Monday, November 1, 2010
Sunday, October 31, 2010
Neoliberalism : The root of the economic crisis by Saba Navalan
The United States and European countries, which dominated every nook and corner of the world by constructing their own system of social justice, are now in a state of shock. The uncertainty about future has made experts convene meetings by the hour in European and US capitals. They spent billions of dollars of hapless taxpayers to bail out giant corporations.
They blame the inevitable failure of capitalism on excessive borrowing and consumption. They find fault with the “have-nots” and have started drafting policies to exploit them more. Imperialism is a system that serves the powers that be. It has no connections with democracy.
The present scenario has once again has proven economist’s observation that the capitalist system based on exploitation of the people will not sustain itself. World’s superpowers, which colonized other countries using military power for creating new markets, restructured their politico-economy after the first world war.
Unlike the feudalistic social structures of the past, capitalism has witnessed several falls within a short span of its birth.
Structural Crisis
The economic crisis of the early seventies created the neo-liberal models which are crumbling today. The new order of liberalism and globalisation was created to withstand the economic crisis of the seventies. Italy’s former finance minister Giulio Tremonti who saw in globalisation a big hope, later (within a span of few months) wrote a book on the dangers of globalisation.
As socialist countries emerged as a challenge to western capitalism in the seventies, capitalists started moving their investments to Third World countries in order to make more profits and to weaken the labour force in the US and the Europe.
The price paid by Western labourers for globalisation and neo-liberalism is unemployment. This rampant unemployment helped capitalism create a reserve army of labour in their own countries. The excessive profits capitalism earned by exploiting third world’s workforce went a long way in funding the social security guarantee schemes to please the unemployed.
The structural crisis of economy which began in the seventies lasted till early eighties. Reduction in industrial productivity, lesser growth rate, unemployment, macro instability of boom and recessions forced would-be US president Ronald Reagan and would-be British Prime Minister Margaret Thatcher to frame globalisation as a policy, according to George Soros. Further he elaborates that today’s economic crisis has several unsolvable features within an entirely different capitalist structure.
In the last twenty years, globalisation has become so widespread that one feared of every nook and corner of the world would become the backyard of American imperialism. When globalisation, the highest form or manifestation of imperialism, is shaken, it is natural for economists and common folks to raise a question if the imperialist structure and its dependent countries could sustain themselves.
Every time capitalism collapsed, a new order such as the neo-liberalism of the 1970s was created to sustain it. However the present situation is completely different. Many capitalist economists have admitted that an all-new restructuring appears to be impossible. Many predict that the dominance of the US and the Europe would last only for a few more years.
Karl Marx’s Vision
When Karl Marx predicted this crisis 160 years ago, he was depicted as a terrorist and a mischief-monger. Karl Marx’s thoughts on economics referred to popularly as ‘Trajectories a la Marx’, explains scientifically why capitalism cannot sustain itself. Marx and Engels, establishing this by dialectical method, say that a communist society would be born from the ashes of a capitalist society. Karl Marx, who introduced to the world scientific socialism, is now remembered not just by capitalist magazines but also by religious leaders. “Karl Marx is proved right. Capitalist economics is suffering blows from all sides,” says the editorial of The Guardian in Britain.
“The criticism of capitalism by Karl Marx, the father of modern Marxism, is partly true,” says the religious leader from Canterbury. Keeping the capital and property under individual ownership is one aspect of capitalism; agency of capital is the other side of the same coin. Macro economic features help this structure sustain itself.
Capital will be accumulated in one place, either with individuals or with giant corporations. The owners of capital want to save it up. Credit Mechanism is born here. It is carried out through banks and money distribution. The nature of money distribution, being an endless one, becomes a threat to the capital accumulated through profits according to Gerard Dumenil and Dominique Levy in their essay Neo Liberalsim: It’s nature and contradictions. The present economic crisis has its roots here.
