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The Financialization of Food and the Profitability of Poverty
By: Andrew Gavin Marshall
The following is a brief excerpt from a chapter of The People’s Book Project, covering issues related to food, water, land grabs, environmental destruction, hunger and poverty. This excerpt examines the global food crisis.
There are a few things upon which humanity is entirely dependent for survival: food, water, land and the environment. One of the central questions with which humanity currently has to address its part, past and present, is the ways in which we, as a species, interact with our environment. When it comes to environmental issues, the primary focus is placed upon the issue of climate change, and while this is indeed an important issue, it could be said that this focus almost misses the forest for the trees. Climatic change is here to stay, it is an inevitability, and it is a requirement for humanity to begin the process of adaptation. However, climate change is not “the problem,” it is a symptom of the problems associated with the environment. The source of the problem is how human society – specifically Western state-capitalist society – interacts with the environment at the local and global level. When examining this question, the issues and concerns raised go far beyond climatic changes, though they all interact.
One cannot separate our interaction with the environment from the interaction between power structures and people, whether we are discussing large states, banks, corporations, international organizations, etc. In a global system in which people are themselves treated as commodities, where more than half the world’s population lives in abject poverty, with hunger and starvation increasing, with imperial powers destabilizing countries, bombing communities, supporting coups and waging wars, oppressing, impoverishing, and destroying, environmental issues are inseparable from social, political, and economic issues.
One need only look at the issue of militarization and war to see a clear relationship between these issues: wars are mostly waged by large states – whether directly or indirectly through proxies – against poor populations in weak ‘Third World’ states. Aside from the obvious destruction the physical war takes – through bombs and bullets – a nation’s infrastructure is destroyed, its people impoverished and oppressed. The American military system – by far the largest in the world – through the maintenance of aircraft carriers, ships, jets, equipment, transportation, weapons, with roughly one thousand military bases around the world, foreign occupations and operations, make this single institution known as the Pentagon “the largest institutional user of petroleum products and energy” in the world. The United States wages wars to secure resources around the world, to dominate and oppress populations, and in doing so, exploits and plunders those very same resources, destroys the environment, spreads poverty, death, and destruction. Its purpose is to serve minute – yet powerful – interests. Yet, it is devastating for the world’s people and the environment.
If we are truly interested with answering the question of how we move forward as a species in dealing with environmental issues, we must ask the parallel questions of how we deal with issues of poverty, hunger, land, exploitation, oppression, war, empire, and power. It seemingly makes the task harder, but it also makes the answers more plausible, and, indeed, possible.
Again, looking at the issue of climate change, we have seen countless international conferences held by global plutocrats, governments, international organizations, banks and corporations and global NGOs and environmental organizations like the World Wildlife Fund and Conservation International, whose boards of directors are dominated by individuals from banks, corporations and oil conglomerates. And we phase surprise that nothing productive is done. The ‘solutions’ we are given for complex problems are based around ideas of carbon credits, carbon trading, carbon caps and carbon markets, effectively commodifying the entire atmosphere, turning pollution itself into a profitable enterprise, and thus, making the problems that much worse. We are told that there are ways to simply ‘Green’ the economy, to promote the interests of state-capitalism and the environment simultaneously. But in a system which has always subjugated the environment and the population at large to the powerful interests which dominate, we are fools to assume they have changed their interests.
A great deal of press was given to the 2009 Copenhagen Conference, and the fact that it ended in failure. The focus was on “who” screwed it up: it was China, it was America, it was Canada! Everyone was pointing the finger at one another. The reality, however, was far more revealing, not only of the failure of Copenhagen, but of the true intent and the result of pursuing environmental issues through the institutions of power which have created the environmental problems in the first place.
The Copenhagen conference was viewed by elites as a means to advancing their institutional power to a more global level, as internal UN documents revealed that the focus was on a “green economy,” noting: “moving towards a green economy would also provide an opportunity to re-examine national and global governance structures.” The document stated that “linkages between environmental sustainability and the economy will emerge as a key focus for public policymaking and a determinant of future market opportunities,” and one top official stated that the environmental, food, and economic “crises provide a unique opportunity for fundamental restructuring of economies so that they encourage and sustain green energy, green growth and green jobs.”
It sounds well enough, but its focus on “market opportunities” for the “green economy” ignores entirely the nature of “market opportunities” being one of the most significant factors in creating environmental crises in the first place. With a focus on advancing issues of “global governance” in order to address environmental issues, the role of dominant institutions in creating the environmental crisis is overlooked, and thus, the ‘solution’ is to enhance the power of those very same institutions to global levels, further removing power from populations and communities (where the real solutions to environmental issues lie). In short, if the issue of ‘power’ – and the global distribution of power between institutions and populations – is not addressed, the ‘solutions’ offered are, at best, little more than band-aids on broken arms.
China received a great deal of the blame for the failure of the Copenhagen talks, but there is more to this story. Perhaps the most significant factor was due to what was called the ‘Danish Text,’ a leaked Danish government document written in secret between the rich and powerful nations to serve as a framework for their actions and intentions at the conference. The agreement would have handed more power to the rich nations, and sideline the UN in any final agreement, as well as “setting unequal limits on per capita carbon emissions for developed and developing countries in 2050; meaning that people in rich countries would be permitted to emit nearly twice as much under the proposals.” In other words, with true Western cultural state-capitalist logic: find the problem, acknowledge the problem, then double the problem! The text was drafted by a select coterie of representatives from Denmark, the U.K. and the United States, and the draft “hands effective control of climate change finance to the World Bank; would abandon the Kyoto protocol – the only legally binding treaty that the world has on emissions reductions; and would make any money to help poor countries adapt to climate change dependent on them taking a range of actions.”
Thus, one of the central institutions of world power – the World Bank – which has advanced the interests of Western banks and corporations across the ‘developing’ world, promoting privatization, deregulation, exploitation, resource extraction, and ultimately, environmental degradation, would then be given the responsibility of ‘solving’ the environmental crisis. And how would it do this? The World Bank would be given control over the dispersal of funds in the same way that it has handled the dispersal of loans in the past. Here’s a hint: it comes with “strings attached.”
A senior diplomat at the talks described the Danish Text as “a very dangerous document for developing countries.” Among the many points in the document were to “force developing countries to agree to specific emissions cuts and measures that were not part of the original UN agreement” and to “weaken the UN’s role in handling climate finance,” as well as aiming to “divide poor countries further.” Allowing for the rich countries to increase their emissions, while poor countries face severe restraints, overlooks the fact that the countries with most emissions already are those very same rich countries. Preventing poor countries from producing emissions would prevent them from developing their own resources as they see fit, instead allowing for the rich countries to move in and further dictate policies in their own interests. Ultimately, it was a draft agreement to advance imperial domination of the rich world over the poor world, using the issue of “climate change” as the excuse.
When the Danish text was leaked, representatives of poor nations were “furious that it is being promoted by rich countries without their knowledge and without discussion in the negotiations.” One diplomat noted: “It is being done in secret. Clearly the intention is to get Obama and the leaders of other rich countries to muscle it through when they arrive next week. It effectively is the end of the UN process.” Further, “It proposes a green fund to be run by a board but the big risk is that it will be run by the World Bank and the Global Environment Facility,” a partnership of ten agencies including the World Bank and UN Environment Programme, thus bypassing more democratically accountable and representative institutions, such as the UN itself. This, stated one diplomat, “would be a step backwards, and it tries to put constraints on developing countries when none were negotiated in earlier UN climate talks.” Since poor countries already suffer the greatest burden, not only of poverty, but of environmental devastation and climatic change (not to mention, war, imperialism, and oppression), the notion of the powerful countries exporting their responsibility to the poor and oppressed does not only fail to address the issues, but would inevitably make the problems much worse. We tend to call this “market logic.”
The release of the Danish text prompted the developing nations, represented by the G-77 (the vast majority of the world’s population) to suspend their participation in the negotiations. Days following the conclusion of the Copenhagen conference, the UN’s climate chief wrote in a confidential internal memo that it was the ‘Danish Text’ that led to the ultimate failure of the talks, stating that, “the text was clearly advantageous to the US and the west, would have steamrollered the developing countries, and was presented to a few countries a week before the meeting officially started.” Within days of the leaking of the ‘Danish Text’, developing nations were accusing the rich countries of engaging in “climate colonialism.” The Sudanese diplomat to the conference stated, “This is all based on the dominance and supremacy of developed countries. One could say the Empire has been doing this since the 16th Century, the Empire has always ruthlessly grabbed natural resources – the new resource is the global atmospheric space and carbon space.” One activist and participant called the deal an act of “carbon colonialism.”
The British delegation at Copenhagen further inflamed tensions and calls of colonialism when it suggested the creation of a “climate fund” by diverting western aid budgets from poverty reduction funds into climate change “adaptation.” Thus, “money earmarked for education or health would be diverted into projects such as solar panels and wind farms,” incurring anger from several developing nations. As one commentator with the Guardian explained, Copenhagen was “a disaster for Africa,” the continent that contributes the least amount of carbon emissions in the world, and will disproportionately suffer the consequences more than any other. Several African nations were coerced into signing the final deal, even though they had walked out of negotiations following the Danish Text, with industrial rich nations threatening to withdraw foreign aid if the deal was not signed.
Again, this is but one of many examples of how environmental issues are intimately related to those of poverty, economics, imperialism, and power, more generally. To address one with any substance, we must address all with perseverance. Or, we could just continue to push for international conferences met with the self-congratulations of global elites who pride themselves on having flown around the world on taxpayers’ dollars to stay in five-star hotels and eat gourmet meals while they discuss issues of poverty and environmental protection, amounting to little more than “agreements to agree” at some point in the future, while globally, business as usual, and more accurately, accelerated rates of exploitation and devastation, dominate the decisions and actions of the powerful.
The Financialization of Food and the Profitability of Poverty
The global food crisis hit international headlines in 2008, with “food riots” erupting in dozens of countries around the world, in Asia, Africa, and Latin America. By May of 2008, it was reported that food riots had hit roughly 37 countries, with some of the more dramatic taking place in Cameroon, Niger, Egypt, and Haiti. At that time, the Food and Agricultural Organization (FAO) warned: “Food is no longer the cheap commodity that it once was. Rising food prices are bound to worsen he already unacceptable level of food deprivation suffered by 854 million people… We are facing the risk that the number of hungry will increase by many more millions of people.”
Governments and repressive regimes around the world were under threat from the rising tide of food price rebellions (commonly referred to as “food riots”), with the rapidly accelerating costs of life’s necessities driving people to desperation, and even pushing governments to the brink of collapse. A UN adviser and economist, Jeffrey Sachs, noted, “It’s the worst crisis of its kind in more than 30 years… It’s a big deal and it’s obviously threatening a lot of governments. There are a number of governments on the ropes, and I think there’s more political fallout to come.” El Salvador’s president, Elias Antonio Saca, told the World Economic Forum that it “is a perfect storm… How long can we withstand the situation? We have to feed our people, and commodities are becoming scarce. This scandalous storm might become a hurricane that could upset not only our economies but also the stability of our countries.” A former adviser to the Ministry of Agriculture in Indonesia added that “[t]he biggest concern is food riots… It has happened in the past and can happen again.” In Haiti, where roughly 75% of the population earn less than $2 per day, with one in five children chronically malnourished, hunger had become so extreme that one “booming” commodity had become “the selling of patties made of mud, oil and sugar, typically consumed only by the most destitute.”
In Haiti, as protesters approached the presidential palace, United Nations “peacekeepers” fired rubber bullets on the hungry and starving, as well as using tear gas, and several protesters were reported to have been killed in the chaos. Food prices rose by an average of 40% since the middle of 2007, and with the price increases, came increased instability and social unrest. An adviser to the Haitian president commented: “I compare this situation to having a bucket full of gasoline and having some people around with a box of matches… As long as the two have a possibility to meet, you’re going to have trouble.”
The American government scrambled to increase “food aid” to countries around the world, fearful for the stability of its protectorates and puppet governments. A U.S. Senator, Richard Durbin, noted: “This is the worst global food crisis in more than 30 years… It threatens not only the health and survival of millions of people around the world, many of them children, but it also is a threat to global security,” with over 36 countries “now facing food crises [and] requiring help from abroad.”
An analyst at a major risk management agency told the Financial Times in November of 2008 that there had been “food protests in 25 countries in the past year,” adding: “In Indonesia the price of rice is directly correlated to the number of strikes or riots… A sharp increase in prices could cause production problems if there are strikes by workers and civil unrest could damage vital infrastructure like roads or telecoms or the government could impose a political crackdown.” The analyst provided advice for global corporations: “What global companies need to do is to avoid being seen as contributing to or being complicit with an issue. Some governments will blame rising food prices on the west, for example.” An analyst at an insurance conglomerate agreed: “Companies need to be aware of how they are perceived and seek to win hearts and minds.” In other words, what is needed is an excellent public relations campaign to ensure that western corporations do not get their deserved share of the blame for rising food prices. The advice was not to avoid contributing to the crisis, but to “avoid being seen as contributing,” after all.
In the span of a year between 2007 and 2008, the global price of wheat rose by 130%, the price of rice – the staple food for the majority of the world’s population – rose by 74%, going up by more than 10% in one day alone. While rising food prices were causing riots, social unrest, and the instability of governments across the ‘Third World,’ the prices were noticeably increasing within the industrial nations themselves, though by no means to the same degree, or with the same dramatic and devastating effects. The FAO estimated that food prices were likely to remain high for at least a decade. Global droughts, climate change, environmental destruction, massive farm subsidies in the west, population growth, and the development of biofuels (food for fuel), have all contributed to the rising costs of food. Of course, a number of other important factors were involved, such as the liberalization of food production and global markets, largely a staple of the neoliberal era, from the mid-1970s onward, and of enormous importance, the role of financial speculation, with banks, hedge funds, and investors speculating on food costs increasing, and thus, driving up the costs of food.
According to a confidential report by the World Bank in 2008 which was leaked to the Guardian, biofuels forced global food prices up by roughly 75%, contradicting the claims of the U.S. government, the main promoter and developer of biofuels, that their production led to a 3% price rise in the cost of food. Robert Bailey, a policy adviser at Oxfam stated: “Political leaders seem intent on suppressing and ignoring the strong evidence that biofuels are a major factor in recent food price rises… It is imperative that we have the full picture. While politicians concentrate on keeping industry lobbies happy, people in poor countries cannot afford enough to eat.” The World Bank estimated that the rising food prices pushed 100 million people worldwide below the poverty line, with government ministers at the G8 conference in Japan describing the food crisis as “the first real economic crisis of globalization.”
The World Bank report contested that: “Rapid income growth in developing countries has not led to large increases in global grain consumption and was not a major factor responsible for the large price increases.” The major droughts in Australia and elsewhere, according to the World Bank report, did not have a significant impact on food prices, with the biggest cause being the US and European drive for biofuels. The report noted: “Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate,” adding that the higher costs of energy and fertilizer contributed to a 15% increase of food costs. Use of biofuels has diverted grain production away from food and toward fuel, with over one-third of U.S. corn used to produce ethanol, and roughly half of vegetable oils in the European Union used to produce biodiesel. Further, farmers have been encouraged to put aside land for use in the production of biofuels instead of food. Finally, and perhaps most importantly, the production of biofuels has encouraged financial speculation in food markets, as prices were expected to increase, and thus speculators were set to make enormous amounts of money if and when prices go up. Speculation, of course, is a self-fulfilling prophecy, as speculators betting that prices will go up inevitably pushes the prices up.
The production of biofuels has been a major strategy by North American and European governments in order to reduce dependency on foreign oil and address climate change and environmental issues. A secret report conducted by the British government – the Gallagher Report – released in 2008, reported that the development of biofuels played a “significant” role in the food price increases. All petrol and diesel in Britain had to contain 2.5% of biofuels by 2008, and was aimed to meet a target of 5% by 2010, while the EU was itself contemplating a 10% target for 2020. Naturally, this would increase food prices accordingly, creating much larger and deeper food crises.
For all the contributory factors, not least of which was the development of biofuels, which collectively account for moderate increases in the cost of food, the primary driver of the food prices was financial speculation. This has been made exceedingly evident as the food crisis was not ended in 2008, but has continued to reach new heights, and the crisis has become almost permanent.
At an emergency meeting on food price inflation in 2010, the UN’s special rapporteur on food, Olivier De Schutter, released a paper in which the increase of food prices was blamed on a “speculative bubble” created by pension funds, hedge funds, sovereign wealth funds, and big banks that speculate on commodity markets. The paper noted that beginning in 2001, “food commodities derivatives markets, and commodities indexes began to see an influx of non-traditional investors… The reason for this was because other markets dried up one by one: the dotcoms vanished at the end of 2001, the stock market soon after, and the US housing market in August 2007. As each bubble burst, these large institutional investors moved into other markets, each traditionally considered more stable than the last. Strong similarities can be seen between the price behaviour of food commodities and other refuge values, such as gold.” De Schutter further wrote: “A significant contributory cause of the price spike [was] speculation by institutional investors who did not have any expertise or interest in agricultural commodities, and who invested in commodities index funds or in order to hedge speculative bets.”
As prices nearly doubled between 2007 and 2008, riots erupted in over 30 countries and 150 million more people were pushed into hunger, the majority of commodity prices in 2010 remained well over 50% of their pre-2007 figures, and were set to continue upwards: “Once again we find ourselves in a situation where basic food commodities are undergoing supply shocks. World wheat futures and spot prices climbed steadily until the beginning of August 2010, when Russia – faced with massive wildfires that destroyed its wheat harvest – imposed an export ban on that commodity. In addition, other markets such as sugar and oilseeds [were] witnessing significant price increases.” Gregory Barrow of the UN World Food Program noted: “What we have seen over the past few weeks is a period of volatility driven partly by the announcement from Russia of an export ban on grain food until next year, and this has driven prices up. They have fallen back again, but this has had an impact.” Food prices were rising by roughly 15% per year in India, Nepal, Latin America and China. A British Green Party MP stated: “Food has become a commodity to be traded. The only thing that matters under the current system is profit. Trading in food must not be treated as simply another form of business as usual: for many people it is a matter of life and death. We must insist on the complete removal of agriculture from the remit of the World Trade Organization.”
In December of 2010, food prices reached a new record high, surpassing the 2008 levels, entering what an FAO economist referred to as “a danger territory,” adding that there was “still room for prices to go up much higher.” As John Vidal wrote in the Guardian, “[t]he same banks, hedge funds and financiers whose speculation on the global money markets caused the sub-prime mortgage crisis are thought to be causing food prices to yo-yo and inflate,” as they have taken “advantage of the deregulation of global commodity markets” and are thus “making billions from speculating on food and causing misery around the world.” Food prices were even rising 10% per year in Britain and Europe, with the UN reporting that prices could be expected to rise at least another 40% within the following decade.
In the mid-1990s, “following heavy lobbying by banks, hedge funds and free market politicians in the US and Britain, the regulations on commodity markets were steadily abolished.” What had previously been “contracts” between farmers and traders turned into “derivatives” which were to be bought and sold on international markets between global investors, “who had nothing to do with agriculture.” Thus, a global market of “food speculation” had been born, noted Vidal: “Cocoa, fruit juices, sugar, staples, meat and coffee are all now global commodities, along with oil, gold and metals.” The same institutions which were responsible for creating the massive housing bubble which resulted in the economic crisis, with foreclosures on millions of homes, reacted to the bursting of that bubble by creating a new one in commodity markets, notably food. Except with this bubble, people don’t have to wait for it to burst in order to suffer, as people are driven deeper into poverty and hunger as it inflates, all the while the institutional “investors” make a killing, quite literally.
When banks and investors began moving billions out of the housing market and into new markets, food speculation became especially attractive. Mike Masters, the fund manager at Masters Capital Management testified in the US Senate in 2008 that, “We first became aware of this [food speculation] in 2006. It didn’t seem like a big factor then. But in 2007/08 it really spiked up… When you looked at the flows there was strong evidence. I know a lot of traders and they confirmed what was happening. Most of the business is now speculation – I would say 70-80%.” In other words, roughly 70-80% of the food price increases were determined by speculation, compared to the plethora of other given reasons, combined. Masters warned the Senate: “Let’s say news comes about bad crops and rain somewhere. Normally the price would rise about $1 [per bushel]. [However] when you have a 70-80% speculative market it goes up $2-3 to account for the extra costs. It adds to the volatility. It will end badly as all Wall Street fads do. It’s going to blow up.”
The president of Strategic Investment Group in New York warned that this speculative market has only increased in size, and that “speculative demand for commodity futures has increased since 2008 by 40-80% in agriculture futures.” In 2010, one London-based hedge fund purchased more than 7% of the world’s stocks of cocoa beans, which drove the price of chocolate to its highest price in 33 years. The UN rapporteur on food, Olivier De Schutter agreed: “Prices of wheat, maize and rice have increased very significantly but this is not linked to low stock levels or harvests, but rather to traders reacting to information and speculating on the markets.” Deborah Doane of the World Development Movement noted: “People die from hunger while the banks make a killing from betting on food.”
The World Development Movement (WDM) issued a report in the Summer of 2010 blaming the rising food prices on investors and speculators, just as cocoa spiked to its 33-year high after a London hedge fund purchased massive amounts of cocoa stock. The report noted that “risky and secretive” speculative bets on food prices were exacerbating the conditions of the world’s poor, as well as sparking social unrest. Deborah Doane, director of the WDM, noted: “Investment banks, like Goldman Sachs, are making huge profits by gambling on the price of everyday foods. But this is leaving people in the UK out of pocket, and risks the poorest people in the world starving.” She added: “Nobody benefits from this kind of reckless gambling except a few City [of London] wheeler-dealers. British consumers suffer because it pushes up inflation, because of unpredictable oil and raw material prices, and the world’s poorest people suffer because basic foods become unaffordable.” The WDM estimated that Goldman Sachs likely made a profit of $1 billion in 2009 through speculating on food prices, though Goldman Sachs stated that these profits from poverty and hunger were “ludicrously overstated.”
Even in the establishment journal, Foreign Policy, ever an apologist and advocate for American imperialism and global hegemony, the food price increases were blamed on “Wall Street greed.” Perhaps not surprisingly, it was bankers at Goldman Sachs in 1991 that developed a derivative (speculative bet) based upon 24 raw materials, from metals and energy, to coffee, cocoa, cattle, corn, wheat and soy, known as the Goldman Sachs Commodity Index (GSCI). In 1999, when futures markets were deregulated, “bankers could take as large a position on grains as they liked, an opportunity which had, since the Great Depression, only been available to those who actually had something to do with the production of our food.” Other banks followed the lead of Goldman Sachs, and found that they too could reap enormous profits from speculating on food prices (and thereby causing mass poverty, hunger, and starvation), including Barclays, Deutsche Bank, Pimco, JP Morgan Chase, AIG, Bear Stearns, and Lehman Brothers. As Frederick Kaufman wrote: “The result of Wall Street’s venture into grain and feed and livestock has been a shock to the global food production and delivery system. Not only does the world’s food supply have to contend with constricted supply and increased demand for real grain, but investment bankers have engineered an artificial upward pull on the price of grain futures.” Speculation thus resulted in a situation where “imaginary wheat dominates the price of real wheat,” as “bankers and traders sit at the top of the food chain – the carnivores of the system, devouring everyone and everything below.”
Alan Knuckman is an analyst with Agora Financials, a consulting firm specializing in commodity investments, which has Knuckman spending his time on the floor of the Chicago Board of Trade (CBOT), the world’s largest commodity futures exchange. Knuckman stated: “This is capitalism in its purest form… This is where millionaires are made.” One might add, however, that it’s also where millions more people in hunger are “made.” Knuckman explained: “I trade in anything you can get in and out of quickly… I’m here to make money.” And that’s what he does, and he does it well. Knuckman reflected the view of many in his field, stating: “I don’t believe in politics… I believe in the market, and the market is always right.” When asked if the soaring food prices were the result of financial speculation, something in which he is directly engaged, Knuckman replied: “I don’t see it.”
One is reminded of a bad joke: two fish meet, one asks the other, “how’s the water today?” to which the other replies, “what’s water?” When one is entirely submerged in a specific universe, it requires a great deal of effort to remove one’s perspective to see a wider world view, and their place within it. Alan Knuckman is quite obviously far removed from the everyday struggles of most people, in his own country, let alone the rest of the world. When questioned by Der Spiegel about the high cost of food, he explained: “The age of cheap food is over… Most Americans eat too much, anyway.” While Americans spend roughly 13% of their disposable income, on average, on food, the world’s poor spend roughly 70% of their budget on food, and thus, high food prices for this population, with one billion people on earth classified as living in hunger, and with food prices hitting new record highs almost every passing year, pushing tens of millions more into poverty and hunger, these price-hikes are “life-threatening.” So what did Knuckman have to say about this? He contended that it amounted to “undesirable side effects of the market,” but of course, as he earlier stated, “the market is always right,” and thus, with that logic of thinking, there is nothing “wrong” with one billion people going hungry, nor with more being pushed into poverty and hunger, which are amounted to mere “undesirable side effects.” As he earlier explained, “I’m here to make money,” and obviously, everything else is incidental.
