Thursday, December 2, 2010

WikiLeaks Expose US Duplicity, Zardari Govt's Complicity; Fuel Popular Anger In Pakistan

Diplomatic cables from the US Embassy in Islamabad released by WikiLeaks have exposed the criminal and duplicitous role played by both Washington and the Pakistani government, fueling popular anger against US operations in the country.
The Pakistani People’s Party coalition government led by President Asif Ali Zardari has been among the most vociferous in its denunciations of WikiLeaks’ release of the classified US documents, and for good reason.
Pakistan's Foreign Ministry described WikiLeaks as “irresponsible” in a statement issued Monday. A senior diplomat quoted in the Washington Post said that Pakistan was frustrated “over how the world’s sole superpower can’t keep its secrets and confidences and how that makes it so much more difficult to be America’s friend.”
For his part, the US ambassador to Pakistan, Cameron Munter, drafted a newspaper column published in both English and Urdu, which declared, “The United States deeply regrets the disclosure of any information that was intended to be confidential. And we condemn it.”
The cables underscore the extremely tenuous relationship between Washington and a government that is supposedly a principal ally in its “war on terrorism.” The cables indicate US mistrust and even contempt for Zardari and even greater suspicion toward the military and its secretive intelligence arm, the ISI.
A cable written last February by then US Ambassador Anne Patterson described Zardari and the civilian government as “weak, ineffectual and corrupt.” She added, “Domestic politics is dominated by uncertainty about the fate of President Zardari.”
Indeed, another cable cites a discussion between US Vice President Joe Biden and Zardari in early 2009 in which the Pakistani president expressed his concern that the “ISI director and [Gen. Ashfaq Parvez] Kayani will take me out.”
The US government apparently knew more than it was sharing with Zardari. Another cable describes a conversation held during the same period in which General Kayani told Ambassador Patterson that he “might, however reluctantly,” move to force Zardari from office.
Washington, which has over the years pursued its policies in Pakistan by backing a series of repressive military dictatorships, was apparently ambivalent over the threatened coup, viewing Zardari as a more pliant servant of US interests, while recognizing that the real power in Pakistan remained in the hands of the military.
Many of the cables expose Washington and Islamabad as partners in carrying out bloody crimes and deception against the Pakistani people.
As the US has stepped up its military operations in the region, dubbing its intervention the “Afpak war,” the Zardari government has attempted to assuage popular anger by posing as an opponent of US violations of Pakistani sovereignty.
This has particularly been the case in relation to the drone missile attacks carried out by remotely controlled unmanned CIA aircraft in the Federally Administered Tribal Areas (FATA) bordering Afghanistan.
The Obama administration has sharply escalated these attacks, producing an ever-growing number of civilian casualties. Pakistani authorities acknowledged the deaths of some 700 civilians from drone missiles last year alone.
While Pakistani officials have routinely condemned the attacks, the cables make explicit the green light that the authorities in Islamabad gave for the CIA’s slaughter from the air.
One of these cables contains a request from an Interior Ministry official, Rehman Malik, that the US “hold off” the attacks until after the Pakistani military completed an operation in the FATA region of Bajaur.
Another cites an even more cynical statement from the country’s prime minister, Yousaf Raza Gilani, who announced at a meeting, “I don’t care if they do it as long as they get the right people. We’ll protest in the National Assembly and then ignore it.”
It was widely understood that this was the real position of the Pakistani government. But having it produced verbatim in the form of a US diplomatic cable can only further inflame the hatred that millions feel for both the politicians in Islamabad and their patrons in Washington.
The cables also confirm that US Special Operations troops are participating in combat in the tribal regions.
Formally, the Pakistani government has declared its unyielding opposition to any US ground troops fighting on Pakistani soil. But, as the cables make clear, it agreed to it in practice.
As the Guardian newspaper, citing the embassy cables, reports, “Small teams of US special forces have been secretly embedded with Pakistani military forces in the tribal belt, helping to hunt down Taliban and al-Qaeda fighters and co-ordinate drone attacks.”
Cables from US representatives in Islamabad boasted of the Pakistani government’s agreement to allow the US counterinsurgency troops to operate inside the country, describing it as a “sea change in thinking” on the part of the country’s military. The embassy cautioned that the agreement had to remain secret, as it would be deeply unpopular with the Pakistani people, and its exposure could force the Pakistani military to shift its position.
Just as significant are cables that prove that the Obama administration deliberately covered up for war crimes by the Pakistani military in the course of a military offensive that Washington had demanded be undertaken against the Taliban in the tribal region.
The US ambassador, Anne Patterson, wrote to Washington in September 2009, warning that “A growing body of evidence is lending credence to allegations of human rights abuses by Pakistan security forces.”
She spelled out that members of Pakistan’s regular army and the paramilitary frontier corps were responsible for summarily executing many hundreds of people detained in the course of the offensive. She added that as many as 5,000 “terrorist detainees” were at risk.
In response, Patterson proposed that Washington could offer human rights training and promote prison reform. However, she steadfastly opposed taking any actions to actually stop the killings.
The embassy “fully recognizes that there is little that USG [US government] can do to change the culture of revenge that underlies many of the extra-judicial killings,” she wrote.
Patterson added, “Much of this is dependent on goodwill … that can easily erode if too much public criticism from USG officials over these incidents is forthcoming. For this reason, post advises that we avoid comment … and that efforts remain focused on dialogue and the assistance strategy.”
Under US law, the government is required to cut off assistance to foreign militaries found to have engaged in human rights violations.
The Obama administration followed the ambassador’s advice and covered up for the crimes of its ally as long as it could. Only last month, after a video surfaced providing incontrovertible evidence of summary executions of prisoners, did the US government announce plans to cut off aid to a few Pakistani military units.
This record of complicity and conspiracy notwithstanding, the cables also underscore the deep distrust that Washington feels for its client state in Pakistan.
This particularly emerges in relation to its nuclear program, which has been the focus of most of the media’s coverage of the Pakistan cables.
One cable sent by the US embassy to Richard Holbrooke, Obama’s special envoy to Pakistan and Afghanistan, expresses concerns that “someone working in the government” at Pakistan’s nuclear facilities “could gradually smuggle enough material out to make a weapon” to be used by terrorists.
Other cables expressed frustration over the Pakistani government’s stalling on an agreement reached with the US to remove unused fuel from a research reactor. It cited concerns by the Pakistani Foreign Ministry that if the plan became public the media “would portray it as the United States taking Pakistan’s nuclear weapons.”
While no doubt Pakistan’s ruling elite and military have built up a nuclear capacity for their own reactionary and predatory interests, it has also been pushed into an arms race largely by Washington’s own policy in the region. In particular, the US has sought to strengthen Pakistan’s regional rival, India, as a counterweight to China, giving New Delhi a pass for its defiance of the world nuclear regulatory regime and providing it with aid that allows it to turn its nuclear program to the buildup of weapons.
Similarly, a number of the cables express frustration over the Pakistani military’s refusal to undertake an offensive against Afghan armed resistance groups taking refuge in Pakistan, particularly the Haqqani network and forces loyal to Gulbaddin Hekmatyar.
A cable written by Ambassador Patterson in February of last year praises Zardari for agreeing on the need to jointly combat the insurgency on the Afghanistan-Pakistan border. She adds, however, “The military and the ISI have not yet made that leap; they still view India as their principal threat and Afghanistan as strategic depth in a possible conflict with India. They continue to provide overt or tacit support for proxy forces (including the Haqqani group, Commander Nazir, Gulbaddin Hekmatyar, and Lashkar-e-Taiba) as a foreign policy tool.”
Under conditions in which Washington has poured billions of dollars worth of military aid into Pakistan, Patterson warned, “There is no chance that Pakistan will view enhanced assistance levels in any field as sufficient compensation for abandoning support for these groups.”
The Taliban came to power in the 1990s with Pakistan’s support, and Islamabad resists cutting off its ties to the movement out of fear that India will fill the vacuum, effectively encircling Pakistan.
The cables only underscore how much the US war, aimed at asserting hegemony over Central Asia’s vast energy resources, has only succeeded in destabilizing the entire region and deepening potentially catastrophic tensions.
Thank you Bill Van Auken/WSWS

