Tag: Globalisation

Gun Control at the Pentagon? Dont Even Think About It — Global Issues

  • Opinion by Norman Solomon (san francisco, usa)
  • Inter Press Service

SAN FRANCISCO, USA, Jun 01 (IPS) – New outcries for gun control have followed the horrible tragedies of mass shootings in Uvalde and Buffalo. “Evil came to that elementary school classroom in Texas, to that grocery store in New York, to far too many places where innocents have died,” President Biden declared over the weekend during a university commencement address.

As he has said, a badly needed step is gun control — which, it’s clear from evidence in many countries, would sharply reduce gun-related deaths.

But what about “gun control” at the Pentagon?

The concept of curtailing the U.S. military’s arsenal is such a nonstarter that it doesn’t even get mentioned. Yet the annual number of deadly shootings in the United States — 19,384 at last count — is comparable to the average yearly number of documented civilian deaths directly caused by the Pentagon’s warfare in the last two decades. And such figures on war deaths are underestimates.

From high-tech rifles and automatic weapons to drones, long-range missiles and gravity bombs, the U.S. military’s weaponry has inflicted carnage in numerous countries. How many people have been directly killed by the “War on Terror” violence?

An average of 45,000 human beings each year — more than two-fifths of them innocent civilians — since the terror war began, as documented by the Costs of War project at Brown University.

The mindset of U.S. mass media and mainstream politics is so militarized that such realities are routinely not accorded a second thought, or even any thought. Meanwhile, the Pentagon budget keeps ballooning year after year, with President Biden now proposing $813 billion for fiscal year 2023.

Liberals and others frequently denounce how gun manufacturers are making a killing from sales of handguns and semiautomatic rifles in the United States, while weapons sales to the Pentagon continue to spike upward for corporate war mega-profiteers.

As William Hartung showed in his Profits of War report last fall, “Pentagon spending has totaled over $14 trillion since the start of the war in Afghanistan, with one-third to one-half of the total going to military contractors.

A large portion of these contracts — one-quarter to one-third of all Pentagon contracts in recent years — have gone to just five major corporations: Lockheed Martin, Boeing, General Dynamics, Raytheon and Northrop Grumman.”

What’s more, the United States is the world’s leading arms exporter, accounting for 35 percent of total weapons sales — more than Russia and China combined. The U.S. arms exports have huge consequences.

Pointing out that the Saudi-led war and blockade on Yemen “has helped cause the deaths of nearly half a million people,” a letter to Congress from 60 organizations in late April said that “the United States must cease supplying weapons, spare parts, maintenance services, and logistical support to Saudi Arabia.”

How is it that countless anguished commentators and concerned individuals across the USA can express justified fury at gun marketers and gun-related murders when a mass shooting occurs inside U.S. borders, while remaining silent about the need for meaningful gun control at the Pentagon?

The civilians who have died — and are continuing to die — from use of U.S. military weapons don’t appear on American TV screens. Many lose their lives due to military operations that are unreported by U.S. news media, either because mainline journalists don’t bother to cover the story or because those operations are kept secret by the U.S. government. As a practical matter, the actual system treats certain war victims as “unworthy” of notice.

Whatever the causal mix might be — in whatever proportions of conscious or unconscious nationalism, jingoism, chauvinism, racism and flat-out eagerness to believe whatever comforting fairy tale is repeatedly told by media and government officials — the resulting concoction is a dire refusal to acknowledge key realities of U.S. society and foreign policy.

To heighten the routine deception, we’ve been drilled into calling the nation’s military budget a “defense” budget — while Congress devotes half of all discretionary spending to the military, the USA spends more on its military than the next 10 countries combined (most of them allies), the Pentagon operates 750 military bases overseas, and the United States is now conducting military operations in 85 countries.

Yes, gun control is a great idea. For the small guns. And the big ones.

Norman Solomon is the national director of RootsAction.org and the author of a dozen books including Made Love, Got War: Close Encounters with America’s Warfare State, published this year in a new edition as a free e-book. His other books include War Made Easy: How Presidents and Pundits Keep Spinning Us to Death. He was a Bernie Sanders delegate from California to the 2016 and 2020 Democratic National Conventions. Solomon is the founder and executive director of the Institute for Public Accuracy.

