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By Jon Kofas

Introduction

In so far as capital markets predict economic trends, the downturn in global markets during December 2015-January 2016 indicate the kind of contraction that IMF economists are also predicting after revising earlier estimate downward for GDP of major economies. “World stock market losses are approaching $8 trillion so far this year and investors last week poured the most money into government bond funds in a year, suggesting they fear the global economy could tip into recession, Bank of America Merrill Lynch said on Friday (22 January 2016.” http://finance.yahoo.com/news/nearly-8-trillion-wiped-off-140643148.html

What does this say about the nature of the economic recovery after the 2008 Great Recession, about the soundness of the economies not just of developing nations suffering the most but of the core countries? Was it a hollow recovery and an uneven recovery mostly limited to the core countries and within those to the top 1% of income earners? Does this mean that the fault rests with governments that are not providing even greater incentives, even greater tax breaks, even greater corporate welfare measures for capital? Is this just another “market correction” or is capitalism manifesting structural problems pointing to chronic decay?

If one takes seriously the mainstream media coverage, listens to market analysts, politicians, journalists and pundits, the inevitable conclusion is that fault for the economic problems rests in anything but gross socioeconomic inequality, and the income and wealth inequality on a world scale. It is simply astounding to read and hear that the fault of the global markets tumbling rests with everything except the structural flaws within the system that includes the following:

1. Wealth concentration: Although there are literally thousands of books, articles, and other empirical studies showing the incontrovertible evidence of wealth concentration and its detrimental effects on society, nothing has changed even when the capitalist economy is threatened with imbalances both at the microeconomic and macroeconomic levels. Sixty-two people own more wealth than 3.6 billion of the world’s bottom-tiered income population; Four Americans own as much wealth as 40% of the US bottom-tiered population. “A global network of tax havens further enables the richest individuals to hide $7.6 trillion. The fight against poverty will not be won until the inequality crisis is tackled.” https://www.oxfam.org/en/research/economy-1?utm_source=oxf.am&utm_medium=Znhx&utm_content=redirect

2. Artificial dollar value as a hard currency losing its preeminent global status, a reality that has been brewing since the IMF secretly warned President Eisenhower in the late 1950s that the chronic US balance of payments deficits accounted for an artificially high dollar value. US currency manipulation through the Federal Reserve and imposing monetary austerity on most of the underdeveloped countries through the IMF, thus keeping capital concentrated in the core nations, has kept the dollar artificially high to the detriment of other economies using the dollar as a hard currency to trade. Because of China’s rise to a preeminent global economic status and the increasing skepticism on the part of many countries about the value of the dollar as a hard currency that only helps the US, we have more diversification in the basket of hard currencies under the IMF Special Drawing Rights than ever before (euro, yen, British pound and Chinese yuan).

This could (and very likely will) lead to the fact all foreign central banks will dump part of their dollars to buy the Chinese currency in the future, thus flooding the currency market with dollars and reducing the purchasing power in the US. This would also mean that the era of cheap borrowing costs would eventually come to an end and lower living standards for Americans saddled with massive public and private sector debt, thus precipitating more and deeper cyclical economic crises. https://reason.com/archives/2012/09/13/occupy-the-fed; http://www.zerohedge.com/news/2015-05-06/usa-manipulating-its-own-currency-important-imf-meeting

3. High structural unemployment in the US and EU is twice the official rate and when combined with underemployment the fulltime working population drops between two-thirds and three fourths. Meanwhile, there has been an assault on labor unions and organized labor in general as much in the US as in Europe. Ever since the Reagan-Thatcher decade of the 1980s, neoliberal policies became prevalent and governments determined that labor rights, especially collective bargaining, impede capital concentration. The so-called US “right-to-work” laws and their versions in other countries that the IMF has been pushing are nothing but another way of driving wages down as low as possible; all of it made possible because government yields to corporate demands. http://useconomy.about.com/od/suppl1/f/real_unemployment_rate.htm; http://www.salon.com/2015/03/25/noam_chomsky_blasts_the_assault_
on_labor_right_to_work_means_right_to_scrounge/

4. Geographic wealth concentration. When the G20 own more than 80% of the world’s wealth and rich countries account for 90% of overall global financial assets – stocks, bank assets and insurance – the rest of the world suffers and helps to contribute to low consumption that accounts for the crisis of overproduction. (Michael Hudson, Super Imperialism: The Origin and Fundamentals of U.S. World Dominance; https://www.gfmag.com/global-data/economic-data/wealth-distribution-income-inequality.
After WWII, the US recognized that its own economy would lapse into recession quickly unless the US helped to strengthen the economies of Europe and Japan, as major trading partners, albeit for geopolitical considerations as well. Although the international political economy of the early 21st century does not resemble that of 1945, disequilibrium on a world scale owing to centralization of capital in the core countries poses a threat to the entire capitalist system. (Mario Baldasari et al. eds.. Global Disequilibrium in the World Economy)

5. IMF austerity policies and the integration patron-client integration models that the US, EU, and Japanhave imposed on the underdeveloped nations have resulted in massive transfer of wealth from the periphery to the core. What the IMF, backed by the World Bank, OECD, the FED and all central banks, calls “structural adjustment” results n essence of wealth transfer from the debtor nations in the periphery – essentially non-Western nations, but also Southern and Eastern Europe – to the core countries. http://richmondvale.org/blog/structural-adjustment-a-major-cause-of-poverty/; http://knowledge.wharton.upenn.edu/article/does-austerity-work-or-does-it-make-things-worse/;

6. Tax havens for corporations and the rich. Corporate and individual money amounting to several trillion dollars (as much as $10 trillion by some estimates) that is sitting in tax havens instead of absorbed back into the economy, and the failure of governments to absorb surplus capital from the private sector to use it to stimulate economic growth and expansion based on a horizontal model of development – benefiting the broader middle and working class. When the top 500 US corporations have sheltered away at least $2 trillion and demand massive tax breaks to repatriate some of that money it is indicative how highly concentrated capital rules over the state. http://america.aljazeera.com/articles/2015/10/6/top-us-companies-keep-21-trillion-in-tax-havens-abroad.html; http://www.huffingtonpost.com/news/offshore-tax-havens/

7. Steadily declining mass consumption across all core countries relying on middle class and working class consumer spending to stimulate growth remains a very serious cause of the cyclical contractions. In the US, consumer spending accounts for 70% of GDP as comparable percentages account for the top 20 richest countries. When the mass consumer suffers downward income pressure, to the degree that some US corporations have decided to raise minimum wages voluntarily, the signs are very clear of a real structural problem in capitalism. The world’s largest retailer WALMART which has just decided to close more than 160 stores, mostly across the south where incomes are low, is the last company to raise wages voluntarily. Although US consumers saved $88 billion in energy in 2015, there was a decline instead of rise in consumer spending when compared with 2014.
Despite a real GDP rise of 2%, sales decline in the US during the fourth quarter of 2015 was -5.3%, indicative that consumers are simply unable to carry any more debt given their income levels. World trade decline in 2015 was the worst since 2009 amid the Great Recession, reflecting a world consumption slump. Ironically, the IMF whose monetarist (austerity policies) are responsible for steadily declining consumption among the middle and working classes lists “low consumption demand” as a root cause for the declining global GDP in its latest revised estimate that I am positive will be revised downward at least once in 2016 possibly twice. http://www.imf.org/external/pubs/ft/weo/2016/update/01/; http://www.ft.com/intl/cms/s/2/fe1df514-4b43-11e5-b558-8a9722977189.html#axzz3xtlGwZsK.

8. Wealth inequality is one-hundred times higher than income inequality, thus signaling a very dire future not just for the US, but the entire western world. Just one month ago, December 2015, the US congress passed legislation providing tax breaks amounting to just over half a trillion going mostly to the rich. This was with the considerable backing of Democrats whose rhetoric is that only Republicans favor tax breaks for the rich. In the EU amid economic contraction and austerity in the last five years the wealthiest 10% have become wealthier, even in the hardest hit countries of Southern and Eastern Europe, thus curbing the consumption power of the middle and working class. According to the PEW Research Center, the US wealth inequality is the highest on record! This does not mean that situation is much better in the EU where inequality is also growing. http://www.pewresearch.org/fact-tank/2014/12/17/wealth-gap-upper-middle-income/; http://reports.weforum.org/outlook-global-agenda-2015/top-10-trends-of-2015/1-deepening-income-inequality/

9. Neoliberal and corporate welfare policies that are parasitic and simply recycle money from the bottom 80% of the population to corporations and the top one percent that own most of the wealth have been at the heart of the contracting cycles that started during the banking crisis of the 1980s and is continuing today. US taxpayers are paying out money to fund everything from sports stadium that millionaires own to subsidizing General Electric that is a very profitable company to providing lucrative contracts by government at all levels to subcontractors for work that is done at a higher cost and less efficiently than it would have at the public sector level. Corporate welfare is not just in the US but all across Europe and it is a policy that the IMF and the World Bank are imposing on governments around the world because it is what the richest are is pushing to maintain their privileged positions. http://thinkbynumbers.org/government-spending/corporate-welfare/corporate-welfare-statistics-vs-social-welfare-statistics/; http://www.theguardian.com/politics/2015/jul/07/corporate-welfare-a-93bn-handshake

10. EU monetarism. Under Germany’s economic and political hegemony, Europe has been pursuing monetarism and imposing austerity on the periphery countries – Southern and Eastern Europe – in the last five years in order to solidify its dominant role in Europe under the patron-client model. This has caused disequilibrium not just in the periphery economies of the EU but across all of Europe against the sanctions imposed on Russia and counter-sanctions by Russia, thus slowing growth down and impacting EU-US and EU-China and Japan economic relations. In short, the Greek crisis mushroomed into a greater crisis because Germany was determined to use austerity as a mechanism for EU hegemony. In an article entitled: ‘The Fourth Reich’: What Some Europeans See When They Look at Germany” argued that: “Following World War II, a German return to dominance in Europe seemed an impossibility. But the euro crisis has transformed the country into a reluctant hegemon and comparisons with the Nazis have become rampant.” http://www.spiegel.de/international/germany/german-power-in-the-age-of-the-euro-crisis-a-1024714.html. European Central Bank president and former Goldman Sachs executive, Mario Draghi has faithfully served Germany largely because the EU multinational corporations benefit from the German model. http://www.socialeurope.eu/2014/09/mario-draghis-policy-ideas-wont-work/

The Pretexts for Global Contraction

There all kinds of excuses and shallow propaganda often by well paid consultants promoting various financial services on why the economy is in its current state of contraction, including the weather is too hot or too cold, thus preventing consumers from spending on winter products and services or conversely staying hope because it is too cold out! The utterly absurd arguments aside, of which there is no shortage especially considering that most people are paid to propagate, the IMF has just released a new report that has revised global DGP growth downward. This includes US growth that Obama, the media and analysts claimed would be robust.