Monday, November 29, 2010

New WikiLeaks Documents Expose US Foreign Policy Conspiracies

The batch of 250,000 US classified documents released by WikiLeaks to several news outlets, some of whose content was made public Sunday, sheds new light on the sordid nature of American imperialist intrigue and conspiracy around the globe. Indeed, the Guardian and the New York Times reports are revealing.

The leaked material consists of classified cables from US embassies, some dispatched as recently as early 2010. The cables, most of which date from 2007-2010, contain US officials’ comments on foreign governments and leaders and speculation about the activities and maneuvers of the latter, as well as details about American foreign policy operations.

In a revelation that should surprise no one, the US State Department and American diplomacy in general turn out to be a vast nest of spies.

The Guardian explains that the WikiLeaks documents “reveal how the US uses its embassies as part of a global espionage network, with diplomats tasked to obtain not just information from the people they meet, but personal details, such as frequent flyer numbers, credit card details and even DNA material.

“Classified ‘human intelligence directives’ issued in the name of Hillary Clinton or her predecessor, Condoleezza Rice, instruct officials to gather information on military installations, weapons markings, vehicle details of political leaders as well as iris scans, fingerprints and DNA.”

The British newspaper reports that Washington’s “most controversial target was the leadership of the United Nations.” One of the leaked directives requests “the specification of telecoms and IT systems used by top UN officials and their staff and details of ‘private VIP networks used for official communication, to include upgrades, security measures, passwords, personal encryption keys.’” In response, a UN spokesperson discreetly commented, “We are aware of the reports.”

 Among other revelations: Officials from numerous Arab regimes have repeatedly urged the US to bomb Iran and destroy its nuclear program. TheFinancial Times, based on the documents, reports: “The Saudi ambassador to Washington … spoke to General David Petraeus, then incoming central command chief, in April 2008 about King Abdullah’s ‘frequent exhortations to the US to attack Iran.’”

The reactionary Arab states “fear a nuclear-armed Iran would make it the undisputed superpower in the region, particularly at a time when the power of their own ally, the US, has receded.”

Moreover, notes the Financial Times, “The leaks will reinforce suspicions that Israel is considering an attack on Iranian facilities. According to reports of the cables, Ehud Barak, the defence minister, warned in 2009 that the world had six to 18 months to deal with Iran’s nuclear programme.”

The new WikiLeaks expos√© also reveals that the US has been trying since 2007 “to remove from a Pakistani research reactor highly enriched uranium that American officials fear could be diverted for use in an illicit nuclear device.” (New York Times) For its part, the Pakistani regime is fearful that if the media were to get word of the fuel removal, they would portray it as the US taking Pakistan’s nuclear weapons.

The New York Times reports this gem as well: “When American diplomats pressed other countries to resettle detainees, they became reluctant players in a State Department version of ‘Let’s Make a Deal.’ Slovenia was told to take a prisoner if it wanted to meet with President Obama, while the island nation of Kiribati was offered incentives worth millions of dollars to take in Chinese Muslim detainees, cables from diplomats recounted. The Americans, meanwhile, suggested that accepting more prisoners would be ‘a low-cost way for Belgium to attain prominence in Europe.’”

US officials were thoroughly aware of the deep-going corruption of the Afghan government, the documents reveal. The Timesreports that United Arab Emirates officials discovered that Afghan vice president Ahmed Zia Massoud was carrying $52 million in cash when he tried to enter that country last year. According to one of the cables, Massoud “was ultimately allowed to keep [the money] without revealing [its] origin or destination.”

The US government is outraged that the world’s population is getting a glimpse into its dirty operations. In a deeply hypocritical statement, the White House issued a statement Sunday denouncing WikiLeaks for its “reckless and dangerous action.” The press release claimed that WikiLeaks had “put at risk not only the cause of human rights but also the lives and work of these individuals [named in the documents].”

On the eve of the new release of documents, the US State Department wrote WikiLeaks a threatening letter, claiming that making the material publicly available was illegal and would “place at risk the lives of countless individuals.” The November 28 letter also asserted, without providing any proof, that the leaks would “place at risk on-going military operations,” and “place at risk on-going cooperation between countries.”

On Sunday afternoon, WikiLeaks reported that its web site had been compromised. “We are currently under a mass distributed denial of service attack,” WikiLeaks said on its Twitter page. A DDOS attack is an attempt to make a given web site unavailable to the public, usually by flooding it with requests for data.

