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Archive for the ‘Labour Relations’ Category

#Brexit = #NoMoreUK =#FUK

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With regard to the recently held referendum in Great Britain, the highly respected and truly inimitable authority that is the roving reporter Pepe Escobar writes on his Facebook wall that “THE WRITING ON [the] FUK’s WALL . . . Those two-bit Game of Thrones/House of Cards Tory clowns STILL can’t see the writing on [the] FUK (Former United Kingdom)’s wall. Brussels hardball is here to stay. NO single market access without freedom of movement, respecting the competence of the European Court of Justice and a “contribution” to the EU budget almost equivalent to what the UK pays today. [The]FUK (Former United Kingdom) gets a status equivalent to Norway, Iceland and [Lichtenstein]. And a trade deal similar to what the EU has with Singapore, Japan and Canada. That’s it. Those Tory clowns simply had no clue Brussels would definitely use Brexit as an example to prevent a domino effect, showing to assorted Europhobes that leaving IS painful. The governor of the Bank of England apparently got the picture: ‘economic post-traumatic stress disorder’. The Economist Intelligence Unit (EUI) says [the] FUK’s economy will contract 6% by 2020. Investment (China included) will decline 8%. Unemployment will RISE. And public debt will reach 100% of FUK’s output. Eastern and Northern Europe are trying hard to soften the ball for [the] FUK. But who gives a damn what Estonia’s president thinks about it all? Even [the] FUK supporters agree there should be no special favors – because that would be a Godsend to Frexisters and Nexiters. But as I said before, everyone is irretrievably pissed, pissed off, pissed beyond belief with the English – and not necessarily the Brits (everyone loves Scotland). Mark Rutte, Dutch Prime Minister and not exactly the brightest bulb in the room, at least nailed it; England has collapsed ‘politically, monetarily, constitutionally and economically’. He should add ‘footballistically’as well. Someone should propose Gareth Bale for PM”[1]

  brexit_leave_7006194783_4ea0b7Is there anything else left to add, I wonder. And, as it turns out, the equally incomparable Nafeez Ahmed did, even before the ballots were cast and fully counted: “Nigel Farage has jumped off an economic cliff screaming ‘Independence Day!!!’, and he’s taking us all down with him. While Brexit will almost certainly usher in a new wave of austerity and impoverishment, it’s far from clear that Remain would avoid it. Wherever you stand on the outcome of Britain’s EU referendum, hard economic reality is going to bite – and it’s going to bite hard. The #VoteRemain camp made a point of highlighting the numerous warnings from economists that a UK exit from the EU would trigger an economic crisis. The #VoteLeave camp insisted that this was a doom-mongering lie. It wasn’t. Last night, over Twitter, I predicted that the Leave campaign would win by a narrow majority – but that the victory would grow hollow very quickly as its immediate economic impact kicked in [:] ‘So here’s a #brexit scenario: 1. #VoteLeave wins by slim majority 2. #VoteLeave victory create crisis in Cameron’s leadership. 11:26 PM – 23 Jun 2016’.[2]  Dr Ahmed then adds the following: “So far, my little forecast has turned out to be uncannily prescient. The pound is in free-fall, so far hitting a thirty-year low. Stocks have slumped, and look to decline further. Banks are shifting their money, and their jobs. David Cameron has resigned, virtually in tears, a fitting end perhaps to a shambolic premiership. But he also put off invoking Article 50 of the Treaty of Lisbon, which would formally begin the EU exit process. I’ve said that by next week, escalating economic turbulence and the inadequacy of contingency measures to keep it in check will dramatically shift the euphoric mood to one of increasing foreboding about the economic slowdown”.[3]

