Age of Climate Crisis,” or go to your website: www.vandanashiva.org and see all of your activities.
Gary Null, Ph.D. is the nation’s longest talk show host on alternative health on NPR and Pacifica radio stations, and an award winning director of documentary films. www.progressiveradionetwork.com

Garry Null is a frequent contributor to Global Research.  Global Research Articles by Garry Null

The Crisis of Common Sense: Is It So Difficult To Understand The Financial Crisis?

The Crisis of Common Sense: Is It So Difficult To Understand The Financial Crisis? by Matthias Chang

Global Research, January 1, 2009

FutureFastForward.org

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Thinking & Common Sense God gave us a brain to think, to think naturally and in simple terms, and not in a complicated way. When we think naturally and use common sense to address problems we will be able to arrive at simple solutions. But our education system tortures us mentally and forces us to think in complicated ways. Our teachers, economists, politicians and so-called experts in God and religion make mountains out of mole-hills, turning simple truths to complex arguments and “scientific theories and equations”. These experts need to make things look difficult to survive and to make sure that we have to rely upon them for solutions. It is often said that, “in the land of the blind, the man with one eye is the King”. Thinking used to be a pleasure and so very invigorating. But now experts have ensured that thinking is difficult and tiring, so burdensome, that we don’t think at all. The result is that common sense is thrown out of the window, and we have been conditioned to rely on our mental crutch, the so-called experts to think for us. How sad. It Is So Difficult To Understand The Financial Crisis Many have expressed to me that they are overwhelmed by the complexity of the global financial tsunami and are absolutely confused as to how to prepare and survive the crisis. When I explained in simple terms, they refused to accept the explanations as to them “it was too simple. It must be more complicated as otherwise how can the crisis become a global fiasco? Consider the following and my simple explanation: 1. financial engineering: new ways of gambling 2. Investors: gamblers 3. Stock & Futures Markets: casinos 4. Financial Analysts: casinos’ salesmen / women 5. Bonds: I.O.Us. 6. Banks: Dishonest Money-lenders (actual money-lenders licensed not as banks, but as money-lenders, cannot create “money out of thin air”. They have to use their own capital – 100% to lend) 7. Currencies / fiat money toilet papers 8. Derivative markets: ponzi scheme So many people have difficulty accepting my explanations as the simple reality. This is even after the recent exposé of the US$50 Billion fraud by Bernard Madoff, the former chairman of NASDAQ. He declared to the FBI, that his scheme was essentially a Ponzi scheme (i.e. using one set of “investors’ money” to pay off an earlier set of “investors”). Banks worldwide have collapsed! Why? Two reasons – (i) they gambled at the casino and lost trillions and (ii) almost all their borrowers that borrowed huge sums (leveraging 30 times or more i.e. if a borrower has $1 million capital, he can borrower $30 million) have defaulted. Common sense tells us that if our income is only $X and we borrow 30 times in excess of $X, there is no way that we can repay the debt, unless our gambling bets pay out in excess of 30 times the original amount of $X. Common sense tells us that if our total family monthly income is e.g. RM3,500, we cannot afford a lifestyle that requires a monthly expenditure of RM10,000 financed by credit-cards with only 5% monthly payment on the outstanding. When interests start piling up on the accumulated monthly outstanding, a point will be reached whereby the cardholder cannot even keep up with the payment of the interests. The cardholder defaults and he gets sued by the lawyers acting for the credit-card companies and or banks. Common sense tells us that if you are conned into buying something allegedly worth US$500,000 when its actual value is US$5,000 and you borrowed to buy the inflated “asset”, there is no way that you will continue paying the installments and the interests on such an acquisition. The bank on the other hand is stuck with an “asset” supposedly worth US$500,000 but its actual worth is only US$5,000 or less. Common sense tells us that the banks and the governments (fearing a systemic banking collapse) will lie and cover up the con-game until it cannot cover up anymore as too many banks are having the same problems and more importantly, the con-game cannot be covered-up anymore because borrowers are walking away and saying to the banks and governments – “You conned us, you take the blame.” Common sense tells us that these so-called assets which “investors” have invested cannot be real assets, but mere papers masquerading as assets (such as CDOs, synthetic CDOs and CDO Squared – toilet papers). Therefore, so-called sophisticated “investors” were borrowing toilet papers to “invest” in toilet paper assets! Common sense tells us, and thinking naturally and in simple terms will enable us to conclude, that only greedy people can be lured by such con-games and that when gambling at such casinos, these so-called sophisticated investors were not using common sense. Common sense tells us that we, the remaining hardworking people should not allow any government to use our tax revenue to bailout such reckless and greedy b@#st@#ds. Common sense tells us that when gamblers lose millions at the Las Vegas, Macau or Genting Highlands casinos, no government can justify and or dare to bailout such stupid and greedy gamblers. We would vote them out of office. Common sense tells us that since all these “clever people” by their reckless, irresponsible and fraudulent conduct have destroyed the economy, they should be prosecuted and sent to jail and the keys thrown away! Common sense tells us that a system that allows such frauds and gambling should be banned and made illegal. Common sense tells us that when common thieves rob a jewelry shop or a bank, they are sentenced to long terms of imprisonment and whipped as well, these sophisticated thieves should be likewise be whipped and sent to prison for life imprisonment, as their destruction is a million times more devastating than the common thieves! Common sense tells us that when times are hard, we should be prudent and thrifty to overcome and survive the hardships, so why are we encouraged to borrow more and more and to spend, spend and spend? Common sense tells us that when a shop is offering a discount, a reduction in the price of a product, the shop-keeper is encouraging us to spend and buy the goods. Common sense tells us therefore, interest charges and penalty interests are the cost of a debt / borrowings from the perspective of the borrower and revenues and profits, when the debt is fully paid, from the point of view of the lender. Common sense tells us that it is not out of kindness that banks lower interest charges. Like the shop-keeper, it is to encourage more borrowings. More borrowings mean more debts and ultimately more profits for the bankers. Common sense tells us that we should not get into debts unnecessarily and not to borrow to purchase things that are not within our income and our ability to repay. Common sense tells us that we should not commit fraud and or be a party to a fraud. Common sense tells us more importantly, not to be greedy and lust for material wealth. Common sense tells us that we should be angry, very angry with the so-called “sophisticated and up-right people” who commit fraud and the regulatory authorities and political leaders who cover-up their crimes. Finally, common sense tells us that we should take action to put a stop to these crimes and scandals. Please use common sense and do something before it is too late!

China Scrambles to Stave Off Economic Meltdown

China Scrambles to Stave Off Economic Meltdown
by Antoaneta Bezlova

China’s wish for a world financial order less dominated by the United States and its dollar is giving way to a more urgent recession at home.

