THE GREAT IMPLOSION: Second and third catastrophes on the horizon?

by GRANT MORGAN 27 February 2009 The Economist magazine, the world's most famous propagandist of corporate globalisation, has long presented an ultra-optimistic face to the world. But no longer. Now The Economist is starting to speculate gloomily about a break-up of the European Union as countries in eastern Europe slide into bankruptcy, endangering not only many of the continent's big banks but also the viability of the euro-zone itself. The magazine's latest cover story editorial carries this grim sub-heading: "If eastern Europe goes down, it may take the European Union with it." (Full story below.) While various scenarios for saving eastern Europe from bankruptcy are floated by The Economist, even its editor doesn't sound at all convinced about their practicality. Significantly, the editor fails to mention that important west European economies, such as Italy and Spain, are likewise teetering on the very brink of bankruptcy. It's a continent-wide economic earthquake whose shock waves look likely to bring down banks, institutions and governments, and possibly shake Old World capitalism to its foundations. If these things come to pass, they will constitute the Second Catastrophe of the Great Implosion, as I call the current mega-crisis, which was sparked by the bursting of America's housing and credit bubbles. Barack Obama has just addressed a joint session of Congress in Washington, delivering two mutually contradictory messages. First, he admitted that the world's largest economy is reliant on historically high deficits as the government's eye-watering welfare payments to corporate America become the last line of defence for a market in meltdown. Second, he promised to move swiftly towards reducing the deficits, without giving any indication of how such an economic miracle could actually happen. Why should Obama talk so fervently about reducing the deficits? After all, US public opinion is fixated on something else entirely: the need for ever-bigger government bailouts of a failed economy. The answer is as simple as it is un-American. The US president is addressing not his "fellow Americans", but rather China's market Stalinist government, the biggest lender to the world's most indebted nation. The commander-in-chief of the planet's most feared military machine is appealing to America's former enemies, the dictators of Communist China, to keep on propping up "the leader of the free world". If the Chinese were to stop or even reduce their buying of T-bonds, as US Treasury bonds are called, or demand a level of interest payments judged to be ruinous to the US economy, then we would see the Third Catastrophe of the Great Implosion: the bankruptcy of the home of the world's reserve trading currency, the greenback. That would send world trade, already reduced to its lowest level in decades, into a deadly tailspin. These ominous developments indicate not only the ideological bankruptcy of 21st century capitalism, but also foretell its likely economic bankruptcy in the not-too-distant future. And when the heartlands of capitalism plunge into prolonged economic ruination, as they did in the Great Depression of the 1930s, all that looks "solid" and "certain" can vanish in a puff of corporate cigar smoke. The international left needs to unite around realistic strategies to protect people from market meltdown and its twin evil, the climate crisis. To do so, we leftists must educate ourselves to interpret the economic danger signals. And we must organise ourselves to play the leadership role of our lives. The future of the world is now at stake. At times of global emergency, the opinions and the actions of small groups of leftists can assume an importance way beyond what is possible in capitalism's "ordinary times", that seemingly calm era when the seeds of today's chaos were planted. See The Economist editorial Eastern Europe's woes: If eastern Europe goes down, it may take the European Union with it (26 Feb 2009) Grant Morgan is a longtime socialist campaigner and writer based in Auckland, New Zealand. He invites websites to publish this analysis, and readers to give feedback. Email grantmorgan@paradise.net.nz

Shorter working hours and government income compensation - a pro-worker stimulus plan?

