sábado, 18 de abril de 2009

U-20: Will the Global Economy Resurface? By Walden Bello* Foreign Policy in Focus March 30, 2009 The Group of 20 (G20) is making a big show of gettin

U-20: Will the Global Economy Resurface?

By Walden Bello*

Foreign Policy in Focus
March 30, 2009

The Group of 20 (G20) is making a big show of getting together to come to grips with the global economic crisis. But here's the problem with the upcoming summit in London on April 2: It's all show. What the show masks is a very deep worry and fear among the global elite that it really doesn't know the direction in which the world economy is heading and the measures needed to stabilize it.

The latest statistics are exceeding even the gloomiest projections made earlier. Establishment analysts are beginning to mention the dreaded "D" word and there is a spreading sense that a tidal wave just now gathering momentum will simply overwhelm the trillions of dollars allocated for stimulus spending. In this environment, the G20 conveys the impression that they're more commanded by than in command of developments (In addition to the seven wealthy industrial nations that belong to the G7, the G20 includes China, India, Indonesia, Mexico, Brazil, Argentina, Russia, Saudi Arabia, Australia, South Korea, Turkey, Italy, and South Africa.).

Indeed, perhaps no image is more evocative of the current state of the global economy than that of a World War II German U-Boat depth-charged in the North Atlantic by British destroyers. It's going down fast, and the crew doesn't know when it will hit rock bottom. And when it does hit the ocean floor, the big question is: Will the crew be able to make the submarine rise again by pumping compressed air into the severely damaged ballast tanks, like the sailors in Wolfgang Petersen's classic film Das Boot? Or will the U-Boat simply stay at the bottom, its crew doomed to contemplate a fate worse than sudden death?

The current capitalist crew manning the global economy doesn't know whether Keynesian methods can re-inflate the global economy. Meanwhile, an increasing number of people are asking whether using a clutch of Social Democratic-like reforms is enough to repair the global economy, or whether the crisis will lead to a new international economic order.

A New Bretton Woods?

The G20 meeting has been trumpeted as a new "Bretton Woods." In July 1944, in Bretton Woods, New Hampshire, representatives of the state-managed capitalist economies designed the postwar multilateral order with themselves at the center.

In fact, the two meetings couldn't be further apart.

The London meeting will last one day; the Bretton Woods conference was a tough 21-day working session.

The London meeting is exclusive, with 20 governments arrogating to themselves the power to decide for 172 other countries. The Bretton Woods meeting tried hard to be inclusive to avoid precisely the illegitimacy that dogs the G20's London tryst. Even in the midst of global war, it brought together 44 countries, including the still-dependent Commonwealth of the Philippines and the tiny, now-vanished Siberian state of Tannu Tuva.

The Bretton Woods Conference created new multilateral institutions and rules to manage the postwar world. The G20 is recycling failed institutions: the G20 itself, the Financial Stability Forum (FSF), the Bank of International Settlements and "Basel II," and the now 65-year-old International Monetary Fund (IMF). Some of these institutions were established by the elite Group of 7 after the 1997 Asian financial crisis to come up with a new financial architecture that would prevent a repetition of the debacle brought about by IMF policies of capital account liberalization. But instead of coming up with safeguards, all these institutions bought the global financial elite's strategy of "self-regulation."

Among the mantras they thus legitimized were that capital controls were bad for developing economies; short-selling, or speculating on the movement of borrowed stocks, was a legitimate market operation; and derivatives — or securities that allow betting on the movements of an underlying asset — "perfected" the market. The implicit recommendation of their inaction was that the best way to regulate the market was to leave it to market players, who had developed sophisticated but allegedly reliable models of "risk assessment."

In short, institutions that were part of the problem are now being asked to become the central part of the solution. Unwittingly, the G20 are following Marx's maxim that history first repeats itself as tragedy, then as farce.

Resurrecting the Fund

The most problematic component of the G20 solution is its proposals for the International Monetary Fund (IMF). The United States and the European Union are seeking an increase in the capital of the IMF from $250 billion to $500 billion. The plan is for the IMF to lend these funds to developing countries to use to stimulate their economies, with U.S. Treasury Secretary Tim Geithner proposing that the Fund supervise this global exercise.

If ever there was a non-starter, this is it.

First of all, the representation question continues to exercise much of the global South. So far, only marginal changes have been made in the allocation of voting rights at the IMF. Despite the clamor for greater voting power for members from the global South, the rich countries are still overrepresented on the Fund's decision-making executive board and developing countries, especially those in Asia and Africa, are vastly underrepresented. Europe holds a third of the chairs in the executive board and claims the feudal right to have a European always occupy the role of managing director. The United States, for its part, has nearly 17% of voting power, giving it veto power.

Second, the IMF's performance during the Asian financial crisis of 1997, more than anything, torpedoed its credibility. The IMF helped bring about the crisis by pushing the Asian countries to eliminate capital controls and liberalize their financial sectors, promoting both the massive entry of speculative capital as well as its destabilizing exit at the slightest sign of crisis. The Fund then pushed governments to cut expenditures, on the theory that inflation was the problem, when it should have been pushing for greater government spending to counteract the collapse of the private sector. This pro-cyclical measure ended up accelerating the regional collapse into recession. Finally, the billions of dollars of IMF rescue funds went not to rescuing the collapsing economies but to compensate foreign financial institutions for their losses — a development that has become a textbook example of "moral hazard" or the encouragement of irresponsible lending behavior.

Thailand paid off the IMF in 2003 and declared its "financial independence." Brazil, Venezuela, and Argentina followed suit, and Indonesia also declared its intention to repay its debts as quickly as possible. Other countries likewise decided to stay away, preferring to build up their foreign exchange reserves to defend themselves against external developments rather than contract new IMF loans. This led to the IMF's budget crisis, for most of its income was from debt payments made by the bigger developing countries.

Partisans of the Fund say that the IMF now sees the merit of massive deficit spending and that, like Richard Nixon, it can now say, "we are all Keynesians now." Many critics do not agree. Eurodad, a non-governmental organization that monitors IMF loans, says that the Fund still attaches onerous conditions to loans to developing countries. Very recent IMF loans also still encourage financial and banking liberalization. And despite the current focus on fiscal stimulus — with some countries, like the United States, pushing for governments to raise their stimulus spending to at least 2% of GDP — the IMF still requires low income borrowers to keep their deficit spending to no more than 1% of GDP.

