Predictable Poverty: The Inevitable Legacy of a Neo-Liberal Europe
October 21, 2008 13:15 | by Susan George
The requirements for reducing or eliminating poverty, in Europe and world-wide, are known and the money is there, but the weight of the financial lobby is such that political will at present seems non-existent.
'All for ourselves and nothing for other people' seems, in every age of the world, to have been the vile maxim of the masters of mankind. As soon, therefore, as [the great proprietors] could find a method of consuming the whole value of their rents themselves, they had no disposition to share them with any other persons. For a pair of diamond buckles, perhaps, or for something as frivolous and useless, they exchanged the maintenance, or what is the same thing, the price of the maintenance of a thousand men for a year.
Adam Smith, The Wealth of Nations, 1776.(1)
In the early twenty-first century, poverty on a world -wide, massive-scale is not merely unnecessary but inexcusable. This is indeed its most striking feature. One could argue, following Adam Smith [who considered himself a "moral philosopher" not an economist] that it was equally avoidable in the Great Britain of 1776, but that is a matter for historians. Here we shall stay in our own century while keeping Adam Smith's words of indictment in mind. The "vile maxim of the masters of mankind" is, alas, alive and well; the masters are still trying to keep all for themselves and allow nothing for other people. Whenever they can, which is most of the time, they organise public policy in such a way that their goals can be met.
In contemporary Europe we are living in such a time. Europe could eliminate poverty on its own soil, reliably estimated in 2006 to strike 72 million people, around 15 percent of its total population.(2) It could also contribute hugely to eradicating poverty in the world, taking the lead in the OECD countries in that regard. It has the wealth and the [unused] policy space to do both. Like other OECD countries, however, Europe refuses to confront the obvious solutions which would involve very small changes in the lifestyles of the rich, and a few, somewhat larger ones, for banks and transnational corporations. So it seems to me that the first duty of a participant in a conference concerning "the fight against poverty" is to examine wealth.
Whatever might have been possible, politically speaking, in the eighteenth century had people been obliged to share more equally, it was still a time when genuine crop failures could take place; trade was expensive and sometimes the necessities of life were in short supply. Here I shall argue that today, for the first time in human history, poverty retains not a shred of mystery nor of inevitability; one need no longer ask if, technologically and materially speaking, it could be eradicated. The answer is simple and straightforward: yes, it could . Politically, however, as I shall also argue, the European Union, with the complicity of its Member States, is doing whatever lies in its considerable power to prevent this happening both in Europe itself and in the world. This will be the second focus of my contribution.(3)
I. Wealth and inequality
Now, nearly two and a half centuries after the opening quote from Adam Smith, the father of modern capitalist theory, let us hear the stylistically less well-crafted but nonetheless heartfelt cry of the "Lowtax Network Editorial Team":
There is such a lot of money!
Despite a presumably temporary dip in asset values as a result of shell-shocked markets post sub-prime, HedgeFund.net said recently that total hedge fund assets stood at $2.848tn at the end of March 2008. (4)
Not quite three trillion dollars in hedge funds, or $2.848.000.000.000? So claims Investors Offshore. Although such a sum may sound enormous and indeed amounts to more than twenty percent of the entire GDP of the European Union, it is modest compared to the real private money that is out there. Merrill-Lynch and Cap Gemini have recently published their twelfth annual World Wealth Report , a trustworthy source given that Merrill-Lynch wants to manage as much wealth as possible and therefore has an interest in getting the figures right. Their Report for 2008 counts a shade over ten million "High Net Worth Individuals" in the world-about one in every 670 people. These HNWIs, including the far richer and more exclusive group of "Ultra-HNWIs", in 2007 together controlled $40.7 trillion, that is, $40.700.000.000.000.
By the year 2012, Merrill-Lynch believes this group will have collectively accumulated $59 trillion. This projection is reasonable given that the increase of the HNWI's total wealth in 2007 compared to that of the HNWIs of 2006 was more than nine percent. Furthermore, since 2002 the total wealth of this growing class of HNWIs has increased by more than 50 percent. In other words, every year there are more HNWIs [although only a slight increase in their numbers compared to the total world population] and every year their nest-egg grows so that it has now reached dinosaurian proportions.
Let us also be clear about the meaning of "wealth" in this context: The Merrill-Lynch Cap Gemini definition limits it to investable wealth of which the HNWIs all have at least a million dollars "excluding collectibles, consumables, consumer durables, and primary residence". In other words, art and wine collections, mansions, luxury cars, top-of-the-line kitchen equipment and other relatively illiquid assets don't count. As a point of comparison, needed when scaling these dizzying financial heights, the $40.7 trillion in the hands of these ten million HNWIs come to more than three times the GDP of either the United States or the European Union, nearly six times that of China and thirteen times the GDP of India.
