The Coming Storm: Italy Under An All-Populist Government And EU’s Impasse

C.J. Polychroniou

A clear pattern has emerged in European societies since the outbreak of the euro crisis in 2010. Voters across the socioeconomic spectrum are casting their votes in support of populist, anti-establishment movements and parties whose leaders offer an inward vision of the future combined with a strong dislike for the political culture of liberal democracy and the values professed by the European Union, including overt skepticism over the single currency, the euro.

However, as yet, it is only in Italy that the political pendulum moved so far to the right that an all-populist government was eventually allowed, after Italian president Mattarella blocked the nomination of Eurosceptic economist Savano for the position of the Ministry of Finance, to be formed under the leadership of a nonelected prime minister, an unknown law professor, Giuseppe Conte, whose academic credentials, as stated in his professional CV, appear to lack truthfulness.

But this is a hardly a consolation to Brussels for there is probably no more problematic country in all of western Europe today, save Greece, for undergoing such epigenetic political changes.
Sure enough, the fact that the anti-establishment Five Star Movement, founded in 2009 by the comedian Beppe Grillo and the ingenious blogger Gianroberto Casaleggio, and the reactionary Northern League (il Carroccio), founded in 1991 with the principal aim of advancing a system of fiscal federalism in order to halt the flow of resources from the northern to the southern regions of Italy, managed to pull jointly a majority of the votes in the March elections and thereby sweep away the mainstream but otherwise dysfunctional political establishment of the postwar era bodes well neither for Italy nor for the EU.

Given Italy’s fiscal and overall economic state of affairs, it is actually through sheer luck that a full-blown financial crisis has not actually erupted in the eurozone’s third largest economy, and eighth largest in the world by nominal GDP. The country’s public debt to GDP ratio stands currently at 131.80%, which is the highest level since unification in 1861, and the fifth largest worldwide. Such high levels of public debt to GDP ratio are simply prohibited under the Frankstein-like creation of the European Monetary Union, where a single currency zone exists among scores of highly diverse economies and political cultures but without a fiscal union or fiscal transfer mechanisms to address competitiveness imbalances, which are quite severe between North and South.

Lest we forget, the Greek debt crisis exploded in early 2010, with the private international credit markets sending borrowing costs to stratospheric levels, when the country’s public debt to GDP ratio was believed to have been around 128%. The fact that about 60% of Italian debt is held by residents has provided indeed something of a safety cushion against a yield market backlash, but this is unlikely to continue indefinitely given the shaky standing of the country’s banks, which hold more than 75% of the debt owned by residents — a concern which will be magnified now that a quacky populist government will be in charge of Italy’s public finances.

Indeed, markers have already shown increased nervousness to the formation of an all-populist government cabinet. The gap between Italian and German government 10-year bond yields has grown significantly lately (by more than 75 basis points between April to May), and the gap will surely grow if the economic policies advocated by the leaders of the Five Star Movement and the Northern League, respectively, are adopted by prime minister Giuseppe Conte.
Both the Five Star Movement and the Northern League advocate a potpourri economic agenda which appears attractive to rich and poor alike, such as sharp tax cuts (both parties favor a flat 25% tax rate) and welfare handouts while promising at the same time to get rid of illegal immigrants and curb further immigration. Read more

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Misleading Unemployment Numbers And The Neoliberal Ruse Of “Labor Flexibility”

Prof.dr. Robert Pollin

Poverty is deepening and the standard of living is declining in the US, even as the national unemployment rate has hit historically low levels. Meanwhile, wages remain stagnant and inequality is worsening with every passing year. What explains this anomalous state of the US economy, and what can be done about it? In this exclusive interview with Truthout, economist Robert Pollin, co-director of the Political Economy Research Institute at the University of Massachusetts at Amherst, analyzes the perverse and extreme nature of the neoliberal economic landscape in the US.

C.J. Polychroniou: Bob, the official US unemployment rate was at 3.8 percent in May 2018, which is the lowest rate since 2000. Is this an indication of the underlying strength of the economy under the policies of the Trump administration, as some pundits seem to be suggesting?

Robert Pollin: After the bursting of the Wall Street speculative bubble at the end of 2007, the US and global economy collapsed into the Great Recession, with national income (GDP) falling by 4 percent by the end of 2009. The US economy has been in a “recovery” since the end of 2009 — meaning that national income has been rising steadily for nine years. But the recovery has been extremely weak by historical standards. The US economy has grown at an average of 2.1 percent between 2009 and the present. This compares with a 3.4 percent average growth rate from the end of World War II until just before the Wall Street collapse. There is no evidence that the overall growth of the US economy has improved since Trump took office in January 2017.