The international food market, which “is always right,” is also incidentally dominated by major banking houses, and the speculative trade in food securities was created and inflated by the very same banks that created, inflated, and profited off of the housing boom in the United States, such as Goldman Sachs, Lehman Brothers, Bear Stearns, Morgan Stanley, and JP Morgan Chase. These banks, hedge funds, and other speculators are able to reap enormous profits as millions are pushed into hunger and poverty, and the brilliance of this scheme is that the investors don’t have to produce a single thing, and never even come into contact with the real food market, whether production or distribution. They trade in “futures,” betting that prices will go up (or possibly down) in the future, and the real prices of food follow the speculative increases and decreases, and when prices go up, the speculators make money. The World Bank estimated that an increase of 10% in worldwide food prices pushes roughly 10 million more people into poverty, and that while there is enough food to feed the world, “many die of hunger simply because they can no longer afford to pay for it.”
In 2011, the annual meeting for Barclays faced protests by anti-poverty campaigners who were raising awareness about the role of Barclays in driving up food prices and profiting off of hunger, as the UK’s largest participant in food commodity trading, and one of the top three banks involved globally, according to information from the World Development Movement (WDM). The other top two banks in global commodity trading are Goldman Sachs and Morgan Stanley. Deborah Doane of the WDM noted: “First, it was sub-prime mortgages, now it’s food commodities… The lack of transparency in these markets bears worrying resemblance to the behaviour that led to the 2008 financial crash. Like any irrational asset bubble, the investors pile their money in for short-term profits, in spite of the consequences.” Estimates from WDM put the profits Barclays accumulated from food speculation at 340 million pounds in 2010.
By 2012, it was reported that Barclays had made as much as half a billion pounds in two years from food speculation. An official at Oxfam noted: “The food market is becoming a playground for investors rather than a market place for farmers. The trend of big investors betting on food prices is transforming food into a financial asset while exacerbating the risk of price spikes that hit the poor hardest.”
In an early 2012 interview with Der Spiegel, the head of the United Nations Food and Agriculture Organization (FAO), José Graziano da Silva, stated that, “speculation is indeed an important cause of the heavily fluctuating and very high prices” of food, and “only benefits banks and hedge funds, but not producers, processors and buyers – and certainly not consumers.” Apart from placing “regulations” on food speculation, da Silva suggested that the rich industrial countries should end their agricultural subsidies, noting that when the U.S. ended its subsidies for corn-based biofuels in the summer of 2011, global prices of corn immediately dropped, which “had a direct and positive effect on the food situation.” The FAO is hardly a radical organization, firmly entrenched within global power structures, it continues to promote “market solutions” to problems of hunger and food, though is critical of market “excesses.” Da Silva noted, however, that “there is enough food for everybody, but for many people, especially the poor, it’s simply too expensive. They are going hungry, even with full shelves of food.” Thus, when asked if the food crisis was “really a financial problem,” da Silva replied, “Of course.”
In 2011, speculative investment in agricultural commodities amounted to 20 times the amount of money spent by all countries of the world on food and agricultural “aid.” The three biggest players in agricultural commodity speculation – Goldman Sachs, Morgan Stanley, and Barclays, respectively – have reaped hundreds of millions and billions in profits in this speculative assault against the world’s poorest billion people suffering from hunger. The UN rapporteur on food, Olivier De Schutter, noted: “What we are seeing now is that these financial markets have developed massively with the arrival of these new financial investors, who are purely interested in the short-term monetary gain and are not really interested in the physical thing – they never actually buy the ton of wheat or maize; they only buy a promise to buy or sell. The result of this financialisation of the commodities market is that the prices of the products respond increasingly to a purely speculative logic. That explains why in very short periods of time we see prices spiking or bubbles exploding, because prices are less and less determined by the real match between supply and demand.”
The UN World Food Programme referred to the 2008-2011 global spike in food prices as a “silent tsunami of hunger,” pushing 115 million more people into hunger and poverty since 2008. This, explained De Schutter, is “an absolute catastrophe” for the world’s poor. In Kenya, an unemployed single-mother looking after her eight-year-old daughter and 83-year old father explained that since the massive food price hikes: “We stopped eating lunch, and saved the little we had to eat for supper. We drank tea without sugar and sometimes we also missed breakfast. I had to travel so much to wash clothes to get money for food, but sometimes I was so weak I fell down. For supper, we had one or two cups of flour mixed with water and salt. Our life was so hard.” It is worth remembering – and reminding yourself continuously – that there is more than enough food in the world to feed the population of the world, yet, stories like this single mother’s are becoming increasingly common among billions of people. If ever there was a clear sign that something is fundamentally wrong with the global system – and “market solutions” – this is it.
In the summer of 2012, the United States experienced the worst draught in decades, contributing to increased speculation in food markets, driving prices up higher and inducing warnings of another major global food crisis on the brink. Chris Mahoney, the head of agriculture at Glencore, a major global commodity trader, let slip some industry honesty when he stated: “The U.S. weather starting mid-May… has been among the worst three or four years of the century, comparable to the dust bowl years of the mid-1930s… In terms of the outlook for the balance [profits] of the year, the environment is a good one. High prices, lots of volatility, a lot of dislocation, tightness, a lot of arbitrage opportunities… I think we will both be able to provide the world with solutions, getting stuff to where it’s needed quickly and timely, and that should also be good for Glencore.” The CEO of Glencore, Ivan Glasenberg, referred to the volatile food market as “a time when industry fundamentals are the most positive they have been for some time.” Put simply, increased food prices, and thus, increased hunger, is “good for Glencore.” Tens of millions more people pushed into abject poverty and hunger? No need to be concerned, that only means that “industry fundamentals are the most positive they have been for some time.”
What can we conclude, therefore, from a global system of ‘markets’ in which poverty and starvation create massive profits for a few select institutions and individuals, at the expense of literally billions of human beings, and entire nations and societies? Does this really reflect, as one trader stated that, “the market is always right”? Or does it reveal a market which benefits few at the expense of many? The answer is, of course, self-evident: so then why is the issue not framed in such a manner? Instead of acknowledging global markets as inherently and structurally (not to mention ideologically) immoral and wrong, we talk about “reforming” and “regulating” these markets as if minor changes would rectify the fundamental problems. The truth – as hard as it may be for many to accept – is that global markets are fundamentally wrong and immoral.
We acknowledge this type of immorality on an individual level, say with the literary character of Ebenezer Scrooge who profited from the misery of others, but when it reaches global institutional and ideological proportions, we often justify and excuse it, or possibly acknowledge that it is “not perfect” and there are “undesirable side effects,” possibly warranting ‘reform.’ Perhaps the institutional ideology could be best summarized by Ebenezer Scrooge when he was asked to donate to a charity to help the poor and hungry who were at risk of dying, to which Scrooge replied, “If they would rather die… they had better do it, and decrease the surplus population.”
At what point is it acceptable to suggest that humanity is in need of an entirely new way of organization and function? In a world of seven billion people, when billions live in poverty, in slums, and with hunger, at what point do we begin to acknowledge that this system simply does not work? Sadly, it seems that people only often recognize this when they are among the poor, within the slums, and starving. By that point, however, their concerns become those of daily survival, not issues of reform or even activism and revolution. Their days are spent toiling and struggling for a meager dollar or two so that they could afford a meager meal, or if lucky, two meals. Looking after other family members, they do not have the luxury of education, information, and the ready capacity for organization and activism that we – who do not live in hunger and absolute poverty – have. If we continue to uphold a world system which has created and sustains and exacerbates the conditions and prevalence of global poverty, slums, and hunger, we doom others – and indeed ourselves – to that same fate.
Andrew Gavin Marshall is an independent researcher and writer based in Montreal, Canada, with a focus on studying the ideas, institutions, and individuals of power and resistance across a wide spectrum of social, political, economic, and historical spheres. He has been published in AlterNet, CounterPunch, Occupy.com, Truth-Out, RoarMag, and a number of other alternative media groups, and regularly does radio, Internet, and television interviews with both alternative and mainstream news outlets. He is Project Manager of The People’s Book Project and has a weekly podcast show with BoilingFrogsPost.
Future samples from this chapter will focus on environmental degradation, poverty, and the global land grabs. If you found this excerpt of interest, please consider making a donation to The People’s Book Project to help the research and writing continue.
 Sara Flounders, “Winner of Project Consored top 25 articles for 2009 – 2010 news stories: Pentagon’s role in global catastrophe,” IAC, 18 December 2009:
 UNEP, Background paper for the ministerial consultations, Governing Council of the United Nations Environment Programme, 14 December 2009: page 3
 John Vidal, Copenhagen climate summit in disarray after ‘Danish text’ leak, The Guardian, 8 December 2009: http://www.guardian.co.uk/environment/2009/dec/08/copenhagen-climate-summit-disarray-danish-text
 Richard Black, Copenhagen climate summit negotiations ‘suspended’, BBC, 14 December 2009: http://news.bbc.co.uk/2/hi/science/nature/8411898.stm
 John Vidal, Copenhagen climate failure blamed on ‘Danish text’, The Guardian, 31 May 2010: http://www.guardian.co.uk/environment/2010/may/31/climate-change-copenhagen-danish-text
 Louise Gray and Rowena Mason, Copenhagen summit: rich nations guilty of ‘climate colonialism’, The Telegraph, 9 December 2009: http://www.telegraph.co.uk/earth/copenhagen-climate-change-confe/6771129/Copenhagen-summit-rich-nations-guilty-of-climate-colonialism.html
 Philippe Naughton, Copenhagen Summit: wealthy nations accused of ‘carbon colonialism’, The Sunday Times, 9 December 2009: http://www.timesonline.co.uk/tol/news/environment/article6950081.ece
 Ben Webster, Britain angers poor nations with plan to switch cash from health to climate, The Times, 10 December 2009: http://www.timesonline.co.uk/tol/news/environment/article6951047.ece
 William Gumede, Copenhagen is a disaster for Africa, The Guardian, 23 December 2009: http://www.guardian.co.uk/commentisfree/cif-green/2009/dec/23/copenhagen-africa-climate-change-deal
 Julian Borger, “Crisis talks on global food prices,” The Guardian, 27 May 2008:
 Marc Lacey, “Across globe, hunger brings rising anger,” The New York Times, 18 April 2008:
 Orla Ryan, “Food riots grip Haiti,” The Guardian, 9 April 2008:
 David M. Herszenhorn, “Senate Democrats Calling for More Food Assistance,” The New York Times, 29 April 2008:
 Jane Croft, “Food: Employers may have to become providers,” The Financial Times, 18 November 2008:
 Paul Vallely, “The other global crisis: rush to biofuels is driving up price of food,” The Independent, 12 April 2008:
 Aditya Chakrabortty, “Secret report: biofuel caused food crisis,” The Guardian, 3 July 2008:
 Julian Borger and John Vidal, “New study to force ministers to review climate change plan,” The Guardian, 19 June 2008:
 John Vidal, “UN warned of major new food crisis at emergency meeting in Rome,” The Guardian, 24 September 2010:
 Jill Treanor, “World food prices enter ‘danger territory’ to reach record high,” The Guardian, 5 January 2011:
 John Vidal, “Food speculation: ‘People die from hunger while banks make a killing on food’,” The Observer, 23 January 2011:
 Katie Allen, “Hedge funds accused of gambling with lives of the poorest as food prices soar,” The Guardian, 19 July 2010:
 Frederick Kaufman, “How Goldman Sachs Created the Food Crisis,” Foreign Policy, 27 April 2011:
 Horand Knaup, Michaela Schiessl and Anne Seith, “Speculating with Lives How Global Investors Make Money Out of Hunger,” Der Spiegel, 1 September 2011:
 Felicity Lawrence, “Barclays faces protests over role in global food crisis,” The Guardian, 25 April 2011:
 Tom Bawden, “Barclays makes £500m betting on food crisis,” The Independent, 1 September 2012:
 Spiegel Staff, “UN Food and Agricultural Chief: ‘Speculation Is an Important Cause of High Prices’,” Der Spiegel, 16 January 2012:
 Grace Livingstone, “The real hunger games: How banks gamble on food prices – and the poor lose out,” The Independent, 1 April 2012:
 Vince Heaney, “US drought renews food speculation concerns,” The Financial Times, 19 August 2012:
 Tom Bawden, “Unholy trade of making millions out of misery,” The Independent, 23 August 2012:
Corporate Culture and Global Empire: Food Crisis, Land Grabs, Poverty, Slums, Environmental Devastation and Resistance
Corporate Culture and Global Empire: Food Crisis, Land Grabs, Poverty, Slums, Environmental Devastation and Resistance
By: Andrew Gavin Marshall
Corporate power is immense. The world’s largest corporation is Royal Dutch Shell, surpassed in wealth only by the 24 largest countries on earth. Of the 150 largest economic entities in the world, 58% are corporations. Corporations are institutionally totalitarian, the result of power’s resistance to the democratic revolution, which was begrudgingly accepted in the political sphere, but denied the economic sphere, and thus was denied a truly democratic society. They are driven by a religion called “short-term profits.” Corporate society – a state-capitalist society – flourished in the United States, and managed the transition of American society in the early 20th century, just as Fascists and Communists were managing transitions across Europe. With each World War, American society – its political and economic power – grew in global influence, and with the end of World War II, that corporate society was exported globally.
This is empire. The American military, intelligence agencies, and national security apparatus operate with the intention of serving U.S. – and now increasingly global – state and corporate interests. Wars, coups, destabilization campaigns, support for dictators, tyrants, genocides and oppression are the products of Western interaction with the rest of the world.
In the same sense that “God made man in his own image,” corporations remade society in their own interest; and with equal arrogance. Corporations and banks created or took over think tanks, foundations, educational institutions, media, public relations, advertising, and other sectors of society. Through their control of other institutions, they extend their ideologies of power – and the variances between them – to the population, to other elites, the ‘educated’ class, middle class, the poor and working class. So long as the ideas expressed support power, it’s ‘acceptable.’ It can extend critiques, but institutional analysis is not permitted. Ideas which oppose institutional power are ‘ideological’, ‘idealist’, ‘utopian’, and ultimately, unacceptable.
Corporate culture dominates our society in the West. Being inherently totalitarian institutions, the culture – and its institutions – become increasingly totalitarian. This is the response by private economic power to undo the achievements in human history which came through increased democracy in the political sphere. Corporations and banks seek to control and consume all things, to dominate without end.
The only reason corporations were and are able to be the defining cultural institution of the 20th and now 21st century, is because of their economic power. This is derived from exploitation: of resources, the environment, labour, and consumers. It is enforced with repression: the job of the state in the state-capitalist society, along with massive subsidies and protectionist measures for corporate and financial interests. As corporate power extended around the world, the rapid destruction of the environment and resources accelerated, and Western powers ‘outsourced’ the environmental devastation our consumer societies ‘require’ to the so-called Third World. We consume, and they suffer; a marriage of inconvenience that we call “civilization.” Corporations and our state keep the rest of the world in a state of poverty and repression, eternally attempting to block the inevitable global revolution to create a human society that acts… humanely. We were busy buying things. Couldn’t be bothered.
Now what our societies have done to the people on whose land we now live, or everyone else in the world, is being done internally, to us. Everything is up for sale! Corporations make record profits, hoard billions and trillions in cash reserves, NOT being invested, but likely waiting until your standard of living is significantly reduced so that your labour and resources are cheaper, and thus, ultimately more profitable. This is called ‘austerity’ and ‘structural reform,’ political euphemisms for impoverishment and exploitation.
Corporations, banks and states have in recent years caused a massive global food crisis, driving food costs to record highs almost every subsequent year from 2007 onward. With billions of people in the world living on less than $2 per day, the majority of humanity spends most of their income on food. Price increases in food, caused primarily by financial speculation (big players include Goldman Sachs, Morgan Stanley, and Barclays), push tens of millions more people into poverty and hunger. Roughly one billion – 1/7th of the world’s population – live in slums. And they are growing rapidly. Massive urban slums were developed out of the imperialism Western states and corporations imposed upon the rest of the world, pushing people off the land and into the cities, whether induced by poverty or coerced by bombs and guns. All billed to the imperial Western state sponsors of terrorism. We supported (and support) ruthless and tiny elites in the countries we dominate[d] around the world, and now we are just beginning to realize the ruthless and tiny elite which rules over our own domestic lives. Their social function is that of a parasite: to suck the life blood out of all global society.
Food price increases have helped spur a massive global land grab, with Western (as well as Gulf and Asian powers) grabbing vast tracts of land – and water – around the world, for pennies on the dollar. This grab is most extensive in Africa, where in the past several years, mostly Western investors have grabbed land which amounts to an area roughly the size of Western Europe. The land not only contains extensive resource wealth, most importantly water (the Nile is up for sale!), but it is home to hundreds of millions of people, and globally, there are 2.5 billion poor people engaged in small-scale farming. This is primarily done through communal land ownership, something which Western society – with its ‘divine right’ of private property – does not understand. Thus, in international, state, and corporate law – which we designed – we deem communally owned and used land to be legally owned by the state. Our ‘investors’ – banks, hedge funds, pension funds, corporations and states – strike deals with corrupt states across the world to give us 40-100 year contracts for vast tracts of land, paying little or sometimes no rent. Then the “empty land” – as we call it – is cleared (of it’s “emptiness”, no doubt), evicting peoples who have been there for generations and beyond, who depend upon the land and the food it produces for their very lives. These people are being driven to cities, and ultimately, slums.
This is what we call “productive” use of land. So naturally, we then destroy it, eviscerate its environment, poison and pollute, extract, exploit, plunder and profit. Or we simply hold onto the land, not using it at all, just waiting until it goes up in profit. Even major American universities like Harvard are getting involved in the massive land grabs across Africa and elsewhere. This is the largest land grab in history since the late 19th century ‘Scramble for Africa’ where Europeans colonized almost the entire continent. When we do use the land for ‘productive use’, we say it will “help the climate” and “reduce hunger.” How? Because we will produce food and biofuels. And in doing so, we will use massive amounts of chemicals, pesticides, genetically modified organisms, deforestation, biodiversity destruction, highly mechanized and heavy fuel-use farming techniques. The food we produce – which is not much, we have more interest in things like biofuels, lumber, minerals, oil, cash-crops, etc. – is then exported to our countries, and away from the poor ones where hunger and poverty are so prevalent. They lose their land, gain more poverty, with the added bonus of extensive food insecurity, hunger, starvation, slum growth, increased mortality rates, disease, and violence. Poverty is violence.
This is how Western states, banks, corporations and international organizations address the issue of “hunger”: by creating more of it. And in a deeply disturbing irony, we call this moving towards “sustainability.” Little did we know that power interests have a different definition of “sustainability” than most people: they simply combined the words sustained and profitability, and called it “sustainability.” And coincidentally, that word already has a meaning to most people, so we simply misinterpreted the meaning. But there are people who take that concept seriously, those who experience the major costs of an unsustainable society.
We are witnessing a massive global resistance to these processes, largely driven by indigenous peoples – in Africa, Latin America, Asia, and now in North America. In Canada, the ‘Idle No More‘ movement began with four indigenous women in Saskatchewan deciding to meet up and discuss their concerns about Steven Harper’s “budget bill,” which, among other things, had reduced the amount of Canada’s protected rivers, lakes, and streams from roughly 2.5 million (as of Dec. 4, 2012) to somewhere around 62 (as of Dec. 5, 2012). Now a large, expanding, and increasingly international social movement led by indigenous peoples is taking place. Less than two months ago, it began with four women having a discussion.
Canada’s Indigenous peoples are showing Canadians – and others around the world – how to stand up against power. And they’ve had practice. For over 500 years, our societies have been oppressing and often eradicating indigenous populations at ‘home’ and abroad. Indigenous peoples, like other oppressed peoples, are at the front lines of the most oppressive nature of our society: they experience and have experienced exploitation, environmental devastation, domination and decimation. With the world’s Indigenous peoples speaking – not only in Canada, but across Latin America, Africa, and elsewhere – it is time that we in the West begin to listen. It is always important to listen to those who are most oppressed; the histories of our ‘victims’ are rarely written or known, at least not to us. Victims remember. And it matters that we begin to listen.
How can we expect to change – or know what and how to change – our societies if we do not listen and learn from those who have experienced the worst of our society? Indigenous people are now giving us a lesson in democratic struggle. If we continue on our current path, Indigenous communities will be completely wiped out; the powers that rule our society will have completed a 500-year genocide.
So we have to ask ourselves the question: should we now listen to, learn from, and join with these people in common struggle for justice and the idea of a humane society, or… are we still too busy buying things?
Perhaps it is time we all should be ‘Idle No More.’
The above was a short summary of roughly three separate chapters currently being researched and written as part of The People’s Book Project. To help the Project continue, please consider spreading the word, sharing articles, or donating.
Crowdfunding a Book for the Revolution
By: Andrew Gavin Marshall
Dear Readers and Supporters,
Funding for The People’s Book Project has essentially – despite a few select donations – come to a halt. At the moment, there are not enough remaining funds to sustain the Project past the next week or so. For this reason, I have started a crowdfunding initiative through Indiegogo, a large crowdfunding website, to attempt to raise funds for both the Book Project itself, and to facilitate a trip to Europe, specifically Greece and Spain, in order to undertake research and journalism from the front lines of the economic crisis and anti-austerity revolts. This was done in an attempt to shift the burden of financial support from those who have long supported my work – through my website(s) – to a new audience with a much wider reach than my own, which is very minimal, to say the least.
However, funding through Indiegogo is also currently not sufficient, so I am asking for your help in promoting this initiative, through Facebook, social media, networking, etc. The only way to increase financial support is to increase exposure, and I cannot do this on my own. If you have the means, or are so inclined, your financial contributions would be enormously appreciated as well, either through my website or on Indiegogo. However, it is in the networking, social media, and promotion that I need a great deal of help. I often see the same names who take it upon themselves to help promote my work through social media, and it is incredibly appreciated; just as I often see the same names who provide financial support. While both of these groups – with some overlap between them – are essentially the reason why I have been able to continue independent research and writing up to this point, I need to expand my exposure and bases of support, in order to continue the Project itself, but also to lift some of the burden from those who have consistently supported this Project as it approaches its one-year anniversary.
So, if you have not made a financial contribution, please consider doing so, and just as – if not more – importantly, please help in sharing my articles, book promotions, and the new Indiegogo fundraising page. Your efforts mean a great deal to me, and are enormously appreciated. So thank you for all you have done, and continue to do!
In looking at the objective for the first volume of the Book Project, with a focus on the global economic crisis and global anti-austerity and resistance movements, I feel that I should re-post some of the research and writing that has come about through the generous support of readers and supporters thus far, and of which a great deal will be going into the first volume of the Book.
Starting with the global economic crisis and anti-austerity resistance movements, the following articles, samples, and excerpts have been made possible due to the generous support of readers:
These articles are collectively but a small sample of the actual research and writing which has gone into the Project over the past two months, which has surpassed 300 pages in writing (with over 100 pages on Greece alone!).
On the subjects of education as social control, class warfare, and student movements, the following articles have been made possible: the series, “Class War and the College Crisis.”
Further into the subject of the Quebec student movement, the following work has been made possible due to reader contributions and support:
From the Chilean Winter to the Maple Spring: Solidarity and the Student Movements in Chile and Quebec
Quebec Steps Closer to Martial Law to Repress Students: Bill 78 is a “Declaration of War on the Student Movement”
Writing About the Student Movement in Québec: You’re Damn Right I’m “Biased”! … Confessions of a Non-Neutral Observer
On the issue of Empire, the following research, samples, and writing have been made available through reader support and donations:
An Education for Empire: The Rockefeller, Carnegie, and Ford Foundations in the Construction of Knowledge
Education or Domination? The Rockefeller, Carnegie, and Ford Foundations Developing Knowledge for the Developing World
The U.S. Strategy to Control Middle Eastern Oil: “One of the Greatest Material Prizes in World History”
All of this does not even begin to truly cover the amount of extensive research and writing which has been undertaken in the past year, a good deal of which will be integrated into the first volume of the Book. Again, ALL of this has only been made possible due to the support of readers.
Readers and supporters have also undertaken – of their own initiative – to kindly translate some of my articles into foreign languages, simply because they chose to do so, and for which they received no financial compensation.
Among the French translations of some of my articles are:
A Greek translation of my article:
An Italian translation of one of my recent articles on the European debt crisis:
And in Spanish translations:
So thank you, sincerely, for all of your support over this past year. I could not have done any of this without you, and it’s only possible – and will only be possible in the near future – because of your support. And I will thank you in advance for helping to promote my writing, research, and fundraising campaign on Indiegogo.
In Solidarity, now and always,
Andrew Gavin Marshall
Andrew Gavin Marshall is an independent researcher and writer living in Montreal, Canada. His website (www.andrewgavinmarshall.com) features a number of articles and essays focusing on an analysis of power and resistance in the political, social, and economic realms. He is Project Manager of The People’s Book Project, and is currently writing a book on the global economic crisis and resistance movements emerging around the world. To help this book come to completion, please consider donating through the website or on Indiegogo.
Austerity, Adjustment, and Social Genocide: Political Language and the European Debt Crisis
By: Andrew Gavin Marshall
The following is a sample analysis from my upcoming book on the global economic crisis and global resistance movements. Please consider donating to The People’s Book Project to help support the effort to finish this book.