by Auckland union activist Mainstream news editorialists are saying that we must spend to get the economy going again. Cutting workers wages and hours without compensation (which is the same as a wage cut) will only further decrease the spending power of working people, therefore making the recession worse. History shows that in the Great Depression unemployment only started to lessen when working people joined unions in mass numbers and won major wage increases. But the major employers will refuse this solution because it would mean cuts to their profits. I feel the Job Summit should be called the "Profit Summit". Falling profit rates, due to the recession, not job losses, will be the real concern of the majority of those attending the Job Summit. This is shown by the guest list which is overburdened with representitives of big business. So why have unions been invited? The NZ Herald has made it clear that employers and the government want a partnership agreement with unions for wage restraint, claiming that this will save jobs. The total opposite is the truth. Declining incomes for workers is more likely to result in job losses than declining incomes for shareholders. This is because for working people, particularly those near the bottom, all their income goes out straight away to buy the necessities of modern life. This creates a demand for goods and services, which creates jobs. Shareholders and investors on the other hand are more likely to sit on their earnings, particularly during a recession. As the NZ Herald on Saturday acknowledged in their lead editorial: it is the "lack of confidence" from investors that is fueling the credit crunch. Instead of wage restraint, Andrew Little's idea of a shortened work week, with government compensation for lost earnings is a better idea. In fact, done right it may not even cost the government that much. For instance, where I work, because of falling trade, workers have already agreed to the employer's demand to go to a 32 hour week, or else the employer said, he would start layoffs. The workers agreed to this drastic drop in their incomes, rather than see their mates thrown completely out of work. I think that these workers should be compensated for their lost income with a tax break on the four remaining days income, equal to their lost day's pay. While this will see a drop in the tax take from these workers, it is not the double tax loss caused by them not paying any income tax at all if they were unemployed and drawing down an unemployment benefit (a negative tax situation). The last government freed up $2 billion to prop up failing investment companies and banks. Will this work? I don't think so, because not only is this crisis caused by the credit crunch it has coincided with a commodity crisis (an overabundance of manufactured goods due to high productivity matched with low wage levels.) Investing in more productive capacity will never fix this. Instead of spending $20 billion in an effort to bolster falling profit rates in the private sector, the government should hold onto this money to pay for what it is supposed to be used for: healthcare, education pensions, necessary infrastructure – all of which is being starved of money, to protect the incomes of the rich.

National moves to cut government spending

The contradiction between all the talk of “economic stimulus” and the realities of declining tax revenue in a recession hits home. Bill English, National's finance minister, is actually preparing to slash government spending – but the rich can have their tax cuts. What will this mean for the provision of education, health and welfare services? How long before the National government is deeply unpopular? And what will the alternative be? And hasn’t gambling the future retirement income of workers on the world’s sharemarkets been a disaster. What remains of the SuperFund should be brought back immediately to NZ and invested in sustainable and socially beneficial enterprises.

Treasury: Effects of recession could last 15 years from TV3 News 25 Feb 2009 Treasury officials believe the current recession could affect us for 15 years. Finance minister Bill English has called for Government department heads to cut spending, and has joined John Key in hinting that the New Zealand superannuation fund may be tampered with to find extra dollars. "Treasury has produced deficits and growing debt for 15 years, and as I have said, that is unacceptable for us," says Mr English. In the last week English summonsed more than 30 Government department heads to the Beehive with the message to cut back and get real. "I want to dispel any notion that CEOs may have had that this will blow over, as some of them said to me," he says. "It won't blow over." The Government needs money, and it is looking at stopping or cutting back the $2 billion it puts away every year into the Superfund to pay for the future costs of national superannuation. Mr English has until now been silent on the issue. Every dollar the Government currently saves in the $12 billion fund is borrowed money, and the fund is losing money big time. "We have to look at whether we're happy to have $5.5 billion of losses," says Mr English. "It actually wipes out two years of contributions." Labour set up the scheme, nicknamed 'the Cullen Fund'. Labour leader Phil Goff is urging National not to touch it. National says entitlements to superannuation won't change, but Labour is sceptical. National is also refusing to put its tax cuts on hold, despite some saying only the rich benefit and it is the poor who need them. "We are committed to going ahead with the April 1 tax cuts," says Mr English. Mr English is a man under pressure, and given the outlook, it won't ease for sometime.

See also:

• Gordon Campbell on "nice guy" Key and National's pitiful response to the global economic crisis
• Building a mass movement for tax justice

Ten lessons for the climate movement

A mass global movement that sweeps aside corporate opposition and drives through a raft of public solutions to prevent runaway climate change is urgent needed. Without such a movement the future for Australia and every other country on the planet looks bleak.

Aussie activist Damien Lawson puts forward his ten lessons for the climate movement. To read the full article click here 1. Changing government does not mean a change in policy 2. Continuous mobilisation 3. If we are not frightened then no-one else will be 4. Knocking on doors is as important as climbing smoke-stacks 5. Alliance building is more than box-ticking 6. Propose solutions that will work 7. Stop talking about the reef and start talking about people 8. But is it the economy, stupid? 9. We are activists not policy advisers 10. Our movement is and must be global Damien Lawson is the coordinator of the Climate Action Centre, Melbourne and works for Friends of the Earth Australia. His article first appeared in a Climate Reader prepared by the Carbon Equity project for Australia's Climate Action Summit. Visit http://www.carbonequity.info See also:

• NZ socialists sign-up to Belem Ecosocialist Declaration
• Aussie Socialists Adopt 10 Point Action Plan to Stop Climate Change

Gordon Campbell on "nice guy" Key and National's pitiful response to the global economic crisis

