Economics for Everyone - free seminar today

Heading along tonight to the second part of 'Economics for Everyone' a free presentation by Canadian union economist Jim Standford, hosted by the Fabian Society.

Last weeks session was so well attended, they had to move the talk into the larger downstairs room at the Trades Hall. Great to see so many people there, and Jim provided a jargon free introduction for those who feel they know little about economics. I also think its useful for people who may know a little more. I often find looking at a subject in a new framework allows for clearer thinking - in essence it makes you a better teacher, and Jim is a great teacher.

If you missed last week you can catch up with the audio podcast

The first seminar, 'Understanding the Logic of Capitalism', was be held last Tuesday.

The second, 'What Went Wrong? The Failure of Neo-liberalism, and the Alternatives', will be held today: 22nd June 5.30pm – 7.30pm, at the Trades Hall, 147 Great North Road. Auckland.

2009 Bruce Jesson Lecture: Robert Wade on Wednesday

On Wednesday Professor of Political Economy and expatriate Kiwi Robert Wade will give the 2009 Bruce Jesson Lecture.

What: How to stop the money men from taking over the world (or, when will be face another September 2008)
Who: Robert Wade
Where: Maidment Theatre, University of Auckland
When: Wednesday 28 October 6.30pm

"Taking off from Bruce Jesson’s ‘Only Their Purpose is Mad: ‘The money men take over NZ’, Robert Wade discusses several reforms of the international monetary and financial system aimed at stabilising global financial markets and curbing the power of the financial sector. After considering the easy part -- ‘what should be done’ -- he goes on to discuss ‘what can be done’, nationally, regionally and globally."

"Professor Robert Wade is one of the world’s most prominent independent thinkers about the contemporary challenges facing the global economy. As professor of political economy at the London School of Economics, Wade espouses a heterdox approach to economics in contrast to the prevailing neoliberal / neoclassical paradigm. As an expatriate New Zealander he has continued to contribute to discussions on New Zealand’s economic direction, including in the context of the global economic crisis."

The Bruce Jesson Lecture is organised by the Bruce Jesson Foundation and the University of Auckland.

Why capitalism fails

The value of a scientific theory is based on its ability to predict phenomena and events, and at least amongst those of a more rationalist persuasion, its explanatory power. Yet free market economics completely failed to predict and explain the financial crisis of 2008-2009. Many are now leaving the free marketeers to their ever increasing Ptolemaic circles, excuses and epicycles and are looking for explanations outside the free market religious cannon.

This has lead to a resurgence of interest an American economist who did see what was coming, Hyman Minsky. Stephen Mihm in The Boston Globe recently wrote about how Minsky's ideas are being given new life in the context of the financial crisis (Hat tip Sam F).

"Minsky called his idea the “Financial Instability Hypothesis.” In the wake of a depression, he noted, financial institutions are extraordinarily conservative, as are businesses. With the borrowers and the lenders who fuel the economy all steering clear of high-risk deals, things go smoothly: loans are almost always paid on time, businesses generally succeed, and everyone does well. That success, however, inevitably encourages borrowers and lenders to take on more risk in the reasonable hope of making more money. As Minsky observed, “Success breeds a disregard of the possibility of failure.”

"As people forget that failure is a possibility, a “euphoric economy” eventually develops, fueled by the rise of far riskier borrowers - what he called speculative borrowers, those whose income would cover interest payments but not the principal; and those he called “Ponzi borrowers,” those whose income could cover neither, and could only pay their bills by borrowing still further. As these latter categories grew, the overall economy would shift from a conservative but profitable environment to a much more freewheeling system dominated by players whose survival depended not on sound business plans, but on borrowed money and freely available credit."

"Once that kind of economy had developed, any panic could wreck the market. The failure of a single firm, for example, or the revelation of a staggering fraud could trigger fear and a sudden, economy-wide attempt to shed debt. This watershed moment - what was later dubbed the “Minsky moment” - would create an environment deeply inhospitable to all borrowers. The speculators and Ponzi borrowers would collapse first, as they lost access to the credit they needed to survive. Even the more stable players might find themselves unable to pay their debt without selling off assets; their forced sales would send asset prices spiraling downward, and inevitably, the entire rickety financial edifice would start to collapse. Businesses would falter, and the crisis would spill over to the “real” economy that depended on the now-collapsing financial system."

From the 1960s to the last years in the 1990s, Minsky warned of the dangers of securitisation and other forms of 'financial innovation'. John Kenneth Gailbraith's (1990) explanation of financial innovation seems particularly relevant: "The world of finance hails the invention of the wheel over and over again, often in a slightly more unstable version. All financial innovation involves, in one form or another, the creation of debt secured in greater or lesser adequacy by real assets". In tracking the changing face of New Zealand capitalism in the 1980s and 1990s, Bruce Jesson tracked the 'financial innovations' that accompanied Rogernomics.

For nearly half a century few economists listened to Minsky.
"By the end of the 20th century, the financial system that Minsky had warned about had materialized, complete with speculative borrowers, Ponzi borrowers, and precious few of the conservative borrowers who were the bedrock of a truly stable economy. Over decades, we really had forgotten the meaning of risk. When storied financial firms started to fall, sending shockwaves through the “real” economy, his predictions started to look a lot like a road map.

“This wasn’t a Minsky moment,” explains Randall Wray. “It was a Minsky half-century.”

Big Business wants First Past the Post to Privatise

Last Saturday the NZ Herald published a column by deputy editor Fran O'Sullivan which revealed that Cabinet was to begin discussions on a public referendum on Mixed Member Proportional(MMP) this week. O'Sullivan makes it clear she supports First Past the Post as an electoral system, if in a runoff against MMP.

O'Sullivan also stated a referendum on MMP is "clearly unfinished business for many Kiwis". Its interesting she used Roger Douglas' turn of phase here, as when she mentions Kiwis she means the section of the business community who genuinely believe the country should be run for their benefit foremost, and ask the rest of us to believe in the trickle down theory. O'Sullivan concludes:
"Fighting the next election on an electoral system - even First Past the Post - which gave more power to the major party to implement sensible policies would do more to even the gap with Australia than endless horsetrading."

Horsetrading, in this context means that annoying thing called democracy - ie the thing we did not have when the Labour Government of 1984-1990 and National Government of 1990-96 used cabinet majorities to push through far right neo-liberal 'reforms'. Funnily enough the gap with Australia became significantly wider in these twelve years. Not that the new right would ever be intellectually honest enough to admit it might have been a combination of their chosen polices and the method of their execution.

In a later interview with Larry Williams on NewsTalk ZB (hat tip Frog), O'Sullivan described what she meant by 'sensible policies', explaining what MMP had stopped for the last decade or so.
"…various single issue or smaller parties will be able to point to wins they have had through [their] influence on the major parties that happens to be in power. But there are also some big things that aren’t happening – there are things from a business perspective. No-one can talk about privatisation… "

So there you have it - the sponger side of business community wants a return to First Past the Post in order to restart the privatisation agenda. The business community do not believe they can convince over 50% of New Zealanders to adopt their chosen policies based on a system where votes are of equal value.