Political language… is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind.
- George Orwell, “Politics and the English Language,” 1946
Political language functions through euphemism, by employing soft-sounding or simply meaningless words to describe otherwise monstrous and vicious policies and objectives. In the European debt crisis, political language employed by politicians, economists, technocrats and bankers is designed to make policies which create poverty and exploitation appear to be logical and reasonable. The language employed includes the words and phrases: fiscal austerity/consolidation, structural adjustment/reform, labour flexibility, competitiveness, and growth. To understand political language, one must translate it. This requires four steps: first, you look at the rhetoric itself as inherently meaningless; second, you examine the policies that are taken; third, you look at the effects of the policies. Finally, if the effects do not match the rhetoric, yet the same policies are pursued time and time again, one must translate the effects as the true meaning of the rhetoric. Thus, the rhetoric has meaning, but not at face value.
The debt crisis followed the 2007-2009 financial crisis, erupting first with Greece, then Ireland, Portugal, Italy and Spain, and threatens even to spread elsewhere. Of those mentioned, only Italy has not received a bailout. Though whether “bailed out” or not, Europe’s people are being forced to undergo “austerity measures,” a political-economic euphemism for cutting social spending, welfare, social services, public sector jobs, and increased taxes. The aim, they are told, is to get their “fiscal house in order.” The people protest, and go out into the streets. The state responds by meeting the people with riot police, batons, tear gas, pepper spray, and rubber bullets. This is called “restoring order.”
The effects of austerity are to increase poverty, unemployment, and misery. People are fired from the public sector, welfare and social benefits are reduced or lost, retirement ages are increased to keep people in the work force and off the pension system, which is also cut. Cuts to health care and education take a social and physical toll; as poverty increases the need for better health care, that very system is dismantled when it is needed most. Taxes are increased, and wages are decreased. People are deeper in debt, and destined for destitution. The objective, we are told, is to reduce public spending so that the government can reduce its deficit (the yearly debt).
In Europe, austerity has been the siren call of all the agencies, organizations, and individuals who represent the interests of elite financial control. In March 2010, the OECD (Organisation for Economic Co-operation and Development) suggested Europe undertake a program of austerity lasting for no less than six years from 2011 to 2017, which the Financial Times referred to as “highly sensible.” In April of 2010, the Bank for International Settlements (BIS) – the central bank to the world’s central banks – called for European nations to begin implementing austerity measures. In June of 2010, the G20 finance ministers agreed: it was time to enter the age of austerity! German Chancellor Angela Merkel, the European midwife of austerity, set an example for the EU by imposing austerity measures at home in Germany. The G20 leaders met and agreed that the time for stimulus had come to an end, and the time for austerity poverty was at hand. This was of course endorsed by the unelected technocratic president of the European Commission, José Manuel Barroso. The unelected president of the European Council, Herman Van Rompuy, also agreed, explaining in his unrelenting economic wisdom that austerity “has no real effect on economic growth.” Jean-Claude Trichet, president of the European Central Bank (ECB), also hopped on the austerity train, writing in the Financial Times that, “now is the time to restore fiscal sustainability.” Jaime Caruana, General Manager of the Bank for International Settlements (BIS) stated in June of 2011 that the need for austerity was “more urgent” than ever, while BIS chairman, Christian Noyer, also the governor of the Bank of France (and board member of the ECB), stated that apart from austerity, “there’s no solution possible” for Greece.
In April of 2011, the two president of the EU – Barroso and Van Rompuy – felt it was necessary to clarify (just in case people were getting the wrong idea), that: “Some people fear this work is about dismantling the welfare states and social protection… Not at all … It is to save these fundamental aspects of the European model… We want to make sure that our economies are competitive enough to create jobs and to sustain the welfare of all our citizens and that’s what our work is about.” However, the following year, the new European Central Bank president, Mario Draghi (former governor of the Bank of Italy), stated in an interview with the Wall Street Journal that, “there was no alternative to fiscal consolidation,” meaning austerity, and that Europe’s social contract was “obsolete” and the social model was “already gone.” However, Draghi explained, it was now necessary to promote “growth,” adding, “and that’s why structural reforms are so important.”
Thus, “austerity packages” will then prepare the state and economy for the next phase, which, we are told, would make the country “competitive” and create “growth.” This is how the country would pay off its total debt, which deficits merely add to. This process is called “structural adjustment” (or “structural reform”) and it requires “competitiveness” to facilitate “growth.”
As we can loosely translate “austerity” into poverty, we may translate “structural adjustment” into exploitation. After all, nothing goes better with poverty than exploitation! How does “structural adjustment” become exploitation? Well through competitiveness and growth, of course! Structural adjustment means that the state liberalizes the economy, so everything is deregulated, all state-owned assets are privatized, like roads, hospitals, airports, rivers, water systems, minerals, resources, state-owned companies, services, etc. This, as the story goes, will encourage “investment” in the country when it “needs it most.” This idea suggests that foreign banks and corporations will enter the “market” and purchase all these wonderful things, explaining that they work better when they are “competitive” in the “free market,” and then with their new investments, they will create new industries, employ local people, revive the economy, and with the “trickle down” from the most productive and profitable, all of society will rise in living standards and opportunity.
But first, other “structural adjustment” measures must be simultaneously employed. One of the most important ones is called “labour flexibility.” This means that if you have protected wages, hours, benefits, pensions… well, now you don’t! If you are a member of a union, or engage in collective bargaining (which has at its disposal the threat of a strike), soon you won’t. This is done because, as the story goes, wages must be decreased to increase the competitiveness of the labour force. Simply put, if less money goes into labour during the process of production, what is ultimately being produced will be cheaper on “the market,” and thus, will become more attractive to potential buyers. Thus, with lower wages comes greater profits. ECB president Mario Draghi himself emphasized that the “structural reforms” which Europe needs are, “the product and services market reform,” and then “the labour market reform which takes different shapes in different countries.” He added that the point was “to make labour markets more flexible and also fairer than they are today.” Isn’t that nice? He wants to make labour markets “fairer.” What this means is that, since some countries have protections for various workers, this is unfair to the workers who have no protections, because, as Draghi explained, “in these countries there is a dual labour market: highly flexible for the young part of the population… [and] highly inflexible for the protected part of the population.” Thus, “labour markets at the present time are unfair in such a setting because they put all the weight of flexibility on the young part of the population.” So to make the labour markets “fair,” everyone should be equally exploitable, and thus, equally flexible.
Labour flexibility will then help “specialize” your country in producing one or a few select goods, which you can produce better, cheaper, and more of than anywhere else. Then your economy will have success and the lives of all will prosper and grow… just not their wages. That is left to the “trickle down” from those whose wages are increased, the corporate, banking, and government executives and managers. That is because they take all the risk (remember, you are not risking anything when you passively accept your wages and standards of living to be rapidly decreased), and thus, they should get all of the reward. And because their rewards are so huge, large scraps will fall off of their table and onto the floor, which the wage-slaves below can fight over. By the laws of what I can only assume is “magic,” this will eventually lift the downtrodden from a life of poverty and labour and all will enjoy the fruits of being in a modern, technological, democratic-Capitalist paradise! Or so the fable goes.
The actual, predictable, and proven results of “structural adjustment” aimed at achieving “growth” through “competitiveness” is exploitation. The privatization of the economy allows foreign banks and corporations to come in and buy the entire economy, resources, commodities, infrastructure and wealth. Because the country is always in crisis when it does this, everything is sold very cheaply, pennies on the dollar kind of cheap. That is because the corporations and banks are doing the government and people a favour by investing in a country which is a large risk. The money the state gets from these sales is recorded as “revenue,” and helps reduce the yearly debt (deficit). The result for the people, however, is that mass layoffs take place, commodity prices increase, service costs increase, and thus, poverty increases. But privatization has benefits, remember; it encourages “competitiveness.” If everything was privatized, everyone would compete with each other to produce the best goods for the lowest costs, and everyone can subsequently prosper together in a society of abundance.
What actually takes place is that multinational corporations and banks, which already own most of the world’s resources, now own yours, too. This is not competitive, because they are ultimately all cartels, and collude together in exploiting vast resources and goods from around the world. They do compete in the sense of seeing which one can exploit, produce, and control more than the other. But at the bottom of this system, everyone else gets poorer. This is called “competitiveness,” but what it actually means is control. So if the economy needs to become more competitive, what is really being said is that it needs to come under more control, and of course, in private corporate and financial hands.
State owned industries are simply closed down, employees fired, and the product or resource which that industry was responsible for producing is then imported from another country/corporation. A corporation takes over that domestic good/resource and then extracts/produces it for itself. But this requires labour. It’s a good thing that the labour force has had its back broken through austerity and adjustment, because now there are no protected jobs, wages, hours, unions, or workers’ rights in general. Thus, the population is free to be exploited for long hours and minimal wages. This makes what they are producing to be cheaper, and thus, more “competitive.” This can become extremely profitable for corporations and banks which took all the risk in this entire process (remember: you don’t count; you had very little to begin with, so you lost very little. They have a lot, and thus, a lot more to lose. That’s what risk means). If workers attempt to form unions or organize and demand higher wages, the corporation can simply threaten to close down the plant, and move the jobs to somewhere else with a more “flexible” labour force. Or, the corporation could simply hire local immigrant populations (or ship in others) and pay them less for more hours, and leave you without any jobs. This is called “labour flexibility.” Labour flexibility translates as cheap labour: to bring everyone down to an equally low level of worker standards, and thus, to encourage “utilization,” which means exploitation.
In the ‘Third World,’ this has been best achieved through what are called “Export Processing Zones (EPZs),” a term used to describe a designated area outside of state control in which corporations may establish factories to freely exploit labour as they choose. Commodities are shipped in, goods are produced in the EPZs, from where they are then exported abroad, free of pesky national taxation and regulation. Ultimately, EPZs are mini corporate colonies. In late May of 2012, it was reported that Germany was looking for “alternatives” to its exclusive focus on austerity, and subsequently came up with a six-point plan for “growth.” One of the most notable points from Berlin was to establish “special economic zones to be created in crisis-plagued countries at the periphery of the euro zone,” as “foreign investors could be attracted to those zones through tax incentives and looser regulations.” Essentially, they are EPZs for the eurozone. The plan also calls for establishing trusts which would organize the sell-off of state assets in massive privatization schemes. Further, what is needed, according to Berlin, was to establish a “dual education system, which combines a standardized practical education at a vocational school with an apprenticeship in the same field at a company in order to combat high youth unemployment.” In other words, no more academic or intellectual education for youth, but rather “vocational” or labour-oriented education, to not allow the expectations of the youth to rise too far, and to simply prepare them for a life of ‘work’ by attaining the necessary vocational skills. And of course, the plan for “growth” from Germany also includes more efforts at establishing “labour flexibility,” which would include “a loosening of provisions that make it difficult to fire permanent employees and to create employment relationships with lower tax burdens and social security contributions.” In other words: make it easy to fire workers, have lower wages, and eliminate benefits.
Economists and politicians often talk about the need to “utilize labour flexibility to increase competitiveness and achieve growth.” What they are really saying is that they need to exploit cheap labour to increase control and achieve profits and power. Lucas Papademos was installed (unelected) as the “Technocratic” prime minister of Greece in November of 2011, in order to “help” Greece undertake the mandatory “reforms.” Papademos was the perfect candidate for the job: he was an economist educated in the U.S., served on the board of the Federal Reserve Bank of Boston, was chief economist at the Bank of Greece, he became Governor of the bank in 1994, where he oversaw the conversion of Greece into the euro, and in 2002, he joined the European Central Bank board, where he became a Vice President under Jean-Claude Trichet.
In a 2005 interview with the Financial Times while he was Vice President at the European Central Bank (ECB), Lucas Papademos said that European “growth” potential was looking good, but added: “There is a risk that, unless there are changes in policies – more reforms in labour and product markets – as well as in the behaviour of private economic agents, this [growth] range may have to be revised downwards.” He explained: “the main way that potential growth could increase is through policies that boost productivity growth and raise labour utilization by increasing the average hours worked and the participation rate in the labour market and by making this market more flexible and adaptable.” In May of 2010, Bank of England governor Mervyn King stated that the eurozone needed “structural reforms, changes in wages and prices in the countries that need to regain competitiveness.” Former ECB president Jean-Claude Trichet had also emphasized that what was needed was a program of fiscal austerity, “accompanied by structural reforms to promote long-term growth.” In other words, what was needed was impoverishment, accompanied by exploitation to promote long-term profits.
The European Financial Stability Facility (EFSF), the Euro-area bailout fund, was headed by a man named Klaus Regling. In an article he wrote for The Banker, Regling emphasized that funds from the EFSF would come with conditions, including of course, austerity measures, but also, “structural reforms, such as modernizing public administrations, improving labour market performance and enhancing the tax systems, with the aim of increasing a country’s competitiveness and growth potential.” In other words, the conditions imposed on countries receiving a bailout would amount to an impoverishment program (“austerity”), combined with increased exploitation (“structural reforms”), through privatization of state industries and assets (“modernizing public administration”), creating a cheap labour force (“improving labour market performance”), extracting all remaining domestic wealth (“enhancing the tax systems”), designed to increase control (“competitiveness”) and profits (“growth”).
Mario Draghi, as president of the ECB, called for a “growth pact” (or a “profit pact”) for Europe, to go alongside the “fiscal pact” (or “poverty pact”). This received quick endorsements from France’s new president Francois Hollande, Angela Merkel, and José Manuel Barroso. Merkel was sure to emphasize, however, that growth would be “in the form of structural reforms.”
The combination of “fiscal austerity” and “structural adjustment” are generally referred to as a “comprehensive structural adjustment program” or a “restructuring of the economy.” This language is important to understand because “restructuring” as a word is used to describe two processes: one, is that it is what is needed to prevent a country from defaulting on its debt and to return the country to a period of growth; and, on the other hand, “restructuring” is used to describe what takes place after a country defaults. The words in both situations are the same, and so are the policies, though in a default they are inflicted more severely. The very process we are told we must undergo to prevent a default, is the very same process that we undergo after a default. Thus, the combination of fiscal austerity and structural adjustment is, in actuality, a slow and painful default.
This combination of austerity and adjustment amounts to a program and effect of social devastation. Thus, the words “structural adjustment program,” “restructuring,” and “default” in actuality translate into social genocide. These three terms provide further insight into their use: the class system is what is being restructured, as middle classes are wiped out and pushed into poverty, the poor are made destitute, and the elite become concentrated and in total control; the political and economic system is being adjusted to fit this restructuring; and the promise that people everywhere were told, that their leaders and society exists to serve their interests, is what is being defaulted on. The state does not default; it is the ‘social contract’ that is defaulted. Just as Mario Draghi told the Wall Street Journal, “the European social model has already gone… Fiscal consolidation is unavoidable in the present set up, and it buys time needed for the structural reforms.” Thus, social genocide.
As George Orwell wrote in his 1946 essay, “political language has to consist largely of euphemism,
question-begging and sheer cloudy vagueness.” But there remains intent and meaning behind the words that are used. When we translate the political language of the European debt crisis, it reveals a monstrous agenda of impoverishment and exploitation. Thus, we also see the necessity of political language for those who use it: one cannot argue openly for programs of impoverishment and exploitation for obvious reasons, so words like “fiscal consolidation” and “structural reform” are used, because they are vague and obscure.
Ultimately, one can get away with saying, “we need a comprehensive austerity package augmented by structural reforms, such as labour flexibility, designed to increase competitiveness and facilitate growth,” as opposed to: “We need to rapidly impoverish our populations, whom we will then exploit to the fullest, such as by creating a cheap labour force, which would increase elite control and generate private profits.” Such honesty and bluntness would lead to revolt, so, political language is used instead. In Europe, political language is part of a ‘power dialectic’ which supports policies and agendas that aim to take more for those who already have the most, and to take from all the rest; to impoverish, exploit and oppress; to plunder, profit and punish.
Andrew Gavin Marshall is an independent researcher and writer based in Montreal, Canada, writing on a number of social, political, economic, and historical issues. He is also Project Manager of The People’s Book Project. He also hosts a weekly podcast show, “Empire, Power, and People,” on BoilingFrogsPost.com.
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Super Mario Monti and the Dictatorship of Austerity in Italy
By: Andrew Gavin Marshall
The following is Part 2 of a two-part excerpt on ‘Italy in Crisis.’ These excerpts are rough-draft, unedited samples of a chapter on the European debt crisis to be featured in my upcoming book (as yet ‘Untitled’), to be done by the end of the summer. The book covers the following: the origins, evolution, and effects of the global economic crisis; the acceleration of international imperialism; the elite global social engineering project of constructing a system of ‘global governance’; emerging resistance and revolutionary movements (and elite attempts to co-opt, control, or crush them), including the Arab Spring, European anti-austerity protests, the Spanish Indignados, the Chilean student movement, the Occupy movement, the Quebec ‘Maple Spring’, and the Mexican student movement, among others. This sample allows you to see the research that is going into this book, and if you would like to see the book come to completion, please consider making a generous donation to The People’s Book Project. With a fundraising goal of $2,500 the Project has raised $810, and just $1,690 to go!
In Part 1 of this series (The Decline of the Roman Democracy and Rise of the ‘Super Mario’ Technocracy), I examined the Technocratic coup in Italy, which removed the democratically-elected Berlusconi and replaced him with an unelected technocrat, Mario Monti, an economist, Bilderberg member, former European Chairman of the Trilateral Commission, former European Commissioner for Competition, and a former adviser to Goldman Sachs International, was also on the board of the Coca-Cola Company, and founded the European think tank, Bruegel. Mario Monti was installed by the European elites with one purpose: punish the population of Italy through ‘fiscal austerity’ and ‘structural adjustment.’
The Technocracy of Austerity
Monti wasted no time in punishing the people of Italy for the crimes and excesses of Europe and the world’s elite. On December 2, 2011, Monti announced a 30 billion euro ($40.3 billion) package of austerity measures, which included “raising taxes and increasing the pension age.” Monti described the measures as “painful, but necessary.” He told a press conference that, “We have had to share the sacrifices, but we have made great efforts to share them fairly.” Monti, who is both Prime Minister and Economy Minister, said he had renounced his own salaries from those positions. Considering that he was – until taking those positions – an adviser to Coca-Cola and Goldman Sachs, among other prominent jobs, those salaries likely would not make much of a difference to Monti’s bank account, anyway. The Deputy Economy Minister Vittorio Grilli (who is still on the board of the Monti-founded think tank Bruegel), said that, “the package should ensure that Italy meet its target of a balanced budget by 2013.” The Welfare Minister Elsa Fornero broke down into tears as she announced an end to inflation indexing on many pension bands, which would essentially amount to “an effective income cut for many retired people.” Unions spoke out against the cuts, stating that they would “hit poorer workers and pensioners disproportionately hard.” Deputy Economy Minister Grilli said that 12-13 billion euros of the package would come from spending cuts, and the rest of the 30 billion euro package would come from tax increases. The minimum age for pensioners (that is, the retirement age) was set to be raised for both men and women to 66 by 2018, as well as providing “incentives” to keep people in the workforce until the age of 70.
The austerity package was passed by an undemocratic decree which Monti named the “Save Italy” decree, and while the union leaders denounced the package, the main business lobby in Italy, Confindustria, praised the package as vital “for the salvation of Italy and the euro.” As Elsa Fornero, the Minister for Welfare, began crying as she announced the austerity measures, she explained, “We know we are asking for sacrifices, but we hope they will be understood in the name of growth and to avoid collective impoverishment.” Of course, austerity is just that: “collective impoverishment.”
In response to the austerity package, Italy’s three largest labour unions began a week of strikes on December 12, with port, highway, and haulage workers stopping work for three hours on the 12th, while metalworkers, including employees of Fiat, put down their tools for eight hours. Printing press operators stopped working for a full shift, and most newspapers were expected to not publish the following day. Public transport strikes took place on December 15-16, and bank employees were set to stop work in the afternoon of December 16, while the public administration closed down for the entire day of December 19. Susanna Camusso, the head of the largest and most militant labour federation, CGIL, said, “We’re not giving up on the idea that the austerity package must be changed… It hurts workers, pensions and the country as a whole.” Mario Monti held a last-minute meeting with the union leaders to unsuccessfully attempt to stop the strikes that were set to begin the following day.
CGIL leader Camusso said that as a result of the austerity measures, “We see every risk of a social explosion.” CGIL, which represents six million members, half of whom are pensioners, stated that, “We are flexible in the face of the emergency but we are not willing to accept everything… You can’t ride roughshod over people.” With only 57% of Italians working, raising the retirement age, as dictated by the austerity package, would amount to “closing the door on the young unemployed,” warned Camusso, adding that Monti had done nothing for “young people and women who can’t find work, and when they do it is badly paid.”
In late December, the Italian Senate passed a vote of confidence on Mario Monti’s government when they approved the new austerity package. Monti commented: “Today this chamber concludes a rapid, responsible, complex job… on a decree that was passed in extreme emergency and that enables Italy to hold its head high as it faces the very serious European crisis.”
Prior to the European Summit held at the end of January 2012, Mario Monti was holding meetings with Angela Merkel, Nicolas Sarkozy, British Prime Minister David Cameron, and European Council President Herman Van Rompuy. Italy, wrote the Economist, “it seems fair to say, is back at the top table after being quietly shoved off under the leadership of Silvio Berlusconi.” Monti emphasized to Merkel, Sarkozy, and other leaders that the EU needs to not simply “enforce fiscal discipline,” but to stimulate growth. This would mean, according to Monti, “not only finding ways to lower interest rates, but encouraging liberalisation wherever possible.” Monti even suggested that Germany should “liberalize” (meaning: privatize) some of its services. Monti, in an interview with the Economist, stated that, “It is rather unusual for Italy to be at the forefront of pro-market initiatives,” but that he planned to undertake a major liberalization of Italy, saying: “I am convinced that it is also in Italy’s national interest.” Acknowledging that his government is “unelected,” Monti told the Economist that, “there was in Italy a hidden demand for a boring government which would try to tell the truth in non-political jargon.” Monti warned, however, that, “Austerity is not enough, even for budgetary discipline, if economic activity does not pick up a decent rate of growth… A lowering in interest rates does not depend only on Italy’s efforts but also, and essentially, on Europe’s ability to confront the crisis in a more decisive way.” Monti stated that Italy’s domestic political situation is getting problematic for the EU, with a growing appeal to ‘Euroscepticism,’ warning: “What I see now, week after week, in parliament is a widening of the spread of this attitude… The degree of impatience-cum-hostility to the EU, to Germany and to the ECB is mounting.”
Monti warned Merkel and other EU leaders that Italian sacrifices alone would not get Italy out of crisis, that Italy needed some form of outside support, without which, he warned: “a protest against Europe will develop in Italy, also against Germany, which is viewed as the ringleader of E.U. intolerance, and against the European Central Bank… I cannot have success with my policies if the E.U.’s policies don’t change.” In particular, he was referring to the need to bring down Italy’s interest rates, something that could likely only be achieved through the ECB purchasing large amounts of Italian bonds, which would increase “market confidence” in Italy and bring down interest rates. Otherwise, Monti lamented, the popular discontent of the people with the economic situation could push Italy to “flee into the arms of populists.” Spoken like a true unelected technocrat. Imagine that, a government which dares to serve the interests of the people over whom it rules! Not in the ‘New Europe.’
In late January, Philip Stephens, writing for the Financial Times, stated that, “Italy is back,” and that while Merkel “sits at the top of Europe’s power list,” and Sarkozy “can lay claim to be the continent’s most energetic leader,” it is Mario Monti who “is its most interesting.” Stephens declared that, “Mr. Monti’s fate may turn out to be Europe’s.” Barack Obama’s White House announced that in a future meeting between Obama and Monti, the two leaders would discuss “the comprehensive steps the Italian government is taking to restore market confidence and reinvigorate growth through structural reform, as well as the prospect of an expansion of Europe’s financial firewall.” Stephens translated this as: “Mr. Obama is behind Mr. Monti all the way – including when he puts pressure on Ms. Merkel.” Lamenting the Italy of Berlusconi, who was “shunned by his European Union peers,” though always embraced as a friend by Russia’s Putin, Stephens wrote that Monti, “a serious-minded academic with a serious plan, is different in every dimension.” He also noted that there was “a second Italian at the top table,” meaning Mario Draghi, the new President of the European Central Bank, “the other Mario,” who in terms of economic orthodoxy, “styles himself an honorary German.” Stephens wrote that Monti is so important because “it is in Italy that the euro’s long-term prospects will be decided,” as Italy is the euro-area’s third largest economy (after Germany and France), and if Italy “cannot chart a credible economic course, the euro does not have a future as a pan-European project.” While praising Monti’s austerity package, Stephens said that, “the real test will come in liberalizing the economy,” which “will not be easy,” but “the choices are unavoidable.”