Finally, there is the question of whether or not the Fund knows what it's doing. One of the key factors discrediting the IMF has been its almost total inability to anticipate the brewing financial crisis. In concluding the 2007 Article IV consultation with the United States, the IMF board stated that "[t]he financial system has shown impressive resilience, including to recent difficulties in the subprime mortgage market." In short, the Fund hasn't only failed miserably in its policy prescriptions, but despite its supposedly top-flight stable of economists, it has drastically fallen short in its surveillance responsibilities.

However large the resources the G20 provide the IMF, there will be little international buy-in to a global stimulus program managed by the Fund.

The Way Forward

The North's response to the current crisis, which is to revive fossilized institutions, is reminiscent of Keynes' famous saying: "The difficulty lies not so much in developing new ideas as in escaping from old ones." So, in Keynes' spirit, let's try to identify ways of abandoning old ways of thinking.

First of all, since legitimacy is a very scarce commodity at this point, the UN secretary general and the UN General Assembly — rather than the G20 — should convoke a special session to design the new global multilateral order. A Commission of Experts on Reforms to the International Monetary and Financial System, set up by the president of the General Assembly and headed by Nobel Prize laureate Joseph Stiglitz, has already done the preparatory policy work for such a meeting. The meeting would be an inclusive process like the Bretton Woods Conference, and like Bretton Woods, it should be a working session lasting several weeks. One of the key outcomes might be the setting up of a representative forum such as the "Global Coordination Council" suggested by the Stiglitz Commission that would broadly coordinate global economic and financial reform.

Second, to immediately assist countries to deal with the crisis, the debts of developing countries to Northern institutions should be cancelled. Most of these debts, as the Jubilee movement reminds us, were contracted under onerous conditions and have already been paid many times over. Debt cancellation or a debt moratorium will allow developing countries access to greater resources and will have a greater stimulus effect than money channeled through the IMF.

Third, regional structures to deal with financial issues, including development finance, should be the centerpiece of the new architecture of new global governance, not another financial system where the countries of the North dominate centralized institutions like the IMF and monopolize resources and power. In East Asia, the "ASEAN Plus Three" Grouping, or "Chiang Mai Initiative," is a promising development that needs to be expanded, although it also needs to be made more accountable to the peoples of the region. In Latin America, several promising regional initiatives are already in progress, like the Bolivarian Alternative for the Americas and the Bank of the South. Any new global order must have socially accountable regional institutions as its pillars.

These are, of course, immediate steps to be made in the context of a longer-term, more fundamental and strategic reconfiguration of a global capitalist system now on the verge of collapsing. The current crisis is a grand opportunity to craft a new system that ends not just the failed system of neoliberal global governance but the Euro-American domination of the capitalist global economy, and put in its place a more decentralized, deglobalized, democratic post-capitalist order. Unless this more fundamental restructuring takes place, the global economy might not be worth bringing back to the surface.

About the Author: Walden Bello is president of the Freedom from Debt Coalition, senior analyst at the Bangkok-based Focus on the Global South, and professor of sociology at the University of the Philippines.

Globalisation: New Rulers of the World

Globalisation: New Rulers of the World

Global Institutions

Who are the multinationals?

A multinational (or 'transnational') corporation is a company which operates in more than one country, as opposed to a purely domestic business which has no operations abroad. There are now 63,000 multinational corporations in the world, and between them they are responsible for two thirds of global trade and 80% of investment. They are the economic force behind globalisation.

Multinational corporations act as the principal motors of globalisation. Officially, however, it is governments which formulate the international rules on trade and investment, and they do so in various forums.

Chief among these is the World Trade Organisation (WTO), which was set up as a result of the Uruguay Round of GATT negotiations. The WTO's role is to increase the liberalisation of trade through further negotiations, and to remove barriers currently standing in the way of free trade.

As such it is the prime mover of pro-globalisation policies, and the prime target of a wide variety of interest groups from concerned citizens to anti-globalisation protestors.

Although the WTO is the body officially responsible for increasing globalisation, two other institutions play an equally important role in ensuring compliance with the free trade agenda. The International Monetary Fund (IMF) and the World Bank provide developing countries with loans for development.

In order to qualify for the loans, however, the governments of those countries are required to carry out programmes of drastic economic reform drawn up for them by the IMF. These have been known for years as structural adjustment programmes (SAPs).

WTO protesters

World Trade Organisation (WTO)

The WTO came into being on 1 January 1995 as the successor organisation to the GATT negotiations which had governed international trade from 1948. The great majority of the world's countries are WTO members, and most of the rest (including China and Russia) have applied to join. Membership involves signing up to a package of free trade agreements covering anything from agriculture to intellectual property rights.

According to the WTO's own description of itself, "The WTO provides a rules-based multilateral trading system. All members have both rights and obligations. The alternative is bilateral commercial relations based on economic and political power - small countries are then at the mercy of the larger trading powers."

Yet critics point out that the WTO's decision making system already puts small countries at the mercy of the larger trading powers. The WTO makes decisions by 'consensus' among its members rather than by voting. In practice this means that the rich nations band together and negotiate policies which they then impose on other member states.

Many Third World delegates were excluded from the key trade negotiations at the WTO's November 1999 Ministerial Meeting in Seattle - even when the negotiations were about the future of their own countries. US negotiators then tried to bully them into accepting deals which had been worked out in their absence.

WTO protesters
Despite the massive international resistance which led to the collapse of the Seattle Ministerial, the WTO is still intent on launching a new round of trade negotiations at its Fourth Ministerial Meeting, to be held in Qatar during November 2001. Developing nations are calling on the WTO to hold back from launching a new trade round, so that poorer countries can have time to deal with the implications of the last one.

As emphasised by S Narayanan, India's ambassador to the WTO, the greatest challenge is to ensure that the WTO is indeed operated as a rules-based as opposed to a power-based system. "Unless the present inequalities are removed in the WTO," argues Narayanan, "I do not believe in a new round."

IMF/World Bank

Both the IMF and the World Bank were conceived at the Bretton Woods Conference of 1944 (and hence are often referred to as the Bretton Woods institutions). Each had a different role to play in the work of global reconstruction after the Second World War.

The IMF was tasked with maintaining the stability of the global financial system, while the World Bank (full name: the International Bank for Reconstruction and Development) was to help rebuild the economies of a world shattered by war.