Europe's share of this valuable pie is roughly a quarter and has remained constant as the total pie has grown. Increasingly large sums and shares now go to Asians, Latin Americans and Middle-Easterners. At 3.7 percent, Europe has the lowest growth rate in the numbers of the HNWIs-who now count 3.100.000 Europeans, compared to over 15 percent growth in the numbers of Mid-Easterners and 12 percent of Latin Americans. The wealth accruing to these geographical regions remains, however, modest compared to the total and two-thirds of that wealth is still in North America and Europe.
So the investable cash the hedge funds have garnered, those $2.8 trillion that the Lowtax Network brags about, is plainly peanuts-not even seven percent of the pile the HNWIs are sitting on worldwide.
Various other measures of private wealth exist, such as the Forbes Magazine list of billionaires world-wide, again measured in $US. The 2006 list [published in 2007] gave 943 names; the one for 2007 published in early March 2008 had grown to 1125 people whose wealth is usually based on corporate shares. I did not have the courage to do the adding-up myself and Forbes does not give totals. Some have said that the total wealth of the 2006 list of fewer than a thousand individuals came to $3.5 trillion. I have lazily added up only the fortunes of the people at the top in 2007: the first three have $180, the first ten $426 billion.
Now try the following simple calculation. If you have "only" one billion dollars, like pages and pages of people at the end of the Forbes list, and if you are such an incompetent investor that you make a return of "only" $50 million or five percent a year; then every day of the year, Sundays and holidays included, you must spend $137.000 in pure consumption or you will automatically become richer. In other words, once you reach this level, it is virtually impossible ever to be poor or even just affluent.
We can indeed join in the Lowtax Network Team's shout of triumph: "There is such a lot of money!" There is indeed. The world is awash in it and there is quite enough for everyone. But as the simple calculation above indicates, beyond a certain level, it's very hard not to become richer. The natural, mathematical tendency of wealth is to become concentrated where it already is-at the top. The 20/80 "power law" takes over. Twenty percent of the population will have 80 percent of the wealth; 80 percent of the population will have 20 percent of the wealth. Today these figures are even more exaggerated and this will be the case so long as no political intervention or regulation is tolerated. This is precisely the position defended by the European Union and its Member States: allow nature to take its course. .(5)
However, before inquiring into the purely European responsibilities concerning the persistence of poverty and what might be done about it, let us quickly look at the collective inequality data for the world, of which the best assessment is undoubtedly the WIDER study published in December 2006. .(6)
The main WIDER findings were not surprising for those who have studied the subject: In the year 2000, 2 percent of adults in the world owned more than half of global household wealth. The richest 1 percent alone accounted for the ownership of 40 percent of global assets while the top 5 percent captured 71 percent and the top 10 percent held 85 percent of the wealth. The bottom half of humanity got along on barely 1 percent of total assets. These figures show the operation of the power law in high gear, especially since the WIDER definition of "wealth" was broader than that of Merrill-Lynch. The WIDER scholars used the classic "net worth" definition, meaning all physical and financial assets, including homes, the principle asset for most people who own anything, less debts.
Who's who, and where, in these WIDER percentages and how much wealth do they have? The good news is that to belong to the category of the "top half" of the human race, you needed only the modest sum of $2200 worth of assets. The bad news is that most people would still feel exceedingly poor at that level, even in terms of Purchasing Power Parity [PPP], the measure now used in most official comparisons. Top 10 percent membership meant owning $61.000; the top 1 percent required $500.000 plus. This latter amount, let us recall, is not nearly enough to get you into the really exclusive ranks of the Merrill-Lynch HNWI club-37 million people are in the top 1 percent according to WIDER whereas only 10 million are of interest to Merrill-Lynch.
The WIDER authors estimate that the world's households together possess $125 trillion in wealth, about triple global GDP. If the wealth were shared equally, everyone on earth would have $26.000 worth of assets [WIDER calculates this figure in terms of PPP]. No one expects ever to arrive at complete equality-it probably would not be a good idea even if it were attainable-but these calculations do tend to show that the world as a whole is certainly not "poor" by any standard measure.
In the 21st century we thus have a broad and increasingly detailed knowledge about who is rich and who is not, where they live, how many they are, what their wealth is based on and so on. Still, many might say that globalisation is the famous tide that lifts all boats so the poor are benefitting from it too. They are said to have risen from an even lower level on the human scale and their absolute and relative numbers are said to be decreasing [although everyone recognises that if China and India are left out of this equation, the argument collapses]. Leave globalisation and the market, we are told, to increase economic growth and the boats of the poor will rise on the tide with the rest.