As Karl Marx rightly pointed out, one of the basic requirements of capitalism is buying labour force. Periodic replenishment of army of labour is central to determine the price of labour from time to time. Creating unemployment for a section of workforce and thereby stopping the pay hike of the rest of the workforce is a strategy to keep up the profits. These two aspects of capitalist mechanism has led to the 2008 economic crisis and the fall of capitalism. The economic crisis of the seventies and its resultant globalization helped free movement of capital. Giant corporations moved to third world countries such as India to increase their profits. Western giant corporations flourished. Capital kept accumulating.
The basics of today’s crisis
Capitalism drafted new plans after its crisis of the 1970s. They found new ways to circumvent the protests of the organized labour force and the struggles of the trade unions for pay rise. A new order is created to overcome the threat of Marxism and the united struggle of the oppressed sections.
Capitalist economic structure, which has profits as its basis, escaped from the well-organised workforce of the West and moved to poorer countries in search of cheap labour. This is what Karl Marx termed as the agenda of creation of unemployed labour force. This jobless army of labour helped control the pay hike of existing workforce in Britain. For instance, the oil tanker drivers of Britain did not enjoy any pay hike after 1992. If the present workforce is sacked, there is an army of labour waiting outside to fill up the vacant posts. This modus operandi has naturally created a change. This has driven capitalism to plunge into the present crisis. The crisis began when the capital and production were moved to third world countries.
With industrial manufacturing sector literally off-shored to third world countries in the last ten years, small productions, banking capital became the source of capital in imperialist or English-speaking countries. After the digital electronics boom of the 1990s, IT became widespread. 80 per cent of the population in Britain and US handle computers and are familiar with them. But the manufacturing of computers by giant corporations such as HP, Dell take place in countries like India and China. While the production was carried out elsewhere, it was the money from sales which helped accumulation of capital in the West. The owners of the capital, which was accumulated by exploiting cheap labour, found in their governments protectors. The governments created credit mechanism to please their people and help the movement of the capital.
Credit Mechanism through the banks
Credit mechanism is the business dynamism of providing the capital invested in stock markets and savings as loans to people and making profits from it in the form of interests. Housing loans are the highest form of this mechanism. As the interest rates of housing loans were slashed, the number of people opting for housing loans went up. The demand for houses increased. In US and Britain, the prices of homes went up by 60 per cent in 10 years. This helped increase the capital of corporations in the housing sector and that of the banks offering home loans. As a result, the dynamism of the capital went up and helped save capitalist economic structure. Thus capitalist credit mechanism helped rotation of the capital and capitalism. The profits associated with the capital invested in third world countries increased. Though there was a guarantee for the pay hike of the European workforce, it was deducted in the form of interest for loans and taxes.
According to economist Michael Robert, home loans were the prime mover of European capitalism as there was hardly any investment in the manufacturing sector. With most of the industrial manufacturing sector moving to the third world, the credit mechanism-dependent structure is crumbling down. Capitalism which kept itself going by reinvesting its profits, earned in the third world, is now struggling to find an alternative.
The consumerist society without the capacity for manufacturing in Britain has left each family with a debt burden of 59,350 sterling pounds. The debt has increased by 10.6 billion sterling pounds in the last 12 months. During 2007, the average per capita income was 1338 pounds and the average daily expenses were a little higher than this.
The ever-increasing cost of living in the West and the inability of the people to pay up their debts created a crisis for the banks. With the prices of homes increasing at 90 per cent rate, people stopped buying houses and the prices of homes hit an all-time low. The giant corporations and business tycoons started withdrawing their shares from the banks and the banks started to fall.
In the US, banks started take a beating since 2006. Yet the crisis accentuated only in 2008. Savings banks took the first blow followed by the commercial banks.
What do we do now?
Capitalism is attempting to create an illusion that the present crisis is just a credit crisis. It has been taking efforts and doing the campaign to avoid any pessimism arising among the public in the system of capitalism.
The dynamics of imperialist capitalism has come to a screeching halt. With the production capacities of manufacturing forces coming to a standstill and no alternative economic models in place, the capitalist structure presents temporary models to buy time. US government paid 700 billion dollars of taxpayers’ money to bail out banks. Britain’s Gordon Brown government acquired 50 billion shares to overcome the crisis temporarily. They are still searching for other coping mechanisms.