By the time the debt crisis developed in the 1980s, the primary focus of both institutions had shifted to the countries of the developing world. Despite their different mandates, both the IMF and World Bank have long shared a common analysis of what developing countries need to do in order to qualify for development assistance. Their policies aim to integrate developing countries into the expanding global economy, but have a disastrous effect on the countries themselves.

Both institutions have admitted the harm which their policies have caused to the poor of the developing world, and in public both have committed themselves to the goal of alleviating poverty in the future. Yet they have signally failed to put their rhetoric into practice, still providing loans to governments on the same basis as before.

The World Bank still gives only 8% of its loans to primary education, health and water/sanitation projects, while 45% of its lending goes directly to multinational corporations bidding for lucrative contracts overseas.

Both the World Bank and IMF are now fighting rearguard actions to limit the damage to their reputations. Internal IMF papers released in March 2001 acknowledge that its restructuring of economies has often been more to do with political ideology than economics.

IMF HQ in Washington DC
The latest World Bank report on Africa admits that the economic conditions it has imposed on African nations have largely failed. The admissions vindicate international campaigners who have long called for the Bretton Woods institutions to be disbanded.

sexta-feira, 17 de abril de 2009

Stiglitz Says White House Ties to Wall Street Doom Bank Rescue

Stiglitz Says White House Ties to Wall Street Doom Bank Rescue

By Michael McKee and Matthew Benjamin

April 16 (Bloomberg) -- The Obama administration’s plan to fix the U.S. banking system is destined to fail because the programs have been designed to help Wall Street rather than create a viable financial system, Nobel Prize-winning economist Joseph Stiglitz said.

“All the ingredients they have so far are weak, and there are several missing ingredients,” Stiglitz said in an interview. The people who designed the plans are “either in the pocket of the banks or they’re incompetent.”

The Troubled Asset Relief Program, or TARP, isn’t large enough to recapitalize the banking system, and the administration hasn’t been direct in addressing that shortfall, he said. Stiglitz said there are conflicts of interest at the White House because some of Obama’s advisers have close ties to Wall Street.

“We don’t have enough money, they don’t want to go back to Congress, and they don’t want to do it in an open way and they don’t want to get control” of the banks, a set of constraints that will guarantee failure, Stiglitz said.

The return to taxpayers from the TARP is as low as 25 cents on the dollar, he said. “The bank restructuring has been an absolute mess.”

Rather than continually buying small stakes in banks, weaker banks should be put through a receivership where the shareholders of the banks are wiped out and the bondholders become the shareholders, using taxpayer money to keep the institutions functioning, he said.

Nobel Prize

Stiglitz, 66, won the Nobel in 2001 for showing that markets are inefficient when all parties in a transaction don’t have equal access to critical information, which is most of the time. His work is cited in more economic papers than that of any of his peers, according to a February ranking by Research Papers in Economics, an international database.

The Public-Private Investment Program, PPIP, designed to buy bad assets from banks, “is a really bad program,” Stiglitz said. It won’t accomplish the administration’s goal of establishing a price for illiquid assets clogging banks’ balance sheets, and instead will enrich investors while sticking taxpayers with huge losses.

“You’re really bailing out the shareholders and the bondholders,” he said. “Some of the people likely to be involved in this, like Pimco, are big bondholders,” he said, referring to Pacific Investment Management Co., a bond investment firm in Newport Beach, California.

Bigger Losses

Stiglitz said taxpayer losses are likely to be much larger than bank profits from the PPIP program even though Federal Deposit Insurance Corp. Chairman Sheila Bair has said the agency expects no losses.

“The statement from Sheila Bair that there’s no risk is absurd,” he said, because losses from the PPIP will be borne by the FDIC, which is funded by member banks.

“We’re going to be asking all the banks, including presumably some healthy banks, to pay for the losses of the bad banks,” Stiglitz said. “It’s a real redistribution and a tax on all American savers.”

Stiglitz was also concerned about the links between White House advisers and Wall Street. Hedge fund D.E. Shaw & Co. paid National Economic Council Director Lawrence Summers, a managing director of the firm, more than $5 million in salary and other compensation in the 16 months before he joined the administration. Treasury Secretary Timothy Geithner was president of the New York Federal Reserve Bank.

‘Revolving Door’

“America has had a revolving door. People go from Wall Street to Treasury and back to Wall Street,” he said. “Even if there is no quid pro quo, that is not the issue. The issue is the mindset.”

Stiglitz was head of the White House’s Council of Economic Advisers under President Bill Clinton before serving from 1997 to 2000 as chief economist at the World Bank. He resigned from that post in 2000 after repeatedly clashing with the White House over economic policies it supported at the International Monetary Fund. He is now a professor at Columbia University.

Stiglitz was also critical of Obama’s other economic rescue programs.

He called the $787 billion stimulus program necessary but “flawed” because too much spending comes after 2009, and because it devotes too much of the money to tax cuts “which aren’t likely to work very effectively.”

“It’s really a peculiar policy, I think,” he said.

Plan Deficient

The $75 billion mortgage relief program, meanwhile, doesn’t do enough to help Americans who can’t afford to make their monthly payments, he said. It doesn’t reduce principal, doesn’t make changes in bankruptcy law that would help people work out debts, and doesn’t change the incentive to simply stop making payments once a mortgage is greater than the value of a house.

Stiglitz said the Fed, while it’s done almost all it can to bring the country back from the worst recession since 1982, can’t revive the economy on its own.

Relying on low interest rates to help put a floor under housing prices is a variation on the policies that created the housing bubble in the first place, Stiglitz said.

“This is a strategy trying to recreate that bubble,” he said. “That’s not likely to provide a long run solution. It’s a solution that says let’s kick the can down the road a little bit.”

While the strategy might put a floor under housing prices, it won’t do anything to speed the recovery, he said. “It’s a recipe for Japanese-style malaise.”

quinta-feira, 16 de abril de 2009

Protest sweeps Europe

Freedom Socialist • Vol. 30, No. 2 • April-May 2009
Responding to the crisis
Protest sweeps Europe

by Megan Cornish

France, Jan. 29, 2009. Public and private workers mount a one-day strike with mass support. Schools, courts and transportation shut down in several cities.
Credit: EPA

urious resistance to paying for the current economic meltdown is spreading across Europe. In country after country, workers are marching, striking, occupying plants and sometimes rioting. Their message to an apprehensive ruling class is not subtle. "We refuse to pay the price of a catastrophe we did nothing to create."

Workers and students in Greece, Iceland, Latvia, Lithuania, Bulgaria, Britain, France, Germany, Italy, and Poland have all mounted major demonstrations and strikes.

