Business Models of NSA & Companies Like Google Are About the Same?

Via the Real News Network; Pt. 1 of a series, “US Policy Toward Global Internet Governance Is Misguided Says Richard Hill.”


LYNN FRIES: It’s The Real News. I’m Lynn Fries.

The U.S. and the private companies it backs have far more say regarding the global internet than anybody else, and they use this power for political ends, mass surveillance; and for economic ends, the very high profits reaped by companies such as Google. The U.S. and its allies have systematically blocked discussion on Internet governance as it pertains to public policy at any United Nations forum that might not conform to U.S. expectations. The U.S. largely denies that certain internet services should be public services, or public goods, and rejects any intergovernmental role in supervising, much less regulating, the Internet.

These are all points related to internet governance raised by Richard Hill. Here to talk to us about all this is Richard Hill. Richard Hill is president of the Association for Proper Internet Governance, and a former senior official at ITU, the International Telecommunications Union. Dr. Hill holds a Ph.D. in statistics from Harvard, and is author of The New International Telecommunication Regulations and the Internet. Welcome, Richard.

RICHARD HILL: Thank you.

LYNN FRIES: What do you make of this call by Microsoft for governmental regulation of face recognition software?

RICHARD HILL: Yes. It’s very interesting. This is now the second time that Microsoft has called for some kind of intergovernmental agreement. What you just mentioned, about regulating facial recognition. Prior to that they had called for what they called the Geneva Digital Convention, under which States would agree not to develop malware, not to purchase malware, not to stockpile malware. And they would agree to notify manufacturers as soon as they discovered malware. As you know, some very nasty incidents have come from the fact that the NSA or the CIA had a stockpile of malware. And somehow it leaked and it got used by cybercriminals. So Microsoft is, I think, rightly worried about that. They’re trying to get the rest of the industry to understand that it can’t go on like this because it’s just too dangerous to be left out there in the open. It’s worse than nuclear weapons. It’s like having cruise missiles that anybody could grab and program and shoot anywhere. The same for facial recognition, it’s going to be a race to the bottom and pervasive surveillance and so on.

Now, it’s true what you said earlier, that the U.S. government is opposing intergovernmental influence on the Internet. But they’ve never been shy about imposing their own rules on the internet. In fact, the whole way the internet is managed is basically a U.S. creation. Because it’s a U.S. private company which in the end is still subject to U.S. court decisions and U.S. executive orders, if they should actually issue an executive order, for example, with respect to terrorist activities, or as in fact taking down poker sites.

So what’s happening now I think is that industry is beginning to see this asymmetry is unsustainable. Because other powerful nations, in particular China, but also India and to a lesser extent Russia and Europe with the Global Data Protection Regulation, are coming in and saying, wait a minute, for what concerns our citizens we have our own views of what should be done, and we’re going to try to impose that nationally, even though we cannot impose that internationally. That’s going to complicate life for the major corporations. And so they’re now abandoning this model of saying we don’t want governments at all, because they understand that that’s not going to work. And so they’re saying, well, you know, maybe we have to have governments in some areas. Let’s focus them, channel them, and get them to do what we want.

LYNN FRIES: And that means the U.S. and its allies are blocking discussions taking place in the more transparent and inclusive forums within the UN system. And it also means they’re pushing this multi-stakeholder model. Explain that.

RICHARD HILL: The multi-stakeholder model today is used as a mantra to justify a certain particular type of internet governance in which basically corporations dominate. The theory of the multi-stakeholder model is not particularly controversial. It’s the idea that you want to consult all the interested parties before making a decision. In fact, if all the players benefit from a common decision and can get something out of a common decision, then it’s logical to consult everybody and wait until you have consensus, and everybody agrees and it suits everybody. When it’s not win-win, it doesn’t work. Let’s just take net neutrality, for example. If you consult the industry on net neutrality, you get very divergent views. The telecom carriers don’t want it, and what we call “Over the Top”, Google and those guys, they want it. So there’s no way you’re going to get consensus out of a multi-stakeholder consultation in that area, so in the end somebody has to make a decision. Now, in democratic societies, we decided or have the custom in those kind of situations, yes, you consult everybody, you listen to everybody but then the elected representatives of the people make the decision, either through a law in Parliament or through delegation of authority to some regulatory body that is still responsible in the end to the people. In the case of net neutrality in the USA, that would be the Federal Communications Commission. We have a well-established model that’s worked for most walks of life for a very long time, certainly since the post-war period where we have had at, least in Western Europe and in the U.S., something that at least many people, or most people, or some people, think approaches a democracy, even if it’s not perfect. It’s not ideal and we’re backsliding in some areas but still, it’s better than dictatorship, authoritarians, et cetera. And to my mind it’s better than dictatorship of corporations, which takes us back to something that happened before the Second War, where in some political systems corporations had excessive influence and were dictating things. But that’s what we’re seeing now, I think, in the Internet, this multi-stakeholder model is really being put forward as a Trojan horse, an excuse to justify total corporate domination in key decisions that actually affect all of us as citizens.

