Tea with Mussolini

Some media commentators have suggested that Ed Miliband’s speech to the Labour conference marked a clear break from the politics of the last 30 years and he deserves support.

Seumas Milne in The Guardian was particularly enthusiastic, calling it “the most radical speech by a Labour leader for a generation”, claiming: “Miliband signalled an unmistakable break with the corporate consensus of the past three decades and the model of unfettered market capitalism this has enforced.”

It’s hard to imagine a more wrong-headed assessment of Miliband’s speech than Milne’s, however.

The “break” that Miliband allegedly made in his speech was with a certain kind of capitalism – but only in order to embrace another, potentially even more sinister, version.

Miliband wants the state to decide between “good capitalists” and “bad capitalists”, and between honest, toiling workers and those who should be shunned by society.

The “good capitalists” will get tax breaks and the others won’t. Decent workers will get social housing and the feckless ones will end up living on the streets, denied a roof over their head by the local council.

The state will oppose strikes (Miliband actually praised the anti-union laws passed by Thatcher governments) and deny benefits to those who decline to work for a pittance (which New Labour introduced and the ConDems are implementing with gusto).

What is all this but a recipe for an authoritarian, corporate state? Miliband’s endless talk of “values” – the term peppered his speech – indicated what such a set-up would look like.

On the one side there would be a vast state bureaucracy – with a regulator called OffCapital – which would pronounce on the virtues of this or that capitalist enterprise. On the other side would be the Ministry for Moral Rearmament, implementing “values-based” policies on the majority.

“Radical” this may be. Progressive it isn’t. Red Ed? Give us a break! Radical populism is always right-wing stuff.

More Mussolini than Marx. The Italian dictator’s corporate state springs to mind as the logical outcome of Miliband’s ideas.

The good news is that Miliband – who told News Night, “I am in favour of capitalism, just for the record” – will never get the opportunity to practice his fiendishly unclever plan.

Globalised capitalism is not for reforming or regulating, or being managed like it was after World War II. That epoch came to a deafening end in 1971, when the post-war Bretton Woods system of controls on investment and currency movements crashed to earth.

Capital has subsequently freed itself, as much as possible, from the constraints of national state controls and operates on a global scale. This is true of both production corporations and even more so of the financial system.

Both departments of capitalism demanded and got deregulation so that they could move assets and money without hindrance. Assorted crises were overcome until the meltdown of 2008 plunged the world into recession and in 2011 has taken us to the precipice of outright depression.

The present crisis, however, is not a result of deregulation which is more a consequence than a cause. Inherent flaws within the capitalist system of production and consumption led to the vast overhang of debt that is now overwhelming economies, currencies and countries like Greece in a merciless fashion.

Fiddling about deciding which capitalists are good and which are bad could not be more irrelevant in this situation. Labour is a party that sold its soul to corporate-driven, free market capitalism. Under Miliband, it is a party that is lost in space, floundering around for something to say, appeasing right-wing voters while staying firmly in the capitalist fold.

We are not fooled.

Paul Feldman

Communications editor

Secret G20 communiqué says it all

The draft communiqué below from the G20, revealed here exclusively by A World to Win, bears no resemblance to the statement eventually published yesterday evening, which is not surprising:



We the leaders of the G20 group of major bankrupt economies meeting in London pledge our undying commitment to the cause of restoring the ailing global capitalist economic system to health by any means necessary. We will do whatever it takes to rebuild the balance sheets of the banks and to restore people’s confidence in a system that has come off the rails and is unfortunately and mistakenly despised by increasing numbers of our citizens.

We acknowledge that the transnational corporations (TNCs) and global financial institutions have, with our encouragement, transformed a capitalist system from one that was fundamentally flawed and riddled with contradictions to one that is even more fundamentally flawed and riddled with contradictions and is in meltdown.

The G20 under the inspiring leadership of Gordon Brown accepts that corporate-driven globalisation has created a grossly unequal world between and within nations; that prime minister Brown never said in June 2007 that the City had created a new “golden age”; that TNCs and the World Trade Organisation call the shots; that as a result the democratic process is now meaningless; that we can and will do nothing about this.

And let no one suggest that we are indifferent to the irreversible damage that corporate globalisation has caused in terms of climate change, manifested by extreme weather patterns. The G20 knows that relentless, profit-driven growth is the main contributor to global warming that now threatens humanity.

