[The following report was adopted by the February 11-12 RSP National Committee plenum, 2012]
This report on the international political situation will focus on the two most significant developments in the world situation in 2011 – the popular revolt across Arab world against their despotic capitalist regimes, i.e., the so-called Arab spring, and secondly, the post-Great Recession capitalist financial crisis.
The ‘Arab spring’
Tunisian President Ben Ali’s ignominious flight to exile in Saudi Arabia on January 14, 2011, after a month of strikes and street protests throughout Tunisia, set in motion a cascade of popular anti-despotic revolts across the Arab world which culminated in the ousting of Egyptian President Hosni Mubarak on February 11, 2011.
The imperialist rulers in the US, Europe and Israel were shocked by the sudden ousting of these two Arab despots, whose governments had for decades helped repress workers’ opposition to poverty and imperialist oppression in the Middle East. The overthrow of Ben Ali and Mubarak set the stage for a year of wars and bitter struggles between Arab working people and their capitalist rulers.
Despite the heroism displayed by many of the pro-democracy protesters, emerging out of decades of repression, they lacked the level of class organisation and class consciousness needed to create unified mass movements capable of replacing the existing capitalist state institutions (military and police) and pro-capitalist politicians with state institutions and political organisations representing the class interests of the working people.
Underlying these popular revolts were growing discontent over persistent high rates of poverty and unemployment, with recent college graduates often facing double the general rate of joblessness, or forced to take menial jobs.
In Tunisia, the mass mobilisations that overthrew Ben Ali led to an attempt by his prime minister, Mohammed Ghannouchi, to assume power. However, the country’s Constitutional Court ruled that the parliament’s president should become acting president pending new parliamentary elections. These were held in October 2011, with the previously banned Islamist Ennahda Movement winning 89 of the 217 seats and forming a coalition government committed to the same neoliberal economic and pro-imperialist policies as the Ben Ali regime, including adhering to the policy prescriptions of the International Monetary Fund and the World Bank.
In neighbouring oil-rich Libya, popular opposition to the despotic regime of Colonel Muammar Gaddafi that erupted last February following the fall of Mubarak was rapidly brought under the influence of the NATO powers, which launched a war to replace the Gaddafi regime with the self-declared National Transitional Council made up of an unstable coalition of former Gaddafi regime officials and Islamists. The NTC itself estimates that the war took 50,000 lives and injured another 50,000 people. Rising infighting between the NTC’s factions is opening the door to a new civil war between Libya’s rival clan-based and regional militias.
The reactionary character of the new regime in Libya is demonstrated by the racist attacks directed by these militias against dark-skinned Libyans and black African immigrant workers during and particularly after the defeat of the Gaddafi regime. According to the August 3, 2011 International Business Times, “Libyan Arabs have taken advantage of the ongoing civil war to exact murderous revenge against the hundreds of thousands of black Africans who have entered Libya in the past decade to look for work”.
In a January 26 statement to the UN Security Council, Navi Pillay, the UN Human Rights chief, reported that Libya’s militias are holding at least 8500 prisoners in about 60 detention centres. Most of these detainees are from sub-Saharan Africa and have been routinely subject to torture. Detainees told Amnesty International they had been beaten for hours with whips, cables, plastic hoses, metal chains, bars, wooden sticks and given electric shocks with live wires.
In Egypt, following Mubarak’s ousting, the US-backed Supreme Council of the Armed Forces (SCAF) installed itself in power. A year after Mubarak’s fall, the military, which is funded by Washington to the tine of over US1 billion a year, remains in power. At the beginning of January, the junta issued a decree cutting public spending by US$2.36 billion. According to Finance Minister Momtaz Al-Said, the biggest cuts will hit wages and government services. Over 40% of the Egyptian population still lives on less than US$2 per day.
These new austerity measures were backed by the long-banned Islamists, who won 75% of the seats in three rounds of elections to the lower house of the Egyptian parliament over the course of six weeks to January 22. The Muslim Brotherhood’s Freedom and Justice Party, which won 47% of the lower house seats, is signalling that it will give the SCAF a privileged role under any new constitution. According to the privately owned Egyptian daily Al-Tahrir, FJP vice-chairman Essam Al-Erian recently announced that “the military has the right to enjoy a special position in the upcoming constitution, more than in previous ones”. He also stated that the transfer of power to an elected civilian authority “should not result in the disappearance of the junta from the political scene”.