The Canary

And finally, Dr Ahmed opines that’ll be “just the beginning folks. Over the next few weeks, we’ll watch as a pound in free-fall drives up inflation, and squeezes the spending power of the average consumer. Who’s that going to hit hardest? The lower middle and working classes, of course. The impact will hit the profits of businesses, big and small, and squeeze wages too. As the UK’s GDP growth – already tepid – freezes over, this will in turn have global impacts: the Eurozone, particularly the northern countries like Denmark and Finland, will be drawn into the downwards spiral; so will parts of southern Europe, already teetering on the precipice. And China, which is seeing its economy hit the brakes, will suffer when the European slowdown triggered by Brexit reduces demand for Chinese exports. It’s the global transmission of these shocks, and their capacity to mutually intensify, that will push the UK off the edge, taking large swathes of the global economy with it. The government will have little choice in this context except to try mitigating the deepening economic crisis – but this simply won’t be possible within the current model of neoliberal capitalism, without repairing the damage done to the UK-EU trade relationship. In the words of The Economist: ‘A lot depends on the kind of trade deal Britain can negotiate with the EU and how quickly. If Britain gets a quick deal with no big reductions in its access to the single market, the grimmer scenarios for the world economy may not come to pass. But markets do not seem to be counting on it.’ And that’s the crux of it. In coming weeks, the mess inside the government that is Cameron’s rather pathetic legacy will be grappling with how to keep the promise of exiting the EU, while staving off the protracted financial collapse that would inevitably follow”.[4]

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[1] Pepe Escobat @Facebook. https://www.facebook.com/pepe.escobar.77377?fref=nf.

[2] Nafeez Ahmed, “Brexit is about to usher in Third World Britain” The Canary (24 June 2016). http://www.thecanary.co/2016/06/24/brexit-usher-third-world-britain/.

[3] Nafeez Ahmed, “Brexit is about to usher in Third World Britain”.

[4] Nafeez Ahmed, “Brexit is about to usher in Third World Britain”.

Sunday Surprise: The Panama Papers

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‘Governments across the world began investigating possible financial wrongdoing by the rich and powerful following a leak of documents from a Panamanian law firm. The documents allegedly show how clients avoided tax or laundered money. The documents detailed schemes involving an array of figures from friends of Russian President Vladimir Putin to relatives of the prime ministers of Britain, Iceland and Pakistan and as well as the president of Ukraine. Australia, Austria, Brazil, France and Sweden were among countries which said they had begun investigating the allegations. The documents were leaked to the International Consortium of Investigative Journalists and more than 100 other news organizations. Published on Apr 4, 2016’.

The funny thing is that the name Putin keep on being bandied about (even by the Chinese CCTV), in spite of the fact that the name does not seem to appear in the leaked papers . . . close associates. Meanwhile, David Cameron’s father is directly implicated as well as a host of other politicians from across the world. The International Consortium of Investigative Journalists (ICIJ) puts it like this: “Files reveal the offshore holdings of 140 politicians and public officials from around the world” . . . “Current and former world leaders in the data include prime ministers of Iceland and Pakistan, the president of Ukraine, and the king of Saudi Arabia” . . . “More than 214,000 offshore entities appear in the leak, connected to people in more than 200 countries and territories” . . . “Major banks have driven the creation of hard-to-trace companies in offshore havens”.[1] Still, the ICIJ also talks about “associates of Russian President Vladimir Putin” . . . . and adding that the “cache of 11.5 million records shows how a global industry of law firms and big banks sells financial secrecy to politicians, fraudsters and drug traffickers as well as billionaires, celebrities and sports stars. These are among the findings of a yearlong investigation by the International Consortium of Investigative Journalists, German newspaper Süddeutsche Zeitung and more than 100 other news organizations. The files expose offshore companies controlled by the prime ministers of Iceland and Pakistan, the king of Saudi Arabia and the children of the president of Azerbaijan. They also include at least 33 people and companies blacklisted by the U.S. government because of evidence that they’d been involved in wrongdoing, such as doing business with Mexican drug lords, terrorist organizations like Hezbollah or rogue nations like North Korea and Iran. One of those companies supplied fuel for the aircraft that the Syrian government used to bomb and kill thousands of its own citizens, U.S. authorities have charged”, and adding that the “leaked data covers nearly 40 years, from 1977 through the end of 2015. It allows a never-before-seen view inside the offshore world — providing a day-to-day, decade-by-decade look at how dark money flows through the global financial system, breeding crime and stripping national treasuries of tax revenues. Most of the services the offshore industry provides are legal if used by the law abiding. But the documents show that banks, law firms and other offshore players have often failed to follow legal requirements that they make sure their clients are not involved in criminal enterprises, tax dodging or political corruption. In some instances, the files show, offshore middlemen have protected themselves and their clients by concealing suspect transactions or manipulating official records”.[2]