So far, the outrage has been directed against heads of government who make massive bailouts to banks and businesses, while they abandon workers to layoffs, pay cuts, and social service cutbacks. But as the crisis inevitably deepens, working people may well move beyond revolt to challenging the profit system itself.

International Monetary Fund brings harm, not help. The financial train wreck in Europe has unfolded first and hardest in the less developed countries. Nations long subject economically to the major imperialist powers, and former workers states (which turned from nationalized economies back to capitalism in the 1990s) are hit worst today, because of the exploitative speculation of Western European and U.S. titans during the boom. When the bubble burst, currencies, real estate and stock markets crashed, causing massive job losses, mortgage defaults, and a severe drop in buying power.

Many countries turned to the International Monetary Fund (IMF) for money to keep their failing banks afloat.

Even as the economic collapse spread, the IMF carried on business as usual. This meant "bailouts" were given only on condition that governments impose austerity measures on workers. Countries were required to chop social services, public sector jobs and pensions to pay back the loans. In other words, the working class was expected to give up its very standard of living to enrich lenders — the banks of the rich nations.

IMF policies further cripple economies because impoverished working people cannot afford to buy the products that capitalism must sell to survive. So, the steady transfer of wealth from the poor to the rich that has been going on for decades continues. It is a main reason why this crisis is so severe. And "staying the course" will only prolong and deepen the depression.

Indignant workers say no. Explosions on the Continent began last December in Greece. Youth riots over the police murder of a student erupted just before a huge, already-planned one-day general strike sponsored by the main union federations. Strikers were protesting IMF-imposed privatizations, tax increases and pension "reform" (cutbacks).

Workers in Iceland turned out in the thousands for weeks during January, to oppose government-imposed belt-tightening, also mandated by the IMF. By the end of the month, the government had fallen.

Rioting broke out along with union-organized demonstrations in Latvia and Lithuania, on the western border of Russia. These too were against government-imposed tax raises and wage cuts demanded by the IMF. Near the end of February, the Latvian government likewise resigned.

At this writing, the Ukraine is considered a tinderbox about to explode over the same issues of IMF-imposed cuts that would come out of the hides of workers, while the loan money flows to banks.

In Ireland, hundreds of thousands demonstrated against social service cutbacks and job and pension cuts. Workers have occupied for several weeks a Waterford Crystal plant that laid them off when the company filed for bankruptcy. Hundreds of farmers demonstrated outside several meat factories to protest beef price cuts.

Workers in the major imperialist countries are also fighting back. In February, France's eight main unions called a one-day strike of up to two and a half million workers, which nearly 70 percent of the public supported. It marched against President Nicolas Sarkozy's investment centered "stimulus" plan. Private sector workers backed this vast mobilization of public workers. A second general strike was called for March 19.

During the February finance meeting of the "Group of Seven" industrial nations, tens of thousands of unionists and unemployed workers marched through Rome objecting to Italy's handling of the economy. It was part of a nationwide strike by Italy's largest union.

Germany has the strongest economy in Europe. But tens of thousands of autoworkers for Opel, owned by GM, demonstrated against threatened cutbacks that are part of Europe-wide layoffs. Public sector workers staged wildcat strikes over a long-standing wage dispute. And railway workers carried out scattered work stoppages for higher wages and better working hours, promising more strikes.

Labor's upsurge is very much from the grassroots.

Although the fight-back started in Europe, where workers had previously been somewhat insulated from the harshest effects of corporate globalization, revolt is spreading worldwide in poorer countries. Angry labor is on the move in Mexico, China, Russia, and Turkey.

The Caribbean island of Guadeloupe went on a general strike for 44 days and neighboring Martinique for a month against low wages, the high cost of living, and a deliberate policy of underdevelopment for these provinces, theoretically part of France. The strikes won wage increases, price cuts, a moratorium on foreclosures, evictions and utility cutoffs, and jobs for youth.

Youth in the forefront. Young people are among the hardest hit. High unemployment among the young is an international epidemic. Skyrocketing college student fees threaten education, which in many countries has been free or inexpensive for decades.

December's youth riots in Greece aroused sympathy demonstrations in Spain, Italy, France, Germany, Britain, and the Ukraine. January saw Britain-wide building occupations at more than 20 universities, described as the biggest sit-ins since the historic year of 1968. Students denounced Israel's war against Gaza and called for divestment from the arms trade. Later, demands broadened to abolishing the recently-imposed tuition fees.

The rise in militancy shows great potential for the labor movement, if older and young workers join forces.

Women are severely affected by swelling poverty and unemployment. Intensified domestic violence has become an added threat. They and their children most need the social services that are being cut everywhere, and they make up the bulk of the workforces that provide these services.

Yet, though active everywhere in Europe's eruptions, women's demands and organizing efforts are rarely covered in the media.

Immigrants under attack. The use of imported labor has exploded internationally, propelled by corporate globalization and free trade policies. Desperate workers are forced out of the poorest countries to look for work, often becoming an underpaid army of refugees in richer countries where big business cynically abuses them to drive down wages.

Under the pressure of today's economic disaster, these workers are especially vulnerable to scapegoating — a classic divide-and-conquer tactic of bosses and governments.

For example, hundreds of British energy workers, including sympathy strikers, went on wildcat strikes in February. They were fired up over an oil refinery decision to hire 400 Italian and Portuguese laborers at a time when local joblessness is skyrocketing.

The strikers angrily denied that their actions were xenophobic, saying that they were fighting against sub-contractors, not workers. Nevertheless, militant and radical unionists must take the lead in defending immigrants, or the whole class will be fatally weakened.

Time to turn left! Up to now, social rage has been mostly directed against government leaders rather than the system itself. But as disaster intensifies and the ruling class continues to feast while the people go hungry, workers are bound to draw broader conclusions. Capitalism is bankrupt, unable and unwilling to provide for the needs of all. When that awareness spreads, the Left needs to be ready to provide the know-how for building the socialist alternative.

Tax Haven Hypocrisies

What's the G20 Really Up To?

Tax Haven Hypocrisies


What are the Group of 20 countries really up to, with their grand plans against tax havens? France’s Nicolas Sarkozy had been particularly noisy on that score, hoping for tough sanctions against off shore centers intent on evading tax officials. Such moves are ostensibly based on an effort to cleanse the global financial system of this “scourge” – capital that moves in less than mysterious fashion to areas of lesser accountability and higher returns.