In the 2016 State of the Union address, Obama claimed that it is a myth the US economy has problems as Republicans claim. Nevertheless, the IMF report lists “subdued demand” as a cause for lowering GDP estimates. However, the IMF proposed at Davos in January 2016 that EU simply lower minimum wage laws and labor laws to absorb Muslim migrants. It goes without saying that refugees would work for food and shelter given their desperate condition to flee war-torn Iraq and Syria where the US and its allies created chaos in the first place. The irony here is that he same IMF that lists “low consumption demand” as a cause for the lower than expected global GDP in 2016 and also 2017, is recommending a wage policy that would only worsen the situation. http://www.imf.org/external/pubs/ft/weo/2016/update/01/

One can understand why corporations and governments spend billions trying to convince the public that economic contractions that account for lower living standards and downward socioeconomic mobility has nothing to do with the structural contradictions of capitalism and the policies governments are pursuing favoring the very wealthy. If they were to admit such a thing, then they would have to accept blame and change the political economy to the benefit of the people rather than corporations and the top one percent that own half of the world’s wealth. The only thing left to do is to manufacture excuses and to have well-paid Nobel Prize winners in economics, politicians and journalists manufacture a pretext, to insist on a better neoliberal model and never examine the structural flaws in a decadent system.

1. China is to blame

a. China not growing its GDP at the same double-digit GDP pace as in the previous decade. If this is the case, then does it not reveal the structural weaknesses of the Western economies and their inexorable dependence on China? Besides, is it realistic to expect China to grow at double digit rates without suffering the same cyclical crises given that it is operating within the capitalist world economy?

b. China’s stock market has dragged down the entire world markets. But who drove the values of markets China higher if not speculative foreign investors that expected growth to take place and drive global demand even higher at home and globally? Even under a quasi-statist system, the evolution of the Chinese market followed a pattern of expansion and contraction as all capitalist countries have done historically.

c. Chinese currency (yuan) manipulation by the government intended to increase exports is the problem along with “shadow banking” that conceals the real debt problem of China, thus intensifying capital flight. China actually helped the US and the world economy soften the blow of the Great Recession of 2008 by keeping its currency at such levels and stimulating continued growth amid global contraction. This at a sacrifice to its own population for the sake of securing market share in the future.

d. Chinese government owns slightly more than half of securities, and manipulates the stock market. Therefore, the absence of market freedom is to blame because the quasi-statist policies preclude free markets from reflecting real values in companies. If China did not have a quasi-statist regime, would it have achieved the economic miracle that it has in a country that had no capitalist class? After all, is this not how Japan, Taiwan, and South Korea also developed after 1945? Are analysts so blind to the realities of China’s history, traditions, institutions, and social structure that the stock market is the only focus as though it operates totally separately from the rest of society? Are they so oblivious to China’s internal dynamics everything from huge income gaps and the need to continue transitioning the economy to better serve its own population instead of serving foreign investors? (http://www.wsj.com/articles/a-global-recession-may-be-brewing-in-china-1439764500; http://foreignpolicy.com/2015/08/18/experts-china-global-recession-currency-rmb-yuan-stock-market/; http://www.cnbc.com/2016/01/20/is-china-really-to-blame-for-the-global-sell-off.html; http://www.nakedcapitalism.com/2015/12/capitalism-not-china-is-to-blame-for-the-current-global-economic-decline.html)

2. Energy Glut

Oil and natural gas prices collapsed to levels that forced giant multinational energy corporations to suffer major losses and energy producing countries to see their GDP slashed. While this is true, why did energy prices collapse? In part, this is because of the contracting world economy, especially manufacturing in China, India, and Japan, all suffering contraction. However, the energy market was also deliberately manipulated for political reasons by the Saudi Arabian regime, with the tacit approval of the US and northwest Europe needing cheap energy to punish both Russia and Iran as major energy producers. Now we know that market manipulation coinciding with sluggish energy demand globally has backfired and impacted those doing the manipulation to a greater degree than Iran and Russia that have struggled to diversify their economies.

From June 2014 to January 2016, the price of oil tumbled by 60%, contributing to the uncertainty about energy stability and of course overall downward pressure on all commodities from cacao to natural gas effecting primarily developing nations that depend on commodity exports. As revenues of energy and commodity-producing countries fell sharply, some including Russia and Iran but smaller states like Azerbaijan among them, used revenues to diversify production and become less dependent on imports. Although the overall impact of the energy and commodities slump has entailed lower asset values, this has hardly translated into any kind of a growth stimulus, as many were speculating but now know better. http://www.weforum.org/agenda/2016/01/azerbaijan
The low energy argument hardly explains the current world contraction and market slump because it is high energy prices that invariably contribute to such contraction as they divert spending from other sectors to energy – as has happened historically. Nevertheless, this is the pretext many are using instead of looking at real causes for capitalism’s structural flaws, just as is the inane argument about Iran releasing a few hundred thousand more barrels of oil in the market. The reality is that Greek oil tankers were already transporting Iranian oil illegally for years to areas that supposedly had sanctions on Iran. http://www.mcclatchydc.com/news/politics-government/article24746689.html; A. H. Cordesman et al.The Gulf and the Military Balance)

3. FED Rates

FED raised rates too quickly and should have waited because this precipitated a negative investor psychology considering companies were used to rates close to zero that allowed them to borrow at practically no cost. FED was slow in raising rates so that market psychology was confused and took this as a signal things were not going as well regarding real unemployment and GDP growth. The FED has been manipulating the currency to the advantage of Wall Street since the 1930s and it follows what Wall Street dictates. If the FED was interested in helping the average American, it would have an inflationary monetary policy, something that would of course entail low dollar value given that the US public debt is about equal to GDP. http://www.cnbc.com/2015/06/03/federal-reserve-policy-helping-rich-get-richer-blackrock-pro-rick-rieder.html; Anthony Sutton, The Federal Reserve Conspiracy, 2014; Stephen Lendman, How Wall Street Fleeces America: Privatized Banking, Government Collusion and Class War, 2011)

4. Presidential Election Jitters: Will Wall Street Have its Favorite?

The presidential race is not going as well as the billionaires funding the Republican campaigns and Hillary Clinton wanted. The chaos in the Republican camp with Bush marginalized and Sanders doing as well as he is brings into question of how well the wealthy control the candidates that they hand to the voters for their final approval. No matter who wins, the capitalist system will remain exactly as it is today, but that is not enough for the billionaires that demand even greater concessions. The reason for the market slump is that investors fear Donald Trump winning and proposing measures that curtail some of the manipulation of Wall Street as he has stated publicly.

The billionaire Koch brothers who own as much wealth as about 20% of the US population, have stated they are adamantly against Trump because of possible tighter market regulations. http://theweek.com/speedreads/587257/donald-trump-reportedly-tried-woo-koch-brothers-sheldon-adelson-turned-down; At the Davos meeting where the world’s most powerful businesspeople and political figures are meeting, the international elites are just as alarmed about Trump as the Koch brothers. “Unbelievable”, “embarrassing” even “dangerous” are some of the words the financial elite gathered at the World Economic Forum conference in the Swiss resort of Davos have been using to describe U.S. Republican presidential frontrunner Donald Trump.” http://finance.yahoo.com/news/davos-elite-alarmed-prospect-nominee-trump-185041216.html. In the last analysis, Trump is a billionaire who will faithfully follow Wall Street as every president has done in US history.

Bernie Sanders is the other pretext along with Trump for Wall Street contraction. Bernie Sanders as a self-proclaimed Socialist-Democrat that many on Wall Street adamantly oppose. While it is true that he is outspoken against the neoliberal political economy and dilution of the social safety net, when one looks at his votes in the senate and his policy positions on fiscal, monetary, trade, investment and labor policy it is clear he is interested in restoring some modicum of Keynesianism that neoliberals have eliminated. Ending some of the pork barrel corporate welfare measures, fiscal advantages to the rich, strengthening banking regulation, criminalizing corporate crimes are some of the proposals he has put on the table.

Contrary to CEOs fears, Sanders who admittedly opposes “cannibal capitalism” (a term coined by Eugene Debs) has proved that he works within the system he wishes to reform on some new version of neo-Keynesian model but realizes it is almost impossible. Even if he wins the presidency, which is highly unlikely, Sanders will fall into the Obama mold and cater to Wall Street with only modest policy changes to strengthen the social safety net. The last time the US reformed its political economy to save it from catastrophe was under FDR in the 1930s who acted out of necessity. The US is not yet in the kind of crisis it experienced in the 1930s and Bernie Sanders is not FDR. http://www.truth-out.org/news/item/34314-ten-powerful-reasons-why-bernie-scares-wall-street

5. The BRICS and Non-Western Economies Contracting

The fault rests with the countries in the BRICS group (Brazil, Russia, India, China and South Africa) and other developing nations. In short, China and the emerging markets are unable to absorb the surplus that the US, EU, Japan, Canada and Australia are producing therefore it is the fault of the BRICS and emerging market economies for causing problems in the G-7. Never mind that the global recession of 2008 started in the US and spread to core countries and then to the rest of the world, taking it down with them. Nor does it matter that US and its EU partners made matter worse by advocating austerity within the European periphery and in many countries outside of Europe at the same time they imposed sanctions on Russia that have only backfired to contribute to Western contraction.

Is it any wonder that instead of slashing defense spending after 2008 and keeping it at low levels, the US demanded that NATO spending increase to maintain an effective containment policy on Russia, policies that have diverted capital from the civilian economy in the US and all across Europe, as well as Japan, Taiwan, and South Korea. When bankrupt Greece asked permission from the EU and Germany to cut defense because it had cut just about everything else under austerity since 2010, the answer was that would defense cuts impact contracts with German and French manufacturers. In short, cut mass consumption and reduce living standards that the IMF and monetarists advocate but not defense.

Because of the US wars in Iraq and Afghanistan, the public debt rose substantially and the average homeowner paid $600 more in mortgage interest by 2008 when the recession hit. Deficit spending is one thing when resources are devoted to productive projects for the civilian economy and to the benefit of people, and entirely another when devoted to the parasitic defense industry. While the media, politicians and pundits in the US and the West defend raising defense spending, they bitterly criticize Russia for doing the same in response to NATO encirclement policy. Oddly enough, the neoliberals in the West defending defense spending argue that in Russia’s case it weakens the civilian economy!
http://watson.brown.edu/costsofwar/costs/economic/economy/macroeconomic; https://news.vice.com/article/russias-economy-is-a-mess-and-its-problems-arent-going-away

It is just as important to mention that the US and UK have been manipulating their currencies to the detriment of the emerging economies. For example, India has recently decided to trade with Iran solely on their currencies and to leave out reserve currencies euro and dollar. Having to pay debt and balance of payments in dollars or in UK British pound that are highly inflated is hardly in the interest of countries trying to enjoy monetary and economic sovereignty. It only stands to reason that both trading partners derive benefits from trade transactions in their own currencies just as it stands to reason that they along with many emerging economies see the dollar and other reserve currencies as obstacles to their growth because it imposes underlying monetarism on their countries. In October 2015, the IMF predicted a global US dollar recession, as more countries abandon it and begin to consider alternatives, including the yuan that the IMF accepted as a hard currency. The decline of the dollar is the result of US policies, not the fault of Brazil and India or other emerging economies. http://www.ft.com/intl/cms/s/3/d86944c0-6d14-11e5-aca9-d87542bf8673.html#axzz3xtlGwZsK; Barry Eichengreen, Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System, 2012)

Conclusion: Solutions to the Crisis of Capitalism

What solutions do mainstream economists, politicians, businesspeople, pundits and media, offer for the cyclical crises of capitalism? These are same solutions they have offered since the beginning of the Industrial Revolution when Adam Smith wrote the Wealth of Nations. Increase market share domestically and globally, innovate to lower production costs, lower taxes on business and the wealthy, less regulation of business, more flexible labor laws more government support for business – everything from exporting products abroad to pursuing a monetary policy that allows for low interest rates and liquidity and providing incentives for research and development, and lower spending on any social programs.