The State Department letter, signed by legal adviser Harold Hongju Koh, was addressed to WikiLeaks co-founder Julian Assange and the latter’s lawyer, Jennifer Robinson. Assange and Robinson had written to Louis B. Susman, US ambassador to the United Kingdom, asking which individuals would be put at risk by the new disclosures and apparently offering limited redactions.

In his reply, Koh asserted that “We will not engage in a negotiation regarding the further release or dissemination of illegally obtained U.S. Government classified materials.” The State Department official’s letter has two indignant references to the “violation of U.S. law” involved in the documents being provided to WikiLeaks and that organization’s holding and publishing them.

The analogy hardly does justice to the present situation, but Koh’s effort might be likened to a Mafia hit man writing to an eyewitness of a mob slaying and complaining bitterly about his or her upcoming testimony. The US actions in Iraq and Afghanistan are criminal and murderous on a massive scale. 

WikiLeaks not only has the legal right, it has the moral obligation to do anything in its power to disrupt these bloody operations. It is to the everlasting shame of the mainstream media that it has not exerted any of its efforts along the same lines.

Washington attempted to weaken the impact of the WikiLeaks material by leaking its own story in regard to the material in the middle of last week. US officials and diplomats, including Secretary of State Hilary Clinton, have been scurrying about the past few days, attempting to alert and reassure some of the governments and leaders referred to in the documents.

By video link from an undisclosed location on Sunday, Assange told reporters that “The material that we are about to release covers essentially every major issue in every country.” The WikiLeaks founder faced trumped up sexual assault charges in Sweden.

Among the apparent revelations not yet to appear in the Guardian or the Times, which are releasing the material piecemeal, is that the US has for years supported the Kurdistan Workers Party (PKK) in Turkey, an organization that both Washington and Ankara have placed on their lists of “terrorist” groups.

Deborah Guido, spokeswoman for the US embassy in Ankara, told the media that the American government’s policy “has never been nor will ever be in support of the PKK. Anything that implies otherwise is nonsense.” Turkish commentators were more inclined to believe the report.

Mehmet Yegin, an expert at the Center for American Studies at the USAK research organization, suggested, according to the English-language version of the Turkish newspaper Hurriyet, “that U.S. support for the PKK could have been a result of Turkey’s decision in 2003 not to allow the United States to enter Iraq through Turkish soil.”

Some of the more sensitive material yet to be published involves the US-UK relationship. The US diplomatic cables reportedly include scathing remarks about British operations in Afghanistan and Prime Minister David Cameron. The Daily Mail in Britain reports: “The documents include highly damaging and embarrassing communiques from U.S. embassies around the world, especially from London--revealing the truth behind the so-called ‘special relationship’ between the U.K. and the U.S.

“The U.S. ambassador to London made an unprecedented personal visit to Downing Street [the British prime minister’s residence] to warn that whistleblower website WikiLeaks was about to publish secret assessments of what Washington really thinks of Britain.”

The global diplomatic crisis triggered by the WikiLeaks documents speaks to the extremely volatile international situation and the number of flashpoints, which do not require much fuel to be ignited.

Furthermore, that a small organization with a computer bank and sympathizers within the US military and intelligence apparatus can wreak such havoc is testimony to the decline of American imperialism and the chaos and disorientation that characterize its daily activities. The US foreign policy establishment lurches from one improvised and violent plan to the next, resentful and fearful of foes and “friends” alike.

Friday, November 26, 2010

UK Students Demonstrate Against Increased Fees and Education Cuts

On Wednesday thousands of students, sixth formers and school pupils demonstrated throughout the UK to protest the governments’ education cuts. More than 4,000 students from the University of Leeds and Leeds Metropolitan University marched into Leeds city centre. There was a very strong police presence all along the route, with eight video filming vans, other police video teams on roof tops, at least 10 police dogs and six mounted police as well as hundreds of police on foot.

As they marched through the city, office workers gathered round the windows and cheered them as they passed.

The demonstrators were met on the steps of the Leeds Art Gallery by up to 1,000 school and further education college students, who had walked out of classes in support of the campaign.

School students from Allerton Grange Comprehensive School had marched five miles into the city centre to attend the rally. On their way they had picked up fellow students from Roundhay Comprehensive. As they passed the Leeds College of Building and Thomas Danby College, students came out to greet them.

Alex from Allerton Grange School told reporters, “These cuts affect school students, not just in the future but right now. The loss of the Education Maintenance Grant (EMA) of £30-a-week for school students is outrageous. The increase of university fees to £9,000 means that the dream of higher education is being taken away from millions of youth, especially from poor families. My mum is very worried about the situation. We are fighting for our future.”

Seyamak, also from Allerton Grange, said, “I think that education is a right. We are the students of the future. I don’t see that you can set a price on education in a civilised society. Education is a class issue. Bailing out the banks should not come at the top of the agenda. If you take away the right to education, what are you left with?”

Students attended from Ilkley Grammar School, travelling 15 miles to get there. They had not known anything about the day of action until their parents received letters through the post from their headmaster warning them of the event and saying they could not take responsibility for what happened to the students if they walked out of school.

One of the pupils explained that in their school staff members had been posted at all the exits. They simply waited until the teachers had gone to their classes and then walked out.

Chris, a guitar student from Leeds Music College, said, “These attacks are international. They are happening everywhere. Cultural activities will be one of the hardest hit areas. According to the government, society cannot afford culture. But everybody has the right to cultural expression, in music and every other form. People need culture.”

Dave, a master’s student at Edge Hill University in Ormskirk, said, “This is not so much about my future because my education has been paid for. I’m here because it’s a fundamental right that you have free education. My parents could maybe have afforded these rises, but a lot or ordinary people can’t. That is why I’m here. It’s the next generation. It’s my kids and everyone else’s kids that are going to feel it.”

Gayle, an unemployed worker who supported the students, had been a domestic worker at Boddington student hall of residence and had been made redundant on September 30. She said, “Loads of other cleaners at the university were sacked in July. I have since tried to get another job but can’t get one anywhere.”