However, as someone once said, business is the only real business of the planet and its inhabitants. So let’s get down to business. Tackling climate change must not sidetrack us.

Taking all the above into account, while putting much of it to one side, we therefore pledge to:

* take measures to restore growth through persuading people once more to buy goods they don’t necessarily need or want with money they don’t actually have
* hand over another $1.1 trillion (made possible by fast printing presses) to the financial system through the International Monetary System and World Bank
* prepare for large-scale cuts in public spending to pay for past and future bank bail-outs
* encourage business to take on more welfare functions because our states have run out of money (the UK in particular welcomes yesterday’s statement by Richard Lambert, director-general of the CBI, that “the state should become a commissioning agent indifferent to whether services were delivered by the private sector, public sector or third sector.”
* use the forces of the state to deal harshly with any threat to private property or those who think capitalism is past its sell-by date and want to replace it. We want to record our thanks for the splendid efforts of the Metropolitan Police in protecting our common interests during the summit.

The G20 leaders who have come together to save the world in less than a day, accept that these measures will almost certainly make not a blind bit of difference. Question marks remain, for example, about the level of toxic debt still buried deep within the financial system. (If anyone knows how we can find out more about this, please get in touch with Tim Geithner or Alistair Darling at info@toxicdebtsrus.com asap.) We also noted that while we drawing up this communiqué another 3,000 job losses were announced in the UK alone. All of us are in agreement that this is a price well worth paying in terms of our future wealth.

In conclusion, we are confident that the people of our different countries will rally to the cause of getting those profits and bonuses rolling again. Never forget, their prosperity is also yours. If you believe that you will probably believe anything.

G20 draft communiqué ends.

The global pyramid scam

After a week of attempts by central banks to resuscitate global financial markets by injecting cash, the contagion continues to spread around the world, driving stock markets sharply lower. As is the fate of all pyramid-selling scams, the global economic structures built upon an addiction to credit and its inseparable opposite debt, are unwinding fast with devastating impact. Adding to the current crisis is the fact that financial institutions are now scared of each other. No one really knows the level of exposure each investment and commercial bank holds. As a result, inter-bank trading has ground to a halt because no one wants to be left holding the debt hand grenade when the music stops.

Central banks have been trying to restore confidence, with the Bank of Japan announcing on Thursday that it would inject a further 400bn yen ($3.4bn) into its banking system. The US Federal Reserve made another $7bn (£3.5bn) of reserves available to the banking system on Wednesday. The Fed has injected $71bn into the system since 9 August. However, such moves, along with comments by US Treasury Secretary Henry Paulson that the economy was strong enough to withstand the turmoil, have done little to appease investors.

The current market volatility has been triggered by the US sub-prime mortgage sector, which offers higher-risk loans to people with a poor credit history. This particular bubble has burst as a result of higher US interest rates combined with falling house prices. The number of people defaulting on their loans has soared. While some estimates say $300bn in loans could be at risk, the eventual scale of the problem is thought to be much greater. The original loans were sold on as debt by mortgage companies to other institutions, who in turn have loaned out money against the expected income. Yesterday the situation worsened after Merrill Lynch told its clients to sell any shares they own in the country's largest mortgage lender, Countrywide Financial. It warned that Countrywide could face bankruptcy if the availability of credit in the market gets any worse and there were market rumours that the lender had failed to raise some money it needed.

No less devastating are the extremes of weather which are linked to climate change, itself a product of over-producing global, capitalist corporations whose products are largely bought on credit. Events in and around Wall Street on, August 8th, little reported in British media, provide a striking illustration of the intimate connection between the turmoil in the markets and wild climate. Hours before the financial storm broke, the Financial Times investment editor was commenting that futures and stock markets “reflect a belief that crisis will be averted. Both are vulnerable to bad news from the credit market. Once Wall Streeters calm down after their commute from hell, that will again be their greatest concern”. That morning a fierce morning storm disrupted transport throughout much of the region and unleashed a rare and destructive tornado that whipped the area with winds of up to 135 miles an hour, dropping 3 inches of rain on the New York metropolitan area in about an hour. Whilst there has so far been little attention to the direct impact of the Brooklyn tornado on the next day’s panic trading across the bridge in Wall Street, both are clear signs of a system in crisis, even meltdown.