LYNN FRIES: At the international level, what about the failures of the existing traditional model of governance?

RICHARD HILL: Let’s recognize that there’s a thing called the nation-state, where people hopefully elect their rulers so they’re representative of the people; we call that democracy. And then those entities would agree on how to cooperate internationally. We have national things and we have international things. In the international things we try to set a framework called international law. That’s worked very, very well in a number of areas. It’s always easier for us to see the areas where it has not worked. For example, it has not worked to solve the conflict in Syria, etcetera. But what people forget is that it works great for lots of other areas. Airline traffic, for example, why do all these airlines manage to fly all over around the world with no problems? Well, there is an international system, an intergovernmental organization, not very well known. There is also a private sector organization at the international level, so they cooperate. It’s the same with the banking system; the same with telecommunications, the telephone system. It’s the same for commercial law. Some of the viewers are probably familiar with the Vienna Convention on the International Sale of Goods which is widely used. Another great example is the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. These are all things that have worked very well to facilitate international trade and the modern world. And they’ve come out of this traditional intergovernmental system where States get together and negotiate things and then they go through a democratic ratification process at home, depending on the country and depending on the treaty. In not all countries do all treaties go to the Parliament. But in many countries, at least some or most of the treaties actually are subject to democratic control.

LYNN FRIES: Give an example of a situation where the U.S. and its allies blocked a major UN forum on internet governance and the modus operandi. What was the MO?

RICHARD HILL: Yes, I can think of many examples where the U.S. and its allies have blocked discussions taking place in various United Nations forums. And they kind of always use the same tactics. It’s, well, that’s an issue, but we should not discuss it here. But then when you go somewhere else, they also say we should not discuss it here. So in the end, there is no ‘here’. So it never gets discussed. The other tactic is to say, oh well, we can’t do that because that would threaten some fundamental value, some human right like freedom of speech or paradoxically, privacy. The U.S., as we know from its mass surveillance initiative, is not very keen on protecting personal privacy. Nevertheless, they’ll trot that out as an argument. Or, more often, they’ll actually get one of their proxies or their allies to trot that out. Now not surprisingly, it’s kind of the same ones that you see in other political contexts. So it will be the UK. It will be Canada, It will be Japan. It will be Australia, the Netherlands, some of the former Eastern Bloc countries such as the Czech Republic, and so on. Now, that might be changing a little bit, because the current President seems to be antagonizing some of the traditional allies. But at least in the internet sphere we haven’t seen a shift yet but it might be coming.

Now, one particularly interesting case that I’d like to talk about in a little bit more detail is what happened in 2012 at a conference in Dubai, which really was supposed to be quite innocuous, and simply modernize an existing framework which is called a regulation; but it’s not actually a binding regulation. It doesn’t have any particular binding language in it. And anyway there’s no enforcement mechanism. So although it is a treaty, it is really more of an invitation to States as to how they should act and not act, and doesn’t have any binding component. And one of the things that everybody agreed on is let’s say something about States should cooperate on combatting spam. Now, you think that’s a totally innocuous thing that everybody could agree on, particularly because it didn’t give any specific measures. It wasn’t binding. It didn’t say thou shalt combat spam. It said they should endeavor to cooperate to combat spam. And that was turned into an attack on freedom of speech on the grounds that somehow nasty authoritarian states- and they were named, by the way. They were always called Russia and China- would use that treaty provision to justify domestic censorship.

Now, I think anybody who knows what’s going on knows that that’s completely ridiculous. States that wish to practice censorship do it anyway. They’re not waiting for an international treaty to authorize them to do that. And how could that language saying cooperate to combat spam be construed to justify some domestic censorship? So when you unpack this and see what’s behind it, that was actually used as a Trojan horse or as a red herring, if you prefer; or to use today’s terminology, we didn’t have it back then, fake news in order to discredit the entire conference and the ITU, because they might have actually done something on the economic side of things.