The specter of a prolonged global recession has dampened China’s wish for a world financial order less dominated by the United States and its dollar, giving way to more urgent dealings with recession worries at home.
As every day brings news of more factory closures and social unrest all over the country, Beijing has swung into a crisis management mode, mandating a sober media tone and attempting to shore up public confidence.
Over the last few weeks the lead pages of major Chinese news outlets have been headed by titles like “coping with crisis” and “withstanding the financial tsunami.” Where once editorials and commentaries were ubiquitously calling for an end to American-style capitalism and the global sway of the dollar, these days the emphasis is on salvaging China’s own boat.
“It is not dissimilar to when you mobilise to go to war,” Liu Jin, an expert on capital markets at the Cheung Kong Graduate School of Business in Beijing, said. “We are in a crisis and the mood in the media is set to help the public cope with the crisis.”
To boost the slowing economy, China unveiled a stimulus package of 585 billion US dollars earlier this month. The money will be pumped into constructing railways, housing, airports, highways and other projects aimed at expanding domestic demand.
“It must be now obvious to many that the impact of the financial crisis to China is not only about us buying U.S. treasury bonds that could shrink in value,” says Wang Luolin, researcher with the Chinese Academy of Social Sciences. “The end of the U.S. development model driven by consumption means the end of China’s development model based on exports.”
As of this week China has overtaken Japan as the largest holder of U.S. treasury securities, with 585 billion dollars compared with Japan’s 573.2 billion, for the first time.
A commentary in the ‘Investor Journal’ deplored Chinese critics of the dollar’s “hegemony” in the financial world as ‘‘blind.”
“It is unfortunate that such criticisms have been widely heard not only among the public but also among economists and policy makers,” the piece said. “China with its vast manufacturing hubs and huge exports has been one of the biggest beneficiaries of the US dollar-centred international trade system.”
China’s manufacturing sector, which produced 14 percent of the shoes, clothes and toys imported into the U.S. in 2007, has sharply slowed down over the past few months due to drop in consumer spending. Hundreds of small businesses in the manufacturing towns along the country’s east and southern coast have been forced to close or suspend production.
China is most concerned about the growing labour unrest, human resources minister Yin Weimin said Thursday. A series of strikes and protests about job losses have been staged in coastal provinces. Official urban unemployment was still about four percent, but could rise to 4.5 percent by the end of the year, he said at a press conference.
“The global economic crisis is picking up speed and spreading from developed to developing countries and the effects are becoming more and more pronounced here,” he said, adding there will be more layoffs and more unrest until the country’s economic stimulus package kicks in next year.
Financially though, China, which exercises capital controls and manages its currency exchange rate, has managed to escape the worst of the current crisis.
Sitting on the fence as the financial meltdown deepens has led some officials and experts to call for Beijing to use the opportunity to wield its power in the financial world and raise the profile of the Chinese currency. Some have said the U.S. should give up its control over the International Monetary Fund (IMF) in return for China’s helping out in the crisis.
This week a senior policy maker voiced this publicly, declaring Beijing would only swap cash aid for more power in the global financial body. The issue has been widely debated since British Prime Minister Gordon Brown said China, which sits on two trillion dollars of exchange reserves, should contribute more cash to the IMF to help fund ailing economies.
“Nobody is going to play with you if you want China to spend money amid the deepening financial crisis while still giving us little voting power,” Jin Liqun, chairman of the supervisory board of the country’s sovereign wealth fund, said in Shanghai.
In another development Wu Xiaoling, a former deputy governor of the central bank, told a seminar in Beijing this week that the Chinese yuan was ready to become an international currency to replace the dollar.
Her words were largely interpreted as a signal that the central government might be preparing to move forward on loosening control over the currency to make a place for the yuan in the central banks’ foreign exchange reserves. At the moment, the yuan is only partly convertible for the purposes of trade and investment.
But China’s readiness to inject substantial change into the global monetary system has been questioned by several leading economists, with Justin Lin, who now serves as the World Bank’s chief economist, being among them.
Speaking at an economic forum in Beijing last month, Lin said China’s financial markets are not mature enough to play a bigger role globally and the yuan has to be fully convertible before it could develop as a major currency for international trade settlements.
People’s Bank of China governor Zhou Xiaochuan said in October last year that there was no set timetable for the full convertibility of the yuan.
Wang Jian, general secretary of China’s Macroeconomics Society, has dismissed all the talk about establishing a new global monetary order as a “daydream.”
“European powers see this crisis as an opportunity too — they want to use it to promote the euro as an alternative to the US dollar,” Wang told the ‘China Business Journal.’ “But there is no way the U.S. is going to relinquish the power of the dollar as an international reserve currency to anybody,’’ Wang told the Journal.

The Global Crisis and Mexico The End of Mexico’s Development Model?

The Global Crisis and Mexico The End of Mexico’s Development Model?
by Hepzibah Munoz-Martinez