Gerry Gold, economics editor

A universe of fantasy finance

The turmoil in the world’s financial and stock markets that erupted at the end of last week prompted a panic release of funds into the system from the leading central banks. But their actions only add to the underlying cause of this crisis. The European Central Bank, the US Federal Reserve and the Banks of Japan and Australia stepped in to try to stem the massive loss of confidence in the share markets and the financial system as a whole. The intention was to loosen the seizure that had cut the flow of funds between banks, which are needed to keep the global economy operating. The hundreds of billions of dollars pumped into the system was the biggest such intervention since the crisis following the 9/11 terror attacks.

Some financial observers, as well as the International Monetary Fund, are claiming that last week’s events, whilst serious, do not greatly damage the fundamentals and will not impede continuing global growth. But this time the problem is not only a liquidity crisis - a sudden shortage of available cash known as a credit crunch. No, this time, the problem is greatly compounded by a crisis of insolvency. People can’t pay their debts. The three decades or so of continuing growth, albeit interrupted by many crises, has been made possible by low interest rates set by central banks, easy and easier credit, and the virtual elimination of control or regulation on the operation of financial institutions.

All of this was necessary to fund the profit-led capital expansion which offered a way out of the political upheavals of the late 1960s, the US defeat in Vietnam, and a wave of action centred on Paris in 1968, which threatened to undermine the capitalist system. A watershed in this process was the decision 36 years ago this week – on 15 August 1971 – to separate the dollar from gold, thus freeing the currency from any nominal connection with real value. Globalising corporations emerged able to optimise opportunities worldwide and dictate terms to national governments. In widening and exploiting inequality they greatly expanded production. Consumers, needed to buy the products, were seduced by marketing and then enslaved by unsustainable debt. To keep the whole thing growing required a universe of fantasy finance - apparently with a life of its own - expanding far faster than the real economy. Every day in the year to April 2006, in the foreign currency markets around 60 times the value of a whole year’s global production changed hands. Hardly a shortage of cash.

In particular, it is the globalisation of unpayable debt in the US housing market as well as other forms of debt, packaged into hedge funds and leveraged buy-out deals which has destabilised the entire system and which sparked the latest crisis. The world’s largest publicly quoted hedge fund manager, Man, lost nearly a quarter of its market value last month, with the worst two-day drop in its history before the weekend. The current crisis began to emerge from the murky depths of unsecured “sub-prime” mortgage lending. Sub-prime simply means borrowers with a poor credit history – usually low-wage earners who have trouble repaying their debts. Wall Street, burnt by its latest bonfire of the vanities, is now describing loans to risky borrowers as “toxic waste”.

The contagion is certain to spread as there are very many over-borrowed, over-stretched corporations - not just financial institutions - as well as the millions upon millions of individuals who find themselves in trouble in every country. The British economy is particularly vulnerable, as it is now dominated by financial services and speculation to the exclusion of manufacture and production. Some observers are comparing the situation to 1929, when the Wall Street crash led to a world-wide slump. But today, the world financial system is far more integrated as a result of globalisation and the consequences will be far more devastating for international capitalism.

Gerry Gold, economics editor

Global financial hurricane starts to blow

Turmoil on the world’s stock markets, induced by yesterday’s sharp falls in New York, is directly connected to a crisis at the heart of the global banking system. The implications for the everyday lives of ordinary working people in every country are enormous in terms of jobs, housing and living standards. In the US, the Dow Jones Industrial Average plunged more than 440 points in late trading - on course for its biggest fall since 9/11. The FTSE 100 suffered its worst day for five years while the FTSE 250 recorded its biggest points fall in history.

This instability has its roots in the frantic globalisation process. As the transnational corporations grew in size, so the need for credit ballooned to expand activities. Loans enabled corporations to buy out other companies through mergers and acquisitions. This in turn spawned a web of inter-connected complex financial markets, all eager to share in this easy “wealth”. Corporate debt was recycled over and over by a financial sector that has come to dominate the major economies. In Britain, for example, financial services account for of a third of the value of UK output, more than twice that of manufacturing. In parallel, ordinary consumers have been encouraged to borrow as much as they want on the promise that interest rates would stay low and the party would go on for ever.