Her daughter is a 20-year-old student who is presently in further education. She is not living at home and is sleeping at various friends or relations. Gayle said, “She is suffering badly. She is entitled to nothing except the £30-a-week EMA and when the government stops that she will literally be penniless. She has to provide for food, clothing, and all the necessaries and yet despite everything she is still managing to go to college. She wants to study Law and Criminology and has a place at Leeds Metropolitan University. But who knows what is going to happen? All governments now are not helping anyone. Even if Labour was in she would get nothing.”

Another protester at the rally said, “University education should be free for all who want to seek it. Putting up the fees even further will discourage millions from poorer backgrounds. I qualified in 2008. I had to pay £1,200 a year fees, plus a £3,000 repayable loan and now I am burdened with debt. In future students will have to pay almost the same amount towards one year’s fees.”

Natasha from Lawnswood High School said, “If they cut EMA and raise the entrance fees we won’t be able to afford university. And even if we go to university, we will come out with bills of £80,000 and more. The future will be McDonalds if we don’t get into university.”

One of her friends said, “We have to think about when our generation is the working generation, who is going to pay the taxes for the people that are retiring?”

Another said, “They are cutting EMA and they are cutting arts and sports programmes, but they are not cutting the Ministry of Defence and nuclear weapons which is ridiculous. They need to get their priorities sorted out.”

In Manchester around 5,000 protesters, including students from the University of Manchester, Manchester Metropolitan University, as well as hundreds of pupils from schools in the city and the wider region, marched from the main university area into the city centre. A group of sixth form students came to Manchester from Kendal in Cumbria, 76 miles away.

The ISSE statement was the only leaflet being given out on the demonstration and one student volunteered to take leaflets to distribute.

The march was met by a heavy police presence, which attempted to divert it away from the Town Hall.

Owen, a sixth form college student, said he felt none of the main parties would oppose the cuts, “which are denying education to the poorest in society”. He agreed with uniting the struggles by all sections of workers, “as they are all connected.”

Another student in a group from Trafford College said, “I have worked hard all through school and at college and I don't think I will ever go to university. I think it will all be for nothing.”

She pointed out the growing unemployment among these who were well qualified and experienced and asked, “What chance have we got?”

Courtesy WSWS

Sunday, November 21, 2010

Punish The Guilty, Recover The Loot

Irespective of how the current impasse in the parliament over the demand for a joint parliamentary committee (JPC) to probe into the massive 2G  spectrum scam unfolds, it is clear that the country is being pushed deeper into the murky morass of crony capitalism. 

Actually, crony capitalism is a tautology.  Capital in its urge to maximise profits invariably seeks to bend, if not, violate all rules and regulations. Nepotism in awarding contracts, sweet heart deals in disposing off public properties (like, for instance, the  outrageous sale of public sector, Balco and Centaur Hotel, Juhu, Mumbai by the earlier NDA government) and creating illegal and new avenues for money laundering and looting public resources are some of the forms that crony capitalism takes.

The capitalist state puts in place certain rules and institutionalises regulators to ensure adherence to these rules in order to provide a level playing field for the capitalists. However, given the fundamental nature of capitalism, where the big fish eats the small ones, these rules and regulations are pushed to the limits of violation.  Capitalism inherently breeds cronyism. 

In countries like India, late entrants into the global capitalist system, (particularly when it embraces the neo-liberal economic trajectory of globalisation) such cronyism becomes all pervasive trapping in its web governmental institutions, indeed, the entire government itself.  This has precisely been the case in the current 2G spectrum scam, with the Supreme Court now dragging in the prime minister and his office. 

To illustrate how such crony capitalism operated in this 2G spectrum scam, consider the following:

For the release of the fourth license and the spectrum needed  for operationalising  the corresponding universal access service license in January 2008, the communications ministry adopted a completely inexplicable principle of `first come first served’ as well as a license fee based on 2001 price.  These 2G licenses were priced at 2001 levels allegedly to ensure that the spectrum should not become expensive, presuming that the benefit would be passed on to the consumers.  However, this was nowhere ensured through the license terms and conditions. As a result, the parties who had secured these licenses have sold or are selling their shares at huge profits.

The deal between UAE’s telecom operator Etisalat and a Bombay-based builder’s Swan Telecom has brought out the magnitude of largesse being doled out.  Swan Telecom bought a license for 13 circles along with the necessary 2G spectrum for a paltry Rs 1,537 crore.  Subsequently, it had sold 45 per cent of its stake to Etisalat for $900 million without putting up any infrastructure, let alone starting operations.  This, therefore, was the market price for the spectrum at around $ 2 billion, as against the price of $300 million SWAN paid.  With the present exchange rate, this would mean that Swan had got a value 5.9 times of what it had paid just eight months earlier in January 2008 without having spent a single paisa in operationalising its license. The government has actually got only one-sixth of what it should have got, had it gone through a fresh auction route – a loss of Rs 4,500 crore to the exchequer.

But this is not all.  Even this loss proved to be an underestimate when one finds the details about the later Unitech-Telenor (of Norway) deal.  Here, Unitech like Swan had not spent a single paisa for executing its license.  It had sold a 60 per cent stake of the telecom firm,  which had paid Rs 1651 crore as license fee for all the 23 circles which it had applied for, to Telenor.  Obviously, Unitech got a better return on its sale because it had given away majority stake and had larger number of circles.  Unitech had got 6,120 crores. Unitech, thus, had got a valuation which is seven times more than  what it had paid.   

For a number of these corporations, who were awarded the so-called 'first come first served' licenses, the promoters are either unknown or shadow companies. This further reinforces the doubts regarding the bona fides of these companies as also the intent of the policy.

In the interests of the country, it is absolutely essential that this colossal scam must be thoroughly probed. Hence the demand for a JPC.  The JPC must not only identify the culprits and prepare the grounds for their punishment, but it must also study the manner in which the system has been so grossly manipulated to allow such a scam to take place. On this basis, more effective rules and regulations must be drawn up to ensure that such known avenues of manipulation are minimised, if not plugged. 

Probing the 2G spectrum scam is not only in the interest of upholding political morality.  This is absolutely essential. The probe, however, must also result in recovering to the national exchequer the loss estimated by the CAG to be  of a mammoth Rs 1,76,379 crores. Our estimations of this loss, stated in these columns earlier, is to the tune of Rs 1,90,000 crores.  All those who have been allocated the 2G spectrum at throw away prices must be made retrospectively to pay the difference.  The benchmark can be the  auction price of the 3G spectrum that is available in public domain.  The licenses of those corporates who refuse to do so must be cancelled and these must be freshly auctioned. 