Political commentator Gordon Campbell has just posted an article on the National government's response to the global economic crisis. See Gordon Campbell on Friday’s job summit, and whether anyone has an end game for the recession Campbell has this to say of the global economic crisis and the National government’s response so far: How bad is it? Campbell: "…the latest economic news lends credibility to the feeling that the hole is getting deeper and darker than Treasury’s public estimates - too rosy, and hopelessly out of date – would indicate." "Could the meltdown and its effects really linger on for 18 months or more ? Unfortunately, yes." "As economist Paul Krugman pointed out last week, the US Federal Reserve has been talking lately to central bankers around the globe, and all of them have concluded that unemployment rates will stay at substantially high levels until 2011 at least. A few central bankers are picking it could take until 2015 before we see a recognizable recovery." "As Krugman says, it took an enormous world war to finally put an end to the Great Depression. Until then, the Depression had been resistant to desperate attempts to cut interest rates to near zero in order to stimulate growth - a tactic today’s central bankers are also finding just won’t re-start the engine." "The slump that followed Japan’s “bubble economy” also eventually ended, but only after a lost decade. And when Japan finally did start to experience some solid growth, it was thanks to an export boom, which was in turn made possible by vigorous growth in the rest of the world — not an experience anyone can repeat when the whole world is in a slump." Unemployment in NZ Campbell: "Will it be 7.5 % by 2011 as the briefing papers for the summit reportedly indicate, or 11.2 % as the horror estimate from the New Zealand Institute suggested on Sunday? Or somewhere in between, for quite a while ….maybe even for the next five or six years or so?" John Key and the National government Campbell: "Frankly, it is hard to see many links between the causes of the recession, and the actions taken so far by the Key government in response to it. In total, we have seen so far: a modest package to assist the cash flow problems of small to medium business. A construction package mainly made up of an old wishlist compiled by the Clark government. A programme of tax cuts already budgeted before the crisis began. This week, we have a talk shop convened by the government. Now, is a tax cut/construction programme a particularly good response – or even any response at all – to the economic problems at the heart of this crisis? Or merely a band-aid on its effects?" "You can bet that when and if our economy ‘recovers’ to anything like previous growth levels, nothing substantive will have been put in place to stop another housing bubble from surfacing." "Sadly, it seems that the Key government doesn’t have any co-ordinated plan to protect this country from the financial crisis. It has done the bare minimum required to look politically responsible, and is taking a huge punt that the colossal sums being spent by other countries will put our overseas markets back in working order again, in time to save us from the worst. If however, we are still in crisis mode 18 months from now – and that seems very likely – these enduring bad times are just as likely to curdle the current rosy perceptions of the new government. Nice guy, but out of his depth could easily become the public verdict on Key as this recession endures." Cutting the country’s “support net” Campbell: "Some state departments, such as the one managing welfare support, need to be bolstered, not cut. Yet as the Greens Sue Bradford pointed out last week, the government is planning to cut 500 jobs from the Ministry of Social Development. This seems incredibly stupid. Someone needs to tell Paula Bennett that with the long recession stretching before us, the safety net in society needs more strands, not fewer." Based on what Campbell is arguing the National governments "Job Summit" is likely to be a non-event for grassroots people fearful of the economic crisis and the impact on their jobs and welfare. The Labour party leadership – tied as it is to a similar mess of neo-liberal and newly popular neo-Keynesian ideas – is not offering anything significantly different to National. There's a political space opening up for the Left to put before worried New Zealanders a real plan for protecting them in this time of global economic turmoil. That's if we can build a credible broad left vehicle, which remains the crucial link in turning good ideas into a political force that can change society. See also:

• The New Depression: a global confrontation between grassroots people and the mega-rich
• Battle of the manifestos
• History will judge the left on how we rose to the crisis

Finance Capitalism Hits a Wall: The Oligarchs' Escape Plan ­ at the Treasury's Expense

by Professor Michael Hudson from Global Research 18 February 2009 The financial “wealth creation” game is over. Economies emerged from World War II relatively free of debt, but the 60-year global run-up has run its course. Finance capitalism is in a state of collapse, and marginal palliatives cannot revive it. The U.S. economy cannot “inflate its way out of debt,” because this would collapse the dollar and end its dreams of global empire by forcing foreign countries to go their own way. There is too little manufacturing to make the economy more “competitive,” given its high housing costs, transportation, debt and tax overhead. A quarter to a third of U.S. real estate has fallen into Negative Equity, so no banks will lend to them. The economy has hit a debt wall and is falling into Negative Equity, where it may remain for as far as the eye can see until there is a debt write-down.