This is unfortunately not the case. Inequalities are growing mightily both within and between countries and as over thirty recent food riots have shown, market events can plunge tens of millions back into absolute destitution. Tony Addison and Giovanni Andrea Cornia explain why we cannot usefully speak about combating poverty without examining inequality. Inequality matters a great deal where poverty reduction is concerned. It impedes rather than encourages growth and it swamps or punches holes in the boats of the poor. We must recognise that
inequality has risen in many countries over the last two decades... . This is disturbing since little progress can be made in poverty reduction when inequality is high and rising. Moreover, contrary to earlier theories of development, high inequality tends to reduce economic growth, and therefore poverty reduction through growth. .(7)
Their paper provides evidence of strong negative relationship between inequality and growth and they show that
'Traditional' sources of inequality must be addressed through land reform, and more public spending on the human capital of the poor.
These measures, however, even if applied, will not be sufficient since
new causes of rising inequality must also be tackled by redesigning stabilization programmes to avoid sharp anti-poor demand compression and to protect pro-poor spending; regulation of privatized enterprises to protect disadvantaged poor consumers; and more pro-poor education investment to offset the tendency of trade liberalization to increase income inequality.
More explicitly, avoiding "anti-poor demand compression" and compensating for same with "stabilisation programmes" means that sharp price increases [food, energy, water...] will hit the poor hardest and leave them without the necessities of survival if governments do not act. "Regulation of privatised enterprises" means that these authors assume that privatisation is a fait accompli. So it is, after decades of structural adjustment at the hands of neo-liberal institutions like the World Bank or the IMF applying "Washington Consensus" anti-poor medicine. These policies also have primacy in neo-liberal Europe, one of whose goals is to facilitate the inclusion of all human activities in the marketplace.
Thus for Cornia and Addison, at the very least, these now privatised utilities, transport networks, health-care systems, education; but also formerly government-managed food stocks, veterinary services, municipal water systems, rubbish collection and so on must be regulated, that is, overseen by public authorities [if these services haven't disappeared altogether]. They don't ask for re-nationalisation or other forms of public ownership, merely for "regulation".
"Pro-poor education investment" to ward of f exclusion of the poor from labour markets when trade is liberalised and subsequently "increases income inequality" is another means of adjusting to contemporary reality and trying to alleviate the plight of the poor. But as we shall see in a moment, fully a third of the European labour force is estimated by the Commission itself to be of "low educational attainment" and there are few signs that Europe has any intention to do anything about it, despite the "Lisbon Strategy". Annual assessments of progress towards the Lisbon goals show Member States falling behind in crucial areas.
In other words, neo-liberal globalisation will necessarily create inequalities and the greater the inequalities, the more the poor will be made poorer and more vulnerable.
A good part of the "social" or non-monetary wage is wiped out through privatisation and higher prices for basics like water, transport or electricity. Lack of public investment in health and education has, in many places, made recourse to private systems an attractive option for anyone who can afford them-which not everyone can. If one hopes to reduce, much less eradicate poverty, then specific, targeted public policies are required in Europe or elsewhere. It is wishful, if often convenient, thinking to believe that such a result can be achieved through "growth" and some imaginary "magic of the marketplace". Markets reward the haves, not the have-nots for the excellent reason that it cannot even "see" those who contribute little to capitalist production and buy so little that they are nearly invisible to capitalist consumption. We have known for decades that growth does not "trickle down".
If one is serious about reducing or eliminating poverty, the obvious road to take in Europe is the Keynesian one of cross-border taxation and redistribution, re-establishment of the social wage through high-quality, integrated [cross border] public services including health-care and life-long education, a responsible fiscal policy including the elimination of tax havens, regulation of financial transactions and imposition of accounting practices that do not allow transnational corporations to use transfer pricing and other dodges; a European Central Bank with a mandate to practice policies leading to full-employment and so on. The European Union is actively avoiding all such practices and in some cases rendering them legally impossible.