LYNN FRIES: Tell us more about that. First, I should let viewers know you were a senior official at the International Telecommunications Union, and actually the ITU Secretary to the conference. And in a review of your book, The New International Telecommunication Regulations and the Internet, which you wrote after the conference, published as an account of what happened, Shawn Powers, the author of The Real Cyber War: The Political Economy of Internet Freedom wrote, and I quote: Rarely are researchers able to access such clear and comprehensive details of closed-door diplomacy, particularly on a topic of such significance.

Very briefly, comment on the economic side of that conference.

RICHARD HILL: One of the issues that was supposed to be discussed in the conference, but never really got discussed because of all this controversy about human rights, was the whole question of who pays for the use of the internet. It’s back kind of to the net neutrality debate. Should “Over the Top” players like Google, Skype, WhatsApp or whatever, actually pay for the use of the network infrastructure, like you do when you make a telephone call? Well, as consumers, of course, we like to think that everything is free. But unfortunately, as we know, there ain’t no such thing as a free lunch. So somebody, somewhere, is paying. And today how are we paying for that? Well, we pay through the monthly subscription fee for the basic internet service, and then of course by giving all of our personal data to these folks who then monetize it and use that to sell targeted advertising. And they have very, very large profits, and make a great deal of money from that.

So the question was, well, do we continue with sort of that model? Or do we try to be more rational, and look at things? Maybe some things could be public services, and then they should be billed in a certain way that’s fair for everybody, and not just allowing a few large dominant corporate players to make very, very large profits while nobody else makes any money. So in order to avoid any kind of rational discussion on that issue, they dragged out these various red herrings, of which the main one was freedom of speech.

LYNN FRIES: I noted in Q&A with the press, after your book on the Dubai conference was published, you were asked why freedom of speech became such an issue at a technical conference. And you answered, and I quote: Of course, it’s easier to generate support for a ‘stop censorship’ campaign than for a ‘save my profits’ or ‘let me keep invading privacy’ campaign, so that’s what happened.

RICHARD HILL: What was particularly fascinating about Dubai was that it was quite clear that actually Google was financing a lot of this. And Google actually opened the attack on the ITU not just because of this specific issue but as an institution. They were basically saying the ITU has no reason to exist, it’s obsolete, get rid of them, it’s an evil beast and we should just completely stop it. And I don’t know of any other example in history where a corporation has attacked an intergovernmental institution, per se. Of course they attack the results if they don’t like the results of certain type of regulation. And I think in a democratic society that’s perfectly normal. Corporations should be allowed to express their point of view.

LYNN FRIES: In parenthesis, to clarify what ITU does, we should mention it’s the world’s oldest intergovernmental organization in managing the exchange of information between nation states; and since 1947, the UN specialized agency for telecommunications.

RICHARD HILL: Most people don’t realize that most of what we’re using actually depends on the ITU. The compression standards, MPEG, like we’re using for this video conference, are actually standardized in ITU and ISO. It’s a joint effort. Many people are using DSL. And that’s all based on ITU standards. And so is much of the broadband connectivity that the operators use among themselves. And then there’s the Wi-Fi frequency. Why does Wi-Fi work everywhere in the world without any problems? Whereas you have to struggle to find the right adapter plug for your electrical connection. Well, it’s because in the ITU Radio Sector they’ve standardized a certain band of frequencies which are license-free, unlike most frequencies everywhere around the world. And there are many other things that the ITU does which are extremely useful. So I thought it was just particularly, I have to use the word, evil to pick out this imagined threat and discard all of the very useful things that ITU has done since 1865. Basically, modern telecommunications is based on the ITU.

Now, I’m not saying the ITU is perfect. But it’s only as good as its Members, which are the people who contribute to it. And it’s not government bureaucrats – a lot of industry people go into the ITU. So if the ITU were used correctly, it could do everything that we really need. Unfortunately, again for political reasons, in what I think is a misguided effort to continue to push U.S. hegemony in certain specific areas, corporate hegemony in this case, they’re trying to prevent these institutions from doing useful things.

LYNN FRIES: So within the UN system, where do proponents of U.S. corporate hegemony want to take discussions?