Even if every single one of these were to work out as ideally in the real economy as its advocates wish, the question remains how it is possible for the mass consumer to stimulate the economy when income and personal debt determine consumption power. No matter how great and how less expensive the smart phone may be, where is the consumer base once the market is saturated on a global scale? How much more debt should the mass consumer carry so that more products and services are consumed before we have a major consumer debt crisis analogous to the student debt crisis in the US about to explode even with US government guaranteeing such debt currently at $1.3 trillion in an $18 trillion economy? US average total debt is at $130,000 or $12 trillion total representing two-thirds of GDP, while US average income is just $52,000. When we consider that public debt resulting in higher taxes for the mass consumer, and consumer debt, the combination of the two necessarily contributes to cyclical crises as scholarly studies on this issue have demonstrated.
(http://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/; Carmen M. Reinhart and Kenneth Roggof, This Time Is Different: Eight Centuries of Financial Folly, 2011; R. Z Aliber and Charles Kindleberger, Manias, Panics and Crashes: A History of Financial Crises, 2011)

The economy has not escaped cyclical contractions and periodically very deep ones, even under a policy mix that includes Keynesian measures. Yet, there is not a single mainstream economist or bourgeois politician who would dare to address the core issue of the problem that is the wealth and income inequality issue. Of course, some of the reformists in the Keynesian school argue in favor of strengthening the social fabric in conjunction with the saving of capitalism by providing a better safety net for the middle and lower classes to secure a democratic society. Under the neoliberal political economy that has prevailed since the 1980s, even those politicians who claim to support some degree of Keynesian policies have not dared to put them into policy and use the rhetoric to win elections and nothing more; France, Spain, Portugal and Greece serve as good examples of politicians running on a Keynesian agenda but governing as neo-liberals. Even the nationalist regimes in Latin America that invoked Keynesianism – Venezuela, Argentina, Bolivia, Peru and Ecuador – catered as much to the nationalist capitalist class as to the comprador bourgeoisie and foreign capital. Embracing the neoliberal path is a manifestation of market hegemony over the state, thus forcing politicians, businesspeople, economists, journalists, and commentators to manufacture myths about disequilibrium in the economy and chronic downward socioeconomic mobility.

There is no reason to look for scapegoats in the economy, no reason to create fictitious forces or policies that brought us to the reality of Bill Gates, Warren Buffett and the Koch brothers owning more wealth than 127 million Americans. There is no reason to constantly evade and avoid the bitter truth about the inescapable crash of the markets that most likely will come in a decade perhaps in the 2030s on the 100th anniversary of the Great Depression. When the culture of the Western world, now a global culture that reaches from Mongolia to Mozambique, celebrates the millionaire and billionaire as society’s hero instead of villain who destroys society, while marginalizing those who work and create, why is anyone surprised that the sharp market decline of January 2016 amounting to more than $8 trillion in losses is but a small signal of a crash that is inevitable probably toward the end of the next decade or early 2030s.

Jon Kofas is a retired university Professor from Indiana University.

25 January, 2016
Countercurrents.org

By Robert Barsocchini

The US illustrates to ISIS, and the world, that the path to the seat of regional and then global power is genocide, land-theft, mass enslavement, never paying reparations, then wielding this illegally and brutally obtained money and military hardware over others and proclaiming one’s national group to be superior (ethnocentrism) and a “respected leader”, while in reality the country is feared, loathed, and isolated, maintaining and expanding its hegemony through continued methods of extreme propaganda, subversion, and physical force.

Through terror, bribery, threats, and other tactics, the US foists huge loans on small, relatively weak nations (which are often weak because of having been ravaged by Europe or the US), then forces them to repay the loans with interest as it drains and impoverishes the target countries, making them cheap resource and service stations for the top tiers of an actual global super-elite.

This tightly controlled and forcibly expanded US/Western-peddled economic system, capitalistic oligarchy, euphemistically referred to in the West as ‘globalization’ or ‘neo-liberalism’, which we are intended to believe is a ‘natural’ and ‘inevitable’ process (it is not), was highlighted this week by Oxfam. While US and Western agencies spend billions trying to convince people that capitalistic oligarchy (‘globalization’) is being globalized for the good of the public, not the enrichment of a tiny elite – a no-brainer propaganda tactic – Oxfam notes:

“Oxfam’s analysis of wealth trends between 2010 and 2015 finds the poor are getting much poorer.

The wealth of the richest 62 people has risen by 44 percent in the five years since 2010—that’s an increase of more than half a trillion dollars ($542 billion), to $1.76 trillion” while “the wealth of the bottom half fell 41 percent or just over $1 trillion.”

These “62 individuals ha[ve] the same wealth as 3.5 billion people, the bottom half of the global population, compared with 388 individuals five years earlier”.

The global oligarchic dictatorship being spearheaded by the United States “did not come about by accident; it is the result of deliberate policy choices”, says Oxfam. These include US/Western military-enforced, corporate-written economic laws and the US’s dubious “loans” to weaker nations, with an emerging end picture similar to a heavily policed planetary slum cheaply laboring to serve a tiny, ultra-rich gated community.

In Lima, the capitol of US-backed Peru, the vast majority of people spend most of their waking hours laboring, then return here.

…while a tiny percentage of the city lives here, in the widely guarded and gated, ultra-rich district.

But in contrast to the self-serving ideology it preaches and forces on its victims, the US itself became powerful by taking out perhaps the biggest loans in world history and then never repaying them (2-3; 6). Further, the loans came from unwilling lenders: the people of Indigenous and African nations. Well-known Israeli author Miko Peled notes in an open letter to Obama this week:

“As a black man, you had an unprecedented opportunity to address the issues of Blacks, but you didn’t. You showed no care for Black lives or for the lives of Blacks in America. You said little and did even less to stop the killing of Black men and the mass incarceration of Blacks. You said nothing and did nothing regarding the over due payment of reparations to the descendants of slaves, men and women upon whose backs the US economy was built. And, if any proof was needed, the outcry of the [Black Lives Matter] movement shows that your priorities were elsewhere.”

The prospects for Native peoples are even more grim. Members of Native nations remain the people killed most often per capita by US government forces. As one Native person commented:

“There are no white or black faces rallying around us, marching with us, protesting with us over this injustice. Why? Because we are a forgotten people.”

If the US were to repay its own loans (or even simply cease its ongoing campaigns of genocide and forced submission), the nation would cease to exist in its current form. All of its physical and more than half its economic foundation rests on the backs of dead Natives and tortured, tormented, raped, enslaved and slain African men, women, and children (the US had a culture, going all the way up to the ‘founding fathers’, devoted specifically to the enjoyment of raping enslaved African children and adults) (6). Yet it is this nation that owes its own existence to loans unprecedented in their scale and ugliness that uses its ill-gotten money and equipment of death to force loans on others and then demand their repayment through funds, labor, ‘favors’, and ‘concessions’.

The US thus illustrates to ISIS, and everyone else, that the path to regional and then global power is to pursue unrelenting genocide, land theft, and hegemonic expansion while taking out huge loans through enslaving people, never repaying the loans, and then using the acquired pool of dirty money to start a global-scale, mafia-style loan-sharking business, and make examples of the disadvantaged people who can’t repay the ‘loans’ by terrorizing and killing them, often en masse.

ISIS seems an apt pupil, but only on a comparatively microscopic scale. However, with further tutelage from continued US refusal to repay its land-theft and slavery loans, and continued US military savagery and expansionism, the US should be able to lead by example and, within a few years, coach ISIS into becoming a stable regional power.

Robert Barsocchini is an internationally published author who focuses on force dynamics, national and global, and also writes professionally for the film industry. Updates on Twitter. Author’s review of the historical background to the ‘Black Lives Matter’ movement.

20 January, 2016
Countercurrents.org

By Gail Tverberg

A person often reads that low oil prices–for example, $30 per barrel oil prices–will stimulate the economy, and the economy will soon bounce back. What is wrong with this story? A lot of things, as I see it:

Oil producers can’t really produce oil for $30 per barrel

A few countries can get oil out of the ground for $30 per barrel. Figure 1 gives an approximation to technical extraction costs for various countries. Even on this basis, there aren’t many countries extracting oil for under $30 per barrel–only Saudi Arabia, Iran, and Iraq. We wouldn’t have much crude oil if only these countries produced oil.

2. Oil producers really need prices that are higher than the technical extraction costs shown in Figure 1, making the situation even worse.

Oil can only be extracted within a broader system. Companies need to pay taxes. These can be very high. Including these costs has historically brought total costs for many OPEC countries to over $100 per barrel.

Independent oil companies in non-OPEC countries also have costs other than technical extraction costs, including taxes and dividends to stockholders. Also, if companies are to avoid borrowing a huge amount of money, they need to have higher prices than simply the technical extraction costs. If they need to borrow, interest costs need to be considered as well.

3. When oil prices drop very low, producers generally don’t stop producing.

There are built-in delays in the oil production system. It takes several years to put a new oil extraction project in place. If companies have been working on a project, they generally won’t stop just because prices happen to be low. One reason for continuing on a project is the existence of debt that must be repaid with interest, whether or not the project continues.

Also, once an oil well is drilled, it can continue to produce for several years. Ongoing costs after the initial drilling are generally very low. These previously drilled wells will generally be kept operating, regardless of the current selling price for oil. In theory, these wells can be stopped and restarted, but the costs involved tend to deter this action.

Oil exporters will continue to drill new wells because their governments badly need tax revenue from oil sales to fund government programs. These countries tend to have low extraction costs; nearly the entire difference between the market price of oil and the price required to operate the oil company ends up being paid in taxes. Thus, there is an incentive to raise production to help generate additional tax revenue, if prices drop. This is the issue for Saudi Arabia and many other OPEC nations.

Very often, oil companies will purchase derivative contracts that protect themselves from the impact of a drop in market prices for a specified time period (typically a year or two). These companies will tend to ignore price drops for as long as these contracts are in place.

There is also the issue of employee retention. In a sense, a company’s greatest assets are its employees. Once these employees are lost, it will be hard to hire and retrain new employees. So employees are kept on as long as possible.

The US keeps raising its biofuel mandate, regardless of the price of oil. No one stops to realize that in the current over-supplied situation, the mandate adds to low price pressures.

One brake on the system should be the financial pain induced by low oil prices, but this braking effect doesn’t necessarily happen quickly. Oil exporters often have sovereign wealth funds that they can tap to offset low tax revenue. Because of the availability of these funds, some exporters can continue to finance governmental services for two or more years, even with very low oil prices.

Defaults on loans to oil companies should also act as a brake on the system. We know that during the Great Recession, regulators allowed commercial real estate loans to be extended, even when property valuations fell, thus keeping the problem hidden. There is a temptation for regulators to allow similar leniency regarding oil company loans. If this happens, the “braking effect” on the system is reduced, allowing the default problem to grow until it becomes very large and can no longer be hidden.

4. Oil demand doesn’t increase very rapidly after prices drop from a high level.

People often think that going from a low price to a high price is the opposite of going from a high price to a low price, in terms of the effect on the economy. This is not really the case.

4a. When oil prices rise from a low price to a high price, this generally means that production has been inadequate with only the production that could be obtained at the prior lower price. The price must rise to a higher level in order to encourage additional production.

The reason that the cost of oil production tends to rise is because the cheapest-to-extract oil is removed first. Oil producers must thus keep adding production that is ever-more expensive for one reason or another: harder to reach location, more advanced technology, or needing additional steps that require additional human labor and more physical resources. Growing efficiencies can somewhat offset this trend, but the overall trend in the cost of oil production has been sharply upward since about 1999.