The current global crisis, and the role of the United States in it, has brought into the public light the role of financial derivatives in keeping the global financial system in a constant state of volatility. This, however, is not a new experience for the Mexican economy. These financial instruments were a key factor in triggering the 1995 peso crisis. While international institutions and neoliberal analysts blamed the 1995 crisis on the rigidities of the Mexican economy and the ineffective role of the state in supervising financial institutions, the role of derivatives in causing the collapse of the Mexican economy and setting the conditions for austerity measures and disciplining workers was completely ignored.
This time the role of derivatives as a central aspect causing a global recession and affecting the Mexican economy negatively can not be denied. The derivatives transactions undertaken by Mexican corporations have intensified the effects of the recession in Mexico due to particular structural problems in the Mexican economy compared to other OECD countries. These problems are: the pressures that financial derivatives denominated in U.S. dollars exert on the Mexican peso; the concentration of market power in a few Mexican firms; the heavy reliance on American markets (and remittances from Mexican migrants to the U.S.); and the failures of the development model based on the exploitation of cheap Mexican labour at home and abroad.
Corporations and Pressures on the Mexican Peso
Derivatives are often described in economics as a two-party financial contract, the worth of which is derived from the value of some underlying asset. They can be traded in specific market places or by private arrangement called ‘over-the-counter’ (OTC) transactions.
Some of the derivatives used prior to the 1995 peso crisis were total return swaps. This instrument was mostly used to profit from interest differentials to borrow in U.S. dollars and invest in Mexican pesos. A Mexican bank and a financial firm in Wall Street signed a contract that established that the Mexican firm or bank would pay to the financial institution the ‘loan,’ and the latter would pay the bank the ‘total return’ on pre-selected securities. These securities were often short-term peso-denominated public debt.
In this operation, a Mexican corporation agreed to pay the financial firm at LIBOR (the London inter-bank overnight lending rate) plus some additional points on a dollar loan for a short period of time. In exchange, New York investment banks agreed to pay the Mexican entity the return on a given amount of public debt for the same period of time. If the peso did not decrease in value against the U.S. dollar, the returns in public debt remained high and the payment on the dollar loan stayed low.
In this way, Mexican banks could borrow dollars from the Wall Street firm and receive the return from the Mexican bond. When the Mexican peso was under pressure in the mid-90s and devalued, Mexican banks and major firms had to pay their outstanding debt in U.S. dollars. For that reason, they created enormous pressures on the peso when they used lots of dollars to cover their foreign currency obligations. Hence the peso crisis, and the harsh neoliberal austerity imposed on Mexican workers and peasants.
This story is now repeating itself. Over the last years, Mexican corporations did not directly invest extensively in American mortgage-backed securities or credit derivatives linked to those securities. Still, they used derivatives to obtain U.S. dollars at low interest rates, pay these loans with yields in their investment in Mexican pesos and obtain profits from the difference between lending rates in the U.S and investment rates in Mexican pesos.
For instance, Cementos Mexicanos, the third largest cement in the world reported profits by $300-million (U.S.) in 2007. With the credit crunch, the shortage of liquidity in U.S. and an increase in interest rates, CEMEX now owes $500-million (U.S.) in its derivatives operations. Other important Mexican firms that comprise a large portion of the Mexican stock exchange have also reported millions of losses in their derivatives operations. This has also resulted in an increase of these firms’ total debt and decreasing share prices. In order to obtain funds to cancel pending instruments in derivatives and make stocks more attractive for investors, Mexican corporations have decided to cut jobs, close plants and decrease production.
Mexican companies also played a crucial role in the downward pressure on the Mexican peso as these firms ran to cover dollar-denominated debt and positions they had taken in exchange-rate derivatives. This created a shortage of U.S. dollars in the economy, increasing the value of the former vis-à-vis the Mexican currency. In order to maintain confidence of the peso and prevent a more intense speculative run on the currency, the Mexican central bank supplied a large amount of dollars from its international reserves (e.g. the Mexican central bank used 11 percent of its reserves in less than 72 hours at one point over the last months) and increased interest rates on public debt to guarantee the value of the peso.
The actions of the central bank do not entail a direct bailing out of Mexican companies. Still, the supply of cheap dollars at the expense of the public-owned oil company’s earnings and the federal budget can and should be considered as an indirect socialization of private losses. On the one hand, the supply of these dollars prevents the Mexican peso from depreciating, and as a result, it stops Mexican corporate debt in derivatives from increasing. On the other hand, the foreign currency provided by the federal government is channelled to the central bank as opposed to social spending.
The neoliberal austerity implemented after the 1995 peso crisis, and the profitable conditions it provided for financial businesses, has in general allowed Mexican firms to be able to finance their losses in capital markets. It is also the very reason why Banamex, the Mexican subsidiary of Citigroup, has become a major source of profit for this American bank. In fact, Banamex’s profits are key in Citigroup’s capitalization commitments with the U.S. government in its 20 000 million bail out program. As current Mexico’s President Felipe Calderón declared in the 2008 G-20 Summit in Washington: “The global economy dynamism has only been sustained by the vitality of emerging economies.” The role of the Mexican economy in the American bail out program therefore raises questions regarding the new nature of dependency relations in an era of liberalized financial markets.
Structural Problems in the Mexican Economy
Mexico’s President Calderón claims that that Mexico’s banks are solid and the Mexican economy is prepared to face the global economic crisis. However, this takes place in a context of slow economic growth, high unemployment and underemployment and increasing prices vis-à-vis wages. Real wages have been declining annually by almost one percent while inflation has reached four percent. According to Mexico’s National Institute of Statistics, 63 percent of people’s income is spent on food, leaving very little money for education, housing and health. Also, levels of poverty have not decreased drastically given that 14 percent of the population still live in poverty. This is the legacy of Mexican anti-inflationary policies that kept minimum wages from rising, implemented austerity measures in social spending, privatized land, removed agricultural and food subsidies and increased interest rates to attract investment in the Mexican peso.
Despite the measures carried out by the Mexican government to maintain a “sound” financial system and public finances, the global financial crisis might have a greater impact on the Mexican economy that on its OECD or other Latin American counterparts. The reasons are threefold. First, the concentration of market power in a few firms has negative effects on job creation and the balance-of-payments. The job cuts planned to fulfill the private sector’s debt obligations increases the unemployment rate and depresses wages even more due to the large availability of labour. At the same time, these firms are central to the Mexican balance-of-payments because they are one of the main sources of foreign currency into the country via exports and portfolio investment. The diminishing flow of foreign currency through these firms entails the expansion of public debt in Mexican pesos by the Mexican government in order to obtain the foreign currency necessary to maintain the value of the peso.
Second, the Mexican economy faces greater challenges than other countries because of its dependence on American markets for its exports. The economic recession in the United States will lessen the demand for Mexican products, bringing the manufacturing sector to standstill and further decreasing job opportunities for Mexicans. It is worth noting that this export-oriented model has been based on cheap labour in the maquilas — factories that import materials on a duty-free and tariff-free basis for assembly and re-export the final product — under deteriorating labour and environmental conditions and weak backward and forward linkages to the national economy.
Third, Mexico relies heavily on remittances from the United States. In fact, remittances have become a special section within Mexico’s national accounting and it has served as a pressure valve for the Mexican government. Remittances have released pressure for jobs and social spending because poor families have relied on the money sent from abroad to overcome the lack of job opportunities and low incomes. Remittances have also helped to maintain the value of the Mexican peso, which is crucial for Mexican firms’ transaction in derivatives. In 2006, for instance, remittances became the second single source of foreign currency after oil exports. However, the economic recession in the U.S. has affected the flow of remittances sent to Mexico because employment and incomes for undocumented Mexican immigrants have decreased. The Mexican central bank has reported a drop of 12.2 percent in remittances, which is the largest of these cash payments in a single year. This, in turn, creates greater pressures for job creation and social spending in Mexico in order to counteract the negative consequences of the decline of remittances from the United States.
Overall, the power of few firms, the dependence on U.S. markets for exports and remittances and the continuing reliance on a development model based on cheap labour have not only obstructed but also reduced the potential for an economic growth based on a more even distribution of income. This is crucial for the creation of internal market that keeps production moving regardless of the lack of external demand for Mexican goods. Not only the absence of an internal market threatens with paralyzing Mexico’s productive sector and creating further unemployment, but also the lack of a social safety net further aggravates the situation of the working people in Mexico. While the Mexican government has implemented social programs that target extreme poverty in Mexico, there are no universal policies that protect people from unemployment, underemployment and depressed wages. These are policies which could benefit those sectors of the population that do not fall under the category of the extreme poor but still live in poverty.
The Limits to the Mexican Government’s New Economic Recipe
The Mexican government has reacted to the global crisis in two ways. First, Mexico’s financial regulators have responded to the risky positions undertaken by Mexican companies with an investigation in an attempt to reveal the nature of their use of foreign-exchange derivatives. Second, Calderón has implemented a $4.4-billion (U.S.) emergency spending program to cope with the financial crisis. Calderón has announced that this program will target the construction of energy, highway, railway, education, health, and hydro-agricultural infrastructure works. Also, the program involves the allocation of $12-billion pesos for the construction of a new refinery to reduce dependence on imported refined oil.
The recent measures reflect a policy shift from strict austerity policies, implemented since 1982 and the de-politicization of the 1995 government bail-out program of Mexican banks, toward a government-spending scheme focused on infrastructure. There is also a re-politicization of the financial practices of Mexican firms through an official enquiry. This, however, is not the result of the “good” intentions or the so-called “social democratic” agenda of the Calderón Administration and the current LX (60th) Legislature (Congress of Mexico). Rather, it is the reflection of the social discontent with the political system and the economic model, which has been expressed in several protests, the lack of support for Calderón in the 2006 presidential elections, and the severe crisis of credibility for the country’s electoral institutions and overall political institutions in Mexico, including the police and courts. As such, the federal government could not respond with the usual supply-side economics prescription of tightening government spending. Instead, it decided to implement a demand-side management strategy focused on infrastructure in order to prevent further social disenchantment with the current economic and political system.
However, this new strategy has several shortcomings. It does not change the balance of power between the private sector and workers. The Mexican government still has the lowest levels of corporate taxation within the OECD and has very little control over short-term capital outflows. This is, in turn, reflected in the severe pressure exerted over the Mexican peso by firms in order to settle derivative obligations in U.S. dollars.
In addition, infrastructural developments do not necessarily translate into the improvement of the living standards of the middle and low income sectors of the population. On the one hand, the infrastructural projects proposed by the Calderón Administration still rely on cheap labour, and therefore only provide a safety valve to unemployment without guaranteeing income redistribution. On the other hand, investment in highways, railroads, energy and hydro-agricultural projects only benefit a small sector of the population, particularly those firms that benefit from cheaper oil prices, faster transportation and large-scale agriculture. At the same time, the rest of the population is excluded from the planning process of these projects, which usually entail community displacement, environmental degradation and low safety standards for workers.
Indeed, the government has planned to channel funds into education and health infrastructure. Still, the inclusive and democratic use of these facilities to improve the health and education levels of the most vulnerable in Mexico is questionable. The reason is the presence of a corrupt leadership within official teachers’ union, which controls the operation of public schools, including its infrastructure, and the deficient health services offered to Mexico’s poorest through the Popular Health Insurance Program.
The Mexican government’s focus on infrastructural projects only reproduces the weaknesses of the Mexican development model in the current context of the global crisis. This poses a double-burden on Mexico’s poor, who do not only have to suffer the consequences of the economic strategy based on cheap labour at home and abroad, but also the costs of the global crisis, which has already manifested itself through lower wages, higher food prices and unemployment. The Mexican government needs to go beyond infrastructural investment to implement policies that create a social safety net, make food accessible to people, improve the quality of education at all levels and promote inclusive and participatory urban and economic planning. But this is really a question of new political movements emerging and a rupture in the existing Mexican state and power structures.
Hepzibah Munoz-Martinez has recently completed a dissertation on the Mexican financial system and derivatives. She is teaching at Simon Fraser University in Vancouver.

The Great Depression of the 21st Century: Collapse of the Real Economy

The Great Depression of the 21st Century: Collapse of the Real Economy

by Michel Chossudovsky

The financial crisis is deepening, with the risk of seriously disrupting the system of international payments.

This crisis is far more serious than the Great Depression. All major sectors of the global economy are affected. Recent reports suggest that the system of Letters of Credit as well as international shipping, which constitute the lifeline of the international trading system, are potentially in jeopardy.

The proposed bank “bailout” under the so-called Troubled Asset Relief Program (TARP) is not a “solution” to the crisis but the “cause” of further collapse.

The “bailout” contributes to a further process of destabilization of the financial architecture. It transfers large amounts of public money, at taxpayers expense,  into the hands of private financiers. It leads to a spiraling public debt and an unprecedented centralization of banking power. Moreover, the bailout money is used by the financial giants to secure corporate acquisitions both in the financial sector and the real economy.

In turn, this unprecedented concentration of financial power spearheads entire sectors of industry and the services economy into bankruptcy, leading to the layoff of tens of thousands of workers.

The upper spheres of Wall Street overshadow the real economy. The accumulation of large amounts of money wealth by a handful of Wall Street conglomerates and their associated hedge funds is reinvested in the acquisition of real assets.

Paper wealth is transformed into the ownership and control of real productive assets, including industry, services, natural resources, infrastructure, etc.

Collapse of Consumer Demand

The real economy is in crisis. The resulting increase in unemployment is conducive to a dramatic decline in consumer spending which in turn backlashes on the levels of production of goods and services.

Exacerbated by neoliberal macro-economic policy, this downward spiral is cumulative, ultimately leading to an oversupply of commodities.

Business enterprises cannot sell their products, because workers have been laid off. Consumers, namely working people, have been deprived of the purchasing power required to fuel economic growth. With their meager earnings, they cannot afford to acquire the goods produced.

Overproduction Triggers a String of Bankruptcies

Inventories of unsold goods pile up. Eventually, production collapses; the supply of commodities declines through the closing down of production facilities, including manufacturing assembly plants.

In the process of plant closure, more workers become unemployed. Thousands of bankrupt firms are driven off the economic landscape, leading to a slump in production.

Mass poverty and a Worldwide decline in living standards is the result of low wages and mass unemployment. It is the outcome of a preexisting global cheap labor economy, largely characterized by low wage assembly plants in Third World countries.

The current crisis extends the geographic contours of the cheap labor economy, leading to the impoverishment of large sectors of the population in the so-called developed countries (including the  middle classes).