RICHARD HILL: They’re trying to move discussions into the World Trade Organization, which I think corporations rightly view as a more friendly forum for them. And where they’re more likely to get what they want than by going into the more open, inclusive and transparent forums that are in the UN. WTO is the least open and least participative and most secretive of any of the intergovernmental organizations. And it’s the most dominated by corporations, as most people know.

LYNN FRIES: As an example of how this is going on today, talk about the working group you were recently involved in at the United Nations here in Geneva. We don’t have much time, so briefly explain the objectives of that working group, and then what happened.

RICHARD HILL: Yes, that was trying to find ways and means to improve various things, such as affordable access, security, freedom of speech, these kinds of things. Discussions were completely blocked. Once again by the United States and its allies, again saying, well, you know, maybe there are things that should be discussed, but they should not be discussed here. Maybe they should be discussed at some other UN agency. But then when you go to that other UN agency, they say no it shouldn’t be discussed there. And then there should be no new mechanism. And there’s no need for any additional coordination. The message from that camp was, well, basically, all we need is more multi-stakeholder models. Now, about halfway through that group, the U.S. and again its allies started promoting the idea that most of these issues should actually be discussed at the World Trade Organization. So then in the group I kind of had fun and made friends, as a sarcastic term – anything but friends – by pointing out that there’s some incoherence and hypocrisy here. How can you be in the UN forum and say all we need to do is more multi-stakeholder model, and then go to the WTO, which is completely closed, opaque, not multi-stakeholder and say well, let’s make decisions, like about free flow of data in the WTO? So there’s a clear incoherence there. And I think a lot of people saw that. And that’s kind of led to this current let’s say effervescence or movement in this whole area, where even some of the big private companies like Microsoft are beginning to say no, wait a minute, we need some intergovernmental discussion. Because you know, you can’t on the one hand say, let’s do it all in the private sector when you’re in the UN and then go into the WTO and say, no let’s all negotiate this behind closed doors with no parliamentary supervision, no input from civil society and binding treaties. And the WTO, as many viewers know, is one of the very few, in fact the only intergovernmental organization that has a tribunal, dispute settlement resolution tribunal, which can actually make binding decisions, which then have economic consequences. That’s not true for most of the other treaties.

LYNN FRIES: So what’s being proposed at the World Trade Organization by the U.S. and its allies?

RICHARD HILL: What’s being proposed in the WTO is basically not no restrictions on the flow of data because they know the Europeans are not going to accept that, but limited restrictions on the flow of data. And the reason to have that is twofold. On the one hand, it serves the interests of the current Internet giants whose business model is based on amassing as much data as possible in order then to sell targeted advertising. Or now in order to build artificial intelligence programs, which then in turn collect more data and provide more services. And this would be highly concentrated and so those a few players would own all the value added. So that’s one aspect.

The other aspect, of course, is as the data flows more freely around the world, it makes it easier for various intelligence agencies like the National Security Administration to get into that and tap those data flows. And then do whatever they want to do with it. The business model of the NSA and of a company like say a Google or Facebook is about the same. Collect as much data as you can, try to create some clever algorithms to analyse it in order to pick out things of interest, and then exploit those. So in the case of the NSA, it’s let’s see if we can figure out who’s a terrorist in some country, and then send a cruise missile over there and try to kill that person. And in the case of a commercial player like Facebook, it’s let’s see if we can figure out who’s more likely to buy this and this type of product. And then we’re going to sell the advertising to the manufacturer of that product on the grounds that hey, this is very effective, because we can target people specifically who are looking for your product.

LYNN FRIES: And what’s your response to that?

RICHARD HILL: There should be no discussions of free flow of data in WTO or any other trade forum until some preconditions are met. And what are those preconditions? Well, first of all, we should have a global regime on data privacy. How can you start negotiating commercial aspects of free flow data if you haven’t yet agreed at a global level how much control I as a citizen or I as a collectivity of citizens have over that data? It just makes no sense. Putting the cart before the horse. The other precondition is to have some sort of effective global worldwide antitrust protection. Already the antitrust mechanisms that we have at the national level don’t work very well in the Internet era because of too much concentration due to network externalities and economies of scale. And at the international level we have absolutely nothing. There’s no agreed global norm on antitrust, no enforcement agencies. There’s no nothing. And so how can you control these big players? Like for example, just recently, it was announced that the European Union just fined Google, I think it was 3 billion euros, or something like that. Sounds like a gigantic amount but actually it’s nothing compared to Google’s profits and turnover. So Google can merrily pay that and continue along on its way. So you cannot have national or even regional effective antitrust enforcement against these gigantic global corporations. You really have to look at it globally. So until we have global antitrust and global agreements on data protection, how can you negotiate free flow of data? It doesn’t make any sense.