The rising price of oil has an adverse impact on affordability. The usual pattern is that after a rise in the price of oil, economies of oil importing nations go into recession. This happens because workers’ wages do not rise at the same time as oil prices. As a result, workers find that they cannot buy as many discretionary items and must cut back. These cutbacks in purchases create problems for businesses, because businesses generally have high fixed costs including mortgages and other debt payments. If these businesses are to continue to operate, they are forced to cut costs in one way or another. Cost reduction occurs in many ways, including reducing wages for workers, layoffs, automation, and outsourcing of manufacturing to cheaper locations.

For both employers and employees, the impact of these rapid changes often feels like a rug has been pulled out from under foot. It is very unpleasant and disconcerting.

4b. When prices fall, the situation that occurs is not the opposite of 4a. Employers find that thanks to lower oil prices, their costs are a little lower. Very often, they will try to keep some of these savings as higher profits. Governments may choose to raise tax rates on oil products when oil prices fall, because consumers will be less sensitive to such a change than otherwise would be the case. Businesses have no motivation to give up cost-saving techniques they have adopted, such as automation or outsourcing to a cheaper location.

Few businesses will construct new factories with the expectation that low oil prices will be available for a long time, because they realize that low prices are only temporary. They know that if oil prices don’t go back up in a fairly short period of time (months or a few years), the quantity oil available is likely to drop precipitously. If sufficient oil is to be available in the future, oil prices will need to be high enough to cover the true cost of production. Thus, current low prices are at most a temporary benefit–something like the eye of a hurricane.

Since the impact of low prices is only temporary, businesses will want to adopt only changes that can take place quickly and can be easily reversed. A restaurant or bar might add more waiters and waitresses. A car sales business might add a few more salesmen because car sales might be better. A factory making cars might schedule more shifts of workers, so as to keep the number of cars produced very high. Airlines might add more flights, if they can do so without purchasing additional planes.

Because of these issues, the jobs that are added to the economy are likely to be mostly in the service sector. The shift toward outsourcing to lower-cost countries and automation can be expected to continue. Citizens will get some benefit from the lower oil prices, but not as much as if governments and businesses weren’t first in line to get their share of the savings. The benefit to citizens will be much less than if all of the people who were laid off in the last recession got their jobs back.

5. The sharp drop in oil prices in the last 18 months has little to do with the cost of production.

Instead, recent oil prices represent an attempt by the market to find a balance between supply and demand. Since supply doesn’t come down quickly in response to lower prices, and demand doesn’t rise quickly in response to lower prices, prices can drop very low–far below the cost of production.

As noted in Section 4, high oil prices tend to be recessionary. The primary way of offsetting recessionary forces is by directly or indirectly adding debt at low interest rates. With this increased debt, more homes and factories can be built, and more cars can be purchased. The economy can be forced to act in a more “normal” manner because the low interest rates and the additional debt in some sense counteract the adverse impact of high oil prices.

Oil prices dropped very low in 2008, as a result of the recessionary influences that take place when oil prices are high. It was only with the benefit of considerable debt-based stimulation that oil prices were gradually pumped back up to the $100+ per barrel level. This stimulation included US deficit spending, Quantitative Easing (QE) starting in December 2008, and a considerable increase in debt by the Chinese.

Commodity prices tend to be very volatile because we use such large quantities of them and because storage is quite limited. Supply and demand have to balance almost exactly, or prices spike higher or lower. We are now back to an “out of balance” situation, similar to where we were in late 2008. Our options for fixing the situation are more limited this time. Interest rates are already very low, and governments generally feel that they have as much debt as they can safely handle.

6. One contributing factor to today’s low oil prices is a drop-off in the stimulus efforts of 2008.

As noted in Section 4, high oil prices tend to be recessionary. As noted in Section 5, this recessionary impact can, at least to some extent, be offset stimulus in the form of increased debt and lower interest rates. Unfortunately, this stimulus has tended to have adverse consequences. It encouraged overbuilding of both homes and factories in China. It encouraged a speculative rise in asset prices. It encouraged investments in enterprises of questionable profitability, including many investments in oil from US shale formations.

In response to these problems, the amount of stimulus is being reduced. The US discontinued its QE program and cut back its deficit spending. It even began raising interest rates in December 2015. China is also cutting back on the quantity of new debt it is adding.

Unfortunately, without the high level of past stimulus, it is difficult for the world economy to grow rapidly enough to keep the prices of all commodities, including oil, high. This is a major contributing factor to current low prices.

7. The danger with very low oil prices is that we will lose the energy products upon which our economy depends.

There are a number of different ways that oil production can be lost if low oil prices continue for an extended period.

In oil exporting countries, there can be revolutions and political unrest leading to a loss of oil production.

In almost any country, there can be a sharp reduction in production because oil companies cannot obtain debt financing to pay for more services. In some cases, companies may go bankrupt, and the new owners may choose not to extract oil at low prices.

There can also be systemwide financial problems that indirectly lead to much lower oil production. For example, if banks cannot be depended upon for payroll services, or to guarantee payment for international shipments, such problems would affect all oil companies, not just ones in financial difficulty.

Oil is not unique in its problems. Coal and natural gas are also experiencing low prices. They could experience disruptions indirectly because of continued low prices.

8. The economy cannot get along without an adequate supply of oil and other fossil fuel products.

We often read articles in the press that seem to suggest that the economy could get along without fossil fuels. For example, the impression is given that renewables are “just around the corner,” and their existence will eliminate the need for fossil fuels. Unfortunately, at this point in time, we are nowhere being able to get along without fossil fuels.

Food is grown and transported using oil products. Roads are made and maintained using oil and other energy products. Oil is our single largest energy product.

Experience over a very long period shows a close tie between energy use and GDP growth (Figure 3). Nearly all technology is made using fossil fuel products, so even energy growth ascribed to technology improvements could be considered to be available to a significant extent because of fossil fuels.
Figure 3. World GDP growth compared to world energy consumption growth for selected time periods since 1820. World real GDP trends from 1975 to present are based on USDA real GDP data in 2010$ for 1975 and subsequent. (Estimated by the author for 2015.) GDP estimates for prior to 1975 are based on Maddison project updates as of 2013. Growth in the use of energy products is based on a combination of data from Appendix A data from Vaclav Smil’s Energy Transitions: History, Requirements and Prospects together with BP Statistical Review of World Energy 2015 for 1965 and subsequent.

While renewables are being added, they still represent only a tiny share of the world’s energy consumption.

Figure 4. World energy consumption by part of the world, based on BP Statistical Review of World Energy 2015.

Thus, we are nowhere near a point where the world economy could continue to function without an adequate supply of oil, coal and natural gas.

9. Many people believe that oil prices will bounce back up again, and everything will be fine. This seems unlikely.

The growing cost of oil extraction that we have been encountering in the last 15 years represents one form of diminishing returns. Once the cost of making energy products becomes high, an economy is permanently handicapped. Prices higher than those maintained in the 2011-2014 period are really needed if extraction is to continue and grow. Unfortunately, such high prices tend to be recessionary. As a result, high prices tend to push demand down. When demand falls too low, prices tend to fall very low.

There are several ways to improve demand for commodities, and thus raise prices again. These include (a) increasing wages of non-elite workers (b) increasing the proportion of the population with jobs, and (c) increasing the amount of debt. None of these are moving in the “right” direction.

Joseph Tainter in The Collapse of Complex Societies points out that once diminishing returns set in, the response is more “complexity” to solve these problems. Government programs become more important, and taxes are often higher. Education of elite workers becomes more important. Businesses become larger. This increased complexity leads to more of the output of the economy being funneled to sectors of the economy other than the wages of non-elite workers. Because there are so many of these non-elite workers, their lack of buying power adversely affects demand for goods that use commodities, such as homes, cars, and motorcycles.1

Another force tending to hold down demand is a smaller proportion of the population in the labor force. There are many factors contributing to this: Young people are in school longer. The bulge of workers born after World War II is now reaching retirement age. Lagging wages make it increasingly difficult for young parents to afford childcare so that both can work.

As noted in Section 5, debt growth is no longer rising as rapidly as in the past. In fact, we are seeing the beginning of interest rate increases.

When we add to these problems the slowdown in growth in the Chinese economy and the new oil that Iran will be adding to the world oil supply, it is hard to see how the oil imbalance will be fixed in any reasonable time period. Instead, the imbalance seems likely to remain at a high level, or even get worse. With limited storage available, prices will tend to continue to fall.

10. The rapid run up in US oil production after 2008 has been a significant contributor to the mismatch between oil supply and demand that has taken place since mid-2014.

Without US production, world oil production (broadly defined, including biofuels and natural gas liquids) is close to flat.

Figure 5. Total liquids oil production for the world as a whole and for the world excluding the US, based on EIA International Petroleum Monthly data.
Figure 5. Total liquids oil production for the world as a whole and for the world excluding the US, based on EIA International Petroleum Monthly data.

Viewed separately, US oil production has risen very rapidly. Total production rose by about six million barrels per day between 2008 and 2015.

Figure 6. US Liquids production, based on EIA data (International Petroleum Monthly, through June 2015; supplemented by December Monthly Energy Review for most recent data).

US oil supply was able to rise very rapidly partly because QE led to the availability of debt at very low interest rates. In addition, investors found yields on debt so low that they purchased almost any equity investment that appeared to have a chance of long-term value. The combination of these factors, plus the belief that oil prices would always increase because extraction costs tend to rise over time, funneled large amounts of investment funds into the liquid fuels sector.

As a result, US oil production (broadly defined), increased rapidly, increasing nearly 1.0 million barrels per day in 2012, 1.2 million barrels per day in 2013, 1.7 million barrels per day in 2014. The final numbers are not in, but it looks like US oil production will still increase by another 700,000 barrels a day in 2015. The 700,000 extra barrels of oil added by the US in 2015 is likely greater than the amount added by either Saudi Arabia or Iraq.

World oil consumption does not increase rapidly when oil prices are high. World oil consumption increased by 871,000 barrels a day in 2012, 1,397,000 barrels a day in 2013, and 843,000 barrels a day in 2014, according to BP. Thus, in 2014, the US by itself added approximately twice as much oil production as the increase in world oil demand. This mismatch likely contributed to collapsing oil prices in 2014.

Given the apparent role of the US in creating the mismatch between oil supply and demand, it shouldn’t be too surprising that Saudi Arabia is unwilling to try to fix the problem.

Conclusion

Things aren’t working out the way we had hoped. We can’t seem to get oil supply and demand in balance. If prices are high, oil companies can extract a lot of oil, but consumers can’t afford the products that use it, such as homes and cars; if oil prices are low, oil companies try to continue to extract oil, but soon develop financial problems.

Complicating the problem is the economy’s continued need for stimulus in order to keep the prices of oil and other commodities high enough to encourage production. Stimulus seems to takes the form of ever-rising debt at ever-lower interest rates. Such a program isn’t sustainable, partly because it leads to mal-investment and partly because it leads to a debt bubble that is subject to collapse.

Stimulus seems to be needed because of today’s high extraction cost for oil. If the cost of extraction were still very low, this stimulus wouldn’t be needed because products made using oil would be more affordable.