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What Should Developed Countries Do? — Global Issues

  • Opinion by Daud Khan (rome)
  • Inter Press Service

ROME, Jun 01 (IPS) – Developing countries – in Africa, in Asia, in Latin America and in the Middle East – are facing a combination of crises that are unprecedented in recent times. Over the last three years they have had to face the COVID-19 crisis, the food crisis, the energy crisis, the climate change crisis, the debt crisis and, on top of all this, a global recession. The crises have overlapped, and each has added to the problems created by the previous ones.

Daud KhanFirst among the crises relates to food – the most basic of human needs. Even before the events in Ukraine there were shortages and uncertainties. International food prices rose by 40% over their level of 2020 – with increases of almost 90% in the price of vegetable oil – pushing up domestic food prices in both importing and exporting countries, and driving millions towards food insecurity. And then came the Ukraine crisis; and price of cereals and cooking oils spiked yet again – up 20% for cereal and 30% for vegetable oils.

And it is not just an issue of prices. Supplies are hard to come by. In April 2022 Ukraine exported only 1 million tons of grain as opposed to a normal export volume of 5 million tons and Indonesia banned exports of palm oil. On top of this came climate change. Low rainfall and drought-like conditions have also affected production in several major wheat exporting countries such as France and the USA. Scorching temperatures across northern India and Pakistan have reduced wheat output by 20% and in response, India has now banned exports of wheat.

The second crisis relates to the price of energy. Energy prices before the Ukraine crisis has risen 75% in twelve months and another 25% since then. This has raised costs of transport, manufacturing and services. Prices of natural gas, which drives the prices of urea fertilizer, rose by over 140% and this will impact plantings, yields and output of food crops in coming years. The prices of phosphate fertilizers have also risen – by over 200% the last year – with about a third of the increase coming since January 2022, mainly as a result of disruption of supplies.

The next punch in the belly for developing countries came from interest rates increases. Developing country debt has boomed in over the past decades years, fueled by the easy availability of savings and real interest rates of virtually zero. With rising inflation, the US Federal Reserve Board has hiked up interest rates. This has not only increased interest payments but also the value of the US$ in which much developing country debt is denominated. This is making debt servicing vastly more expensive and balance of payments problems are looming large for many countries. Higher debt servicing is also putting pressure on Government budgets and is resulting in large cuts in development and social spending.

And we are not finished yet. Global GDP and trade are slowing down. This reflects the recessionary cocktail of high energy prices, supply bottlenecks, rising interest rates and political uncertainties around the globe, as well as COVID-related lockdowns in China.

This perfect storm is mostly the result of the policies of the big economies – the ongoing US/Russia/China rivalry; rapid globalization followed by the strict COVID-related lockdowns; and easy monetary policies which first pumped in huge sums of money into the economies and are now raising interest rates to rein in inflation. Climate change has much to do with large and continued emission of GHGs, the bulk of which comes from the big economies, including China. And now, speculative capital, mostly originating in the developed world, is further aggravating the situation in food, fuel and other commodity markets.

But the interlinked nature of the globalized world implies that in relative terms the financial and human burden of these actions falls heaviest on developing countries. After all it is one thing for food and energy prices to rise, or for GDP growth to slow in rich countries such as the USA, Europe and Australia, or even in China. In these countries living standards are high, infrastructure and services are well developed, and often well designed social safety nets are in place. It is quite different in developing countries, where large numbers continue to live with poverty and hunger; where basic services such as education, health and clean drinking water are scarce; and those facing old age, illness or loss of earnings can only rely on the goodwill of friends or family.

There is, quite rightly, much concern about the situation. Several high level meetings have been convened, including by the UN, and there are strong calls for increased aid flows and debt relief, as well as for the creation of special funds for the countries most affected by high prices, debt burdens or climate change. These actions are needed and necessary to avoid widespread suffering, political turbulence and increased migratory flows. And the developed countries will likely bear most of the financial burden of these measures.

But many of the measures, even if implemented, are short term palliatives and will not solve underlying problems. Moreover, developing countries cannot continue to rely indefinitely on goodwill and charity. The risk of doing this became very clear during the COVID crisis where little of the vaccines available and none of the vaccine production technology were shared.

However, times of crisis also create opportunities. There is a need for new thinking and for paradigm shifts in developing countries but also for Governments to undertake reforms that they have been postponing for years, if not decades, due to fears that such reforms would hurt vested interests and national elites. It is now time to act bravely.

Part two of this article will discuss some of the concrete measure that developing countries could take to address the various crises.