Mario Monti, upon unveiling his “liberalization” plans in late January, stated: “Italy’s economy has been slowed down for decades by three constraints: insufficient competition; an inadequate infrastructure; and complicated administrative procedures.” Thus, Monti passed a decree opening the occupation of taxi drivers up to “competition,” prompting taxi drivers to block central streets in Rome. As liberalization brings in higher petrol prices (which were previously under more control), truck drivers and agricultural workers set up barricades in Sicily. One Italian paper (owned by the Berlusconi family) headlined: “Half of Italy is ready to wage war on the government.” Once decrees are issued, they go into effect immediately, but require parliamentary approval within two months. Monti’s liberalization decrees of January (following the austerity decrees of December) also targeted the gas and electricity markets, as well as the insurance sector and public services. Next in Monti’s target: the labour market. One analyst at Roubini Global Economics told the Financial Times: “Although structural reforms are necessary to boost long-term growth, they will take several years to bear fruit and, in a period of economic contraction and government retrenchment, will have an adverse effect on short-term output, deepening the recession which will last through 2013.”
In his first interview since resigning as Prime Minister, Berlusconi told the Financial Times in early February that he was “stepping aside” from frontline Italian politics and had no intention of running for prime minister again. Berlusconi gave his “strongest endorsement to date of the technocratic government led by Mario Monto,” specifically in “its intention to implement labour market reforms opposed by trade unions.” Berlusconi declared: “I have now stepped aside, even in my party.” He explained that he resigned the previous November because he had been attacked “by an obsessive campaign by the national and foreign media that blamed me personally and the government for the high spread of Italian state bonds and the crisis on the stock market.” Thus, he contended: “After having evaluated the causes of the crisis, which did not rest in Italy but in Europe and the euro, I believed that if I had stayed in government I would have damaged Italy as we would have had more terrible media campaigns… With a sense of responsibility, though having a majority in both houses of parliament… I stepped aside and with elegance.” One can always rely upon a politician to sing their own praises, especially if they are undeserving. He did suggest, however, that he would consider running for parliament, quipping: “I still have strong popular backing, almost twice as much as my colleagues Merkel and Sarkozy… In opinion polls, I personally have 36 per cent support. If I walk out in the street I stop the traffic. I am a public danger and I cannot go out to do the shopping.” Berlusconi concluded:
The hope is that this government, which is supported for the first time by the whole of parliament, will have the chance to propose great structural reforms, starting from the state’s institutional architecture, without which we cannot think of having a modern and truly free and democratic country.
Martin Wolf, perhaps the most influential financial columnist in the world, writing for the Financial Times in January of 2012, asked if the two Marios – nicknamed by the media as the “Super-Marios” – will be able to “save the eurozone?” Wolf wrote that they “bring sophisticated pragmatism to the table,” and hoped that they would “shift policy in a more productive direction.” Wolf referred to the ECB’s new long-term refinancing operation announced in December of 2011, which is essentially a bank bailout with a three-year yield at the ECB’s average interest rate (which stands at 1% currently). When the ECB began this new program, roughly 523 banks took 489 billion euros, described by Wolf as “a bold and cunning move by Mr. Draghi and probably the most he could get away with right now.” Wolf also referred to Monti’s willingness to argue that the creditor countries “do more to lower his country’s borrowing costs,” or interest rates, warning in the Financial Times against a “powerful backlash” among voters in the EU periphery states. Wolf wrote that, “Mr. Monti is in a strong position to make this argument,” as Monti “is a well-respected official with staunchly pro-European views and a strong sympathy for German attitudes to competition and fiscal and monetary stability.” Wolf explained that, “Draghi and Monti are addressing two interlinked fragilities: the vulnerability of the banking system and the unsustainable terms on which weaker countries can now borrow.” While praising the “Super-Marios,” Martin Wolf said that they alone could not save the eurozone, whose problems run very deep, and where even the ‘solutions’ to the crises felt by various EU states can make larger, structural reforms even more challenging. As Wolf correctly noted: “In Italy’s case, for example, the combination of high interest rates and vulnerable banks with fiscal austerity is likely to lead to a lengthy and deep recession and so to a rise in cyclical fiscal deficits [debt incurred during and because of the economic crisis at the time] as the structural deficit falls [the debt acquired by spending more than what is brought in through revenue].” Naturally, though, this simply means that the overall debt will increase. Wolf wrote, ultimately, that if “break-up [of the euro] is ruled out, one must choose reforms, however painful.” This is because, according to Wolf, “the costs of failure are so large that the possibility of domestic and eurozone reform must be kept alive.” On this, the “Super-Marios” can be leaders.
When the credit ratings agency Standard & Poor’s downgraded Italy’s debt in January by two notches to BBB, “with a warning of more to come,” Mario Monti stated that he “agrees with almost everything in S&P’s analysis,” and “jokes that he could almost have written it himself.” He told the Financial Times that, “If I ever dictated anything, it must have been what S&P had to say about domestic Italian economic policy,” and then laughed. As a result of the downgrade, Italy had the lowest credit rating of any eurozone country which did not receive a bailout, apart from Cyprus. Why was Monti so pleased with the downgrade? He quoted the report to the interviewer from the Financial Times, going through the risk factors associated with Italy, but adding: “Nevertheless, we have not changed our political risk score for Italy. We believe that the weakening policy environment at European level is to a certain degree offset by a strong domestic Italian capacity.” In other words: “Mr. Monti’s 60 days in office have been enough to convince the agency that his government is on a path of reform that could return the country to growth and shrink its debt levels, but that European Union mismanagement of the eurozone debt crisis is dragging down struggling countries, including Italy.” Mr. Monti stated, “I think I’m the only one in Europe not to have criticized the rating agencies.”
In discussing how his government came into existence, as in, not through democratic means, Monti told the Financial Times that he agreed that he could be helping to bring a “revolution,” referring to the number and extent of measures he intended to pass before democratic elections take place. He explained that if Italy’s borrowing costs (interest rates) fall, “the political parties will not dare stop the experiment [in technocracy] before it has to stop… And in my view the political parties will not dare go back to the acrimonious, superficial and tough confrontation that animated parliament. The image and style of public debate has changed.” He added: “If and when success comes, you will find us not really taking credit… My ambition is that Italy becomes a boring country, in relative terms. It is really in the hands of Europe.”
In February of 2012, Mario Monti gave an interview with PBS Newshour in which he continued to heap praise upon austerity measures, saying that because Greece’s debt had been so high, “it would have been hard – let’s face realities – to have a soft landing from those excesses of deficit without a recession.” He added, “I think there is a valid point if we say that Europe needed to be put under a safe place as regards the public finances of each member state.” Monti thanked “German and other pressures” for pushing countries in that direction of austerity. And now, he claimed, “the time has come to focus more energies on how collectively we can achieve more growth in Europe.” Growth, of course, simply means growth of profits for big banks and multinational corporations.
Super Mario’s ‘Structural Adjustment’: The Meaning of “Growth”
When Europe’s political and financial elite discuss “growth” in the current context as an added “solution” on top of austerity, what they really mean is to implement major structural changes: to liberalize the economy, privatize all assets, state subsidies, services, industries, and resources. This will allow corporations and banks to come in and purchase all of these assets and industries, and since this process takes place in the midst of a deep crisis, they are able to take control of all the assets for very cheap prices. This is called “foreign direct investment.”
The major corporations of Europe, of North America, and elsewhere, will be able to control directly a much larger share of the economy. Their purchases provide short-term funds for the state, thus increasing short-term revenue. However, since state industries are privatized and sold for pennies on the dollar, they are actually losing long-term revenue, but that isn’t mentioned. Markets respond to the short-term, not the long-term, and of course, we want to have our world and its social, political, and economic stability determined by forces that theoretically do not look more than a couple months ahead. The process of liberalization and privatization is also sold on the prospect of “creating jobs,” because the theory goes that corporations will enter the market with the ability to invest and thus, create jobs for workers. The reality is that the corporations buy up the industries, and generally shut them down to relocate elsewhere for cheaper labour. This means mass firings. This also means that unions and labour rights in general have to be dismantled and people have to be kept in line, under control.
Austerity measures are aimed at redistributing wealth from the mass of society to the very top percentiles, which is achieved through increased taxation, mass firing of public sector workers, cuts to social spending, health care, welfare, education and other areas. This, quite predictably, creates a massive social crisis. Many austerity packages – such as Monti’s in Italy – also include efforts to undermine labour and unions. This prepares the work force for the period and programs of “growth,” in which workers will be forced to submit to exploitative working conditions with no collective bargaining rights, or else the industries will simply fire them all, close up shop, and go elsewhere. This is why we hear all the Eurocrats and politicians in Europe and elsewhere explain that austerity and growth are not mutually exclusive, that they can and should co-exist together. Indeed, from the view of the ‘effects’ of these policies, a joint program of “austerity” and “growth” makes perfect sense: commit social genocide (through fiscal austerity), and exploit, plunder, and profit from the spoils of economic war (growth through structural adjustments).
In the ‘Third World’ over the past three decades, these policies were imposed by the IMF, World Bank, Western imperial powers, and Western banks and corporations. With the primary engine being the International Monetary Fund (IMF), countries in Latin America, Africa, and Asia, which were in the midst of a major debt crisis in the 1980s, were forced to sign what were called ‘Structural Adjustment Programs’ (SAPs) with the IMF and World Bank if they wanted to get any loans or aid from Western banks or institutions. The SAPs would be a set of conditions that the countries would have to adhere to if they were to get a loan, and the conditions included a mix of ‘fiscal austerity’ and ‘structural adjustment’: devalue the currency to make it cheaper to invest in the country (but which creates inflation and increases the costs of food, fuel, and other commodities, hurting the poor and middle classes); cut social spending to reduce the deficit (but which saw the destruction of education, health care, welfare and social programs, as well as mass firings from the public sector); trade liberalization, to allow for foreign countries and corporations to more easily invest in the country, and thus, bring in revenue (which meant dismantling all tariffs, trade barriers, price controls, state subsidies, and resulted in the easy exploitation and cheap purchase of the country’s wealth by foreign corporations and banks); and privatization, meant to encourage investment and allow for the market to make state-owned industries and asset more “efficient” (but which resulted in mass firings, closing of entire industries, mass corruption, and total control of the economy being handed to foreign banks and corporations).
The result of SAPs – the combination of “austerity” and “growth” – over three decades has been devastating: poverty has rapidly accelerated and expanded; wealth becomes heavily polarized, with a tiny minority owning the economy, and everyone else with next to nothing; the small elite become increasingly dependent upon and integrated with a global elite (based primarily in the West), and disassociated from their fellow citizens; mortality rates go up as health care and social services are dismantled or made incredibly expensive at a time of deepening poverty in which more people need the services more than ever before; social unrest and repression become rampant, as the people rise up against ‘Structural Adjustment,’ the state resorts to increasingly authoritarian and brutal measures to control or crush resistance to the programs and to protect the dominance of the tiny minority, locally and internationally.
This, essentially, is the fate of Europe and the rest of the industrialized world. Europe, simply being the most integrated region of the world (a trend which is accelerating everywhere in the world), is experiencing the brunt of this crisis before the rest of the industrialized nations of the world. So when politicians and financial elites say that Europe needs “growth” in conjunction with austerity, and this will lead to “recovery”, remember what “growth” means: exploitation, plundering, and profits. When you remember this, suddenly everything the politicians and pundits have been saying for years, suddenly makes sense.
When asked if he felt that there was a danger of “a backlash” in Italy against what people “may see as E.U. imposed changes to their way of life that are very, very painful,” Monti replied that, “there was such a risk of backlash,” but he explained: “I try to avoid that backlash by always presenting the necessary sacrifices that Italians have to go through not as an imposition from Brussels or Germany or the European Central Bank, but rather as a necessary step that Italians have to undertaking — to undertake also at the suggestion of Europe, but basically for their own interests, for the interests of ourselves and of future generations of Italians. This is precisely meant to avoid backlashes.” Interesting statement: saying that austerity is for the interests of Italians and “future generations” is done not to speak truth, but “to avoid backlashes” against the E.U. Monti emphasized that, “it is very, very important” to ensure that the single currency, “which was meant to be the culminating point of the European construction,” does not become, “through psychological negative effects, a factor of disintegration of Europe.”
In an interview with the Wall Street Journal in early February, Mario Monti publicly outlined his strategy for “growth” in Europe, which he proposed privately to other European governments the previous month, pushing Europe beyond austerity and suggesting “tougher European rules aimed at prying open member states’ national industries,” of course to “encourage economic growth and competition in the euro zone.” Monti explained that if this is not done, “Europe will not be a nice place to live in five years from now if we haven’t solved the problem of how to grow… We have to say what growth will look like in a fiscally compacted union.” His proposal “would speed up the process by which European authorities sanction nations that violate the tenets of the EU’s single market.” For Monti and other technocrats like himself, this “growth” does not include government spending. Since Italy is supposed to knock off 30 billion euros ($39.8 billion) – 2% of its GDP – from its public debt “every year for decades,” this means, explained Monti, that “any thought of budget-stimulated growth ideas will have to go away.” Instead, Monti suggested that the European Union “should back single markets more forcefully to support economic growth,” which instead of having Berlin sign off on the EU spending its way to prosperity, would mean “to push Germany to liberalize its own economy,” which, claimed Monti, “would have a trickle-down effect.”
Monti was undertaking various programs of “liberalization” in Italy, such as liberalizing major professions and sectors, such as pharmacies, taxis, and notaries. To handle Italy’s “unemployment” issue, which is significant to say the least, Monti was seeking to “introduce new measures aimed at making it easier for companies to hire and fire workers,” which, he said, “will increase the overall flexibility of the labor market,” meaning that it will allow for cheaper and more easily-exploited labour by corporations. Monti even stated that the changes he was making in the labour market were aimed at “reducing the segmentation of Italy’s labor market between those who are protected, sometimes hyper-protected, and those, particularly the young, who can’t really get into the labor market.” So, instead of having various work forces that are “protected” (or “hyper-protected” in Monti’s words), it would be better to simply bring everyone down to the same level to allow for “flexibility,” or in other words, easy exploitative capacity. For “Super Mario,” no protection is better than any protection when it comes to workers. Imagine if there were politicians who thought the same thing about bankers.
While Europe agreed to a ‘Fiscal Compact’ to ensure austerity, Monti felt that the EU should add to this a growth pact, and felt that the supranational and undemocratic European Union should have “an efficient mechanism to swiftly sanction countries that don’t open up their economies to competition,” meaning exploitation and plundering. Thus, the previous month, Monti submitted a proposal “aimed at giving the European Commission – the EU’s governing body – greater power over sanctioning member states.” This proposal, which had not been reported prior to this interview, “could speed up the process by years, by making it easier for the commission to impose rulings rather than having to take member states to court, as it often does now.” When asked what this has to do with growth, Monti replied: “A lot, because if you give more teeth to the commission to remove national obstacles to the functioning of the single market, we’ll create a large level playing field, which the business community always insists is a key component of growth.” Well that answers that: it will lead to “growth” because the business community says so. Thank you, Prime Minister.
Monti acknowledged that this creates obvious concerns, especially with countries like the U.K. and France which would likely oppose the proposal for fear of its encroachment on their sovereignty, and the existence of a “democratic deficit” which will continue “as member states gradually hand over more of their fiscal and economic policies to the central oversight of European institutions.” But for this, Monti has a solution: “Much of the reconciliation between more centralized governance and the scope for democracy will be resolved through an even stronger role of the European Parliament,” which is, in effect, utterly useless.
The Most Important Man in Europe?
In late February, Time Magazine published an article reporting on an interview they conducted with Monti in which they referred to him as “the most important man in Europe.” The article described Monti as “the tough taskmaster Italy so desperately needs,” though he “has the aura of a gentlemanly grandfather.” Time reported that Monti was “fixing a deadlocked democracy,” no doubt by ruling as an unelected technocrat, “and charging forward with greater European integration,” in a “wholesale overhaul of Italian society.” Monti told Time, “I believe that reforms will not really take hold if they do not gradually come into the culture of the people.” Time declared that for the problem of Italy’s partisan politics, “the solution was Monti.” Monti said that the request to rule came “at such a severe time of crisis for Italy that I could not refuse.” Thus, declared Time Magazine: “Today he reigns over Rome like a new Caesar.” In effect, “the democratic process has been suspended to allow an unelected technocrat to implement policies that elected politicians could not.” Monti himself refers to this as a “temporary mutual disarmament” of the left and right, a technocratic euphemism for “dictatorship of austerity.”
The publication praised Monti’s austerity package in December, his liberalization program in January, and his new plan to overhaul the labour market; then lamented that Monti is taking on “entrenched interest groups,” such as taxi drivers (no joke, the article referred to taxi drivers as “entrenched interest groups”), who staged strikes in Rome and other Italian cities, and pharmacists who were threatening to do the same thing, or truckers that blocked roadways in protest of a fuel-tax hike. The president of a national taxi union stated, “In Italy, the economy was more based on rules that used to be applied to create wealth for the general public… I don’t understand why suddenly the only solution is to get rid of the rules.” He added: “Monti has always lived in the salons… He really doesn’t know the problems of ordinary people.” To this, Monti replied, “Maybe they’re right,” but he felt this was an advantage: “Italy has piled up huge public debt because the successive governments were too close to the life of ordinary citizens, too willing to please the requests of everybody, thereby acting against the interests of future generations.” Monti earned a reputation – and the nickname “Super Mario” – back when he was an EU Commissioner, where he came into conflict with some major global corporations, such as blocking a merger between GE and Honeywell, which prompted the then-CEO of GE, Jack Welch, to refer to Monti as “cold-blooded.” Monti acknowledged that as he is more successful in pushing “reforms,” the effects of those reforms would put pressure on the political parties to abandon him, and make it more difficult for him to continue his programs before he leaves office in 2013. “The point,” explained Monti, “is how to keep this pressure even once the most visible elements of emergency hopefully are over.” This would largely be left to accelerating the process of European integration: “I think there is a genuine wish on the part of the E.U. and Germany and France to again play an active game with Italy for a relaunch of European integration… I think we will be seeing an acceleration of the good news.” Apparently, accelerating the integration and institutionalization of an undemocratic, technocratic, supranational structure is “good news.”
When Mario Monti went to visit Wall Street on the seventh floor of the New York Stock Exchange (to visit his actual ‘constituents’), he received a long, standing ovation when he entered the room with an audience of 200 people. Charlie Himmelberg, a managing director at Goldman Sachs, commented that, “It’s been impressive how quickly the sentiment has changed on Italy.” Blaise Antin, the head of sovereign research at TCW said, “It is a good thing Monti visits investors… But plenty will ultimately depend on the Italian parliament” in the tough choices ahead. Monti told the crowd of Wall Street financiers that, “What’s important is that this improved governance of the euro zone is almost there and the euro zone crisis is almost overcome, I believe.” Monti later reflected at a new conference in New York that he was “warmly greeted by the financial community” on Wall Street. No doubt.
Super Mario Wages War on Workers
After making the rounds in interviews, state visits, meeting Obama, and visiting his constituents at Wall Street, Mario Monti went back to Italy in late February to push forward on his “labour reforms” to undermine and destroy unions and workers’ rights. By March, the effects were being felt among Italians. Monti went to great pains to denounce what he described as Italy’s “two-tier labour market,” dividing generations and leaving the young out to dry. The New York Times wasted no time in supporting Monti’s calls to dismantle this system. Framing the discourse around the generational divide, in which “older workers came of age with guaranteed jobs and ironclad contracts granting generous pensions and full benefits,” the younger Italians, “the best-educated in the country’s history… are lucky to find temporary work, which offers few benefits or stability.” Thus, one of Monti’s “solutions” was to “make it easier for companies to hire and fire.”
Very typical of the neoliberal economic discourse, is to draw conclusions based upon these facts alone: older workers have benefits, younger workers have few opportunities; thus, older workers are destroying future generations with their “entitlements.” Solution: dismantle entitlements and benefits so all can work on an “equal playing field.” The discourse divides workers and people against each other, meanwhile, there is no mention of the fact that the reason why the youth have so few job opportunities has more to do with the lack of state and business investment, the deregulation and privatization of industries over the 1990s (while Mario Draghi was head of the Treasury), the effects of the euro (creating an economic hierarchy between the Northern nations of the EU and the Southern states), or the very obvious fact that Italy is in a severe crisis because its corrupt government colluded with global banks and suffered under the institutions and rules of the E.U., which promote elite interests and undermine democracy and self-determination. No, mentioning the massive – and elite-driven – causes for the crisis Italy faces, and the unemployment issues which are symptomatic of that crisis, is too inconvenient for the New York Times. Instead, it is simply easier and more acceptable in the popular discourse to pit workers against each other, in an effort to undermine them all, collectively.
An economist at Bocconi University, of which Mario Monti was president until he became Prime Minister of Italy, supported this discourse for Italy, arguing: “Reforming contracts, unemployment benefits and salary levels would permit labor productivity to rise, which would in turn permit the country to grow… It’s a central theme for improving a country like Italy.” Undertaking all of these labour “reforms,” in actuality, would allow for youth to enter the job market to a certain degree, as it would mean that other “hyper-protected” workers no longer have protection, and all of Italy’s workforce is left vulnerable to exploitation. Thus, youth could be hired as extremely cheap labour, since for them, some work – even horrible work with little pay – is better than nothing at all. If workers who had protections attempt to organize and salvage various labour rights, companies can simply fire them and hire cheap, young workers with no benefits as replacements. This is called “youth opportunity.” This is how sweatshops became so popular in the ‘developing’ world over the past several decades, which were also brought about through fiscal austerity and structural adjustment: undermine labour/worker rights for easy exploitation, and if they attempt to organize, strike, or obtain rights, foreign corporations can fire them all and hire cheaper labour, close their factories and outsource elsewhere, or ship in cheaper immigrant labour forces. This has the effect of bringing the standards and conditions of the entire work force, and indeed, the global labour market, down to a more easily exploitative position: equality of exploitation (what economists and bankers call “labour flexibility”).
Monti declared: “We have to get away from a dual labor market where some are overly protected, while others totally lack protection and benefits when unemployed.” Thus, he said, “equity and growth” would be the “watchwords” of his government. Since “growth” means profits, plunder, and exploitation, “equity” is a logical addition to this: equity in exploitation. The New York Times, reporting on a 33-year old graduate without job opportunities, said she would “welcome” such changes, as she, “like so many in her generation, feels thwarted, overly reliant on her parents and uncertain of her future.” Amazingly, in the same article, it was acknowledged that the two-tier labour system was not created by “entitlements,” but rather as a result of policies the government undertook nearly a decade previous (in facilitating Italy’s entry into the euro-zone), in which the state made it easier for Italian corporations “to hire younger workers on a range of temporary contracts and internships,” while many of the early-retirement benefits for older workers were put in place during the mass privatizations (undertaken by Mario Draghi), in order to facilitate the reduction of staff “and cutting costs in the period before Italy joined the euro zone.” The article then went on to blame the unions, claiming that “younger Italians have come to see them as part of the problem.”
One must actually pause in appreciation of the intellectual gymnastics displayed by the New York Times in publishing an article which quietly acknowledges that the causes of Italy’s two-tiered labour and employment issues were the result of demands and policies put in place in order to join the single-currency, yet still concluded that the main problem was “overly-protected workers,” and thus, that the solutions lie in undermining labour and workers’ rights. The article even acknowledged that the government’s policies of making it easy for Italian corporations to exploit youth labour were designed “to make the market more flexible,” yet does not question the logic in Monti’s program of solving the crisis brought on by this “flexibility” by implementing measures to make it “more flexible.” The Monti-logic, which the New York Times readily endorses, is to look at policies that didn’t work (in terms of what people were ‘told’ they were meant to achieve), and then to advance and accelerate those same policies in the hopes that it will have the opposite effect as to that which it has always had before. Einstein once said that the definition of insanity is doing the same thing over again, expecting different results. If we actually apply that definition, almost the entire discipline of economics – and most especially neoliberal economics – is absolutely insane. Either that, or they simply use coded rhetoric which sounds like one thing, means another, and is done so to promote a global social, political, and economic agenda which would otherwise be impossible to publicly justify: preserving and accumulating for a tiny minority, and exploiting and punishing the vast majority.
Right on cue, the effects of the economic crisis over the previous year, exacerbated by Monti’s labour reforms and austerity package, was being felt across Italy. In Naples, one of Europe’s poorest cities, by late March it was reported that child labour has returned, as “thousands of children are leaving school to help their families make ends meet,” an increasing trend in the country, in which children work in the black market or “are recruited for sinister purposes by the mafia.” The most common job for child workers is as a “shop assistant,” earning less than a euro an hour. This trend had been developing in Italy over a number of years, as one local government report in the Campania region revealed that between 2005 and 2009, more than 54,000 children left school to join the work force, with 38% of them under the age of 13. The deputy mayor of Naples, located in the Campania region, commented: “Of course, we were the poorest region in Italy. But we haven’t seen a situation like this since the end of the Second World War… At age 10, these kids are already working 12 hours a day, which is a clear breach of their right to development.” The succession of financial reforms put in place by the Italian government since 2008 introduced drastic cuts, and in June of 2010, the Campania region had to end its minimum welfare program, “plunging more than 130,000 families into poverty.” Children from poor families face three options: struggle to stay in school, drop out to work in the black economy, or “join the ranks of the Camorra, the Neopolitan mafia.” Since the beginning of the crisis, support for youth and their families has been cut by 87%, and roughly 20,000 educators in the Campania region had not been paid for two years. Perhaps this is what Mario Monti means by “labour flexibility.”