Committed as they are to the same pro-imperialist neoliberal policies as the Mubarak government, neither the military junta, nor any Islamist government that succeeds it, will be able to defuse the discontent within the Egyptian working class that propelled the anti-Mubarak uprising in the first place.
According to the United Nations, which has relied largely on Syrian opposition sources for its information, some 5000 Syrians have been killed since mass demonstrations against the regime of President Bashar al- Assad began some 11 months ago. The Syrian government has claimed that some 2000 members of its security forces have died in fighting with opposition armed groups.
In the December 19 American Conservative, former CIA officer Philip Giraldi gave a detailed description of the operation that is being mounted by the US and its NATO allies to foment armed conflict inside Syria. According to Giraldi, “Unmarked NATO warplanes are arriving at Turkish military bases close to Iskenderun on the Syrian border, delivering weapons from the late Muammar Gaddafi’s arsenals as well as volunteers” from Libya. Iskenderun is also the seat of the Free Syrian Army, the armed wing of the Syrian National Council. French and British special forces trainers are on the ground, assisting the Syrian rebels while the CIA and US Spec Ops are providing communications equipment and intelligence to assist the rebel cause, enabling the fighters to avoid concentrations of Syrian soldiers.”
The imperialist backed Free Syrian Army called for the Arab League to pull out its observers from Syria, saying they had “failed in their mission”. The group’s leader, Colonel Riyad al-Asaad, told the Reuters news agency that the group was calling on the Arab League “to turn the issue over to the UN Security Council and we ask that the international community intervene because they are more capable of protecting Syrians at this stage than our Arab brothers.”
The December 28 Foreign Policy magazine this week reported that “top officials in President Barack Obama’s administration are quietly preparing options for how to assist the Syrian opposition”,” including the option of setting up a “no-fly zone” similar to that used to launch NATO’s war on Libya. The article noted that, “Although the opposition is decidedly split on the issue, Burhan Ghalioun, the president of the opposition Syrian National Council (SNC), earlier this month called on the international community to enforce a no-fly zone in Syria”. In an interview with the December 2 Wall Street Journal, Ghalioun stated that under an SNC regime, Syria will break its strategic ties with Iran and with Hezbollah in Lebanon including ending any arms supplies to “Middle East militant groups.
OWS
Partly inspired by the Arab revolts, the Occupy Wall Street movement burst onto the political scene in 2011. It had a common view that the problems facing the big majority of the Us population ere caused by the richest 1%. It centred its first occupation in the the Wall Street area of New York City, the heart of US financial industry. Very quickly, many workers and students across the US began to sympathise with the movement. It should be noted that Occupy Wall Street would not have survived in New York for as long as it did without the help of the labour movement. After the first few weeks of facing the pepper spray and nets of the police, the New York teachers’ union, started storing equipment for the occupiers and allowed them space for their press outreach as well as restroom facilities. The city’s healthcare workers’ union provided the resources to print the Occupied Wall Street Journal in both English and Spanish, and enabled it to be distributed fee of charge.
A number of unions, including the two just mentioned, then organised a rally after the police arrested more than 700 people on the Brooklyn Bridge. It seems the local union officials were happy to see people protesting and fighting back against austerity. The New York City’s teachers’ union has been without a co mayor has tried to avoid giving them the same wage increases that other city workers were granted a few years ago.
The Occupy movement has now called for two “general strikes” on the West Coast. The first was a call for a general strike in Oakland after the police almost killed a demonstrator who happened to be an Iraq War veteran. Most of the labour movement did not oppose this, also did not organise genuine strike action either. The fact that many workers individually took the day off and that the later shifts at the Oakland waterfront were shut down as workers refused to cross the Occupy picket lines was proof that many workers sympathise with the movement. Indeed, opinion polls in the US indicate that 60-80% of US residents do. This reflects the depth of the social crisis of US capitalism and the massive erosion of the public legitimacy of the capitalist neoliberal model that the US capitalist financial oligarchy has sought to impose over the last three decades both in the US itself and across the rest of the capitalist world, particularly since near collapse of the global financial system in 2008.
Eurozone debt crisis
Europe has become the focus of the post-Great Recession international financial crisis because the capitalist financial oligarchy believes that in Europe the state spends too high a proportion of gross domestic product on education, health, social provisions, infrastructure, etc. – outlays that detract from the profits of the private owners of capital.
A measure of this is the share of government spending in relation to the total economic output of a country. The average for the industrialised countries in the Organization for Economic Cooperation and Development (OECD) is 41%. For the euro area, the figure is 46%. The leader here is France, with 53%. By contrast, at 39%, the US is considerably lower. The difference is even greater when one considers that a large part of US government spending flows into the military budget.
