Understanding Brexit

On April 24, John Weeks, retired from SOAS University of London, gave testimony on the economic cost of Brexit to the Committee on the Affairs of the European Union of the Deutsche Bundestag. He was invited as an expert witness by the Left Party (Die Linke) based on a study he had co-authored on reform of the European Union. His main points were that while the economic costs have been exaggerated, the social consequences, especially loss of EU protection of the environment, consumer rights, employment rights and civil rights, will be extremely detrimental to British citizens, with the possible independence of Scotland a massive shock to the political system.

Summary of testimony (in German, use right-click to translate)

A primer on the split that has now been set into motion.

John Weeks

In the United Kingdom on June 23, 2016, 52% of those casting ballots voted in favor of ending the UK’s membership in the European Union—generally referred to as “Brexit” (Britain + exit). Voters in England (population 53 million) and Wales (3.1 million) supported “Leave” (in both about 53% voted to leave), while Northern Ireland (1.8 million) and Scotland (5.3 million) gave majorities for “Remain” (53% and a landslide 62%, respectively).

These results came on a high voter turnout of 72% (compared to 66% in the 2015 national election). Whether the outcome was “close” is a question of opinion. Those of us in the losing camp think so, while the winners consider the outcome “decisive.” It is with some reluctance that I concede that many may have voted to stay with little enthusiasm, balanced perhaps by “Leave” voters who did so to protest government policies while believing Brexit would lose.

Various hypotheses have come forth to explain why a majority of those voting chose “Leave”: national sovereignty (however defined), dislike of the European Union, revenge of globalization “losers,” and anti-immigration sentiment. While anger over the inequalities generated by globalization and fears of immigrants may have prompted many in the working and middle classes to vote for Brexit, this and other anti-EU motivations must be placed in the longer context of British relations with the continent.

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Globalization and the End of the Labor Aristocracy, Part 4

This is the concluding part of a four-part article by Jayati Ghosh, published in the March/April 2017 special “Costs of Empire” issue of Dollars & Sense magazine. Parts 1, 2, and 3 are available here, here, and here respectively. In this section, Prof. Ghosh focuses on the erosion of labor incomes in the high-income countries and the implications for politics there.

Jayati Ghosh

End of the Labor Aristocracy … What Comes Next?

A recent report from the McKinsey Global Institute, “Poorer than Their Parents? Flat or falling incomes in advanced economies” (July 2016) shows how the past decade has brought significantly worse economic outcomes for many people in the developed world.

Falling Incomes

In 25 advanced economies, 65-70% of households (540-580 million people) “were in segments of the income distribution whose real incomes were flat or had fallen” between 2005 and 2014. By contrast, between 1993 and 2005, “less than 2 percent, or fewer than ten million people, experienced this phenomenon.”

In Italy, a whopping 97% of the population had stagnant or declining market incomes between 2005 and 2014. The equivalent figures were 81% for the United States and 70% for the United Kingdom.

The worst affected were “young people with low educational attainment and women, single mothers in particular.” Today’s younger generation in the advanced countries is “literally at risk of ending up poorer than their parents,” and in any case already faces much more insecure working conditions.

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Growing Inequality Under Global Capitalism

Jomo Kwame Sundaram and Anis Chowdhury

Income and wealth inequality has increased in recent decades, but recognition of the role of economic liberalization and globalization in exacerbating inequality has never been so widespread. The guardians of global capitalism are nervous, yet little has been done to check, let alone reverse the underlying forces.

Global elite alarmed by growing inequality

The World Economic Forum (WEF) has described severe income inequality as the biggest risk facing the world. WEF founder Klaus Schwab has observed, “We have too large a disparity in the world; we need more inclusiveness… If we continue to have un-inclusive growth and we continue with the unemployment situation, particularly youth unemployment, our global society is not sustainable.”

Christine Lagarde, IMF Managing Director, told political and business leaders at the WEF, “in far too many countries the benefits of growth are being enjoyed by far too few people. This is not a recipe for stability and sustainability.” Similarly, World Bank President Jim Yong Kim has warned that failure to tackle inequality risked causing social unrest. “It’s going to erupt to a great extent because of these inequalities.”

In the same vein, the influential US Council of Foreign Relations’ journal, Foreign Affairs, carried an article cautioning, “Inequality is indeed increasing almost everywhere in the post-industrial capitalist world…. if left unaddressed, rising inequality and economic insecurity can erode social order and generate a populist backlash against the capitalist system at large.”

Much ado about nothing?

Increasingly, the main benefits of economic growth are being captured by a tiny elite. Despite global economic stagnation for almost a decade, the number of billionaires in the world has increased to a record 2,199. The richest one per cent of the world’s population now has as much wealth as the rest of the world combined. The world’s eight richest people have as much wealth as the poorer half.

In India, the number of billionaires has increased at least tenfold in the past decade. India now has 111 billionaires, third in the world by country. The largest number of the world’s abject poor also live in the same country — over 425 million, a third of the world’s poor, and well over a third of the country’s population.