In late March, reported the Economist, as Mario Monti was engaged in talks with employers and unions, trying to get them to accept labour-market reforms, “when it became clear that unanimity was impossible, Mr. Monti declared the talks over and said his government would press ahead regardless.” It is quite appropriate, one must acknowledge, that for a government which was created through undemocratic means, it should only continue to act and rule undemocratically as well. Such is the path Mario Monti has taken with Italy. On March 16, the Italian parliament’s three largest parties endorsed Monti’s reforms, on the warning from President Napolitano that, “failure to agree would have serious consequences.” The main problem for Monti came from the largest union federation, the CGIL, an historic ally of the Democratic Party (PD), which had endorsed Monti and his austerity packages, leading one senior leader in the PD to suggest that the party leader, Pier Luigi Bersani, “could face a backbench revolt or a party split.”
The Wall Street Journal naturally congratulated Monti, in an article entitled, “Monti pulls a Thatcher,” for showing “political courage” in walking away from negotiations with Italy’s labour unions, announcing that he was “going to move ahead with reforming the country’s notorious employment laws – with or without union consent.” Italy had stringent rules regarding the ability of employers to fire workers, what the Wall Street Journal referred to as a “job-for-life scheme,” which Monti’s reforms will replace with a “generous system of guaranteed severance when employees are dismissed” for what are called, “economic reasons.” The Journal heaped praise upon Monti, as “standing up to Italy’s labor unions takes courage, and not only of the political sort,” noting how there was an economist ten years prior who was shot and killed “for his role in designing a previous attempt at labor reform.” Monti had been ruling by decree since December, but announced in late March that the labour reform proposals would be voted through the National Assembly. The WSJ wrote that as a former economics professor, Mario Monti “has a rare opportunity to educate Italians on the consequences of opposing reform,” to which the Journal suggested, they need only to look at Greece: “If that doesn’t scare them sober, then nothing will help.”
Within a week, Monti allowed for a very slight change to his labour reform bill, which would give judges “greater leeway in determining whether companies were justified in laying off a worker.” The Wall Street Journal then referred to this, in an article entitled, “Surrender, Italian Style,” as a “cave-in to the left side of his political coalition,” and noted that, “Monti was brought in as Prime Minister to retrieve his country from the edge of a Greek abyss,” and that this “labor bill is a surrender to those who are bringing” that abyss to Italy. For the WSJ, any capitulation – no matter how minor (and this particular one was very minor) – to unions and labour, is deemed an absolute “surrender” or “cave-in.” Monti defended himself in a letter to the Wall Street Journal in which he explained that this “surrender” was still a move in the right direction of reform, as it “introduces a more predictable [i.e., controllable] and speedier [i.e., systematic] procedure to handle dismissals for economic or other objective reasons.” He elaborated: “First, a fast, compulsory, out-of-court settlement procedure at local level; then, if conciliation fails, the worker can take the case to a judge as happens in other countries.” In “extreme cases” where the “economic or other reason” for firing the worker is deemed “manifestly inexistent,” the judge then has the ability to decide “for reinstatement instead of compensation.” When the “economic dismissal” is “not justified” in other cases (i.e., not an “extreme case”), compensation will be given with a cap at 24 months of wages. Monti said that it was a “complex reform” and deserves “serious analysis rather than snap judgments.” He then wrote: “I would suggest that perhaps the fact that it has been attacked by both the main employers association and the metalworkers union, part of the leading trade union confederation [CGIL], indicates that we have got the balance right.” This reform, claimed Monti, “will make the Italian labor market more flexible” which “lays the foundation for increase productivity, economic growth and employment.”
In mid-April, Italy’s major unions took to the streets of Rome in protest against Mario Monti’s pension-system reforms put in place in January, “saying it traps hundreds of thousands of workers in a legal limbo without retirement pay.” The reform that raised the retirement age affects those who are already retired. Bloomberg gave the example of Maria Dinelli, who had an early-retirement deal in 2008, in which her former employer provided benefits until her pension was to begin in 2015. Under Monti’s reforms, her pension won’t begin until 2017, upon which she commented, “I’ll be without a salary or pension for two full years before the retirement age, and will have to put money aside… You were told you had guarantees, then you lose it all because a new government takes power and changes the rules.” Tens of thousands of Italians took to the streets of Rome on April 13 as the Italian Labor Ministry said the night before that, “there are 65,000 Italians who may be left without support between when they leave work and when their pension kick in as the higher retirement age delays their payout,” while unions say the amount of people affected is five times that size, at roughly 300,000, prompting one union leader to state, “If these figures were correct,” referring to the Labor Ministry numbers, “then we’d have to say that the thousands of workers who’ve turned to the union for help are not real and just ghosts.” A labor law professor in Rome estimated the number may actually be as high as 450,000.
Monti referred to this plan as “cutting edge.” Well, it certainly ‘cuts.’ Meanwhile, Italians are facing increased taxes and record-high gasoline prices, thus producing a “slump in consumer demand” which pushed Italy into a deeper recession. Nicola Marinelli of Glendevon King Asset Management in London stated: “An overhaul of the pension system was unavoidable because the old scheme was too generous compared to the country’s possibilities and the European standards… That said, the protest of these workers may be a harbinger of future social tensions. I don’t think the younger workers have really realized they will have starvation-level pensions.” Just another “cutting edge” facet of Monti’s reforms. Interestingly, though perhaps not surprisingly, Monti’s reforms had not yet included “a heavy hand with the richest taxpayers,” prompting a labor law professor to opine, “I think it’s about time for those who have more to contribute to the needs of the country.” But such is not the nature of austerity.
In fact, in April it was reported that the political class in Italy, the “army of politicians and senior officials” who support Monti and his reforms in Parliament, “are clinging to fat salaries that far outstrip those of their peers abroad.” Monti had issued a decree which aimed to “prevent public servants earning more than U.S. President Barack Obama,” many of whom “earn considerably more.” Italy’s wealthy, however, not simply the top politicians and bureaucrats alone, “are hardly carrying their share of the burden.” One economist noted: “There has not been an equal distribution of sacrifices… In proportion to their salaries, higher incomes are paying less.” Italy has roughly 1,000 lawmakers across the nation, who earn more than their counterparts in the United States, with a base salary of 11,283 euros per month, while the lowest-earning households in Italy, “hurt most by rising fuel, property and sales taxes,” live “on less than 8,000 euros per year, or 667 euros per month, after taxes.” Between 2006 and 2010, Italy’s poorest families already lost almost 12 percent of their real income, according to data from the Bank of Italy. Unlike the political class, most Italian families are “traditionally thrifty,” however, under austerity in 2011, “households saved only 12 percent of their gross income, the lowest level since 1995.” That is the nature of austerity: when you need to save more than ever before, the ability to do so becomes harder than ever before. In March, a Moroccan worker in Italy set himself on fire in protest, and an Italian businessman did the same. Polls in Italy have shown that the people are “increasingly dissatisfied with the parties and politicians that led the country for the past two decades,” as more than 40% of respondents said that they wouldn’t vote for any of them if there were an election today.
Italy Under Austerity
The Wall Street Journal reported in early April that figures from the Italian Treasury revealed that Monti’s austerity measures were “stunting activity in the euro-zone’s third-largest economy,” and while “recent tax increases are helping Italy cut its fiscal shortfall,” they are also “pushing economic activity to contract even faster.” Industry Minister Corrado Passera stated: “With austerity one doesn’t grow.” The majority of tax increases are on the income of workers, though they also include taxes on consumption (such as Value Added Taxes – VAT) and on property assets. As Italy’s GDP contracted by 1% in the first quarter of 2012, yields on Italian government bonds rose, making it more expensive for Italy to borrow. Former prime minister Berlusconi commented: “The cure that the European Union has prescribed for our country is the one that has already caused a disaster in Greece and is beginning to do so again in Spain,” though he continued to throw his support behind the technocratic government. One businessman in Italy warned that, “Consumers have insurmountable obstacles ahead of them, with higher income-tax rates from March, higher property taxes as of June and a value-added tax increase in September.”
By late April, unemployment in Italy had reached nearly 10%, according to “official” statistics (meaning, it’s actually much higher), and in Sardinia, one in two young people were out of work. The construction industry in Italy has been hard hit, leading to one industry businessman killing himself, adding to a wave of “austerity suicides” across Italy, reaching 25 by April for the year of 2012.
In May of 2012, the Italian anarchist group which had claimed responsibility for shooting a nuclear engineering firm chief threatened to target Mario Monti. The group, referring to itself as the Olga Nucleus of the Informal Anarchist Federation – International Revolutionary Front, sent a statement to a newspaper in southern Italy, warning that “Monti was among seven remaining targets after Roberto Adinolfi, chief executive of Ansaldo Nucleare, was shot in the leg last week.” The statement read: “We say to Monti that he is one of the seven remaining and that the people have no interest in staying in Europe, saving the banks and helping to balance the accounts of a state that squandered money for its own interests.” The statement explained that any suicide connected to tax difficulties brought about by the austerity measures would be punished as a “state murder.” This referred to a series of suicides in Italy by businessmen and others, “despairing at the collapse of their livelihoods because of the crisis.” It was the same anarchist group that in the previous year, claimed responsibility for sending letter bombs to several banks, including to Josef Ackermann, the CEO of Deutsche Bank, while the director-general of Equitalia in Italy lost a finger opening one of the letter bombs in December. One of the members of the group, facing prosecution in court, “called for armed revolution… when asked about the Adinolfi shooting.”
Mario Monti had been pushing himself into European politics as a “mediator” between Germany and the weaker euro-zone economies, to seemingly “broaden” decision-making in Europe beyond the Franco-German axis. In the first few weeks of May, Monti’s technocratic administration had been “courting Berlin on two fronts,” trying to draw the parliaments of both countries closer together, and in term of ideology, they had been “trying to convince German officials – in both private meetings and public speeches – that the compromise solution to stoking growth in Europe’s weaker economies is investment in big public projects, such as transportation, Internet networks or electricity grids, while maintaining fiscal discipline.” Some spending, claimed Monti, should be “exempted” from fiscal austerity, something which Germany had long opposed. But with the French elections in early May getting rid of Nicolas Sarkozy and bringing in the Socialist President Francois Hollande, who favoured a strategy of spending on growth, Monti was seeking to find a common ground between Germany and France, but in a way that ultimately was supportive of the European Union, specifically. Nicholas Spiro, who heads a London-based sovereign debt consultancy, stated, “If there’s one European leader whose policies can appeal to both Chancellor Merkel and President-elect Hollande, it’s Monti.” The refined “growth” program promoted by Monti would be based on “creating bonds to fund European Union infrastructure projects and boosting the firepower of the European Investment Bank to fund public investments.” Thus, it would be based upon European spending, not individual nations spending, and so the debt would be pan-European, and controlled by the EU.
In late April, Mario Monti announced that he would be making more cuts to spending by the end of the year, “and appointed an expert from the private sector as a special commissioner to oversee the spending review.” The cuts, amounting to some 4.2 billion euros (or $5.6 billion), “would allow him to avoid proceeding with a plan to raise the national sales tax to 23 percent in October from 21 percent, a move that could hurt consumer spending and slow a return to growth,” reported the New York Times. Monti stated, “Today we are faced with the necessity of making up for the time lost… And not in years, but in months.” The new special commissioner from the private sector to review the process was Enrico Bondi, known as “Mr. Fix-it” for having successfully restructured the bankrupt Parmalat group. The change in austerity measures followed intense pressure from the business community in Italy to push the burden from increased taxation to more government spending cuts.
In mid-May, yields on Italian debt jumped up to nearly 6%, as evidence emerged that Italy was sliding into an even deeper recession, brought on by Monti’s austerity measures and ‘structural adjustments.’ The government in Italy was openly discussing using troops to protect various targets after a wave of violent actions, claimed by various anarchist groups, such as the shooting of the nuclear industry executive, as well as petrol bombs being thrown at tax offices in early May. An Italian banker warned that unless the European Central Bank was converted into a lender of last resort, Italy faces “massive devaluation, three to five years of hyperinflation, and unbearable unemployment.” Moody’s ratings agency downgraded 26 Italian banks in May, evoking the anger of the Italian Banking Association, which called the downgrade, “irresponsible, incomprehensible, and unjustifiable,” and said it was “an attack on Italy, its companies, its families and its citizens.”
Italy held a series of local elections in early May, in which the Italian comedian, Beppe Grillo, who is also leading a political party, the Five Star Movement, which “rode a wave of protest against austerity politics” and suggested, “We will see you in parliament.” Grillo had been increasingly critical of Monti’s tax hikes, and in one local election forced a run-off with the Democratic Party (PD), and managed to “trounce” Silvio Berlusconi’s Freedom People party in all the local elections, while the right-wing Northern League party, which has also criticized Monti’s reforms, “was humiliated at the polls.” The major Italian newspaper, Corriere della Sera, said, following the elections, “As of yesterday, it seems Monti is now more alone.”
In mid-June, police in Italy, Switzerland and Germany arrested 10 people suspected of involvement in “leftwing terrorist activity” in Italy and elsewhere over the previous three years, connected to one of two organizations, the Informal Anarchist Federation (FAI) and the International Revolutionary Front (FRI). A general in Italy’s semi-militarized Carabinieri police force said that, “the two groups were in contact with the Greek anarchist movement.” The individuals who were arrested, however, were not suspected of being involved in the major act associated with the groups, the shooting of Roberto Adinolfi in Italy, though the General claimed, “The origin is the same.” The arrests did, however, include suspected involvement in the failed letter bomb sent to former Deutsche Bank CEO Josef Ackermann.
In mid-June, as the G20 meeting unfolded in Mexico, Italian Prime Minister Mario Monti said that the euro area needs a “road map with concrete interventions to make the euro more stably credible,” as well as a “pro-growth plan,” stating, “the two things are strictly complementary.” Even though Monti had imposed his brutal austerity measures upon the people of Italy, the bond rates for the country remained high, prompting Monti to comment, “There must be something wrong if a country that complies still has such high interest rates.” Monti noted that through the European Financial Stability Facility (EFSF), the European bail out fund, Italy had supplied loans to Greece, Ireland and Portugal amounting to 31.5 billion euros, commenting, “Italy has not until now asked for loans… She has made a lot of them and every day that passes, is in fact subsidizing others with the high interest rates she pays in the market.”
In late June, following the G20 summit, Mario Monti announced a “growth decree” for Italy, which included “discount loans for corporate R&D [Research & Development], tax credits for businesses that hire employees with advanced degrees, and reduced headcount at select government ministries.” Also in late June, Italy, Germany, France and Spain agreed to a “growth pact” for Europe with the total value of 130 billion euros ($163 billion), noting that, “austerity alone will not be enough to pull the euro zone out of its deep crisis.” The total sum represents 1% of the European Union’s GDP. Also envisioned are “project bonds” which would be financed through the EU’s budget, and issued “for private-sector infrastructure projects,” or in other words, corporate subsidies.
At the end of June, it was reported that Italy’s economic crisis was deepening, due in large part to the austerity measures, but also as a result of the increasingly high yields (interest rates) on Italian bonds, as Italy had to pay the highest interest rates since December in a 5.24 billion euro auction of 5 and 10 year government bonds (meaning that the country pays high interest rates to the financial institutions which purchased these bonds until they expire in a 5-or-10 year term). The ten-year bonds sold at an average rate of 6.19 percent, while the five-year bonds were at an average rate of 5.84 percent. This, the Financial Times warned, “is the latest sign of a deepening double-dip recession in Italy and will add urgency to prime minister Mario Monti’s demands for short-term measures” to reduce interest rates (such as the ECB purchasing bonds on the market). An Italian business lobby, however, went on to praise the “huge steps, unthinkable only a year ago,” which were implemented by Monti’s technocratic government, though adding, “the process is far from being completed.”
In late June, a bickering Italian parliament passed Monti’s labour reform package, just ahead of the EU summit. Angela Merkel said that Italy had “taken the road towards solid public finances, growth, jobs and competitiveness.” The reform of the labour market has been a major demand of the European Commission and the European Central Bank, and thus, Brussels praised the passing of the reforms, and even the IMF chimed in to cheer on Monti. The reform package was passed in parliament as protests led by the labour unions, took place outside, with police helicopters overhead and demonstrators clashing with security forces blocking the way to the parliament building.
At the EU summit at the end of June, Italy and Spain forced leaders to remain at the summit overnight, forcing an agreement to restructure Spain’s 100 billion euro bank recapitalization plan (the Spanish bailout), allowing funds to be injected directly into banks in Spain, “meaning Madrid can sweep the burden of the bailouts off its sovereign books.” Though this, in turn, requires the “creation of a single banking supervisor to be run by the European Central Bank,” likely as a precursor to a European banking union. Italy also received concessions, though less than Spain received, yet was the main driving force behind the revised rules for the eurozone bailout fund – the EFSF (and later the ESM) – which would have it purchasing sovereign bonds in order to lower the borrowing costs, as it would increase confidence in Italian bonds and thus, lower the interest rates, Monti’s key demand in the previous months. The countries that have their bonds purchased by the bailout fund “will no longer be subject to Greek-style monitoring programmes,” but instead, “they would simply have to maintain their EU debt and deficit commitments.” Monti declared, “It is a double satisfaction for Italy.” For Angela Merkel, who had for months refused to support any short-term rescue measures, “the deal was a significant concession.” Though, of course, every concession comes with a condition: “a German-led group of northern creditor countries will gain more control over all of the eurozone banks through the new single supervisor,” the mechanism through which to establish the banking union.
Upon this news, Spanish and Italian government bond yields fell sharply, with a Deutsche Bank economist commenting, “There was so little expectation and since there was a breakthrough at least on bank recapitalizations, the markets salute that.” The German media reported that, “Italy and Spain broke the will of the iron chancellor by out-negotiating her in the early hours of Friday morning,” on June 29. Der Spiegel reported that, “Monti emerged from the late-night negotiations as a clear victor.” Merkel had to concede to Monti, and Spanish Prime Minister Mariano Rajoy, specifically on the issue of “demands” for the bailouts, as Merkel has been the reigning Queen of austerity. Faced up to Monti, however, the permanent European bailout fund – the European Stability Mechanism (ESM) – can loan to countries “which fulfill the budgetary rules laid down by the European Commission… without agreeing to tough additional austerity measures.” Thus, strict oversight by the troika – the European Commission, the European Central Bank, and the IMF – would no longer apply.
Monti’s uprising at the summit began at 7:00 p.m. on Thursday evening, when European Council President Herman Van Rompuy wanted to conclude the first working session and announce the growth pact to the press. Monti, furious, asked Van Rompuy where he was going, and then refused to agree to the growth pact until resolving the issue of establishing “concrete measures to fight the high interest rates on Italian government bonds.” Spanish Prime Minister Rajoy supported Monti, adding that he could not support the growth pact either until such an issue had been resolved. Danish Prime Minister Helle Thorning-Schmidt asked if the attendees “were now all hostages,” and Van Rompuy remained seated. After midnight, representatives from the ten non-euro EU countries left for their hotel rooms, while the 17 eurozone countries “remained in their seats and began a decisive round of negotiations.” After a few hours, Monti and Rajoy convinced Merkel “that countries would in the future be able to receive funds from the ESM without having to submit to troika oversight.” Thus, “only the European Commission’s annual targets will have to be met.” The session ended at 4:20 a.m. on Friday morning, with European Commission President Barroso and Council President Van Rompuy announcing it at a press conference.
This is not to say that austerity and structural adjustment would not be pursued, but simply that the ‘Troika’ (the EC, ECB, and IMF) monitoring and imposition of austerity would cede in favour of general targets set by the European Commission. Those targets, however, would still demand fiscal austerity and structural adjustment, but would not be subject to the same oversight or schedule with which the demands must be met. Ultimately, it was a deal that was not aimed at reducing the imposition and effects of austerity, but rather, was designed to institutionalize more effectively the domination of the European Commission itself (an unelected technocratic institution), as opposed to a more ad-hoc Troika system of oversight.
In the Italy of Mario Monti – and in the European Union at large – austerity is poverty, growth is plundering, labour reform is exploitation, and democracy… is Technocracy. Welcome to Italy, welcome to the new Europe in the age of austerity.
Andrew Gavin Marshall is an independent researcher and writer based in Montreal, Canada, writing on a number of social, political, economic, and historical issues. He is also Project Manager of The People’s Book Project. He also hosts a weekly podcast show, “Empire, Power, and People,” on BoilingFrogsPost.com.
Please donate to The People’s Book Project to help this book be finished by the end of summer:
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Italy in Crisis: The Decline of the Roman Democracy and Rise of the ‘Super Mario’ Technocracy
Part 1 of “Italy in Crisis”, a series of excerpts from a chapter in an upcoming book.
By: Andrew Gavin Marshall
The European debt crisis continues into its third year, with four government bailouts – of Greece, Italy, Portugal, and Spain – and having imposed harsh austerity measures upon the people of Europe, forcing them to pay – through reduced standards of living and increased poverty – for the excesses of their political and financial rulers. Italy, as Europe’s third largest economy, with one of the largest debt-to-GDP ratios, plays a central role in the unfolding debt crisis across Europe. Part 1 of this excerpt from a chapter on the economic crisis in my upcoming book covers the “suspension” of democracy in Italy and the imposition of a ‘Technocracy’ – an unelected government led by academics and bankers – with a mandate to punish the people, facilitate the financial elite, and serve the interests of the supranational, unelected, technocratic European Union. Power centralized, power globalizes, power plunders and profits on the punishment and impoverishment of people everywhere. This is the story of Italy’s debt crisis.
This is an unedited, rough draft excerpt from my upcoming book – the Preface to the People’s Book Project – which is due to be finished by the end of the summer, and covers the following subjects: the origins, evolution, and consequences of the global economic crisis; the expansion and effects of global imperialism and war; the elite-driven social engineering project of establishing an institutional structure of ‘global governance’; and the rising resistance of people around the world to this system, as well as the attempts of the imperial powers to co-opt, control, or destroy these socio-political movements – the embodiment of the ‘Global Political Awakening’ – from the Arab Spring, to the anti-austerity movements across Europe, the Indignados in Spain, the Occupy Movement, the Chilean Winter and the Maple Spring in Quebec, among others. This project needs your support: I am attempting to raise $2,500 in donations to support the efforts to finish this book by the end of the summer, with $530 raised so far, and $1,970 left to go. Please donate today!
Bilderberg, Berlusconi, and Italian Austerity
The Italian Finance Minister, Giulio Tremonti had attended the Bilderberg meeting in early June of 2011, alongside other notable Italian participants, including Franco Bernabe, CEO of Telecom Italia (and Vice Chairman of Rothschild Europe); John Elkann, the Chairman of Fiat; Mario Monti, the president of Bocconi university and a former EU Commissioner; and Paolo Scaroni, the CEO of Eni, an oil and gas company and Italy’s largest industrial corporation. The Bilderberg meeting for 2011 took place from June 9-12 in Switzerland, and of course was attended by a host of other major European elites, including: Josef Ackermann, Chairman and CEO of Deutsche Bank; Marcus Agius, Chairman of Barclays Bank; the Swedish Ministers for Foreign Affairs and Trade; Luc Coene, the Governor of the National Bank of Belgium; Frans van Daele, Chief of Staff to the President of the European Council; Werner Faymann, the Federal Chancellor of Austria; Douglas J. Flint, Group Chairman of HSBC Holdings; Neelie Kroes, Vice President of the European Commission; Bernardino Leon Gross, Secretary General of the Spanish Presidency; George Papaconstantinou, the Greek Minister of Finance; Herman Van Rompuy, President of the European Council; and Jean-Claude Trichet, President of the European Central Bank, among many others.
In July of 2011, Silvio Berlusconi’s government announced a package of austerity measures hoping to calm markets, seeking to reduce the deficit by 40 billion euros. The package, largely designed by finance minister Giulio Tremonti, only attempted to address Italy’s debt, but markets were also concerned about the country’s “ultra-low-growth,” which has been consistent since Berlusconi returned to office in 2001. Once the austerity measures would be signed into law, several opposition politicians were suggesting the formation of a cross-party “technical government” without Berlusconi in office. The Finance Minister Tremonti announced a wave of privatizations. Apparently, the privatizations and various liberalizations were urged into the austerity package by the main opposition party, the Democratic Party (PD), not Berlusconi’s Freedom People Party. The central bank governor of Italy, Mario Draghi, who was poised to become the next President of the European Central Bank (ECB) following the end of the term of Jean-Claude Trichet, warned the Italian government that “it would have to raise taxes or make further spending cuts” if it wanted to calm markets. By July 14, the Italian Senate approved an increased austerity package worth 70 billion euros (or $99 billion), “aimed at convincing investors that the eurozone’s third-largest economy won’t be swept into the debt crisis.” Italy’s bonds (government debt) saw its borrowing rates (interest) hit record highs as investors were not calmed by the proposed austerity measures.