The December 8-9 European Union summit meeting did little to end the continuing eurozone debt crisis. Instead, with the exception of UK Prime Minister David Cameron, all the rest of the 26 EU leaders accepted German Chancellor Angela Merkel’s push to impose a fiscal austerity compact that was simply a souped up version of the 1992 Maastricht Treaty, which on paper on paper committed all EU member-states to limit their annual budget deficits to 3% of GDP and their accumulated government debt to 60% of GDP.
As the December 4 London Financial Times commented: “Contrary to what is being reported, Ms Merkel is not proposing a fiscal union. She is proposing an austerity club, a stability pact on steroids. The goal is to enforce life-long austerity, with balanced budget rules enshrined in every national constitution. She also proposes automatic sanctions with a judicially administered regime of compliance. She rejects eurobonds on the grounds that they reduce pressure on fiscal discipline.”
Cameron vetoed Merkel’s original proposal to have this enshrined in changes to the treaties establishing the EU, not because it would impose brutal government austerity measures upon the EU’s working people, but because it would involve acceptance of a financial services transaction tax. It is estimated that 35% of the revenues from any financial transactions tax would be paid by London-based banks. Cameron was concerned that such a tax could mean a switch to other financial centres like New York or Switzerland to avoid such a tax.
Following Cameron’s veto, the 17 nation-states that use the euro as their common currency plus the other nine EU member-states that still retain their own currencies decided to accept the Merkel plan through an “inter-govermental agreement” rather than EU treaty amendments.
Merkel plan
Under this plan, EU governments (with the exception of the UK) agreed that each of them must run an annual ‘“structural deficit” of no more than 0.5% of GDP and achieve overall balanced budgets. A structural deficit is as supposedly calculated by taking out that part of government spending that changes with the booms and busts of a capitalist economy’s business cycle. So it is supposed to measure the “underlying” difference between a capitalist government’s revenues and spending.
Government deficits are financed by borrowing from private banks, and continued borrowing leads to an accumulation of debt. The ability to pay off this debt is measured by a country’s debt relative to its GDP, referred to as its debt-to-GDP ratio. If a country’s debt-to-GDP ratio gets too high, private investors will worry that the government will either default on this debt, or will deflate its value away by engineering a high inflation rate.
Under the Merkel plan, any EU government that fails to the “structural deficit” target will be automatically subject to a fine equivalent to 0.2% of annual GDP unless a “qualified majority” (87%) of EU member-states agree to let it off. Also, under the Merkel plan. EU governments agreed that if their public sector debt ratios were above 60% of GDP, they must take steps to reduce it to that level over the next 20 years. For Germany, with a debt-to-GDP ratio of 87%, that amounts to an annual reduction in debt of 1.3% of GDP each year. But for Italy, with a debt-to-GDP ratio of 120%, it means, in addition to running a balanced budget, finding an extra 3% of GDP or €80 billion – each year until 2032.
As for Greek government. it means (even after the default of 50% its debt owned by the private banks) paying off around an extra 4% of GDP – €16 billion – a year until 2032. This is in addition to having to find the funds to meet its interest payments to Greek government bondholders, which will amount to €12.75 billion next year. Under the Merkel plan, in 2012 alone the Greek government would have to devote two-thirds of its revenue (excluding income from asset sales) to its bondholders!
Australian Associated Press reported on November 19 that while Greek government had earlier hoped to raise €5 billion this year from privatisation sales, Greek finance minister Evangelos Venizelos said he to raise only raise €1.8 billion by December 31.
As for the eurozone debt crisis itself, the December EU summit decided only that the European Stability Mechanism that will replace the emergency €440 billion European Financial Stability Facility in July 2012 (instead of June 2013) as a permanent rescue funding program for heavily indebted eurozone government is to be capped at €500 billion. By comparison, the total eurozone government debt is exceeds €9.5 trillion!
The adoption by the 17 eurozone governments of the Merkel austerity pact will if anything simply make the eurozone debt crisis worse. By requiring eurozone governments to cut government spending it will push these countries toward a new recession, thus boosting the heavily indebted countries’ government debt-to-GDP.
Merkel was quoted in the December 5 Financial Times as saying that her fiscal austerity plan was aimed to “show that Europe is a ‘safe place to invest’“. This reflects the neo-liberal policy that all developed capitalist governments have pursued since the early 1980s, with the exception of the “Keynesian moment” of 2008 (when these governments, briefly turned to massive deficit spending to bail out insolvent banks and to avoid a slide into economic depression).