In the US, Canada and Western Europe, the entire industrial sector is potentially in jeopardy.

We are dealing with a long-term process of economic and financial restructuring. In its earlier phase, starting in the 1980s during the Reagan Thatcher era, local and regional level enterprises, family farms and small businesses were displaced and destroyed. In turn, the merger and acquisition boom of the 1990s led to the concurrent consolidation of large corporate entities both in the real economy as well as in banking and financial services.

In recent developments, however, the concentration of bank power has been at the expense of big business.

What is distinct in this particular phase of the crisis, is the ability of the financial giants (through their overriding control over credit) not only to create havoc in the production of goods and services, but also to undermine and destroy large corporate entities of the real economy.

Bankruptcies are occurring in all major sectors of activity: Manufacturing, telecoms, consumer retail outlets, shopping malls, airlines, hotels and tourism, not to mention real estate and the construction industry, victims of the subprime mortgage meltdown.

General Motors has confirmed that “it could run out of cash within a few months, which could prompt one of the biggest bankruptcy filings in U.S. history”. (USNews.com, November 11, 2008))  In turn this would backlash on a string of related industries. Estimates of job losses in the US auto industry range from 30,000 to as much as 100,000.(Ibid).

Collapse of General Motors Share Price

In the US, consumer retail companies are in difficulty: the share prices of JC Penney and Nordstrom department store chains have collapsed. Circuit City Stores Inc. filed for Chapter 11 protection. The shares of Best Buy, the electronics retail chain, have plunged.

The Vodafone Group PLC, the world’s biggest mobile phone company not to mention InterContinental Hotels PLC are in difficulty, following the collapse of stock values. (AP, Nov 12, 2008). Worldwide, over two dozen airlines have gone under in 2008, adding to a string of airline bankruptcies in the course of the last five years. (Aviation and Aerospace News, 30 October 2008). Denmark’s Second commercial airline Stirling has declared bankruptcy. In the US, a growing list of real estate companies have already filed for bankruptcy protection.

Vodophone. Collapse of Share Price

InterContinental Hotels PLC

In the last two months, there have been numerous plant closures across America leading to the permanent layoff of tens of thousands of workers. These closures have affected several key areas of economic activity including the pharmaceutical and chemical industries, the automobile industry and related sectors, the services economy, etc.

US factory orders have declined dramatically. Research firm Autodata reported in October that “sales of cars and light trucks in September had declined 27 percent compared with a year earlier.”(Washington Post, October 3, 2008)

Unemployment

According to the US Bureau of Labor Statistics, an additional 240,000 jobs were lost during the month of October alone:

“Nonfarm payroll employment fell by 240,000 in October, and the unemployment rate rose from 6.1 to 6.5 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. October’s drop in payroll employment followed declines of 127,000 in August and 284,000 in September, as revised. Employment has fallen by 1.2 million in the first 10 months of 2008; over half of the decrease has occurred in the past 3 months. In October, job losses continued in manufacturing, construction, and several service-providing industries…

Among the unemployed, the number of persons who lost their job and did not expect to be recalled to work rose by 615,000 to 4.4 million in October. Over the past 12 months, the size of this group has increased by 1.7 million.” (Bureau of Labor Statistics, November, 2008)

The official figures do not describe the seriousness of the crisis and its devastating impact on the labor market, since many of the job losses are not reported.

The situation in the European Union is equally disturbing. A recent British report points to the potential plight of mass unemployment in North Eastern England. In Germany, a report published in October, suggests that 10-15% of all automotive jobs in Germany could be lost.

Job cuts have also been announced at General Motors and Nissan-Renault plants in Spain. Sales of new cars in Spain plummeted by 40 percent in October in relation to sales in the same month last year.

Workers of Nissan automaker protest in front of the Japanese company’s building in Barcelona (AFP)

Bankruptcies and Foreclosures: A Money-spinning Operation for the Financial Giants

Among the companies on the verge of bankruptcy are some highly lucrative and profitable operations. The important question: who takes over the ownership of bankrupt giant industrial corporations?

Bankruptcies and foreclosures are a money-spinning operation. With the collapse in stock market values, listed companies experience a major collapse of the price of their stock, which immediately affects their creditworthiness and their ability to borrow and/ or to renegotiate debts ( which are based on the quoted value of their assets).

The institutional speculators, the hedge funds, et al have cashed in on their windfall loot.

They trigger the collapse of listed companies through short selling and other speculative operations. They then cash in on their large scale speculative gains.

According to a report in the Financial Times, there is evidence that the plunge of the US automobile industry was in part the result of manipulation:  “General Motors and Ford lost 31 per cent to $3.01 and 10.9 per cent to $1.80 despite hopes that Washington may save the industry from the brink of collapse. The fall came after Deutsche Bank set a price target of zero on GM.” (FT, November 14, 2008, emphasis added)

The financiers are on a shopping-spree. America’s Forbes 400 billionaires are waiting in limbo.

Once they have consolidated their position in the banking industry, the financial giants including JP Morgan Chase, Bank of America, et al  will use their windfall money gains and bailout money provided under TARP, to further extend their control over the real economy.

The next step consists in transforming liquid assets, namely money paper wealth, into the acquisition of real economy assets.

In this regard, Warren Buffett’s Berkshire Hathaway Inc. is a major shareholder of General Motors. More recently, following the collapse in stock values in October and November, Buffett boosted his stake in oil producer ConocoPhillips, not to mention Eaton Corp, whose price on the NYSE tumbled by 62% in relation to its December 2007 high (Bloomberg).

The target of these acquisitions are the numerous highly productive industrial and services sector companies, which are on the verge of bankruptcy and/or whose stock values have collapsed.

The money managers are picking up the pieces.

Ownership of the Real Economy

As a result of these developments, which are directly related to the financial meltdown, the entire ownership structure of real economy assets is in turmoil.

Paper wealth accumulated through insider trading and  stock market manipulation is used to acquire control over real economic assets, displacing the preexisting ownership structures.

What we are dealing with is an unsavory relationship between the real economy and the financial sector. The financial conglomerates do not produce commodities. They essentially make money through the conduct of financial transactions. They use the proceeds of these transactions to take over bona fide real economy corporations which produce goods and services for household consumption.

In a bitter twist, the new owners of industry are the institutional speculators and financial manipulators. They are becoming the new captains of industry, displacing not only the preexisting structures of ownership but also instating their cronies in the seats of corporate management.

No Reform Possible under the Washington-Wall Street Consensus

The November 15 G-20 Financial Summit in Washington upholds the Washington-Wall Street consensus.

While formally presenting a project to restore financial stability, in practice, the hegemony of Wall Street remains unscathed. The tendency is towards a unipolar monetary system dominated by the United States and upheld by US military superiority.

The architects of financial disaster under the 1999 Gramm-Leach-Bliley Financial Services Modernization Act (FSMA) have been entrusted with the task of mitigating the crisis, which they themselves created. They are the cause of financial collapse.

The G20 Financial Summit doesn’t question the legitimacy of the hedge funds and the various instruments of derivative trade. The final Communiqué includes an imprecise and blurred commitment “to better regulate hedge funds and create more transparency in mortgage-related securities in a bid to halt a global economic slide.”

A solution to this crisis can only be brought about through a process of  “financial disarmament”, which forcefully challenges the hegemony of the Wall Street financial institutions including their control over monetary policy. ”Financial disarmament” would also require freezing the instruments of speculative trade,  dismantling the hedge funds and democratizing monetary policy. The term “financial disarmament” was initially coined by John Maynard Keynes in the 1940s.

Obama Endorses Financial Deregulation

Barack Obama has embraced the Washington-Wall Street consensus. In a bitter twist, former Congressman Jim Leach, a Republican who sponsored the 1999 FSMA in the House of Representatives is now advising Obama on formulating a timely solution to the crisis.

Most Serious Economic Crisis in Modern History

The October 2008 financial meltdown is not the result of a cyclical economic phenomenon. It is the deliberate result of US government policy instrumented through the Treasury and the US Federal Reserve Board.

This is the most serious economic crisis in World history.

The “bailout” proposed by the US Treasury does not constitute a “solution” to the crisis. In fact quite the opposite: it is the cause of further collapse. It triggers an unprecedented concentration of wealth, which in turn contributes to widening economic and social inequalities both within and between nations.

The levels of indebtedness have skyrocketed. Industrial corporations are driven into bankruptcy, taken over by the global financial institutions. Credit, namely the supply of loanable funds, which constitutes the lifeline of production and investment, is controlled by a handful of financial conglomerates.

With the “bailout”, the public debt has spiraled. America is the most indebted country on earth. Prior to the “bailout”, the US public debt was of the order of 10 trillion dollars. This US dollar denominated debt is composed of outstanding treasury bills and government bonds held by individuals, foreign governments, corporations and financial institutions.