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But, the journalist Clark Mindock and David Sirota now also reveal that “U.S. President Barack Obama and then-Secretary of State Hillary Clinton pushed for a Bush administration-negotiated free trade agreement that watchdogs warned would only make the situation worse”, “[y]ears before more than a hundred media outlets around the world released stories Sunday exposing a massive network of global tax evasion detailed in the so-called Panama Papers”.[3] These statements would indicate that, not Putin but rather, Obama should be wary of the recent leak . . . Mindock and Sirota explain that “[s]oon after taking office in 2009, Obama and his secretary of state — who is currently the Democratic presidential front-runner — began pushing for the passage of stalled free trade agreements (FTAs) with Panama, Colombia and South Korea that opponents said would make it more difficult to crack down on Panama’s very low income tax rate, banking secrecy laws and history of noncooperation with foreign partners. Even while Obama championed his commitment to raise taxes on the wealthy, he pursued and eventually signed the Panama agreement in 2011. Upon Congress ratifying the pact, Clinton [aka the Hillerator] issued a statement lauding the agreement, saying it and other deals with Colombia and South Korea ‘will make it easier for American companies to sell their products.’ She added: ‘The Obama administration is constantly working to deepen our economic engagement throughout the world, and these agreements are an example of that commitment.’ Critics, however, said the pact would make it easier for rich Americans and corporations to set up offshore corporations and bank accounts and avoid paying many taxes altogether”.[4]

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And then, some of the names appearing in the leaks are Sergi Roldugin, Arkady Rotenberg and Boris Rotenberg, (apparently close friends of Russia’s President), and the soccer star Lionel Messi and the Spanish director Pedro Almodovar (and brother Agustin Almodovar Caballero) and the Argentina President Mauricio Macri as well as Ivan Zamorano, a retired Chilean and Real Madrid soccer player, but also the actor Jackie Chan and the already-disgraced Michel Platini, the former President of the Union of European Football Associations (UEFA), but also Juan Pedro Damiani, member of the FIFA Ethnics Committee and also an Argentine former soccer player with Manchester United, Gabriel Iván Heinze, in addition to the UK PM’s old man, Ian Cameron, as well as former Spanish King Juan Carlos I’s sister Pilar de Borbon, and a certain Daniel Muñoz, aide to former Argentina presidents Cristina Fernandez de Kichner and Nestor Kichner. And then there are also the names of the Prime Minister of Iceland, Sigmundur Davíð Gunnlaugsson, and Juan Armando Hinojosa, the “favorite contractor” of Mexican President Enrique Peña Nieto, as well as a certain Néstor Grindetti, Mayor of the Lanús, Argentina (a town with a population of 212,152) and João Lyra, Member of the Brazilian Chamber of Deputies, and Alfredo Ovalle Rodríguez, intelligence agency associate in Chile as well as Pedro Delgado, former Governor of the Central Bank of Ecuador. In addition to the name Riccardo Francolini, the former chairman of the state-owned Savings Bank in Panama, and César Almeyda, the Director of Peru’s National Intelligence Service. And then there is a former Venezuelan commander-in-chief of the army known as Victor Cruz Weffer, as well as Jesús Villanueva, the former Director of Venezuela’s state-owned oil and gas company PDVSA, as well as Idalécio de Oliveira, potential briber of Brazil’s President of the Chamber of Deputies Eduardo Cunha. Another name is that of Javier Molina Bonilla, a former advisor to Ecuador’s Director of the National Intelligence Secretariat Rommy Vallej, and César Rosenthal, son of former Honduran Vice President Jaime Rosenthal. And the names of two Argentinean businessmen also implicated in the 2015 FIFA corruption case, Hugo and Mariano Jinkis, and yet another professional soccer player, Leonardo Ulloa.[5] But for some strange reason there seem to be no names of big-time American Capitalists and/or philanthropists on the lists, no Gates of Buffet, for one thing. Or, as asked on the website Slashdot, “Where are the US politicians and businessm[e]n?”.