Decision makers thought that peak oil could be fixed simply by producing more oil and more oil substitutes. It is becoming increasingly clear that the problem is more complicated than this. We need to find a way to make the whole system operate correctly. We need to produce exactly the correct amount of oil that buyers can afford. Prices need to be high enough for oil producers, but not too high for purchasers of goods using oil. The amount of debt should not spiral out of control. There doesn’t seem to be a way to produce the desired outcome, now that oil extraction costs are high.

Rigidities built into the oil price-supply system (as described in Sections 3 and 4) tend to hide problems, letting them grow bigger and bigger. This is why we could suddenly find ourselves with a major financial problem that few have anticipated.

Unfortunately, what we are facing now is a predicament, rather than a problem. There is quite likely no good solution. This is a worry.

Note:

[1] For example, more dividend and interest payments are paid, tending to benefit the financial industry and the elite classes. More of the output of the economy goes to workers in supervisory positions or having advanced education. Other workers–those with more “ordinary” responsibilities–find their wages falling behind the general rise in the cost of living. As a result, they find it increasingly difficult to buy cars, homes, motorcycles, and other goods that use commodities.

Gail E. Tverberg graduated from St. Olaf College in Northfield, Minnesota in 1968 with a B.S. in Mathematics. She received a M.S. in Mathematics from the University of Illinois, Chicago in 1970. Ms. Tverberg is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries. Ms. Tverberg began writing articles on finite world issues in early 2006. Since March 1, 2007, Ms. Tverberg has been working for Tverberg Actuarial Services on finite world issues. Her blog is http://ourfiniteworld.com
20 January, 2016
Ourfiniteworld.com

 

By Samar

“I always wanted to be a writer. A writer of science, like Carl Sagan. At last, this is the only letter I am getting to write.”

Rohith Vemula, a young Dalit research scholar and student activist of the University of Hyderabad, would certainly not have wanted to die. No one with dreams does, after all. Yet, he died yesterday, on 17th January 2016. He killed himself after leaving the protest venue he was living at for 15 days, after getting expelled from his hostel. He sneaked out on some pretext and hanged himself. Did he really kill himself though?

Go through the ‘suicide note’ and it becomes apparent that he did not. He was in fact killed by the phantom limb of caste on which the pretentious democratic credentials of the republic are superimposed. He was forced into killing himself for standing against and injustices against his people, the ex-untouchables.

Rohith was forced to kill himself because he did not stop at that cardinal sin of fighting for his own people. He dared to speak for all the marginalized ones, be it the minorities, the workers or women as a leading activist of the Ambedkar Students Association (ASA).

There is nothing new in suicides, actually cold blooded murders, of bright Dalit students in premier educational institutions of the country. Many such incidents have been documented in the recent past showing how continuous harassment from the so called upper caste faculties and students pushed Dalit students into taking the extreme step. A documentary named ‘Death of Merit’ had counted 18 such cases in 4 years up to 2011 and led to a fierce discussion on the issue.

The suicides include that of Jaspreet Singh of Government Medical College, Chandigarh who was an extraordinary student and never failed even once. That was till he reached the final year of his graduation in medicine. The head of the department failed him then and threatened to do so over and over again. Unable to cope up with this torture, Jaspreet committed suicide blaming the head of department for his death. Yet, the police refused to lodge the First Information Report against the perpetrator. The trauma of losing him followed by this grave injustice was so severe for his sister, a student of Bachelor of Computer Application, that she also committed suicide,

The outrage over the suicides led to the intervention of the National Commission of Scheduled Castes (NCSC) which made a three-member team of senior professors re-evaluate his answer sheet. The team found that he had in fact passed the examination. It was only after NCSC’s intervention that the police filed the FIR under SC/ST (Prevention of Atrocities) Act. Not all the Dalit students killed by the system were fortunate enough to get even this much; a semblance of justice of something being done against their murderers.

Despite the clear pattern of caste based discriminations leading to such ‘suicides’, there is something markedly different in Rohith’s case. He, unlike most of the other young Dalits murdered for their caste, was not killed behind the walls of educational institutions away from the public gaze. His case was not about bad grades, or getting deliberately failed by the rogue faculties. Neither was his case about years and years of such endless torture finally culminating in a suicide and the world getting to know of that only after the final act.

Rohith’s suicide-murder was not one of them. It unfolded under full public gaze, on television, in social media, a gaze that apparently failed to save him.

Further, most of the other victims of suicide-murders had no support system inside the institutions they were harassed in, Rohith had. He had his friends, colleagues and common students supporting him in droves. He was expelled from the hostel and hundreds of those not expelled came to sleep out in open with him in solidarity. He, with his activist friends, led a procession in his campus and thousands marched in their own across the country. Yet, he was forced to kill himself and that is what makes this suicide-murder different, and a dangerous marker of the times to come by.

Recapping the incidents that led to Rohith’s suicide-murder may shed some light on the times to come by for the marginalised of the republic. His troubles started when ASA organised a protest march in August 2015 at the campus against the attack on the Montage Film Society in Delhi University by Akhil Bhartiya Vidyarthi Parishad (ABVP). They were attacked for screening a documentary movie ‘Muzaffarnagar Baaqi Hai” that exposed the roles of Hindutva outfits in Muzaffarnagar riots in 2013. Local ABVP unit did not, of course, like the protests and its leader Susheel Kumar posted a comment on Facebook calling ASA members ‘goons’. He later submitted a written apology. Next morning, Susheel Kumar alleged that about 30 students belonging to the ASA had beaten him up and he had to be hospitalized.

The University’s Proctorial Board conducted an enquiry into the allegations with a medical examination which found no proof of injuries claimed by Susheel Kumar. The Board observed the following-

“The board could not get any hard evidence of beating of Mr. Susheel kumar either from Mr Krishna Chaitanya or from the reports submitted by Dr. Anupama. Dr. Anupama’s reports also could not link or suggest that the surgery of the Susheel Kumar is the direct result of the beating.”

Based on these findings, the Board, reportedly, decided to end the matter with a warning to both the groups. The final report of the Board, however, inexplicably blamed ASA activists for causing injuries to Susheel Kumar and ordered the suspension of five students, including Rohith. ASA organized a protest following the suspension and held an open discussion with the then vice chancellor Prof. RP Sharma over the discrepancies in the findings and the punishment. Realising the injustice done to ASA students, Prof. Sharma revoked the suspension, subject to constitution of a new committee to enquire into the incident afresh.

Things started changing course soon afterwards. The new vice-chancellor Prof. P Apparao who took over from Prof. Sharma constituted no committee for a fresh enquiry and kept the suspended students in the dark until the Executive Council decided to suspend the students and expel them from their hostels. Self-evidently, Union Minister Bandaru Datttreya’s ‘intervention’ with the Ministry of Human Resources Development (MHRD) seems to have played an important role in the change in the university administration’s instance.

Mr. Datttreya, as it later came to be known, had intervened with the MHRD and urged it to discipline “casteist, extremist and anti-national’ elements like ASA. His primary reason for accusing ASA to be all this was simple- it had “held protests against the execution” (of Yakub Memon). Yes, he chose a reason which would turn many of the celebrated lawyers of the country including Anand Grover, Prashant Bhushan, Indira Jaisingh, Yug Choudhary, Nitya Ramakrishnan, Vrinda Grover and others into anti-nationals for opposing the same and seeking (and getting) an unprecedented 5 AM hearing by a Supreme Court bench to stop the execution.

What could have made a Union Minister intervene with the MHRD in such a ‘small’ case, likes of which keep taking in campuses across the country? Was it Rohith’s, and ASA’s, attempt to link the struggles of all the marginalized communities into one that had irked him? Perhaps it was, as Dalits standing up for Muslims, a vulnerable minority, would puncture the politico-ideological narrative that has propelled the present regime to power.

This makes the suicide-murder of Rohith markedly different from those preceding it and must send a shiver down the spine of any conscientious citizen of the country. The operational blame of past suicide-murders of the Dalit students lied, primarily, with identifiable rogue casteist elements; rogue because practicing casteism was never that easy despite it being deeply entrenched in the system. Harassment of Dalit students in prior cases could often be traced back to the individual perpetrators. It never was brazen enough to allow an incumbent union minister proactively trying to silence the voices for social justice by terming them anti-national and what not for raising issues as a united whole and not from the scattered locations of being a Dalit, a minority, tribal and so on.

This is also why Rohith’s suicide cannot be seen as an act of desperation. Neither was his struggle an individual one, for grades for instance, nor there was a reason for him to go desperate suddenly. His suicide note makes it clear too. His letter is not a suicide note in fact, it is an indictment of the republic that had been failing its vulnerable citizens for long and has started to shed even the pretence of justice of late.

To quote from his ‘suicide note’ again-

“The value of a man was reduced to his immediate identity and nearest possibility. To a vote. To a number. To a thing. Never was a man treated as a mind. As a glorious thing made up of star dust. In very field, in studies, in streets, in politics, and in dying and living.”

It is this reduction of human beings into mere categories that he fought against all his life. It is this reductionism, perhaps, he tried to challenge with one last act of supreme sacrifice. His body, as a body of a Dalit, had always been a site of struggle between forces wanting to dehumanize and own it and those wanting to put an end to this dehumanization. He turned it into a site of marking the necessity of all liberation struggles joining hands against increasingly vitiating attacks of the old order with new power.

This is our turn to not let his sacrifice go in vain. This is our turn to ensure that a functioning and accessible mechanism is put in place to support those fighting against systemic discrimination based on caste, gender, religion or any such regressive identity. It is high time to ensure that perpetrators do not get away with their crimes- be it witch hunt of activists or torture of individual students.

We need to begin with ensuring that all those responsible for this suicide murder, including VC Appa Rao and Union Minister Bandaru Datttreya, are booked under both -the provisions of the Scheduled Caste and Scheduled Tribes (Preventions of Atrocities) Act and for abetment of suicide-murder of Rohith Vemula.

Samar is Programme Coordinator – Right to Food Programme Asian Legal Resource Centre / Asian Human Rights Commission, Hong Kong

18 January, 2016
Countercurrents.org

By Patrick Cockburn

It has been a week of bombings across the world, most of them carried out by Islamic State (Isis). Some were highly publicised because they took place in the centre of large cities and involved foreigners, such as the suicide bombing on 12 January close to the Blue Mosque and Hagia Sophia in Istanbul which killed 10 people, nine of them German tourists. Two days later gunmen and bombers claiming allegiance to Isis killed two people in Jakarta in an attack that topped the international news agenda because it appeared to show that Isis has a frightening global reach. Furthermore, it took place in a city of 10 million people which is a media hub, ensuring that there were plenty of television cameras to record events.

The reverse is true of a double bombing in Muqdadiyah, a town in the Iraqi province of Diyala, north-east of Baghdad, which took place the day before the Istanbul attack. Though the casualty figures of 46 killed and 55 wounded were far worse than in Turkey and Indonesia combined, the slaughter was scarcely noticed by the Iraqi or international media. Isis had first exploded a bomb outside a coffee shop, allegedly frequented by Shia militiamen belonging to the Hashd al-Shaabi movement, and followed this up soon after with a second explosion that killed people who had gathered to see what was happening or to help the injured.

The attack provoked, as Isis probably intended, retaliatory attacks on Sunni by Shia militia who killed 15 people, burned seven Sunni mosques and at least 36 shops. Diyala is a mixed Sunni-Shia province, famous for fruit growing when I first visited in the 1990s but notorious over the last 12 years for sectarian warfare. Even within Iraq there was little publicity for the killings last week, because people in Baghdad are used to this happening in Diyala, the Shia-dominated government and Shia militias were not keen to publicise it, and the risks of doing so were demonstrated when two journalists from Sharqiya television channel were killed.