In 1993 the Anti-MMP campaign was headed by Telecom Chairman Peter Shirtcliffe who bankrolled the misnamed Campaign for Better Government (CBG) along with other big business backers. I really hope some of the 1993 advertising is replayed and replayed - as it will completely do in Shirtcliffe's crediability. In 1993 CBG warned MMP would put our future at risk alongside the chorus of crying babies - yes really - see here. Now it can be seen for the scaremongering nonsense it is, as well as a dummy run for the National party's Hollow Men campaign of 2005.

Fran O'Sullivan quickly responded to Frog's post. She clarified that she only became aware of the forthcoming cabinet discussions following a question raised by a participant at business breakfast meet in Auckland. In second comment O'Sullivan said:
"To clarify – Personally I favour either FPP or STV – I do not like a system where the party vote delivers half the MPs. Would prefer to tick a candidate."

Yet there is only one system that will deliver the 'unfinished business' of privatisation that Fran champions above - a rotten borough system* known as First Past the Post. This impression is also reinforced by Fran's endorsement of Shirtcliffe's timetable for a referendum - a single referendum held in 2010, and applied at the 2011 election. O'Sullivan says "Frankly, Key should adopt Shirtcliffe's timetable. If past polling is anything to go by, many Kiwis would vote MMP down if given the chance". Clearly Shirtcliffe can't wait, and sees an opportunity to remove MMP by doing it quickly - this was also the strategy of Roger Douglas to avoid the interference of democracy.

That said, on this occasion I am prepared to give Fran the benefit of the doubt. I note she sometimes uses her columns to channel the views of others, and sometimes this can give the strong impression these are the views she also supports. Yet if Fran was being a complete partisan hack it is likely she would have downplayed the reemergence of Peter Shirtcliffe and not raised the "fundamental issue of fairness" raised by the differing treatment of Act and NZFirst at the last election, where Act remained in parliament despite receiving around 10,000 less votes than NZ First.

I would suggest people look at the campaign to keep meaningful proportional representation in New Zealand as a long game. Having journalists write stories about 'the other side' can at times be useful, as well as adding to the debate in a useful way. If Fran found out more about who was funding the anti-MMP campaign - this would be worth a few hail Mary's would it not?

* I am defining rotten borough in this context to mean any system where a vote is not necessarily of near equal worth. John Key's preferred option of Supplementary member is just a rotten borough with a thin layer of icing designed to cover up the rottenness.

PS: Fran in case I have your attention I would appreciate it if the next time you wrote one of your fawning columns about the 'benefits' of free trade with the USA you would also mention the potential costs. This comes from a solid source, the US Trade Representative's publication 'Foreign Trade Barriers', but the majority of pro-free trade business journalists either don't know, or perhaps more likely don't want to know such a document exists - if the risk is Kiwis paying more for their medications surely the public deserve better than journalists who stick their fingers in their ears and chant 'see no evil'.

The legacy of neo-liberalism on family life - some thoughts from Blackball

I wrote most of the following post around three weeks ago, and was always intending to go back and finish it. I thought it might be an opportune time after seeing a related item on the news tonight.

A neonatal paediatrician is warning parents to do all they can to avoid putting their young children in daycare, saying it could permanently harm their developing brains. Dr Simon Rowley advocates for a parent to stay home with children in the early years if they can. He cites research looking at the hormone cortisol that found 80% of children in daycare become more stressed during the day, with toddlers showing the highest levels of stress.

Early Childhood Council chief executive Sarah Farquhar has taken issue with Dr Rowley .
"It's going back to the times of women being barefoot and pregnant in the kitchen. That's not healthy for children and it's not healthy for women . . . making parents feel guilty about their choices is not the way to go."
The Early Childhood Council also happens to be protecting its market - as an organisation representing private childcare centres. Kids are their source of cash.

Now its possible that Dr Rowley is running a socially conservative agenda here, particularly when he blames the social policies of Helen Clark, and many social conservatives demonise Clark. Yet to leave the issue there I think does the left a disservice, as it may leave empty political ground for socially conservative politicians if the left is not seen to be engaging with the issues in a deeper way.

What got me thinking about this was a very interesting discussion during the Blackball May Day celebrations earlier this year. We looked at the legacy of neo-liberalism in New Zealand, with a focus on its affect on family life.

I am greatly thankful to my fellow participants for helping me think about the issues in new ways.
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The Blackball Working Class History Project now has a blog.

This year I attended the May Day celebrations in Blackball. It was an enjoyable and engaging weekend. As 2008 was the 100th anniversary of the famous Blackball miners strike, the numbers were smaller in 2009, but this allowed the issues to be covered in greater depth.

On the Saturday morning a forum was held on The Legacy of Neo-Liberalism. Many people prepared provocations for the forum in order to start the discussion. Rather than focus on economics and the undemocratic nature of how neo-liberalism was forced on the electorate, many people spoke of the legacy of neo-liberalism on families and family life.

It is great to see many of these contributions from the forum now appearing online. Paul Manuder has written a rundown of the weekend. Sandra and others highlighted the punative attitude of many government departments.

"I’ve got a friend in Greymouth who cares for her baby granddaughter, her ten year old son and her suicidal adult son. Can someone tell me why this woman, this mother, grandmother, carer of our most vulnerable, is being badgered by WINZ to get paying employment?"

I believe part of the explanation for this lies with the Social Security Amendment Act passed by the last Labour Government. This Act changed the whole purpose of the Act famously passed by Michael Joseph Savage in 1938. Rather than a focus on the welfare of the community, the focus came on getting a job - any job - as the only legitimate form of social assistance. I suggested Savage would be turning in his grave if he knew about these changes.

To return to the focus on the impact of neo-liberalism on family life, it was interesting that many saw the lack of family time due to financial pressure as a key problem. For example, a local teacher, Te Whaea Ireland saw many children with a desperate need for one on one contact with adults. Sandra summarised Te Whaea's comments like this.

"Parents love their children but the children are stressed. Families are stressed through everyone working long hours to survive economically. Children are arriving at school earlier, then there’s after school care, there’s no adult with the time to help with homework, no time for mooching- that stress-free space which generates self management, relatedness, creativity etc. The family is no longer functioning as a nurturing unit. She saw among her peer group, the stress in terms of a young couple trying to acquire a home and to have a family. She saw the traditional homemaker, once gender equality is accepted, as a valid and vital role in society."

It ought to be stressed that Te Whaea was not advocating a socially conservative agenda, as she assumes the acceptance of gender equity. Freedom and equity should aim to give people greater choices. The issue is that due to financial pressure parents no longer have the choice whether they wish to work OR be a homemaker.

