Monthly Archives: June 2016

The Brexit: A Very British Affair

Brexit Vote: A Very British Affair

Dispatches From The edge

June 24, 2016

 

In the end, the Brexit—the vote on whether the United Kingdom should remain in the European Union (EU) or be the first in the 29-member trade group to bail out—was a close fought matter, but for all the sturm und drang about a pivotal moment for the EU, the June 23 referendum that saw the Brexit pass was a very British affair.

 

While the European Union is clearly in a crisis—countries weighed down with unpayable debt, economies virtually dead in the water, double digit unemployment, and a rising chorus of opposition to the austerity policies of the EU authorities in Brussels—those were not the issues that brought the British people to the polls.

 

Indeed, the whole affair started as an entirely homegrown matter, an internal split in the ruling Conservative Party. Back in 2013, Conservative Prime Minister David Cameron cut a deal with the euro skeptic part of his party that if they would close ranks until after the 2015 general election, he would hold a referendum on the EU.

 

At the time, Cameron was also looking over his shoulder at the rise of the extreme right wing, racist United Kingdom Independence Party (UKIP), which had begun using anti-immigrant issues to poach Conservatives. It is likely that Cameron never really intended to follow through on the 2013 pledge, but once he let slip the dogs of war he had little control over the havoc that followed.

 

When the Conservatives defeated the Labour Party last year, the “out” faction demanded their due, and what emerged was a deeply disturbing campaign that focused on race, religion and “sovereignty,” the latter a code-word for a particularly nasty brand of nationalism that is on the rise all over Europe.

 

Brexiters conjured up hordes of Turks pouring into Britain, even though Turkey is not a EU member—or likely to become one. In any case, the UK is not part of the Schengen countries, those members of the EU that allow visa less travel.

 

“Vote Leave” ran posters depicting crowds of Syrians and endless ads on Turkish birthrates. “None of this needs decoding,” wrote Philip Stephens of the Financial Times, “The dog whistle has made way for the Klaxon. EU membership talks with Turkey, we are to understand, will soon see Britain overrun by millions of (Muslim) Turks—most of them thugs or welfare scroungers.”

 

Last year Britain did process some 330,000 immigrants, but the overwhelming majority of them hailed from Spain, Poland, the Baltic countries, and Greece. The UK has accepted very few Syrian refugees and Turks, certainly not enough to “overrun” the place.

 

The openly racist and xenophobic character of the “Leave” campaign put the UK left in a difficult spot. While the left, including the Labour Party, has profound differences with current policies and structures of the EU, these are not over immigration and religion. How to express those critiques without bedding down with the likes of UKIP or the euro skeptic Conservatives was a tricky business.

 

Labour Party head Jeremy Corbyn chose to endorse the “remain” campaign, but also to point out that the EU is an undemocratic organization whose financial policies have spread poverty and unemployment throughout the continent. However, because the trade groups have a progressive stance on climate change, equal pay, work hours, vacations, and maternity leave, Corbyn argued—if somewhat tepidly—that all in all, it was best to stay in and try to reform the organization.

 

Part of the “leave” vote sprang from one of Britain’s most pernicious ideologies—nostalgia. Run through a few verses of “Rule Britannia” and a considerable portion of older Britains go misty eyed with the mythology of Trafalgar, Waterloo, and Omdurman. Polls indicate that support for the EU among people over 60 was just 33 percent. It was only 10 percent more among Conservative Party members of all ages.

 

In contrast, young Britains, Labour Party members, the Scots and Northern Irish supported remaining, though in the end they were not enough. The fallout? There will almost certainly be another referendum for Scottish independence. Will Northern Ireland do the same?

 

Is this the beginning of end for the EU? It is hard to imagine how the organization can continue as it is since the second largest economy in the trade group has debarked. But the European Union’s troubles have only just begun, and a far more important measure of the future of the organization will come when Spanish voters go to the polls June 26.

 

In that election the austerity policies of the “troika”—the European Central Bank, the International Monetary Fund, and the European Commission—will be directly confronted by a spanking new left formation, Unidos Podemos (United We Can). UP comes out of an alliance of Izquierda Unida (United Left) and Podemos. It is currently running number #2 in the polls and nipping at the heels of the ruling rightwing Popular Party.

 

The UP calls for rolling back the austerity policies of the troika, a public works program to create 300,000 jobs, and economic stimulation to tackle Spain’s horrendous unemployment problem. Joblessness is over 22 percent nationwide and 48.5 percent among young Spaniards.