Merkel clearly believes that the root of the current crisis is that some European governments have “overspent”. In fact, the countries with the worst debt crises have big deficits and debts as a consequence of the economic crisis – the 2009-08 Great Recession and the accompanying Global Financial Crisis – rather than as a consequence of big deficits.
As Martin Wolf pointed out in the December 6 Financial Times, on the “Maastricht” criterion of budget deficits less than 3% of GDP, all the crisis-hit countries were doing fine before the Great Recession, except Greece (on revised figures, though not on the figures cited at the time). Before 2007, the four “worst” governments for deficits after Greece were Italy, France, Austria and Germany! “After the [economic] crisis, the picture changed, with huge (and unexpected) deteriorations in the fiscal positions of Ireland, Portugal and Spain (though not Italy). In all, however, fiscal deficits were useless as indicators of looming crises”, Wolf noted. And relying on the criterion of public debt, “Ireland and Spain had vastly better public debt positions than Germany”.
“If the most powerful country in the eurozone refuses to recognise the nature of the crisis”, Wolf correctly observed, “the eurozone has no chance of either remedying it or preventing a recurrence.”
In a further heightening of the eurozone debt crisis, the US-based Standard & Poor’s debt rating agency slashed the credit ratings of a number of eurozone countries, including France, Italy and Spain on January 13. The downgrading of sovereign debt, especially that of France, will intensify the debt crisis of many European countries, increasing their borrowing costs and further undermining confidence in their solvency. Since France is one of the major underwriters of the European bailout fund, its creditworthiness will now be in doubt. In its statement announcing the credit downgrades, S&P said it would soon be issuing credit evaluations of international financial organisations, including the EFSF.
Explaining the downgrade decision, S&P wrote that it expected growing popular anger across the eurozone at government austerity measures that have already plunged millions into unemployment and poverty. “We believe there is a risk that reform fatigue could be mounting, especially in those countries that have experienced deep recessions and where growth prospects remain bleak.” It warned that “lower levels of predictability exist in policy orientation”.
Greek debt crisis
Hopes have also faded that a deal will be reached between the Greek government and the private holders of €200 billion of Greek government debt on these bondholders taking a 50% reduction in previously held Greek government debt. According to the January 22 British Guardian, “After being close to a breakthrough, the high-stakes talks – aimed at averting a Greek default by slashing the country’s monumental debt load – were set back when the International Monetary Fund and Germany insisted that investors agree to reduced interest rates on new bonds…
“Private government debt holders, including banks, insurers and hedge funds, had reportedly reached an agreement on interest rates averaging 4% before official creditors including the IMF and the European Central Bank called for yields to be no higher than 3.5%, citing the deteriorating Greek economic outlook.
“Previously, the Greek finance minister, Evangelos Venizelos, had told parliament that the debt reduction plan would have to be in place by Monday [January 22] to give lenders enough time to draw up a second €130bn bailout for the country before the EU’s next summit on 30 January. Private creditor participation has been set as a prerequisite by the EU and IMF for further aid. Without the loans Athens will be unable to meet a €14.5bn bond repayment due on 20 March, triggering a default on its debts.”
The EU and the IMF have reportedly demanded further and harsher austerity measures – a 20% cut in Greece’s minimum wage of €750 per month, a 15% cut in supplementary pensions; and 15,000 civil service redundancies this year – in exchange for approval of the second aid package. Unions and employers’ associations in Greece are opposed to the cuts in private-sector wages, warning it would deepen Greece’s recession, already in its fourth year. According to the Greek Chamber of Commerce, 20% of all Greek businesses closed in 2010-11, and another 15% are near bankruptcy. The official unemployment rate stands at 18.8%, with 46.6% of young people jobless.
The figures for the four largest European economies are grim. Officially, more than 23 million people are unemployed in the EU and the real figure is much higher. Fourth quarter GDP in Britain fell 0.2%.Italy’s economy is forecast to shrink 1.5% this year, according to the Bank of Italy, while the IMF forecast a contraction of 2.2%. The unemployment rate has risen to 9.7%. The German economy, the largest economy in Europe, shrank by 0.25% in the last three months of 2011, according to the German Statistical Office, its first decline since early 2009 in the wake of the Wall Street financial crash.