Daud Khan works as consultant and advisor for various Governments and international agencies. He has degrees in Economics from the LSE and Oxford – where he was a Rhodes Scholar; and a degree in Environmental Management from the Imperial College of Science and Technology. He lives partly in Italy and partly in Pakistan.

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Fighting Inflation Excuse for Class Warfare — Global Issues

  • Opinion by Jomo Kwame Sundaram, Anis Chowdhury (sydney and kuala lumpur)
  • Inter Press Service

SYDNEY and KUALA LUMPUR, May 24 (IPS) – A class war is being waged in the name of fighting inflation. All too many central bankers are raising interest rates at the expense of working people’s families, supposedly to check price increases.

Forced to cope with rising credit costs, people are spending less, thus slowing the economy. But it does not have to be so. There are much less onerous alternative approaches to tackle inflation and other contemporary economic ills.

Short-term pain for long-term gain?
Central bankers are agreed inflation is now their biggest challenge, but also admit having no control over factors underlying the current inflationary surge. Many are increasingly alarmed by a possible “double-whammy” of inflation and recession.

Nonetheless, they defend raising interest rates as necessary “preemptive strikes”. These supposedly prevent “second-round effects” of workers demanding more wages to cope with rising living costs, triggering “wage-price spirals”.

In central bank jargon, such “forward-looking” measures convey clear messages “anchoring inflationary expectations”, thus enhancing central bank “credibility” in fighting inflation.

They insist the resulting job and output losses are only short-term – temporary sacrifices for long-term prosperity. Remember: central bankers are never punished for causing recessions, no matter how deep, protracted or painful.

But raising interest rates only makes recessions worse, especially when not caused by surging demand. The latest inflationary surge is clearly due to supply disruptions because of the pandemic, war and sanctions.

Raising interest rates only reduces spending and economic activity without mitigating ‘imported’ inflation, e.g., rising food and fuel prices. Recessions will further disrupt supplies, aggravating inflation and worsening stagflation.

Wage-price spirals?
Some central bankers claim recent instances of wage increases signal “de-anchored” inflationary expectations, and threaten ‘wage-price spirals’. But this paranoia ignores changed industrial relations and pandemic effects on workers.

With real wages stagnant for decades, the ‘wage-price spiral’ threat is grossly exaggerated. Over recent decades, most workers have lost bargaining power with deregulation, outsourcing, globalization and labour-saving technologies. Hence, labour shares of national income have declined in most countries since the 1980s.

Labour market recovery, even tightening in some sectors, obscures adverse overall pandemic impacts on workers. Meanwhile, millions of workers have gone into informal self-employment – now celebrated as ‘gig work’ – increasing their vulnerability.

Pandemic infections, deaths, mental health, education and other impacts, including migrant worker restrictions, have all hurt many. Contagion has especially hurt vulnerable workers, including youth, migrants and women.

Workers’ share of national income, 1970-2015

Ideological central bankers
Economic policies by supposedly independent and knowledgeable technocrats are presumed to be better. But such naïve faith ignores ostensibly academic, ideological beliefs.

Typically biased, albeit in unstated ways, policy choices inevitably support some interests over – even against – others. Thus, for example, an anti-inflation policy emphasis favours financial asset owners.

Politicians like the notion of central bank independence. It enables them to conveniently blame central banks for inflation and other ills – even “sleeping at the wheel” – and for unpopular policy responses.

Of course, central bankers deny their own role and responsibility, instead blaming other economic policies, especially fiscal measures. But politicians blaming central bankers after empowering them is simply shirking responsibility.

In the rich West, governments long bent on fiscal austerity left the heavy lifting for recovery after the 2008-2009 global financial crisis (GFC) to central bankers. Their ‘unconventional monetary policies’ involved keeping policy interest rates very low, enabling corporate shenanigans and zombie business longevity.

This enabled unprecedented increases in most debt, including private credit for speculation and sustaining ‘zombie’ businesses. Hence, recent monetary tightening – including raising interest rates – will trigger more insolvencies and recessions.

German social market economy
Inflation and policy responses inevitably involve social conflicts over economic distribution. In Germany’s ‘free collective bargaining’, trade unions and business associations engage in collective bargaining without state interference, fostering cooperative relations between workers and employers.

The German Collective Bargaining Act does not oblige ‘social partners’ to enter into negotiations. The timing and frequency of such negotiations are also left to them. Such flexible arrangements are said to have helped SMEs.