Even as the austerity measures were being passed, market confidence was still lacking, which was largely credited to the fact that a rift emerged between Berlusconi and his Finance Minister Tremonti, who as a Bilderberg attendee, no doubt has the confidence of markets. Berlusconi reportedly viewed Tremonti as a “rival” and has “repeatedly attacked [Tremonti] as a traitor in newspapers owned by the Berlusconi family.” After Tremonti, who was facing his own corruption charges, was caught on camera calling a colleague a “cretin,” Berlusconi told an Italian newspaper, “You know, he thinks he’s a genius and that everyone else is stupid… I put up with him because I’ve known him for a long time and one has to accept the way he is. But he’s the only one who is not a team player.” It was opined, then, that markets reacted to this rift between the Prime Minister and the Finance Minister, as articulated by an official at F&C Investments, who stated that markets view Tremonti as the “steady counterweight to the unpredictable and capricious” Berlusconi.
In July of 2011, Nichi Vendola, a popular leftist opposition political figure in Italy, wrote an article for the Guardian, in which he critiqued the austerity measures imposed by the Berlusconi government. Vendola wrote that, “Italy will not survive this crisis by listening to the very people who got us into it, especially not when they demand that the middle class and poor foot the bill for their failures.” Vendola also put blame on the European managing of the crisis, as “governments now have an obsessive fixation on employing tighter control of budget deficits to satisfy the European stability pact.” Vendola referred to Tremonti’s austerity package as a “social catastrophe,” and that instead, he suggested, what Italy must do “is turn this policy on its head,” noting that, “Italy’s problem is as much about growth as it is debt.” To do this, Vendola wrote, it “will require a new government,” and that, “Italy needs elections, because only a completely new governing class can achieve the political consensus to design and implement a plan to tackle the crisis.” He suggested that the European stability pact would need to be re-negotiated, and concluded: “It does us little good to please the out-of-touch elite of our capitals while the people have to tighten their belts and our youth are robbed of their future.”
Mario Monti, President of Bocconi University and a former European Commissioner, also agreed that Italy needed a new government, though for different reasons (and a different type of government). He wrote an article in a major Italian paper in August of 2011 in which he advocated – as a solution to Italy’s problems – the formation of a “supranational technical government” which would make all the major decisions in order to “remove the structural constraints to growth,” and opined that “an Italy respected and authoritative… would be of great help to Europe.” Vendola wanted a new government to help the people, and Monti wanted a new government to help “Europe” (read: banks and elites). Guess who became the next leader of Italy!?
Berlusconi Bows Down to the Bankers and Punishes the People
In August, Silvio Berlusconi had to approve a new austerity package, the second in less than a month. In a letter which was leaked to the Italian press, it was revealed that Jean-Claude Trichet, the President of the European Central Bank, and Mario Draghi, the President of the Italian Central bank (from 2006 to 2011, who was set to secede Trichet at the ECB in October of 2011), put pressure on Berlusconi to “implement significant austerity measures.” The letter, written by the two central bankers, demanded “pressing action… to restore the confidence of investors.” Dated August 5, 2011, it was issued just days before the ECB announced its new programme to buy Italian bonds (debt), designed to reduce the country’s borrowing costs (interest on future debt). One of the measures mentioned in the letter instructed Berlusconi to take “immediate and bold measures to ensuring the sustainability of public finances,” to achieve a balanced budget in 2013. This was adopted in the subsequent austerity package put forward by Berlusconi in August. The letter also stated that, “it is possible to intervene further in the pension system, making more stringent the eligibility criteria for seniority pensions and rapidly aligning the retirement age of women in the private sector to that established for public employees.” Further, the “borrowing, including commercial debt and expenditures of regional and local governments should be placed under tight control, in line with the principles of the ongoing reform of intergovernmental fiscal relations.”
In economic-speak, the letter asked for privatizations of public services: “Key challenges are to increase competition, particularly in services to improve the quality of public services and to design regulatory and fiscal systems better suited to support firms’ competitiveness and efficiency of the labour market.” This would require three key actions, the first of which was that, “a comprehensive, far-reaching and credible reform strategy, including the full liberalization of local public services and of professional services is needed,” and that, “this should apply particularly to the provision of local services through large-scale privatizations.” The second major step was “a need to further reform the collective wage bargaining system [meaning: undermine unions] allowing firm-level agreements to tailor wages and working conditions to firms’ specific needs and increasing their relevance with respect to other layers of negotiations.” In other words, destroy the unions so that companies can exploit labour to whatever degree they choose. And thirdly, according to Trichet and Draghi, what was needed was a “thorough review of the rules regulating the hiring and dismissal of employees [which] should be adopted in conjunction with the establishment of an unemployment insurance system and a set of active labour market policies capable of easing the reallocation of resources towards the more competitive firms and sectors.”
In other words, labour rights and laws and the rights of workers need to be dismantled so that companies can do as they please. It’s not simply the unions that need to be destroyed, but the laws for worker security in general. Of course, no advice from central bankers would be complete if it didn’t advocate that the government “immediately take measures to ensure a major overhaul of the public administration in order to improve administrative efficiency and business friendliness.” Trichet and Draghi wrote that it was “crucial” that the government take these actions “as soon as possible with decree-laws, followed by parliamentary ratification,” or, in other words: skip the democratic process because it takes too long, rule by decree, something Italy has a “proud” history of. All of this was demanded to be done before the end of September 2011. In an interview with an Italian paper, Trichet admitted that this was not the first time the ECB had sent such letters to governments (such as Greece), saying, “We have sent messages and we do that on a permanent basis, through various means, addressed to individual governments. We do not make them public.”
Indeed, the European Central Bank had demanded austerity measures be implemented by the governments of Greece, Ireland, Portugal, and Italy, and when Berlusconi submitted to the mandate from the central bankers, he complained that it made his administration look like “an occupied government.” A leading liberal MP in Italy, Antonio Di Pietro, said that, “Italy is under the tutelage of the EU, and a country under tutelage is not a free and democratic one.” An Irish MEP (Member of the European Parliament), Paul Murphy, stated that there had been a “massive shift away from democratic accountability since the start of the crisis,” and that: “There needs to be a check on the enormous power of the ECB, which is unelected, and has basically held a government to ransom.” Europe’s largest trade union federation, the European Public Sector Union, “accused the ECB of directing Italian fiscal and labour policy in secret,” which is, of course, true. The Deputy General Secretary of the federation, Jan Willem Goudriaan, said, “Europe cannot be governed through secret letters of bankers, officials or an unaccountable body.” EU officials, from Angela Merkel, Nicolas Sarkozy, to Herman Van Rompuy and Jean-Claude Trichet, have been increasing their calls for an “economic government” of Europe, tightening and deepening fiscal integration and proposing the creation of new council’s and organizations to impose sanctions on countries and “police the austerity measures of governments,” and even the creation of a European finance ministry. Paul Murphy stated that, “All these proposals, discussions about economic government, are about undermining democracy in order to impose a European shock doctrine… EU elites need to remove points of pressure that can be mounted on governments. If the mass of people are opposed to austerity, they can mount pressure on governments to hold that in check. So the only way it can then be imposed s undemocratically.” The head of a Belgian pro-transparency group stated that, “European powers [are] distancing themselves from voters while at the same time [there is] a growing tendency towards building closer relationships with corporate and specifically financial lobbies… These two trends are explosive and can only lead to a loss of legitimacy for the EU institutions.”
Shortly after, on August 12, the Berlusconi government was meeting to approve the new austerity package to meet the ultimatum from the ECB, amounting to a package of “fiscal adjustments” (i.e., spending cuts) of 20 billion euros in 2012 and 25 billion euros in 2013, with the spending cuts and tax increases to be “enacted immediately by decree, but subject to approval by parliament later,” just as Draghi and Trichet instructed. The rapid tax increases did much to damage even long-time supporters of Berlusconi who had promised that he would “never put their hands in the pockets of the Italian people.” Fiscal federalism was the policy of giving the various regions in Italy more control over their finances. With the new austerity package, the governor of Lombardy, Roberto Formigoni, stated, “It seems clear [fiscal] federalism has vanished.”
In mid-September, Berlusconi won final parliamentary approval for the 54 billion euro ($74 billion) austerity package, while police outside the parliament in Rome had to disperse protesters with tear gas. The German Economy Minister Phillip Roesler told a news briefing in Rome that, “The approval of the austerity package sends a signal of stability… I have respect for what Italy has done with its budget adjustment as this will benefit the whole euro area.” The legislation simply made legal the measures that Berlusconi’s government enacted through un-democratic decree the month before, and were formalized in exchange for the European Central Bank bond purchases which helped to reduce Italy’s borrowing costs. Silvio Peruzzo, an economist at the Royal Bank of Scotland, stated that the plan’s passage is a “very welcome step,” but that the slowing global economy still cast doubts on whether Italy could “meet its fiscal targets and will also render additional corrective measures [austerity packages] very likely.” Even with the endorsement and backing of the ECB, said Peruzzo, Italy’s debt remained “under pressure, which is indicative of a well-rooted lack of confidence in Italy and in the European policies to tackle the crisis.” One the plan was approved, said Italian Finance Minister Tremonti on September 10, “If there are things to change in our growth measures we will, and if there are things to add, we will.”
The Economist reported on the new austerity package, noting that while Berlusconi had approved the austerity package in Italy, designed to cut roughly 45.5 billion euros from the deficit by the end of 2013, he almost immediately back-peddled on 7 billion euros worth of spending cuts and tax increases, “notably a tax on high earners that would have hurt his natural supporters,” meaning, rich people. Thus, even as the package went to the Senate in early September, Berlusconi was fine-tuning the details. Thus, noted the Economist, “the markets [were] again registering alarm,” and at the same time, Italy’s largest and most militant trade union federation, the CGIL, called for a one-day strike in opposition to the austerity package, “protesting over a clause making it easier to dismiss workers and, more generally, over a budget that the CGIL’s leader, Susanna Camusso,” referred to as “unjust because it attacks the weakest.” This further worried “the market” and “investors.” The Economist wrote that: “Mr. Berlusconi had consistently failed to react unless bullied. His first emergency budget in July followed a telephone call from the German chancellor, Angela Merkel,” while the second was of course at the prompting of the ECB.
By October of 2011, the austerity measures in Italy had been wreaking havoc, as non-profit organizations lose their funding and had major bureaucratic obstacles put in their way for community projects, such as the Associazione Obiettivo Napoli, which ran two programs working with children in difficulty in Naples since 1998, helping them clean up local communities and provide counseling. As central government funding to town halls had been cut, organizations like Obiettivo Napoli, “which sit uneasily somewhere between education, welfare and rehabilitation budgets, have been the first to suffer.” Pietro Varriale, who works with the organization, commented on further obstacles put in their way: “They’re saying we need a second degree in education science to be able to do this work… It’s crazy. I have 15 years experience in this field, most of the team likewise, and we all have first degrees. A second degree is going to cost people a fortune, really a lot of money, and there’s no help or grant for that kind of thing. We’ve been given till 2013 to conform.” To add to that, the city of Naples simply stopped paying the bills for the organization, which had to then borrow money from a bank, forcing the employees such as Pietro to have to take on jobs working at bars, waiting tables, picking tomatoes and other piecemeal projects while they continue to work with the association being unpaid: “You keep going because of the kids, the relationships you build up.”
Giancarlo Di Maio, a 23-year old university graduate in Naples working at a secondhand bookshop told the Guardian that, “University here is like a car park. You stay there as long as you can, because there’ll be nothing to do when you come out,” referring to the lack of jobs for youth. As he was employed, he explained: “Every morning, I wake up with a smile… How fortunate am I? Because otherwise, the only other work around here is black. The black economy is a huge, monumental issue for Italy.” His friends might make 30 euros for 10 hours working in a bar, or 20 euros for a night waiting tables in a restaurant. Di Maio, who works at a bookshop owned by his father, said that, “I know plenty of people in their 30s, even some in their 40s, still living with their parents… That’s not normal. For me, that’s one of the biggest problem [sic] in Italy – opportunities, any kind of prospects for young people.” When asked about Italian politics, he replied, “We have the worst political class in Europe, no question… Twenty years of Berlusconi, and not a single reform, nothing for the unemployed, nothing to address the economic crisis. Instead we talk about his sex life… we have a political class who do nothing. They don’t have solutions, and even if they did they wouldn’t try to do anything. They just speak air, it’s all they can do. Posturing.” Expressing some hope at the Occupy movement, though lamenting how it turned to violence in Italy, he explained that people were “finally starting to get angry. They are beginning to see that really, we can’t carry on like this. Italy really is sick. We can’t pretend to be the doctor any more; we need curing ourselves.”
The Technocratic Coup
By early October 2011, it was clear that the “markets” were not satisfied with Berlusconi’s efforts at implementing a program of social genocide (fiscal austerity) which was to their liking. Thus, on October 5, the international ratings agency Moody’s cut Italy’s credit rating for the first time in two decades, adding to the downgrading from Standard & Poor’s two weeks prior. The Italian government responded that the actions of the ratings agencies were “politically motivated.” Even Moody’s acknowledged that the political situation within Italy played a part in its decision, including Berlusconi’s sex scandals, and the growing protests against the austerity measures.
The effect of the downgrades is to make Italian bonds (government debt) less attractive to buy (as it is a riskier investment), and thus, Italy would have to pay higher interest rates. As a result of that, as we have seen with Greece, this makes the country’s overall debt larger (as it amounts to borrowing money to pay back borrowed money), except with the higher yields (interest rates), the future payments will be even more costly, likely to create potential for a bailout (again, just taking more debt to pay interest on older debts). All the while, the overall debt to GDP ratio increases, and austerity measures become the “conditions” for receiving bailouts, and the country is essentially taken over by the IMF, the ECB, and the EC (named the “Troika”), as occurred in Greece. This creates a permanent spiral of expanded debt, economic crisis, and social genocide. This is what is often called “market discipline.”
In mid-October, opposition to Berlusconi’s harsh austerity measures from within Italy was increasing, just as “market pressure” and EU-opposition from outside Italy was building against Berlusconi for his austerity measures being perceived as ‘too little, too late.’ Nine members of Berlusconi’s own coalition said the austerity package “unfairly targets the middle class and fails to tackle Italy’s massive tax evasion problem.” Susanna Camusso, the head of Italy’s largest and most militant labour federation, CGIL, said that a strike is the only way to “change the inequity of this package.” During a global “day of rage” partly inspired by the Occupy Wall Street movement in the United States and the Indignados movement in Spain, October 15 saw various Occupy and other protests erupt around the world, in 950 cities in 80 different countries. In Italy, Rome saw roughly 200,000 protesters come out into the streets, protesting against the austerity measures, the government, the EU, the ECB and the IMF. The protests erupted into violence as hundreds of those assembled began fighting with riot police, who were using tear gas and water cannons against the protesters, and several hundred erupted in urban rebellion (what is often called “riots”) in which banks were destroyed, they set cars and garbage bins on fire, hurled rocks, bottles, and fireworks at the police who continually charged the crowd. Roughly two dozen demonstrators were injured, with one reported to be put in critical condition, and at least 30 riot police were injured.
As Berlusconi’s own government began to fracture in the face of the austerity package, disagreeing on what and how and if to cut, one of Berlusconi’s main coalition partners, the center-right Northern League, hinted that new elections were a possibility. Considering the popularity of the anti-austerity leftist leader Nichi Vendola, this was perhaps too much to bear. European leaders Angela Merkel and Nicolas Sarkozy lost their patience, and in late October, demanded that Berlusconi move forward with the austerity package. In a series of EU summits in late October on handling the economic crisis, discussing specifically the plan to boost the funds of the European Financial Stability Facility (EFSF), there was concern, reported Der Spiegel, “that the current size of the (recently expanded) fund isn’t sufficient should additional countries, particularly Spain and Italy, be infected with debt contagion.”
Following these meetings, it was made “abundantly clear” to the Italians that their “leadership is no longer taken seriously.” Italian papers and TV shows were overwhelmed with covering the “condescending smile” of Angela Merkel to Berlusconi, and comments made by Sarkozy. Merkel and Sarkozy and other EU leaders told Berlusconi in the talks that he had to present a plan within three days “for reducing Italian debt more quickly than current plans call for.” European Council President Herman Van Rompuy said that Berlusconi had “promised to do so.” The following evening, Berlusconi stated, “No one is in a position to be giving lessons to their partners.” European leaders were frustrated that even the austerity package passed earlier in the summer had not been fully implemented, and the government’s stability was continually threatened over debating each new measure. The European Commissioner for Economic and Monetary Affairs, Olli Rhen, said that all the details of the new plan were “unclear.” With the EU summits proposing increasing the EFSF bailout fund from 440 billion euros to 1 trillion, a central feature to the demands of the EU leaders was that countries like Italy impose more stringent austerity measures. As Der Spiegel reported, “A clear Italian commitment to austerity is a key component of that plan.” There was then a good deal of conjecture over the possible departure of Berlusconi. The Italian paper Corriere della Serra reported that Angela Merkel called the Italian President Giorgio Napolitano the previous week “to discuss concerns about Italy’s political leadership.”
In fact, Angela Merkel did make such a phone call to Italy’s president Napolitano in October, violating “an unwritten rule” for Europe’s leaders “not to intervene in one another’s domestic politics.” But this is a new, changing EU, one in which democracy – even the withering façade Western governments maintain – simply no longer matters. Merkel was “gently prodding Italy to change its prime minister, if the incumbent – Silvio Berlusconi – couldn’t change Italy.” The Wall Street Journal reported on the events that led to this incident, explaining that at the annual meeting of the IMF in September, China, Brazil, and the U.S. “berated” Europe for its small bailout fund, and told Europe to borrow “hundreds of billions of euros from the ECB,” something Merkel had long been against, and which was refused by Jens Weidmann of the German central bank, explaining that the bailout fund “was an arm of the governments… and lending to governments was against the ECB’s charter.” On October 19, Sarkozy left his wife who was in labor at a clinic in Paris to fly to Frankfurt to confront Jean-Claude Trichet at a party being held for the President of the ECB to honour him as he prepared to leave the ECB at the end of the month (to be replaced by the president of the Central Bank of Italy, Mario Draghi). Sarkozy argued that the ECB needed to intervene in the bond markets (buying government debt), stating that, “Everything else is too small.” Trichet said that it wasn’t “the ECB’s job to finance governments.”
The ECB had engaged already in certain bond purchases, which “had caused a political backlash in Germany,” and as Trichet said, “I did a bit, and I was massively criticized in Germany.” Merkel, who was present during the shouting match between Trichet and Sarkozy, was frustrated at Sarkozy’s pressure on Trichet, as she had always opposed the ECB printing money to handle the crisis, telling Trichet, “You’re a friend of Germany.” It was the following day, on October 20, that Merkel made her “confidential” phone call to the Italian President in Rome, “the man with authority to name a new prime minister if the incumbent were to lose parliament’s support.” President Napolitano informed Merkel that it was “not reassuring” that Berlusconi had only “recently survived a parliamentary vote of confidence by just one vote.” Merkel then thanked Napolitano for doing what was “within your powers” in promoting reform. Within days, Napolitano began “sounding out Italy’s political parties to test the support for a new government if Mr. Berlusconi couldn’t satisfy Europe and the markets.” It no doubt did not help Berlusconi when he wrote in an Italian paper in late October that the word austerity “isn’t in my vocabulary.”
In early November, at a G20 meeting in Cannes, President Obama and other leaders were “effectively ordering Silvio Berlusconi to accept surveillance of Italy’s austerity measures by the International Monetary Fund,” reported the Guardian. Berlusconi was advised by Merkel, Sarkozy, Herman Van Rompuy and other EU leaders the previous week to come to the G20 with “a specific austerity package,” but due to divisions within his cabinet, Berlusconi “arrived empty-handed.” It was reported that Berlusconi would likely not survive a vote of confidence in the Italian parliament set for the following week. The ECB had been purchasing Italian bonds since August in order to push the yields lower, which dropped to below 5%, but by early November they had been driven up to 6.5%, “levels that make it difficult to pay back debt.” Italian President Napolitano had been holding meetings with party leaders to discuss the possibility of “constructing an interim government if Berlusconi’s collapses.” The G20, which was discussing the possibility of adding $300 billion to the IMF’s bailout fund of $950 billion, and G20 leaders pressured Italy “to sign up to a more specific austerity package or else the US and other countries would not put extra funds into the IMF.”
Just prior to heading to the G20 meeting, Berlusconi had attempted to issue a decree which would pass various austerity measures, “thus bypassing the parliament,” but, reported the EUobserver, he “was held back by [President] Giorgio Napolitano,” as well as the Finance Minister Giulio Tremonti. Instead, Berlusconi was pressured to attempt an amendment to a “law for stability” to be approved the following week, at which time he would likely face a vote of confidence. Enrico Letta, the deputy general secretary of the center-left Democratic Party (PD), the main opposition party, said that, “We think that next week will be a week in parliament where we try to force the situation if Berlusconi does not resign before.”
As Jean-Claude Trichet retired from the ECB at the end of October, and Mario Draghi left the Bank of Italy to take up his new job as President of the ECB, the newly-appointed governor of the Bank of Italy, Ignazio Vasco, said that Italy “needed to take urgent action to boost confidence in the economy and initiate structural reforms,” insisting that the commitments already given to the EU in a “letter of intent” in late October (following Berlusconi being castigated by Merkel and Sarkozy), “must be honoured quickly and consistently.” At the G20 conference, Berlusconi agreed under pressure to have the IMF oversee Italy’s implementation of austerity measures, following late-night talks with G20 leaders. Jose Manuel Barroso, President of the European Commission (EC), said that, “Italy had decided on its own initiative to ask the IMF to monitor. I see this as evidence of how important Italy’s commitment to reform is.” The EC would also monitor Italy’s progress, and was set to visit Italy the following week to undertake a more detailed study. One EU source told the Telegraph that, “We need to make sure there is credibility with Italy’s targets – that it is going to meet them. We decided to have the IMF involved on the monitoring, using their own methodology, and the Italians say they can live with that.” The chief financial officer of Commerzbank, Eric Strutz, said that, “The whole stability of Europe depends on whether Italy gets its act together.”
On November 8, Berlusconi suffered a party revolt in parliament which failed to deliver him a majority, and would likely lead to a vote of non-confidence a few days later. Upon this defeat, Berlusconi announced that he would resign as Prime Minister “as soon as parliament passed urgent budget reforms demanded by European leaders.” President Napolitano announced that he would begin consultations on the formation of a new government, and stated that he would prefer a “technocrat or national unity government.” At the same time, the “markets” had pushed Italy’s bond yields (debt interest) to nearly 7%, figures that saw Greece, Ireland, and Portugal getting bailouts. The leader of the main opposition Democratic Party (PD), Pier Luigi Bersani, said, “I ask you, Mr. Prime Minister, with all my strength, to finally take account of the situation… and resign.” Berlusconi and some of his close allies, however, warned that appointing a technocratic government, the option which was said to be favoured by “markets,” would amount to an “undemocratic coup.” Naturally, that’s just what happened.
Writing for the Guardian, John Hooper suggested that one of four scenarios would take place upon the event of Berlusconi’s resignation: one envisions Berlusconi leaving but the right gaining a broader majority, specifically under Umberto Bossi’s Northern League, who was in Berlusconi’s coalition but had advised him to resign, and was pushing for him to be replaced with the next in command in Berlusconi’s party, Angelino Alfano; another scenario envisioned a “grand coalition,” or a “government of national emergency or salvation,” bringing together all the parties; a third scenario had Italy calling an election, urged by both Berlusconi and Bossi; or the fourth option, “a cabinet of technocrats,” which Hooper wrote was “favoured by the markets and the Italian centre left,” which would consist of “a government filled with specialists who could pass the unpalatable legislation needed to revive Italy’s flagging economy without having to worry about re-election.” This happened before in Italy, when Berlusconi’s government fell in 1994, at which time he was replaced by Lamberto Dini, a central banker, who headed a government of “professors, generals and judges.” In this scenario, suggested Hooper, the likely prime minister would be Mario Monti.
Upon Berlusconi’s failure to achieve a minority during the budget vote on November 8, many officials from the financial community began making their observations, such as Jan Randolph, the head of sovereign risk analysis at HIS Global Insight, who said that, “Berlusconi has effectively lost political capital to carry the country through a period of austerity and structural reform,” and that, “Berlusconi will have to resign.” He went on to suggest that it was possible “that a broad National Unity government headed by a respected technocrat like ex-EU commissioner Mario Monti could be formed.”
As Berlusconi officially resigned on the night of November 12, 2011, he left the president’s palace through a side door as a crowd of over 1,000 people outside yelled, “buffoon,” “Mafioso,” and for him to “face trial.” A poll from early November reported that 71% of Italians favoured his resignation, and upon hearing of his official resignation, the crowd erupted in roars of “Halleluja.”
On November 16 of 2011, Mario Monti was appointed as Prime Minister of Italy. Monti accepted the mandate to form a new government, and was expected to appoint technical experts as opposed to politicians to his cabinet. President Napolitano told Italian politicians that, “it is a responsibility we perceive from the entire international community to protect the stability of the single currency as well as the European frame work.” Berlusconi’s political party, the People of Liberty, said it would accept a Monti government for a short while before elections would have to be scheduled, and Berlusconi referred to his resignation as “an act of generosity.”