II. European responsibilities
The arguments concerning poverty laid out above could be illustrated and supported for pages more, but this paper has no pretentions to being exhaustive. Nor do I believe it possible to convince anyone not already convinced of the harmful effects of neo-liberal policies. These policies, as now applied throughout Europe and the world, were consciously designed to do exactly what they have done: amass maximum wealth at the top while ignoring the consequences of greater poverty and inequality below. .(8)
No one now denies the rise in inequality and wealth concentration but the standard answer to corrective policy changes is always the same. We heard it most recently at the failed mini-ministerial meeting of the WTO in Geneva this summer. Have faith in "market-based solutions" and the market will solve your problems. Let us now look briefly at how Europe, specifically the European Union, with the acquiescence and active cooperation of its Member States, fits into this picture.(9)
Since the Single European Act of 1986, the purely economic orientation of the EU has grown ever-clearer. The amendments to previous treaties contained in this Act were designed to increase the capacity of Europe to establish a truly common market. It was also the first time that social policies and democratic aspirations were explicitly pushed aside. The then-President of the Commission, the social-liberal Jacques Delors, explained that these would come "later". We are still waiting.
Nearly twenty years later, under the Barroso Commission which many consider the most neo-liberal in EU history, the Treaty for a European Constitution [TEC] drafted by an unelected convention made the market orientation even more explicit. The word "market" occurred 78 times in the text, "competition" [usually accompanied by the phrase "free and undistorted"] was given 25 mentions, "social policy" got three and "unemployment" none. The "four freedoms" were the paramount objective of the TEC: the free movement of "goods, persons, services and capital", interpreted as we shall see shortly in the broadest possible way so as to reduce other rights to the barest minimum.
The French debate in 2005 on the TEC and the future of Europe was the most ardent I had witnessed since May 1968: contrary to the assertions of the Commission, the French knew exactly what they were voting for/against. It was a class vote, with everyone but the managerial class voting No and when the French people voted decisively [54.7%] against the TEC [as did the Dutch even more decisively-61.6%-- shortly thereafter], the Commission and European elites discarded all democratic pretence. The people had voted wrongly, therefore the people were wrong and should be ignored. Or, as Commission Vice-President Gunter Verheugen put it even more brutally after the French/Dutch votes, "We must not give in to blackmail". So much for universal sovereignty.
The Lisbon Treaty, drafted in an even more secretive fashion and even more difficult to decipher, followed in due course and incorporated virtually all the provisions of the defunct Constitution, passing over the popular rejections as if they had never occurred. According to the principle author of the TEC, Valéry Giscard d'Estaing, Lisbon provided only "cosmetic changes" to make it "easier to swallow". Nicolas Sarkozy admitted that if the French were allowed to vote again, they would again vote No, as would the people of many other nations. Therefore they should not be allowed to vote. The same authoritarian treatment given the French and the Dutch is now being meted out to the Irish. Disregard for one's own rule of unanimity is clearly preferable to another failure and one can be sure that the Commission will not rest until it has obtained the Treaty it wants in order to steamroll ahead with its own profoundly undemocratic, economically divided Europe.(10)
Among the poverty-enhancing attributes of the texts Europeans are being forced to swallow are the provisions on public services or rather "services of general economic interest" which are specifically made subject to competition. Unanimity is required for any common social or fiscal policy, meaning that competition will push these downwards. Lisbon obliges EU members to "improve their military capabilities" [while making them subservient to the US and NATO] which means that other budgets will necessarily suffer. Although "enhanced cooperation" is quite easy to realise among like-minded European governments in the military sphere, it is extremely difficult if not impossible to organise cooperation regarding social and fiscal policies. And of course the four freedoms trump all other considerations.
The twelve central/eastern European newcomers will not receive anything like the structural funds generously apportioned to Spain, Portugal, Greece and Ireland in earlier days; everything points to the deliberate use of these newcomer countries as reservoirs of cheap labour. In 2005, the "Bolkestein" or services directive was roundly denounced as organising unfair competition between the workers of higher- and lower-wage countries. The characteristically neo-liberal directive stipulated that firms from Eastern Europe need not even register with the authorities of a western European country in order to supply services there, at the going wage and working conditions in the "country of origin". Faced with an outcry, even from the usually docile European Trade Union Confederation, the Commission and Parliament were obliged to soften the directive to some degree and exclude some vital social services from its remit.
The Commission, however, true to form, decided that it would get what it wanted through another channel and has now passed on the matter to the European Court of Justice.
The result has been consistent jurisprudence in 2007-2008 weakening labour protection and the right to strike, while forbidding a national Member State to consider its own labour code as "public policy". The relevant cases, known as the Vaxholm-Laval, Viking, Ruffert and Luxembourg decisions, have all diminished hard-won worker rights.
The Vaxholm-Laval decision forbade Swedish unions to organise industrial action to force a Latvian company [Laval] to pay Swedish wages to its Latvian workers engaged in construction work in the Swedish town of Vaxholm.