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NZ socialists sign-up to Belem Ecosocialist Declaration

The Belem Ecosocialist Declaration (see below) is bringing together a network of international socialist activists. This is a very positive development in the struggle to bring ecological, social and democratic sanity to the world. 

The Declaration was prepared by a committee elected for this purpose at the Paris Ecosocialist Conference of 2007. That committee consisted of Ian Angus, Joel Kovel, Michael Löwy, with the help of Danielle Follett. 

The Declaration is now being promoted widely around the world. Activists are being asked to sign-up to the Declaration as individuals. 

The following New Zealand activists have so far signed their name to the Declaration: Don Archer, Bronwen Beechey, Grant Brookes, Joe Carolan, Vaughan Gunson, Bernie Hornfeck, Peter Hughes, Greg Kleis, Daphne Lawless, Grant Morgan, Len Parker, Paul Piesse and Tony Snelling-Berg. 

The Belem Ecosocialist Declaration

“The world is suffering from a fever due to climate change, and the disease is the capitalist development model.”

— Evo Morales, president of Bolivia, September 2007

Humanity’s Choice 

Humanity today faces a stark choice: ecosocialism or barbarism.

We need no more proof of the barbarity of capitalism, the parasitical system that exploits humanity and nature alike. Its sole motor is the imperative toward profit and thus the need for constant growth. It wastefully creates unnecessary products, squandering the environment’s limited resources and returning to it only toxins and pollutants. Under capitalism, the only measure of success is how much more is sold every day, every week, every year – involving the creation of vast quantities of products that are directly harmful to both humans and nature, commodities that cannot be produced without spreading disease, destroying the forests that produce the oxygen we breathe, demolishing ecosystems, and treating our water, air and soil like sewers for the disposal of industrial waste. 

Capitalism’s need for growth exists on every level, from the individual enterprise to the system as a whole. The insatiable hunger of corporations is facilitated by imperialist expansion in search of ever greater access to natural resources, cheap labor and new markets. Capitalism has always been ecologically destructive, but in our lifetimes these assaults on the earth have accelerated. Quantitative change is giving way to qualitative transformation, bringing the world to a tipping point, to the edge of disaster. A growing body of scientific research has identified many ways in which small temperature increases could trigger irreversible, runaway effects – such as rapid melting of the Greenland ice sheet or the release of methane buried in permafrost and beneath the ocean – that would make catastrophic climate change inevitable. 

Left unchecked, global warming will have devastating effects on human, animal and plant life. Crop yields will drop drastically, leading to famine on a broad scale. Hundreds of millions of people will be displaced by droughts in some areas and by rising ocean levels in others. Chaotic, unpredictable weather will become the norm. Air, water and soil will be poisoned. Epidemics of malaria, cholera and even deadlier diseases will hit the poorest and most vulnerable members of every society.

The impact of the ecological crisis is felt most severely by those whose lives have already been ravaged by imperialism in Asia, Africa, and Latin America, and indigenous peoples everywhere are especially vulnerable. Environmental destruction and climate change constitute an act of aggression by the rich against the poor. 

Marx on cover of Time in Europe: Capitalism losing legitimacy

by Dan DiMaggio from Socialist Alternative (Canada) 5 February 2009

"A specter is haunting Europe..." Karl Marx made the front cover of the February 2 issue of the European edition of Time Magazine, displaying the weakening confidence of the capitalist ruling elite in their system. This is quite a striking reversal. Less than 20 years ago, with the collapse of the Soviet Union, Marx’s ideas were dismissed as dead. Capitalism was seemingly triumphant worldwide.

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Asia Economy: The Coming Fury

by Walden Bello

from Foreign Policy in Focus

9 February 2009

For over 40 years now, the cutting edge of the region's economy has been export-oriented industrialization (EOI). Taiwan and Korea first adopted this strategy of growth in the mid-1960s, with Korean dictator Park Chung-Hee coaxing his country's entrepreneurs to export by, among other measures, cutting off electricity to their factories if they refused to comply.

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France: Capitalist crisis and mass strike set scene for NPA

by Sam Wainwright

from Green Left Weekly

14 February 2009

On the weekend of February 7-8, over 600 delegates and as many observers attended the founding conference of France's New Anti-capitalist Party (NPA), held at la Plaine-Saint-Denis in the working class suburbs to the north of Paris.

Less than a week before, on January 29; around 2.5 million people took to the streets across the country as part of a nationwide strike against the efforts of the government of Nicolas Sarkozy to foist the burden of the capitalist economic crisis on to working people.