The G-20 countries, after their London labours, were meant to produce a “blacklist” of recalcitrant jurisdictions. But as Alexander Neubacher of the German magazine, Der Spiegel, rightly remarks, it must be one of the shortest blacklists in history. With remarkable deftness, a list that would have seemed impressively long seemed startlingly short. None, to be exact. Overnight, tax havens had, it would seem, ceased to exist. No country was willing to throw their hat in the ring – we are all saints in the financial system now.

The reasoning behind this sudden willingness to make such escape options for enterprising businesses and individuals disappear is clear enough. No country wants sanctions on the basis that they offer such services. The official communiqué of the G-20 London summit trumpeted with confidence that, “The era of banking secrecy is over” promising stern measures against countries not in accord with the “international standard for exchange of tax information.”

How did tax havens and associated countries miraculously purify themselves overnight? A solemn assurance to abide by the new rules was all that was required, an odd kind of gentleman’s agreement. Given the recent chapters in banking and financial irresponsibility, this provision is barely believable.

The G-20 gloss has also given the impression that tax havens and abuses are the stuff of small offshore states, exotic retreats with little or no regulation to speak off. Nothing similar could, it is implied, take place within the states of the OECD itself. Surely. This, is far from true. As the Economist pointed out last month (March 26), “The most egregious examples of banking secrecy, money laundering and tax fraud are found not in remote alpine valleys or on sunny tropical isles but in the backyards of the world’s biggest economies.”

The OECD has been busying itself with drawing up a blacklist of tax havens for sometime, an exercise that is weakened by what it leaves out. In fact, the OECD nations control a staggering 80 percent of the world’s “offshore” market, with many member states qualifying as havens themselves. Additionally, it has only focused on smaller jurisdictions, suggesting, perhaps, an anti-competitive bias in the whole exercise.

One key offender is, unsurprisingly, the United States, where reporting requirements in such states as Delaware, Wyoming and Nevada are skimpy. Indeed, political scientist Jason Sharman of Griffith University in Australia argues that the US is worse on such things as shell corporations than classic tax havens, more so than Liechtenstein or Somalia. The state of Nevada boasts, through its website, “limited reporting and disclosure requirements” along with rapid incorporation services. Shareholders do not need to be named, and information is rarely shared with the federal government. Given such services, the ratio of companies to people in that state is roughly one to six.

The new regime of strict bookkeeping and accountability must, as ever, take root within the OECD states before the tentacles are extended to jurisdictions of little consequence to the financial system. After all, the diligent evasion of financial regulations and rules, the result of an ideological mania, began there.

Binoy Kampmark was a Commonwealth Scholar at Selwyn College, University of Cambridge. Email: bkampmark@gmail.com

quarta-feira, 15 de abril de 2009

No Blank Check for the IMF

April 14, 2009

Congress Must Put Strings on the Money

No Blank Check for the IMF


This month's G20 meeting ended with one overriding tangible agreement: A commitment by the rich countries to provide more than $1 trillion in assistance (mostly in the form of loans) to developing countries.

This money is desperately needed. Although they had nothing to do with mortgage-backed securities or credit default swaps, developing countries are getting worst hit by the global economic meltdown. The World Bank conservatively estimates that 53 million more people will be trapped in deep poverty due to the crisis.

Fleeing foreign investors, plummeting remittance earnings, falling commodity prices and shrinking export markets are devastating developing countries, leaving them in dire need of infusions of hard currency.

So, the G20 move is to be applauded … except that the entire purpose of the G20's assistance may be thwarted by the institution through which the G20 countries chose to channel most of the money: the International Monetary Fund (IMF). (There's also the matter that the $1 trillion figure overstates what will actually be delivered, and includes previously pledged money.)

The logic of providing assistance to developing countries is to help them adopt expansionary policies in time of economic downturn. Yet the IMF is forcing countries in financial distress to pursue contractionary policies -- exactly the opposite of the stimulative policies carried out by the rich countries (and supported by the IMF, for the rich countries).

The good news is this: The U.S. Congress can fix the problem, if it imposes conditions on the IMF before it agrees to authorize the U.S. contributions to the Fund.

For three decades, the IMF has imposed "structural adjustment" on the developing world, using different names. In exchange for providing loans and, more importantly, a stamp of approval needed to access donor money, the IMF requires countries to adopt a series of market fundamentalist policies. These include deregulation (including of financial services), privatization, opening to foreign investment, orienting economies to export markets, removing protections for local producers growing food or manufacturing for the local market, removing labor rights protections, cutting government budgets, raising interest rates, and more.

Furious at being subject to IMF dictates, over the past decade almost all middle-income countries paid back their loans to the IMF and refused to have anything to do with the institution. Only African and other poor countries remained under IMF control.

The financial crisis has breathed new life into the IMF. Now headed by a new Managing Director, Dominique Strauss-Kahn, the Fund proclaims that it has changed. The days of harsh conditionality are over, it says.

That's a pronouncement to be applauded … except that the evidence of actual change in IMF policy is disturbingly hard to find.

The Fund's loans since September 2008 to countries rocked by the financial crisis almost uniformly require budget cuts, wage freezes, and interest rates hikes. These are exactly the opposite of the policies that make sense in recessionary conditions. They are exactly the opposite of the huge stimulus measures taken in the United States and other rich countries. They are the opposite of the interest rate reductions in the United States (now effectively at zero) and other rich countries.

In Ukraine, Georgia, Hungary, Iceland, Latvia, Pakistan, Serbia, Belarus and El Salvador, the IMF has told countries to cut government spending, an analysis by the Third World Network shows. This means less money for health, education and other vital priorities. Earlier this month, the IMF told Latvia -- where the economy is expected to contract 12 percent this year -- that its loans would be suspended until it further cuts spending.

The IMF has also instructed almost all of these countries to raise interest rates, the Third World Network analysis shows.

The IMF has ballyhooed a new, low-conditionality lending program, known as the Flexible Credit Line. But that is available only to "good performing" countries -- which will be the countries least in need of loans.

In some countries, there may be a modest loosening of Fund conditions. But the basic framework remains in place.

Putting on its best face at a meeting it convened in Tanzania on the impact of the financial crisis on Africa, the Fund said in a policy paper that a few poor countries might have some capacity to undertake small stimulative programs. "A few countries may have scope for discretionary fiscal easing to sustain aggregate demand depending on the availability of domestic and external financing." But even then: "All this must be done carefully so as not to crowd out the private sector through excessive domestic borrowing in the often thin financial markets."