[6] us-blog-post

[1] “Giant Leak of Offshore Financial Records Exposes Global Array of Crime and Corruption” ICIJ (03 April 2016). https://panamapapers.icij.org/20160403-panama-papers-global-overview.html.

[2] “Giant Leak of Offshore Financial Records Exposes Global Array of Crime and Corruption”.

[3] Clark Mindock and David Sirota, “Panama Papers: Obama, Clinton Pushed Trade Deal Amid Warnings It Would Make Money Laundering, Tax Evasion Worse” IBT (04 April 2016). http://www.ibtimes.com/panama-papers-obama-clinton-pushed-trade-deal-amid-warnings-it-would-make-money-2348076.

[4] Clark Mindock and David Sirota, “Panama Papers: Obama, Clinton Pushed Trade Deal”.

[5] “Panama Papers: Partial list of celebrities, government officials named in leak” Fox News Latino (04 April 2016). http://latino.foxnews.com/latino/news/2016/04/04/panama-papers-partial-list-celebrities-government-officials-named-in-leak/.

[6] “Panama Papers: Data Leak Exposes Massive Official Corruption” Slashdot (03 April 2016). https://politics.slashdot.org/story/16/04/03/2026258/panama-papers-data-leak-exposes-massive-official-corruption.

How Reaganomics Killed America’s Middle Class

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‘Thom Hartmann discusses what Ronald Reagan’s economic policies have done to America’s middle class with economist Richard Wolff, author of the book Democracy at Work: A Cure for Capitalism in this edition of the Big Picture. (Published on Nov 11, 2015)’.

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Today, Today Blues: 2016 Oxfam Report on Global Inequality

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Back in January 2014 I posted a blog entry entitled “Inequality Rising: 46% of Global Wealth owned by 86 Individuals”,[1] but now the world has changed and Oxfam recently released a report called An Economy For the 1%. And its findings are stark, the report’s summary succinctly puts it like this: “In 2015, just 62 individuals had the same wealth as 3.6 billion people – the bottom half of humanity. This figure is down from 388 individuals as recently as 2010”.[2] Going down to he nitty-gritty, Oxfam postulates that the report “shows that the wealth of the poorest half of the world’s population has fallen by a trillion dollars since 2010, a drop of 41 percent. This has occurred despite the global population increasing by around 400 million people during that period. Meanwhile, the wealth of the richest 62 has increased by more than half a trillion dollars to $1.76tr. The report also shows how women are disproportionately affected by inequality – of the current ‘62’, 53 are men and just nine are women. Although world leaders have increasingly talked about the need to tackle inequality, and in September [2015] agreed a global goal to reduce it, the gap between the richest and the rest has widened dramatically in the past 12 months. Oxfam’s prediction, made ahead of last year’s Davos, that the 1% would soon own more than the rest of us, actually came true in 2015 – a year earlier than expected. Oxfam is calling for urgent action to tackle the extreme inequality crisis which threatens to undermine the progress made in tackling poverty during the last quarter of a century. As a priority, it is calling for an end to the era of tax havens which has seen the increasing use of offshore centers by rich individuals and companies to avoid paying their fair share to society. This has denied governments valuable resources needed to tackle poverty and inequality. Winnie Byanyima, Oxfam International Executive Director, who will again attend Davos having co-chaired last year’s event, said: ‘It is simply unacceptable that the poorest half of the world’s population owns no more than a few dozen super-rich people who could fit onto one bus. World leaders’ concern about the escalating inequality crisis has so far not translated into concrete action – the world has become a much more unequal place and the trend is accelerating. We cannot continue to allow hundreds of millions of people to go hungry while resources that could be used to help them are sucked up by those at the top. I challenge the governments, companies and elites at Davos to play their part in ending the era of tax havens, which is fuelling economic inequality and preventing hundreds of millions of people lifting themselves out of poverty. Multinational companies and wealthy elites are playing by different rules to everyone else, refusing to pay the taxes that society needs to function. The fact that 188 of 201 leading companies have a presence in at least one tax haven shows it is time to act'”.[3]