The publicity generated by a “terrorist” attack may exaggerate or understate its political significance. In Indonesia, it was in the interests of Isis, the Indonesian government and the perpetrators of the attack to emphasise that it was similar in method and intent to the massacre in Paris on 13 November.

Isis wants to show it can operate anywhere in the world, and the Indonesian government that it can largely thwart such evil intentions. In fact, Isis does not seem to have had much to do with it, but the extreme Islamist faction that carried it out knows that it can instantly generate vast global interest and news coverage by labelling itself as the Isis branch in Indonesia. The Isis attack in Istanbul is important because it shows that the movement now considers itself to be at war with the Turkish state that between 2011 and early 2015 showed a tolerance for IS movements in and out of Turkey that were central to the growth of the movement. Ankara was sympathetic to all jihadi movements trying to bring down President Bashar al-Assad and saw Isis as a counter-balance to the growing strength of the Syrian Kurds.

Turkish policy towards Syria has been one miscalculation after another since the Syrian uprising began five years ago. Assad did not fall, and Isis became much stronger than the Turks expected. Worst of all, not only did Isis fighters fail to beat the Syrian Kurds in the four-and-a-half month siege for the city of Kobani on the Turkish border, but the Kurds allied themselves with the United States and have been advancing with the help of thousands of US airstrikes. The 25,000 Kurdish soldiers of the People’s Protection Units (YPG) are not on their own the most powerful military force in Syria, but backed by the largest air force in the world they are of crucial significance.

Turkey is deeply alarmed by the rise of a militarily strong Kurdish quasi-state running along its southern flank in de facto alliance with the US and Russia. It has discovered to its cost that Isis is not the answer to the Kurds, but it is not clear what is. Five years ago there were not wholly unrealistic dreams in Ankara of Turkey being a model for the new Middle East, and spreading its influence through Iraq and Syria. Instead, it is now in danger of being excluded from the region after allying itself to Saudi Arabia and Qatar and supporting or turning a blind eye to the activities of extreme jihadi groups such as Isis, the al-Qaeda affiliate, the al-Nusra Front and the ideologically similar Ahrar al-Sham.

The problem for Turkey and the Sunni powers is that they now have to raise their stakes in Syria if they want to stay in the game. They did this earlier in the year by backing an anti-Assad offensive that made gains on the ground, but sparked a Russian and Iranian counter-intervention in September that enabled Assad and the Syrian army to go over to the attack. Turkey is getting close to the point where it has to become militarily engaged in the war for northern Syria or become a marginal player. The sealing of the Turkish border by Syrian Kurds and a Russian-backed Syrian army would be a body blow to all the other anti-Assad forces in Syria from which it would be difficult for them to recover.

The Syrian army has not won any decisive victories since the Russians intervened, but its soldiers are advancing rather than pulling back. The armed opposition as a whole is on the retreat. This is one of several reasons why the Syrian peace talks that begin in Vienna on 25 January are unlikely to succeed. Assad and the combination of powers behind him – Russia, Iran and Hezbollah – feel that they are getting stronger rather than weaker so there is less reason for them to compromise.

The Russians evidently enjoy interacting with the US in a way that recalls the super-power bargaining of the Cold War. But a former Arab diplomat points out that “Syria has two separate alliances with Russia and Iran and, of these, the Iranian one is the most important.” A defeat in Syria has always been a far more devastating prospect for Iran than Russia. The Iranians are the leaders of the region-wide Shia axis that is one of the guarantees of Assad’s survival and they have also, hitherto, provided badly needed money to Damascus which the Russians have not. This limits Russia’s capacity to put pressure on Assad on Vienna even if it wanted to.

The other problem facing negotiations in Vienna is that the armed opposition groups which are doing most of the shooting will not be present. The most important of these are Isis and al-Nusra, while Ahrar al-Sham is ambivalent towards Saudi Arabia’s attempt to unite the opposition. There is little point in having local ceasefires, unless al-Nusra and the other extreme fundamentalists agree to them and get something in return.

Guerrilla forces tend to disintegrate if they are not fighting an enemy. It is difficult to see why the war should not go on.

Patrick Cockburn is an Irish journalist who has been a Middle East correspondent since 1979 for the Financial Times and, presently, The Independent. He was awarded Foreign Commentator of the Year at the 2013 Editorial Intelligence Comment Awards.

17 January 2016

Peace for Life, a global faith-based peace and justice movement resisting militarism, war and globalisation, lauds the United Methodist Church (UMC) for blocking five of the biggest Israeli banks from its $20-billion Pension and Health Benefits Fund investment portfolio. UMC’s divestment deals a major blow to the Israeli apartheid regime and inspires other communities of faith to take the morally courageous stand for peace, justice, and human rights in Palestine.

The five banks are Bank Hapoalim, Bank Leumi, First International Bank of Israel, Israel Discount Bank, and Mizrahi Tefahot Bank. Additionally, UMC sold its holdings in the Israeli real-estate company Shikun & Binui, and barred the company from the pension group’s investment portfolio.

According to the 2010 report released by the Israeli rights group Who Profits, Israeli banks partake in Israel’s brazen violations of international humanitarian and human rights law in Palestine, specifically through: 1) the provision of mortgage loans for homebuyers in settlements; 2) special loans for building projects in settlements; 3) financial services to Israeli local authorities in the occupied West Bank, including East Jerusalem, and the Golan Heights; 4) setting up of branches in Israeli settlements; 5) providing financial services to businesses in settlements; and 6) holding captive the Palestinian monetary market.

The UMC is justified in divesting its investments from companies that gain from the illegal Israeli settlements in the occupied Palestinian territories. These settlements constitute a violation of the Fourth Geneva Convention forbidding an occupying power to forcibly displace the population of an occupied territory. Israel’s plunder of land, water, and other natural resources for the benefit of settlements and residents violate the Hague Regulations of 1907 prohibiting an occupying power from expropriating the resources of the occupied territory for its own use. Israeli businesses, according to the rights watchdog Human Rights Watch, comprise the lion’s share of the illegal settlement activities in the occupied territories and enjoy low rents, tax incentives, government subsidies, and access to cheap Palestinian labour.

Peace for Life congratulates the United Methodist – Kairos Response (UMKR) for its years of persistent hard work and conscientious efforts to increase awareness within the church about the Palestinian peoples’ struggle and to highlight the need to put its ethical commitment into action by aligning its business practices and investment policies with the United Methodist Social Principles and Social Creed.

We support the continued initiatives of the UMKR divestment committee to urge the UMC to further ensure consistency and completely ban from its investment portfolio all companies that financially sustain Israel’s genocidal war in Palestine. UMKR has already submitted four proposals to the Church’s upcoming General Conference in May. Three of the proposals require divestment from companies involved with the occupation, and one puts in place a screening procedure to rule out investments in companies doing business in illegal settlements anywhere in the world.

Similarly, we recognize the actions taken in previous years by various Christian confessions in the US in support of the Boycott, Divest and Sanction movement against Israel. In June 2015, the overwhelming majority of participants in the 30th general synod of the United Church of Christ (UCC), upheld the resolution supporting boycotts and divestments from companies profiting in Israeli occupation of Palestinian territories. In June 2014, the 221st General Assembly of the Presbyterian Church voted to sell its stock in Caterpillar, Hewlett-Packard, and Motorola Solutions whose products Israel uses to pacify and oppress Palestinians.

Peace for Life urges other churches to follow the UMC, the UCC and the Presbyterian churches’ lead and support the Boycott, Divest and Sanction campaign against Israel. We look forward to further working with the United Methodist Kairos Response and similar groups in bringing to public attention the plight of the Palestinians and their struggle for justice and freedom. We call for an ecumenical united front against Israel’s occupation and violations of international human rights and humanitarian laws.

By Hassanal

With 2016 still at its infancy, the beginning of the year has been marked with extraordinarily explosive events that may very well set the trend for the year and will continue to persist for a longer time.

New Year’s eve saw reports of mass sexual assaults in Cologne, termed Taharrush in the Arabic tongue or known also as the rape game. This incident had provoked mass outrage among German citizens towards immigrants and Syrian refugees, mainly due to the fact that those in custody as suspects of the crime were primarily asylum seekers from the Middle East and North Africa.

This had also resulted in a backlash against Chancellor Merkel’s administration and its decision to open Germany’s borders to Syrian refugees fleeing persecution from Islamic State militants in Syria. Criticisms range from the poor institutional processing of refugees to the failure to empower law enforcement personnel to effectively handle the influx of crime brought on by such large migration of people.

What is most distressing however is that the harshest reaction was reserved for the refugees themselves. Soon after, protests adorned with signs reading Rapefugees Not Welcome and other such derogatory slogans began emerging in the public space. Right wing groups in Europe such as Pegida had found their proverbial smoking gun to finally prove once and for all of the encroaching threat of Islamization to further reinforce their bigotry and racist ideology. Distinction between criminals and other refugees mattered very little in the eyes of right-wing Pegida ; the whole lot of the refugees were the problem.

Another similar parallel could actually be found in Australia, where another right wing movement has taken shape, calling itself Reclaim Australia. Quite similar in many regards to the right wing groups of Europe, Reclaim Australia promotes fear-mongering among Australians, such as an encroaching halal industry, as well as reports of cultural and racial dilution. Australia has a long history of racism institutionalized in its political and social discourse which borders on outright xenophobia, and this is most evident in the state’s appalling treatment of illegal immigrants as well as the highly discriminatory practices in its refugee policies.

Such attitudes are entrenched within the right wing movements in Australia, with supporters of Reclaim Australia advocating for the outright ban of Muslims from gaining citizenship in the country and even the registering and monitoring of Muslim groups who already reside in Australia.

When the Syrian refugee crisis was at its peak, Australian Federal Cabinet Minister Scott Morrisson highlighted that there would be more focus on persecuted minorities among the Syrian refugees, in particular the Christian Syrians. It seems that when Muslim groups are persecuted by other Muslim groups, they rest on the lower scale of importance for humanitarian assistance.

On the larger international stage, Republican Presidential Candidate, Donald Trump is perhaps one significant element in the recent rise of the right wing movements. His call for the banning of Muslims from entering the United States and his own bigoted anti-immigrant views have made him a favourite among right wing groups and has further empowered their cause.

Another dimension which is leading to the rise of right wing movements is perhaps economic. Apart from the refugee crisis which, it appears, will persist for a long time more to come, there are harbingers of world-wide economic instability, evidenced by the poor performance of industrial superpowers such as China, the lowering of oil prices, and the bleak outlook for the Eurozone, with many proclaiming that the European Union is on the verge of collapse.

As noted by Jason Wilson, a contributor to the Guardian, it is a common occurrence that when the economic situation is at a negative state, right wing movements will find it much easier to ignite resentment among the local population. Social ills can then be blamed upon the Other and resentment towards this external group can be further exacerbated to a point where violence can be made justifiable.

With all these elements coming together, the Western world and Europe in particular is experiencing what can be called a Right-Wing Renaissance. Through the conjuring of deeply rooted cultural phobias along with hate-filled rhetoric, the right wing movements continue their march fuelled by their bigotry and ill informed prejudices. Their conviction in their ideology is only matched by their lack of compassion for their fellow human beings.

