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Europeans shift long-held view that social benefits are untouchable

Edward Cody, Washington Post
PARIS — From blanket health insurance to long vacations and early retirement, the cozy social benefits that have been a way of life in Western Europe since World War II increasingly appear to be luxuries the continent can no longer afford.

Particularly since the global economic crisis erupted in 2008, benefits have begun to stagnate or shrink in the face of exploding government deficits. In effect, the continent has reversed a half-century history of continual improvements that made Western Europe the envy of many and attracted millions of immigrants from less fortunate societies.

In the new reality, workers have been forced to accept salary freezes, decreased hours, postponed retirements and health-care reductions.

… France, emblematic of Europe’s social advances, has considered a generous protection system part of the landscape ever since Charles de Gaulle embraced a program put forward by Communist resistance groups immediately after World War II. With subsequent additions under the Socialist Party’s two turns in power since then, including the 35-hour workweek and more vacation time, the welfare state has since been taken to a level that made this country the envy of many.

When the global crisis hit, the French social protection net — which helps push government expenditures to 54 percent of gross domestic product — cushioned people from the worst effects. But now, as Europe struggles to return to growth, conservatives in and outside the government have said the protections are threatening the health of public finances and holding back the economy.
(24 April 2011)

Europe’s Nationalists Waiting in the Dark

Boris Kagarlitsky, ZNet
Finnish elections don’t usually make headlines in Europe. But this spring Finnish voters managed to spoil the mood among Brussels bureaucrats and the liberal public by giving the nationalist True Finns party the third highest number of seats in parliament. The Social Democrats secured second place by a margin of only one-tenth of a percent of the vote.

This is indicative of the overall trend gaining momentum in Europe. As the financial crisis hits one country after another, voters become increasingly angry about having to make economic sacrifices. Residents of the poorest countries are unhappy with the austerity measures forced on them by the European Union as a prerequisite to receiving aid, and people in the wealthier countries do not like paying out of their national budget to help others.

Whenever free market policy fails, the only salvation offered is even higher doses of the same policy. And when the standard of living falls and domestic markets shrink, governments and central banks can find no better solution than to cut social spending, thereby lowering living standards and shrinking domestic markets still further.

That vicious cycle will continue until somebody has the courage to adopt the opposite course. But that would mean not only changing the economic ideology of one government or a group of countries, but the collapse of the entire system of current European institutions that is built upon this ideology. The need to support and maintain existing structures compels politicians of every stripe to persist in pursuing a policy that everyone, including themselves, can clearly see has already failed.

Critics of the euro have long warned that the attempt to integrate different economies under a single monetary system would not only fail to unify the people of Europe but would intensify the existing tensions between them.

… The majority of people see the experiment as a succession of hardships they are forced to endure.

As a result, they are searching for an alternative. Not finding one in the political left, they are turning to nationalist parties that promise their voters measures for combating unemployment, government regulation of the market and, most important, the willingness to challenge the ruling structures of the European Union. But along with a protectionist economic program, voters also receive the rest of the nationalists’ ideological baggage that comes with it — ultraconservatism, authoritarianism and xenophobia.

Boris Kagarlitsky is director of the Institute of Globalization Studies.
(30 April 2011)
Kagarlitsky doesn’t mention peak oil, climate change and commodity prices, but these will add to the economic pressures. As he suggests, these pressures will push people to the Left and the Right. -BA

Chomsky on Iraq, corporations and financialization of the economy

Vikas Shah, Thought Economics
In this exclusive interview we speak to Noam Chomsky, Professor Emeritus of Linguistics at the Massachusetts Institute of Technology (MIT), who (with over 150 books published) is regarded as “one of the most critically engaged public intellectuals alive today”. We discuss the state and future of democracy around the world together with the role that government, corporations and the media play in shaping our lives. We also look at the global war on terror, globalisation, and how the world will look in the next quarter century.

… Q: What really drives our foreign policy? and how does that impact us, as citizens?

[Noam Chomsky] … In November 2007 the Bush administration issued a declaration of principles stating that any agreement with Iraq would have to ensure the unlimited ability of US forces to operate there- essentially permanent military bases- and such an agreement would also secure the privileging of US investors in the energy systems. In 2008 Bush re-iterated and, in fact, strengthened this in a message to congress where he said that he would ignore any legislation that limits US capacity to use force in Iraq or that interferes with US control over Iraqi oil. That was stated very clearly and explicitly. In fact, the US had to back down from this goal as a result of Iraqi resistance; but the goals themselves were clear and explicit and had nothing to do with the security of Americans.

… Q: What influence do large corporations exert in society?

[Noam Chomsky] Corporations play an overwhelming role in society. I don’t think that fact is even contentious. Similar observations have been made as far back as Adam Smith who pointed out that in Britain the principal architects of policy were merchants and manufacturers, the people who own society- and they ensure that their interests are served however grievous the impact on the people of England. This is far more true today, with much higher concentrations of power- we are not just manufacturers, we have financial institutions and multinational corporations. They have an enormous influence, and the influence can not only be harmful, but in many cases lethal.