Imperialist countries talk about controlled capitalism and cooperation between banks; they don’t even whisper about the huge capital accumulated by giant corporations. They cannot exploit poorer countries like before by devising new schemes. The boom of Chinese capitalism and the modernization of manufacturing sector in the third world have become new external factors while dealing with the crisis. US-led economic monopoly is coming to an end. It will try to regain control again. What alternatives do the Leftists have? The mere boasting that Karl Marx predicted movement of capitalism from the West to the East and the fall of capitalism will not suffice.
Bibliography:
Britain: The housing tsunami: Michael Robert. 2008
The politics of financial service revolution: Michael Morgan. 1991
The Globalisation Decade: A critical Reader : AAKAR BOOKS. 2006
Financial Time UK
The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means : George Soros.2008
They blame the inevitable failure of capitalism on excessive borrowing and consumption. They find fault with the “have-nots” and have started drafting policies to exploit them more. Imperialism is a system that serves the powers that be. It has no connections with democracy.
The present scenario has once again has proven economist’s observation that the capitalist system based on exploitation of the people will not sustain itself. World’s superpowers, which colonized other countries using military power for creating new markets, restructured their politico-economy after the first world war.
Unlike the feudalistic social structures of the past, capitalism has witnessed several falls within a short span of its birth.
Structural Crisis
The economic crisis of the early seventies created the neo-liberal models which are crumbling today. The new order of liberalism and globalisation was created to withstand the economic crisis of the seventies. Italy’s former finance minister Giulio Tremonti who saw in globalisation a big hope, later (within a span of few months) wrote a book on the dangers of globalisation.
As socialist countries emerged as a challenge to western capitalism in the seventies, capitalists started moving their investments to Third World countries in order to make more profits and to weaken the labour force in the US and the Europe.
The price paid by Western labourers for globalisation and neo-liberalism is unemployment. This rampant unemployment helped capitalism create a reserve army of labour in their own countries. The excessive profits capitalism earned by exploiting third world’s workforce went a long way in funding the social security guarantee schemes to please the unemployed.
The structural crisis of economy which began in the seventies lasted till early eighties. Reduction in industrial productivity, lesser growth rate, unemployment, macro instability of boom and recessions forced would-be US president Ronald Reagan and would-be British Prime Minister Margaret Thatcher to frame globalisation as a policy, according to George Soros. Further he elaborates that today’s economic crisis has several unsolvable features within an entirely different capitalist structure.
In the last twenty years, globalisation has become so widespread that one feared of every nook and corner of the world would become the backyard of American imperialism. When globalisation, the highest form or manifestation of imperialism, is shaken, it is natural for economists and common folks to raise a question if the imperialist structure and its dependent countries could sustain themselves.
Every time capitalism collapsed, a new order such as the neo-liberalism of the 1970s was created to sustain it. However the present situation is completely different. Many capitalist economists have admitted that an all-new restructuring appears to be impossible. Many predict that the dominance of the US and the Europe would last only for a few more years.
Karl Marx’s Vision
When Karl Marx predicted this crisis 160 years ago, he was depicted as a terrorist and a mischief-monger. Karl Marx’s thoughts on economics referred to popularly as ‘Trajectories a la Marx’, explains scientifically why capitalism cannot sustain itself. Marx and Engels, establishing this by dialectical method, say that a communist society would be born from the ashes of a capitalist society. Karl Marx, who introduced to the world scientific socialism, is now remembered not just by capitalist magazines but also by religious leaders. “Karl Marx is proved right. Capitalist economics is suffering blows from all sides,” says the editorial of The Guardian in Britain.
“The criticism of capitalism by Karl Marx, the father of modern Marxism, is partly true,” says the religious leader from Canterbury. Keeping the capital and property under individual ownership is one aspect of capitalism; agency of capital is the other side of the same coin. Macro economic features help this structure sustain itself.