“The Bailout”: The US Administration is Financing its Own Indebtedness

Ironically, the Wall Street banks –which are the recipients of the bailout money– are also the brokers and underwriters of the US public debt. Although the banks hold only a portion of the public debt, they transact and trade in US dollar denominated public debt instruments Worldwide.

In a bitter twist, the banks are the recipients of  a 700+ billion dollar handout and at the same time they act as creditors of the US government.

We are dealing with an absurd circular relationship: To finance the bailout, Washington must borrow from the banks, which are the recipients of the bailout.

The US administration is financing its own indebtedness.

Federal, State and municipal governments are increasingly in a straightjacket, under the tight control of the global financial conglomerates. Increasingly, the creditors call the shots on government reform.

The bailout is conducive to the consolidation and centralization of banking power, which in turn backlashes on real economic activity, leading to a string of bankruptcies and mass unemployment.

Will an Obama Administration Reverse the Tide?

The financial crisis is the outcome of a deregulated financial architecture.

Obama has stated unequivocally his resolve to address the policy failures of the Bush administration and “democratize” the US financial system. President-Elect Barack Obama says that he is committed to reversing the tide:

“Let us remember that if this financial crisis taught us anything, it’s that we cannot have a thriving Wall Street while Main Street suffers. In this country, we rise or fall as one nation, as one people.” (President-elect Barack Obama, November 4, 2008, emphasis added)

The Democrats casually blame the Bush administration for the October financial meltdown.

Obama says that he will be introducing an entirely different policy agenda which responds to the interests of Main Street:

“Tomorrow, you can turn the page on policies that put the greed and irresponsibility of Wall Street before the hard work and sacrifice of men and women all across Main Street. Tomorrow you can choose policies that invest in our middle class and create new jobs and grow this economy so that everybody has a chance to succeed, from the CEO to the secretary and the janitor, from the factory owner to the men and women who work on the factory floor.( Barack Obama, election campaign, November 3, 2008, emphasis added)

Is Obama committed to “taming Wall Street” and “disarming financial markets”?

Ironically, it was under the Clinton administration that these policies of “greed and irresponsibility” were adopted.

The 1999 Financial Services Modernization Act (FSMA) was conducive to the the repeal of the Glass-Steagall Act of 1933. A pillar of President Roosevelt’s “New Deal”, the Glass-Steagall Act was put in place in response to the climate of corruption, financial manipulation and “insider trading” which resulted in more than 5,000 bank failures in the years following the 1929 Wall Street crash.

Bill Clinton signs into law the  Gramm-Leach-Bliley Financial Services Modernization Act, November 12, 1999

Under the 1999 Financial Services Modernization Act, effective control over the entire US financial services industry (including insurance companies, pension funds, securities companies, etc.) had been transferred to a handful of financial conglomerates and their associated hedge funds.

The Engineers of Financial Disaster

Who are the architects of this debacle?

In a bitter irony, the engineers of financial disaster are now being considered by President-Elect Barack Obama’s Transition Team for the position Treasury Secretary:

Lawrence Summers played a key role in  lobbying Congress for the repeal of the Glass Steagall Act. His timely appointment by President Clinton in 1999 as Treasury Secretary spearheaded the adoption of the Financial Services Modernization Act in November 1999. Upon completing his mandate at the helm of the US Treasury, he became president of Harvard University (2001- 2006).

Paul Volker was chairman of the Federal Reserve Board in the l980s during the Reagan era. He played a central role in implementing the first stage of financial deregulation, which was conducive to mass bankruptcies, mergers and acquisitions, leading up to the 1987 financial crisis.

Timothy Geithner is CEO of the Federal Reserve Bank of New York, which is the most powerful private financial institution in America. He was also a former Clinton administration Treasury official. He has worked for Kissinger Associates and has also held a senior position at the IMF. The FRBNY plays a behind the scenes role in shaping financial policy. Geithner acts on behalf of powerful financiers, who are behind the FRBNY. He is also a member of the Council on Foreign Relations (CFR)

Jon Corzine is currently governor of New Jersey, former CEO of Goldman Sachs.

Larry Summers (left) and Timothy Geithner

At the time of writing, Obama’s favorite is Larry Summers, front-runner for the position of Treasury Secretary.

Harvard University Economics Professor Lawrence Summers served as Chief Economist for the World Bank (1991–1993). He contributed to shaping the macro-economic reforms imposed on numerous indebted developing countries. The social and economic impact of these reforms under the IMF-World Bank sponsored structural adjustment program (SAP) were devastating, resulting in mass poverty.

Larry Summer’s stint at the World Bank coincided with the collapse of the Soviet Union and the imposition of the IMF-World Bank’s deadly ” economic medicine” on Eastern Europe, the former Soviet republics and the Balkans.

In 1993, Summers moved to the US Treasury. He initially held the position of Undersecretary of the Treasury for international affairs and later Deputy Secretary. In liaison with his former colleagues at the IMF and the World Bank, he played a key role in crafting the economic “shock treatment” reform packages imposed at the height of the 1997 Asian crisis on South Korea, Thailand and Indonesia.

The bailout agreements negotiated with these three countries were coordinated through Summers office at the Treasury in liaison with the Federal Reserve Bank of New York and the Washington based Bretton Woods institutions. Summers worked closely with IMF Deputy Managing Director Stanley Fischer, who was later appointed Governor of the Central Bank of Israel.

Larry Summers became Treasury Secretary in July 1999. He is a protégé of David Rockefeller. He was among the main  architects of the infamous Financial Services Modernization Act, which provided legitimacy to inside trading and outright financial manipulation.

Larry Summers and David Rockefeller

“Putting the Fox in Charge of the Chicken Coop”

Summers is currently a Consultant to Goldman Sachs and managing director of a Hedge fund, the D.E. Shaw Group, As a Hedge Fund manager, his contacts at the Treasury and on Wall Street provide him with valuable inside information on the movement of financial markets.

Putting a Hedge Fund manager (with links to the Wall Street financial establishment) in charge of the Treasury is tantamount to putting the fox in charge of the chicken coop.

The Washington Consensus

Summers, Geithner, Corzine, Volker, Fischer, Phil Gramm, Bernanke, Hank Paulson, Rubin, not to mention Alan Greenspan, al al. are buddies; they play golf together; they have links to the Council on Foreign Relations and the Bilderberg; they act concurrently in accordance with the interests of Wall Street; they meet behind closed doors; they are on the same wave length; they are Democrats and Republicans.

While they may disagree on some issues, they are firmly committed to the Washington-Wall Street Consensus. They are utterly ruthless in their management of  economic and financial processes. Their actions are profit driven. Outside of their narrow interest in the “efficiency” of “markets”, they have little concern for “living human beings”. How are people’s lives affected by the deadly gamut of macro-economic and financial reforms, which is spearheading entire sectors of economic activity into bankruptcy.

The economic reasoning underlying neoliberal economic discourse is often cynical and contemptuous. In this regard, Lawrence Summers’ economic discourse stands out. He is known among environmentalists for having proposed the dumping of toxic waste in Third World countries, because people in poor countries have shorter lives and the costs of labor are abysmally low, which essentially means that the market value of people in the Third World is much lower.  According to Summers, this makes it far more “cost effective” to export toxic materials to impoverished countries. A controversial 1991 World Bank memo signed by of Chief Economist Larry Summers reads as follows (excerpts, emphasis added):

DATE: December 12, 1991 TO: Distribution FR: Lawrence H. Summers Subject: GEP

“‘Dirty’ Industries: Just between you and me, shouldn’t the World Bank be encouraging MORE migration of the dirty industries to the Less Developed Countries? I can think of three reasons:

1) The measurements of the costs of health impairing pollution depends on the foregone earnings from increased morbidity and mortality…. From this point of view a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.

2) The costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low cost. I’ve always though that under-populated countries in Africa are vastly UNDER-polluted, their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City. Only the lamentable facts that so much pollution is generated by non-tradable industries (transport, electrical generation) and that the unit transport costs of solid waste are so high prevent world welfare enhancing trade in air pollution and waste.