Essentially, over the past 50 years employers have used the rightful work aspirations of women to halve 'real' family incomes - double incomes are now required to raise families in most cases. The Employment Contracts Act made the situation worse. I do not wish to go back to the 1950s here - what I am highlighting is how New Zealand employers and their right wing friends have used this societal change to their own economic advantage.

In terms of policy responses the following might be a useful starting point. The challenge of the left is not only to announce such policies but to demonstrate how they are relevant to the issues currently facing families. I am not sure the left has done so yet, or as effectively as it might.

• A new industrial relations framework which delivers a fairer share of company profits to families (the new Australian legislation might be worth looking at - particularly if we are serious about a real CER that is not limited to just what the business community wants)
• A minimum wage set at two thirds of the average wage (sign the Unite petition)
• Universal Basic Income (which would recognise the currently unpaid work of homemakers)
• A year or more of paid parental leave.
• More research on children's experiences on daycare - are there ways to make it less stressful and more confortable for the kids?
  

I very much welcome comments on this post, as I feel as if I am still working out the issues as I go.

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During the Blackball forum I also suggested that the Clark Labour Government may be seen by future historians as playing a key role in embedding neo-liberalism as it deliberately avoided changing any of the neo-liberal legislation or the aggressive 'free trade' policies of the forth Labour Government. Despite the country voting left in 1999, the Reserve Bank Act, the Public Finance Act, the State Sector Act and a strict orthodoxy of 'balanced budgets' remained. Even after nine years. Indeed it is significant that in his valedictory speech the former Labour Finance Minister Michael Cullen spoke of his pride in pursuing free trade agreements and maintaining a socially progressive but fiscally conservative party.

I respected Cullen's intellect and his wit a great deal, but I always thought his views on the inevitability and the desirability of the WTO version of the global market were simply pollyanna. While he did renationalise the railways, this was only after costing the country millions by entering into a failed public-private partnership with Toll Holdings in 2004. In 2003 he had the opportunity buy the railways on the cheap and to tell Toll to noddy off, but did not do so.

Free market electricity ripoff

This week the Commerce Commission released a damming report on the so called 'electricity market' in New Zealand. Electricity companies have overcharged New Zealanders over $4.3 billion dollars in six years.

While the report found no breach of the Commerce Act - its conclusions were far more devastating for those who would argue for further privatisation and the maintenance of a 'lightly regulated' framework. The Commerce Commission concluded the electricity companies used their market power to maximise profits in a legitimate way within the current market structure and rules. These being rules created by free market minded politicians.

The Otago Daily Times editorial puts the blame right where it ought to be - the National Government of the late 1990s and the Labour-led Government between 1999 and 2008. While Labour introduced the Electricity Commission, and appointed an old Rogernome to run it, their actions effectively embedded the infamous reforms of Max Bradford. I don't think I will be revealing any state secrets when I say the Alliance at the time was very uncomfortable in being asked to support the Electricity Amendment Act in 2001 - an Alliance Parliamentary adviser working on these issues told me it was so bad we should not have supported it at all. But Labour had light-handed regulation as a religion - and lack of regulation is one of the key problems identified by the Commission this week.

If Labour really had the will to fix things up they could have bought back Contact in 2004 when its parent company Edison Mission Energy was in need of cash. With the main four in Government control, Labour could have made the significant changes to the sector that are required, without the interference of the rent seeking privateers.

Our regulatory regime is so pathetic it doesn't even mandate the provision and collection of the data required for the calculation of competitive benchmark prices. Most other countries do. Professor Wolak, who crunched some of the numbers for the Commission said it took him more time to compile and clean the datasets on the New Zealand electricity supply industry than it did for all his previous projects put together - this includes an analysis of market outcome data from California, England, Wales, Columbia, Australia and Spain (p. 25).

It sounds very much like National and Labour have effectively allowed the electricity industry to design the system to suit themselves. Electricity companies do not even have to participate in the collation of meaningful data. Gee, in whose interests might that be?

A couple of comments from the Commission are worth highlighting. "The experience of countries that have liberalised wholesale electricity markets has shown that the assumption that markets will naturally produce a competitive result is not always justified....[T]he economics of electricity has specific attributes, which makes competition in this sector significantly different from that for most other products." These include very high market entry costs and the fact that demand is largely unaffected by changes in the wholesale price, as consumers do not immediately face price increases as scarcity increases. This companies gain substantial market power.

And before some clown points to the fact three of the major electricity companies are State Owned Enterprises (SOEs) and attempts to argue that government ownership is somehow the problem - I would remind them that the primary goal of SOEs is to make money*. So on this basis I would argue New Zealand already has an effectively privatised electricity system - it just so happens one of the robber barons is the government.

Sadly no SOE has ever gone Kiwibank and aimed to lower costs for consumers. Another model would see power companies run like non-profit trusts with the aim to produce power in the most socially responsible and environmentally sustainable way.

Dunedin blogger Chris Ford calls on the Government to order the electricity companies to pay back their ill gotten gains to consumers. While there is some justice in this proposal, this would effectively require the Government to pay out dividend money that now lives in the Crown accounts. I would sooner use a $4.3 billion pot to fix up the industry once and for all, and if nationalisation is the most effective means of achieving effective policy change, so be it.

The report by the Commerce Commission this week is a damming incitement on the current electricity system. Yet it also dams the agenda of those who want to further privatise the SOEs and maintain a lightly regulated market.

It is simply opportune nonsense for Energy Minister Gerry Brownlee to blame it all on the Electricity Commission - the problems go a lot deeper than that. The Commerce Commission have effectively demonstrated the difficulties in creating a functioning electricity market in a small place like New Zealand. Perhaps it would be better not to try.
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Cartoon credit: The cartoons in the above post are the work of a couple of creative Dunedin Alliance members (E. & H.). Thanks for giving me the ok to post them here.

* It could be argued the SOEs are failing to live up to a requirement in the State Owned Enterprises Act to exhibit a sense of social responsibility - unfortunately many other SOEs seem to ignore this too.

Germaine Greer on Thatcher

Feminist Germaine Greer tears Margaret Thatcher's legacy to shreds in a great article in the Guardian (UK). I liked this bit in particular.

"A story is often told of how, when she was leader of the opposition, Thatcher turned up at a seminar at the Centre for Policy Studies with a copy of Friedrich Hayek's The Constitution of Liberty, banged it down on the table and declared "This is what we believe". She claimed to have first read Hayek when she was at Oxford, but her version of his arguments is one he might not have recognised. Her commitment to a free market, wealth creation and lower taxation was absolute. She had no time for Hayek's misgivings and probably never knew that he believed that "probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rules of thumb, above all of the principle of laissez-faire capitalism". "Wooden insistence" describes Thatcher's style exactly...."