The Finnish Viking Line wanted to reflag one of its vessels staffed with a largely Finnish crew in Estonia so it could hire an Estonian crew not benefiting from a collective agreement negotiated by the Finnish Seaman's Union. The decision found that "Social policy objectives do not automatically take precedence over the objective of having a properly functioning common market", in this case "freedom of establishment" in Estonia.
The Ruffert case concerned the right of German public authorities, when awarding work contracts, to demand that tendering companies commit to paying wages to foreign workers in line with rates specified in collective agreements applicable to German workers. The European Trade Union Confederation General Secretary called the ECJ decision refusing this demand "another destructive and damaging judgement [after Vaxholm-Laval]. They both assert the primacy of the free movement of services over existing labour regulations which apply to the place where the service is provided".
The ETUC also called the Ruffert decision "an open invitation for social dumping, which will not only threaten workers' rights and working conditions, but also the capacity of local (small and medium) enterprises to compete on a level playing field with foreign (sub)contractors."(11)
Most ominous of all, however, is doubtless the "Luxembourg" case brought by the European Commission against its own EU Member State. The Commission claimed that Luxembourg had violated the EU "Posting of Workers Directive" [PWD] when it transposed this directive into national law. Luxembourg argued that its national "public policy" [which could therefore legally replace the terms and conditions expressly listed in the PWD] included among other provisions written employment contracts, automatic indexation of wages to the cost of living, regulation of part-time and fixed-time work and respect of collective labour agreements. Luxembourg therefore claimed it was justified in requiring foreign employers to conform to its "public policy" which is "to protect workers".
The ECJ upheld the Commission on all points: Luxembourg's interpretation was "excessive"; its legislation went beyond what is allowed by the PWD because the latter embodied an "autonomous principle of Community law and can be monitored by the European judge accordingly...National labour law as a whole cannot constitute public policy". .(12)
These four decisions create a huge incentive for companies to subcontract work to subsidiaries that are, on paper at least, located in low-cost EU countries. Downward pressure on standards, wages and social rights will necessarily increase.
Thus the EU is organising the race to the bottom among workers. Its own statistics show that it has already been successful in reducing the gains of labour while enhancing those of capital. The statistics relating to the labour/capital share of added value can be calculated in different ways, using different bases and different time-lines--economists enjoy arguing about the best ones to use. But the EU itself, in its own most recent Employment in Europe Report 2007 shows that after hitting a peak in 1975 when the labour share of added value was 70 percent [69.9% to be precise], by 2006 it had declined gradually by over 12 percentage points, to 57.8 percent, with, of course, equivalent increases in capital's share from 30 to 42.2 percent.
In some countries the decline has been even steeper, as in France which now stands at 56.7 percent labour share of added value. The erosion of the labour share in the new Member States is even more drastic. In 2005 and 2006, Poland stood at 48.6, Bulgaria at 44.6 and Slovakia at only 42.3 percent. Malta, of particular interest to us here, averaged a 51 percent share of added value for labour over the period 1990-2006, peaking in 2003 at 53.3. It has since slipped back to 50 percent. .(13)
In the EU, the drop for labour was more than double that of the United States. Although in the US, over the whole period 1960-2006 the share of labour never exceeded 66 percent, with that high point reached in 1970, it was more stable. The low point came in 2005, at 61 percent, for a total loss of "only" five percentage points compared to 12 for the EU. As for Japan, long known as the most egalitarian developed country, it reached a remarkable 76 percent share for labour in 1975-1977 but had plummeted to 60 percent by 2006. In terms of labour share, Europe still remains the worst performer among these major OECD countries-or the best for capital, depending on how one measures.
As noted above, economists don't necessarily agree on the details of calculating added value shares between labour and capital, but as the EU points out in its own Report, all the other credible sources-the Bank for International Settlements, the IMF or the OECD-- show exactly the same patterns though the actual numbers may vary.
Not being an economist, I am unqualified to assign proportional responsibility for the decline in the labour share [never forgetting the improved share for capital] but it is easy to point to at least some of the factors that have contributed to it. Globalisation has given capital greater bargaining power over labour and changes in this rapport de forces between the two have surely played a part. Offshoring, de-industrialisation with the consequent loss of well-paid manufacturing jobs and the simultaneous rise of less well-paid service jobs also must have had something to do with this trend. Privatisation , like the relentless search for "shareholder value" have gone hand in hand with massive layoffs.
The unexamined question in the changes in value-added shares seems to me the role of the financial sector which exploded especially during the past decade. At least during the period from 2000-2006, profits of the banking and financial secotrs were nearly double those of any other industry. Investors had little incentive to invest in the real, job-creating economy. Financial institutions were furiously innovating, leveraging, and passing the hot potato of shaky loans, packaged as "Structured Investment Vehicles" or "Collateralised Debt Obligations", on to other unwary institutions-with the private ratings agencies egging them on.