But the music has suddenly stopped. Interest rate rises have made borrowing more expensive and bad debts are mounting up. In the United States, the crisis centres around loans to people with bad credit histories to help them buy homes. This is euphemistically known as the sub-prime market. A turndown in the US economy combined with rising rates has produced increasing levels of default. This leaves lenders exposed to large amounts of debt on loans which themselves are financed by borrowings from other institutions! In Britain, the consumer boom is over. Yesterday companies ranging from retailers Kingfisher, JD Sports and Kesa Electricals to Bradford & Bingley, the buy-to-let mortgage specialist, and insurer Legal & General all warned that five interest rate hikes in the past year are beginning to take their toll. Robin Evans, global strategist at Fox-Pitt Kelton, warned that "growth in the UK could slow quite sharply into the end of this year and the beginning of next year".

The capitalist press is trying to take a sanguine view. As a comment in today’s Daily Telegraph put it: “Yesterday's market falls were just an intensifying of the bad weather engulfing markets. The flood of debt that American consumers have been adrift on for years has finally turned toxic thanks to rapidly rising interest rates… To use one of the choicer quotes from a trader yesterday: ‘We're watching the slow-motion suicide of the capital markets.’ " There have been more than $3,000 billion (£1,500bn) announced acquisitions so far this year, more than 50pc above last year's levels. That activity has sent stock markets around the world sharply higher. But with banks now struggling to raise the money to finance these takeovers, investors are selling shares and fleeing to the relative security of government bonds.

The bursting of the global speculative bubble has unpredictable consequences. Banks failing, companies running out of credit, consumers spending less – it all points to an emerging global economic slump. The Brown government is aware of this and may plan an autumn election in a bid to beat the storm. Having stolen the Tories’ clothes on immigration, and wooing Conservative voters with reactionary policies on drugs, terrorism and crime, Brown calculates that New Labour could win an election with the support of right-wing Daily Mail and Daily Express readers. The financial storm of today is, however, a prelude to tomorrow's global hurricane.

Paul Feldman, communications editor

World’s poor pay the price for climate change

Buried over the holiday period, when the media was more interested in New Labour’s disastrous attempt to spin the Iranian hostage story, was another devastating report on climate change. Rajendra Pachauri, the chair of the of the UN's Intergovernmental Panel on Climate Change (IPCC) was clear that "the poorest of the poor in the world - and this includes poor people in prosperous societies - are going to be the worst hit" by climate change. Despite last minute watering down of its contents, the second IPCC report this year described the regional impacts of climate change. China, Saudi Arabia, Russia and the United States were all blamed for changing the scientific conclusions in the report, with some of the scientists walking out of the all-night drafting session in disgust. The report forecasts that climate change will affect the health of millions of people, increase malnutrition, disease, injuries and deaths (from heat waves, floods, storms, fires and droughts). Some 29,000 observational data sets were looked at during the preparation of the report, which confirmed that the increase in regional temperatures over the last 30 years have had discernible impacts on both physical and biological systems. Over the next 40 years, people in seasonally dry and tropical regions will face increasing droughts and hunger as the productivity of crops decreases, with up to a 30% decrease in water availability. At the same time, more severe storms will increase the risk of floods. Water availability will also decline in places like Lima in Peru, where people rely on water supplies from glaciers and snow.

Up to 30% of the world's plant and animal species could become extinct even with a global average temperature rise of 1.5 to 2.50C , which is now virtually certain. The progressive acidification of oceans will have continuing negative impacts on marine shell organisms, with warming seas increasing coral bleaching and mortality. It is expected that net carbon uptake by terrestrial sinks will peak before 2050, after which they will weaken or go into reverse, feeding global warming. The poor in the developing world, especially those in coastal and river plains, will suffer most from a range of regional impacts. In Africa, up to 250 million people will be exposed to increased water stress by 2020, with agricultural yields reducing by up to 50%. Fish resources will decrease as lake-water temperatures increase and rising sea levels will affecting densely populated low lying coastal regions. In Asia, Himalayan glacial melt will initially increase flooding. But by 2050 decreased river flows will result in reduced freshwater availability in Central, South, East and Southeast Asia, affecting more than a billion people. Crop yields in Central and South Asia will decrease by up to 30% by 2050, while the heavily populated mega-deltas in South, East and Southeast Asia will face increased flooding. In Latin America , the tropical forests of the eastern Amazon will be replaced by savannah, and semi-arid vegetation will be replaced by arid-land vegetation by 2050, with significant bio-diversity loss and species. Increased salinisation and desertification of agricultural land will result in decreased crop productivity and declining levels of livestock. On small islands, people will be especially vulnerable to coastal erosion of beaches from rising sea levels and increasing inundation from extreme storm surges. Coral bleaching will negatively effect fishing resources. By 2050 both Caribbean and Pacific islands will find that fresh water availability will not be met from annual rainfall. The picture is stark. As globalised capital continues business as usual, pouring out ever increasing quantities of carbon into the atmosphere in its search for increasing levels of profit, the world's poor are paying the price through increased risks of starvation, drought, disease and death from flooding. The nub of the problem is that global capitalism needs to be replaced with a not-for-profit ecological approach to the economy, based on producing enough for all and not more profits. You can read more about this approach in Running a Temperature, published recently by A World to Win.