"Success and profit were identical. Her career shows a bland disregard of the principles of honest dealing that ought to underpin the free market in which she had such blind faith. One of the enduring mysteries of the 20th century will be how on earth she got away with it.From her first days in power Thatcher developed and refined ways of circumventing political protocol and procedure, partly because hers was usually a minority opinion."

Greer goes into some detail on Thatcher's dodgy arms dealings, believing it demonstrates "the kind of recklessness and lack of scruple that is now being blamed for the global financial crisis.". Thatcher exported arms to many a nasty dictator, including Saddam Hussein's Iraq (despite a ban officially being in place), Suharto in Indonesia and Pinochet in Chile. It has been suggested Thatcher's own wayward son Mark gained a commission of between 12-20m pounds from a deal involving the Saudi defence minister's son. While Mark Thatcher has denied this, it is not a good look for Maggie.

It would have been useful if Greer had also highlighted the reliance of the UK economy on the defence industry, as this is a useful context for the points she makes. The UK remains the second largest defence supplier in the world, with the defence industry a key source of export dollars. As Thatcher's policies had the effect of narrowing Britain's industrial base, her advocacy on behalf of the defence industry, is not a surprise. Moving Britain closer to a military-industrial complex was one way among many Maggie modelled the UK to be more like America. NewLabour have embraced this element of Thatcherism just like they have embraced the rest, with a Minister of State For Defence recently crowing with pride that the projected UK defence budget is now 10% higher in real terms than it was in 1997.

Given the difficulties now faced by the UK with the global financial crisis it is about time Thatcher's role in in all is revisited, given that she largely began the wholesale liberalisation of the banking and finance sectors. Lax regulation is now widely cited as a key cause of the crisis.

No doubt when Thatcher kicks the bucket the neo-liberal myth making machine will go into overdrive and produce all matter of sick making hagiography. Personally I liked this take on the death of Ronald Reagan...

Rooksmoor, a blogger in the UK also commented on Greer's article.

In 1980 Thatcher's famous catchphrase was "this lady is not for turning". Well to end on a lighter note - I always took this to mean Thatcher was denying that she was a vampire :)

Role of the Alliance in the early 1990s: A response to Jordan

I thought I would repost a comment I made in response to Jordan on his blog.

Jordan said
"Imagine, if you will, a situation where the Labour Party and the Alliance re-united in 1994, rather than not, and that as a result the Labour Party of today was a much more left wing creature than it is. (Practically this was never going to happen for a huge range of reasons, but bear with me). Imagine that this more left wing Labour party, with a wider activist base and a more radical policy and caucus, had taken power in 1999, aided by the Greens as a coalition partner."

Jordan then lists a reasonably moderate left wing programme with uncanny similarity to the programme the Alliance would have liked to have implemented in 1999, if we had not faced so much opposition to such a programme from within the parliamentary Labour Party.

Such a programme would have had more chance in 1999 if Labour party activists had not stuck slashes on electoral billboards with the poe faced lie 'Only a party vote for Labour can change the Government', costing the Alliance 2-3% of our party vote.

In any case, this is my response to Jordan's rather hopeful little scenario.
"I think it is pretty well established that Labour have drifted right again over the three terms they have been in government. Perhaps you should not be so ready to blame others for the Labour party lacking vision.

The direction of the programme you outlined would have been more likely if the Alliance had replaced the Labour party as the major party of the left in 1994. It nearly happened. If a few more people had based their party membership on policy and what they actually believed in, rather than party branding, we may have got there.

Without the existence of the Alliance in the first half of the 1990s the time the Labour party would be even more right wing than it is now (the Act people may have stayed and Goff might be the leader). Without the Alliance Labour would have had no reason to change. You can see this by comparing the policy of the Labour party in 1993 and 1996.

Not that I am saying Labour has changed enough to even contemplate the programe you outlined - it hasn't. It may have lost the neo-liberal crusading zeal in some areas (it retains it in trade policy), but this didn't equate to a desire to undo anything the forth Labour Governemnt did. While Labour reversed some of National's policies - they hardly touched their own.

Nor I do not believe it is fair for you to blame the left for failing to advocate an alternative. The Labour party need to take some responsibility for this too - since 1984* Labour have attempted to sell NZ a very limited version of social democracy - if you could even call it that. Labour party ministers regularly defend the neoliberal economy.

The fact that Government spending as a percentage of GDP is now lower than it was under National is not a record any self described social democratic government should be proud of. Perhaps if people had seen more significant increases into health eduction and housing people now would not be so ready to ask for tax cuts."

* On second thoughts can I change this date to 1981.

Free trade policies lead manufacturing out to dryer: Assessing the NZ-Thai free trade deal

Kiwi whitewear manufacturer Fisher and Paykel announced on Friday it was moving production of washing machines and dryers to Thailand. This seems like a good time to ask the question - was the free trade agreement with Thailand really such a good idea?

Well, that's one question that the Ministry of Foreign Affairs and Trade will never ask, as they have a documented history of only considering the "benefits" of such trade deals - la-la-la. (see my article here)

The so called Closer Economic Partnership Agreement between New Zealand and Thailand came into force on the 1st of July 2005.

Fisher and Paykel chief executive John Bongard said free-trade agreements with countries such as India, China and Thailand being sought by the Government were unhelpful to the manufacturing sector. "I guess the loss of the CER duty preference into Australia early next year was kind of the straw that broke the camel's back," Mr Bongard said.

I took a look at the NZ-Thai free trade agreement. Prior to its signing, washing machines and dryers made in Thailand attracted a 7% tariff when imported into New Zealand. This dropped to 5.5% once the agreement was signed in 2005, with the tariff to be completely phased out by 2010. I have no doubt this also influenced the decision of F&P to move to Thailand - as the NZ-Thai trade agreement allows the company to profit from cheap labour and then import their machines back into NZ at little cost.

New Zealand currently has a trade deficit of $560m with Thailand(1), meaning that we import far more from Thailand than NZ exports to that country. This deficit has improved of late - but the overall pattern since the negotiation of the Thai deal has been a ballooning of imports into New Zealand with a significantly smaller increase in NZ exports to Thailand.

At the time of the signing of the Thai deal in 2004, CTU President Ross Wilson expressed concern at the large number of "free trade" agreements promoted by the Labour-led Government. "There is a risk these deals will permanently damage New Zealand’s manufacturing base. There is also (the risk) that the phased elimination of tariffs will expose some sectors, such as whiteware and clothing, to unfair competition" (Press, B5, 2/12/04, "Business keen on Thai deal")

Now the whitewear is off to Thailand.

For Helen Clark to claim such closures are the "way of the world" is just an excuse to hide the fact the neo liberal free trade policies of her Government are killing off New Zealand's manufacturing base. A similar argument was advocated by Roger Douglas, as in TINA (there is no alternative).