Capital will be accumulated in one place, either with individuals or with giant corporations. The owners of capital want to save it up. Credit Mechanism is born here. It is carried out through banks and money distribution. The nature of money distribution, being an endless one, becomes a threat to the capital accumulated through profits according to Gerard Dumenil and Dominique Levy in their essay Neo Liberalsim: It’s nature and contradictions. The present economic crisis has its roots here.
As Karl Marx rightly pointed out, one of the basic requirements of capitalism is buying labour force. Periodic replenishment of army of labour is central to determine the price of labour from time to time. Creating unemployment for a section of workforce and thereby stopping the pay hike of the rest of the workforce is a strategy to keep up the profits. These two aspects of capitalist mechanism has led to the 2008 economic crisis and the fall of capitalism. The economic crisis of the seventies and its resultant globalization helped free movement of capital. Giant corporations moved to third world countries such as India to increase their profits. Western giant corporations flourished. Capital kept accumulating.
The basics of today’s crisis
Capitalism drafted new plans after its crisis of the 1970s. They found new ways to circumvent the protests of the organized labour force and the struggles of the trade unions for pay rise. A new order is created to overcome the threat of Marxism and the united struggle of the oppressed sections.
Capitalist economic structure, which has profits as its basis, escaped from the well-organised workforce of the West and moved to poorer countries in search of cheap labour. This is what Karl Marx termed as the agenda of creation of unemployed labour force. This jobless army of labour helped control the pay hike of existing workforce in Britain. For instance, the oil tanker drivers of Britain did not enjoy any pay hike after 1992. If the present workforce is sacked, there is an army of labour waiting outside to fill up the vacant posts. This modus operandi has naturally created a change. This has driven capitalism to plunge into the present crisis. The crisis began when the capital and production were moved to third world countries.
With industrial manufacturing sector literally off-shored to third world countries in the last ten years, small productions, banking capital became the source of capital in imperialist or English-speaking countries. After the digital electronics boom of the 1990s, IT became widespread. 80 per cent of the population in Britain and US handle computers and are familiar with them. But the manufacturing of computers by giant corporations such as HP, Dell take place in countries like India and China. While the production was carried out elsewhere, it was the money from sales which helped accumulation of capital in the West. The owners of the capital, which was accumulated by exploiting cheap labour, found in their governments protectors. The governments created credit mechanism to please their people and help the movement of the capital.
Credit Mechanism through the banks
Credit mechanism is the business dynamism of providing the capital invested in stock markets and savings as loans to people and making profits from it in the form of interests. Housing loans are the highest form of this mechanism. As the interest rates of housing loans were slashed, the number of people opting for housing loans went up. The demand for houses increased. In US and Britain, the prices of homes went up by 60 per cent in 10 years. This helped increase the capital of corporations in the housing sector and that of the banks offering home loans. As a result, the dynamism of the capital went up and helped save capitalist economic structure. Thus capitalist credit mechanism helped rotation of the capital and capitalism. The profits associated with the capital invested in third world countries increased. Though there was a guarantee for the pay hike of the European workforce, it was deducted in the form of interest for loans and taxes.
According to economist Michael Robert, home loans were the prime mover of European capitalism as there was hardly any investment in the manufacturing sector. With most of the industrial manufacturing sector moving to the third world, the credit mechanism-dependent structure is crumbling down. Capitalism which kept itself going by reinvesting its profits, earned in the third world, is now struggling to find an alternative.
The consumerist society without the capacity for manufacturing in Britain has left each family with a debt burden of 59,350 sterling pounds. The debt has increased by 10.6 billion sterling pounds in the last 12 months. During 2007, the average per capita income was 1338 pounds and the average daily expenses were a little higher than this.
The ever-increasing cost of living in the West and the inability of the people to pay up their debts created a crisis for the banks. With the prices of homes increasing at 90 per cent rate, people stopped buying houses and the prices of homes hit an all-time low. The giant corporations and business tycoons started withdrawing their shares from the banks and the banks started to fall.
In the US, banks started take a beating since 2006. Yet the crisis accentuated only in 2008. Savings banks took the first blow followed by the commercial banks.