Again, the recovery of these monies, unscrupulously looted, is not only to reassert public morality.  This recovery is much needed to improve the livelihood of the vast mass of the Indian people.  Take for instance, the issue of food security.  It has been estimated that to provide all Indian families (APL and BPL) 35 kg of foodgrains at Rs 3 a kilo, it would cost an additional food subsidy of Rs 84,399 crores.  The loot in the 2G spectrum scam is nearly double of what is required to provide food security to all Indians.  Or, for that matter, to ensure education for all, it is estimated by the National Institute for Educational Planning and Administration (NIEPA) to cost Rs 34,000 crore annually for the next five years.  A  total of Rs 1.7 lakh crores.  This is less than what has been looted in this 2G spectrum scam.  The scam accounts for nearly six times of the health budget proposed for this year.

A government that continues to wear the pretence of concern for the aam admi must be forced to speedily uncover the manner in which such a colossal loot of our country’s resources has taken place.  Further, the government must be forced to recover this loss and put these huge sums of money to provide the much-needed food security, education and health for our people. 

From People's Democracy

Tuesday, October 19, 2010

The Currency War

Currency wars are the only means left for countries to climb out of the recession. Recourse to such policies is bound to intensify. They are a symptom of the impasse in which capitalism is currently caught; and they also accentuate it

EVERYONE is talking now of the “currency war” that seems to be breaking out among the world’s leading economies, each working for a depreciation of its currency vis-a-vis the others. The effect of a currency depreciation is to enlarge the exports of the country undertaking such a depreciation and to reduce its imports, since its goods become cheaper compared to those of other countries.

In short, currency depreciation increases a country’s net exports, i.e. its market at the expense of other countries. It enlarges the country’s output and employment, but at the expense of other countries, which is why increasing domestic employment through a currency depreciation is often referred to as an instance of a “beggar-my-neighbor” policy.

If world aggregate demand was increasing then there would be little cause for competitive currency depreciations, since domestic employment in each country would be increasing even in the absence of such depreciation. The reason for countries being engaged in such competitive depreciations, i.e. in snatching each other’s markets, lies precisely in the fact that world aggregate demand is not increasing, i.e. that the world crisis is persisting.

Till now the same people who are now so concerned about the currency war were declaring confidently that the world crisis was over, which just shows the superficiality of their understanding. In fact the crisis is going to be prolonged and acute. This explains the currency war, the desperation of each country to improve its position at the expense of its neighbour, since there is no other silver lining on the horizon.

But the currency war itself will deepen the crisis. If there is uncertainty about what the configuration of exchange rates will be some months from now, and hence about what the size of the market of any particular country will be some months from now, then this acts as a disincentive for private investment everywhere, which only compounds the recession.

In addition, if uncertainty about relative currency values makes wealth-holders shift to gold or oil-futures, or other commodity-futures, as their preferred form of holding wealth, then this gives rise to inflation; and the typical means of combating inflation in contemporary capitalist economies, which is the pursuit of contractionary monetary and fiscal policies, only worsens the recessionary crisis. In short, the currency war is both a reflection of the abiding nature of the current crisis, and a means of its accentuation.

Most Western, especially American, commentators lay the blame for the currency war at the door of so-called “newly-emerging” economies, especially China and other Asian countries (which includes India). Their argument runs as follows: there are serious imbalances in the world economy arising from the fact that the US is running a massive current deficit, while China above all, and some other newly-emerging economies, are running current account surpluses.

This basic imbalance also causes speculative flights of finance capital from crisis-hit USA to China and the newly-emerging economies. If the currencies of the latter were allowed to appreciate, then those of the USA (and other advanced countries) could remain more or less stable vis-a-vis one another and vis-à-vis any other medium such as gold or commodities.

But China and other newly-emerging economies have prevented such an appreciation, and have instead soaked up whatever dollars flow into their economies in the form of higher foreign exchange reserves. It is this which puts pressure on the value of the dollar. Chinese undervaluation of the currency therefore is the “original sin” that starts the currency war. And only last week the US House of Representatives allowed the government to impose countervailing duties on imports from China, on the grounds that such imports derived an “unfair” implicit subsidy owing to China’s undervalued currency.

This entire perception however misses the point. Suppose China allows its currency to appreciate. That would basically mean that Chinese goods would no longer be as cheap as they were earlier. While this fact would certainly mean a reduction in China’s net exports, and, hence, immediately at any rate (since no other country can step into Chinese shoes at short notice), an improvement in the state of current account imbalances in the world economy, it would, other things remaining the same, cause a reduction in China’s employment and output as well.

The only way that China can avoid such a reduction in output and employment, while appreciating its currency, is if it simultaneously increased its government expenditure, or government transfers to the people to raise their consumption. If it did so, then the reduction in net exports on account of the appreciation of its currency would have been offset by the increase in government expenditure, so that its total level of aggregate demand, and hence its output and employment, would have remained unchanged.

But if China did so, i.e. shifted from net exports to government expenditure (which includes transfers to the workers and peasants) as a source of aggregate demand, then there would be no need for it to appreciate its currency at all. The improvement in global imbalances and the stimulus to global aggregate demand that a Chinese policy of “currency appreciation plus enlarged government expenditure” would bring about, could be equally well brought about by enlarged government expenditure alone.

What is equally striking is that the very same commentators, the very same US Congressmen, the very same spokesmen for finance, who vociferously condemn China’s undervalued exchange rate, are also the ones who, day in and day out, oppose with vehemence any increase in government expenditure anywhere and who are all for rolling back even president Obama’s minuscule stimulus package.

Those who advocate an appreciation in China’s (and other emerging economies’) currency cannot possibly hold that an increase in government expenditure for removing unemployment is bad everywhere else, but not in China. They cannot possibly hold that an increase in, say, workers’ wages as a means of enlarging domestic demand for eliminating unemployment (such as would arise if the currency gets appreciated) is good for China, while in the US a situation of unemployment must be met through a cut in workers’ wages. In other words, they cannot possibly advocate the use of precisely those weapons, which are the only weapons available, for overcoming unemployment in China, when they are opposed to their use in the US.