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The organization’s press release continues that in “2015 G20 governments agreed steps to curb tax dodging by multinationals through the BEPS agreement, however these measures will do little for the poorest countries and largely ignore the problems posed by tax havens. Globally, it is estimated that a total of $7.6tr of individuals’ wealth sits offshore. If tax were paid on the income that this wealth generates, an extra $190 billion would be available to governments every year. As much as 30 percent of all African financial wealth is estimated to be held offshore, costing an estimated $14 billion in lost tax revenues every year. This is enough money to pay for healthcare for mothers and children in Africa that could save 4 million children’s lives a year, and employ enough teachers to get every African child into school. Nine out of ten WEF corporate partners have a presence in at least one tax haven and it is estimated that tax dodging by multinational corporations costs developing countries at least $100 billion every year. Corporate investment in tax havens almost quadrupled between 2000 and 2014. Allowing governments to collect the taxes they are owed from companies and rich individuals will be vital if world leaders are to meet their new goal, set last September [2015], to eliminate extreme poverty by 2030. Although the number of people living in extreme poverty halved between 1990 and 2010, the average annual income of the poorest 10 percent has risen by less than $3-a-year in the past quarter of a century. That equates to an increase in individuals’ daily income of less than a single cent a year. Had inequality within countries not grown between 1990 and 2010, an extra 200 million people would have escaped poverty. One of the other key trends behind rising inequality set out in Oxfam’s report is the falling share of national income going to workers in almost all developed and most developing countries and a widening gap between pay at the top and the bottom of the income scale. The majority of low paid workers around the world are women. By contrast, the already wealthy have benefited from a rate of return on capital via interest payments, dividends, etc, that has been consistently higher than the rate of economic growth. This advantage has been compounded by the use of tax havens which are perhaps the most glaring example set out in the Oxfam report of how the rules of the economic game have been rewritten in a manner that has supercharged the ability of the rich and powerful to entrench their wealth. Oxfam is calling for action against tax havens to be part of a three-pronged attack on inequality. Action to recover the missing billions lost to tax havens needs to be accompanied by a commitment on the part of governments to invest in healthcare, schools and other vital public services that make such a big difference to the lives of the poorest people. Governments should also take action to ensure that work pays for those at the bottom as well as for those at the top – including moving minimum wage rates towards a living wage and tackling the pay gap between men and women. Byanyima added: ‘The richest can no longer pretend their wealth benefits everyone – their extreme wealth in fact shows an ailing global economy. The recent explosion in the wealth of the super-rich has come at the expense of the majority and particularly the poorest people.’ In addition to its inequality campaign, Oxfam will be attending Davos to press world and business leaders to tackle climate change and act to resolve humanitarian crises including that in Syria”.[4]

Tax-Havens

Graphic shows standalone graphic shows a map listing countries considered to be tax havens or financial privacy jurisdictions. Update removing a designation for countries unwilling to cooperate with foreign tax authorities.

Turning its attention to one of the above-mentioned additional issues Oxfam would like to see taken care of, namely climate change, the report summary states that “Oxfam has also recently demonstrated that while the poorest people live in areas most vulnerable to climate change, the poorest half of the global population are responsible for only around 10% of total global emissions.7 The average footprint of the richest 1% globally could be as much as 175 times that of the poorest 10%”.[5] Only to then, once more drive home their main bone of contention, the summary declares that a “powerful example of an economic system that is rigged to work in the interests of the powerful is the global spider’s web of tax havens and the industry of tax avoidance, which has blossomed over recent decades. It has been given intellectual legitimacy by the dominant market fundamentalist world view that low taxes for rich individuals and companies are necessary to spur economic growth and are somehow good news for us all. The system is maintained by a highly paid, industrious bevy of professionals in the private banking, legal, accounting and investment industries”.[6]

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[1] “Inequality Rising: 46% of Global Wealth owned by 86 Individuals” The Erimtan Angle (23 Jan 2014). https://sitanbul.wordpress.com/2014/01/23/inequality-rising-46-of-global-wealth-owned-by-86-individuals/.

[2] “AN ECONOMY FOR THE 1%”, OXFAM BRIEFING PAPER SUMMARY (18 JANUARY 2016)”. https://www.oxfam.org/sites/www.oxfam.org/files/file_attachments/bp210-economy-one-percent-tax-havens-180116-summ-en_0.pdf.