What do we do now?
Capitalism is attempting to create an illusion that the present crisis is just a credit crisis. It has been taking efforts and doing the campaign to avoid any pessimism arising among the public in the system of capitalism.
The dynamics of imperialist capitalism has come to a screeching halt. With the production capacities of manufacturing forces coming to a standstill and no alternative economic models in place, the capitalist structure presents temporary models to buy time. US government paid 700 billion dollars of taxpayers’ money to bail out banks. Britain’s Gordon Brown government acquired 50 billion shares to overcome the crisis temporarily. They are still searching for other coping mechanisms.
Imperialist countries talk about controlled capitalism and cooperation between banks; they don’t even whisper about the huge capital accumulated by giant corporations. They cannot exploit poorer countries like before by devising new schemes. The boom of Chinese capitalism and the modernization of manufacturing sector in the third world have become new external factors while dealing with the crisis. US-led economic monopoly is coming to an end. It will try to regain control again. What alternatives do the Leftists have? The mere boasting that Karl Marx predicted movement of capitalism from the West to the East and the fall of capitalism will not suffice.
Bibliography:
Britain: The housing tsunami: Michael Robert. 2008
The politics of financial service revolution: Michael Morgan. 1991
The Globalisation Decade: A critical Reader : AAKAR BOOKS. 2006
Financial Time UK
The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means : George Soros.2008
Thursday, September 23, 2010
UNLOCK THE GATES OF THE FOOD GODOWNS
PROTESTS OUTSIDE FCI GOWDOWNS (AND DISTRICT COLLECTORATES AND STATE SECRETARIATS)
DEMANDING FROM THE GOVERNMENT -
# DISTRIBUTION OF FOOD FOR FREE OR AT SUBSIDISED RATES TO ALL THE POOR AND VULNERABLE IN THE COUNTRY, INSTEAD OF LETTING GRAINS ROT
# LEGISLATION OF A COMPREHENSIVE NATIONAL FOOD SECURITY ACT WITH A UNIVERSAL PDS AND ENTITLEMENTS FOR CHILDREN, OLD AND THE SOCIALLY VULNERABLE.
In light of the recent Supreme Court order to distribute food grains to the poor rather than rotting in the FCI godowns, we announce the “Godamo Ke Tala Kholo Abhiyan”, a week of action and protests in the state, from 22nd to 28th September. This will be part of National Action Week which will be held across the country on behalf of Right to Food Campaign, with participation from PBKMS, Udayani Social Action Forum and many other organisations in West Bengal. Padyatras, meetings and press conferences will be organised throughout the week.
Thursday, September 2, 2010
Sunday, August 22, 2010
Monday, August 9, 2010
Friday, July 16, 2010
Haitian peasants march against Monsanto Company for food and seed sovereignty
On June 4th about ten thousand Haitian peasants marched to protest US-based Monsanto Company’s ‘deadly gift’ of seed to the government of Haiti. The march was seven kilometers from Papaye to Hinche, in a rural area on the central plateau, and was organized by several Haitian rural social movements that are proposing a development model based on food and seed sovereignty instead of industrial agriculture. Slogans for the march included “long live native maize seed” and “Monsanto’s GMO & hybrid seed violate peasant agriculture.”
The poorest country in the Western Hemisphere, Haiti shares the Caribbean island of Hispaniola with the Dominican Republic. About 65 percent of Haiti’s population lives in rural areas and are subsistence farmers. On January 12 2010, a devastating earthquake leveled Haiti’s capital city Port au Prince, and 800,000 urban refugees migrated to rural areas. According to Chavannes Jean-Baptiste, coordinator of the Papaye Peasant Movement (MPP) and a member of La Via Campesina’s international coordinating committee, “there is presently a shortage of seed in Haiti because many rural families used their maizeseed to feed refugees.”