LYNN FRIES: We’re going to break and be back with our guest for the second half of this discussion. Richard Hill, thank you.

RICHARD HILL: Thank you. It’s a pleasure.

LYNN FRIES: And thank you for joining us on The Real News Network.

Trump Is Giving Protectionism a Bad Name

By William G. Moseley (guest post)

While it might not seem like it now, President Donald Trump is a gift to free market-oriented economists and policymakers. His clumsy approach to protectionism has ignited a trade war that inevitably will harm the U.S. economy. When the pendulum inexorably swings the other way after the Trump fiasco, free trade ideology will return with a vengeance. This is a potential tragedy for left-leaning policy analysts who have long been concerned about the excesses of neoliberalism and argued for a more measured use of tariffs to foster local economic development. As such, it critical that we distinguish between Trump’s right-wing nationalist embrace of tariffs and the more nuanced use of this tool to support infant industries.

As a development geographer and an Africanist scholar, I have long been critical of unfettered free trade because of its deleterious economic impacts on African countries. At the behest of the World Bank and the International Monetary Fund, the majority of African countries were essentially forced, because of conditional loan and debt-refinancing requirements, to undergo free market–oriented economic reforms from the early 1980s through the mid-2000s. One by one, these countries reduced tariff barriers, eliminated subsidies, cut back on government expenditures, and emphasized commodity exports. With the possible exception of Ghana, the economy of nearly every African country undertaking these reforms was devastated.

This is not to say that there was no economic growth for African countries during this period, as there certainly was during cyclical commodity booms. The problem is that the economies of these countries were essentially underdeveloped as they returned to a colonial model focused on producing a limited number of commodities such as oil, minerals, cotton, cacao, palm oil, and timber. Economic reforms destroyed the value-added activities that helped diversify these economies and provided higher wage employment, such as the textile, milling, and food processing industries. Worse yet, millions of African farmers and workers are now increasingly ensnared in a global commodity boom-and-bust cycle. Beyond that cycle, they are experiencing an even more worrying long-term trend of declining prices for commodities.

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University of Vermont Penalizes Rethinking Economics

By Steve Keen, professor and Head of the School of Economics, History and Politics at Kingston University in London
Cross-posted from his Patreon page.

Mainstream economics clearly failed humanity in 2007, when, as the world sat on the brink of the biggest economic crisis since the Great Depression, mainstream economic models were predicting that 2008 was going to be a great year.My favourite such prediction was the OECD’s bi-annual Economic Outlook, which proclaimed in June of 2007 that “the current economic situation is in many ways better than what we have experienced in years“.




In its Economic Outlook last Augutm, the OECD took the view that the US slowdown was not heralding a period of worldwide economic weakness, unlike, for instance, in 2001. Rather, a “smooth” rebalancing was to be expected, with Europe taking over the baton from the United States in driving OECD growth.

Recent developments have broadly confirmed this diagnosis. Indeed, the current economic situation is in many ways better than what we have experienced in years. Against that background, we have stuck to the rebalancing scenario. Our central forecast remains indeed quite benign: a soft landing in the United States, a strong and sustained recovery in Europe, a solid trajectory in Japan and buoyant activity in China and India. In line with recent trends, sustained growth in OECD economies would be underpinned by strong job creation and falling unemployment.


That was two months before the crisis began.

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Will Trump’s Trade War Make America Great Again?

By Jomo Kwame Sundaram, Anis Chowdhury
Crossposted at Inter Press Service.
The United States has had the world’s largest trade deficit for almost half a century. In 2017, the US trade deficit in goods and services was $566 billion; without services, the merchandise account deficit was $810 billion.
The largest US trade deficit is with China, amounting to $375 billion, rising dramatically from an average of $34 billion in the 1990s. In 2017, its trade deficit with Japan was $69 billion, and with Germany, $65 billion. The US also has trade deficits with both its NAFTA partners, including $71 billion with Mexico.
President Trump wants to reduce these deficits with protectionist measures. In March 2018, he imposed a 25% tariff on steel imports and a 10% tariff on aluminium, a month after imposing tariffs and quotas on imported solar panels and washing machines. On 10 July, the US listed Chinese imports worth $200 billion annually that will face 10% tariffs, probably from September, following 25% tariffs on $34 billion of such imports from 7 July.