Hassanal Noor Rashid
JUST Program Coordinator
23 January 2016

By Seyed Hossein Mousavian

New sanctions against Iran will backfire on efforts to restore stability in the Middle East

When the nuclear negotiations between Iran and the P5+1 world powers kicked off with renewed hope after Iranian President Hassan Rouhani’s inauguration in August 2013, ­­­Iran’s Supreme Leader Ayatollah Ali Khamenei was quick to endorse the diplomatic efforts but also stressed that the “U.S. government is not trustworthy.” Indeed, the main impediment to normal relations between Iran and the United States since the 1979 Islamic Revolution has been the mutual mistrust between the two sides. Iran, for its part, has a long list of legitimate grievances. The U.S. supported Saddam Hussein in the conflict that began with his invasion of Iran in 1980, sparking an eight-year war that cost the lives of over 300,000 Iranians and resulted in an estimated $1.19 trillion in damage to both sides. During the war, the Iraqi army used chemical weapons against Iran, killing and injuring over 50,000 civilians.

The Iran nuclear talks saw for the first time Iran and the United States engaging in serious negotiations at the highest levels after over 35 years of hostility. An Iranian foreign minister and a U.S. secretary of State sat down and directly talked with one another to resolve one of the most pressing international crises.

In terms of abiding by its commitments under the nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA), Iran has done a commendable job. According to U.S. Secretary of State John Kerry, Iran has implemented its commitments under the agreement in a timely manner, including recently completing the process of shipping out of the country its 11,000 kg stockpile of low-enriched uranium. Neither the IAEA nor the P5+1 group of nations have ever publicly found Iran to be in violation of either the Nov. 2013 interim deal or the JCPOA.

However, there have been some distressing developments as the JCPOA’s “implementation day” has approached. The more Iran moved to complete its commitments, the more the U.S. Congress has in parallel explored new ways to impose sanctions on Iran. One notorious example is recent visa legislation, which would discourage the flow of foreign investment and tourism. Even worse than the visa bill, there are also now reports of multiple other Iran-related bills circulating in the U.S. House of Representatives that would undercut the nuclear deal. One seeks to limit the president’s authority to waive sanctions; another to prevent sanctions relief for Iranian banks that the JCPOA mandates.

From the Iranian perspective, the JCPOA is a test of whether or not it can trust the United States. One school of thought in Iran holds that America’s policies and nature are based on bullying and not rationality. Their contention is that if Iran shows flexibility towards the United States, it will only encourage more aggressive behavior towards Iran. Thus, Iran must pursue a tit-for-tat strategy and raise the costs of pursuing aggressive actions against Iran.

The other prevailing school of thought in Iran maintains that you can only deal with the United States if you have substantial bargaining chips. “If it were not for the 20,000 centrifuge slap from the previous government [Ahmadinejad] they [the P5+1] would have never sat at the negotiating table,” former chief of Iran’s Revolutionary Guard, Mohsen Rezaei has stated. In response to the recent U.S. move against Iranian missile capability, Rezaei called for Iran to develop missiles with a range of 5,000 km.

The fate of broader U.S.-Iran cooperation rests on whether or not the JCPOA is successfully implemented. The two sides are currently at a critical juncture. If the United States proceeds with expanding sanctions on Iran, even if it does so under the umbrella of terrorism or human rights and does so in ways that do not directly violate the JCPOA, it will make the JCPOA worthless for Iran. Pursing this approach now that Iran has almost completed its commitments under the JCPOA will vindicate the predominant line of thinking in Tehran that the United States cannot be trusted.

The Iranian Revolutionary Guard’s recent goodwill — releasing 10 American sailors that Iran said entered illegally into its territorial waters — is a clear example. The White House confirmed the “new lines of communication with Iran established during nuclear negotiations were key to getting 10 U.S. Navy sailors released quickly.” I doubt if the U.S. government would do the same if two Iranian boats inadvertently drifted into U.S. waters.

The bottom line is that the Middle East is on the verge of total collapse and we need cooperation and not more confrontation. The recent strife between Saudi Arabia and Iran, regional powers that have commanding influence in the Sunni and Shia worlds respectively, has made the Middle East even more volatile. By pursuing legislation to sink the Iran deal, the U.S. Congress will be adding fuel to the fire. However, the promise of the JCPOA — that the United States and Iran could move on to cooperate on fighting ISIL and on solutions to the conflicts in places like Syria, Iraq and Yemen — will be lost. U.S. decision makers are faced with a stark choice — properly implementing the JCPOA or having to contend with a far more precarious situation in the Middle East. But the choice is theirs.

Ambassador Seyed Hossein Mousavian is a research scholar at Princeton University and a former spokesman for Iran’s nuclear negotiators. His latest book,Iran and the United States: An Insider’s view on the Failed Past and the Road to Peace, was released in May 2014.

14 January 2016

 

by Rami G. Khouri

BEIRUT — The flurry of attacks around the Middle East and other parts of the world in recent months by militants related to the “Islamic State” (ISIS) has sharpened the urgency of figuring out how to defeat ISIS and rid the world of this terror. The continued expansion of Al-Qaeda in parallel with ISIS’ robustness heightens the urgency of implementing a strategy that could minimize the immediate threats from such militant groups, while also allowing the dozens of countries — mostly in Asia and Africa — that are the breeding ground for such fanatical groups to look forward to more normal and peaceful national development.

The recent news from leading Western states is not encouraging in this respect, as the United States, France, the United Kingdom and some of their allies among the world’s industrialized democracies continue to focus heavily on a military response to the ISIS threat. A major global meeting of these countries fighting ISIS is taking place in Paris this week, while a few weeks ago the /New York Times/ revealed that the United States is considering a Pentagon proposal to build up a string of military bases in Africa, Southwest Asia and the Middle East that could be used, “for collecting intelligence and carrying out strikes” against ISIS’ many affiliates across those regions. The bases would serve as hubs for Special Operations troops and intelligence operatives who would conduct counterterrorism missions, creating what the /Times/ quoted Pentagon officials as calling an “enduring” American military presence in these volatile regions.

Say what? An enduring American military presence across the Middle East? And this is supposed to promote stability, peace and security? Please think again, guys, and get some Middle Eastern scholars, sociologists, anthropologists, psychologists, and, especially, historians in the room with you to give you a more accurate analysis of what happens when foreign militaries park themselves long-term in local societies across the global South.

Military force should be used on occasions when it is the most appropriate response to an immediate threat or aggression, such as liberating Kuwait from Iraq’s occupation in 1990. But in this situation of seeking a policy to reduce and ultimately eliminate the threats from ISIS and similar groups, long-term military action anchored in a permanent foreign presence in our region is probably the most nonsensical and counterproductive approach that could be adopted — especially if it does not include a serious mechanism to reform the autocratic, corrupt, unjust, and mostly inefficient security-based governance systems in our region.

We have almost half a century of experience in foreign powers using military means across the Arab-Asian region to ensure their and their local allies’ well-being. Any rational analysis of the actual consequences of such a military-heavy approach to the legitimate triple goals of defeating ISIS, protecting one’s allies, and enhancing one’s own national interests suggests that this policy does not work, as the Al-Qaeda and ISIS experience alone should show.

The main problem is that foreign military actions tend to achieve exactly the opposite of the intended goals. Military assaults against terror groups, resistance movements, and just plain old civilian demonstrators or non-violent rebels — whether carried out by local governments or foreign powers, or both — tend to harden and expand the resolve of those who challenge the states in question. Militarism as the main response to citizen grievances only heightens the sense of humiliation and degradation that sparked citizen protests in the first place; it also tends to widen the circle of aggrieved citizens who join the ranks of those who oppose their militaristic states. Egypt and Bahrain today are ongoing examples of this.

A more familiar example for Americans is the FBI’s and Alabama Governor George Wallace’s failed policies against African-Americans who struggled for their full civil rights as American citizens. When something similar happens which also includes foreign militarism to thwart citizen aspirations and rights — like Russian, Iranian, and Hizbullah action in Syria today — the angry reaction of aggrieved citizens is even more acute.

The ensuing heightened citizen challenges to the state backed by foreign militarism tend to reduce the legitimacy of the state government or regime, which only increases the regime’s reliance on foreign support to remain in power; this sets in motion a destructive cycle of deteriorating national integrity and stability, as the Syria, Bahrain, and Yemen situations today reveal (for an American lesson, remember Vietnam and Afghanistan).

These trends ultimately lead the local citizens across our region to hold very negative views of both the military-happy foreign powers /and/ the local governments. This often contributes to triggering terror attacks by individuals or small groups in Paris, London, New York, California, Madrid and other far away lands — but in fact they are not so far away, when seen from the perspective of villagers who just saw their families killed and their homes destroyed in Yemen, Iraq, Afghanistan, Egypt, Lebanon, Syria and a dozen other places where the local government and foreign military forces bomb at will.

Rami G. Khouri is published twice weekly in the /Daily Star/. He was founding director and now senior policy fellow of the Issam Fares Institute for Public Policy and International Affairs at the American University of Beirut.

16 January 2016

By Nile Bowie

Myanmar is a country rapidly moving toward uncharted political terrain. By March 2016, the National League for Democracy (NLD) will take power for the first time in history, bringing an end to five decades of rule by the military establishment. Once suppressed by the military junta, the NLD – led by longtime dissident and Nobel laureate Aung San Suu Kyi – has secured an indisputable victory during the country’s November 2015 elections, winning a majority in both houses of Parliament.

The ascent of the NLD comes at a time when Myanmar finds itself at a new strategic crossroads, pulled toward the geopolitical orbit of major powers: the United States and China, as well as India. Since the outgoing military-backed government opened the country to Western investment in 2011, the US has prioritised its relationship with Myanmar as part of its strategy to reassert influence in the Asia-Pacific region. The country has received numerous visits by US high-ranking leaders, including President Obama on two occasions.

China, the country’s neighbour and largest trading partner, has long suspected Washington of seeking to influence Myanmar’s opening to nurture a regime with an antagonistic position toward Beijing. While the NLD positions itself to form a new government, the rise of this political force with a thoroughly pro-Western orientation, which has long anchored itself as a pro-democracy movement lauded throughout the West, begs the question of Myanmar’s place in the current geopolitical scenario.

The Constitutional Question

As the military-backed Union Solidarity and Development Party (USDP) prepares to handover power to the NLD, it appears that the political dynamics of the ongoing transition are based around pragmatism between the military establishment and the pro-democracy camp, both of whom harbour old enmities. The military issued a conciliatory response and expressed interest in working together with the NLD, signalling a desire to peacefully transfer power.

Under the current constitution, drafted by the military in 2008, Aung San Suu Kyi is ineligible to become president due to her children holding foreign (British) citizenship. Despite widespread NLD opposition to the constitution, Suu Kyi will be effectively appointing the next president to avoid any clashes with the military, signalling that the party is not looking to rustle feathers by pushing for constitutional change in the near-term.

The military is the most powerful institution in the country, both de facto and constitutionally. Under the terms of the military-drafted constitution, 25 percent of the parliament is allotted to unelected military representatives, while a powerful part of the bureaucracy will remain under the direct control of the military, including control over the police, military, and domestic security apparatus, and the power to issue passports.

After the NLD’s sweeping victory, Suu Kyi took aim at the military-drafted constitution by saying she would serve above the president, who she described as being subservient to her as party president. Despite this rhetoric, there are many indications that the NLD understands that the key to a functioning government involves cooperation with the military. It would simply be impossible to administer the country without having the support of the home ministry and Myanmar’s generals, and the NLD is not prepared to mount a direct challenge to the military.