 

A recent manifesto by more than 200 leading Spanish economists charges that the austerity policies of the EU have created an “economic crisis” that “has had devastating consequences for our country, as well as the euro zone as a whole” and “unnecessarily prolonged the recession across the continent and generated deep social fractures by increasing economic and social inequalities.”

 

The euro zone is the 19 members of the EU that use the common currency, the euro.

 

UP plans to link up with similar minded forces in Greece, Portugal, Italy and Ireland to demand that Brussels adopt fiscal stimulation as a strategy against the economic malaise plaguing most of the EU.

 

United Left leader and Communist Alberto Garzon, probably the most popular politician in the country, says “Brussels has to understand that if they continue to apply austerity politics in Spain our social emergency will get worse, which only helps the rise of fascism—as we have already seen in Austria and other EU countries.”

 

The Brexit vote was a British affair (and promises to be a messy one). The Spanish election is a continental affair that will have reverberations worldwide.

 

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Spanish Elections: EU Watershed?

The Spanish Challenge

Dispatches From The Edge

June 8, 2016

 

For the past quarter of a century there have been few watershed moments in Spanish political history. Like a well-choreographed pas de deux, the center-left Socialist Workers Party (PSOE) and right-wing Popular Party (PP) have taken turns governing the country.

 

But the 2015 election changed all that. Upstart parties on the right and left crashed the ball, punished the two major parties, and forced another round of voting on June 26 that could be a turning point in a growing campaign to roll back austerity policies that have spread poverty and unemployment throughout the continent.

 

Last December’s vote saw the ruling PP drop 63 seats and lose its majority. But voters chastised the Socialists as well, with the party losing 20 seats. Many of the seats that formerly went to the two major parties shifted to the left-wing Podemos Party and, to a lesser degree, the rightist Ciudadanos Party. In the current parliament, the PP controls 123 seats, the Socialists 90, Podemos 69, and Ciudadanos 40. Regional parties of Basques, Catalans and Canary Island independents hold 28 seats. The parliament has 350 seats and a ruling majority is 176.

 

The new election was forced when none of the parties could form a working majority. The PP and Ciudadanos are on the same page politically, but together fall short of a majority. The Socialists, Podemos and the regional parties—most of which are leftist to one extent or another—could have formed a government, but the Socialist Party refuses to have anything to do with Catalan separatists.

 

While polls indicate that Spaniards are likely to vote pretty much the same way they did in December, a new kid on the block has altered the electoral terrain and raised the pressure on the center-left Socialists to make a choice: follow the lead of Portugal, where the Socialist Party formed a united front with the Left Bloc and the Communist/Green alliance, or imitate the Social Democrats in Germany and join a “grand coalition” and make common cause with the right?

 

The “new kid” is “Unidos Podemos” (“United We Can”), a coalition of Podemos and the United Left (UL). No one expects the new alliance to win a majority, but most analysts predict, that under Spain’s quirky election system the coalition could increase its representation by 25 percent, or somewhere between 15 to 20 seats. That would vault the new formation past the PSOE, making United Podemos (UP) the second largest bloc in the parliament. The PP is still number one and on track to slightly increase the 29 percent they received in the last election.

 

Spain’s election geography is heavily weighted toward rural areas, where the PP and Socialist Party are strong. While it takes 128,000 votes to elect someone in Madrid, it only takes 38,000 in some areas of the countryside. The rules also favor regional depth over broad support. In December, the UL won almost a million votes but only got two representatives. Other parties averaged one seat for every 60,000 votes.

 

United Podemos has internal tensions, but both parties have put these aside for the moment. For instance, Podemos supports continued membership in NATO, while United Left opposes the military alliance. The UL is also opposed to the current structure of the European Union and calls for a “refounding” of the organization.

 

What both agree on is ending Spain’s punishing austerity regime and confronting the country’s staggering unemployment. The national jobless rate is 21 percent, with a catastrophic 45.5 percent for youth 25 and under. The education system is in a state of collapse, and there is a national housing crisis. In the face of those conditions, the UP has decided to shelve disagreements over NATO and the EU and make common cause.

 

This is almost exactly what the left did in Portugal, where disagreements on NATO and the EU were sidelined in favor of freezing privatizations, rolling back tax increases, increasing the minimum wage and augmenting funding for education and medical care. There is no question that differences will eventually surface, but the Portuguese left has decided that when the house is burning down saving the inhabitants takes precedent. Whether the Spanish Socialist Party will take that step is an open question.