With sales of $11.7 billion in 2009, US-based transnational corporation (TNC) Monsanto Company is the world’s largest seed company, controlling one-fifth of the global proprietary seed market and 90 percent of seed patents from agricultural biotechnology. In May Monsanto announced that it had delivered 60 tons of hybrid seed maizeand vegetables to Haiti, and over 400 tons of its seed (worth $4 million) will be delivered during 2010 to 10,000 farmers. The TNC United Parcel Service is providing transport logistics, While Winner, a $127 million project funded by the US Agency for International Development (USAID) and focused on “agricultural intensification”, is distributing the seed.1 According to Monsanto, the decision to donate seed to Haiti was decided at the World Economic Forum in Davos, Switzerland: “CEO Hugh Grant and Executive Vice President Jerry Steiner attended the event and had conversations with attendees about what could be done to help Haiti.”2 It is unclear whether any Haitians were included in the conversations in Davos.
Some have charged that the Monsanto representative in Haiti is Jean-Robert Estimé, who served as foreign minister during the brutal 29-year Duvalier family dictatorship.3 While Monsanto vehemently denies this claim4, Estimé is included in an email exchange about the donation between Elizabeth Vancil, Director of Global Development Partnerships at Monsanto and Emmanuel Prophete, a Haitian agronomist working for the Minister of Agriculture.5 The domain for Estimé’s email address is for Winner (www.winner.ht).6
Many Haitians consider Monsanto’s seed donation to be part of a broader strategy of US economic and political imperialism. "The Haitian government is using the earthquake to sell the country to the multinationals," stated Jean-Baptiste. Vancil stated that opening up Haitian markets to Monsanto’s products “would be good.”7
Monsanto is emphasizing that the donated seed is hybrid and not genetically-modified (GM)8. However, hybrid seed will not increase Haitian farmers’ food sovereignty or self-reliance; Monsanto acknowledges that they will be unable to save seed to plant in the future9, and that although the seed is being provided free of charge, farmers will pay for it. “Providing an outright donation of seed would undercut one of the basic pieces of Haiti’s agricultural and economic infrastructure,” says Monsanto10, which is donating the seed to the government to sell to farmers. Winner is distributing the seed through farmer association stores, which will use the revenue to reinvest in other inputs, and help “farmers decide whether to use additional inputs (including fertilizer and herbicides) and…how to handle next year’s planting season.” 11
Haiti’s agricultural sector has already been decimated by US interference. In 1991, Jean Bertrande Aristide, Haiti's first democratically-elected president, was removed in a US-supported military coup. As a condition for his return, the US, IMF and World Bank required that Aristide open up Haiti to free trade. Tariffs on rice (Haiti’s staple grain) were reduced from 35% to 3%, government funding was diverted away from agricultural development to the nation's foreign debt, and subsidized rice from Arkansas (it was the Clinton administration) flooded the Haitian market. Haitian rice farmers were decimated12, and today almost all of the rice consumed in Haiti is imported. Sacks marked ‘US Rice’ are everywhere in the markets and neighborhood stores, on peoples’ heads and the backs of mules.
The US is now undermining Haiti’s food system from the ground. A letter from the Haitian Minister of Agriculture to Monsanto implies that GM seed may have been offered in addition to hybrid. “In the absence of a law regulating the use of genetically-modified organisms (GMO) in Haiti, I am not at liberty to authorize the use of Roundup Ready seed or any other GMO material,” stated Juanas Gue, Haitian Minister of Agriculture, in a letter to Monsanto13, which has already proven the length it will go to open new markets in developing countries for its GM seed and toxic chemicals. In 2005, Monsanto was found guilty by the US government of bribing high-level Indonesian officials to legalize GM cotton. Evidence indicates that in Brazil in 2004, Monsanto sold a farm to a senator for one-third of its value in exchange for his work to legalize glyphosate, the world’s most widely used herbicide (sold by the corporation as Roundup).14
According to Paulo Almeida, 31, a member of the Brazilian Movement of Landless Rural Workers who has been in Haiti since 2009 on a solidarity brigade organized by Via Campesina-Brasil, Monsanto also encouraged Brazilian farmers to illegally plant Roundup Ready soybeans. “They want to implant the technological package of the Green Revolution, which isn’t possible here in Haiti. There is no way to survive with monoculture here.”