It follows that those who are advocating an appreciation of the Chinese currency must believe either that such appreciation would cause no unemployment in China, which is patently wrong, or that unemployment in China does not matter, which is patently chauvinistic. Which one is it? As a matter of fact it is a patently chauvinistic argument being put forward via a theory that is patently wrong. Let us see how.

The fundamentally wrong theory that finance capital puts forward, via numerous economists and commentators who echo its views and are adulated professionally for doing so, is that the free and unfettered operations of markets in a capitalist economy automatically brings about a state of “full employment” (which means not that everybody is employed but that the only unemployment which remains is either voluntary or frictional or because the search for jobs, which are in any case lying around unfilled, takes time).

Even in the midst of the greatest crisis since the 1930s Depression, this position has not been abandoned. It received a jolt at the start of the crisis but it has once more regained its hegemony, thanks to the assiduousness of the propaganda by financial interests. How else does one explain the fact that even in the midst of almost 10 per cent unemployment rate in the US, there are strong demands for Obama’s stimulus package, which was extremely paltry to start with, to be withdrawn?

The belief obviously is that even without such stimulus, the economy would automatically move to full employment, provided wages are sufficiently flexible (ie, are sufficiently cut), a view which was held by Herbert Hoover, US president before Franklin Roosevelt, and which was resoundingly disproved by the collapse of Hoover’s policy that accentuated the Great Depression.

Now, on the basis of this theory, where aggregate demand does not matter, where Say’s Law, that supply creates its own demand, holds, a currency appreciation by China and other emerging Asian economies cannot possibly cause unemployment in those economies; it can only have the salutary effect of removing world imbalances.

When US treasury secretary Tim Geithner says that countries like China, by interfering in the determination of their exchange rates, are not allowing free markets to function as they should, he is implicitly suggesting that if China allowed the foreign exchange market to function, it would be good for all including China, i.e. that an appreciation of the Chinese currency, which a “free” foreign exchange market will bring about, is not a cause for worry from the point of view of employment and output in China. He is in short, like all spokesmen of finance, downplaying the unemployment-generating effect of a currency appreciation.

It may be argued that this is an unfair inference to draw, that those who are asking for an appreciation of the Chinese currency (and of other Asian currencies), really have in mind something altogether different. They recognise that such appreciation will cause unemployment in China, but would like the Chinese State to step into the breach by increasing its expenditure, in which case it would have begun to play the role of a locomotive for the world economy as a whole, i.e. taken over in part a role which the US has been playing single-handedly, but which it can no longer afford to do.

But if this is the argument, namely that China should absorb more goods domestically and thereby boost world demand, then there is no reason why for doing so, it should appreciate its exchange rate at all. In other words, the argument that China should henceforth play a leading role in stimulating world demand is quite independent of the argument about the need for China to appreciate its exchange rate.

The fact that it is exclusively the latter argument that is advanced by spokesmen of finance and all right-wing forces, suggests something quite different, namely that within the existing world market, China and other Asian countries should yield a larger share to the US and other advanced capitalist economies, i.e. the solution to the capitalist crisis in these latter economies should come about through unemployment and recession in China and other Asian economies, much the way that perpetrating “deindustrialisation” on the colonies was the means of achieving prosperity in the metropolis in the old days.

This strategy is sought to be camouflaged by the absurd theory that such unemployment will automatically disappear, through the spontaneous functioning of markets; but it is nothing else but a “beggar-my-neighbour” policy being sought to be imposed by the advanced capitalist countries on the newly-emerging economies.

The need for this arises because at the moment there are no prospects of an expansion in the level of world aggregate demand. The leading capitalist country, the US, is not in a position to provide a lead in this regard because any expansion on its part will increase its current account deficit in the prevailing situation (i.e. in the absence of recourse to protectionism on its part); countries like China are still not large enough to lead the world in the matter of boosting aggregate demand; and a coordinated expansion of world demand by several countries simultaneously providing a fiscal stimulus, is totally unacceptable to international finance capital which is always opposed to any State activism of this sort.

With the total size of the world demand thus constrained, “beggar-my-neighbor” policies and currency wars are the only means left for countries to climb out of the recession. Recourse to such policies is bound to intensify. They are a symptom of the impasse in which capitalism is currently caught; and they also accentuate it.

Prabhat Patnaik/People’s Democracy

Sunday, August 22, 2010

Nuclear Liability Bill : Government Protects Foreign Suppliers

The amendments to the Civil Liability for Nuclear Damage Bill, 2010 proposed by the Government not only goes against the grain of the crucial recommendations of the Standing Committee, but also seeks to further dilute the provisions of the original bill to protect the interests of the foreign suppliers of nuclear equipment and domestic private players.

The new formulation of Clause 17 (b) suggested by the Government reads as follows:

"(b) the nuclear incident has resulted as a consequence of an act of supplier or his employees, done with the intent to cause nuclear damage, and such act includes supply of equipment or material with patent or latent defects or sub-standard services;"

This makes any liability on the part of the suppliers, for supplying defective or sub-standard equipment or material, contingent upon proof that it was "consequence of an act.done with the intent to cause nuclear damage.". With this amendment, it will become impossible  to ascribe liability to the supplier.

This goes against the Standing Committee formulation of 17 (b), which does not require any such proof:

"(b) the nuclear incident has resulted as a consequence of latent or patent defect, supply of sub-standard material, defective equipment or services or from the gross negligence on the part of the supplier of the material, equipment or services."

Thus, in the name of removing the "and" in 17 (a), as suggested by the Standing Committee, the Government has rewritten 17 (b), effectively throwing the baby out with the bathwater. The formulation of 17 (b) proposed in the amendment is in fact worse than the provision contained in the original bill.

The dubious intent of the Government is further exposed by the addition of Clause 7 (1) proposed as an amendment, through which it seeks to "assume full liability for a nuclear installation not operated by it" (i.e. private nuclear installations) even as the Standing Committee had categorically recommended "that there will be no private operator of nuclear installation". This paves the way for a massive subsidization of the private players in nuclear power by the Government, as and when they are allowed to operate.

All this is clearly being done under pressure from the foreign nuclear suppliers and domestic corporate lobbies.