Argentina: 20 Years on, Has the IMF Really Changed Its Ways?  

By Gino Brunswijck, Maria Jose Romero and Bodo Ellmers, The European Network on Debt and Development (Eurodad)

Argentinians are experiencing deja-vu this month as the government announces massive layoffs and a hiring freeze as part of an adjustment package attached to a loan from the International Monetary Fund (IMF). Thousands of public servants are being forced yet again to swallow the bitter pill of austerity, which the IMF programme – published last Friday – aims to patch up through increased targeted social assistance.

For many Argentinians the financial crisis gripping the country, and the return to the Fund, brings back bad memories of 2001. Then, IMF-induced policies triggered the worst economic meltdown in Argentinian history.  A cocktail of austerity measures contributed to the contraction of economic activity with a loss of 20 % of GDP between 1998 and 2002. They also compromised the government’s ability to provide essential services; unemployment soared above 20 % while real wages dropped by 18%; and poverty affected more than half of all Argentinians. Children were most affected, with seven out of 10 falling below the poverty line.

To appease popular discontent, the government and IMF officials have emphasised that this time the Fund has changed its ways. However, a comparison between previous and current agreements points to business as usual, focusing on traditional austerity with a few cosmetic tweaks.

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EU Elite on the (Far) Right Side of History

By John Weeks

There seems some disagreement as to whether Nero played the violin or the harp as Rome burned in AD 64.  Whatever happened 1,954 years ago, there was considerable complacent fiddling in Brussels after the 4 March Italian election.  To replace the centrist government of neoliberal Matteo Renzi Italian voters cast 60% of their ballots for two anti-EU parties, the aggressively xenophobic coalition of Lega neo-fascists and the anti-immigrant 5 Star Movement (Movimento 5 Stelle, M5S).

Confounding the hope and expectation of the EU elite, this pair formed their misbegotten government in Rome in April.  The anti-EU rhetoric of these two parties, plus their promise to breech EU budget rules – end fiscal austerity – ended the fiddling and set off alarm bells.

The EU elite quickly moved to prevent this anti-establishment government from rocking the Brussels neoliberal consensus.  The nominally neutral Italian president refused to accept the first proposed coalition government of the Lega-M5S.  The refusal did refer to thee proposed racist immigration policies, nor to its aggressively anti-Roma policies.   Unacceptable to the president that the person nominated for finance minister, who had long standing opposition to the euro (see commentary by Yanis Varoufakis).

Should anyone miss the implied priories of the Italian establishment, the president sought to form an interim government that would continue Brussels-designed austerity policies. To lead that government the president chose a former functionary of the International Monetary Fund.  This affront to the electoral process proved short-lived.  Soon the far right Lega and eclectic right M5S were back in government with a different, but no less anti-austerity, finance minister.

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Why Mexican Farmers Are Hopeful About López Obrador’s Win

By Timothy A. Wise

The victory of Andrés Manuel López Obrador and his Morena party in Sunday’s Mexican elections has stunned international observers. The center-left insurgency received an estimated double the votes of its nearest rival in a multi-party presidential race, winning more than 50 percent of the vote, several important governorships including the first woman to run Mexico City, and an absolute majority in the House of Representatives and the Senate. However the final tally ends up, López Obrador has a resounding mandate for change.

Many observers have interpreted the results as a vote against rampant corruption; given the pervasive graft and influence-peddling in Mexico, López Obrador’s clean, austere reputation was certainly a factor for voters. But economic factors also motivated many voters, especially farmers. The majority of Mexicans have been left behind in a failing strategy to hitch the country’s fortunes to open trade with the United States under the North American Free Trade Agreement (NAFTA).

As one recent report summarized, “Poverty is worse than a quarter century ago, real wages are lower than in 1980, inequality is worsening, and Mexico ranks 18th of 20 Latin American countries in terms of income growth per person in 21st century.” It is hard to imagine worse outcomes in a country with privileged and historic access to the largest capital and consumer markets in the world—the U.S.