Africa had a resource boom for a decade until 2014, but most people there still struggle daily for food, clean water and health care. Meanwhile, the number of people living in extreme poverty, according to the World Bank, has grown substantially to at least 330 million from 280 million in 1990!

In Europe, poor people bore the brunt of draconian austerity policies while bank bailouts mainly benefited the moneyed. 122.3 million people, or 24.4 per cent of the population in the EU-28, are at risk of poverty. Between 2009 and 2013, the number of Europeans without enough money to heat their homes or cope with unforeseen expenses, i.e., living with “severe material deprivation,” rose by 7.5 million to 50 million people, while the continent is home to 342 billionaires!

In the United States, the income share of the top one per cent is at its highest level since the eve of the Great Depression, almost nine decades ago. The top 0.01 per cent, or 14,000 American families, own 22.2 per cent of its wealth, while the bottom 90 per cent, over 133 million families, own a meagre four per cent of the nation’s wealth. The top five per cent of households increased their share of US wealth, especially after the 2008 financial crisis. Meanwhile, the richest one per cent tripled their share of US income within a generation.

This unprecedented wealth concentration and the corresponding deprivation of others have generated backlashes, arguably contributing to the victory of Donald Trump in the US presidential election, the Brexit referendum, the strength of Marine Le Pen in France, the Alternative for Germany, and the ascendance of the Hindutva right in secular India.

“Communist” China and inequality

Meanwhile, China has increasingly participated in and grown rapidly as inequality has risen sharply in the ostensibly communist-ruled country. China has supplied cheaper consumer goods to the world, checking inflation and improving living standards for many. Part of its huge trade surplus — due to relatively low, albeit recently rising wages — has been recycled in financial markets, mainly in the US, which helped expand credit at low interest rates there.

Thus, cheap consumer products and cheap credit have enabled the slowly shrinking “middle class” in the West to mitigate the downward pressure on their living standards despite stagnating or falling real wages and mounting personal and household debt.

China’s export-led development on the basis of low wages has sharply increased income inequality in the world’s largest country for more than three decades. Beijing is the new “billionaire capital of the world,” no longer New York. China now has 594 billionaires, 33 more than in the US!

Since the 1980s, income inequality in China has risen faster than most! China now has one of the world’s highest levels of income inequality, rising mainly in the last three decades. The richest one per cent of households own a third of the country’s wealth, while the poorest quarter own only one per cent. China’s Gini coefficient for income rose to 0.49 in 2012 from 0.3 over three decades before when it was one of the most egalitarian countries in the world. Another survey put China’s income Gini at 0.61 in 2010, greatly exceeding the US’s 0.45!

Originally published by Inter Press Service.

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Letter from Vietnam

James K. Boyce

As a first-time visitor to Vietnam I’m struck by three things. First, the sheer beauty of the countryside, from the green sheen of rice paddies to the mist-shrouded mountains. Second, the vibrancy of the economy, tangible not only on the streets of its cities but even in the ethnic villages of the far north. Finally, most remarkable to me as an American, the lack of acrimony left by the war fought in my youth.

The American War, as it’s called in Vietnam, killed one million Vietnamese combatants and civilians, maybe many more – no one kept reliable score. It took the lives of 58,000 Americans, including some of my high school classmates. It cost American taxpayers over $100 billion – more like $800 billion in today’s money – in military spending alone, not counting the deferred costs of veterans’ benefits and interest on government debt.

As I travel, a recurring thought loops through my mind: We fought the war to prevent … this?

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Globalization and the End of the Labor Aristocracy, Part 3

This is Part 3 of a four-part article by Jayati Ghosh, published in the March/April 2017 special “Costs of Empire” issue of Dollars & Sense magazine. Parts 1 and 2 are available here and here, respectively. The final part will appear on Triple Crisis next week. In this section, Prof. Ghosh focuses on the current structure of globalized production and its implications for the distribution of income within and between countries.

Jayati Ghosh

Structures of Global Production and Trade

It is often argued that the rise of new powers—especially China, but also India, Brazil and others—means that the concept of “imperialism” is no longer valid. Yet the imperialist phase of capitalism has always been characterised by the emergence of “new kids on the block,” some of which have gone on to become neighborhood bullies. At the time when Lenin wrote his famous pamphlet Imperialism: The Highest Stage of Capitalism, a century ago, the emergence of the United States as the dominant global power was far from evident. Lenin’s claim that, during the imperialist phase of capitalism, “the territorial division of the whole world among the biggest capitalist powers is completed” is the weakest link in his argument, and one which was belied almost immediately. The United States, which was then only a minor player compared to the major European powers, emerged to dominate the world scene from the second half of the 20th century on. The rise of Japan in the second half of the 20th century by no means signified a weakening of imperialist power generally; it merely necessitated a more complicated assessment of such power.