Siddharth Vardarajan of The Hindu gives the background to the Manmohan Singh Government's shenanigans: 

Despite assuring the Left and the BJP that their concerns on the government’s proposed nuclear liability law had been fully addressed, the final version of the bill – as cleared by the Union Cabinet on Friday – protects foreign companies in the event of a nuclear accident caused by gross negligence or defective supplies on their part.

It does this by raising a legal barrier against damage claims that is so high it will be impossible to scale. The amended version of the bill says the suppliers of any defective equipment involved in an accident can be sued by the Indian operator of a nuclear facility only if the supply in question was made “with the intent to cause nuclear damage”.

In other words, the operator, who is wholly liable in the first instance for any damages resulting from an accident caused by that faulty equipment, can recover his money only if it is proved that the supplier intentionally caused the accident.

Clause 17(b) of the original draft allowed a right of recourse for the operator in the event of an accident resulting from “a wilful act” or “gross negligence” on the part of the supplier. As reported by The Hindu on March 8 and April 1, U.S. nuclear suppliers want this clause deleted as they feel it would expose them to litigation.

Critics in India, on the other hand, saw these conditions as too weak. The Standing Committee on Science & Technology, whose report on the bill was released earlier this week, felt the “vague” language of 17(b) offered suppliers an “escape route” and needed strengthening. “In case an incident takes place, it would be difficult to prove and establish the fact that it was a wilful act or gross negligence on the part of the supplier”, the report said.

“Hence there should be clear cut liability on the supplier of nuclear equipments/material in case they are found to be defective”. The committee also quoted the testimony of the Secretary (Legislative Department) to argue the use of the doctrine of mens rea, or criminal intent, though common in criminal and tax law, “is grossly inadequate and misplaced” in compensation cases.

Accordingly, the Standing Committee expanded the scope of the right of recourse in 17(b) to include nuclear incidents resulting “as a consequence of latent or patent defect, supply of sub-standard material, defective equipment or services” in addition to gross negligence.

The government’s first attempt by stealth to indemnify suppliers from legal action came in June, when it circulated amendments to the Standing Committee deleting 17(b) altogether. When the Opposition cried foul, it backed off, seeking instead to negate the clause by making it contingent on 17(a), which grants operators a right of recourse against suppliers only if expressly provided for in a contract.

Forced to backtrack there too, the government now appears to have hit upon the inclusion of intent as the best way of ensuring foreign suppliers never face legal action in the event of a nuclear accident.

Thus, the amended 17(b) gives the operator a right of recourse where “the nuclear incident has resulted as a consequence of an act of supplier or his employees, done with intent to cause nuclear damage, and such act includes supply of equipment or material with patent or latent defects or sub-standard services”.

Since accidents resulting from the intentional acts of a “person” (including corporate entities like a supplier) are already covered by 17(c) of the original draft, the government is now proposing to replace the word “person” in 17(c) with “individual” to avoid the charge of redundancy.

If the earlier subterfuge was to merge 17(b) with 17(a), the attempt now is merge it with 17(c). Either way, the Manmohan Singh government’s aim is the same: to produce legal language that would shield foreign suppliers from civil suits.

Friday, August 20, 2010

The Myth of the “Sub-Prime Crisis”

CAPITALISM, like the proverbial horse, kicks even when in decline. Even as the current crisis hit it, it gave an ideological kick by attributing the crisis to “sub-prime” lending; and so well-directed was its kick that the whole world ended up calling it the “sub-prime crisis”, argues Prabhat Patnaik.

The idea, bought even in progressive circles, was that in the euphoria of the boom that had preceded the crisis, financial institutions in the US had given loans even to sections of the population who were not really “credit-worthy”, i.e. who were poor and had few assets of their own.

They would normally not get loans from banks; they were not “prime borrowers”. They got loans only because the boom had lowered guards everywhere and banks had started underestimating risks. But if you give loans to people who are not “creditworthy”, who are not “true blue”, then you inevitably come to grief, which is what ultimately happened, precipitating the crisis.

Remarkably, the idea appealed not only to the Right but even to sections of the Left. Sections of the Left liked it because they read into this explanation a basic contradiction of the system: to keep the boom going the capitalist system needs to give more and more loans, and therefore to bring an ever larger number of people into the ambit of borrowing, so that the level of aggregate demand is kept suitably up. This necessarily means that “sub-prime” borrowers have to be brought in more and more for the sustenance of the boom, which therefore must eventually lead to a collapse.

The Right saw in it an opportunity to argue that the crisis arose because capitalism had become “too soft”: people who should not be touched by financial institutions with a barge-pole had actually been given huge loans. The problem therefore lay not with the system as such, since it normally would never do such silly things, but with an aberration it had suddenly got afflicted with.

Some even saw in this aberration a muddle-headed humaneness which the system had suddenly developed. And they used the crisis as an illustration of the fact that all such humaneness is fundamentally misplaced, that there is, as they had always maintained, no scope for sentiment in the harsh world of economics.

In India, apologists of neo-liberalism worked overtime to use the fact of the crisis itself to discredit policies of “social banking”, such as priority sector lending and differential interest rates, that the country had embarked on after bank nationalization. All such policies, they argued, saddle banks with the responsibility of lending to “sub-prime” borrowers, and hence put on their shoulders an unbearable burden of “non-performing assets”. This ultimately makes them unviable and in need of substantial doses of government assistance to survive, as had happened in the US and elsewhere.

The moral of the story therefore was that in countries like India the markets should be left to work in their own pitiless manner without having to accommodate sentimental hogwash like “social banking” and “financial inclusion”. Hence by a curious irony, a crisis precipitated in the advanced capitalist world by the free functioning of the markets was used in the Indian context to argue for an unleashing of the free functioning of the markets.

The basic argument about “sub-prime” lending causing the crisis however was a flawed one. The banks had given loans to the so-called “sub-prime borrowers” against the security of the houses they had bought with these loans. If the values of the houses collapsed then banks’ asset values collapsed relative to their liabilities, precipitating a financial crisis.

The cause of the crisis therefore lay not in the identity of the borrowers, the fact of their being “sub-prime”, but in the collapse of the asset values, which in turn was because asset markets in a capitalist economy are dominated by speculators whose behaviour produces asset-price bubbles that are prone to collapse.