While Helen Clark stated in 2000 "We have unilaterally disarmed ourselves on trade but very few others have been so foolish", for the last six and a half years in government Helen Clark and Co have continued to do exactly that. Labour's economic/trade policies has changed very little from the time of the Forth Labour Government, despite the efforts of some Labour activists to exaggerate the differences between the two governments (2). Clark and Co are now promoting the 'Jeremy Moon' model, where products are designed in New Zealand and made offshore - but how long is it before the design team is off overseas too? Neither is it an answer to focus purely on services - as this ignores the fact the local manufacture of merchandise creates greater demand for the service sector.

Sleepyhead managing director Graeme Turner has called for more Government help for exporters rather than leaving them to the vagaries of the currency. Well the way I see it this is due to Roger Douglas's removal of all exchange controls and the continued support of both major parties to the highly economically reductionist Reserve Bank Act. I get the strong impression the Turners would prefer to stay here.

The end of Kiwi made Fisher and Paykel washing machines is just the latest example of how the pursuit of neo-liberal "free" trade policies undermines the aims of the left for sustainable economic and industry development. It is also environmentally irresponsible, as bulky heavy washing machines are not the kinds of products the world wants transported long distance if it is reasonably practical to make them locally(3).

(1) Figures from Statistics New Zealand, Overseas Merchandise Trade, year ending March 2007
(2) Sure its a good thing Labour have halted the widespread sale of state assets, but what I am talking about here is the continued agressive attitude to 'trade liberalisation' and overall legislative structure of the economy (eg Reserve Bank Act, Fiscal Responsibility Act etc) which Labour have failed to change into something more recognisably social democratic. Labour are attempting to use a relatively low tax neo-liberal economy to create money for greater social spending, but this will become a self defeating project as soon as the economy retracts - just watch them retrench!
(3) Moving a heavy washing machine around a flat is difficult enough, as I can recently attest. And the amount of packing that came with my new machine suggests washing machines are brittle things to transport.

Brash is gone, well done Nicky

Pleased to see Don Brash resign - even if only half the allegations in Nicky Hagar's book are true he is simply not the kind of person most New Zealanders would want to see running the country.
Perhaps National party President Judy Kirk secretly agrees - it was interesting her press release said she 'supported and respected' Brash' decision to resign. Under normal circumstances one would expect the word 'regret' to be used - but it wasn't. And being 'thanked for your contribution' can act as a euphemism for being fired.

In seeking an injunction in an attempt to prevent his emails being published Brash may as well have picked up a megaphone and shouted 'I have something to hide'.

The fall of Don Brash is a significant setback for the new right in New Zealand. They appear to know they will never be popular enough to be openly elected to implement their policies, so they rely on portraying a reassuring and misleading image of themselves (Labour in 1984, Bolger's 'decent society' in 1990), only to invent an economic crisis after the election and implement the policies they wanted all along.

I must say I find some of the reaction to Hagar's book from the Labour party more than a little opportunistic. Labour spilt a lot of venom at Hagar for his previous book 'Seeds of Distrust', yet because they believe the conclusions of the Hollow Men may suit their political interests some within Labour are heralding the book before they have even read it.

If Hagar ever decided to write a second volume of the Hollow Men I am sure he could find some links between the corporates and the Labour Party Helen and Co would prefer to stay hidden. That said I would expect such a book on the Labour party to be significantly shorter than Hagar's book on National - while the forth Labour government were disgracefully dishonest I doubt the current lot are as bad - or as cynical as Nicky seems to think National have been under Don Brash.

Austin Mitchell and the economic woes of Europe

Found an amusing post on left-wing British Labour MP Austin Mitchell's blog, where he wonders what John Maynard Keynes and John Kenneth Galbraith would make of the current economic organisation of the EU, or more specifically, the Stability and Growth Pact and the dominance of bankers in setting monetary policy.

"Bankers Rule. Not OK. Never could be in fact. The priority of bankers is to fight inflation not get growth, which they fear as destabilising. Their instincts are deflationary. Their aims are to keep interest rates high (bankers love that, can't think why) and keep the exchange rate as high as possible, like a phallic symbol: proud when it's hard."
...
"Enthrone all that lot and what do you get? Europe today. There are benefits for small countries because the interest rate premium they paid for smallness is gone so Ireland Greece, even Spain, are bowling along. Yet for big, grown up, economies and the great majority of the people the result is disaster. The French can riot, the German unions demand, the Italians switch from one set of crooks to another, but no one can bring down unemployment, simply because they can't boost demand, borrow or spend. The only real strategy open to governments is "reform". That basically means cutting welfare, wages and public spending, firing workers and generally embarking on Merkel deflations."

"In the good old days of full employment and high growth the Germans kept the D Mark low to keep exports pounding out. Can't now. France and Italy periodically devalued to boost demand and accelerate growth. Can't now. Business invested and expanded production for export led growth. Can't now. In fact the smarter capitalists, rather than sit around to face the limitless future of misery Bankernomics offers them, are shifting as much as possible overseas. The interests of bankers are quite distinct from those of capitalism, workers, politicians or the people."

Mitchell then makes a comparison between the so called "battle against inflation" and another recent example of a declaration of war on an abstract concept.

"Of course all we losers can't be told that. So we're enrolled in a "battle against inflation". This excuses misery by a fight against a dead enemy in the same way as the politicians proclaim the "war against terrorism" to excuse repressive measures and the loss of civil liberties. So here we all are then, just as Orwell described life in 1984, mobilised to fight unwinnable wars against invisible enemies in order to distract attention from the misery, unemployment and alienation all around. That's Bankers' Europe. The two Johns would have had fun pointing all that out but it just makes me want to cry."

Personally I am not as Euro-sceptic as Austin Mitchell, but in terms of identifying one of the euro-zone's key economic problems I believe Mitchell hits the nail on the head. I have long thought the Stability and Growth Pact is a unworkable and inflexible monetarist piece of nonsense. Member states of the EU are forced to restrict annual budget deficits to 3% of GDP, and to make matters worse this restriction is calculated from year to year, thus making it impossible to take into account any wider economic cycles. In essence, it attempts to outlaw Keynesianism.

The fact that the Pact has been applied inconsistently since its introduction is another demonstration of its impracticality. The EU Council of Ministers did not apply any sanctions against France and Germany when they exceeded the budget deficit "limit" year after year.

At the time the Masstrict Treaty was being negotiated in the early 1990s Europe was dominated by centre-right governments with sympathy to monetarist reductionism, who held a simplistic view of the economy where inflation was the only evil worth worrying about. Yet when Europeans later decided to elect centre-left governments, plans for greater social spending were hampered (in some cases) by the restrictions of the Stability and Growth Pact.

While some form of economic agreement is needed to maintain a multi country currency like the Euro, this should not be used as an excuse to write extremist economic assumptions into "law" at the expense of democracy.

German grand coalition is formed despite Germans voting for a left wing government

It looks like the new government of Germany will be an "grand" coalition of the SPD and the centre right CDU/CSU parties, led by Angela Merkel as Chancellor.