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See also France: Towards the foundation of a New Anti-Capitalist Party

Animation film on Climate Change by Leo Murray

Wake Up, Freak Out - then Get a Grip by Leo Murray

Building a mass movement for tax justice

As the New Depression takes hold the Left must push hard for tax justice. An economic recession will see tax revenues fall, putting pressure on government's social spending budget, which in times of severity will be even more necessary. For its part, big business will be pushing for a combination of "stimulus spending" - on their terms with the most benefit to their profits - and tax breaks. Thus social spending will come under the squeeze. Government revenue from tax, and where the government directs that wealth, will be a political battleground in the years ahead. The call for tax justice will resonate with low and middle income earners. Mobilisng masses of people behind concrete demands like getting rid of GST or a Finnancial Transaction Tax (FTT) is very possible. It will only be through truly mass campaigns that such progressive tax reforms will be won. Below is article penned by longtime US social justice and environmental campaigner, Ralph Nader, on the need for a Financial Transaction Tax in America. He argues that hundreds of billions dollars of government revenue could be raised by a modest tax on financial transcations in the order of 10 to 25 cents per hundred dollars. The left in New Zealand has long seen the need for a Financial Transaction Tax. It was one of RAM's Ten Commandments (for more detail see The RAM Plan).

How to Lighten the Income Tax Load on the American Worker: Tax the Speculators! by Ralph Nader from Counterpunch 7 February 2009 Let's start with a fairness point. Why should you pay a 5 to 6 percent sales tax for buying the necessities of life, when tomorrow, some speculator on Wall Street can buy $100 million worth of Exxon derivatives and not pay one penny in sales tax?Let's further add a point of common sense. The basic premise of taxation should be to first tax what society likes the least or dislikes the most, before it taxes honest labor or human needs.

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See also Who bears the tax burden - the poor or the rich? A global battleground

Chávez Promises Continuation of Project to Create Socialist Democracy in Venezuela

by Tamara Pearson

from Venezuelanalysis.com

16 February 2009

After it was officially announced that the “yes” vote had won the constitutional amendment with 54.4% of the vote, Venezuela’s President Hugo Chavez delivered a speech from the balcony of the Miraflores Presidential Palace, his two daughters beside him. He spent most of the speech talking about what problems need to be struggled against and what needs to be done next.

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The New Depression: a global confrontation between grassroots people and the mega-rich

Below is a good account of the global economic crisis by Martin Jaques of the New Statesman. He raises some possible global political consequences which are worth considering. Though Jaques is silent on the likely emergence of an international grassroots movement demanding more fundamental changes to the system than the bankers, corporate politicians and business elites will want. The outcome of this coming global confrontation between masses of ordinary people and the mega-rich elite will determine what the world is going to look like in a decade or so. The RAM Plan http://www.ram.org.nz/pdf/the_ram_plan.pdf, which represents the combined thinking of activists and social movements in New Zealand and internationally, has some good common sense ideas for establishing a rational human-centered society. Check it out.

The New Depression by Martin Jacques from New Statesman 17 February 2009 We are living through a crisis which, from the collapse of Northern Rock and the first intimations of the credit crunch, nobody has been able to understand, let alone grasp its potential ramifications. Each attempt to deal with the crisis has rapidly been consumed by an irresistible and ever-worsening reality. So it was with Northern Rock. So it was with the attempt to recapitalise the banks. And so it will be with the latest gamut of measures. The British government - like every other government - is perpetually on the back foot, constantly running to catch up. There are two reasons. First, the underlying scale of the crisis is so great and so unfamiliar - and, furthermore, often concealed within the balance sheets of the banks and other financial institutions. Second, the crisis has undermined all the ideological assumptions that have underpinned government policy and political discourse over the past 30 years. As a result, the political and business elite are flying blind. This is the mother of all postwar crises, which has barely started and remains out of control. Its end - the timing and the complexion - is unknown.

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Lenin on liquidationism

by Chris Slee from LINKS - International Journal of Socialist Renewal In recent years there have been a number of cases where revolutionary Marxist parties have initiated or participated in attempts at building broad left parties. Examples include the Scottish Socialist Party; the Socialist Alliance and later Respect in England; the Socialist Alliance in Australia; Papernas in Indonesia; the participation of Italian Trotskyists in the Party of Communist Refoundation; and the New Anti-Capitalist Party initiated by the Revolutionary Communist League (Ligue Communiste Revolutionnaire) in France.