Indeed when the banks were giving loans against houses to the so-called “sub-prime borrowers”, they too were essentially speculating in the asset markets, using the “sub-prime borrowers” only as instruments, or as mere intermediaries in the process.

To attribute the crisis to sub-prime lending therefore amounted to shifting attention from the immanent nature of the system, the fact that it is characterized by asset markets, which are intrinsically prone to being dominated by speculators whose behaviour produces asset-price bubbles that necessarily must collapse, to a mere aberration, a misjudgement on the part of the financial institutions that made them lend to the “wrong people”.

It was a deft ideological manoeuvre. The identity of the people who borrowed, whether they were in rags or drove limousines, was actually irrelevant to the cause of the crisis, but it was presented as the cause. The blame for the crisis was put falsely on “sub-prime lending”; and a fabrication, a complete myth, called the “sub-prime crisis” was sold to the world, quite successfully.

Let us for a moment imagine that no loans were made to the so-called “sub-prime” borrowers, and that all loans were made only to “prime borrowers” against the security of the houses that were purchased through such loans. True, “prime borrowers” might not have been interested in taking more loans than they already had, in order to purchase houses, and that “sub-prime” borrowers had to be brought in. But, let us, just for a moment, assume that all the loans that the banks had actually made were made to “prime borrowers” rather than “sub-prime borrowers”.

With the collapse in house prices, which had to happen sooner or later, the “prime borrowers” would have found their balance sheets going into the red, and so would the banks who gave them the loans. The borrowers would have been hard put to keep to their payments commitments, and the same denouement that unfolded with “sub-prime borrowers” would have unfolded with “prime borrowers”.

The fact that the latter owned other assets would not have made any difference; they would not have easily or voluntarily liquidated those assets to pay the banks for the housing loans (and, besides, those other asset prices too would have collapsed if the “prime borrowers” had tried to liquidate them). And if such forced liquidation was insisted upon for paying off housing debt, then there would have been prolonged court battles to prevent it; the crisis certainly would not have been averted.

Hence the real reason for the crisis lies in the collapse of the house price-bubble (which was bound to happen no matter what the identity of the borrowers), and not the identity of the borrowers themselves.

Of course it may be argued that with consumer credit the matter is entirely different, since such credit has been given to large sections of the population without any security. In other words, it may be argued that consumer credit to “sub-prime borrowers” is necessarily crisis-causing, in a sense that consumer credit to “prime borrowers” is not, since it is given without any collateral. But the consumer credit bubble has not yet busted; so it is idle to speculate on this matter.

The fact remains that with regard to the bubble that has actually busted, namely the housing bubble, the identity of the borrowers, whether they are prime borrowers or sub-prime borrowers makes little difference.

To say this is not necessarily to deny that the sustenance of boom under capitalism may require bringing more and more people under the ambit of borrowing, including the so-called “sub-prime” borrowers who normally do not have access to credit. But this is not the cause of the crisis; the bringing in of “sub-prime” borrowers, the widening of the circle of borrowers, is merely the mechanism through which speculation may get sustained.

It may determine the size of the “bubble”, but the real cause of the crisis lies in these “bubbles” themselves, i.e. in the fundamental fact that in a modern capitalist economy, where fiscal deficits are sought to be restricted, booms are necessarily “bubbles-led” or at least “bubbles-sustained”; and the inevitable collapse of these “bubbles” necessarily produces crises.

Or putting it differently, if “sub-prime” lending had not happened, then the crisis would have occurred even earlier than it did, i.e. the bubble would have collapsed even earlier. This would of course have limited the size of the collapse relative to the top of the boom, since the bubble would have burst before it became too big; but by the same token it would also have limited the size of the boom itself that preceded the collapse, so that the unemployment rate, experienced with the crisis, would not have differed much between the two situations.

A modern capitalist economy is characterized by highly-developed and highly-complex asset markets, where it is not only the physical assets themselves, but, above all, financial assets, which represent claims on physical assets, that are bought and sold. Since the carrying costs of these financial assets are extremely low (rats do not eat them up as they eat up foodgrains for instance, and they do not need godowns for storage and for protection from the elements), they are particularly prone to speculation.

Their markets tend to be dominated by speculators who buy assets not “for keeps” but for selling at the opportune moment to realize capital gains. The prices of these financial assets therefore are determined largely by the behaviour of speculators. When there is a rise in their prices for whatever reason, speculators often rush in expecting a further rise and this pushes up prices even further. This process may go on for sometime, creating a “bubble”. But when, for whatever reason, the price rise comes to a halt, speculators start running away from this asset like rats deserting a sinking ship and the “bubble” collapses.

The real point however is this: the amount of the physical asset that is produced depends upon the price of the claims upon it, i.e. of the financial assets that represent claims upon this physical asset. If the price of these claims is high, then more of such physical assets are produced, and if the price is low then less. But while the price of these claims is determined by the behaviour of the speculators, the output and employment in the real economy is determined by the amount of physical assets that are produced.

Hence in a modern capitalist economy, it is the caprices of a bunch of speculators that determines the real living conditions of millions of people, their employment and incomes. When speculators are bidding up the prices of assets (or claims upon assets) employment and output start rising and we have a boom. When speculators leave assets like rats leaving a sinking ship and wish only to hold money (and in extreme cases, when confidence in banks gets impaired, only currency), we have a crisis.

John Maynard Keynes, acutely aware of the irrationality of this system that made the lives of millions of people dependent upon the caprices of a bunch of speculators, and yet extremely keen to prevent its transcendence by socialism, sought to alter this state of affairs by advocating “socialization of investment”. This would mean that how much of physical assets were produced depended not upon the whims of speculators but upon the decisions of the State, which made these decisions with the objective of keeping the economy close to full employment.

The Keynesian remedy was tried out for nearly two decades after the second world war; and the unemployment rate in the advanced capitalist countries was indeed kept at levels that were extremely low by the historical standards of capitalism. But with the ascendancy of international finance capital, and the consequent transformation in the nature of the nation-State, whose interventions now are meant exclusively for promoting the interests of finance capital, Keynesian “demand management” recedes to the background; and we are back to a regime of booms and busts associated with the formation and collapse of “bubbles”.
The current crisis is not caused by any aberration on the part of financial institutions; it is immanent to a regime of finance capital.