This is a defeat for the current Chancellor Gerhard Schröder, who pushed to keep his job in the advent of a grand coalition being formed. It now looks likely he will decline a cabinet post in favour of semi-retirement and the chance to spend more time with his daughter.

While cabinet positions are yet to be finalised, it appears the CDU and its Barvarian sister CSU will have eight cabinet posts - Merkel as chancellor, a minister of state at the chancellery, and the economy, interior, defence, agriculture, education and family ministries. The Social Democrats are also expected to have eight ministers in the new government, with the social democrats gaining foreign affairs, finance, justice, labour, health, transport, environment and international development.

The irony is that a majority of Germans actually voted for a centre-left government. A total of 51.1 percent of Germans voted for the three parties to the left of the center, the SPD, the Green party and the newly formed Left Party. Only 43.9 percent voted for the conservatives and the free-market liberal Free Democrats (FDP).

It is a shame the animosity of the SPD and the Greens towards the Left party have denied the German people what they voted for. While it has been widely reported that all three parties rejected any sort of deal, recently many Left party MPs said they would consider supporting a SPD/Green minority government if the SPD would make changes to its neo-liberal agenda. Oskar Lafontaine, the Left Party's designated parliamentary group leader, praised the SPD and Green party agendas and also implied that his party could possibly work with them. Sadly, the SPD and the Greens have only responded with more sniping.

The newly formed Left party, itself a coalition of disenfranchised former SPD members and the PDS (the party that grew out of the communist party) gained 54 seats. With their support the SPD and the Greens could continue to govern with a heathy 40 seat majority in the 614 seat parliament.

Larry Elliott, economics editor of the Guardian, argues the inconclusive vote in Germany is a rejection of the neo-liberal policies pursed by Gerhard Schröder, and would be pursued with even more vigour by Angela Merkel.
"The strong showing by Oskar Lafontaine's Left party is indicative of the deep suspicion German voters have of what to them smacks of a wholesale introduction of the neo-liberal US economic model. Put simply, Germans don't buy the idea - touted by both Mr Schröder and Ms Merkel - that the way to safeguard Germany's post-war social democratic model is to dismantle it."

The mere fact that the SPD would prefer to form a coalition with the conservatives says a lot about the present direction of the SPD. With Merkel as Chancellor the right wing of the SPD will continue with the neo-liberal reforms they wanted to do anyway, and may attempt to blame Merkel for any fallout.

But it is the new Left party that has the most to gain from the CDU-SPD grand coalition. Only a few days ago, the left wing of the SPD were telling Schröder they would never work with Merkel as Chancellor. SPD deputy parliamentary leader Ludwig Stiegler, has refused to vote for Merkel and influential SPD leftwinger Andrea Nahles warned on Thursday against a deal where the SPD traded the chancellery for cabinet posts and policy concessions, which is exactly the kind of deal the SPD have made today.

In order to be Chancellor Merkel still needs to survive a secret ballot of MPs. It is possible a large number of SPD rebels could ignore the whip and vote for Schröder or another SPD candidate. In this situation the Left party could also tactically vote for Schröder, along with the Greens and give Merkel her first taste of defeat.

Nils Diederich, a professor of political science at Berlin's Free University, told the Guardian.
"If the SPD voted for Merkel this would be tantamount to the party shooting itself in the foot. Some 4%-5% of the SPD's core voters would desert it. They would join the Left party instead. It is going to be extremely difficult for the SPD's leadership to sell Mrs Merkel to its own supporters."

With the Greens also set to go into opposition I hope they can mend fences with the Left party. Especially when Oskar Lafontaine claims he could "sign the Green's election manifesto as it is. It's not far from the party that I currently represent". If the Greens and the Left party touted the dream of a coalition without the SPD, this could provide a strong incentive for the SPD to move back in a real Red/Green direction. A lesson for New Zealand perhaps :)

Categories: Germany, Politics, Election, Coalition, Left Party, Greens, Schröder, Merkel

The Bush Administration's complete contempt for democracy in Iraq

In the June 27 edition of Focus on Trade, Herbert Docena compiles the complete story on how America have implemented their neo-liberal economic designs on Iraq.

'Shock and Awe Therapy: How the US is attempting to control Iraq's oil and try open its economy" is a very impressive piece of work and while long, is well worth reading. My April 2004 article 'Hijacking of a Nation' covered similar ground - its nice to see someone else reaching similar conclusions, as well as providing some damming quotes and references :)

Even before the invasion Docena quotes documents to show that the US had "sweeping plans to remake Iraq's economy in the US image". During the bombing BP engineers were embedded with the soldiers to locate and secure the oil wells. In May 2003, Defense Secretary Rumsfeld announced the Bush administration would be installing a regime heading by personnel who "favor market systems" and "encourage moves to privatize state-owned enterprises"

The US hand the contract for "transforming" Iraq's economy to US multinational Bearing Point. The contract states "The new government will seek to open up its trade and investment linkages and put in place the institutions promoting democracy, free enterprise and reliance on a market-driven private sector as the engine of economic recovery and growth.". Docena contrasts this 'systematic plan' with the complete lack of any planning for post-war humanitarian, rehabilitation and relief operations.

US Viceroy Paul Bremer illegally changed the "existing laws in force" in Iraq, allowing foreign investors to buy up and take over Iraq's state owned enterprises and repatriate 100% of the profits and other assets at any time (Order 39). As Iam al-Khafaji, who worked with the US in the early states of he occupation but later left, attests, "Many radically new sweeping changes, for example the law on foreign investment, Iraqis were not allowed to review it. They not even given the chance to look at it before it was passed.". Other 'orders' allowed foreign banks into the country and reduced the top tax rate form 40% to a flat rate of 15%, doing away with the principle of progressive taxation.

All of these imposed 'law' changes are clear violations of international law. The Hague Regulations and the Geneva Conventions, which the US has signed up to, outlaw such law changes under occupation. Even though these 'laws' were forced on the Iraqi people before they had a chance to have a say in an election, Bremer also took steps to ensure it would be difficult for an incoming elected government to change the 'Orders' put in place by the Coalition Provisional Authority.

From the earliest days of the occupation, the US searched for Iraqis whose interests converged with that of the US. The US needed Iraqi faces 'out front' to attempt to show they were not colonizers imposing their will on the Iraqi people (yeah right!), and these Iraqis needed the US because lacking constituency and legitimacy, they have no chance of surviving in power without US protection. "What Washington wanted was Iraqis who - while willing to dabble in occasional criticism of the administration - were at the final analysis beholden to it" Middle East Historian Dilip Hiro (Hiro's book on the history of Iraq is well worth reading)

The US also planted hundreds of "advisers" in key ministries and the bureaucracy - including dozens of organisations and agencies who specialise in designing neo-liberal policies. The US also created new commissions and institutions that, according to the Wall Street Journal "effectively take away virtually all the powers once held by several ministries". Paul Bremer appointed the chiefs of the commissions to 5 year terms, which will neatly ensure the US appointees can not be replaced by an elected government.