As we know, this bubble has burst, with dire consequences. Working people have already paid several times: first when jobs in the real economy became scarcer and less well paid because of the rush to invest in financial products, not "real" ones; second when many lost their homes or the "equity" [capital] placed in their homes; finally when the bubble burst and taxpayers had to step into the breach to save the financial system. Now they will pay once more as we sink into generalised recession.
Europe's growth problem-and it is a problem-is seen to lie not in the dominance of runaway finance but in the "rigidity of the labour market". The remedy, seen from Brussels, is "Flexicurity". This hideous neologism is supposed to combine to best effect flexibility and security but it is also dangerous: the GUE-NGL [progressive left] group in the European Parliament has already labelled it "Flexploitation". Theoretically, the idea is to export the Danish model to the rest of Europe. The Danes have little protection with regard to hiring and firing, but a lot of support if they are between jobs or unemployed. Unfortunately, it's not possible to generalise this system without a great many other changes which the EU and most of its Member States are unwilling or unable to undertake.
For example, the Danes [and other Scandinavians] don't want to hear about a "European Minimum Wage" which would be a progressive measure for some other countries, because they know that their own wages [no minimum is set] are higher than an EMW would be. The Scandinavians also live in societies where the social consensus accepts high taxes and expects very high rates of participation in trade unions and collective bargaining among social partners. So while the goals of full employment, high levels of security, willingness to change jobs and access to life-long learning are certainly worthy ones, more emphasis for the moment seems to be placed on flexibility than on security, as the mounting proportions of casual and unwilling part-time employment seem to attest.
Furthermore, the 2008 Commission Report on Education brings the unwelcome news that illiteracy [called officially "low performance in reading literacy"] in Europe "actually increased by 10 percent between 2000-2006 and has reached 24.1 percent". These illiterates, unless they can somehow be rescued, will soon join the ranks of the "almost 108 million people [who] still have low educational attainment, about one third of the labour force", which is to say that they are virtually unemployable except in purely manual, unskilled jobs which are in shorter and shorter supply. These people constitute an exceptionally large reservoir of present and future poverty.
It would be wrong to leave the subject of European policy's own contributions to poverty without examining, however briefly, the impact of the EU on poverty in the South. Here we have a rich field to choose from. I have argued elsewhere that Europe should commission systematic research on the contribution of its own policies to the "push factors" causing massive immigration which is now treated entirely as a security-police-military problem. My argument is that we have helped to close off every avenue of socio-economic success, particularly in the countries of North and Sub-Saharan Africa and having done this, we are then surprised when the inhabitants of these countries risk their lives trying to move to Europe.(14)
I will not elaborate on this theme here other than to say that in my research proposal to the EU Research Directorate, I included in my list of topics which should be examined in relation to migration pressures : the continuing existence of large amounts of external debt and structural adjustment which impede personal development, the acquisition of skills, promote exports over local needs, and so on. Other areas are commodity prices; agriculture, notably the CAP; fisheries, climate change [beyond Europe's sole control] and unfair trade. Here I would like merely to touch on EU trade strategies, particularly the Economic Partnership Agreements [EPAs] under negotiation with ACP countries and the likely results-namely to increase poverty in some of the poorest countries in the world.
"Free trade" is the most sacred of the neo-liberal doctrines and the EU Trade Commissioner Peter Mandelson is a true believer. In October 2006, he launched the strategy "Global Europe" which concerns Europe's place in the world through commerce. Particularly since the "Doha Round" of the World Trade Organisation has become stalled if not comatose, Mandelson has concentrated on bilateral and plurilateral negotiations and has given the Economic Partnership Agreement with the 78 African-Pacific-Caribbean countries his particular attention.
The definition of "free trade" has shifted enormously in the past decade. Although lowering of tariffs on incoming goods is still an important component of trade agreements, what Mandelson and others refer to as "Beyond Borders Barriers" are as important if not more so. BBBs or "non-tariff barriers" in the European vocabulary mean any obstruction not only to sales of EU goods and services but also "barriers to investment" by European transnational corporations in any area. They want equality of access to government contracts and the elimination of government regulations Europe interprets as "disguised barriers to trade". The WTO is also concerned with all these, but bilateral and plurilateral trade agreements are all "WTO Plus", meaning that by definition they must allow freer movement and fewer "barriers" than WTO agreements do.