The hybrid seed maize donated by Monsanto was treated with the fungicide Maxim XO, and the calypso tomato seed were treated with thiram, a chemical so toxic that the US government requires agricultural workers to wear protective clothing when handling seed treated with the fungicide. Monsanto's communications to the Ministry of Agriculture contains no explanation of the danger of these chemicals, or any offer of special clothing or training for Haitian farmers.15
Development of industrial agriculture in Haiti is related to plans to develop an export-oriented agrofuels industry in the country. In 2007 USAID published a report on the ‘prospects for solid and liquid biofuels in Haiti’16, while the Inter-American Development Bank’s Haiti strategy document for 2007-2011 states that removing “obstacles to export of agricultural products are a top priority,” and that “biofuel promotion is being explored specifically.”17
The Obama administration has a hypocritical and inconsistent policy on Monsanto and GM crops. When the Obamas moved into the White House they planted an organic garden, and one can only assume they did not plant GM or hybrid seed. In the US Monsanto monopolizes 60 percent of the entire seed maizemarket and 80 percent of the GM seed maizemarket. In March the administration convened public anti-trust hearings on competitiveness in the US seed market, and has yet to publish its conclusions. Yet the Obama administration is strongly promoting the interests of US agricultural biotechnology TNCs abroad. At the Biotechnology Industry Organization's annual convention in May, Jose Fernandez, assistant secretary for the Bureau of Economic, Energy and Business Affairs, stated that the US State Department (which controls USAID) will aggressively confront critics of agricultural biotechnology.18
Meanwhile, the US Supreme Court is presently deliberating Monsanto Co. vs Geertson Seed Farms, a case about the ecological and economic effects of genetic contamination of organic seed from GM pollen. A favorable decision for Monsanto will lead to the widespread contamination of organic alfalfa, which will destroy the organic milk industry in the US. Though Monsanto’s GM pollen has been contaminating Mexican corn for a decade, the corporation recently received license from the country’s government to conduct open field trials of GM maize in four states. Mexico is the cradle of maize, with thousands of native varieties. Contamination of Haitian maize with pollen from Monsanto’s hybrid corn will also occur, and could render the Haitian varieties unusable for saving and replanting, forcing farmers to become dependent upon the corporation.
“The entrance of Monsanto into Haiti will spell the disappearance of the peasants,” said Doudou Pierre Festil, a member of the Peasant Movement of the Congress of Papaye and coordinator for the National Haitian Network for Food Sovereignty and Security. “If Monsanto’s seed come into Haiti, the seed of the peasants will disappear. Monsanto’s seed will create problems of health and for the environment. Thus it is necessary for us to struggle against this project of death to do away with the peasants.”
“If the US government truly wants to help Haiti, it would help the Haitians to build food sovereignty and sustainable agriculture, based on their own native seed and access to land and credit. That is the way to help Haiti,” says Dena Hoff, a diversified organic farmer in Montana and member of Via Campesina’s international coordinating committee.
The United Nations estimates that 75 percent of the world’s plant genetic diversity has been lost as farmers have abandoned their local seed for genetically-uniform varieties offered by TNCs, and as GM and hybrid seed have contaminated native varieties. Genetic homogeneity increases farmers’ vulnerability to sudden changes in climate and the appearance of new pests and diseases, while seed agrobiodiversity, adapted to different microclimates, altitudes and soils, is fundamental for adapting to climate change.
Critics of Monsanto’s donation argue that the best way to ensure enough seed for Haiti is through the collection, conservation and propagation of local, native varieties in community seed banks. Haiti’s native seed varieties have developed and adapted to the different regions of Haiti over generations, in tandem with its people. Saving and replanting seed strengthens crops’ genetic plasticity, e.g. their capacity to adapt rapidly over generations to changing growing conditions, and also increases agrobiodiversity.
