From: Sid Shniad www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3537362/World-stability-hangs-by-a-thread-as-economies-continue-to-unravel.html
World stability hangs by a thread as economies continue to unravel The political bubble is bursting. Spreads on geo-strategic risk are now widening as dramatically as the spreads on financial risk at the onset of the credit crunch. "In the 1930s, it was not obvious to people living through debt deflation that their world was coming apart. The crisis came in pulses, each followed by months of apparent normality – like today." By Ambrose Evans-Pritchard Daily Telegraph: 1 December 2008 Whether it is the Indian rupee, the Shanghai bourse, or Kremlin debt, the stars of the credit boom have fallen to earth. Investors are retreating into 3-month US Treasury bills – the ultimate safe-haven. The yield has fallen to 0.02pc, less than zero after costs. You pay Washington to guard your money. The working assumption of the "Great Boom" is – or was – that we live in a benign era where most societies are converging towards some form of market liberalism; where trade and capital flows are unrestricted; where governments have enough legitimacy to keep order by light touch; where a major war is unthinkable. This illusion is now being tested. We should not to read too much into the Bombay carnage. It may or may not be significant that the Deccan Mujahideen – whoever they are – picked India's financial hub to launch their spectacular. Even so, the love affair with Bombay's bourse was cooling anyway. The Sensex index is down almost 60pc from its peak. The exodus of foreign capital may now quicken, laying bare the horrors of Indian public finance. The combined federal and state deficit is 8pc of GDP. Plainly, spending will have to be slashed. If the atrocity now propels the Hindu nationalist leader Narendra Modi into office at the head of a revived Bharatiya Janata Party (BJP), south Asia will once again face a nuclear showdown between India and Pakistan. Events are moving briskly in China too. Wudu was torched by rioters this month in a pitched battle with police. Violence has spread to the export hub of Guangdong as workers protest at the mass closure of toy, textile, and furniture factories. "The global financial crisis has not bottomed yet. The impact is spreading globally and deepening," said Zhang Pin, head of the national development commission. "Excessive bankruptcies and business closures will cause massive unemployment and stir social unrest". We are about to find out whether China has made the wrong bet with a development strategy of vast investment in manufacturing plant for mass export at thin margins to the US and Europe. The shocking detail in the World Bank's latest report on China is that wages have fallen from 52pc to 40pc of GDP since 1999. This is evidence of an economic model that is disastrously out of kilter, and unlikely to retain popular support. The Communist Party lost its ideological mission long ago. The regime depends on perpetual boom to stay in power. As the economy sours, there must be a high risk that it will resort to the nationalist card instead. Tokyo certainly thinks so. When I visited Japan's Defence Ministry last year the deputy minister showed me charts detailing the intrusion of China's fast-growing fleet of attack submarines into Japanese waters. "We see its warships in the Sea of Japan all the time," he said. Shoichi Nakagawa, the head of the ruling LDP party, was even more explicit. "What happens when China attacks Japan? Will the US retaliate on our behalf?" he said. As for Europe, it is already fragile. Iceland, Hungary, Ukraine, Belarus, Latvia, and Serbia have turned to the IMF. Russia is a hostage to oil prices. If Urals oil stays below $50 a barrel for long, we are going to see an earthquake of one kind or another. It is too early in this crisis to conclude whether Europe's monetary union is a source stability, or is itself a doomsday machine. The rift between North and South is growing. The spreads on Greek, Irish, Italian, Austrian, and Belgian debt remain stubbornly high. The lack of a unified EU treasury has become glaringly clear. Germany has refused to underpin the system with a fiscal blitz. In the 1930s, it was not obvious to people living through debt deflation that their world was coming apart. The crisis came in pulses, each followed by months of apparent normality – like today. The global system did not snap until September 1931. The trigger was a mutiny by Royal Navy ratings at Invergordon over pay cuts. Sailors on four battleships refused to put out to sea. They sang the Red Flag. News that the British Empire could not uphold military discipline set off capital flight. Britain was forced off the gold standard within five days. A chunk of the world followed suit. Nor was it obvious that Germany would go mad. Bruning persisted with deflation, blind to the danger. The result was the election of July 1932 when two parties committed to the destruction of Weimar – the KPD Communists and the Nazis – won over the half the seats in Reichstag. We can hope that governments have acted fast enough this time – with rate cuts and a fiscal firewall – to head off such disasters. But then again, the debt excesses are much greater today. If in doubt, cleave to those countries with a deeply-rooted democracy, a strong sense of national solidarity, a tested rule of law – and aircraft carriers. The US and Britain do not look so bad after all. *** Though the sit-in has just ended, this history of worker response and current conditions throughout the country - the world, actually, make this article of interest. 