 

In some ways the divisions of the left in Spain are narrower than they are in the Portuguese alliance: part of the UP—specifically Podemos—backs NATO membership and the EU. But the PSOE’s opposition to Catalan independence is a major roadblock to an alliance with the UP. Podemos also believes Catalonia should remain part of Spain, but it supports the right of the Catalans to hold a referendum on the issue.

 

The Socialist Party’s hostility to Catalan independence allies it with the PP and Ciudadanos. The latter was formed to oppose Catalan independence, and the PP has led a mean-spirited campaign against Barcelona. When Catalans banned bull fighting, Madrid made bull fighting a “national cultural heritage” to thwart the ban. When Catalans flew their nationalist “Estelada” flag at the Copa Del Rey soccer match finals in Madrid, the government tried to block it. A court stopped the authorities from banning the flag, and Barcelona defeated Madrid in the match.

 

PP leader and acting Prime Minister, Mariano Rajoy, is pressing the Socialists to join a grand coalition that, so far, the latter has resisted. But the PSOE is deeply split. Some in the Party would rather bed down with the right than break bread with Podemos United. Others are afraid that, if the Socialist Party enters a grand alliance with the Popular Party, the Socialists will end up suffering the consequences. Center-left parties that join with center-right parties tend to do badly come election time.

 

The Greek Socialist Party was decimated by the left-wing Syriza Party after the former went into a grand coalition with the right. The Liberal Party’s alliance with the Conservative Party in England turned out to be a disaster. The Liberal Party barely exists today. And the German Social Democrat’s grand coalition with Chancellor Angela Merkel’s Christian Democratic Union has seen the once mighty Socialists slip below 20 percent in the polls. In Spain the mantel of “the left” would clearly shift to the UP alliance, something that many in the Socialist Party deeply fear.

 

There are profound differences among the European left, making unity difficult. The Socialist parties in Portugal and Spain, for instance, support paying off their countries debts to European banks and the International Monetary Fund (IMF). The Portuguese Socialist Party’s alliance partners, as well as the Spanish United Left, think the debt is unpayable and, in any case, unfair because most of the debt is the result of the 2008 economic crisis brought on by the irresponsible speculation of private banks. Speculators may have lost the money, but the taxpayers are picking up the tab.

 

There is a potential path out of the current situation, but it will have to overcome powerful interests and a deeply flawed economic system.

 

Those “interests” are the debt holders, ranging from governments to the European Central bank and the IMF.

 

The flaw is built into the eurozone, which is made up of the 19 countries in the 28-member European Union that use the common currency, the euro. As economist Thomas Piketty puts it, the eurozone has “a single currency with 19 different public debts, 19 interests rates upon which the financial markets are completely free to speculate, 19 corporate tax rates in unbridled competition with one another, without a common social safety net or shared educational standard—this cannot possibly work, and never will.”

 

Piketty argues the eurozone’s rigidity on debt and its strategy for solving it—austerity and yet more austerity—has “throttled” a recovery, particularly in Greece, Spain, Portugal, and Ireland. Even where countries economies are finally growing—Spain and Ireland—their debts are actually higher than when they instituted austerity regimes. And the “growth” is not due to the EU’s economic strategy, but rather to cheap oil and the declining value of the euro.

 

Piketty proposes a conference on debt, similar to the one that saved postwar Germany. Syriza has long called for such a gathering. Such a conference could cut debt burdens, lower interest rates and spread out repayments.

 

However, the eurozone would also have to be democratized. The current European parliament includes non-eurozone members and is largely powerless. Decisions are largely made by the unelected Troika—the IMF, the European Central Bank, and the European Commission. One thing that could be done immediately would be to institute a common corporate tax rate, which could be used to finance infrastructure improvements and education.

 

Germany is unlikely to support such an approach, but Germany only represents 25 percent of the EU’s population and GDP, while France, Italy and Spain combined account for 50 percent. Add in Ireland, Portugal and Greece, and Germany and its allies are a distinct minority.

 

Italy is openly advocating debt reductions and loosening of the eurozone’s rules, and France has already raised the issue of a more democratic and transparent EU political structure along the lines of what Piketty is proposing.

 

Can it be done? It won’t be easy, but Germany is increasingly isolated, and countries in the southern tier of the eurozone are desperate for relief from the endless rounds of austerity. They are also no longer convinced that such a strategy will lower their debt burdens and stimulate their economies. In fact, most the debt is unpayable no matter how much austerity is applied.

 

There are some wild cards in the upcoming election. Both the PP and PSOE have been tarred with the corruption bush, and two former Socialist governors of Andalusia have just been charged with illegal payments to supporters. Turnout will likely be lower than in the December election, but the left’s effective grassroots organizations may offset that.