Stuart Barlow

Avian flu and fowl play

Blaming wild birds for the spread of avian flu is a convenient way of avoiding the real cause – intensively farmed poultry and the domination of the food chain by corporations whose first duty is to shareholders. In a factory farm with a high density of birds, the virus can spread and multiply rapidly throughout the huge confined flock, and beyond that, via the global trade in live birds, eggs, virus-contaminated feed and manure, across country borders and across continents. There were no fewer than 160,000 turkeys in the sheds in Suffolk where the deadly H5N1 strain was identified. But this is small stuff compared to the giant factories in Asia - the region where avian flu was first identified - which house millions of birds.

Grain, an international campaigning group promoting agricultural biodiversity in the developing world, says in a report entitled Fowl Play that bird flu is really nothing new. "It has co-existed rather peacefully with wild birds, small-scale poultry farming and live markets for centuries. But the wave of highly-pathogenic strains of bird flu that have decimated poultry and killed people across the planet over the past ten years is unprecedented - as is today's transnational poultry industry," says Grain. The group describes the transformation of poultry production in Asia in recent decades as "staggering". In the Southeast Asian countries where most of the bird flu outbreaks are concentrated -Thailand, Indonesia, and Vietnam - production jumped eightfold in just 30 years, from around 300,000 metric tonnes (mt) of chicken meat in 1971 to 2,440,000 mt in 2001. China's production of chicken tripled during the 1990s to over 9 million mt per year. The poultry industry in Asia supplies a significant proportion of the 200 million chickens Britain imports each year. Among the biggest corporations is Charoen Pokphand, the region's biggest producer of poultry and feed, and the Asian business partner of the supermarket giant Tesco. The Grain report adds: "Practically all of this new poultry production has happened on factory farms concentrated outside of major cities and integrated into transnational production systems. This is the ideal breeding ground for highly-pathogenic bird flu - like the H5N1 strain threatening to explode into a human flu pandemic." There is speculation that the H5N1 originated in China. Reports suggest that the authorities tried to keep the lid on less virulent strains of avian flu by using an anti-viral drug intended for humans only. Such misuse could have caused the avian flu virus to mutate into the drug-resistant H5N1 strain.

Meanwhile, bodies like the World Health Organisation and the Food and Agriculture Organisation barely mention the implications of industrial poultry in the bird flu crisis. Instead, fingers are pointed at backyard farms which sustain many people in poorer countries. Where the FAO once supported local farmers, it now favours a switch to large-scale production, which shows how far the UN and its constituent parts are in bed with the corporations. As is New Labour, of course. Ministers are casting doubt about the source of the Suffolk outbreak, suggesting that we can never know. Sticking to the unknown wild bird theory leads to increased pressure on organic farmers, who rear poultry outdoors. Professor David King, the government’s tame chief scientist, says that in his view the arrival of the H5N1 virus in Britain would mean that "organic farming and free-range farming would come to an end". That’s just what the major producers want to hear. Meanwhile, the Bernard Matthew’s corporation will get vast sums in compensation for the culling of the wretched turkeys. Leaving food production under the ownership and control of a handful of producers and retailers, who drive down conditions as a way of reducing prices, is a real threat to human health world-wide. From H5N1 to the consequences of climate chaos, globalised capitalism is an unsustainable system as far as the welfare of the planet is concerned.

Paul Feldman, communications editor