3) The demand for a clean environment for aesthetic and health reasons is likely to have very high income elasticity. [the demand increases when income levels increase]. The concern over an agent that causes a one in a million change in the odds of prostrate cancer is obviously going to be much higher in a country where people survive to get prostrate cancer than in a country where under 5 mortality is is 200 per thousand…. “

http://www.globalpolicy.org/socecon/envronmt/summers.htm

Summers stance on the export of pollution to developing countries had a marked impact on US environmental policy:

In 1994, “virtually every country in the world broke with Mr. Summers’ Harvard-trained “economic logic” ruminations about dumping rich countries’ poisons on their poorer neighbors, and agreed to ban the export of hazardous wastes from OECD to non-OECD [developing] countries under the Basel Convention. Five years later, the United States is one of the few countries that has yet to ratify the Basel Convention or the Basel Convention’s Ban Amendment on the export of hazardous wastes from OECD to non-OECD countries. (Jim Valette, Larry Summers’ War Against the Earth, Counterpunch, undated)

The 1997 Asian Crisis: Dress Rehearsal for Things to Come

In the course of 1997, currency speculation instrumented by major financial institutions directed against Thailand, Indonesia and South Korea was conducive to the collapse of national currencies and the transfer of billions of dollars of central bank reserves into private financial hands. Several observers pointed to the deliberate manipulation of equity and currency markets by investment banks and brokerage firms.

While the Asian bailout agreements were formally negotiated with the IMF, the major Wall Street commercial banks (including Chase, Bank of America, Citigroup and J. P. Morgan) as well as the “big five” merchant banks (Goldman Sachs, Lehman Brothers, Morgan Stanley and Salomon Smith Barney) were “consulted” on the clauses to be included in the Asian bail-out agreements. [Note: These are 1997 denominations of major financial institutions]

The US Treasury in liaison with Wall Street and the Bretton Woods institutions played a central role in negotiating the bailout agreements. Both Larry Summers and Timothy Geithner, were actively involved on behalf of the US Treasury in the 1997 bailout of South Korea:

[In 1997] “Messrs. Summers and Geithner worked to persuade Mr. Rubin to support financial aid to South Korea. Mr. Rubin was wary of such a move, worrying that providing money to a country in dire straits might be a losing proposition…” (WSJ, November 8, 2008)

What happened in Korea under advice from Deputy Treasury Secretary Summers et al, had nothing to do with “financial aid”.

The country was literally ransacked. Undersecretary of the Treasury David Lipton was sent to Seoul in early December 1997. Secret negotiations were initiated.  Washington had demanded the firing of the Korean Finance Minister and the unconditional acceptance of the IMF “bailout”.

A new finance minister, who happened to be former IMF and World Bank official, was appointed  and immediately rushed off to Washington for “consultations” with his former IMF colleague Deputy Managing Director Stanley Fischer.

“The Korean Legislature had met in emergency sessions on December 23. The final decision concerning the 57 billion dollar deal took place the following day, on Christmas Eve December 24th, after office hours in New York. Wall Street’s top financiers, from Chase Manhattan, Bank America, Citicorp and J. P. Morgan had been called in for a meeting at the Federal Reserve Bank of New York. Also at the Christmas Eve venue, were representatives of the big five New York merchant banks including Goldman Sachs, Lehman Brothers, Morgan Stanley and Salomon Smith Barney. And at midnight on Christmas Eve, upon receiving the green light from the banks, the IMF was allowed to rush 10 billion dollars to Seoul to meet the avalanche of maturing short-term debts.

The coffers of Korea’s central Bank had been ransacked. Creditors and speculators were anxiously awaiting to collect the loot. The same institutions which had earlier speculated against the Korean won were cashing in on the IMF bailout money. It was a scam. (See Michel Chossudovsky, The Recolonization of Korea, subsequently published as a chapter in The Globalization of Poverty and the New World Order, Global Research, Montreal, 2003.)

“Strong economic medicine” is the prescription of the Washington Consensus.  “Short term pain for long term gain” was the motto at the World Bank during Lawrence Summers term of as World Bank Chief Economist. (See IMF, World Bank Reforms Leave Poor Behind, Bank Economist Finds, Bloomberg, November 7, 2000)

What we dealing with is an entire ” old boys network” of officials and advisers at the Treasury, the Federal Reserve, the IMF, World Bank, the Washington Think Tanks, who are  in permanent liaison with leading financiers on Wall Street.

Whoever is chosen by Obama’s Transition team will belong to the Washington Consensus.

The 1999 Financial Services Modernization Act

What happened in October 1999 is crucial.

In the wake of lengthy negotiations behind closed doors, in the Wall Street boardrooms, in which Larry Summers played a central role, the regulatory restraints on Wall Street’s powerful banking conglomerates were revoked “with a stroke of the pen”.

Larry Summers worked closely with Senator Phil Gramm (1985-2002),chairman of the Senate Banking committee, who was the legislative architect of the  the Gramm-Leach-Bliley Financial Services Modernization Act, signed into law on November 12, 1999 (See Group Photo above). (For Complete text click US Congress: Pub.L. 106-102). As Texas Senator, Phil Gramm was closely associated with Enron.

In December 2000 at the very end of the Clinton mandate, Gramm introduced a second piece of legislation, the so-called Gramm-Lugar Commodity Futures Modernization Act, which paved the way for the speculative onslaught in primary commodities including oil and food staples.

“The act, he declared, would ensure that neither the sec nor the Commodity Futures Trading Commission (cftc) got into the business of regulating newfangled financial products called swaps—and would thus “protect financial institutions from overregulation” and “position our financial services industries to be world leaders into the new century.” (See David Corn, Foreclosure Phil, Mother Jones, July August 2008)

Phil Gramm was McCain’s first choice for Secretary of the Treasury.

Under the FSMA new rules – ratified by the US Senate in October 1999 and approved by President Clinton – commercial banks, brokerage firms, hedge funds, institutional investors, pension funds and insurance companies could freely invest in each others businesses as well as fully integrate their financial operations.

A “global financial supermarket” had been created, setting the stage for a massive concentration of  financial power. One of the key figures behind this project was Secretary of the Treasury Larry Summers, in liaison with David Rockefeller. Summers described the FSMA as “the legislative foundation of the financial system of the 21th century”.  That legislative foundation is among the main causes of the 2008 financial meltdown.

Financial Disarmament

There can be no meaningful solution to the crisis, unless there is a major reform in the financial architecture, implying inter alia the freezing of speculative trade and the “disarming of financial markets”.  The project of disarming financial markets was first proposed by John Maynard Keynes in the 1940s as a means to the establishment of a multipolar international monetary system. (See  J.M. Keynes, Activities 1940-1944, Shaping the Post-War World: The Clearing Union, The Collected Writings of John Maynard Keynes, Royal Economic Society, Macmillan and Cambridge University Press, Vol. XXV, London 1980, p. 57).

Main Street versus Wall Street

Where are Obama’s “Main Street appointees”? Namely individuals who respond to the interests of people across America.  There are no labor or community leaders on Obama’s list for key positions.

The President-elect is appointing the architects of financial deregulation.

Meaningful financial reform cannot be adopted by officials appointed by Wall Street and who act on behalf of Wall Street.

Those who set the financial system ablaze in 1999, have been called back to turn out the fire.

The proposed “solution” to the crisis under the “bailout” is the cause of further economic collapse.

There are no policy solutions on the horizon.

The banking conglomerates call the shots. They decide on the composition of the Obama Cabinet. They also decide on the agenda of the Washington Financial Summit (November 15, 2008) which is slated to lay the groundwork for the establishment of a new “global financial architecture”.

The Wall Street blueprint has already been discussed behind closed doors: the hidden agenda is to establish a unipolar international monetary system, dominated by US financial power, which in turn would be protected and secured by US military superiority.

Neoliberalism with a “Human Face”

There is no indication that Obama will break his ties to his Wall Street sponsors, who largely funded his election campaign.

Goldman Sachs, J. P. Morgan Chase, Citigroup, Bill Gates’ Microsoft are among his main campaign contributors.

Warren Buffett, among the the world’s richest individuals, not only supported Barak Obama’s election campaign, he is a member of his transition team, which plays a key role deciding the composition of Obama’s cabinet.

Warren Buffett

Unless there is a major upheaval in the system of political appointments to key positions, an alternative Obama economic agenda geared towards poverty alleviation and employment creation is highly unlikely.

Barack Obama. November 7 Press Conference.
Joe Biden (far left), newly appointed chief of staff Rahm Emanuel (far right). Photo: Charles Dharapak

What we are witnessing is continuity.

Obama provides a ” human face” to the status quo. This human face serves to mislead Americans on the nature of the economic and political process.

The neoliberal economic reforms remain intact.

The substance of these reforms including the “bailout” of America’s  largest financial institutions ultimately destroys the real economy, while spearheading entire areas of manufacturing and the services economy into bankruptcy.

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The Irish Economy’s Rise Was Steep, and the Fall Was Fast

Derek Speirs for The New York Times

The developer Sean Dunne and his wife, Gayle Killilea, at home in Dublin. It is not known whether Mr. Dunne will fall victim to the global financial crisis, but there is no doubt Ireland has.