During the January 2005 elections, the US used its usual "democracy promotion" organs (National Endowment for Democracy, The National Democratic Institute and the International Republican Institute(IRI)) to promote their preferred parties, mostly Allawi's and other parties inside the Iraqi Governing Council, who also dominated the interim government. A IRI survey found 55% of Iraqis did not see the interim government as representing their interests. Bremer and his cronies also made attempts to disallow "rejectionists" such as Moqtada Sadr from being candidates in the elections.

No international monitors were allowed to scrutinize the elections - so there was no way to verify if fraud took place - the world just had to trust the word of the US-installed Iraqi government.

My point at present is not whether Iraq adopts a free market capitalist or a socialised economy. Following the fall of Saddam Hussein, it should be entirely up to the Iraqi people to decide the type of economy they want and the laws that will govern it. Not only are the radical reforms imposed by the CPA in violation of international law, they have been imposed before the Iraqi people have had a chance to have a say in an election. Not only that, but it appears the US have gone to great lengths to ensure any 'elections' are anything but a fair fight.

The actions of the Bush Administration in Iraq demonstrate nothing by complete contempt for democracy.

Categories: Iraq, Antiwar, Politics, Neo-liberalism, Investment, International Law

Make Poverty History into a cheer squad for Tony and Gordon

ZNet carries an interesting article 'Inside the Murky World of the UK's Make Poverty History Campaign' (MPH). Stuart Hodkinson explains how conservative forces within MPH have sought to emphasise the role of celebrities and moderate MPHs anti-neoliberal policies to ensure its public face is indistinguishable from the policies of Prime Minister Tony Blair and Chancellor Gordon Brown. This has caused considerable tension within the MPH coalition.

"For the past six months, some of the UK's leading development and environmental NGOs have been increasingly vocal in their unease about a campaign high on celebrity octane but low on radical politics. One insider, active in a key MPH working group, argues there "has often been a complete divergence between the democratically agreed message of our public campaign and the actual spin that greets the outside world". He is angry: "Our real demands on trade, aid and debt, and criticisms of UK government policy in developing countries have been consistently swallowed up by white bands, celebrity luvvies and praise upon praise for Blair and Brown being ahead of other world leaders on these issues."
..
Critics argue that on paper at least, MPH's policy demands on the UK government are fairly radical, especially its calls for "trade justice not free trade", which would require G8 and EU countries, notably the UK, to stop forcing through free market policies on poor countries as part of aid, trade deals or debt relief....With additional calls for the regulation of multinationals and the democratisation of the IMF and World Bank, John Hilary, Campaigns Director of UK development NGO, War on Want, has a point when he asserts that MPH's policies "strike at the very heart of the neo-liberal agenda."

But when these policies are relayed to a public audience they become virtually indistinguishable from those of the UK Government. This is due, according to Hodkinson, to the conservative role played within the MPH coalition by Oxfam, the Trade Union Federation and Comic Relief co-founder Richard Curtis.

A recent cover story of the New Statesman 'Why Oxfam is failing Africa' warned that Oxfam's relationship, both in terms of people and policy was "far too cosy" to New Labour. It also pointed to the key role in MPH played by Oxfam's Sarah Kline, a former World Bank official who champions the organisation's 'constructive dialogue' approach with the IMF and World Bank.

In my previous post I argued that despite its political aims, the commentary of Live 8 was not political enough. Despite noble aims, Live 8 could only be a 'sticking plaster' if it continued to ignore the underlying power issues that lead to humanitarian disasters. Apparently Richard Curtis is to blame here (much as I love his comedy writing).

[T]he most destructive aspect of [Richard] Curtis's involvement, critics argue, has been his personal intervention in the public communications of MPH to ensure that the politics are routinely buried by the personality as part of his own personal and completely unaccountable strategy to change G8 policy: "Richard's philosophy has become painfully obvious to everyone in MPH," one critic argues. "He believes that we should support the efforts of the UK government to bring other G8 countries into its line on aid and debt, and is adamant that Brown and Blair should not be criticised."

A key Comic Relief official reported that Curtis "found it difficult" to turn against the government because of his personal friendship with Gordon Brown.

"Frustration would not perhaps be so intense if there was real pluralism and democracy in MPH's organising practices. But as the G8 draws near, MPH apparatchiks have gone to extraordinary lengths to ensure that come the 2 July rally in Edinburgh, only the branded, monolithic message and speakers of MPH are seen and heard. The MPH Coordinating Team, which includes Oxfam, Comic Relief and the TUC, has also twice unanimously vetoed the Stop the War Coalition's (STWC) application to join MPH on the Orwellian grounds that the issues of economic justice and development are separate from that of war, and STWC's participation in Edinburgh on 2 July would confuse the message. It will be interesting, then, to see if Oxfam bans itself - it is currently leading a global campaign for an international arms treaty on the basis that "uncontrolled arms fuels poverty and suffering". STWC has since been banned from even having a stall at the MPH rally.

While a focus on debt, aid and trade does offer opportunities to the global justice movement, Hodkinson warns the direction of the MPH campaign also threatens to actively derail the movement at the same time.

Perhaps the most dangerous aspect of MPH's blending of its message with that of the government's, and its exclusion of critics North and South, is that it enables the state and media to draw a sharp line in the sand between the 'good protester' attending the 2 July Edinburgh rally, and the 'bad protester' - anyone who is contemplating engaging in civil disobedience against what is, after all, an illegitimate institution and set of governments responsible for the deaths of millions of innocent people each year.

Those UK development NGOs unhappy with MPH's direction know this only too well, but refuse to publicly walk away from a campaign that is actively derailing the global justice movement. Although it may sound cynical, the reason is simple: MPHistory is a money-spinner. "Although we hate the message and the corporate branding, some NGOs are making thousands of pounds through the wristbands," one arch critic admitted. "We have loads of new people on our database interested in our campaigns, and because the issues of trade, debt and aid are now suddenly sexy again, we have new funding bodies approaching us to do projects and research. MPH is paying for my job for the next 3 years."

Categories: UK, Politics, Live 8

Bush Administration: Historical parallels with 1930s Germany

Via About Town, No Right Turn cites a 'great article' by Jim Peron of the Institute for (classical) Liberal Values The Ugly Side of America. Peron is alarmed that his country has been taken over by fundumentalists and divided into competiting extremisms, and sees some historical parallels.

And although I've been proud to be an American for most of my life that pride is shattered. My friends will tell you that I annoyed them by telling them about all the great things about America. I loved the spirit of liberty that made up America and that is embodied in the Constitution. Today I fear that is all dead. It's been pushed aside because of a president who campaigns on fear. He terrorises people into supporting him. If "terrorism" isn't enough he has other bogey men to trot out - hence his campaign against gay people. His whole re-election strategy is built on fear. And when people are afraid - even people who love liberty - they start making excuses for tyranny.