Although Germany’s ‘social market economy’ has no national tripartite social dialogue institution, labour unions, business associations and government did not hesitate to democratically debate crisis measures and policy responses to stabilize the economy and safeguard employment, e.g., during the GFC.

Dialogue down under
A similar ‘social dialogue’ approach was developed by Australian Labor Prime Minister Bob Hawke from 1983. This contrasted with the more confrontational approaches pursued in Margaret Thatcher’s UK and Ronald Reagan’s USA – where punishing interest rates inflicted long recessions.

Although Hawke had been a successful trade union leader, he began by convening a national summit of workers, businesses and other stakeholders. The resulting Prices and Incomes Accord between the government and unions moderated wage demands in return for ‘social wage’ improvements.

This consisted of better public health provisioning, pension and unemployment benefit improvements, tax cuts and ‘superannuation’ – involving required employees’ income shares and matching employer contributions to a workers’ retirement fund.

Although business groups were not formally party to the Accord, Hawke brought big businesses into other new initiatives such as the Economic Planning Advisory Council. This consensual approach helped reduce both unemployment and inflation.

Such consultations have also enabled difficult reforms – including floating exchange rates and reducing import tariffs. They also contributed to the developed world’s longest uninterrupted economic growth streak – without a recession for nearly three decades, ending in 2020 with the pandemic.

Social partnerships
A variety of such approaches exist. For example, Norway’s kombiniert oppgjior, from 1976, involved not only industrial wages, but also taxes, salaries, pensions, food prices, child support payments, farm support prices, and more.

‘Social partnerships’ have also been important in Austria and Sweden. A series of political understandings – or ‘bargains’ – between successive governments and major interest groups enabled national wage agreements from 1952 until the mid-1970s.

Consensual approaches undoubtedly underpinned post-Second World War reconstruction and progress, of the so-called Keynesian ‘Golden Age’. But it is also claimed they have created rigidities inimical to further progress, especially with rapid technological change.

Economic liberalization in response has involved deregulation to achieve more market flexibilities. But this approach has also produced more economic insecurity, inequalities and crises, besides stagnating productivity.

Such changes have also undermined democratic states, and enabled more authoritarian, even ethno-populist regimes. Meanwhile, rising inequalities and more frequent recessions have strained social trust, jeopardizing security and progress.

Policymakers should consult all major stakeholders to develop appropriate policies involving fair burden sharing. The real need then is to design alternative policy tools through social dialogue and complementary arrangements to address economic challenges in more equitably cooperative ways.

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When Saviours Are the Problem — Global Issues

  • Opinion by Jomo Kwame Sundaram, Anis Chowdhury (sydney and kuala lumpur)
  • Inter Press Service

SYDNEY and KUALA LUMPUR, May 17 (IPS) – Central bank policies have often worsened economic crises instead of resolving them. By raising interest rates in response to inflation, they often exacerbate, rather than mitigate business cycles and inflation.

Neither gods nor maestros
US Federal Reserve Bank chair Jerome Powell has admitted: “Whether we can execute a soft landing or not, it may actually depend on factors that we don’t control.” He conceded, “What we can control is demand, we can’t really affect supply with our policies. And supply is a big part of the story here”.

Anis ChowdhuryHence, decisionmakers must consider more appropriate policy tools. Rejecting ‘one size fits all’ formulas, including simply raising interest rates, anti-inflationary measures should be designed as appropriate. Instead of squelching demand by raising interest rates, supply could be enhanced.

Thus, Milton Friedman – whom many central bankers still worship – blamed the 1930s’ Great Depression on the US Fed. Instead of providing liquidity support to businesses struggling with short-term cash-flow problems, it squeezed credit, crushing economic activity.

Similarly, before becoming Fed chair, Ben Bernanke’s research team concluded, “an important part of the effect of oil price shocks on the economy results not from the change in oil prices, per se, but from the resulting tightening of monetary policy”.

Adverse impacts of the 1970s’ oil price shocks were worsened by the reactions of monetary policymakers, which caused stagflation. That is, US Fed and other central bank interventions caused economic stagnation without mitigating inflation.

Likewise, the longest US recession after the Great Depression, during the 1980s, was due to interest rate hikes by Fed chair Paul Volcker. A recent New York Times op-ed warned, “The Powell pivot to tighter money in 2021 is the equivalent of Mr. Volcker’s 1981 move” and “the 2020s economy could resemble the 1980s”.