The extent of this cooperation remains to be seen. Despite the NLD formally taking over the executive, it should be understood that the military’s acquiescence to peacefully transfer power implies that the new political arrangement is a de facto power-sharing arrangement between Suu Kyi and the military. Despite a contentious past that saw the violent suppression of the NLD and its leader condemned to two decades of house arrest, Suu Kyi is now in some dimension aligned with her former captors.

The Question of Development

The degree to which the NLD and the military have today found common ground on a wide range of positions has spurred disappointment from Western rights advocates who view her pragmatic political conservatism as a retreat from defending human rights. Most notably, Suu Kyi has kept silent on the official discrimination of Rohingya Muslims across displacement camps in western Myanmar, as well as the current government’s attacks against ethnic minorities in various parts of the country.

On developmental matters, the NLD have failed to articulate a detailed strategy and there is reason to believe that Suu Kyi’s stewardship over the economy will be an extension of the status quo, characterised by an upending of human rights concerns by the enormous bargaining power of global investment capital. Myanmar’s rapidly liberalising economy – brought about by reforms that have driven displacement, human rights abuses, and social unrest – have given a boost to a growing urban middle class at the expense of an exploited underclass.

In recent years, Suu Kyi has collaborated closely with the USDP government by courting foreign investment and encouraging closer diplomatic ties with the US and its allies. Myanmar owes its investment boom in no small part to the personality of Suu Kyi, who leveraged her close ties with the West to end US sanctions and open the floodgates of foreign capital, bringing with it poverty wages, gruelling hours, and unsafe working conditions for a large segment of the domestic labour market.

The NLD and the USDP see eye-to-eye on pro-market restructuring to encourage multinational investment and an export-oriented industrialisation strategy, which has thus far not been offset by increased expenditure on basic services. Suu Kyi’s embrace of neoliberalism and reluctance to advocate for human rights since entering politics signals that the NLD will put the bottom line of foreign investors before the rights and general welfare of labourers and ethnic minorities.

The Question of Federalism

The NLD has long garnered support across ethnic lines, from rural villages and urbanites alike, though its leadership represents sections of the majority ethnic Burman elite whose interests were undermined for decades by the military’s monopoly over important sectors of the economy. Despite capturing a larger-than-expected segment of the ethnic minority vote, Suu Kyi carefully avoided rhetoric during her campaign that would upset ethno-nationalist and Burman chauvinist sentiment.

Myanmar is one of the most ethnically diverse countries on the planet, with over 100 ethnic minorities and sub-groups, each with separate languages, culture and customs. Armed conflicts between rebel groups have continued unabated in the nearly seven decades since Myanmar’s independence, and the question of federalism is one of the largest political challenges the incoming government must face. Attempts to broker a nationwide ceasefire have been unsuccessful in recent years, despite active engagement between the USDP government and ethnic leaders in multiple rounds of negotiations.

In recent times ethnic parties have begun to call more forcefully for a federal structure comprised of politically autonomous ethnic states, as well as greater self-government in regards to administration, culture, education, and the management of natural resources. The NLD has voiced a public commitment to bringing about a federal system but has offered few specifics, though it is still widely seen by ethnic minorities as being more amenable to making concessions in contrast to the military.

President Thein Sein has expressed support for a federal system in theory, but top military leaders oppose a central demand of many of ethnic leaders: the integration of ethnic militias into a federal army. The USDP government has also failed to integrate some of the most powerful and influential armed groups into ceasefire negotiations, such as the ethnic Chinese separatist guerrillas that operate in the remote Kokang region on the border with China’s Yunnan province, as well as the Kachin Independence Army and Shan State Army.

Kokang guerrillas clashed with the military for four months during 2015 in one of the most intense standoffs in decades prior to declaring a unilateral ceasefire after coming under pressure from Beijing. The military incurred hundreds of causalities and failed to make much headway against the Kokang forces, despite sending tens of thousands of troops into the mountainous region supported by aircraft and artillery.

During an offensive last March against the Kokang rebels, Myanmar mistakenly dropped a bomb on the Chinese side of the border, killing five Chinese farmers working in a sugar-cane field. Beijing responded angrily and called on the USDP government to open peace negotiations with the Kokang, which government officials refused. The issue of federalism and a national ceasefire between the government and all armed groups is central not only to promoting development and national coherence, but also to China’s strategic interests in Myanmar and its own landlocked southwestern Yunnan region.

As the daughter of Myanmar’s independence hero, Aung San (who promoted a federalist system before his assassination in 1947), Suu Kyi and the NLD are uniquely positioned to lead the peace process. Her failure to break the impasse and achieve an outcome on federalism that is agreeable to powerful ethnic minorities could deepen racial friction and instil the perception that she has become co-opted by her alliance with the military.

The Question of China

Myanmar’s landmark election was watched closely from Beijing, which publicly welcomed the results but nonetheless holds concerns about the orientation of the incoming NLD government. As Myanmar’s largest trading partner and neighbour, China wields irreplaceable influence over the country’s geopolitical and economic development. Since the 2011 policy shift, however, Naypyidaw has drawn closer to Washington, effectively downgrading its relationship with Beijing.

China was the main backer of Myanmar’s military junta and largest investor during years of international seclusion, spending billions on infrastructure such as pipelines, ports, and dams. Despite major investments, anti-Chinese sentiment is rife throughout Myanmar due to the controversial implementation of large-scale projects, which saw populations forcibly relocated by the army and major land confiscations. Since the relaxation on censorship laws, public criticism of China is now commonplace in local-language media.

Though there is no overt signs of hostility between Beijing and Naypyidaw, a gradual deterioration of relations has taken place in recent years, evidenced by China’s foreign direct investment having dropped from $8.2 billion in the peak year of 2010/11 to merely $56 million in 2013/14. China-backed projects such as the Myitsone dam and the Letpadaung copper mine have been the subject of protests, spurred on by US-funded NGOs and media outlets.

Beijing has taken a pragmatic approach to the rise of Aung San Suu Kyi and the NLD, and appears willing to accommodate with her. There is, however, deep skepticism toward Suu Kyi and concerns that she could pursue policies that undermine China’s interests. In a rare occasion of state-level interaction with an opposition leader, China invited Suu Kyi to Beijing last June, where she met with President Xi Jinping.

Beijing was clearly anticipating an NLD victory and moved proactively to open dialogue with Suu Kyi to promote the development of relations. To offset any antagonism between China and the NLD, its likely that Beijing will offer its financial muscle in various aid projects and assistance as a mediator in the domestic peace process when the new government takes over.

China would seek the re-opening of the now-suspended suspended Myitsone dam project, as well as resolutions to numerous economic initiatives, such as the Kyaukphyu special economic zone, plans to construct a Sino-Myanmar highway, and various joint transportation initiatives. Despite attempts by civil society in Myanmar to disseminate hostility against China, the NLD appears cognisant that a constructive relationship with Beijing is essential to ensuring investment for major capital-intensive development projects.

India has taken notice of China’s presence on the Indian Ocean, where Chinese state-owned firms manage Myanmar’s Kyaukphyu port and Pakistan’s Gwadar port. Delhi’s response has been to develop a port in Sittwe, on Myanmar’s western coast, which is currently in the final stages of construction. Myanmar’s political establishment are favourably disposed toward India and have maintained excellent bilateral relations, though Delhi is widely seen as being unable to match the level of financing that Beijing has shown a willingness to put forward.

Suu Kyi’s visit to China underscores how there will not be a wholesale rejection of Chinese investment and assistance, despite Beijing’s mishandling of past projects with Myanmar’s military and the neglect of Myanmar’s pro-democracy camp. China has an important stake in Myanmar’s stability because military conflicts inside the country are impediments to it’s own economic and strategic programs. Furthermore, Beijing is by far the most qualified candidate to monitor Myanmar’s peace process given its geographic position and familiarity with the region’s internal dynamics.

It is in China’s interests to revaluate its economic cooperation with Myanmar to ensure the welfare and interests of local people through grass-roots communication with communities in areas marked for development. Beijing should better regulate the performance of Chinese enterprises that have garnered contentious reputations in Myanmar while doing more to ensure Chinese investors comply with the rule of law.

The Question of Washington’s Pivot to Asia

Since 2011, the large-scale refocusing of American corporate and military muscle to the Asia-Pacific region has been a key foreign policy objective in Washington. Naypyidaw’s opening to the United States is one component of an over-arching policy to harness the power of developing nations throughout the ASEAN region to serve as an economic counterweight to Beijing.

The United States is attempting to realise this goal through instruments like the Trans-Pacific Partnership (TPP) agreement – a sweeping trade deal that includes a number of Pacific Rim nations but excludes China – which aims to formulate new rules for international trade around core US strategic interests. Though Myanmar is not part of the TPP, it was once firmly in Beijing’s orbit but has now realigned itself to Washington.

Naypyidaw’s policy shift and the subsequent triumph of Aung San Suu Kyi will surely be utilised as a vehicle for US interests in the region, under the guise of promoting the universality of Western democracy. Though the NLD has indicated its penchant for pragmatism with its approach to Beijing, it remains to be seen to what extent Suu Kyi would acquiesce to attempts by the West to drive a wedge between China and Myanmar.

Moreover, she may decide to demonstrate support for pro-democracy movements in China or Nobel laureates like the Dalai Lama or activist Liu Xiaobo of her own accord. In the past, Suu Kyi has selectively criticised the practices of Chinese state-enterprises while applauding the conduct of Western energy firms like Total, despite its controversial history of collaborating with the military junta.

Though she may be predisposed to give preferential treatment to Western investment, she notably endorsed the China-backed Letpadaung copper mine project as leader of an investigative committee tasked with evaluating the project. Despite considerable opposition from local residents and Myanmar society in general, she displayed pragmatism in handling a major Chinese project in this instance even at the cost of alienating her own supporters.

Despite being ideologically aligned with the West, the NLD appears to understand that balanced relations with China and other Asian countries are the surest means of securing investment for large-scale infrastructure, while American companies are only just testing the waters and expanding their business relationships in Myanmar in areas such as tourism, energy, and telecommunications.

Military ties between Washington and Naypyidaw have been modest at this stage, with the inclusion of observers from Myanmar’s military during the annual Cobra Gold regional military exercises led by the US and Thailand. There remains a high degree of distrust between members of the US Congress and Myanmar’s generals, but these misgivings could quickly give way if the military maintains a conciliatory approach to the NLD. Increased US military presence in Myanmar will be unfavourably perceived in Beijing.

As the NLD prepares to lead the next government, there are enormous expectations for Suu Kyi to clean up corruption and improve the effectiveness of long-neglected and underfunded government services. Myanmar is now emerging from six decades of isolation, and political stability is crucial to allowing the country to rebuild its economic and social institutions to reverse the severe underinvestment in education and infrastructure it suffers from.

Unfortunately, the NLD has yet to articulate policy specifics and a strategy for the future of the country. Much of the incoming government’s focus is on manoeuvring through a political landscape still shaped by the military. Myanmar’s generals made a bargain on the West and have gotten what they came for: a huge influx of foreign capital and a secure inroad to the global economy. If Suu Kyi can promise the generals that they need not fear reprisals under an NLD government, perhaps only then would the military consent to constitutional reform, allowing her to hold the presidency.

Nile Bowie is a Singapore-based political commentator and columnist for the Malaysian Reserve newspaper. He can be reached at nilebowie@gmail.com.

17 January 2016