[3] “62 people own the same as half the world, reveals Oxfam Davos report” Oxfam (18 Jan 2016). https://www.oxfam.org/en/pressroom/pressreleases/2016-01-18/62-people-own-same-half-world-reveals-oxfam-davos-report.

[4] “62 people own the same as half the world, reveals Oxfam Davos report”.

[5] “AN ECONOMY FOR THE 1%”, OXFAM BRIEFING PAPER SUMMARY (18 JANUARY 2016)”.

[6] “AN ECONOMY FOR THE 1%”, OXFAM BRIEFING PAPER SUMMARY (18 JANUARY 2016)”.

Politicking with Larry King: Matt Taibbi

‘Journalist Matt Taibbi joins Larry to examine inequality in the U.S. justice system. In his new book, The Divide-American Injustice in the Age of the Wealth Gap. Taibbi says white-collar criminals walk, while the poor get locked up in record numbers (2 May 2014)’.

In the Murdoch-owned Wall Street Journal, the blogger, journalist, and libertarian political pundit Matt Welch, who is also a co-host of ‘The Independents’ on the Fox Business Network, reviews the book as follows: “[w]hen the polemicist who made Goldman Sachs synonymous with a “vampire squid” writes a book called The Divide, with a subtitle that references “the wealth gap,” one may reasonably anticipate some undergraduate-style fist-shaking about income quintiles and the predatory rich. But one would be wrong. Matt Taibbi’s The Divide is primarily concerned with the grotesquely unequal application of American justice, between the too-big-to-jail Wall Street elite and the too-poor-to-fight minority underclass. “The cleaving of the country into two completely different states—one a small archipelago of hyperacquisitive untouchables, the other a vast ghetto of expendables with only theoretical rights,” Mr. Taibbi maintains, “is a terrible story, and a crazy one.” The characterization is typically overwrought, but the general indictment is broadly correct”.[1]

Welch’s statement that Taibbi’s “general indictment is broadly correct” does strike me as somewhat condescending . . . but juxtaposing the harsh prosecution of the “small, family-owned Chinatown operation . . . called Abacus Federal Savings Bank” to the lenient treatment received by “Countrywide, Citigroup, JPMorgan Chase, AIG—each of which, eventually, signed non-prosecution agreements with the Department of Justice” seems like an illustration of an injustice that is more than just “broadly correct”.[2] And the fact that “large banks” and “their executives” were essentially immune from prosecutions in the aftermath of the 2008 financial meltdown. In his book, Taibbi traces the origins of the Too Big To Fail (TBTF) mantra to a “1999 Justice Department memo written by a then obscure lawyer named Eric Holder” that read that “Prosecutors may take into account the possibly substantial consequences to a corporation’s officers, directors, employees, and shareholders”, employing the loaded phrase “collateral consequences”.[3] Funny how things work out sometimes . . . and in conclusion, here is Welch positing that “at heart The Divide is a face-slap, not a legal brief. Though Mr. Taibbi doesn’t couch it in these terms, his warning is all about moral hazard, in two senses of the phrase. When swindlers know that their risks will be subsidized, and their potential crimes will be punishable only through negotiated corporate settlements, they will surely commit more crimes. And when most of the population either does not know or does not care that the lowest socioeconomic classes live in something akin to a police state, we should be greatly concerned for the moral health of our society”.[4]

 

[1] Matt Welch, “Book Review: ‘The Divide’ by Matt Taibbi” The Wall Street Journal (11 April 2014). http://online.wsj.com/news/articles/SB10001424052702303456104579489582963112764.

[2] Matt Welch, “Book Review: ‘The Divide’ by Matt Taibbi”.

[3] Matt Welch, “Book Review: ‘The Divide’ by Matt Taibbi”.

[4] Matt Welch, “Book Review: ‘The Divide’ by Matt Taibbi”.