Monetary policy for supply shocks?
Food prices surged in 2011 due to weather-related events ruining harvests in major food producing nations, such as Australia and Russia. Meanwhile, fuel prices soared with political turmoil in the Middle East.

Jomo Kwame SundaramHowever, Boston Fed head Eric Rosengren argued, “tightening monetary policy solely in response to contractionary supply shocks would likely make the impact of the shocks worse for households and businesses”.

Referring to Boston Fed research, he noted commodity price changes did not affect the long-run inflation rate. Other research has also concluded that commodity price shocks are less likely to be inflationary.

This reduced inflationary impact has been attributed to ‘structural changes’ such as workers’ diminished bargaining power due to labour market deregulation, technological innovation and globalization.

Hence, central banks are no longer expected to respond strongly to food and fuel price increases. Policymakers should not respond aggressively to supply shocks – often symptomatic of broader macroeconomic developments.

Instead, central banks should identify the deeper causes of food and fuel price rises, only responding appropriately to them. Wrong policy responses can compound, rather than mitigate problems.

Appropriate innovations
A former Philippines central bank Governor Amando M. Tetangco, Jr noted it had not responded strongly to higher food and fuel prices in 2004. He stressed, “authorities should ignore changes in the price of things that they cannot control”.

Tetangco warned, “the required policy response is not… straightforward… Thus policy makers will need to make a choice between bringing down inflation and raising output growth”. He emphasized, “a real sector supply side response may be more appropriate in addressing the pressure on prices”.

Thus, instead of restricting credit indiscriminately, financing constraints on desired industries (e.g., renewable energy) should be eased. Enterprises deemed inefficient or undesirable – e.g., polluters or those engaged in speculation – should have less access to the limited financing available.

This requires designing macroeconomic policies to enable dynamic new investments, technologies and economic diversification. Instead of reacting with blunt interest rate policy tools, policymakers should know how fiscal and monetary policy tools interact and impact various economic activities.

Used well, these can unlock supply bottlenecks, promote desired investments and enhance productivity. As no one size fits all, each policy objective will need appropriate, customized, often innovative tools.

Lessons from China
China’s central bank, the People’s Bank of China (PBOC), developed “structural monetary policy” tools and new lending programmes to help victims of COVID-19. These ensured ample interbank liquidity, supported credit growth, and strengthened domestic supply chains.

Outstanding loans to small and micro businesses rose 25% to 20.8 trillion renminbi by March 2022 from a year before. By January, the interest rate for loans to over 48 million small and medium enterprises had dropped to 4.5%, the lowest level since 1978.

The PBOC has also provided banks with loan funds for promising, innovative and creditworthy companies, e.g., involved in renewable energy and digital technologies. It thus achieves three goals: fostering growth, maintaining debt at sustainable levels, and ‘green transformation’.

Defying global trends, China’s ‘factory-gate’ (or producer price) inflation fell to a one-year low in April 2022 as the PBOC eased supply chains and stabilized commodity prices. Although consumer prices have risen with COVID-19 lockdowns, the increases have remained relatively benign so far.

In short, the PBOC has coordinated monetary policy with both fiscal and industrial policies to boost confidence, promote desired investments and achieve stable growth. It maintains financial stability and policy independence by regulating capital flows, thus avoiding sudden outflows, and interest rate hikes in response.

Improving policy coordination
Central bankers monitor aggregate indicators, such as wages growth. However, before reacting to upward wage movements, the context needs to be considered. For example, wages may have stagnated, or the labour share of income may have declined over the long-term.

Moreover, wage increases may be needed for critical sectors facing shortages to attract workers with relevant skills. Wage growth itself may not be the problem. The issue may be weak long-term productivity growth due to deficient investments.

Input-output tables can provide information about sectoral bottlenecks and productivity, while flow-of-funds information reveals what sectors are financially constrained, and which are net savers or debtors.

Such information can helpfully guide design of appropriate, complementary fiscal and monetary policy tools. Undoubtedly, pursuing heterodox policies is challenging in the face of policy fetters imposed by current orthodoxies.

Central bank independence – with dogmatic mandates for inflation targeting and capital account liberalization – precludes better coordination, e.g., between fiscal and monetary authorities. It also undercuts the policy space needed to address both demand- and supply-side inflation.

Monetary authorities are under tremendous pressure to be seen to be responding to rising prices. But experience reminds us they can easily make things worse by acting inappropriately. The answer is not greater central bank independence, but rather, improved economic policy coordination.

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