Taking the United States as an example- the corporate sector has been carrying out major propaganda campaigns to try to convince the population that there is no threat from global warming. This, in effect, has led to the majority of people now agreeing it is not a real issue. Business funding has also been the primary instrument in bringing a new group of cadres to congress- figures who are virtually all climate change deniers. These individuals are about to enact legislation to cut-back funding for the international organisation (the IPCC) and the capacity of the environmental protection agency who may not even be able to monitor the effect of greenhouse gases or carry out any other actions which could reduce the impact of global warming which is a very serious threat!

This has been done by the corporate executives who are carrying out these propaganda campaigns and funding political figures who are undercutting such efforts. They understand as well as anyone else that global warming is a very serious threat, but there is an institutional role that enters here. If you are the CEO of a corporation, your task is to maximise short-term profit. That’s much more true now than it ever has been in the past. We are in a new stage of state-capitalism in which the future just doesn’t matter very much, even the survival of the firm doesn’t matter very much. What matters increasingly is short term profit and if a CEO doesn’t pursue that, he will be replaced with someone who will do it. This is institutional effect, not individual effect, and has extraordinary implications on society. It may, in fact, destroy our very existence.

… Q: To what extent does a class-system still exist in western societies?

Noam Chomsky]… In the last thirty years or so, there have been changes in the nature of the economy- shifting from capitalist to state-capitalist. A lot of the dynamism in an economy comes from the state; computers, the internet, the IT revolution and so on. The applications come from the private sector, but not the basic research and development. That has remained true, across the board.

Over the past thirty years, there has been a significant change- a move towards “financialisation” of the economy. Financial institutions now have a far higher share of the profit in the economy than forty years ago. Another shift has been towards the outsourcing of production which, in effect, places working people throughout the world in competition- with obvious consequences.

Well those changes have set in motion a vicious cycle in which wealth is more and more concentrated within an extremely small population. In the United States, the primary factor of inequality is the extreme concentration of wealth within a fraction of one percent of the population comprising CEO’s, hedge fund managers and so on. As that concentration of wealth increases, it carries with it a concentration of political power since wealth has an enormous effect on the political system- and the political power in turn leads to legislation, which enhances the concentration of wealth. Fiscal policies, deregulation, rules of corporate governance and so on.

This cycle exists all through the world, but is very striking in the United States. Within the last generation, for one thing, we have seen repeated financial crises which simply didn’t occur in the fifties and sixties when new-deal regulations were still in place and the financial system was much more restricted. Increasing financial crises are not a problem for the big banks and investment firms because they can rely on the nanny state to bail them out.

If we had a capitalist system, financial crises would be serious but they would be overcome simply by bankruptcy of the culprits, so Goldman Sachs, J.P. Morgan Chase and Citigroup simply wouldn’t exist- they would have gone bankrupt a long time ago! But since we don’t have a capitalist system, they have been rescued by the taxpayer repeatedly. In fact, they are given what amounts to a government insurance policy called “too big to fail” and the credit-ranking agencies take that into account. When they determine the credit-level of Goldman Sachs, they take into account that if they partake in a lot of risky transactions, and hence make a lot of profit and the system collapses, there will be a bailout- that increases the firms credit-ranking and means that can get cheaper loans and so on.

Meanwhile, for the general population of the past generation or so- for the overwhelming majority, incomes have pretty much stagnated while working hours have increased and benefits have declined leaving a very angry, frustrated and confused population that is pretty much divorced from political decisions. Decisions which are extremely in the hands of an extremely narrow concentration of power- and the media go along with it, as they are essentially part of the system.
(27 April 2011)

McCarthyism in Manama? (Bahrain)

Kanya D’Almeida, IPS
As the savage crackdown on the majority Shiite opposition movement drags on in Bahrain, King Hamad bin Issa Al Khalifa’s military regime – backed by the hefty armed forces of Sunni- dominated Saudi Arabia – has moved from launching outright assaults on peaceful protestors on the streets of Manama in broad daylight into the murky waters of what experts are calling state terror, featuring all the old tactics of petrifying a population into submission.

On top of facing over 1,500 troops from the Gulf Cooperation Council (GCC)’s most formidable army, the Bahraini people appear to be increasingly encountering the far more sinister face of a monarchy desperate to retain power in the oil-rich Gulf state as regimes topple around it. Midnight knocks on doors, unmarked vehicles whisking activists away in the dead of night and relentless suppression of the media are fast pushing Bahrain into an abyss of impunity, critics here say.

“What we are seeing in [Bahrain] today is like what the United States saw in the 1950s under McCarthyism,” Dr. Muneera Fakhro, a leader of the left-leaning Wa’ad party, told a gathering of activists, reporters and policy heads at the United States Institute of Peace (USIP) in Washington Tuesday.
(27 April 2011)