But for countries in weak positions -- the vast majority -- "the scope for countercyclical fiscal policies is limited."

And, the Fund continues to counsel against capital controls, which could limit the ability of foreign funds to enter and flee a country easily. This is of central importance, because it is concern about a currency attack that is the rationale for why poor countries cannot undertake stimulative measures. Capital controls would be the obvious remedy. But since the Fund rules them out a priori, countries are helpless, and denied the right to use the same Keynesian tools available to the rich countries.

The opportunity to win real change at the IMF is this: The new money for the Fund's coffers has not yet arrived. The United States has pledged $100 billion of the $500 billion in new money that G20 countries said they would provide for the Fund (they also announced plans for an additional $250 billion through issuance of Special Drawing Rights, a kind of IMF currency).

Congress must approve the U.S. contribution. Congress can very reasonably attach conditions to any money for the IMF, so that IMF policies do not undermine the very purposes of providing money in the first place. The Congress can say, before the money goes to the IMF, the IMF must agree not to impose contractionary policies during times of recession, or at least provide a reasoned, quantitative justification for any such policies. The Congress can say, before the money goes to the IMF, that the IMF must exempt health and education spending from any government budget caps. The Congress can say, before the money goes to the IMF, that parliaments must be given the authority to approve any deals negotiated between the IMF and finance ministries.

People are growing a little tired of seeing hundreds of billions of dollars allocated without conditions and accountability. Congress must not sign a blank check for the IMF.

Robert Weissman is editor of the Washington, D.C.-based Multinational Monitor and director of Essential Action.

terça-feira, 14 de abril de 2009

Who caused the great crash of 2008?

Who caused the great crash of 2008?

Lee Sustar analyzes the roots of the worst economic crisis since the Great Depression--and shows why Marxism offers the best way of understanding what went wrong.

Clockwise from top left: Angelo Mozilo, George Bush, Henry Paulson, Phil Gramm, Robert Rubin, Alan GreenspanClockwise from top left: Angelo Mozilo, George Bush, Henry Paulson, Phil Gramm, Robert Rubin, Alan Greenspan

THERE ARE plenty of people who should be held accountable for turning an ordinary recession that began a year ago into a global catastrophe.

Topping the list is former Federal Reserve Chair Alan Greenspan, who fed the bubble by keeping interest rates at rock-bottom levels, urging home buyers to take on adjustable-rate home loans and refusing to use the Fed's powers to oversee a mortgage industry rife with fraud.

Then there are the former Treasury Secretaries from the Clinton administration, Robert Rubin and Larry Summers, who teamed up with Greenspan to block regulation of so-called derivatives--complex financial instruments based on underlying assets like mortgages.

Backing them up was former Sen. Phil Gramm, the Texas Republican who, as chair of the Senate Banking Committee, pushed through legislation repealing the Depression-era Glass-Steagall Act that restricted commercial banks from entering the high-stakes financial activities of investment banks.

Former President Bill Clinton, who signed Gramm's bill into law, bears responsibility as well.

This Clinton-era deregulation opened the way for operators like former Countrywide Financial CEO Angelo Mozilo, whose company pushed sub-prime loans on people who qualified for better deals.

What else to read

For analysis of the ongoing economic crisis, read "Capitalism's worst crisis since the 1930s" by Joel Geier in the November–December 2008 International Socialist Review. In the same issue, see "A system on the edge" by Lee Sustar.

Also see Geier's previous article "More than a recession: An economic model unravels" from issue 58.

The best introduction to Marxism remains The Communist Manifesto by Karl Marx and Frederick Engels.

Countrywide paid mortgage brokers a higher commission on high-interest sub-prime mortgages, since those mortgages were more profitable to sell to Wall Street investment banks--like the now-bankrupt Lehman Brothers, where CEO Dick Fuld pushed the company into the obscure but highly profitable market for collateralized debt obligations (CDOs), which packaged together large numbers of prime and sub-prime loans as investments for Wall Street's biggest players.

And there's Robert Rubin--again. This time, as chair of Citigroup's executive committee, Rubin egged on executives as they plunged the bank ever deeper into the market for CDOs. "According to current and former colleagues, [Rubin] believed that Citigroup was falling behind rivals like Morgan Stanley and Goldman Sachs, and he pushed to bulk up the bank's high-growth fixed-income [bond] trading, including the CDO business," the New York Times reported.

Those assets turned toxic with the housing bust and resulting credit squeeze. Now, Citigroup is the latest financial institution to be bailed out by the Bush administration, with a rescue package that will put $45 billion of government money into Citigroup--and put taxpayers on the hook to insure $306 billion in bad assets.

But back at the start of the decade, with the table set by Clinton's economic policies, Wall Street could gorge itself on an ever-expanding financial menu, as the new Bush administration looked on approvingly.

Even when the financial crisis first broke out in the summer of 2007, Bush and Treasury Secretary Henry Paulson insisted that the problem would be "contained" in the sub-prime mortgage market. It was only after the failure of the investment bank Bear Stearns in March 2008 that Paulson and Federal Reserve Chair Ben Bernanke lurched into action with an array of new lending programs and multibillion-dollar bailouts of Fannie Mae, Freddie Mac, AIG and, now, Citigroup.

According to Bloomberg news service, taxpayers are on the hook (so far) for an astonishing $7.7 trillion--a figure equivalent to more than half the total U.S. economic output, or gross domestic product, for 2007.

But despite this immense sum, the crisis has gotten worse--not least because free-market ideologues like Bush and Paulson delayed taking decisive action before carrying out its series of confused and contradictory "rescues."

So yes, the people who presided over this crisis should be held accountable. But the global scale of the crisis points to a far more fundamental problem--the crisis-prone nature of capitalism itself.

With even the most pro-capitalist analysts and commentators panicked about the prospect of a repeat of the Great Depression, it's important for those on the left to revisit the work of capitalism's first great scientific critic and revolutionary opponent--Karl Marx.

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TO UNDERSTAND the dynamics of today's crisis, it's helpful to look briefly at what Marx's identified as contradictions at the core of the capitalist system.

Marx stressed that a key distinguishing feature of capitalism is its reliance on wage labor. Unlike previous societies, in which most production was carried out by slaves, peasants or small crafts producers, capitalist production relies on workers who have nothing but their labor power to sell to the boss.