'Yes they did, Yes we can.' Stay tuned. Ed http://www.cnn.com/2008/POLITICS/12/08/lichtenstein.chicago.labor/index.html Chicago factory sit-in fits nation's mood By Nelson Lichtenstein and Christopher Phelps Special to CNN: Dec 9, 2008 (CNN) -- The factory occupation by 200 workers at Republic Windows and Doors in Chicago, Illinois, recalls one of the most storied moments in American history, when thousands of Depression-era workers took over their own workplaces, seeking union recognition and better wages. The pivotal battle began on the morning of December 30, 1936, when shop activists shut down a General Motors factory in Flint, Michigan, to restore the jobs of three of their workmates fired by the company. From the windows, they sang in rowdy camaraderie: When they tie the can to a union man, Sit down! Sit down! When they give him the sack, they'll take him back Sit down! Sit down! When GM agreed to recognize the United Automobile Workers, all sorts of workplaces, from dime stores to shoe shops, caught the spirit. Pie bakers, seamen and movie projector operators sat down. Even before Flint, there had been occupation strikes at Hormel in Austin, Minnesota; Goodyear in Akron, Ohio; and Bendix in South Bend, Indiana. As often as not, they won. There are big differences between those events and the occupation at Republic Windows and Doors. The Chicago workers already have a union. They seek severance pay, not a raise. Theirs is a protest, not a strike. Rather than disrupt production, they refuse to vacate a closed plant. And their numbers are minuscule in comparison to the half-million American workers who sat down in 1936 and 1937. Some of the underlying issues, however, are the same: preservation of jobs, economic fairness and the meaning of democracy itself. Even if this occupation is quickly settled, it has exposed perfidy and dramatized justice, as did the sit-downs of the 1930s. Factory occupations are rare because they violate the everyday laws of property, and for the most part American workers are law-abiding people. They occur only when workers feel morally aggrieved, when they sense that ownership has itself violated the law, when the boss has become the outlaw in their eyes and in that of the community as well. This was the case in the winter of 1936-37 when corporations such as GM and U.S. Steel defied the newly enacted Wagner Act, which President Franklin Delano Roosevelt signed to encourage labor unionism and raise purchasing power. Just a couple of months before, tens of thousands of autoworkers poured out of factories to cheer Roosevelt as his motorcade made a slow tour of Flint and other industrial cities. "You voted New Deal at the polls and defeated the auto barons," organizers told workers after FDR's smashing re-election victory. "Now get a New Deal in the shop." Will history repeat itself? The Chicago factory occupiers, overwhelmingly Latino, don't have much clout, but they rightly sense that the national mood is with them. Just as FDR once told reporters, "If I worked in a factory, the first thing I would do is join a union," so too has President-elect Barack Obama declared the Republic workers "absolutely right" in their quest for remuneration. More importantly, Obama observed that the Republic factory closure "is reflective of what's happening across this economy." Indeed, it is not just that workers are suffering during a severe recession, but that the owners of capital, both large and small, are morally compromised in the crisis that besets the nation. Bank of America, the giant lender, played a large role in the Republic factory closure when the bank, noting a decline in Republic's sales, cut off the company's line of credit. In normal times, this would have been considered prudent banking practice, but just last month Bank of America received $25 billion in a financial bailout meant to keep loans and credit flowing. But Main Street managers have dirty hands as well. According to the union, the owners of Republic Windows and Doors failed to give their workers a legally required 60-day notice that they would close. And the Chicago Tribune reports that in the weeks before the factory shutdown, people with apparent ties to Republic formed a corporation that bought a similar plant in western Iowa. It is hardly surprising that Republic's workers have laid temporary claim to the factory in which some have given decades of their lives. Its owners and creditors have forfeited their own claims, both moral and legal, to rightful stewardship. As Sen. Robert Wagner said in response to the 1937 sit-downs, "The uprising of the common people has come, as always, only because of a breakdown in the ability of the law and our economic system to protect their rights." Editor's note: Nelson Lichtenstein teaches history at the University of California, Santa Barbara, where he directs the Center for the Study of Work, Labor and Democracy. He is the author of "Walter Reuther: The Most Dangerous Man in Detroit." Christopher Phelps teaches at Ohio State University at Mansfield and is writing a history of strikes in American social thought. ------------------------------------ --------------------------------------------------------------------------- LAAMN: Los Angeles Alternative Media Network --------------------------------------------------------------------------- Unsubscribe: <mailto:[email protected]> --------------------------------------------------------------------------- Subscribe: <mailto:[email protected]> --------------------------------------------------------------------------- Digest: <mailto:[email protected]> --------------------------------------------------------------------------- Help: <mailto:[email protected]?subject=laamn> --------------------------------------------------------------------------- Post: <mailto:[email protected]> --------------------------------------------------------------------------- Archive1: <http://www.egroups.com/messages/laamn> --------------------------------------------------------------------------- Archive2: <http://www.mail-archive.com/[email protected]> --------------------------------------------------------------------------- Yahoo! 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