That is what worries me about America. I go back historically to Weimar Germany and see the same type of polarisation and fear. The Weimar Germans were separated into warring camps of extremists. Extreme Left versus the Nationalist Right dominated Weimar politics. People were afraid. Each side feared the other and feared what would happen to their nation if something wasn't done. America is setting itself up for the same "solution" that the Weimar Germans sought.

While I share Jim Peron's concerns over the rise of fundamentalism in US politics and Bush's manipulation of the fear of terror for political ends, his example of Weimar Germany is a poor one.

The polarisation of German politics occurred because the previously prevailing liberal free market economics fundamentally failed. The key economic malaise during the 1920s and 1930s was unemployment and ‘Milton Friedman’ style economics consistently failed to address this problem. The continuation of such policies after the stock market crash simply made things worse. While free market ‘fundamentalists’ may argue this was due to the ideas of Saint Freidman (and the like) not being applied in full, this ignores the key point that during the 1930s economic liberalism was justifiably discredited.

In Germany people were looking for alternatives, and this explains the increase in support for the Nazis and the Communists, who both rejected, to varying degrees, the old liberal economic orthodoxy. In New Zealand the electorate dismissed the policies of the United/Reform government with the election of Labour in 1935. The free market remained in retreat for half a century. It is a sad irony that the ‘free market’ was resurrected as the ‘only alternative’ (sic) to deal with a similar depression during the 1980s and 1990s. The ‘intellectual façade’ of conservatism during the 1980s was a façade indeed – a central claim of the new right of ‘there is no alternative’ was a logical error and its prescriptions had already been demonstrated to be counterproductive during the 1930s depression.

According to the Oxford English Dictionary 'Fundumentalism' means 'the strict maintainence of the ancient or fundumental doctrines of any religion or ideology'. So while Peron is absolutely right to note the rise in religious fundumentalism in the state of America, it also could be said that the Institute for (classical) Liberal Values (ILV) demonstrates an ideological fundumentalism to free markets, in that it appears to believe such artifical creations can do no evil.

ILV, a thinly disgused cheer squad for a faction of the Act party, includes on its board such lumanaries such as Rodney Hide and Lindsey Mitchel. The later promotes himself as a campaigner for the abolution of the Domestic Purposes Benefit, an initiative that came from the development of the welfare state from 1935. So in a sense the ILV and their ideological buddies continue to oppose the policy framework that finally lifted the world from the 1930s depression.

Germany in 1933, after the Nazis gained power, offers a far better comparison with the polarisation and fear engineered by the Bush administration. Following the Reichstag fire, the Nazis claimed they needed new laws to deal to the ‘terrorists’. The Reichstag fire decree has an uncanny resemblance to the Patriot Act. Bush also appears to share the fascist rejection of reason in favour of ‘instinct and will’.

At present I am reading Eric Hobsbawn’s ‘Age of Extremes: The Short Twentieth Century’. In attempting to explain how the capitalism of the US and the communism of the USSR became allies in the fight to defeat fascism, I think Hobsbawn comes up with a very interesting thesis. Both the “liberal democracies” (UK, US, France) and the USSR were founded on the ideals of the enlightenment and the French revolution. Fascism rejected these ideals in favour of an even more traditional order, and thus these ideals formed the basis for the anti-fascist alliance in World War II.

Iraq opens oil reserves to Western companies

Just read a report on the NZ Herald Online 'Iraq opens oil reserves to Western companies'.

Opening up Iraq's natural resources to widespread foreign investment completes the neo-liberal agenda of the US and its former viceroy Paul Bremer. In September 2003 Bremer imposed Order 39, a 'law' that rescinded nearly all of Iraq's legal and constitutional restrictions on foreign investment and banking. This law allowed 100% foreign investment in Iraqi companies (and state assets) and 100% repatriation of profits to their offshore owners. The only sector to be excluded from this carte blanche neo-liberalism was 'natural resources' (i.e. oil). This law is clearly illegal under the Geneva and Hague conventions, as Iraq was under under military occupation when Bremer imposed the changes, and the provisions of Order 39 clearly breached Iraq's constitution of 1970, a constitution that is still valid under international law.

Oil was exempted from Order 39 because it was thought that domestic political opinion would not stand for it. That’s not to say these changes were in any way democratic, as Order 39 was imposed before elections. The US clearly thinks that Iraqis will be happier with US part ownership of oil infrastructure, if the policy is advocated by an Iraqi face. This is where the (unelected) interim government comes in.

In an interview in a Shell newsletter that is distributed to its Middle Eastern clients, [Oil Minister] Mr Ghadban added that Iraq would open its doors to the oil giants early next year.

"We would like to open a dialogue with international oil companies [IOCs]. We are now formulating our policies ... and we think there is room for IOCs in Iraq - in particular in the upstream because we need new investment."

"We believe that there is at least 2.5 to 3 million barrels per day of new oil production capacity that could, in the long term, be added to our production levels."

The 'problem' for such 'investment' is the 1970 constitution that provides that "natural resources" and the "basic means of production" are owned by "the People". Not even Bremer attempted to override the clear constitutional prohibition to foreign ownership of the oil. It would not surprise me if the latest comments by the 'Iraqi' Oil minister are part of a strategy to move public opinion in favour of privatisation. Expect the interim unelected 'government' to stitch up a deal with BP or Shell and then claim 'there is no alternative' to Iraqis accepting full or part US/UK profiteering from the oil. Then expect such clauses to be missing when a replacement constitution for Iraq is drawn up next year.

Luckily, global justice activists have time to fight this issue, as the western oil companies are hesitant about investing in Iraq while the violence continues.

The Iraqi Oil Ministry was forced to cancel a conference in April when most companies pulled out after a surge in violence in the country.
...
Today, neither BP nor Shell has any staff working there. Shell has one consultant in Iraq and it is monitoring developments from its Dubai office. A spokeswoman refused to say if it was planning to send employees to the country. But she added: "Iraq does offer opportunities. We are following developments and working with the Iraqi Minister of Oil.". A BP spokesman said that the company would only consider opportunities in Iraq when "there is a proper regime" in the country.

While it would be nice to think that BP regards the current Iraqi administration as illegitimate, it is more likely they are worried about the prospect of their 'investments' being renationalised by a future representative Iraqi government, on the grounds that privatisation under effective occupation is illegal (and they would be right!)

Also expect US relations with Saudi Arabia to cool further as more barrels of oil roll out of Iraq. Saudi Arabia was one of the most significant beneficiaries of the 1991 Gulf War, as it was able to increase its production as Iraq's oil infrastructure was bombed. Saudi Arabia picked up the slack, and Iraq will soon want and be able to take the 'slack' back.