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Casting Away Despair

Triple Crisis blogger Liz Stanton delivered the following talk at a Brookline (MA) Climate Week event on April 1. Stanton is the founder and director of the Applied Economics Clinic at the Global Development and Environment Institute (GDAE), Tufts University, described as follows on its website:

“The Applied Economics Clinic provides technical expertise to public service organizations working on topics related to the environment, consumer rights, the energy sector, and community equity. Founded by GDAE Senior Research Fellow Liz Stanton in February 2017, the Clinic is a non-profit consulting group offering low-cost and pro bono expert services from seasoned professionals, while also providing on-the-job training to the next generation of technical experts on public interest issues.”

Liz Stanton

It’s been a hard week for hope. It’s been a hard six months for hope. And I say that as someone who’s spent a career dedicated to building our societal knowledge regarding climate change. It’s easy to despair, and I know that I’m not the only person here today who feels that: Our hope has been trampled on quite a bit, and it’s looking a little worse for wear.

It is easy to despair. But I want to do something harder. And I’m guessing there are folks in the audience that feel the same way. I don’t want to despair. I want to fight.

I’ve been thinking a lot about what it is I’m fighting against. The root of the problem. And here’s what I’ve got for you.

Selfishness.

A set of values currently espoused by our nation’s elected representatives that boil down to nothing more or less than selfishness. The foxes are guarding the hen house, and they are desperately short-sighted. Concerned with nothing but lining their little fox pockets in this minute, this theft, this deal.

Well to me the values that have taken over in Washington—in word and in deed—look a whole lot like the values of toddlers and sociopaths:

  1. Me, Me, Me: It’s all about me. A cult of individualism.
  2. More, More, More: More stuff means I’m more powerful.
  3. Mine, Mine, Mine: Do unto others before they can do anything unto you.

Those are the values behind the policies to end climate regulation, strip access to healthcare, and defund Sesame Street.

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Dispute Settlement Becomes Speculative Financial Asset

Jomo Kwame Sundaram

Investor-state dispute settlement (ISDS) provisions in bilateral investment treaties (BITs) and free trade agreements (FTAs) have effectively created a powerful and privileged system of protections for foreign investors that undermines national law and institutions.

ISDS allows foreign corporations to sue host governments for supposedly causing them losses due to policy or regulatory changes that reduce the expected profitability of their investments. Very significantly, ISDS provisions have been and can be invoked, even when rules are non-discriminatory, or profits come from causing public harm. ISDS will thus strengthen perverse incentives for foreign investors at the expense of local businesses and the public interest.

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Reading Capital 150 Years Hence

Erinç Yeldan

Karl Marx published the first volume of Capital one hundred and fifty years ago. The writing of Capital was aimed at uncovering the operational laws of capitalism, as well as providing a theoretical weapon for the working class in its historical struggle for freedom and equality against the bourgeoisie. We have to remember that the main motivation behind this Herculean theoretical effort was not limited only to a realistic depiction of the conditions of the working class under capitalist accumulation, but to unearth the intrinsic elements of these iron laws in their sheer brutality.

If we are to read Capital once again hundred and fifty years after its publication, we ought to distinguish between Marx’s efforts to understand the logic of capital in its abstract form and his efforts concerning the realization of this logic in terms of class struggle. In other words, if we were to interpret Marx’s writings in a deterministic and mechanical fashion, we would not be able to understand the dynamics of the evolving “new international division of labor” between different countries, different geographies, and the new forms of capital and working classes.

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Globalization and the End of the Labor Aristocracy, Part 2

This is Part 2 of a four-part article by Jayati Ghosh, published in the March/April 2017 special “Costs of Empire” issue of Dollars & Sense magazine. Part 1 is available here. Subsequent parts will appear on Triple Crisis over the next two weeks. In this section, Prof. Ghosh focuses on the new international economic architecture for trade, investment, and property rights.

Jayati Ghosh

International Economic Agreements

The past two decades have witnessed an explosion in the treaties, agreements, and other mechanisms whereby global capital imposes it rules upon governments and their citizenries. Unlike the conditions imposed on developing countries by the IMF and the World Bank, these rules apply even to countries that are not debtor-supplicants to international financial institutions. They require all countries to restrict their policies, though these restrictions are especially damaging to the prospects of autonomous economic development in the “periphery” of the world capitalist economy.

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Reflections on World Health Day

Martin Khor

What is the most precious thing in the world which unfortunately we take for granted and realise its true value when it is impaired? Good health, of course.

In the last Global Trends, I wrote about the importance of water on World Water Day.

On April 7 we celebrated World Health Day. Water and health are the most critical things in our daily life.

In the 1980s, the World Health Organisation’s director-general Half­dan Mahler steered through a declaration with the popular slogan “Health for all by the year 2000”.

We crossed into the 21st century without realising that noble goal. Although health has improved in most countries, due mainly to cleaner water and sanitation and also better treatment, much remains to be done.

In recent years, the slogan “Health for All” has been strengthened by the recognition in the United Nations of health as a human right. It has been further boosted by the adoption of the principle of universal healthcare.

This means that no one should be deprived of healthcare, even if he is too poor to afford it.

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