Renewable Energy in Turkey: A World Bank Project

In today’s world such institutions like the IMF (or the International Monetary Fund) or the World Bank have become common currency, popping up at regular intervals in the global news cycles, and not just because of DSK’s philandering proclivities. The Bretton Woods Project, a UK-based NGO challenging the World Bank and IMF while promoting alternative approaches, announced in 2005 that “[c]riticism of the World Bank and the IMF encompasses a whole range of issues but they generally centre around concern about the approaches adopted by the World Bank and the IMF in formulating their policies, and the way they are governed. This includes the social and economic impact these policies have on the population of countries who avail themselves of financial assistance from these two institutions, and accountability for these impacts. Critics of the World Bank and the IMF are concerned about the ‘conditionalities’ imposed on borrower countries. The World Bank and the IMF often attach loan conditionalities based on what is termed the ‘Washington Consensus’, focusing on liberalisation—of trade, investment and the financial sector—, deregulation and privatisation of nationalised industries. Often the conditionalities are attached without due regard for the borrower countries’ individual circumstances and the prescriptive recommendations by the World Bank and IMF fail to resolve the economic problems within the countries. IMF conditionalities may additionally result in the loss of a state’s authority to govern its own economy as national economic policies are predetermined under IMF packages. Issues of representation are raised as a consequence of the shift in the regulation of national economies from state governments to a Washington-based financial institution in which most developing countries hold little voting power. IMF packages have also been associated with negative social outcomes such as reduced investment in public health and education. With the World Bank, there are concerns about the types of development projects funded. Many infrastructure projects financed by the World Bank Group have social and environmental implications for the populations in the affected areas and criticism has centred on the ethical issues of funding such projects. For example, World Bank-funded construction of hydroelectric dams in various countries has resulted in the displacement of indigenous peoples of the area. The World Bank’s role in the global climate change finance architecture has also caused much controversy. Civil society groups see the Bank as unfit for a role in climate finance because of the conditionalities and advisory services usually attached to its loans. The Bank’s undemocratic governance structure – which is dominated by industrialised countries – its privileging of the private sector and the controversy over the performance of World Bank-housed Climate Investment Funds have also been subject to criticism in debates around this issue. Moreover, the Bank’s role as a central player in climate change mitigation and adaptation efforts is in direct conflict with its carbon-intensive lending portfolio and continuing financial support for heavily polluting industries, which includes coal power”.[1] As a result, the World Bank’s current project in Turkey might seem surprising: “Renewable Energy Project”.

On the dedicated website, the World Bank announces that the “project objective is to increase privately owned and operated distributed power generation from renewable sources, without the need for government guarantees, and within the market-based framework of the new Turkish Electricity Market Law. The project has the following two components: Component 1) The SPDF is a term lending facility which will be established and will be operated by the two financial intermediaries (Fls). The two Fls selected are: (a) Turkiye Sinai Kalkınma Bankası (TSKB) – the Turkish Industrial Development Bank (private); (b) Turkiye Kalkınma Bankası (TKB) – the Turkish Development Bank (Government) The World Bank loan for the SPDF will be on-lent from Treasury (the Borrower) to the Fls. The Fls will utilize the SPDF to provide long-term debt financing to private sponsors of renewable energy projects. The SPDF is intended to leverage equity investment from local private developers, export credit financing and other financing for the construction and operation of qualified renewable generation projects. Component 2) In order to support the implementation of the Project, Ministry of Energy and Natural Resources (MENR), General Directorate of State Hydraulic Works (DSI) and General Directorate of Electric Power Resources (EIE) will undertake various institutional development activities. These activities will be financed through internal sources and grants. The World Bank and the Government will work together to obtain the required grant financing for these activities. The principal institutional development activities that will be pursued include: (a) Renewable Energy Development Capacity: For the immediate to medium-term (next 2-3 years) there is a substantial potential pipeline of projects which are at an advanced stage of development by private sponsors. (b) Legislation for Renewable Energy Resource Development: Apart from the Electricity Market Law (EML) and the MENR-DSI Regulation on Principles and Procedures for Obtaining a Water-Use Rights Agreement, Turkey does not have a specific and comprehensive law for renewable energy resource development. (c) Mechanisms for Public-Private Hydropower Development: With the implementation of the new Electricity Market Law (Law No. 4628), the responsibilities for developing new hydropower generation will tend to shift towards the private sector”.[2] And this just seems like a perfect project for Turkey’s AKP-led government that is keen to privatize the nation’s assets and encourage the private sector to run things, as recently vividly illustrated in the Soma mining disaster.[3]