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JOIN THE RAT PATROL AGAINST UNFAIR DISMISSALS

From March '09 workers in small businesses will be able to be sacked for any reason, or no reason at all, in their first 90 days of employment. The RAT PATROL has been launched by unions and community groups to make sure no worker get unfairly dismissed under the new law. There is loads of anger in the community about the new law, and people love the idea of bringing the giant inflatable rat to shame their own rat bosses. Come along over the next few weeks to give us a hand with the leaflets and sign-ups to build our day of action on February 28. We had a fun but wet day out with the RAT PATROL at Mangere Market on Saturday. This weekend there are a few activities planned, but it's essential that you let us know which ones you will come to in advance, so please email wewontpayforyourcrisis@gmail.com or text 0210 358 513. Saturday 21 Feb - Otara market meet 9am at Unite office, or 10am at Otara market. Saturday 21 Feb - Rock in the Park, Three Kings Reserve, off Mt Eden Road (Albert Road end) from 2pm Sunday 22 Feb - Avondale Market - meet 9am at Unite Office or 10 at the market. Monday 23 Feb - 6pm Unite office 6A Western Springs Road, planning meeting. REGISTER AS A RAT PATROL MEMBER to join the emergency solidarity pickets against unfair sackings. Our goal is to have several hundred people registered as willing and able to respond to appeals for help on short notice. Register with your email address and/or mobile number for text messages. TO REGISTER GO TO http://unite.org.nz/?q=contact OR EMAIL wewontpayforyourcrisis@gmail.com DOWNLOAD THE POSTER FROM http://indymedia.org.nz/newswire/display/76759/index.php FEB 28: JOIN THE RAT PATROL AGAINST UNFAIR DISMISSALS: On Saturday February 28th come out on the streets to show Auckland that the Rat Patrol will be on hand to deal with unfair dismissals. Downloadable poster here: http://indymedia.org.nz/newswire/display/76759/index.php

Predicting the future with Obama's ghost: Franklin D. Roosevelt

Socialist Worker Auckland forum

US President Franklin D. Roosevelt

The forum will examine President Roosevelt's New Deal in the United States during the Great Depression of the 1930s. This will help us to predict where his ideological successor, Barack Obama, might go in today's global mega-slump. Presenter: GRANT MORGAN, longtime socialist campaigner 2pm Sunday 22 February Socialist Centre, 86 Princes St, Onehunga

ALL WELCOME

Failure to save East Europe will lead to worldwide meltdown

by Ambrose Evans-Pritchard from The Telegraph (UK) 15 February 2009 If mishandled by the world policy establishment, this debacle is big enough to shatter the fragile banking systems of Western Europe and set off round two of our financial Götterdämmerung. Austria's finance minister Josef Pröll made frantic efforts last week to put together a €150bn rescue for the ex-Soviet bloc. Well he might. His banks have lent €230bn to the region, equal to 70pc of Austria's GDP.

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See also Next Wave of Banking Crisis to come from Eastern Europe by F. William Engdahl.

'This is the worst recession for over 100 years'