Spain, with fifth largest European economy, may be in the worst shape of any, at least in terms of the impact on working class living standards. Spain now has a record five million workers are out of work. This is an official unemployment rate of 22.9%, with the youth unemployment rate approaching 50%.
Other economic black spots in Europe include Ireland, whose 14.6% unemployment trails only Spain and Greece; and Portugal, whose credit was downgraded to “junk” status after another bailout by the European Central Bank.
US jobs figures
On February US President Barrack Obama Obama hailed the January Labor Department report employment report, calling it “good news” and claiming that the US economy was “growing stronger”. The report showed a modest growth in non-farm payrolls of 243,000 jobs, with an upward revision of previous estimates for 2011 of 180,000. The official unemployment rate was reduced from 8.5% in December to 8.3% in January, the lowest official level since February 2009.
However, the According to the Washington-based Economic Policy Institute (EPI), pointed out that if the 2.8 million “marginally attached” workers – those wanting a job but discouraged from actively looking for one – were counted by the government as part of the labour force, January’s unemployment rate would actually be 9.9% instead of 8.3%.
Furthermore, as the New York Times‘ economics writer Floyd Norris pointed out that same day, the Labor Department actually estimated that the economy lost 2.6 million jobs in January. It arrived at the “seasonally adjusted” estimate of a net payroll gain of 243,000 by factoring in the normal loss of temporary holiday season jobs.
In his January State of the Union address, Obama touted the revival of US auto industry profits and a modest growth of jobs in the industry as a model for the entire US economy. With characteristic cynicism, he failed to mention that this rebound is due to the 50% cut in wages for all newly hired workers imposed on General Motors and Chrysler in 2009 by his Auto Task Force. According to the Labor Department report, average hourly earnings for private-sector employees rose by 1.9% over the past 12 months. The latter figure is well below the 3% rise in the consumer price index, resulting in a further lowering of workers’ average real wages.
Latest Greek debt deal
Greece’s unelected “technocratic” prime minister Lucas Papademos, the former governor of the Bank of Greece and former European Central Bank vice-president, is desperately trying to make the three parties supporting his government – the centre-left PASOK, the centre-right New Democracy and the far-right LAOS – agree to the further round of brutal austerity measures demanded by the EU and the IMF.
A leaked German government document obtained by the London Financial Times and made public on January 27 talked about Greece transferring “national budgetary sovereignty” to a EU-appointed commissioner. In fact, the German bankers and European capitalists in general have been dictating the terms of the Greek budget for some time, through the mechanism of the terms of the debt bail out. They even removed the elected PASOK government when they thought it could not be trusted to implement their dictats. The leaked German government document shows that now they want to cut out the middle man and take direct control of Greece’s budgetary policy.
The leader of the Greece’s far-right LAOS party has correctly warned that the new round of austerity measures demanded by the EU and the IMF could provoke “economic collapse and a social explosion of a kind that Europe has not seen for decades”. This did not stop the LAOS leader, along with the other parties in the coalition government, agreeing to the cuts in public sector jobs demanded by the EU and the IMF.
An indication of what such a social explosion might involve was the announcement on February 5 that by the health workers at the general hospital in Kilkis, an industrial town of 56,000 inhabitants in northern Greece, that they had occupied the hospital and paced it under workers’ control. A declaration issued by the hospital workers declared that “All decisions will be made by a ‘workers general assembly”. It went on to state that of if their demands were not met “they will turn to the local and wider community for support in every possible way to save the hospital, defend free public healthcare, to overthrow the government and every neoliberal policy.”
The hospital workers declared that “we place our special interests inside a general framework of political and economic demands that are posed by a huge portion of the Greek people that today is under the most brutal capitalist attack; demands that in order to be fruitful must be promoted until they end in cooperation with the middle and lower classes of our society. The only way to achieve this is to question, in action, not only the political legitimacy, but also the legality of the arbitrary authoritarian and anti-popular power and hierarchy which is moving towards totalitarianism with an accelerating pace.
“The workers at the general hospital of Kilkis answer to this totalitarianism with democracy. We occupy the public hospital and put it under our direct and absolute control. The [general hospital] of Kilkis will henceforth be self-governed and the only legitimate means of administrative decision making will be the general assembly of its workers.”
The statement called on “workers from other hospitals to make similar decisions” and for “employees in other fields of the public and private sector and the participants in labour and progressive organisations to act likewise, in order to help our mobilisation take the form of a universal labour and popular resistance and uprising, until our final victory against the economic and political elite that today oppresses our country and the whole world”.