 

The Spanish elections arrive at a critical time for the European Union, and a Madrid government that resists the increasingly discredited economic strategy of the troika could shift the balance in the direction imagined by Piketty.

 

That, however, will depend on whether the Socialist Party decides to join with the left or go into a grand coalition with the right.

 

A failure by the left to unite will open the door for Europe’s resurgent far right, whose xenophobia and racism have gained ground all over the continent.The only way to effectively counter the far right is to democratize the European Union and pursue economic policies that will provide jobs and raise living standards. Only the left can deliver such a program.

 

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A Very Brazilian Coup

 

A Very Brazilian Coup

Dispatches From the Edge

May 26, 2016

 

On one level, the impeachment of Brazilian President Dilma Rousseff seems like vintage commedia dell’arte: the Lower House speaker who brought the charges, Eduardo Cunha, had to step down because he has $16 million stashed in secret Swiss and U.S. bank accounts. The man who replaced Cunha, Waldir Maranhao, is implicated in corruption around the huge state-owned oil company, Petroblas. The former vice-president and now president, Michel Temer, has been convicted of election fraud, and has also been caught up in the Petroblas investigation. And the president of the Senate, Renan Calheiros, has also been implicated in the oil company scandal and is dodging tax evasion charges. In fact, over half the legislature is currently under investigation for corruption of some kind.

 

But there is nothing comedic about what the fall of Rousseff and her Workers Party will mean for the 35 million Brazilians who have been lifted out of poverty over the past decade, and for the 40 million newly minted members of the middle class one-fifth of Brazil’s 200 million people.

 

While it was the current downturn in the world’s seventh largest economy that helped light the impeachment fuse, the crisis is rooted in the nature of Brazil’s elites, its deeply flawed political institutions, and the not so dead hand of its 1964-1985 military dictatorship.

 

Given that the charges against Rousseff do not involve personal corruption, or even constitute a crime—if juggling books before an election were illegal, virtually every politician on the planet would end up in the docket—it is hard to see the impeachment as anything other than a political coup. Even the conservative Economist, long a critic of Rousseff, writes “in the absence of proof of criminality, impeachment is unwarranted” and “looks like a pretext for ousting an unpopular president.”

 

That suspicion is reinforced by the actions of the new President. Temer represents the center-right Brazilian Social Democratic Party (PSDB) that until recently was in alliance with Rousseff’s Workers Party. As soon as Rousseff was impeached by the Senate and suspended from office for 180 days, Temer made a sharp turn to the right on the economy, appointing a cabinet of ministers straight out of Brazils’ dark years of dictatorship: all white, all male, and with the key portfolios in the hands of Brazil’s historic elites. This is in a country where just short of 51 percent of Brazilians describe themselves as black or mixed.

Seven of those ministers have been implicated in the Petroblas scandal.

 

 

The President announced a program to “reform” labor laws and pensions, code words for anti-union legislation and pension cuts. His new Finance Minister, Henrique Meirelles, a former central bank head who once headed BankBoston in the U.S., announced that, while programs for the poor “which don’t cost the budget that much” would be maintained—like the highly popular and successful Bolsa Familia that raised tens of millions out of poverty through small cash grants— other Worker Party initiatives would go under the knife.

 

The new government is already pushing legislation that would roll back laws protecting the environment and indigenous people, and has appointed ministers with terrible track records in both areas.

 

One of the largest soybean farmers in Brazil, Blairo Maggi, was appointed Agriculture minister. Maggi has overseen the destruction of vast areas of the Amazon to make way for soybean crops. Temer’s initial appointment for Science minister was an evangelical Protestant minister who doesn’t believe in evolution. Temer also folded the culture ministry into the ministry of education, sparking sit-ins and demonstrations by artists, filmmakers and musicians.

 

Brazil has long been a country with sharp divisions between wealth and poverty, and its elites have a history of using violence and intimidation. Brazil’s northeast is dominated by oligarchs who backed the 1964 military coup and manipulated the post-dictatorship constitution.

 

Political power is heavily weighted toward rural areas dominated by powerful agricultural interests. The three poorest regions of the country, accounting for only two fifths of the population, control three quarters of the seats in the Senate.

 

As historian Perry Anderson puts it, the political system was designed “to neutralize the possibility that democracy might lead to the formation of any popular will that could threaten the enormities of Brazilian inequality.”