Of course, independent producers and small farmers still exist. But the system as a whole is dominated by big capitalists, who own the factories, offices and other "means of production," to use Marx's term. Where the output of pre-capitalist societies was primarily geared to creating "use values"--items that met an immediate human need--capitalists produce for sale on the market, or for "exchange value."

Under capitalism, competing employers command the labor power of workers, who are "free" to work--or starve.

What gives capitalism its dynamism is that workers' labor adds value to the commodities they produce, by transforming raw materials into something that can be sold on the market. The value of a given commodity, Marx argued, is determined by the amount of labor time necessary to produce it. And in this process, Marx said, "surplus value" is created.

What is surplus value? Capitalists can pay workers wages that are sufficient (in boom times, anyway) to cover the costs of food, housing, raising children, etc., and still have a surplus left over when commodities are sold. Essentially, workers are paid for only part of their workday. This is true whether the boss appears to the workers as a "good" or "bad" one.

These basic relationships give capitalism both its dynamism and its propensity to crisis, Marx argued.

In order to compete with one another, rival capitalists are compelled to maximize the productivity of labor--that is, to get more commodities produced from the same expenditure on labor power. They can try to do so by forcing workers to work harder and longer--but the physical limits of (if not resistance by) workers and the length of the day restrict how far this can go.

Real breakthroughs in productivity can only come through the use of labor-saving technology that allows workers to produce the same commodity in less time. Thus, Marx described capitalism as constantly revolutionizing the means of production. Capitalists who invest in technological innovations win out over rivals who are unwilling or unable to do so.

For capitalists, Marx wrote, the motto is, "Accumulate, accumulate! That is Moses and the prophets!...Therefore, save, save, i.e, reconvert the greatest possible portion of surplus value, or surplus product into capital! Accumulation for accumulation's sake, production for production's sake..."

This drive to technological change is the reason why industrial capitalism could start to transform the world in a few decades.

However, the rapid accumulation of capital created a boom-bust cycle. Investment would pour into industries that seemed to be the most profitable. As capitalist enterprises grew larger, they increasingly relied on credit to carry out the years-long investments needed to develop, say, a new steel mill. Since all these investments take place without any overall coordination, there's an inevitable disconnection between production and demand--and when the gap reaches a certain point, the boom turns into a bust.

In Volume III of Capital, Marx described the perverse nature of capitalist crisis this way:

The contradiction of the capitalist mode of production...lies precisely in its tendency towards an absolute development of the productive forces, which continually come into conflict with the specific conditions of production in which capital moves, and alone can move. There are not too many necessities of life produced, in proportion to the existing population. Quite the reverse. Too little is produced to decently and humanely satisfy the wants of the great mass.

This "crisis of overproduction" is the defining feature of a capitalist crisis, according to Marx. Factories are shuttered even as workers look for work. People go hungry while food sits unsold in warehouses or rots in the fields. Homes stand empty although millions lack an affordable place to live.

In 1880, Marx's collaborator Frederick Engels described capitalism's periodic crises in words that could have been written last week:

Commerce is at a standstill, the markets are glutted, products accumulate, as multitudinous as they are unsaleable, hard cash disappears, credit vanishes, factories are closed, the mass of the workers are in want of the means of subsistence, because they have produced too much of the means of subsistence; bankruptcy follows upon bankruptcy, execution upon execution.

The stagnation lasts for years; productive forces and products are wasted and destroyed wholesale, until the accumulated mass of commodities finally filter off, more or less depreciated in value, until production and exchange gradually begin to move again.

Little by little, the pace quickens. It becomes a trot. The industrial trot breaks into a canter, the canter in turn grows into the headlong gallop of a perfect steeplechase of industry, commercial credit and speculation, which finally, after breakneck leaps, ends where it began--in the ditch of a crisis. And so over and over again.

Beyond this destructive boom-slump cycle, capitalism had an even more fundamental tendency toward crisis, Marx argued.

Because capitalists are under constant pressure to invest in ever-greater amounts of machinery, there is a long-term tendency for the rate of profit to fall. The reason: because labor is the source of the surplus value that capitalists keep as profit, a rising proportion of machinery to workers creates a downward pressure on the rate of profit over the long run.

That, however, didn't mean that Marx expected capitalism to collapse of its own accord as profit rates dried up. He identified several countervailing influences--and pointed out that capitalist crises actually clear the way for a revival of growth by bankrupting unproductive capitalists and devaluing capital in general.

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BY THE early 20th century, capital had become concentrated in ever-larger business entities and centralized into fewer ones. These monopolized companies, the forerunners of modern corporations, were increasingly intertwined in their home nation-states.

Military and economic competition between rival countries gave rise to a new, imperialist stage of capitalism and the slaughter of the First World War. Rather than rival capitalists trying to put one another out of business and take over their markets, competing imperial states sought to destroy the economic capacity of their rivals.

The war didn't overcome the underlying economic problems of the world system, however. The boom of the 1920s gave way to capitalism's biggest slump ever--the Great Depression of the 1930s.

The Great Depression confirmed Marxist crisis theory in all its essentials. It was only overcome through another imperialist slaughter--the Second World War. So as the war drew to a close, the allied powers led by the U.S. created a new, American-dominated world economic order (excluding the Eastern bloc controlled by the USSR).

Unlike the prewar era, financial services and capital flows were strictly regulated. But capitalism nevertheless boomed as never before, and the depression was seen as an aberration, the result of poor political leadership. Capitalism, according to its apologists, had overcome its contradictions.

The reality was different. As the late British Marxist writer Mike Kidron explained, the Cold War had given rise to a permanent arms economy that gave the system a constant stimulus. But because these enormously expensive nuclear weapons were never used, arms spending acted as a kind of safety valve for the system: It drained capital away from investment in new machinery that would have increased the tendency of the rate of profit to fall.

By the mid-1970s, however, the picture had changed. Profit rates had fallen sharply across the advanced industrial countries as a revitalized Germany and Japan, the losers in the Second World War, were able to compete with the U.S. Efforts to stimulate the economy led to a combination of inflation and slow growth, known as "stagflation." Marx's theory of the tendency of the rate of profit to fall was validated once more.

The capitalist solution to this crisis was to go back to market fundamentals. Economists like Milton Friedman, for decades seen as a right-wing crank, were suddenly promoted as sages for preaching deregulation of business, privatization of government services and "flexible" labor policies.