Mario Monti is an economist and academic who served as European Commissioner for the Internal Market, Services, Customs and Taxation from 1995 to 1999, and European Commissioner for Competition from 1999 to 2004. Monti is founder and Honorary President of Bruegel, a European think tank he launched in 2005, based in Belgium, and which represents the interests of key European elites. Monti has also been a member of the advisory board of the Coca-Cola Company, and was an international advisor to Goldman Sachs, was a former member of the Steering Committee of the Bilderberg Group, having previously attended the meeting in Switzerland in June of 2011, and was European Chairman of the Trilateral Commission until he resigned when he became Prime Minister of Italy.
Monti’s think tank, Bruegel, represents key elite European interests. The Chairman of the Board of Bruegel is Jean-Claude Trichet, the former President of the European Central Bank (ECB) from 2003 to 2011, who is also a member of the board of directors of the Bank for International Settlements (BIS), and has joined the boards of a number of major corporations, including EADS. Other board members of Bruegel include: Jose Manuel Campa Fernandez, who was the Spanish Secretary of State for Economic Affairs at the Ministry of Economy and Finance from 2009 to 2011, and has been a consultant for the European Commission, the Bank of Spain, the Bank for International Settlements (BIS), the Federal Reserve Bank of New York, the Inter-American Development Bank, the International Monetary Fund and the World Bank; Anna Ekström, the president of the Swedish Confederation of Professional Associations, Saco, and formerly the Swedish State Secretary for the Ministry of Industry, Employment and Communication; Jan Fisher, Vice President of the European Bank for Reconstruction and Development (EBRD), former Prime Minister of the Czech Republic; Vittorio Grilli, the Deputy Minister of the Ministry of Economy and Finance of Italy (whom Monti appointed to his technocratic government in November of 2011), and a former Managing Director at Credit Suisse First Boston; Wolfgang Kopf, Vice President at Deutsche Telekom AG; Rainer Münz, head of Research and Development at Erste Group and Senior Fellow at the Hamburg Institute of International Economics (HWWI), former consultant to the European Commission, the OECD, and the World Bank; Jim O’Neill, Chairman of Goldman Sachs Asset Management; Lars-Hendrik Röller, the Director General of the Economic and Financial Policy Division of the German Federal Chancellery, and is President of the German Economic Association; Dariusz Rosati, former consultant economist at Citibank, former Minister of Foreign Affairs for Poland, former adviser to the President of the European Commission, and was a member of the European Parliament from 2004 to 2009; and Helen Wallace, a British academic expert on European integration.
In October of 2009, Mario Monti was asked by the President of the European Commission Manuel Barroso to draw up a report on how the EU should re-launch its single market. Barroso advised that the report, “should address the growing tide of economic nationalism and outline measures to complete the EU’s currently patchy single market.” Mario Monti was President of the Bocconi University at the time he was asked to write the report. In May of 2010, Monti produced the report and officially handed it in to European Commission President Barroso. The report recommended ways to fight the potential of economic nationalism and to preserve and protect the regional bloc and to advance the process of integration, with Monti arguing that, “There is now a window of opportunity to bring back the political focus of the single market.” The report eventually became the EU’s Single Market Act of 2011.
After becoming the technocratic and unelected Prime Minister of Italy, Monti quickly appointed his new cabinet, of which more than a third of the 17-member cabinet consisted of professors and other technocrats. The cabinet position of Minister of Economic Development, Infrastructure and Transport was given to Corrado Passera, the chief executive of Italy’s largest bank, Intesa Sanpaolo. Passera told the Financial Times upon his appointment as “superminister” that, “If you want to build the wide consensus that is needed, we have to share sacrifices and benefits among all the segments of society with a balanced set of actions and with the right mix of austerity and development programmes.” British hedge fund manager Davide Serra stated, “Monti and Passera are the right guys for the job. They are the dream team.” Upon appointing his new technocratic government, Monti declared: “We feel sure of what we have done and we have received many signals of encouragement from our European partners and the international world. All this will, I trust, translate into a calming of that part of the market difficulty which concerns our country.” On the lack of party representatives in his cabinet, Monti commented, “The absence of political personalities in the government will help rather than hinder a solid base of support for the government in parliament and in the political parties because it will remove one ground for disagreement.”
A former ambassador who worked with Monti when he was an EU Commissioner recalled Mario’s style of governance, stating, “He didn’t have a very Italian way of going about things… His nickname in those days was ‘The Italian Prussian’.” An article in Reuters described Monti as “a convinced free marketeer with close connections to the European and global policy making elite, Monti has always backed a more closely integrated euro zone,” and went on to mention his leadership positions within the Bilderberg Group of “business leaders” and “leading citizens” and the Trilateral Commission, which “brings together the power elites of the United States, Europe and Japan.” Monti’s government would be given roughly 18 months to push through “reforms” and austerity measures, as another election would not be due until 2013. However, as one outgoing minister commented in November of 2011, “The decisions which Monti will take must pass in parliament and I think that with such a heterogeneous majority he will have many problems. I believe this solution will lead to many problems.”
Monti of course received abundant praise from Europe’s leaders on becoming the new unelected technocratic Prime Minister of Italy. An article by Tony Barber in the Financial Times explained that Italian party politics was simply too problematic, as: “Even a centre-left government with a mandate from the voters would find it hard to maintain the unity and resolution required to implement the unpopular austerity measures and structural economic reforms demanded by Germany, France, the European Commission, the European Central Bank and the International Monetary Fund.” And with the prospect of labour resistance from workers and pensioners, “it is easy to see why Europe’s leaders were eager for Mr Monti to inherit the premiership.” Thus, wrote Barber, “technocracy has an irresistible appeal.” Mario Monti himself had acknowledged that “irresistible appeal” in August of 2011, when he wrote an article in a major Italian paper advocating the formation of a “supranational technical government” which would make all the major decisions in order to “remove the structural constraints to growth,” and opined that “an Italy respected and authoritative… would be of great help to Europe.” And as it turned out, a great help to Monti.
In early December of 2011, after forming his cabinet and being approved by Italy’s lower chamber of Parliament with a rare majority, Mario Monti received the endorsement of Angela Merkel and Nicolas Sarkozy, declaring their “absolute trust” in Monti and in “his structural changes” to his governing of Italy. Monti, upon assuming power, warned Italians in a speech that, “It is not going to be easy, sacrifice will be required.” As Monti’s “technocratic government” is full of appointments from the ruling class, including bankers and other executives, many in Italy were raising concerns that this suggested an inherent conflict of interest in his government, as those who helped create the crisis are brought in to solve it, a highly political government, despite all the claims of an apolitical ‘technocracy’ (technocracies are always political entities, but instead of pushing party ideologies, they push ultra-elite ideologies in the management and maintenance of society). Monti replied that, “There is no conflict of interests… The fact that many of us have played a role in the institutions before doesn’t mean that we will not be totally transparent.” And with that note, Monti appointed Carlo Malinconic as undersecretary for publishing affairs, after having previously served as president of the Italian Federation of Publishing and Newspapers.
Writing in the journal of the Council on Foreign Relations, Foreign Affairs, Jonathan Hopkin, a professor of comparative politics at the London School of Economics, commented that the replacement of Berlusconi with Monti “marks a new stage in the European financial crisis,” in which “the crisis now seems to be wiping out democratically elected governments.” Largely under pressure from bond markets, “Italian politicians have opted to hand power to technocrats, expecting that they will somehow enjoy greater legitimacy as they impose painful measures on an angry population.” Hopkin stated: “This will not work.”
In early November, as democratically-elected governments in Greece and Italy were replaced with unelected and unaccountable technocratic governments, essentially run by and for the European Union and global banks, Tony Barber, writing in the Financial Times, suggested that this is but one of several responses to the economic crisis. Specifically, this response “involves the surgical removal of elected leaders in Greece and Italy and their replacement with technocratic experts, trusted within the EU to pass economic reforms deemed appropriate by policymakers in Berlin, the bloc’s top paymaster, and at EU headquarters in Brussels.” Barber referred to the “sidelining of elected politicians in the continent that exported democracy to the world” as a “momentous development.” In short, “eurozone policymakers have decided to suspend politics as normal in two countries because they judge it to be a mortal threat to Europe’s monetary union.” Thus, these policymakers “have ruled that European unity, a project more than 50 years in the making, is of such overriding importance that politicians accountable to the people must give way to unelected experts who can keep the show on the road.” In Greece, the government was put under the technocratic leadership of Lucas Papademos, a former vice president of the European Central Bank, and upon accepting his appointment, stated: “I am confident that the country’s participation in the eurozone is a guarantee of monetary stability.” In Italy, Mario Monti came to power, a technocrat who “is revered in Brussels as one of the most effective commissioners for competition and the internal market that the EU has known.” One prominent Italian banker commented: “We need a strong national unity government for one to one and a half years to do what the politicians haven’t had the courage to do.”
Running the ECB can be such a ‘Draghi’
In late October of 2011, at a gala event to mark the end of Jean-Claude Trichet’s eight years as president of the European Central Bank, Mario Draghi, the governor of the Bank of Italy, who was selected to take over for Trichet at the start of November, was “working the room” of high-powered European elites, including Angeal Merkel, and IMF Managing Director Christine Lagarde. Between 1984 and 1990, Draghi was the Italian Executive Director at the World Bank, and in 1991, he became the director general of the Italian Treasury until 2001. Between 2002 and 2005, Draghi was the Vice Chairman and Managing Director of Goldman Sachs International, thereafter becoming the governor of the Bank of Italy from 2006 until 2011, also putting him on the Governing Board of the European Central Bank and the Bank for International Settlements (BIS). Draghi is not simply one of the individuals who has been most responsible for handling and managing the economic crisis, but he also played an important role in causing it. As Vice Chairman of Goldman Sachs, and in Italy at the Treasury and the central bank, “Draghi was a proponent of nations and other institutions like pension funds using derivatives to more efficiently manage their liabilities.” This means that Draghi advised that governments should essentially hide their debts in the derivatives market, where they would not be viewed as liabilities, but rather, transactions. These “transactions” were very popular in Greece and Italy, and had a great deal to do with accumulating and hiding the massive debts of these countries.
When Draghi led the Italian Treasury in the 1990s, he “oversaw one of the largest European privatization efforts ever and paved the way for Italy’s entry into the euro,” earning him the nickname, “Super Mario.” Italy liberalized its financial markets, allowing for massive speculation, derivatives, and other banking excesses, and he privatized roughly 15% of Italy’s economy. While Italian governments came and went during this period, Draghi always remained. While both Draghi and Goldman Sachs said that “Super Mario” did not have anything to do with the especially controversial Greece-Goldman Sachs transactions, one Goldman Sachs executive in Europe, “who was not authorized to speak publicly,” told the New York Times that, “Mr. Draghi had discussed similar initiatives with other European governments.” When asked about his involvement at Goldman Sachs, Draghi once replied, “I was not in charge of selling stuff to the governments… In fact, I worked in the private sector even though Goldman Sachs expected me to work in the public sector when I was hired.” However, in a paper which Draghi wrote in 2002 just a couple months after being hired by Goldman Sachs, at which his job description was “to win investment banking business from European governments,” Draghi argued in favour of governments using derivatives “to stabilize tax revenue and avoid the sudden accumulation of debt,” which the New York Times politely described as “faithful to the spirit” of the Goldman-Greece deal.
In an interview with the Financial Times in December of 2011, European Central Bank president Mario Draghi reflected upon the financial crisis and the actions taken to manage it. He explained that the ECB’s long-term refinancing operation (a half-trillion euro bank bailout) was not designed to give banks an incentive to buy government bonds from the “periphery” nations, but rather, that, “the objective is to ease the funding pressures that banks are experiencing,” and that the banks “will then decide what the best use of these funds is.” Draghi stated that, “we don’t know exactly” what banks were doing with the money, but that, “the important thing was to relax the funding pressures.” Draghi reiterated that the banks “will decide in total independence what they want to do.”
It’s interesting to note that when governments get bailouts, they are told what and how to spend the money, and are forced to impose austerity measures that destroy the social fabric and punish the populations of their countries, and then, of course, have to pay back the money at exorbitant interest rates; but when banks get a half-trillion euro bailout, the banks will “decide what the best use” of the money is, and where it goes is not important, it’s only important to “relax” the pressure on the banks, who will repay the debt over a long-term period (3 years) with extremely low interest (averaging 1%). So people get pressure, and banks get pressure “relaxed.”
Draghi told the Financial Times that what is needed most is to “restore confidence,” and for this, there are four answers. The first one “lies with national economic policies, because this crisis and this loss of confidence started from budgets that had got completely out of control.” The second answer, explained Draghi, “is that we have to restore fiscal discipline to the euro area,” which means to impose austerity, “and this is in a sense what last week’s EU summit started [in mid-December 2011], with the redesign of the fiscal compact.” The third answer “is to have a firewall in place which is fully equipped and operational,” meaning a massive bailout fund, which “was meant to be provided by the EFSF.” The fourth answer, according to Draghi, is for countries “to undergo significant structural reforms that would revamp growth,” implying things like liberalization, privatization, and further deregulaiton. When Draghi was asked about the critics of the fiscal compact who suggest that it amounts to a “stagnation and austerity union,” Draghi replied that, “they are right and wrong at the same time.” Draghi repeated the mantra of pro-austerity voices, who always suggest with no historical evidence to support, that there is “no trade-off between fiscal austerity, and growth and competitiveness.” However, Draghi contended, “I would not dispute that fiscal consolidation [austerity] leads to a contraction in the short run.” The correspondent with the Financial Times asked: “But these austerity programmes are very harsh. Don’t [you] think that some countries are really in effect in a debtor’s prison?” Draghi replied: “Do you see any alternative?”
In an interview with the Wall Street Journal in February, Mario Draghi warned European countries “that there is no escape from tough austerity measures and that the continent’s traditional social contract is obsolete.” Draghi said that Europe’s social model was “already gone,” and that the only way to return to “long-term prosperity” was “continuing economic shocks [that] would force countries into structural changes in labor markets and other aspects of the economy.” As European people were suffering through the increased austerity measures, Draghi warned that, “Backtracking on fiscal targets would elicit an immediate reaction by the market.” This of course implies that the market has the ‘right’ to determine the fate of Europe’s people. For Draghi, “austerity, coupled with structural change, is the only option for economic renewal.” The European Commission, headed by Jose Manuel Barroso, agreed with Draghi, stating that despite forecasting a deepened recession brought on by austerity measures, governments “should be ready to meet budgetary targets.” Simon Johnson, the former chief economist of the IMF, said that Draghi was “just sugarcoating the message.” Johnson explained: “A lot of this structural reform talk is illusory at best in the short run… but it’s a better story than saying you’re going to have a terrible 10 years.”
In the interview, Draghi commented on the “positive changes” which had been taking place in the previous few months: “There is greater stability in financial markets. Many government shave taken decisions on both fiscal consolidation and structural reforms. We have a fiscal compact where the European governments are starting to release national sovereignty for the common intent of being together.” When Draghi was asked what his view was “of these austerity policies in the larger strategy right now, forcing austerity at all costs,” Draghi replied: “There was no alternative to fiscal consolidation, and we should not deny that this is contractionary in the short term.” Then, he added, it was necessary to promote growth, “and that’s why structural reforms are so important.” The interviewer asked Draghi what the “most important structural reforms” were for Europe at that time. Draghi replied:
In Europe first is the product and services market reform. And the second is the labour market reform which takes different shapes in different countries. In some of them one has to make labour markets more flexible and also fairer than they are today [in other words: more easily exploited]. In these countries there is a dual labour market: highly flexible for the young part of the population where labour contracts are three-month, six-month contracts that may be renewed for years. The same market is highly inflexible for the protected part of the popuation where salaries follows seniority rather than productivity. In a sense labour markets at the present time are unfair in such a setting because they put all the weight of flexibility on the young part of the population.
When central bankers and politicians and others talk about “labour flexibility,” what they really mean is “worker insecurity.” This was bluntly stated by Alan Greenspan back when he was Governor of the Board of the Federal Reserve System, when in testimony before the US Senate in 1997, he discussed how America’s “favorable” economy was constructed. Greenspan discussed how wage increases for workers did not keep pace with inflation, which was, he explained, “mainly the consequence of greater worker insecurity.” He elaborated: “the willingness of workers in recent years to trade off smaller increases in wages for greater job security seems to be reasonably well documented.” Greenspan credited the creation of “worker insecurity” with technological changes, corporate restructuring and downsizing, as well as “domestic deregulation.” The New York Times reported on this, stating that Greenspan described “job insecurity” as “a powerful recent force in the American economy,” and that Greenspan, “clearly elevated this insecurity to major status in central bank policy.” How does worker insecurity influence central bank policy? The article explained: “Workers have been too worried about keeping their jobs to push for higher wages… and this has been sufficient to hold down inflation without the added restraint of higher interest rates.” However, Greenspan warned that even though job insecurity continues to rise, once “workers become accustomed to their new level of uncertainty, their confidence may revive and the upward pressure on wages resume.”
In his interview with the Wall Street Journal, Mario Draghi was asked if “Europe will become less of the social model that has defined it,” to which Draghi replied: “The European social model has already gone.” Draghi, repeating the mantra of so many in power, stated that, “there is no feasible trade-off between” austerity and growth: “Fiscal consolidation is unavoidable in the present set up, and it buys time needed for the structural reforms. Backtracking on fiscal targets would elicit an immediate reaction by the market.” In terms of “progress” – as Draghi defines it – throughout the crisis, he praised the fiscal compact treaty as “a major political achievement because it’s the first step towards a fiscal union. It’s a treaty whereby countries release national sovereignty in order to accept common fiscal rules that are especially binding, and accept monitoring and accept to have these rules in their primary legislation so they are not easy to change. So that’s a beginning.”
In further testimony in 2000, Alan Greenspan again addressed the issue of “worker insecurity,” which he stipulated was the “consequence of rapid economic and technological change,” which in turn created a “fear of potential job skill obsolescence.” Greenspan stated that, “more workers currently report they are fearful of losing their jobs than similar surveys found in 1991 at the bottom of the last recession,” and that, “greater workers insecurities are creating political pressures to reduce fierce global competition that has emerged in the wake of our 1990s technology boom.” While Greenspan admitted that “protectionist policies” would “temporarily reduce some worker anxieties,” he felt this was a bad idea, as “over the longer run such actions would slow innovation and impede the rise in living standards.” Greenspan elaborated:
Protectionism might enable a worker in a declining industry to hold onto his job longer. But would it not be better for that worker to seek a new career in a more viable industry at age 35 than hang on until age 50, when job opportunities would be far scarcer and when the lifetime benefits of additional education and training would be necessarily smaller?.. These years of extraordinary innovation are enhancing the standard of living for a large majority of Americans. We should be thankful for that and persevere in policies that enlarge the scope for competition and innovation and thereby foster greater opportunities for everyone.
This is called “labour market flexibility.” Of course, as Greenspan was full of praise for the fact that “job insecurity” is a necessary factor in “enhancing the standard of living for a large majority of Americans,” which “fosters greater opportunities for everyone,” what he really meant was that it benefits a tiny minority and creates better opportunities for exploitation. Ironically, this wonderful “boom” in the economy turned out to be a bubble, and it popped within a year of his giving this speech, and then of course, he resorted to building up the housing bubble thereafter… and we know how that went: more worker insecurity, more labour market flexibility, and thus, more benefits to a tiny minority and more opportunities for exploitation and profits. Isn’t the “free market” wonderful?
In April of 2012, Mario Draghi advised the eurozone to adopt a “growth compact” in order to boost economic prospects as he “scaled back his hopes for an early economic rebound,” stating that the eurozone bloc was “probably in the most difficult phases” in which the austerity measures were “starting to reverberate its contractionary effects,” he told the European Parliament. Austerity had, according to Draghi, “taken a larger than expected toll.” A “growth pact” was promoted by the front-runner in the French presidential elections, Francois Hollande, who would go on to win the May 6 elections against Sarkozy. Hollande had called for a “new Europe” stressing “solidarity, progress and protection,” warning against a North-South split in the EU countries. Angela Merkel also approved of Draghi’s call for a “growth pact,” agreeing that austerity was not “the whole answer” to the crisis, but insisted that growth would be “in the form of structural reforms,” which implies liberalization and privatization. She added: “We need growth in the form of sustainable initiatives, not simply economic stimulus programmes that just increase government debt.” While acknowledging the “economic weakness” created by the austerity packages across Europe, Draghi continued to say that, “Europe’s leaders should stay the course on fiscal consolidation.”
European leaders were quick to endorse the calls from Draghi for a “growth pact” for Europe, including Angela Merkel in Germany, and France’s new Socialist president, Fancois Hollande, as well as EC President José Manuel Barroso. Following Draghi’s suggestion, Barroso stated that, “Growth is the key, growth is the answer.” Francois Hollande commented in references to Draghi’s proposal, “He doesn’t necessarily have the same measures in mind as me to foster growth,” as Draghi’s position was closer to that of Angela Merkel, who viewed the pact as consisting of “structural reforms,” not a stimulus which would “again increase national debt.” An analyst at the Cutch bank ING said: “For the ECB, a growth compact does not mean more fiscal stimulus,” which is, of course, only reserved for banks, not people. Instead, stated the analyst, Carsten Brzeski, it entails “structural reforms with a vision.”
In May, this vision was publicly endorsed by Jorg Asmussen, the governor of the Bundesbank (the German central bank), and a member of the Executive Board of the European Central Bank, and was just previously the deputy finance minister of Germany. In a speech on May 21, Asmussen stated that, “we need both” austerity and growth, but that: “Talking about more growth does not mean moving away from the fiscal policy strategy pursued so far. It is not a matter of boosting growth over the next one to two quarters with credit-financed spending programmes, but of increasing potential growth. No one is against growth. The crucial and rather difficult question to answer is how, in ageing societies, to increase potential growth.” As to the question of ‘how’, Asmussen suggested three main components: product market reforms, labour market reforms, and financing of reforms. Product market reforms could include, according to Asmussen, “the completion of the internal market for services… [as] 70% of the EU’s GDP comes from services, but only 20% of services are provided on a cross-border basis.” As for labour market reforms, Asmussen suggested they should be “inspired by the Agenda 2010 programme in Germany,” and that, ultimately: “labour mobility needs to be increased in the euro area (the theory says, we remember, that an optimal currency area requires full mobility of labour). Mobility could be increased through broader recognition of qualifications within Europe, greater portability of pension rights, language courses and a European network of job centres.” The Agenda 2010 programme was, explained Der Spiegel, “a series of labor market and social welfare reforms introduced by former Chancellor Gerhard Schröder that completely restructured Germany’s welfare state,” which included, “easing job dismissal protections, lowering bureaucratic hurdles for starting businesses, setting a higher retirement age and lowering non-wage labor costs,” all of which are “typical examples of structural reforms.”
The Crisis Continues…
And so the European debt crisis continues, and so the austerity measures continue to punish the populations of Europe, and so Italy remains at the forefront of a growing global power grab: a ‘Technocratic Revolution’ in which even the trappings of formal democracy are pushed aside in favour of a government subservient to unelected councils of supranational institutions and global financial interests. In Par 2 of this excerpt on the Italian debt crisis, we examine the austerity programs and structural adjustments undertaken by the technocratic government of Mario Monti.
Andrew Gavin Marshall is an independent researcher and writer based in Montreal, Canada, writing on a number of social, political, economic, and historical issues. He is also Project Manager of The People’s Book Project. He also hosts a weekly podcast show, “Empire, Power, and People,” on BoilingFrogsPost.com.
Please donate to The People’s Book Project to help this book be finished by the end of summer:
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Student Strikes, Debt Domination, and Class War in Canada: Class War and the College Crisis, Part 4
By: Andrew Gavin Marshall
There is a process under way in Canada, led by the corporate and financial elite, and directed against the general population, the poor, and the young, intending to provide for the rich and powerful, to punish the poor and steal from the rest, to plunge into poverty, to repress, control, and dominate: this process is called ‘Class War’ and it’s waged by the super-rich against the supposedly superfluous rest. It’s objective is simple: to preserve, protect, and expand the control and domination of the wealthy over the majority.
In Quebec, where the class warfare has taken on a specific assault on the students and youth, there are finally growing signs and actions that the youth are starting to fight back. The provincial government of Quebec – the French-speaking province of Canada – has decided to double the costs of tuition over the next few years. These moves have prompted hundreds of thousands of students across Quebec to go on strike in protest of the increased fees. Since Quebec currently has the lowest tuition costs in Canada for residents, a great deal of the media and commentary on the issue is related to lambasting Quebecers for their concept of “entitlements” and for “complaining” that they have to pay what others pay. The debate is focused around the ‘need’ for the government of Quebec to reduce its debt – balance its budget – framing increased tuition costs as a necessity to be accepted, and when resisted, to dismiss the protesters as unrealistic and petty.
So is it true that Quebec has the lowest tuition fees in Canada? Yes. However, Quebec residents also pay the highest income taxes in all of Canada. One of the major claims by the Quebec government as to why tuition must be increased is the claim that Quebec’s universities are among the most “under-funded” in Canada, and therefore they need to increase their funding so as to increase their “competitiveness.” However, according to the Quebec government itself, total government spending on education (in 2008-2009) amounted to 1.94% of GDP, compared to 1.76% for Ontario, and 1.65% for Canada as a whole. At the same time, total university spending per student in Quebec was at $29,242, compared to $26,383 in Ontario, and $28,846 for Canada as a whole. Thus, Québec’s universities are funded to a greater degree than the rest of Canada, so that argument does not hold weight.