By LANDON THOMAS, JR

Published: January 3, 2009

Dublin

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Ireland’s Slowing Economy

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Derek Speirs for The New York Times

A site in Limerick, Ireland, where work on a shopping center was halted. The city has been hit hard by the downturn.

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Derek Speirs for The New York Times

Brother Shawn O’Connor, a Franciscan monk, works with the poor in Moyross, on the outskirts of Limerick.

IT’S 3 a.m. at Doheny & Nesbitt, a favorite watering hole of Dublin’s political and business elite, and the property tycoon Sean Dunne stoops to retrieve a penny from the pub’s grimy floor.

One would think that Mr. Dunne, Ireland’s best-known building developer, would be in bed at this hour. It’s a weeknight, after all, and he has meetings that begin before first light.

What’s more, the Irish economy, pummeled by the most severe housing bust in Europe, has collapsed. And the gossip around town is that Mr. Dunne, whose brazen deal-making and Donald Trump-like lifestyle epitomized the country’s euphoric boom, might be going bankrupt.

But, no matter, a penny is a penny.

“I am never, never too proud to pick a penny up from the floor,” Mr. Dunne said. He is on perhaps his fifth pint of Guinness, capping a rollicking night of Champagne cocktails, followed by a wine-soaked dinner — yet his thick brogue is clear of even the faintest slurring.

“I grew up with nothing and I know the value of money,” he adds. “The Celtic Tiger may be dead and if the banking crisis continues I could be considered insolvent. But the one thing that I have is my wife and children — that they can’t take away from me.”

It is not known whether Mr. Dunne will fall victim to today’s world financial catastrophe, but there is no doubt that his country has.

Everything, it seems, has grown worse here. The recession started earlier and its bite has been deeper. Housing prices have fallen by as much as 50 percent. Bank shares have plummeted by more than 90 percent. Unemployment is approaching 10 percent.

The roots of Ireland’s fall date to more than 20 years ago, when a clutch of economists, politicians and civil servants put their heads together in this very pub and planted the philosophical seeds for the Irish economic miracle.

Known widely as the “Doheny & Nesbitt School of Economics,” these beery musings soon became government policy that chopped taxes in half, sharply reduced import duties and embraced foreign investment — a radical transformation that gave birth to the Celtic Tiger and perhaps the most open and vibrant economy in Europe.

But beyond the glow of this sudden efflorescence that made Ireland the fourth most-affluent country in the Organization for Economic Cooperation and Development, a housing bubble had begun to form. Low interest rates, a wave of inward immigration and a bank lending spree drove housing’s share of the economy to 14 percent, the highest in Europe, from 5 percent, according to research done by Finfacts, a financial Web site that analyzes the Irish economy.

Developers like Mr. Dunne became multimillionaires and — much like the hedge fund and private-equity elite in America — became visible public and cultural figures. They were living large in a country just coming to grips with its ability to show a little swagger.

Ireland’s policy makers, like their counterparts in the United States and Britain, were seduced by record tax inflows and a full-employment economy. They paid little heed to the lonely voices that warned of the crash that finally came over the summer, when interest rates in Europe began to rise. Banks that had steered more than 60 percent of their loans toward property stopped lending, and asset values plummeted.

“We have repeatedly warned that the government’s housing policy was extremely dangerous,” said John Fitz Gerald, an economist at the Economic and Social Research Institute, a leading policy center in Dublin, who has long urged that the government stanch housing demand by raising taxes. “You will now see unemployment going to 10 percent and we will experience a sharp drop in output.”

He shakes his head and sighs: “This was predictable, but the government just did not deal with it.”

BY wide consensus here, two events have come to define — both culturally and financially — the sweep and excess of the Irish property boom. Both revolve around Sean Dunne.

In July 2005, Mr. Dunne paid 379 million euros for a seven-acre plot in the exclusive Ballsbridge neighborhood of Dublin and promptly announced that he would tear down the two luxury hotels on the site to build a high-end commercial and residential development.

That deal amounted to 54 million euros an acre, one of the highest amounts ever paid for land in Europe. His subsequent architectural plan featured a soaring Dubai-like office tower cut in the shape of a diamond that anchored a futuristic community of expensive houses and glamorous shops, and the price tag of one billion euros shocked Dubliners with its gall and ambition.

Hobbled by delays and vocal neighborhood opposition, the project sits before a local planning board that on Jan. 30 will either approve or scrap the plan.

The second moment occurred in 2004 when Mr. Dunne, who is now 54, celebrated his second marriage, to Gayle Killilea, a former gossip columnist 20 years his junior, by inviting 44 of his friends on a two-week Mediterranean wedding cruise on the yacht Christina O, on which Aristotle Onassis and Jacqueline Kennedy married.

Much as the $3 million birthday party for Stephen A. Schwarzman, the Blackstone Group founder, came to be seen as a crass display of private equity’s manifold riches, the Dunne wedding was viewed similarly in Ireland: as a conspicuous and garish expression of the man and his business.

That a billion euro property plan and a gaudy wedding celebration should be held up as cautionary exemplars of Ireland’s pursuit of money angers Mr. Dunne. In his view, it speaks to what some call the Irish disease.

“Jealousy and begrudgery are still alive and well in Ireland, and whoever eradicates them should be prime minister for life,” he says as he tucks into a heaping plate of gravy-drenched turkey and mashed potatoes in the restaurant of one of the two hotels he owns — and is hoping to raze. “It’s part of the Irish psyche and it is the result of 800 years of being controlled by other people, of watching everything the master or landlord is doing.”

Mr. Dunne’s compact paunch, reddish cheeks and mischievous grin — which he occasionally deploys with a wink of his eye — can give him the air of a department store Santa. But his business methods are far from jolly: he is notorious for taking legal action against all who cross him, from local newspapers to rival property developers.

He defends his purchase of the Ballsbridge site as responsible, not reckless, as his critics have deemed it. He points out, too, that his winning bid was just slightly more than the second-highest offer and that subsequent property sales had far exceeded his submission of 54 million euros an acre.

Still, he recognizes that times have changed. Just recently, he pruned staff at his development company, and some of his senior executives agreed to take 50 percent pay cuts.

Asked where he will find the 600 million euros that he needs to tear down the two hotels, dig a massive hole in the ground and erect his vision of a new Dublin, he ruefully remarks: “It is fair to say that there is not a queue of bankers lining up to lend to me right now.”

But he says the project will be completed, assuming that it wins approval of the planning board. “If anyone wants to bet I can’t do this, I will take that bet,” he says, citing, without specifics, talks with Asian banks and a sovereign wealth fund. “You have to have steel in a certain part of your body to do this job, and as one of my bankers recently said to me, ‘Sean, the only thing that will take you out is a stray bullet.’ ”

IN many ways, the ups and downs of Mr. Dunne’s life and career mirror the Irish economy’s own rise and fall. Born into a house without electricity or running water in the small provincial town of Tullow, outside Dublin, Mr. Dunne studied construction economics at a technical college in the 1970s.

Along with many of his countrymen, he forsook the stagnant Irish economy — in his case, choosing bartending in New York City and working on an oil rig in Canada.

With the Irish economy still afflicted by an unemployment rate of about 20 percent in the 1980s, and a punitive overall tax rate, he began his real estate career in London. He moved back to Ireland in 1990 and began a string of property deals.

He initially focused on government-sponsored housing projects. But as the Irish economy began its true take-off, demand came from the growing corps of newly wealthy Irish, many of whom were returning to Ireland from abroad. They were joined by a wave of foreign workers.

After years of emigration and economic stagnation, Ireland’s housing stock was depleted, precipitating a housing euphoria. Capital gains taxes were low, as were interest rates. Banks stood ready to lend, offering mortgages with no money down to a house-hungry population.

The projects of Mr. Dunne and a small circle of developers grew in size and scope until the skyline of Dublin, never known for its tall buildings, began to fill with cranes and great shiny towers.

Signs of a bubble were everywhere: a family home in Dublin cost as much as a similar abode in Beverly Hills; house prices more than doubled over a 10-year period; and household debt as a percentage of G.D.P. jumped to 160 percent from 60 percent during the same period.

Irish banks, unlike those in the United States, didn’t dole out that many subprime loans. Rather, they lent furiously to big property developers who themselves were liberated to build pell-mell by government-imposed tax breaks.

Mr. Dunne, who says he put 35 percent cash down — or about 125 million euros — for the Ballsbridge project, says that even with the drop in asset values, he still has hope that the project can be completed.

“This is the way God made me, with heavy shoulders and an ability to carry a great load,” he says, forcefully rejecting the rumors of his financial demise buzzing around Dublin. (One of the more fantastic claims was that his financial troubles had forced him to take a month’s recuperation in a mental institution.)

“Failure is not an option for me,” he says. But others aren’t so sure.