All the successful, now-industrialised countries, including the most recent ones like Korea or Taiwan, reached their present economic status by protecting their infant industries, using targeted government spending and subsidies and maintaining tariffs often as high as 40 or 50 percent on incoming goods, but these protections are no longer allowed for newcomers. Some of the ACP countries, especially the poorer ones, receive a hefty slice of their revenues from tariffs but are now being asked to forego these without compensation.
Mandelson's chief aim, however, seems to be totally unrestricted entry for European transnationals, so he is calling for the dismantling of national investment codes so as to eliminate restrictions on the sectors a TNC can invest in, the number of investors allowed in each sector, quantitative or proportional limitations on investment [for example 49 percent] or repatriation of profits, requirements for local hiring and local content and so on. EPAs can only be described as "leonine". So why do poor countries accept them, as many have done with a few notable exceptions like Senegal? They have signed because the EU has told them that if they don't, their development aid will be cut and the EU will buy fewer of their products. It is also demanding access to government public procurement contracts, often reserved for local firms, as well as access to raw materials.
No country seems too small or insignificant to pry open-in the early days of the services negotiations in the Doha Round, NGOs [legally] obtained copies of the correspondence between the Commission and the major European water companies in which the former asked the latter which countries they wanted to expand in, supplying which services, in which modes. The result was 73 GATS [General Agreement on Trade in Services] requests for market opening in the "request-offer" process, often to extremely poor countries.
The solutions to poverty, both European and world-wide are quite obvious and, naturally, the financial industry and many other interests lobby consistently against them. As there are between 10.0000 and 15.0000 lobbyists in Brussels, they have a lot of help.
--With regard to the financial crisis-cum-recession, transparency is vital. Banks at present won't lend to each other because nobody knows how much debt the other one has and how bad its balance sheet really is. So they are pulling back from most lending and making loans much more expensive. This is known as the "credit crunch" based on lack of trust, not of money.
--The private ratings agencies which gave the toxic SIVs and CDOs triple AAA ratings need to be placed under government control; they should be paid by the buyers, not the sellers of securities to eliminate their present perverse incentives.
--The finance wonder-boy innovators have to be prevented from passing on the hot potato of toxic debt and obliged to keep a good proportion of their own products on their own books. Leverage [through which $1 can easily become $40, $50 or even $100] must be controlled by enforcing capital requirements with real assets.
--Stop allowing the socialising of losses and make shareholders pay the real costs of the debacle.
In a general way, we are neglecting to use existing tools. Here are a few:
--Cancel the debt of poor Southern countries, but [this is my personal view, not that of any particular NGO] in exchange for involvement of the people in the concerned countries in determining how the savings should be spent. The government should not be allowed to do this by itself. The argument that "one cannot apply conditions" is laughable, given that we have been doing so for decades, but the wrong conditions, those of the Bank-IMF.
--Close down tax havens, particularly those in Europe used by Europeans and European companies. The Tax Justice Network estimates that rich individuals have placed well over $11 trillion in such havens; the OECD has branded three major European ones-Andorra, Monaco and Lichtenstein-as completely uncooperative. Tax avoidance and evasion are now major industries.
--Tax cross-border financial flows, whether of currencies [recently traded at the rate of $3.2 trillion a day], stock market purchases, or transnational corporation profits. A very small property tax above a certain level would be helpful. Let us hire Price-Waterhouse or the equivalent to tell us how to levy another small tax on the billionaires and the HNWIs. The technical means to do all these exist, the obstacles involved are purely political.
--Seek fair trade, not free trade, taking into account the real, long-term interests of Europe, especially with the Mediterranean countries and Sub-Saharan Africa. Recognise food sovereignty as a basic, inviolable right.
--Invest in education and ecology. Require the banks that have been bailed out time and again reserve a certain portion of their loans at very low interest rates for these areas.
It is now generally known that there is no such thing as "aid flows" from North to South. Rather, the "aid" is coming from the South, or from Southern nationals, to the North and net flows are massively in the North's favour. Worker remittances from migrant workers to their home countries dwarf anything that Europe is sending to them under the heading of "Development Aid" and market opening will proceed by one means or another. Debt service from Sub-Saharan Africa alone continues at the rate of $25.000 every minute. Transnationals set up more or less where they like and disregard the needs of the local people when they do not simply steal their land. We can expect further impoverishment as a result.
It is not an accident that many NGOs and social movements have given up on the European Union as it presently exists although they continue to fight against its policies. Yet Europe could be a model for a new kind of society if it abandoned the meretricious, damaging values of neo-liberalism and returned to its Enlightenment roots which would now include enlightened Keynesian policies of taxation and redistribution, at the European and global levels. Europe still has the best social model in the world, based on rights and economic security and this can be mathematically proven.(15)
The requirements for reducing or eliminating poverty are known and the money is there. The political will at present seems non-existent, but social movements will continue as best they can to defend a different future, as I have tried to do here.