by Nigel Morris, Deputy Political Editor, and Sean O'Grady, Economics Editor from The Independent 10 February 2009 In an extraordinary admission about the severity of the economic downturn, Ed Balls even predicted that its effects would still be felt 15 years from now. The Schools Secretary's comments carry added weight because he is a former chief economic adviser to the Treasury and regarded as one of the Prime Ministers's closest allies. Mr Balls said yesterday: "The reality is that this is becoming the most serious global recession for, I'm sure, over 100 years, as it will turn out." He warned that events worldwide were moving at a "speed, pace and ferocity which none of us have seen before" and banks were losing cash on a "scale that nobody believed possible". The minister stunned his audience at a Labour conference in Yorkshire by forecasting that times could be tougher than in the depression of the 1930s, when male unemployment in some cities reached 70 per cent. He also appeared to hint that the recession could play into the hands of the far right. "The economy is going to define our politics in this region and in Britain in the next year, the next five years, the next 10 and even the next 15 years," Mr Balls said. "These are seismic events that are going to change the political landscape. I think this is a financial crisis more extreme and more serious than that of the 1930s, and we all remember how the politics of that era were shaped by the economy." Philip Hammond, the shadow Chief Secretary to the Treasury, said Mr Balls's predictions were "a staggering and very worrying admission from a cabinet minister and Gordon Brown's closest ally in the Treasury over the past 10 years". He added: "We are being told that not only are we facing the worst recession in 100 years, but that it will last for over a decade ¬ far longer than Treasury forecasts predict." The minister's comments came as the Chancellor, Alistair Darling, admitted the global economy was "seeing the most difficult economic conditions for generations". Writing in today's Independent, Mr Darling said his plans for shoring up Britain's finances included "measures to insure against extreme losses" as well as separating out impaired assets into a "parallel financial vehicle". Unemployment figures out tomorrow are expected to show the number of people out of work has passed two million. The Bank of England's quarterly inflation report, also released tomorrow, is expected to include a gloomy forecast for economic growth. Yesterday, the Financial Services Authority warned that the recession "may be deeper and more prolonged than expected", adding that the global financial system had "suffered its greatest crisis in more than 70 years". Speaking to Labour activists in Sheffield, Mr Balls conceded that the Government must share some of the blame because it had failed properly to control the banks. But he accused the Tories of blocking Labour's attempts to tighten financial rules. He said: "People are quite right to say that financial regulation wasn't tough enough in Britain and around the world, that regulators misunderstood and did not see the nature of the risks of the dangers being run in our financial institutions ¬ absolutely right." The other great depressions: Long Depression, 1873¬96 Precipitated by the "panic of 1873" crisis on Wall Street and a severe outbreak of equine flu (Karl Benz's first automobile did not chug on to the scene until 1886), it was remarkable for its longevity as well as its global reach. In Britain, it was the rural south rather than the rich cities of the north that suffered. The UK ceased to be a nation that relied in any way on farming for its livelihood. Great Depression, 1930s The "Hungry Thirties" were rough on many, at a time when welfare systems were rudimentary. The worst period was from the Wall Street Crash of 1929 to about 1932, but in places such as Jarrow, the unemployment rate hardly dipped below 50 per cent until the economy was mobilised in 1940. However, for many in the south and for the middle classes, the times were relatively prosperous.

The real change the world needs: a response to Barack Obama

by Grant Morgan Chair of RAM (Residents Action Movement) 6 February 2009 US president Barack Obama yesterday penned a perspectives article for The Washington Post called The Actions Americans Need. Given that Washington's actions affect the world, it's fitting that non-Americans (like myself) respond to Obama's strategy. Here are five representative quotes from Obama's article, along with my responses: QUOTE #1: DEEP Obama: "We have inherited an economic crisis as deep and dire as any since the days of the Great Depression." Me: Just days ago, New Zealand's Reserve Bank governor Alan Bollard flatly denied that today's global crisis is anything like the Great Depression. Many other world leaders are saying similar silly things. Now Obama is linking the two Combo Crises. This breathes a welcome sense of reality into official pronouncements on the depth of the slump. QUOTE #2: DEEPER Obama: "If nothing is done, this recession might linger for years... Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse." Me: Implicitly, Obama is raising the spectre of a slump growing so bad that it threatens the continuation of capitalism, as did the Great Depression. Of course, the US president softens his words with the usual politik-speak about the worst only happening "if nothing is done". QUOTE #3: HOPE Obama: "That's why I feel such a sense of urgency about the recovery plan before Congress. With it, we will... strengthen our country for years to come." Me: Here the US president is doing what Franklin D. Roosevelt did during the Great Depression: planting the flag of hope in the midst of an economic blizzard. Obama is hoping that the expression of hope will (as it mostly did in FDR's time) keep the grassroots from revolt even when reality fails to match the expressions of hope. QUOTE #4: SILENCE Obama: "In recent days, there have been misguided criticisms of this plan that echo the failed theories that helped lead us into this crisis... I reject these theories, and so did the American people when they went to the polls in November and voted resoundingly for change." Me: Yet Obama is silent on the fundamental reforms needed to bring about real change beneficial to the grassroots. Such fundamental reforms would include moves to permanently socialise the banks and other corporate monopolies (instead of merely socialising their losses) as part of democratising control of the economy. QUOTE #5: IDEOLOGY Obama: "We can pull together... We can place good ideas ahead of old ideological battles." Me: Behind an ideological swipe against ideology, Obama ends with a somewhat tired battle cry in favour of the very old ideology of social democracy. This ideology claims that crisis can only be overcome if all social classes and political forces "pull together". Yet that would leave intact the old class and state hierarchies which have given us today's economic and climate crises, and will give us new horrors tomorrow unless there is a bottom-up refoundation of society. WHAT DOES HISTORY SAY? Obama is outlining a crisis-inspired manifesto to save capitalism from itself in a re-play of Roosevelt's role in the Great Depression. Where might Obama's strategy lead? Let's look quickly at what history can tell us (if we wish to listen, of course). Roosevelt's New Deal created some jobs (but not enough) and expanded social welfare (again, not enough). These commendable achievements helped many struggling citizens (yet again, not enough). There is a dark side as well, however. Because Roosevelt left intact the old power structures, his strategy led directly towards an era of perpetual imperial bullying, a war on ecology, expanding corporate domination, third world poverty, increasing labour exploitation and the many other sins of global capitalism. Thus Roosevelt's New Deal planted the seeds of today's job-destroying Combo Crisis as well as a life-threatening Climate Crisis. Will Obama act on history's lessons? We should applaud Obama's call for "change". At the same time, we should shout out that real change must challenge the dictatorship of the profitariat if we are to escape further social and ecological calamities. You can go to The RAM Plan (viewable at ram.org.nz) for some grassroots Kiwi ideas on the path towards a humanistic and ecological society.