Turkey’s Prime Ministry Privatization Administration announces to the world that “[w]hen it comes to ‘Privatization in Turkey’, we are talking about a comprehensive and a radical programme. 15 years ago, it was just a controversial idea. Now, it is a national policy implemented by every government an supported by public opinion. Total income from privatization implementations over US $ 10 billion. Every step brings us closer to a stronger and more competitive economy. That’s why, we call it very important privatization”.[4]

 

[1] “What are the main concerns and criticism about the World Bank and IMF?” Bretton Woods Project (23 August 2005). http://www.brettonwoodsproject.org/2005/08/art-320869/.

[2] “Renewable Energy Project” The World Bank (2014). http://www.worldbank.org/projects/P072480/renewable-energy-project?lang=en&tab=overview.

[3] C. Erimtan “The Soma mine disaster or privatization gone wild in Turkey” Op-Edge (16 May 2014). http://rt.com/op-edge/159420-erdogan-turkey-mine-disaster/.

[4] “PRIVATIZATION IN TURKEY” Prime Ministry Privatization Administration. http://www.oib.gov.tr/index_eng.htm.

Thomas Piketty: Capital in the Twenty-First Century

‘The Economic Policy Institute and the Washington Center for Equitable Growth host a presentation by Thomas Piketty—economist from the Paris School of Economics and ground-breaking researcher on income inequality—of the findings in his new book, Capital in the Twenty-First Century. His presentation is followed by a panel discussion moderated by Heather Boushey, Executive Director and Chief Economist of the Washington Center for Equitable Growth, with Josh Bivens, Research and Policy Director of the Economic Policy Institute, Robert M. Solow, Professor Emeritus at the Massachusetts Institute of Technology and Betsey Stevenson, Member of the White House Council of Economic Advisers, serving as discussants. Piketty examines data from more than twenty countries spanning in some cases as far back as the 18th century to assess the dynamics of income and wealth distribution, with a particular focus on the role of capital ownership as a driver of long-run trends in income inequality. He argues that when the rate of return on capital exceeds the rate of economic growth, as it has for most of history, then rising income inequality becomes inevitable. He says that if this rising inequality is allowed to continue unchecked, the results could be deep political and social disruption. While Piketty notes that inequality has different dimensions across countries, he concludes with a recommendation: significantly increase the progressivity of both income and wealth taxation. Given the extraordinarily globalized market for capital, he further argues that the reach of such taxes must be global as well. Capital in the Twenty-First Century, already a best seller, is an invaluable contribution to how we understand inequality and its possible consequences. The book, which has already focused the attention of economists like no other work in recent decades, will be available for purchase at the event. We very much hope you can join us. This event is free to the public (15 April 2014)’.

The New Statesman‘s Nick Pearce posits that “Piketty’s thesis is arresting because he buttresses it with ample historical data to show that the reduction of inequality in the middle of the 20th century was an exception, not the norm in a market economy. Ordinarily, he argues, if capital is reinvested it yields between 4 and 5 per cent a year, outstripping economic growth. Wealth inequalities therefore increase. This has been true of almost all human history. The 20th century was exceptional because of the capital shocks of two world wars, decolonisation and the growth of the welfare state. The huge inequalities of the belle époque gave way to a more egalitarian distribution as capital was destroyed, taxed or nationalised to pay for the war effort and the building of public services and social security. Growth, on the other hand, was relatively high because of technological catch-up and convergence, particularly in Europe and Japan following the Second World War. In the late 1970s and 1980s, these processes started to go into reverse, as growth rates slowed, capital was rebuilt, taxes on wealth and top incomes were cut, and the institutions of postwar social democracy were dismantled. Today, wealth holdings in the advanced economies are six times as large as annual national income – the same sort of level as existed before the First World War”.[1]

 

[1] Nick Pearce, “Thomas Piketty: a modern French revolutionary” New Statesman (03 April 2014). http://www.newstatesman.com/2014/03/french-revolutionary.