 

Brazil’s legislature is splintered into 35 different parties, many of them without a political philosophy. The legislature is elected on the basis of proportional representation, but with an added twist: an “open list” system in which voters can choose any candidate, many of them standing on the same ticket. The key to winning elections in Brazil, then, is name recognition, and the key to that is lots and lots of money. Most of that money comes from Brazil’s elites and the oligarchs in the country’s northeast.

 

Because of the plethora of parties, forming a government is tricky. What normally happens is that one of the larger parties ropes in several smaller parties by giving them ministries. Not only does this encourage corruption—each party knows it needs to raise lots of money for elections—but results in political incoherence.

 

When the Workers Party was elected in 2002 it was unwilling to dilute its programs by bringing ideological opponents into a cabinet, yet the Workers Party needed partners. The solution was cash payouts to legislators, a scheme titled “mensalao” (“monthly payoffs”) that was uncovered in 2005. Once the payoffs were revealed, the Workers party had little choice but to fall back on the old system of handing out ministries in exchange for votes. That is how Temer and the PMBD entered the scene.

 

With the reputation of Silva and the Workers Party dented by the payoff scheme, the right saw an opportunity to rid themselves of the left, but Silva’s popularity and the success of programs aimed at alleviating poverty made the Workers Party pretty much unassailable at the ballot box. Silva won another landslide election in 2006, and Rousseff was elected twice in 2010 and 2014. In short, the elites could not win elections.

 

But they could still pull off a very Brazilian coup. First, they hammered at the fact that some Workers Party leaders had been involved in corruption and others implicated in the Petroblas bribery scheme. Rousseff headed up Petroblas before being elected President. While she has never been linked to any of the corruption, it did happen on her watch.

 

Petroblas is rated the fourth largest company in the world, and it is building tankers, off shore platforms and refineries. That expansion has opened opportunities for graft, and the level of bribery involved could exceed $3 billion. Nine construction companies are implicated in the scandal, as well as more than 50 politicians, legislators and state governors, including the PMDB and the Workers Party.

 

Rousseff’s biggest mistake was to run on an anti-austerity platform in 2014 and then reversing course after she was elected, putting the brakes on spending. The economy was already troubled and austerity made it worse. The 2005 bribery scheme lost the Workers Party some of the middle class, and the 2014 austerity alienated some of the Party’s working class support.

 

But it was most likely Rousseff’s decision to green light the Petroblas corruption investigation that spurred her enemies to strike before the probe pulls down scores of political leaders and wealthy construction owners. One of Temer’s ministers was recently caught on tape plotting how to use the impeachment to derail the investigation.

 

Certainly the campaign aimed at Rousseff was well orchestrated. Brazil’s media—dominated by a few elite families—led the charge. According to Reporters Without Borders, the role of the media was “partisan,” its anti-Rousseff agenda “barely veiled.” Judge Sergio Moro, who is a key figure in the Petroblas investigation, illegally leaked wiretap intercepts that put Silva and Rousseff in a bad light.

 

Given the makeup of the Brazilian Senate, it is likely Rousseff will be convicted and removed as President. It also appears that Temer will try to roll back many of the programs that successfully narrowed the gap between rich and poor.

 

Brazil’s economy is in trouble, shrinking 3.7 percent last year. Commodity prices are down worldwide, in large part because of the downturn of China’s economy. Iron ore dropped from $155 to $55 a ton, soya went from $18 to $8 a bushel, and oil from $140 to less than $40 a barrel.

 

Brazilian debt is rising, but it is still half that of Italy, and unemployment is low, at least by European standards. A return to the austerity policies that destroyed economies all across the southern cone during the 1980s and ‘90s would be a disaster. The worst thing one can do in a recession is curb spending, which stalls out economies and puts countries into a debt spiral.

 

The austerity policies of the European Union have kept all but a few European economies virtually dead in the water, and those that have shown some growth, like Spain, still post unacceptable unemployment rates. Spain currently has an overall national jobless rate of 21 percent, rising to almost 50 percent among youth. Brazil’s jobless rate is 10.9 percent.

 

For now, the Workers Party is on the ropes but hardly down and out. It has 500,000 members, and the new government will find it is very difficult to take things away from people now that they have gotten used to having them. Some 35 million people are unlikely to return to their previous poverty without a fight.

 

One of Temer’s first acts was putting up 100,000 billboards all over the country with the slogan: “Don’t speak of crisis; work!”, which sounds a lot like “shut up.” Brazilians are not noted for being quiet, particularly if the government instituting painful cuts is unelected.

 

The pressure for new elections is sure to grow, although the current government will do anything it can to avoid them. Sooner or later there will be a reckoning.

 

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