The official unemployment rate peaked amid the Great Recession at nearly 10 percent. It has been falling fairly steadily ever since, through most of the Obama years as well as the 18 months that Trump has held office. So again, there is no evidence that anything Trump has done per se has brought the official unemployment rate to its current low level.

We also need to be clear, though, as to what employment conditions really look like even when the official rate is historically low, at 3.8 percent. The US Labor Department itself has more than one measure of conditions in the labor market. The rate we are quoting — 3.8 percent — refers to everyone who had any kind of job as “employed,” including people who wanted to work 40 hours a week but could only find a job at, say, 10 hours a week. We call the people who aren’t getting as many hours as they would like as “underemployed,” but they are still counted as employed in the official measure of unemployment.

The Labor Department also has categories of people that it calls “marginally attached” and “discouraged.” These are people who are not counted as part of the unemployed in the official measure, because they haven’t looked for a job within the last month, but have looked within the past year. But if we count the underemployed, marginally attached and discouraged workers as among the unemployed, the US Labor Department’s own figure for this measure of unemployment rises to 7.6 percent for last month. That is 12.3 million people overall — roughly equal to the entire population of New York City and Los Angeles. Read more

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Depraved Cowards And The Collapse Of U.S. Civic Culture

C J Polychroniou

There is a clear pattern among entertainment and public figures in general in the United States, which is to make racist statements (ala Roseanne Barr) or employ vulgar and filthy language (ala Samantha Bee) and then apologize the day after when they feel the heat, professionally, and sense that their contemptible behavior may lead to a loss of job opportunities, income, and professional marginalization in general. Another very common pattern among people from all walks of life who have committed horrible acts is to try to excuse their behavior by attributing it to factors beyond their own control (drugs, alcohol, sexual disappointments (unfuckability), “the devil made me do it”, and so on).

Depraved is the only word to describe the behavior of people who do not think twice before insulting other human beings with the use of vulgar language. However, the reaction of these people to either real or perceived “corrections” that their depraved behavior may elicit by their employers also indicates that they lack a backbone. In other words, their depraved behavior is also accompanied by political cowardice.

Depraved cowardice among entertainment and public figures in the US (and a similar case can be made about many of the women in Hollywood who are coming out years later, when all is safe and secure, to declare their victimhood and demand justice for having experienced sexual assaults by men who had the power to promote or kill their acting careers) is a symptom of a capitalist culture in which the only things that really matter are money and professional advancement. But the sharp decline of civic culture in the US is also symptomatic of a society that lacks institutions and political leaders that seek to advance a vision of a common good based on the principles of reason, human dignity, justice, equality, and democratic ethos.

The entertainment industry has played of course a significant role all of its own in the deterioration of civic values and civilized behavior in U.S. society through its constant glorification of violence, with its pathological tendency to delink the individual from the social whole, and the use of incessant cursing and bad language in movie dialogues and music lyrics. Rap music, in particular, seems to thrive on the use of profane and vulgar language, and thereby leading the way towards blurring, if not wiping out, the lines between human decency and depravity. Read more

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Global Financial Governance Ten Years After The Crisis: An Interview With Ilene Grabel

Prof.dr. Ilene Grabel

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.

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.

In When Things Don’t Fall Apart I take on the widely held but incorrect view of the global crisis, which I call the “continuity thesis.” The continuity thesis holds that the opportunity for meaningful reform created by the global crisis was lost, and that nothing of significance has changed, especially as concerns EMDEs. Against this view I argue that the Asian and especially the global crisis catalyzed disparate, disconnected innovations across several dimensions of global financial governance, and that these discontinuities matter deeply for EMDEs. But to be clear: I do not argue that the global crisis occasioned an abrupt, radical shift from one regime of global financial governance to another. It hasn’t. Indeed I argue that non-trivial continuities in global financial governance are also readily apparent. But I argue–and this is the key point for me–that a chief problem with the continuity thesis is that it understands radical, systemic ruptures as the true test of meaningful change. Read more

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Are Fossil Fuel Divestment Campaigns Working? A Conversation With Economist Robert Pollin

Prof.dr. Robert Pollin

Is fossil fuels divestment an effective strategy in tackling climate change? A newly released study by the Political Economy Research Institute (PERI) at the University of Massachusetts at Amherst suggests that this strategy is not sufficient on its own in affecting the global battle against climate change and that new approaches are needed. Robert Pollin, a distinguished professor of economics at the University of Massachusetts, Amherst, co-director of PERI and co-author of the study spoke to C.J. Polychroniou about the limits of the movement to divest from fossil fuels and the need for fresh approaches and a more holistic type of action for combatting climate change.

C. J. Polychroniou: Climate change is one of the most significant threats facing human civilization today. According to some projections, there is a very high probability that temperatures will rise by several degrees in less than 100 years. In that context, and given that the largest source of greenhouse gas emissions stems from burning fossil fuels, mitigating the effects of climate change demands a transition to clean energy sources. Yet adapting to climate change does not seem to be an easy undertaking for modern societies, although the hidden costs of climate change run already into hundreds of billions of dollars a year. In your view, why is it that we are ignoring the costs associated with climate change?

Robert Pollin: I don’t think it is accurate to say that “we” are ignoring the costs associated with climate change. The evidence on the effects of climate change are widely known and are getting increasingly understood with time. Millions of people around the world are committed to disseminating valuable information and advancing policies to dramatically cut carbon dioxide (CO2) emissions, which is the most significant factor driving climate change. Certainly, the experience in the US and the Caribbean last summer and fall, with three severe hurricanes in short order — i.e. Harvey, Irma and Maria — made even more people aware of the reality that we are playing Russian roulette with the climate.

There is, rather, one fundamental reason why policy makers in most countries throughout the world are unwilling to cut their CO2 emissions sufficiently, notwithstanding the ever-mounting ecological threat. It is because the only way countries can achieve serious CO2 emissions cuts is to stop burning so much oil, coal and natural gas to produce energy. Confronting this reality in turn creates three problems that are distinct but interrelated.

The first is that workers and communities throughout the world whose livelihoods depend on people consuming fossil fuel energy will face major losses — layoffs, falling incomes and declining public-sector budgets to support schools, health clinics and public safety. The second is that profits will fall sharply and permanently for the colossal fossil fuel companies, such as Exxon-Mobil, Shell and the range of energy-based businesses owned by the US mega-billionaires David and Charles Koch. The world’s publicly owned energy companies — such as Saudi Aramco, Gazprom in Russia and Petrobras in Brazil, which together control about 90 percent of the world’s total oil reserves — will take still larger hits to their revenues. The third problem pushes us beyond the fossil fuel industry itself and into broader issues of jobs and prospects for economic growth. According to most analysts, economies will face higher energy costs when they are forced to slash their fossil fuel supplies. It will therefore become more expensive to operate the full gamut of buildings, machines and transportation equipment that drive all economies forward. Read more

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Noam Chomsky On Donald Trump And The “Me First” Doctrine

Noam Chomsky ~ Photo:

President Trump’s sudden cancellation of the upcoming denuclearization summit with North Korean leader Kim Jong Un is just the latest example of Trump’s wildly erratic approach to foreign policy.

While Trump’s domestic policies seem to be guided by clear objectives — increasing corporate profits, undoing every policy made by the Obama administration, and appeasing Trump’s anti-immigrant base — the imperatives driving US foreign policy under Trump remain something of a mystery.

In this exclusive interview, renowned linguist and public intellectual Noam Chomsky sheds light on the realities and dangers of foreign relations in the age of “gangster capitalism” and the decline of the US as a superpower.

C. J. Polychroniou: Noam, Donald Trump rose to power with “America First” as the key slogan of his election campaign. However, looking at what his administration has done so far on both the domestic and international front, it is hard to see how his policies are contributing to the well-being and security of the United States. With that in mind, can you decode for us what Trump’s “America First” policy may be about with regard to international relations?

Noam Chomsky: It is only natural to expect that policies will be designed for the benefit of the designers and their actual — not pretended — constituency, and that the well-being and security of the society will be incidental. And that is what we commonly discover. We might recall, for example, the frank comments on the Monroe Doctrine by Woodrow Wilson’s Secretary of State, Robert Lansing: “In its advocacy of the Monroe Doctrine the United States considers its own interests. The integrity of other American nations is an incident, not an end. While this may seem based on selfishness alone, the author of the Doctrine had no higher or more generous motive in its declaration.” The observation generalizes in international affairs, and much the same logic holds within the society.

There is nothing essentially new about “America First,” and “America” does not mean America, but rather the designers and their actual constituency.

A typical illustration is the policy achievement of which the Trump-Ryan-McConnell administration is most proud: the tax bill — what Joseph Stiglitz accurately called “The US Donor Relief Act of 2017”. It contributes very directly to the well-being of their actual constituency: private wealth and corporate power. It benefits the actual constituency indirectly by the standard Republican technique (since Reagan) of blowing up the deficit as a pretext for undermining social programs, which are the Republicans’ next targets. The bill is thus of real benefit to its actual constituency and severely harms the general population.

Turning to international affairs, in Trumpian lingo, “America First” means “me first” and damn the consequences for the country or the world. The “me first” doctrine has an immediate corollary: it’s necessary to keep the base in line with fake promises and fiery rhetoric, while not alienating the actual constituency. It also follows that it’s important to do the opposite of whatever was done by Obama. Trump is often called “unpredictable,” but his actions are highly predictable on these simple principles. Read more

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