The Irish government recently announced a $7.5 billion bank bailout and took majority stakes in the country’s largest banks, a move that followed the government’s earlier promise to guarantee all bank deposits.

Analysts are uncertain that the government will allow the banks to continue to support the type of high-risk, high-reward projects that have become the bane of their financial existence.

“The banks in Ireland did not lend recklessly to individuals; they lent recklessly to developers,” says Ronan Lyons, an economist at Daft, Ireland’s largest property Web site. As for the Ballsbridge project, he may well take Mr. Dunne’s bet.

“I would be surprised if it gets built,” Mr. Lyons says. “The migrants are going home, there is a surplus of properties for sale, and even though this is a landmark project there is just not an appetite for large projects now.”

WHILE the pain is acute in Dublin, at least the city has the small comfort of having enjoyed the full benefit of the boom.

Such is not the case in the city of Limerick. Traditionally one of Ireland’s more depressed cities, Limerick was a latecomer to the property party. While there were some good times, the downturn has had a more wrenching effect there, with unemployment over 14 percent — among the highest rates in Ireland.

The layoffs have picked up speed around Limerick in the last month, as construction companies have stopped work, seemingly on a dime, sending such a procession of jobless to seek assistance that the local unemployment office became the second busiest in the country.

The waiting room in the office is dank and gloomy, and Dale McNamara, 20, wonders how a professional life once so charmed came to be so hopeless. Since graduating from high school as an electrician, flourishing building work in the area kept him more than busy and flush enough to buy a new car, start a family and consider buying a house.

Then, without warning on Dec. 5, he was told that it would be his last day of work, just six months before he would have received his certificate as an independent electrician.

Since then, he has been frantically knocking on doors, but to no avail. Now, as rent, heating bills and car payments pile up, he is beginning to feel desperate, unable to afford a night out or a Christmas present for his 20-month-old baby.

“If I don’t get a job in the next two weeks, I am worried about losing my house,” he says. “We have no money.”

He looks at his number in the unemployment lines and grimaces — he has been waiting four hours now and his name has still not been called.

“My grandfather says this reminds him of the 1930s when everyone left for America and Australia,” he adds. “There is just no work here.”

More dire, however, is the condition of the permanently unemployed in Limerick’s festering ghettoes, where experts say the unemployment rate touches 70 percent. During the early years of the economic revival, the government did its best to spread money to such areas, which are a feature of urban life all over Ireland.

IN fact, it was through social housing projects like these that Mr. Dunne got his start as a developer. But as the investment returns in the private sector became quite obviously more lucrative, the attention paid to so-called social estates like Moyross, on the northern outskirts of Limerick, wavered.

Crime, gangland disputes and a sense of anomie flourished as Moyross and other similar projects evolved as cocoons of poverty and hopelessness amid the riches and celebration of the Irish miracle.

“This place missed out entirely on the moment,” says Stephen Kinsella, an economist at the University of Limerick. “There has been no accumulation of wealth here.”

Walking through the garbage-strewn, empty roads on a cold, misty afternoon, Mr. Kinsella points to the shuttered houses and the mothers still dressed in pajamas taking their children home from school. Social workers in Moyross refer to the “pajama index”: the more men and women one sees who do not take the time and care to dress for the day, the worse the economic situation tends to be.

The Irish government has recently begun a regeneration project in Moyross that would result in large new investments in housing and infrastructure, but the going so far has been slow.

For Brother Shawn O’Connor, a Franciscan monk who has been living and working with the poor in Moyross for more than a year now, the vicissitudes of the Irish property market are a notion as distant as is his hometown, Red Hook, a village in the Hudson Valley of New York.

Brother O’Connor is the local superior of the community of Franciscan Friars, who do their work in some of the world’s most destitute communities. He and his fellow monks extend day-care assistance and spiritual counseling to the needy. They survive themselves on four hours of daily prayer and food handouts from neighbors — as Franciscans, they take a vow of chastity, poverty and obedience and thus do not spend money on any personal items, including food.

He recognizes that the deprivation of his community is severe, but suggests that it may be an easier hardship than the experiences of many Irish who have seen their riches disappear.

“There was this one story of a guy who shot his wife, son and daughter,” he says. “He had overextended himself. There is this desperation for wealth and people go after it — only to find out that it is not enough.”

Funny Business in Minnesota In which every dubious ruling seems to help Al Franken.

Funny Business in Minnesota

In which every dubious ruling seems to help Al Franken.

Strange things keep happening in Minnesota, where the disputed recount in the Senate race between Norm Coleman and Al Franken may be nearing a dubious outcome. Thanks to the machinations of Democratic Secretary of State Mark Ritchie and a meek state Canvassing Board, Mr. Franken may emerge as an illegitimate victor.

AP

Mr. Franken started the recount 215 votes behind Senator Coleman, but he now claims a 225-vote lead and suddenly the man who was insisting on “counting every vote” wants to shut the process down. He’s getting help from Mr. Ritchie and his four fellow Canvassing Board members, who have delivered inconsistent rulings and are ignoring glaring problems with the tallies.

Under Minnesota law, election officials are required to make a duplicate ballot if the original is damaged during Election Night counting. Officials are supposed to mark these as “duplicate” and segregate the original ballots. But it appears some officials may have failed to mark ballots as duplicates, which are now being counted in addition to the originals. This helps explain why more than 25 precincts now have more ballots than voters who signed in to vote. By some estimates this double counting has yielded Mr. Franken an additional 80 to 100 votes.

This disenfranchises Minnesotans whose vote counted only once. And one Canvassing Board member, State Supreme Court Justice G. Barry Anderson, has acknowledged that “very likely there was a double counting.” Yet the board insists that it lacks the authority to question local officials and it is merely adding the inflated numbers to the totals.

In other cases, the board has been flagrantly inconsistent. Last month, Mr. Franken’s campaign charged that one Hennepin County (Minneapolis) precinct had “lost” 133 votes, since the hand recount showed fewer ballots than machine votes recorded on Election Night. Though there is no proof to this missing vote charge — officials may have accidentally run the ballots through the machine twice on Election Night — the Canvassing Board chose to go with the Election Night total, rather than the actual number of ballots in the recount. That decision gave Mr. Franken a gain of 46 votes.

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Meanwhile, a Ramsey County precinct ended up with 177 more ballots than there were recorded votes on Election Night. In that case, the board decided to go with the extra ballots, rather than the Election Night total, even though the county is now showing more ballots than voters in the precinct. This gave Mr. Franken a net gain of 37 votes, which means he’s benefited both ways from the board’s inconsistency.

And then there are the absentee ballots. The Franken campaign initially howled that some absentee votes had been erroneously rejected by local officials. Counties were supposed to review their absentees and create a list of those they believed were mistakenly rejected. Many Franken-leaning counties did so, submitting 1,350 ballots to include in the results. But many Coleman-leaning counties have yet to complete a re-examination. Despite this lack of uniformity, and though the state Supreme Court has yet to rule on a Coleman request to standardize this absentee review, Mr. Ritchie’s office nonetheless plowed through the incomplete pile of 1,350 absentees this weekend, padding Mr. Franken’s edge by a further 176 votes.

Both campaigns have also suggested that Mr. Ritchie’s office made mistakes in tabulating votes that had been challenged by either of the campaigns. And the Canvassing Board appears to have applied inconsistent standards in how it decided some of these challenged votes — in ways that, again on net, have favored Mr. Franken.

The question is how the board can certify a fair and accurate election result given these multiple recount problems. Yet that is precisely what the five members seem prepared to do when they meet today. Some members seem to have concluded that because one of the candidates will challenge the result in any event, why not get on with it and leave it to the courts? Mr. Coleman will certainly have grounds to contest the result in court, but he’ll be at a disadvantage given that courts are understandably reluctant to overrule a certified outcome.

Meanwhile, Minnesota’s other Senator, Amy Klobuchar, is already saying her fellow Democrats should seat Mr. Franken when the 111th Congress begins this week if the Canvassing Board certifies him as the winner. This contradicts Minnesota law, which says the state cannot award a certificate of election if one party contests the results. Ms. Klobuchar is trying to create the public perception of a fait accompli, all the better to make Mr. Coleman look like a sore loser and build pressure on him to drop his legal challenge despite the funny recount business.

Minnesotans like to think that their state isn’t like New Jersey or Louisiana, and typically it isn’t. But we can’t recall a similar recount involving optical scanning machines that has changed so many votes, and in which nearly every crucial decision worked to the advantage of the same candidate. The Coleman campaign clearly misjudged the politics here, and the apparent willingness of a partisan like Mr. Ritchie to help his preferred candidate, Mr. Franken. If the Canvassing Board certifies Mr. Franken as the winner based on the current count, it will be anointing a tainted and undeserving Senator.