The Action Americans Need

by Barack Obama President of the United States from The Washington Post 5 February 2009 By now, it's clear to everyone that we have inherited an economic crisis as deep and dire as any since the days of the Great Depression. Millions of jobs that Americans relied on just a year ago are gone; millions more of the nest eggs families worked so hard to build have vanished. People everywhere are worried about what tomorrow will bring. What Americans expect from Washington is action that matches the urgency they feel in their daily lives -- action that's swift, bold and wise enough for us to climb out of this crisis. Because each day we wait to begin the work of turning our economy around, more people lose their jobs, their savings and their homes. And if nothing is done, this recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse. That's why I feel such a sense of urgency about the recovery plan before Congress. With it, we will create or save more than 3 million jobs over the next two years, provide immediate tax relief to 95 percent of American workers, ignite spending by businesses and consumers alike, and take steps to strengthen our country for years to come. This plan is more than a prescription for short-term spending -- it's a strategy for America's long-term growth and opportunity in areas such as renewable energy, health care and education. And it's a strategy that will be implemented with unprecedented transparency and accountability, so Americans know where their tax dollars are going and how they are being spent. In recent days, there have been misguided criticisms of this plan that echo the failed theories that helped lead us into this crisis -- the notion that tax cuts alone will solve all our problems; that we can meet our enormous tests with half-steps and piecemeal measures; that we can ignore fundamental challenges such as energy independence and the high cost of health care and still expect our economy and our country to thrive. I reject these theories, and so did the American people when they went to the polls in November and voted resoundingly for change. They know that we have tried it those ways for too long. And because we have, our health-care costs still rise faster than inflation. Our dependence on foreign oil still threatens our economy and our security. Our children still study in schools that put them at a disadvantage. We've seen the tragic consequences when our bridges crumble and our levees fail. Every day, our economy gets sicker -- and the time for a remedy that puts Americans back to work, jump-starts our economy and invests in lasting growth is now. Now is the time to protect health insurance for the more than 8 million Americans at risk of losing their coverage and to computerize the health-care records of every American within five years, saving billions of dollars and countless lives in the process. Now is the time to save billions by making 2 million homes and 75 percent of federal buildings more energy-efficient, and to double our capacity to generate alternative sources of energy within three years. Now is the time to give our children every advantage they need to compete by upgrading 10,000 schools with state-of-the-art classrooms, libraries and labs; by training our teachers in math and science; and by bringing the dream of a college education within reach for millions of Americans. And now is the time to create the jobs that remake America for the 21st century by rebuilding aging roads, bridges and levees; designing a smart electrical grid; and connecting every corner of the country to the information superhighway. These are the actions Americans expect us to take without delay. They're patient enough to know that our economic recovery will be measured in years, not months. But they have no patience for the same old partisan gridlock that stands in the way of action while our economy continues to slide. So we have a choice to make. We can once again let Washington's bad habits stand in the way of progress. Or we can pull together and say that in America, our destiny isn't written for us but by us. We can place good ideas ahead of old ideological battles, and a sense of purpose above the same narrow partisanship. We can act boldly to turn crisis into opportunity and, together, write the next great chapter in our history and meet the test of our time.

Battle of the manifestos

by Grant Morgan RAM Chair 5 February 2009 A telling document has been published in The Independent, one of Britain's foremost social democratic papers. Titled "A manifesto to save the free market", it sets out business editor Jeremy Warner's prescription to save global capitalism from erupting social discontent sparked by the world's first Combo Crisis since the 1930's Great Depression. (reprinted in full below.) Although Warner admits that "unfettered markets would seem manifestly to have failed us", he continues social democracy's historic compromise with capitalism by promoting a 10-point action plan to save the market from itself.

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