Among those rejoicing now over López Obrador’s victory are Mexico’s farmers, who have been largely abandoned by the government while unregulated imports of below-cost maize, wheat, pork, and other agricultural goods flooded Mexican markets under NAFTA. (See my report.) After the agreement took effect in 1994, maize farmers endured a 400-percent increase in imports of U.S. maize priced 19-percent below its costs of production, resulting in a punishing 66-percent drop in producer prices. Producers of other farm goods faced similar pressures, forcing many to become migrant workers in the strawberry fields of multinational growers or migrate to the U.S. without documentation.

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Global Financial Governance Ten Years After the Crisis

The financial crisis of 2008, which resulted in the near meltdown of the world’s financial and banking system, has left a lot of questions unanswered regarding reform and whether enough has been done to avoid another similar crisis. A leading authority on financial governance, Ilene Grabel, Professor of  International Finance at the University of Denver, spoke to C. J. Polychroniou about where things stand today ten years after the biggest capitalist crisis since the Great Depression. (Cross-posted at Global Policy.)

C. J. Polychroniou: It’s been ten years since the outbreak of the financial crisis, and the verdict on the effect of that crisis on global financial governance remains largely ambiguous.  Nonetheless, all this may soon change as a result of the publication of your recent book titled When Things Don’t Fall Apart: Global Financial Governance and Developmental Finance in an Age of Productive Incoherence.  In this book, you argue that much has in fact changed since the East Asian financial crisis of 1997-98 and especially since the global financial crisis of 2008. In what ways has global financial governance changed over the last couple of decades?

Ilene Grabel: I argue that the contradictory effects of the East Asian financial crisis (EAFC) of 1997-8 laid groundwork for consequential (albeit paradoxical) shifts in several dimensions of global financial governance and developmental finance that deepened during and since the global crisis. The EAFC solidified neoliberalism through the leverage granted to external and domestic actors who had been previously unable to secure liberal reform prior to the crisis. The EAFC also inaugurated a gradual, uneven rethinking of capital flow liberalization. In addition, the crisis gave the IMF a vast new client base. But the crisis was ultimately costly to the institution because its crisis response led EMDEs to implement strategies (such as reserve accumulation) to escape its orbit. Reserve accumulation was enabled by the fortuitous global economic conditions that followed the EAFC.  The Asian Monetary Fund (AMF) proposal catalyzed by the EAFC was quickly scuttled by tensions between Japan and China, tensions that were adroitly exploited by the IMF and the U.S. government, both of which strongly opposed the AMF. Though the AMF proposal failed, the crisis ultimately bore fruit in the region and beyond. Not least, it yielded the creation of a currency reserve pooling arrangement among the members of the Association of Southeast Asian Nations plus Japan, China, and South Korea (ASEAN+3). More broadly, the EAFC stimulated in other regions of the developing world an interest in regional mechanisms that could deliver countercyclical liquidity support and long-term project finance through institutions that are, to some degree or other, independent of the Bretton Wood Institutions (BWIs, namely, the IMF and World Bank). In sum, the EAFC marked the beginning of the end of a unified neoliberal regime.

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Warnings of a New Global Financial Crisis

By Martin Khor

Cross-posted at Inter Press Service.

There are increasing warnings of an imminent new financial crisis, not only from the billionaire investor George Soros, but also from eminent economists associated with the Bank of International Settlements, the bank of central banks.

The warnings come at a moment when there are signs of international capital flowing out of some emerging economies, including Turkey, Argentina and Indonesia.

Some economists have been warning that the boom-bust cycle in capital flows to developing countries will cause disruption, when there is a turn from boom to bust.

All it needs is a trigger, which may then snowball as investors in herd-like manner head for the exit door. Their behaviour is akin to a self-fulfilling prophecy: if enough speculative investors think this is the time to move back to the global financial capitals, then the exodus will happen, as it did in previous “bust” phases of the cycle.

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Growing Resistance: The Rise and Fall of Another Mozambique Land Grab

By Timothy A. Wise

The rice fields of Xai-Xai, three hours up the coast from Maputo, are vast, coming into view as we descended onto the alluvial plain from the villages that dot the hills above. They stretch across the plains toward the Indian Ocean as far as the naked eye can see, in the flat green monochrome of a rice plantation. Mozambique was one of the leading targets of large-scale agricultural investment projects, widely denounced as “land-grabs” by critics. Community resistance had prevented most such projects in Mozambique, including ProSAVANA, the controversial Brazil-Japan initiative, which was slated to be the largest land grab in Africa. As I’d seen in the field, it seemed to grow not crops but only rumors, threats, government proclamations, and community resistance.

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