This was Susan George's contribution to "The fight against poverty" civil society project conference 2008 at the Jean Monnet Centre Of Excellence, University Of Malta, 8 October 2008. Susan George is Chair of the Board of the Transnational Institute. Her latest books are Hijacking America: How the religious and secular right changed what Americans think, and We the peoples of Europe.
(1) Book III, Chapter IV, p.512 in the Andrew Skinner edition, London, Penguin 1974
(2) Sarah Bouquerel and Pierre-Alain de Malleray, "L'Europe et la Pauvreté: Quelles réalités ? » Note no. 31 for the Robert Schumann Foundation, April 2006
(3) The elites of the United States, Asia, Brazil, etc. are also trying to prevent redistribution and eradication of poverty but this conference centres on Europe.
(4) See Investorsoffshore.com, "Private Wealth Management" by the Lowtax Network Editorial Team, August 2008. This network appears to be based in London although this is not clear from the data on the site..
(5) The "power law" holds true in an amazing number of areas: 20% of the banks have 80% of the accounts; 20% of publishers publish 80% of the books; 20% of US colleges receive 80% of the applications and so on.
(6) United Nations University World Institute for Development Economics Research [UNU-WIDER] The World Distribution of Household Wealth [James Davies, Susanna Sandstrom, Anthony Shorrocks, Edward Wolff] , Helsinki, December 2006
(7) Tony Addison and Giovanni Andrea Cornia, "Income Distribution Policies for Faster Poverty Reduction", WIDER Discussion Paper no. 2001/93
(8) For the means by which neo-liberal policies became the new "common sense" in the US, see Susan George, Hijacking America: How the Religious and Secular Right Changed What Americans Think, Polity Press, Cambridge, 2008. For more on the enthusiastic participation of the EU in these same policies, see Susan George, We the Peoples of Europe, Pluto Press, London, 2008.
(9) Because critics of the Constitution and now the Lisbon Treaty have so often been shoved into the category of "allies of the right" or "anti-Europeans", allow me to make clear that this is not the case for me, for the Attac movement [I am honorary president of Attac France], for the coalition most active in organising the No campaign in France, nor for the many other progressive Europeans I meet. While willingly recognizing my non-elected status and lack of representativity, I find all around me, in many European countries and contexts, something like furor, even hatred for the Commission and the present structures of Europe emerging. Those who feel this way are almost invariably enlightened, fervent Europeans but they want a social, ecological, democratic European Union, not the autocratic, corporate-friendly one being imposed on us now. The more official Europe displays its contempt for the people, the more dangerous this situation could become. Unfortunately, everything indicates that the Commission itself, like the top European bureaucrats, are utterly oblivious to this danger.. .
(10) Bruno Waterfield, "EU polls would be lost says Nicolas Sarkozy" The Daily Telegraph, 15 November 2007; . Giscard d'Estaing in hearings before the Constitutional Affairs Committee of the European Parliament 17 July 2007, see also his 'Tribune libre" in Le Monde of 14 June 2007 in which he explains that through Lisbon,, which was the Constitution rendered "colourless and painless" , "public opinion would be unwittingly led to adopt the provisions that [governments} didn't dare present to them straightforwardly". Many other major European figures [Barroso, Merkel, d'Amato, Zapatero, Bertie Ahern, the Belgian foreign minister, etc].all explained that Lisbon was the same thing as the Constitution ; many added that it had been deliberately made much more difficult to understand. .
(11) See press releases on the ETUC site
(12) Posting of Workers Directive 96/71/EC; European Court of Justice, Commission vs. Luxembourg C319/06 and ETUC Briefing Note on the case. The decision was handed down on 19 June 2008, a week after the Irish referendum favouring the No. The formal name of this court is the Court of Justice of the European Communities.
(13) .Employment in Europe Report 2007, Chapter 5, "The labour income share in the European Union"., European Commission, 2007; using country or area specific tables and charts.
(14) Susan George, Paper for the EU Research Directorate, programme "Responding to Global Challenges"; "Examining Relationships between European Union Policies and Migratory Pressures" [April 2008, to be included in an as yet unpublished collection of proposals issuing from the Global Challenges workshop.
(15) See the final chapter of Susan George, We the Peoples of Europe, op.cit. which is based on the International Labour Organisation report Economic Security for a Better World; 2006, an exhaustive survey classing countries according to seven types of security. European countries, including many in eastern Europe, come out on top; the United States is no. 25.