Quebec’s universities are funded more than other Canadian universities, while Quebec residents pay more in taxes than the rest of Canada, so why the increase in tuition? As tuition fees for universities increase, government spending on education decreases. As the Canadian Federation of Students notes:
In the past fifteen years, tuition fees in Canada have grown to become the single largest expense for most university and college students. The dramatic tuition fee increases during this period were the direct result of cuts to public funding for post-secondary education by the federal government and, to a somewhat lesser extent, provincial governments. Public funding currently accounts for an average of approximately 57% of university and college operating funding, down from 84% just two decades ago. During the same period tuition fees have grown from 14% of operating funding to over 34%.
This marks a move “away from a publicly funded model and towards a privatised user fee system,” which has caused “post-secondary education to become unaffordable for many low- and middle-income Canadians.” In the mid-1960s, nearly all of Canada’s university funding was provided by the federal and provincial governments, and tuition fees were either incredibly minimal or non-existent. This process began to change in the early 1980s, with the rise of neoliberalism in the global political economy, which saw moves toward cutting social spending by governments. As government funding decreased, tuition costs rose, and as a result, between the early 1980s and the early 1990s, tuition fees in Canada nearly doubled. In 1995, the Liberal federal government of Canada cut $7 billion in spending for the provinces, leading to “the largest tuition fee increases in Canadian history.” Quebec had, however, resisted the push toward making students pay more, which was taking place in all the other Canadian provinces. In the early 1990s, average undergraduate tuition fees in Canada were $1,464; today the average has more than tripled to $5,138.
So why is this process taking place? Why must government spending on education (and other social programs) be reduced, while personal costs for all of these services be increased? The answer is not in “efficiency” or “balancing budgets,” but rather, in class warfare.
In April of 2007, TD Bank (one of Canada’s ‘big five’ banks which dominate the economy) released a “plan for prosperity” for the province of Quebec, which recommended, among other things, raising the cost of tuition: “by raising tuition fees but focusing on increased financial assistance for those in need, post secondary education (PSE) institutions will be better-positioned to prosper and provide world-class education and research.” In one Canadian province, Nova Scotia, the government hired a former chief economist from the Bank of Montreal, Tim O’Neill, to assess higher education finances, and unsurprisingly, advocated higher tuition fees. Banks, of course, have a major interest in promoting increased tuition costs, because they provide student loans and profit off of the interest on student debt, like some malevolent ever-growing succubus draining the life force and potential of future generations which are doomed to debt slavery. So naturally, our governments take the advice of the banks, because they know whom their real masters are.
It should be noted, as well, that this is not merely a problem in Quebec or Canada. Tens of thousands of students in the United Kingdom are planning a walk out in protest of increasing tuition fees, which “are pricing students out of education.” The Occupy Movement in the United States is moving into universities, as campuses in California experienced demonstrations and protests against “state budget cuts to education and the resulting hikes in tuition.” In Spain, more than 30,000 students took to the streets of Barcelona protesting the ‘austerity cuts’ to education, and were then of course met with state repression. Perhaps most impressive is a mass student movement that has developed in Chile over the past year.
The College Crisis
What is the ‘college crisis’? It’s quite simple: our society is producing more educated, professionalized youths than ever before, who are then graduating into a jobless market, and what’s more, they are graduating with extensive debt. The professional education students receive, in combination with the heavy overbearing debt load and the immense dissatisfaction with the lack of opportunities for them, creates a large, mobile, educated, activated, and very pissed off group of people. This is what is referred to as a ‘poverty of expectations,’ whereby the inculcated expectations of a group or sector of society cannot be met by the society in which they live. In any society, in any period of history, this is a recipe for social unrest, resistance, rebellion, and, potentially, Revolution.
Naturally, the elites of any society fear such a scenario, so they always come up with various methods of managing these increasingly problematic conditions. The solutions, invariably, are always aimed at finding methods and means for undermining the ability and effectiveness of the target group to mobilize and organize for their cause; in this case, students. Cutting education budgets and increasing tuition fees is a very effective means to create more ‘desirable’ conditions for elites. How so? Any form of ‘austerity’ is essentially an act of class war, waged by the upper class against the rest. Austerity means that budgets will be cut and costs will be increased, whether through taxation, direct prices for services and necessities, or more often, both. The stated purpose of ‘austerity measures’ is to reduce debt (spending) and increase profitability (or revenue), with the purported aim of eliminating the debt over time. This is, however, not the true purpose of austerity, and appropriately so, it is never the result. The result is actually to increase debt, and impose a regimen of what amounts to ‘social genocide’: increasing the burden, costs, taxes, and hardships upon the wider population. For the poor, it means despair; for the middle class, it means poverty; and for the rich, it means prosperity and power.
The current crisis stems from developments that took place in the 1960s which saw an increase in activism and engagement among the general population, and especially the youth. Universities were breeding grounds for activism and movements which sought to create social uplift. The elite response to this scenario, in the United States specifically but also across the Western world as a whole, was to declare a “Crisis of Democracy” in which too many people were making too many demands upon the system, in which all forms of authority were under attack, and the legitimacy of those authorities were called into question. Elites of both the left and right saw this acceleration of democratic participation and activism as an assault upon their conception of what “democracy” should be – namely, a state that serves their interests alone. From the right, the U.S. Chamber of Commerce – and from the liberal internationalists, the Trilateral Commission – launched a major national and global attack upon the surge of democratic activism in what the Trilateral Commission referred to as an “excess of democracy.” The result of this attack: neoliberalism and debt. The two documents that were most influential in this attack on democracy were the “Powell Memo” of 1971 sent to the U.S. Chamber of Commerce which outlined a detailed program for how big business could reorganize society for its own interests, and the Trilateral Commission’s 1975 report, “The Crisis of Democracy,” which outlined an elite ideology which saw the problem of society being in an “excess of democracy” and that what is required is to correct the balance in favour of elites and increase apathy and passivity among the population. The Chamber of Commerce represents all the major business interests in the United States, while the Trilateral Commission (founded in 1973 by banker David Rockefeller), represents roughly 350 elites in the areas of academia, finance, business, government, foreign policy, media and foundations from North America, Western Europe, and Japan.
The result of this was to decrease government funding for education, increase tuition and other costs, increase debt for students and the general population as a whole (through credit cards, mortgages, loans, etc.), and to merge higher education and big business: the corporatization and privatization of universities.
As part of this process, knowledge was transformed into ‘capital’ – into ‘knowledge capitalism’ or a ‘knowledge economy.’ Reports from the World Bank and the Organization for Economic Cooperation and Development (OECD) in the 1990s transformed these ideas into a “policy template.” This was to establish “a new coalition between education and industry,” in which “education if reconfigured as a massively undervalued form of knowledge capital that will determine the future of work, the organization of knowledge institutions and the shape of society in the years to come.”
Knowledge was thus defined as an “economic resource” which would give growth to the economy. As such, in the neoliberal era, where all aspects of economic productivity and growth are privatized (purportedly to increase their efficiency and productive capacity as only the “free market” can do), education – or the “knowledge economy” – itself, was destined to be privatized.
Solving the ‘College Crisis’
In February of 2011, it was reported that the average debt for a Canadian family had reached over $100,000, spending 150% of their earnings. Thus, for every $1,000 in after-tax income, the average Canadian family then owes $1,500. The debt figures include mortgages, student loans, credit card debts, and lines of credit. In 1990, the average Canadian family was able to put roughly $8,000 into savings, in 2012, that number was at $2,500. So while the public is constantly told that the ‘recession’ is over, this is simply not true for the general population, though it may appear to be true in the quarterly reports of Canada’s multinational corporations and banks. A 2011 report indicated that, “17,400 households were behind in their mortgage payments by three or more months in 2010, up by 50 per cent since the recession began. Credit card delinquencies and bankruptcy rates also remain higher than before the recession.”
By February of 2012, this rate of income-to-debt had not only failed to improve, but even got slightly worse, hitting a new record. The state for Canadian families is indeed getting worse. More than half of the jobs created since the “end” of the “recession” went to those aged 55 and older, leaving the youth struggling to find jobs, while older workers have to either stay working longer, return from retirement because they can’t survive off of their pensions, and thus, young people are living at home longer and staying in school longer. The slight increases in hourly earnings has not kept up with inflation, and thus amounts to a loss of earnings, and income inequality continues to grow between the super-rich and everyone else.
Mark Carney, Governor of the Bank of Canada (Canada’s central bank), is also Chairman of the Financial Stability Board, run out of the Bank for International Settlements (BIS) in Basel, Switzerland – the central bank to the world’s central banks – and which operates under the auspices of the G20. Carney had previously served as Deputy Governor of the Bank of Canada, the Canadian Department of Finance, and spent thirteen years with Goldman Sachs prior to that.
The Bank of Canada, like all central banks, serves the dominant elite interests of the nation, but also of the international financial elite more broadly. The board of directors of the Bank of Canada includes William Black, former CEO of Maritime Life, who sits on the boards of Dalhousie University, the Shaw Group, Standard Life of Canada, and Nova Scotia Business, Inc.; Philip Deck, CEO of Extuple, Inc. (a technology finance corporation), former managing partner with merchant banking company HSD Partners, and is on the board of a major Canadian think tank, the C.D. Howe Institute; Bonnie DuPont, former Vice President at Enbridge Inc., former director of the Canadian Wheat Board, a current director of agribusiness firm Viterra Inc, UTS, on the board of governors of the University of Calgary, member of the Institute of Corporate Directors, and is past president of the Calgary Petroleum Club; Jock Finlayson, Vice President of the Business Council of British Columbia, former Vice President of the Canadian Council of Chief Executives (an interest group made up of Canada’s top 150 CEOs), and a member of the Canada West Foundation; Daniel Johnson, a director of Bombardier, IGM Financial, Mackenzie Financial Corporation, Investors Group, and former Minister of Industry and Commerce in the Province of Quebec; David Laidley, Chairman Emeritus of Deloitte & Touche LLP, on the boards of Nautilus Indemnity Limited, ProSep Inc., EMCOR Group, Aviva Canada Inc., the Cole Foundation, and on several boards at McGill University. The rest of the directors of the Bank of Canada are almost exclusively businessmen or former government officials (two women in total), and all of them are white; so, naturally, they truly represent the struggling Canadian family.
In March of 2012, the Bank of Canada warned that household debt “remains the biggest domestic risk” to Canada’s economy. While part of the Bank’s role is to set interest rates, it has kept interest rates very low (at 1%) in order to encourage lending (and indeed, families have become more indebted as a result). Yet, the Bank says, interest rates will have to rise eventually. Economists at Canada’s major banks (CIBC, RBC, BMO, TD, and ScotiaBank) naturally support such an inevitability, as one BMO economist stated, “while rates are unlikely to increase in the near term, the next move is more likely to be up rather than down, and could well emerge sooner than we currently anticipate.” The chief economist at CIBC stated that, “markets will pick up on the slightly improved change in tone on the economy, and might move forward the implied date for the first rate hike.” This translates into: the economy is doing well for the big banks, therefore they will demand higher interest rates on debts, and plunge the Canadian population into poverty; the “invisible hand of the free market” in action. Increased interest rates mean increased payments on debts, which means increased suffering for the indebted, who make up the general population.
As the Bank of Canada warns that interest rates will increase, perhaps as soon as this year, the Canadian people – heavily indebted – will suffer immensely and will likely fail to meet their interest payments. Since such a large majority of the debt and interest is in mortgages, this would potentially cause a major housing crisis, which is already at bubble proportions (especially in Vancouver, now the most expensive city to live in within North America), and will drag the middle class and the rest of the Canadian economy down with it. Even TD Bank has said the housing market is over-valued (i.e., artificially inflated), and warned of a coming “correction” (i.e., economic crisis).
As the gap widens between the rich and everyone else in nearly every OECD (Organisation for Economic Cooperation and Development) country, Canada is no exception. The top 10% of Canadian earners make ten times as much as the bottom 10%. The top 1% in Canada saw their share of total income increase from 8.1% in 1980 to 13.3% in 2007, while the top 0.1% saw their share increase from 2% to 5.3%. Tax policies in Canada strengthen the wealth gap. In 1981, the tax rate for the top margin of earners was 43%, and in 2010, it was 29%. As the Secretary General of the OECD stated in December of 2011, “The social contract is starting to unravel in many countries… This study dispels the assumptions that the benefits of economic growth will automatically trickle down to the disadvantaged and that greater inequality fosters greater social mobility.” Thus, “inequality will continue to rise.”
In a 2008 OECD study, Canada was singled out as one of the countries with the worst rates of widening inequality, stating that, “In the last 10 years, the rich have been getting richer, leaving both middle and poorer income classes behind.” The top 3.8% of Canadian households controlled 66.6% of all financial wealth by 2009, with rates set to increase. As the Conservative government in Canada continues to implement corporate tax cuts, this disparity will increase, with the Harper government providing $60 billion in corporate tax breaks, while maintaining a $30 billion budget deficit (public debt). Despite all the tax cuts for corporations, the money that is not spent on taxes tends to go to shareholders and very little goes toward investments or job creation, meaning that the benefits do not “trickle down,” but rather, as to be expected, trickle up. For Prime Minister Harper’s tax policies and programs, “The higher the income, the bigger the tax break.” The senior economist at the International Trade Union Confederation stated that, “The growing gap between the rich and the rest of us has many causes, including higher remuneration for top earners, much higher profits as a share of the economy, less bargaining power for workers, and less progressive taxes… Conservative tax policies will clearly aggravate the problem.”
The Conference Board of Canada released a study in the fall of 2011 which stated that, “income inequality has been rising more rapidly in Canada than in the U.S. since the mid-1990s,” and on a global scale, “Canada has had the fourth-largest increase in income inequality among its peers.” The President of the Conference Board explained, “Even though the U.S. currently has the largest rich-poor income gap among these countries, the gap in Canada has been rising at a faster rate.”
Among the OECD countries, the one with the highest rates of inequality was none other than the Petri-dish experiment of neoliberalism, Chile, followed by Israel, Italy, Portugal, the U.K., and the United States. While the top 10% of Canadian earners had an average income of $103,500, the bottom 10% had an average annual income of $10,260.
While Canada is often hailed as the most promising nation to come out of the economic-financial crisis of 2008, since its banks were largely left out of the housing derivative market (and thus, were protected), the facts on the ground represent a different reality. As the Economist reported in 2010, of the 31 OECD nations, Canada ranked as the 22nd worst country in terms of child poverty, with one in ten Canadians (roughly 3 million) being poor, 610,000 of them being children. In November of 2010, it was reported that roughly 900,000 Canadians were dependent upon food handouts, a 9% increase from the previous year, with roughly 300,000 homeless people. The majority of the poor are single mothers, immigrants, aboriginal and disabled Canadians. Through the 1980s and 1990s (with the implementation of neolibral policies), welfare payments to these groups were slashed, with British Columbia as the most enthusiastic supporter of exacerbating child poverty, which stood at 10.4% by 2010.
The cost of poverty is quite extensive:
* By 2011, poverty was said to cost the government between $72-86 billion per year;
* In the city of Hamilton, Ontario, there is a 21 year-difference in life expectancy between those who live in high and low-income neighborhoods;
* In March of 2010, nearly 900,000 Canadians had to go to food banks for food, 38% of them being children, an increase of 28% since March of 2008, the “highest level of food bank use ever”;
* In 2010, there were between 150-300,000 “visible” homeless in Canada, with another 900,000 “hidden” homeless, and 1.5 million families in “core housing need” and 3.1 million families in unaffordable housing;
* In 2010, 59% of Canadians (over 20 million Canadians) lived from paycheck to paycheck, “saying they would be in financial difficulty if their paycheque was delayed by a week”;
* In 2009, the average annual income of Canada’s best paid CEOs was $6.6 million, “155 times higher than the average worker’s income ($42,988);
* A third of all income growth in Canada over the past two decades has gone to the richest one percent of Canadians.”
Canada’s Youth: A “Bankrupted Generation”
By January of 2009, Canadian students had a debt to the federal government of over $13 billion, with student loan debt increasing by $1.2 million every day. The Canadian Federation of Students said the obvious answer to this growing crisis was to make education “affordable.” Studies show the effects of student debt, reducing “the ability of new graduates to start families, work in public service careers, invest in other assets, volunteer, or even just take a lower paying job in their own field to get a foot in the door.” On top of the $13 billion owed to the Federal Government, Canadian students owed an additional $5 billion to provincial governments, and the figures do not include debt owed to banks, credit card companies or parents. In short, Canada’s student youth are a “lost generation.”
In September of 2010, the Canadian Council on Learning published a report which indicated that, “students who graduate from college and university with high debt loads are putting off buying a house, having children or investing for the future.” The average debt load of a Canadian university graduate in 2009 was $26,680, and the average debt for college graduates was $13,600. These figures, it should be noted, do not take into account mortgages, credit card debt, lines of credit, or car loans. This represented a doubling in the amount of student debt from 1990, and in 2005, the number of Canadian students needing loans to pay for their education had increased to 57%.
In October of 2011, it was reported that Canadian student debt (to the Federal Government) will surpass $15 billion by 2013, which is the current ceiling set by the government in student loans. Thus, if it reaches the ceiling, the government will no longer (in theory) be able to provide student loans. The solution, according to the Canadian Federation of Students, does not mean eliminating the debt ceiling, which will only make the problem worse, but rather, in reducing the costs of education itself. As the national chairperson of the CFS stated, “The reality is that the job market is grim and students are facing their first interviews with a mortgage-sized debt.” Thus, once they begin work, they do not contribute to the economic growth of the country, but rather merely have to focus on paying interest and repaying debts. The cost of university education in Canada is estimated to be at $60,000, and some studies suggest that this will rise to $140,000 for those born in 2011. The average yearly undergraduate tuition fees were a 4.3% increase from the previous year, reaching $5,366.
In 2011, almost two million Canadians had a student debt totaling $20 billion, and as the chairman of the Canadian Federation of Students stated, “We have an entire generation of people who now more than ever have to complete some form of post-secondary education just to get a job interview, with more than 70% of all new jobs requiring some degree or diploma. We are on the verge of bankrupting a generation before they even enter the workplace.” As job losses continue, and especially as the youth job market continues to decline, the number of full-time students tends to increase, and the availability of part-time work for students continues to decline. A post-secondary education no longer increases a “return on investment” through a lifetime, as it was once assumed. The overall student debt is not the most pressing immediate problem, but rather the “crippling interest rate attached to these government loans” which plunge youth into a deep crisis. So while interest rates are very low (in other lending, as set by the Bank of Canada at 1%), the government is charging 8% interest on student loans. Margaret Johnson, president of Solutions Credit Counselling Service Inc. in Vancouver stated that, “When the loan goes into default, the interest starts to compound. And then you have an absolute nightmare. The average debt I’m seeing is anywhere between $30,000 and $60,000. The payments are so high on some of these loans that the young person cannot live and make a payment. Instead of lowering the interest rate — or eliminating it, which I think is the best solution — the government extended the repayment term to 14 years. The fact that so many loans are in arrears proves this isn’t the answer.”
Some things are worth repeating: the average debt for every Canadian household is over $100,000 and the average debt for a university graduate in Canada is over $26,000; nearly one million Canadians depend upon food banks for their food, poverty and inequality are increasing, homelessness is increasing; the rich are getting richer and everyone else is getting poor or poorer, and there is a horrible job market with few jobs available, let alone available to youth. So the “solution” – we are told – to the supposed “problem” of “competitiveness” in our universities… is to increase the burden, the cost, and the debt of students, families, and the general population; to increase tuition and student debt, to increase interest rates on all debts, and to plunge the population into abject poverty. It seems then, that Canadians, and the Western world in general (as these policies are being pushed throughout the G8 nations on the whole) are about to get a hard lesson in what our countries of the industrialized and supposedly “democratic” north have been doing to the rest of the world (Africa, Asia, Latin America) for decades and, indeed, centuries. What has been done abroad is now coming home to roost.
The conditions, restrictions, programs and policies that our nations have imposed upon Africa, Asia, and Latin America for the past four decades have plunged those countries into poverty, allowed for the unhindered control and extraction of their resources for our corporations, put their nations into the debt of our banks, exploited their populations for cheap labour, and propped up ruthless dictators to repress the people if they ever get wise and want to change their society. While our nations of course continue in their raping and pillaging of the world, now they have also turned their attention – and absolute disregard for humanity – to their domestic populations. The same banks, international institutions, nations, organizations and even individuals who promoted the policies which led to the impoverishment and punishment of much of the world’s population are now telling us that these same policies are the “solutions” to our current crises, just as they told the populations of Africa, Asia, and Latin America. If we listen to these same people, submit to the same policies, and accept the same ideologies which have caused so much destruction and devastation around the world, and expect different results at home, we deserve what we get. Naturally, then, we must stop accepting and consenting to the hegemony and power of our elites and their institutions and ideologies. This means that we have to actively create alternatives, not simply protest against their programs, or demand reforms, rearranging deck chairs on the Titanic. The boat is sinking, it doesn’t matter how it looks on the way down. It’s time for a new system altogether. One cannot demand from others to create a new system, but must actively create it themselves.
In the next part of this series, “Class War and the College Crisis,” I will be discussing the coming economic crisis for Canada, which has thus far been hailed as the “safest” nation emerging from the 2008 “recession,” a myth that will soon be broken. As Canada, and much of the rest of the world, begin their rapid descent into an economic depression, the above-mentioned statistics regarding debt, poverty, and inequality will get worse. As the social and economic crisis deepens, our governments will continue to show in whose interests they truly rule: with batons, tear gas, beatings, mass arrests, detention camps, and the growth and development of a police state surveillance society, our governments will reveal that they rule for bankers, corporations, and oligarchs. The democratic façade will wash away. It is within these circumstances that Canadians, and the wider world in general, must seek to create a true democratic system. First, however, we must recognize and understand the system in which we live for what it is: a State-Capitalist society ruled by a power-mad oligarchy. The next part of this series will be taking a look at what this power-mad oligarchy is doing and will be doing to Canada’s economy and society in the coming years. Here’s a hint: it doesn’t benefit YOU!
 CRA, What are the income tax rates in Canada for 2012? Canada Revenue Agency:
 Finances Québec, “A Fair and Balanced University Funding Plan: To Give Québec the Means to Fulfill its Ambitions,” The Government of Québec, 2011-2012 Budget, page 7.
 CFS, Tuition Fees, The Canadian Federation of Students:
 Press Release, “TD Economics outlines plan for prosperity in Quebec report,” Newswire, 10 April 2007:
 CNW, “Déjà Vu: O’Neill Report Recycles Dated, Discredited Tuition Fee Myths,” Newswire, 17 September 2010:
 Alison Kershaw, “Thousands of students to stage walkout protest,” The Independent, 12 March 2012:
 Carla Rivera and Larry Gordon, “Occupy protests bring small yet intense crowds to state campuses,” Los Angeles Times, 1 March 2012:
 Giles Tremlett, “Fighting breaks out in Barcelona as students protest over education cuts,” The Guardian, 29 February 2012:
 Mark Olssen and Michael A. Peters, “Neoliberalism, Higher Education and the Knowledge Economy: From the Free Market to Knowledge Capitalism,” Journal of Education Policy (Vol. 20, No. 3, May 2005), page 331.
 Ibid, pages 338-339.
 CTV News Staff, “Average Canadian family debt hits $100,000,” CTV News, 17 February 2011:
 Why are Canadian families falling further into debt?, The Globe and Mail, 14 February 2012:
 Tavia Grant, “Financial security ‘elusive’ for many Canadian families,” The Globe and Mail, 22 March 2012: http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/financial-security-elusive-for-many-canadian-families/article2377592/
 Gordon Isfeld, “Bank of Canada says household debt ‘biggest risk’ to economy,” The Leader Post, 9 March 2012:
 John Morrissy, “Household debt a mounting concern as rates appear set to rise,” The Montreal Gazette, 23 March 2012:
 CBC, Wealth gap widens to 30-year high, CBC News, 5 December 2011:
 Les Whittington, “Tax policies may aggravate gap between rich and poor,” Toronto Star, 27 May 2011:
 Tavia Grant, “Income inequality rising quickly in Canada,” The Globe and Mail, 13 September 2011:
 CTV News Staff, “OECD report finds income inequality rising in Canada,” CTV News:
 Poverty in Canada: Mean Streets, The Economist, 25 November 2010:
 CTV News Staff, “Canada Student Loan debt tops $13B, figures show,” CTV News, 21 January 2009:
 CTV News Staff, “Canada Student Loan debt tops $13B, figures show,” CTV News, 21 January 2009:
 CBC, “Student debt limits post-grad options,” CBC News, 22 September 2010:
 QMI Agency, “Student debt doubled over 20 years: Study,” Toronto Sun, 22 September 2010:
 Sharon Singleton, “Action needed on student debt: CFS,” Toronto Sun, 17 October 2011:
 Mary Teresa Bitti, Student debt bankrupting a generation, The Financial Post, 4 June 2011: