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AFTER IRAQ, BUSHIES PLAN WORLD WAR THREE Japanese "defense force" practices amphibian landings in Southern California. Target: China. Chris Reed reports from Tokyo. The FBI and the Myth of Fingerprints: Cockburn and St Clair trace the final downfall of "100 per cent certainty" on fingerprint matches What's a miner's life worth? Do we hear $230 and seventy six cents? Jeffrey St Clair on Big Coal's lethal auction, courtesy of the Bush administration. ... CounterPunch Online is read by millions of viewers each month! But remember, we are funded solely by the subscribers to the print edition of CounterPunch. Please support this website by buying a subscription to our newsletter, which contains fresh material you won't find anywhere else, or by making a donation for the online edition. Remember contributions are tax-deductible. Click here to make a donation. If you find our site useful please: Subscribe Now! or write CounterPunch, PO BOX 228, Petrolia, CA 95558 |
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Edition Neoliberalism, Katrina and the Asian TsunamiCasualties of WarBy PETER FENG The recent controversy surrounding the plan to rebuild New Orleans and the passage of the first anniversary of the Asian tsunami cap a year in which a host of catastrophic disasters caused widespread death and destruction and garnered worldwide media attention. In so doing, these disasters revealed certain fundamental truths regarding economic development in both the developed and developing world. Two of the most well-publicized disasters in particular, the Asian tsunami and Hurricane Katrina, exposed the extent to which public welfare and security were undermined by governments' deference to the interests of private profit, militarism, and laissez faire capitalism. These events have opened the door for a fundamental reevaluation of the current neoliberal model of economic development being pursued in the United States and elsewhere. While most people in the U.S. generally give little thought to issues of so-called Third World development, they would do well to pay closer attention, because politicians and policy makers in this country have employed many of the same austerity measures that have been inflicted on Third World countries for decades to instill fiscal discipline in the domestic economy. As in the global South, however, these strategies are driven less by notions of fiscal conservatism than by a stubborn adherence to a set of economic policies that have successfully trapped developing countries in a spiral of poverty, debt, environmental degradation, and social instability for decades. It follows that the application of these selfsame austerity measures in the developed world over the last 30 or so years will have reduced First World nations like the U.S. to the same level as Third World countries.
The Near Abroad As the leading proponent of neoliberalism, an economic paradigm that promotes corporate governance over state governance through (1) financial market liberalization, (2) the privatization of public industries and services, (3) the withdrawal of government intervention in the market economy, and (4) unrestrained foreign trade, the U.S. has itself adopted many of the same austerity measures it has helped to impose on developing countries around the world. In 1979, for instance, Federal Reserve Chairman Paul Volker inaugurated an era of falling living standards and increased joblessness in the U.S. when he raised interest rates to unprecedented levels on the pretext of fighting inflation. In reality, Volker undertook this course of economic shock therapy in order to suppress wages in the labor market and to restore profitability to the financial sector, which had been losing money on low-interest loans whose margin of return was diminished by the high inflation rates of the 1970s. What followed was higher unemployment, greater poverty, increased homelessness, lower rates of economic growth, and the creation of the Rust Belt. The effects of this particular passage of U.S. economic history still linger on today, and a comparison between the U.S. and several countries that rank among the world's poorest will serve to illustrate the fact that the U.S. is the one developed country in the world that bears the most similarity to a Third World nation. According to the 2004 United Nations Human Development Report, Sierra Leone is the poorest country in the world with a national debt of about $1.7 billion. In comparison, the U.S. national debt stands at $7.8 trillion. Niger, the world's second poorest country, has a population of about 12 million people. Contrast this with the 37 million people in the U.S. who are now living below the poverty line. By official measures, the federal poverty rate currently stands at $9,310 a year for individuals and $18,850 a year for a family of four in the 48 contiguous states. Although it is possible to live quite well in the Third World on these sums of money, citizens subsisting at these levels in the U.S. often find themselves engaged in a daily struggle to maintain food, clothing, and shelter. This is because the basis for the federal poverty rate has remained unchanged since 1964, despite substantial increases in the cost of living. Adjusted for inflation, the federal poverty rate amounts to no more than $3,000 a year. In the lexicon of international development, that amounts to less than $9 a day.
High Poverty and Inequality Before the arrival of Hurricane Katrina, New Orleans was home to about 500,000 inhabitants, a majority of whom were African American. Of that number, roughly one-third (100,000 people) lived in poverty. This same number of poor people were left to fend for themselves in the wake of the hurricane and were unable to evacuate the city, because they had neither the means nor the ability to do so. This situation highlights the following fact: Just as Third World countries are characterized by high levels of poverty and enormous income gaps between rich and poor people, so too is the U.S. Indeed, the 2004 UN Human Poverty Index found that the U.S. has the highest level of poverty and income inequality in the entire Western world. The rankings were determined by tallying up the following four factors among "high income" countries claiming membership in the Organisation for Economic Co-operation and Development (OECD): (1) probability at birth of not surviving to age 60; (2) percentage of adults lacking functional literacy skills; (3) percentage of people living below the income poverty line, which is defined as 50% of median adjusted disposable household income; and (4) long-term unemployment, which is defined as 12 months or longer. To put this information into perspective, in China the richest 10% of the population was about 12 times wealthier than the poorest 10% at the end of the first quarter of 2005. In comparison, the richest 5% of the U.S. population was already 19 times richer than the bottom 20% by 1999. Moreover, the U.S. Federal Reserve reported that between 1998 and 2001 the income gap between the top 10% and the bottom 20% grew by 70%. Additional studies have further shown that the richest 1% of the population in the U.S. has appropriated 94% of the growth in total income since 1973. This also gibes with findings by the U.S. Census Bureau which show a decrease in the Gini coefficient between 1947 and 1968 followed by a marked increase between 1968 and 1999. Developed by Italian statistician Corrado Gini, the Gini coefficient is used internationally to measure income inequality. On the Gini scale, the number zero corresponds to complete income equality, meaning that income is perfectly distributed amongst all citizens: the number one (1) corresponds to perfect income inequality, meaning that only one person has all the income. The developed nations that rank ahead of the U.S. in the UN Human Poverty Index have coefficients between 0.24 and 0.36. In 2004 the U.S. had a Gini coefficient of 0.45, worst among all the developed nations in the world and ranking behind even Cambodia (0.40). China currently has a Gini coefficient of about 0.48.
Joining the Third World One of the obvious consequences of this large income gap is that one out of ten households in the U.S. experiences hunger or the risk of hunger. Nationally, this translates to about 36 million people or 11% of the population, roughly the same number of people currently living in poverty. Remarkably, this is almost three times greater than the number of people in southern Africa who went without food in 2002. Unfortunately, these numbers are likely to increase in the U.S., as Republicans seek to further reduce spending on public subsidies for the food stamp program. This, despite the fact that more than 25 million people rely on the program to provide them with food, and that hunger has risen four years in a row. Another consequence of the large income gap in the U.S. is that every year at least 3.5 million people lack clothing and shelter. That is, they are homeless. The U.S. is not alone in this regard. Indonesia has a population of about 242 million people, which approximates the 296 million people living in the U.S., and it generates roughly the same number of homeless people as the U.S. The difference, of course, is that the U.S. is a First World country. Or is it? In the developed world homelessness is mitigated through a vigorous and well-funded public education system, job training, a comprehensive public housing policy, income protections such as unemployment benefits and public pensions, and most importantly a universal health care system that provides medical care, mental health services, drug treatment, and domestic violence counseling. Additionally, joblessness has traditionally been alleviated via government spending on public works projects. In the U.S. public spending on education has steadily declined over the last 20 years, and what little funding that remains is typically distributed unequally. As Jonathan Kozol, author of Shame of the Nation: The Restoration of Apartheid Schooling in America, has documented, average per pupil spending for public school students in inner city school districts like New York's South Bronx is $8,000 versus $12,000 to $18,000 a year in wealthier suburbs. What this means is that family income and economic status are now the primary factors that determine who will receive the benefits of a quality education at the elementary, secondary, and university level. This situation is reminiscent of many Third World countries, where there is no public education system to speak of, and where the educational opportunities that do exist are limited to those who can afford to pay for private schooling. With regard to public housing policy, Michigan State University Professor John T. Metzger has written that section 5301 of the Housing and Community Development Act of 1974 put the U.S. Department of Housing and Urban Development (HUD) on record as supporting a policy of "spatial deconcentration of housing opportunities for persons of lower income and the revitalization of deteriorating or deteriorated neighborhoods to attract persons of higher income." In other words, gentrification. According to journalist Frank Morales, the origins of this approach can be found in a 1968 report by the Kerner Commission, which was created by President Lyndon Johnson to investigate the causes of the urban riots that took place in the U.S. during the 1960s. In Chapters 16 and 17 of the Kerner report, which were written by University of Chicago Economics Professor Anthony Downs, the concentration of poor people in city centers is identified as an important factor in the civil disorder of that time, and a strategy of "spatial deconcentration" is recommended to reduce the potential for future disturbances. As spelled out by Downs, this policy involves the dispersal of the urban poor from the inner cities and the resettlement of these neighborhoods with middle class residents through a process of disinvestment and redlining on one hand and predatory lending on the other. The combination of alternatively denying conventional bank loans and insurance to property owners in low-income neighborhoods while making available high risk, predatory-type loans generally results in mass evictions, foreclosures, and abandonment of property in the inner cities. The resulting ghettos are then declared blighted areas and designated for redevelopment or urban renewal (i.e., gentrification). The upsurge in federal spending on homeless shelters between 1984 ($300 million) and 1988 ($1.6 billion) speaks to the effectiveness of this policy in making people homeless. The analogy of the U.S. as a Third World country becomes even clearer, when one considers that in the developing world regulations protecting the environment and the safety and health of consumers and workers are either minimal or non-existent. At a time when developed countries in Europe and Asia are expanding these protections by requiring companies to assume complete liability for the environmental impacts of any product sold in the European Union for the life of that product, a concept known as Extended Producer Responsibility (EPR), public officials in the U.S. are intent on rolling back or eviscerating many of the landmark environmental regulations in this country such as the Clean Air Act, the Clean Water Act, and the Endangered Species Act. The fact that public officials at the local, state, and federal level cannot persuade private companies ranging from computer makers to manufacturers of cosmetic beauty products whose merchandise is often comprised of toxic chemicals and other carcinogenic compounds to comply with regulations regarding recycling and labeling that they have already submitted to in Europe, Japan, Taiwan, and Korea demonstrates exactly how far behind the rest of the developed world the U.S. truly is.
Greater Disparities, Shorter Lives All of these factors likely help to explain why despite spending 15% of its gross domestic product on health care, more than any other country in the world, the overall health of the U.S. population continues to worsen. For many years, Dr. Stephen Bezruchka, an emergency room physician and University of Washington senior lecturer, has argued that when the wealth of a society becomes concentrated in fewer hands, larger numbers of citizens lose the ability to access the resources essential to their well-being. This leads to higher stress levels which, in turn, increase the risk of heart disease, back pain, mental illness, and other diseases. It is, therefore, no surprise that in the U.S. the poorest segments of the population routinely have the worst health. A 2004 report by the U.S. Commission on Civil Rights found that Native Americans and African Americans have the highest and second highest rates of poverty in the nation at 26% and 22% respectively. Predictably, both of these groups are afflicted with higher blood pressure, higher infant mortality rates, and higher instances of tuberculosis than their Hispanic, Asian, and white counterparts whose poverty rates correspond to 21%, 11%, and 8% respectively. Native Americans and African Americans also tend to live five years less than whites who enjoy higher average incomes than any other group in the U.S. Nonetheless, whether one is African American or Native American or Asian American or Latin American, few Americans derive much benefit from income protection programs in the U.S. anymore. The most basic income protection program, the minimum wage, has long since ceased to be relevant. This is because it has not been indexed to inflation. Consequently, today's federal minimum wage of $5.15 an hour is worth roughly 33% of the average hourly wage of U.S. workers, the lowest level since 1949 when the minimum wage was 75 cents an hour. As if that wasn't bad enough, a movement is underway in the U.S. to do away with pension programs altogether. In the public sector, Republicans in the White House and in state governments like California have plans to privatize pension systems such as Social Security and the California Public Employees' Retirement System (CalPERS). Success in any of these arenas will result in a windfall for the financial industry worth billions of dollars, while retirees will wind up with fewer benefits and more meager payouts. Meanwhile, in the private sector a federal bankruptcy judge recently gave permission to United Airlines to default on its pension obligations to company employees. The decision will likely pave the way for similar actions in the airline industry and other corporate sectors. While some may argue that inequality is an inevitable part of life, those who expound this point of view frequently tend to discount the effects of income inequality in their own lives. For example, Bezruchka points to the fact that in 1960, when the income gap between rich and poor was smaller, the U.S. ranked 13th in the world in life expectancy. Then in 1997 the U.S. fell to 25th. This development did not go unnoticed in international circles. In a press release issued in 2000 Dr. Christopher Murray, director of the World Health Organization's (WHO) Global Programme on Evidence for Health Policy remarked that: "Basically, you die earlier and spend more time disabled if you're an American rather than a member of most other advanced countries." The situation appears to have worsened since then, because in 2002 the U.S. placed 27th in the "health Olympics." Today, in 2005 the U.S. has slipped to 29th in world life expectancy, trailing behind the majority of the world's developed nations as well as a handful of developing countries like Cyprus, Costa Rica, the United Arab Emirates, and Chile. It is worth noting that in a majority of cases, the countries that rank ahead of the U.S. are characterized by more equitable distributions of income as well as significant state involvement in the health care sector. These facts demonstrate that the net effect of the enormous disparities in wealth and income that have arisen in the U.S. over the past 30 years is a decline in the health of the entire population. For those who point to recent studies that dispute the negative correlation between income inequality and life expectancy, an examination of these studies finds that there has been an attempt to explain away the relationship between income inequality and life expectancy in the U.S. by pointing to differences in educational levels, as though there were no relationship between individual income and educational achievement. Also absent from these analyses is the fact that the U.S. is the only industrialized country in the world that fails to provide universal health care to all its citizens. Consequently, while differences in individual income certainly do exist in industrialized countries, the existence of a national health care system in those countries acts to even out the income inequalities that do exist, which in turn reduces mortality rates.
Neoliberalism Births Corporatism As stated previously, neoliberalism is an economic paradigm that promotes corporate governance over state governance through: (1) financial market liberalization, (2) the privatization of public industries and services, (3) the withdrawal of government intervention in the market economy, and (4) unrestrained foreign trade. Derived from the theoretical musings of 19th century liberal economists David Ricardo and Adam Smith, the latter of whom said that a market economy must be free of state intervention or regulation in order for the "invisible hand" of rational self-interest to produce economic well-being, proponents of neoliberalism are ultimately out to weaken central governments to such a degree that free market principles may be substituted for government of the people, by the people, and for the people. However, in a departure from the economic liberalism of Smith, who abhorred monopolies and whose followers more or less believe that "government is best which governs least," today's self-styled neoliberals have seen fit to preserve the power of "big government" in the military sector. Indeed, figures from the U.S. Office of Management and Budge (OMB) in 2004 show that the size of the federal government has expanded exponentially since 2001. Specifically, discretionary spending in the realm of military and homeland security has expanded by 180 percent and 53 percent respectively. As neoliberalism is practiced in the U.S., the idea appears to be to create a robust national security apparatus that exercises minimal control over the private sector, but which is fully capable of suppressing the dissent and unrest that typically emerge from the implementation of the economic policies outlined above. This development shows that the political economic program that the U.S. is following at home and exporting around the world is not neoliberalism but, in fact, corporatism. In the U.S. the corporatist effect is achieved via a method known in Republican circles as "starving the beast." The aim of this strategy is to create enormous budget deficits through a combination of tax cuts for the wealthy and simultaneous increases in military and security spending. By engaging in this type of financial sleight of hand, so-called fiscal conservatives can point to persistent budget deficits at the governmental level as justification for slashing social spending on everything from public education, food stamps, student loans, public housing, Medicare, Medicaid, unemployment insurance, and public works projects. In many ways, the flooding of New Orleans is a fulfillment of the corporatist wish to reduce the size of the federal government until it reaches a size where, in the words of Republican strategist Grover Norquist, "we can drown it in the bathtub." Case in point, despite a federally sponsored project in 2004 that predicted more than 61,000 deaths if New Orleans were struck by a category 3 hurricane and despite recommendations from the Federal Emergency Management Agency (FEMA) in 2001 that the federal government should engage in a sustained program of flood control and levee protection in Louisiana, the Bush administration consistently reduced the share of the federal budget dedicated to public works programs. Of the $500 million that Louisiana officials had requested for flood prevention programs over the last four years, the White House allocated only $166 million. At the same time, in a $2.5 trillion budget submitted to Congress on February 7, 2005, the Bush administration set aside $420 billion for the Pentagon in 2006. This figure did not include the cost of the ongoing wars in Iraq and Afghanistan. To pay for those conflicts, the White House later submitted a supplemental budget of $82 billion dollars to the legislature, which Congress approved on May 11, 2005. A mere fraction of this money could have easily shored up the levees surrounding New Orleans and prevented the flooding of the city. Now, with more than $62 billion allocated for hurricane relief in New Orleans and a reconstruction price tag hovering in the range of $250 billion, lobbyists representing companies in the energy and transportation industries have infiltrated the legislative process that produced the Louisiana Katrina Reconstruction Act in order to channel government contracts worth hundreds of millions of dollars each to their corporate clients. This, according to an October 10, 2005, Los Angeles Times article. Although an earlier public outcry forced FEMA to seek new bids on at least $400 million worth of no-bid contracts that it had previously handed out to companies with ties to the White House, companies which coincidentally have also played central roles in the U.S. occupation of Iraq (e.g., the Shaw Group, Fluor Corporation, Bechtel National, and CH2M Hill), most observers acknowledge that it will be difficult to track the flow of taxpayer dollars paid out to contractors involved in the reconstruction of New Orleans. This occurrence should come as no surprise to astute students of political economy. If the arguments of Smith and Ricardo are taken to their ultimate conclusion, then the only logical outcome of such a worldview would be a corporatist one. This is because under liberal economic theory, the state, having been reduced in both size and strength, would have a minimal presence in society. In the absence of "big government," the power vacuum that would necessarily be created would logically be filled by a newly invigorated and unchecked private sector. Under neoliberalism, the inability of the state to regulate the activities of the private sector ensures the emergence of private monopolies that will distort the workings of the vaunted free market, and this is exactly what is happening in all the countries that have accepted the so-called neoliberal school of thought as gospel.
The Larger Agenda As the reconstruction process in Southeast Asia and New Orleans has played out, it has become apparent that the principal beneficiaries of the rebuilding process in both places have been private companies operating in the areas of energy and mining, construction and engineering, international finance, and tourism. Take the case of tsunami-ravaged Indonesia. In March, 2005, the Australian Government Overseas Aid Program (AusAID) revealed that multinational corporations based in Australia such as Boral, BlueScope Steel, OneSteel, Leighton Holdings, Thiess and Linfox, and even Halliburton, which has subsidiary companies based in Adelaide, could reap as much as 90% of Australia's $1 billion tsunami aid package. Worse still, Indonesia's Aceh province, which suffered the most damage from the disaster worldwide, may receive even less aid than first thought. In a 2005 parliamentary research paper, Dr. Ravi Tomar of the Australian Department of Foreign Affairs and Trade (DFAT) wrote that: "perception, based on reports in some sections of the media, is that most of the money (if not all) will be spent on reconstruction and infrastructure building projects in Aceh, one of the poorest and most conflict-ridden provinces in Indonesia. This may not necessarily be the case. While the package does focus on areas affected by the tsunami, its application is Indonesia-wide." At least part of Australia's aid package is likely to involve some type of military or security component. In an interview with Green Left Weekly, AidWatch campaigner Tim O'Connor said that for some time now the focus of Australian foreign aid has been shifting away from poverty alleviation to "protecting Australia's security and national interest" in the South Pacific, resulting in an increasing number of aid contracts being awarded to private security and paramilitary firms. O'Connor said that Prime Minister John Howard has taken advantage of the opportunity afforded by the Asian tsunami to renew Australia's military ties with Indonesia, which were severed after the 1991 Santa Cruz massacre in East Timor. The Howard government is not alone in this regard. Media outlets ranging from Jane's Foreign Report, The Irish Times, and Inter Press Service report that the Bush administration is in the midst of a campaign to expand the network of U.S. military bases in the Indian Ocean. Among the activities the U.S. has undertaken under the guise of tsunami relief operations are the reopening of the Utapao military base in Thailand and the strengthening of existing military alliances in Southeast Asia. Observers have speculated that this may be part of a larger strategy aimed at containing the emerging power of China by facilitating the projection of U.S. military power into Southeast Asia and the Middle East. Because energy and mining, construction and engineering, international finance, and tourism are the very same sectors that are typically involved in the economic development plans of most Third World nations, such a confluence of events highlights the existence of a link between the business of economic development in the Third World and reconstruction efforts in post-disaster environments. This link was recently explored in a February, 2005, report by the World Bank entitled "International Companies and Post-Conflict Reconstruction: Cross-Sectoral Comparisons." Claiming that international companies are essential complements to aid agencies in any reconstruction effort, the report advanced the argument that policymakers need to understand how "different companies and sectors view opportunity and risk" in a post-conflict and/or disaster environment. It then went on to describe the types of investments typically made by companies in the petroleum and mining, telecommunications, construction, and commercial banking industries as well as the "time-frame in which they expect to make returns." Another report from the International Business Leaders Forum (IBLF) briefly acknowledged the possibility of corporate corruption in post-conflict and/or disaster environments, even while it argued for the public sector (i.e., government) to create an "enabling environment" for big business:
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