Politicians like Ronald Reagan in the U.S. and Margaret Thatcher in Britain turned Friedman's ideas into policies by smashing unions, slashing government spending and turning finance capital loose. The Clinton administration shaved off some of the rough edges of these policies, but basically consolidated what is now known as "neoliberalism."

For U.S. capitalists, neoliberalism was a spectacular success. The deep recession in 1982 gave rise to a boom, and following the relatively mild (for capitalists) recession of 1991, U.S. GDP increased by 49 percent until the slump of 2001. Total non-agricultural employment grew by 22.5 percent in the same period. By the late 1990s, U.S. profit rates approached those of the late 1960s at the peak of the long boom.

Bill Clinton hailed this as the "miracle economy," and once again, capitalist ideologues proclaimed that capitalism had finally cured itself of the tendency to crisis.

The dot-com stock market bust of 2000 and the recession of 2001 threatened to undo that success. The number of corporate bankruptcies soared--with Enron and WorldCom among the highest-profile casualties. In response, Federal Reserve Chair Greenspan cut interest rates to effectively zero to stimulate the economy, repeating measures he had taken in the late 1990s when the East Asian financial crisis threatened to sweep the world.

For business, Greenspan's rock-bottom interest rates allowed them to clean up their balance sheets and begin investing again--but not in the U.S. Even as the economic expansion began in 2002, job growth remained miserable and wages flat--or worse. According to the Economic Policy Institute, real income for the median family fell by 1.1 percent between 2000 and 2006--and wages remained flat during the 2002-2007 expansion.

For the wealthy, however, the 2000s saw continued dramatic increases in income. Between 1989 and 2006, the wealthiest 10 percent got more than 90 percent of all income growth. The richest 1 percent saw their income increase 203.7 percent, while the wealthiest 0.1 percent saw an increase of 425 percent.

By contrast, if workers wanted to maintain, let alone improve, their standard of living, they had to take on debt. Personal debt increased by 159.1 percent since 1997, from about $5.5 trillion to $14.4 trillion. In that same period, the ratio of debt to disposable income increased from 93.4 percent to 139 percent.

By 2006, the average debt owed by every U.S. adult was about $52,000, compared to average yearly pay of less than $31,000 for non-supervisory production workers. Buying a house that would supposedly keep increasing in value seemed like a way out of this dilemma--and the likes of Angelo Mozilo and Robert Rubin engineered the financial system to take full advantage of working people.

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WITH CONSUMER demand sustained by debt, the U.S. economy was able to maintain its role as the importer of last resort into the 2000s.

For China, the prospect of an endlessly expanding U.S. market was the basis for crash investment programs to build steel mills, airports, roads and factories of all sorts. China's industrial revolution, in turn, spurred demand for oil and other raw materials, particularly from Latin America. Japanese and German companies profited by selling machine tools and other goods to rapidly expanding Chinese capitalism. By early 2007, the world economy was growing at its fastest rate in 30 years.

Fueling this expansion was a vast extension of credit from both the $10 trillion traditional banking system and an unregulated shadow banking system of equal size.

But as the U.S. Federal Reserve Bank began to raise interest rates and the economy slowed, the dominoes of debt began to fall. What began in the U.S. sub-prime mortgage market became a global financial credit crunch, as capitalists were forced to reckon with the fact that assets of all types were overvalued.

Here, too, Marx's analysis of capitalism is validated. Credit, he argued, may postpone a capitalist crisis, but it cannot overcome the contradictions created by capitalism's drive toward production for its own sake. "The means--unconditional development of the productive forces of society--come continually into conflict with the limited purpose, the self-expansion of the existing capital," he wrote.

Thus, at some point, a crisis of "overproduction" is inevitable, as capitalists can no longer realize their profits through the sale of goods on the market. At that point, financial instruments of various sorts are depreciated, as are elements of fixed capital.

Next, Marx wrote, "[t]he chain of payment obligations due at specific dates is broken in a hundred places. The confusion is augmented by the attendant collapse of the credit system, which develops simultaneously with capital, and leads to violent and acute crises, to sudden and forcible depreciations, to the actual stagnation and disruption of the process of reproduction, and thus to a real falling off in reproduction."

Such periodic crises have not always been catastrophic for the capitalist system. Today, however, a prolonged slump seems inescapable--both because the U.S. can no longer drive the world economy through debt-financed consumption, and because the world financial system is staggering under the weight of bad debt.

The risk of such a long and deep recession has forced policymakers in the U.S. and Europe to toss free-market orthodoxy aside to try to find a way out. But as Marx showed, capitalism will inevitably generate crises until it is replaced with a socialist alternative.

domingo, 12 de abril de 2009

What is the WTO?

What is the WTO?

The World Trade Organisation was established in 1995. It includes 145 countries and is headquartered in Geneva, Switzerland. The WTO has been used to push an expansive array of policies on trade, investment and deregulation that exacerbate the inequality between the North and the South, and among the rich and poor within countries. The WTO enforces some twenty different trade agreements, including the General Agreement on Trade in Services (GATS), the Agreement on Agriculture (AoA) and Trade-Related Intellectual Property Rights (TRIPS).

The powerful industrialized countries within the WTO, as well as multinational corporations, are pushing for a broad expansion of the WTO’s scope to include even more areas of our daily lives and governments’ operations. At the next WTO Ministerial, scheduled for September 10-14, 2003 in Cancun, Mexico, there will be strong pressure on developing countries to accept the launch of negotiations on the so-called “new issues�: government procurement, investment, competition and trade facilitation. Large-scale liberalization of economies in these areas will force developing countries to relinquish many of the economic development tools that industrialized countries used to build their economies and create jobs. Furthermore, existing provisions of the WTO—as well as ones currently being negotiated, would effectively lock in the so-called “structural adjustment programs� of the World Bank and International Monetary Fund (IMF) permanently.

The WTO is inherently undemocratic. Its trade tribunals, working behind closed doors, have ruled against a stunning array of national health and safety, labor, human rights and environmental laws, which have been directly challenged as trade barriers by governments acting on behalf of their corporate clients. National policies and laws found to violate WTO rules must be eliminated or changed or else the violating country faces perpetual trade sanctions that can be in the millions of dollars. Since the WTO’s inception in 1995, the vast majority of rulings in trade disputes between member nations have favored powerful industrialized countries. Consequently, many countries, particularly developing countries, feel enormous pressure to weaken their public interest policies whenever a WTO challenge is threatened in order to avoid costly sanctions.

The official website of the WTO is wto.org.