Island nations are particulalry vulnerable to climate change. If the US does not get its’ policy for Haiti right this time, there will not be another chance. Given the extent of food insecurity and environmental degradation in Haiti, the country must adopt a policy for food sovereignty in order for its people and biodiversity to survive. Ninety-eight percent of Haiti’s original tropical forest cover has been lost, there is widespread soil erosion, and desertification is increasing. Haiti cannot sustain further ecological destruction from the imposition of industrial agriculture. Alternatively, if the Obama administration supports a policy of food sovereignty in Haiti, the country could construct a model food system that could feed all Haitians healthy food, increase biodiversity and ecological resilience, and contribute to local, sustainable economic development. Recent research by agroecologists at the University of Michigan shows that sustainable, small-scale farming is more efficient at conserving and increasing biodiversity and forests than industrial agriculture.19 In order to implement a policy for food sovereignty, Haiti must develop without Monsanto’s seed.
Fortunately, Haitian peasants have a long history of resistance and struggle. Haiti was the first colony in the Western Hemisphere to have a successful slave revolt that resulted in an independent nation in 1804. Haiti became a global pariah to the emerging global powers, especially the US. “We defend peasant agriculture, we defend food sovereignty, and we defend the environment of Haiti until our last drop of blood,” states the Final Declaration of the march against Monsanto. “We commit to unite our forces to change this anti-peasant, anti-national state. We want to construct another kind of state, a state that defends peasant agriculture, a state that assists the rural men and women in the protection of the environment, and the conservation of soil and forest.” 20
Speaking from a stage in Charlemagne Péralte plaza, named for the Hinche-born leader of an armed movement against the 1915-1934 US occupation of Haiti, Jean-Baptise symbolically set Monsanto seed on fire, while others began to distribute packets of native seed maize to the cheering crowd. "We have to fight for our local seed," Jean-Baptiste told them. "We have to defend our food sovereignty." 21
Via News – June 15 2010
1 PR Newswire. “Monsanto Company Donates Conventional Maizeand Vegetable Seed to Haitian Farmers to Help Address Food Security Needs.” May 13 2010. http://www.prnewswire.com/news-releases/monsanto-company-donates-conventional-corn-and-vegetable-seed-to-haitian-farmers-to-help-address-food-security-needs-93713444.html.
2 Monsanto Company. “Monsanto donates maizeand vegetable seed to Haiti.” Monsanto Blog May 13 2010. http://www.monsantoblog.com/2010/05/13/monsanto-donates-seed-to-haiti/. Accessed June 7 2010.
3 Urfie, Fr. Jean-Yves. “A new earthquake hits Haiti: Monsanto’s deadly gift of 475 tons of genetically-modified seed to Haitian farmers.” Global Research. Canada. May 11, 2010.
4 Monsanto Company. “Haiti seed donation timeline.” http://www.monsanto.com/features/helping_haitian_farmers_timeline.asp. Accessed June 15 2010 @ 10:46 EST.
5 Email exchange dated April 1st between Elizabeth Vancil and Emmanuel Prophete, in which Jean Robert Estimé is included at a Project Winner email domain.
6 project winner.
7 Katz, Jonathan M. “Monsanto gives Haiti $4 million in hybrid seed.” Associated Press. May 14, 2010. http://www.politicalfriendster.com/showConnection.php?id1=6093&id2=238.
8 Monsanto Company. “Five answers on Monsanto’s Haiti seed donation. Monsanto blog May 20 2010. http://www.monsantoblog.com/2010/05/20/five-answers-monsanto-haiti/.
9 Katz, Jonathan M. “Monsanto gives Haiti $4 million in hybrid seed.” Associated Press. May 14, 2010. http://www.politicalfriendster.com/showConnection.php?id1=6093&id2=238.
10 Monsanto Company. “Monsanto donates maizeand vegetable seed to Haiti.” Monsanto Blog May 13 2010. http://www.monsantoblog.com/2010/05/13/monsanto-donates-seed-to-haiti/.
11 Monsanto Company. “Five answers on Monsanto’s Haiti seed donation. Monsanto blog May 20 2010. http://www.monsantoblog.com/2010/05/20/five-answers-monsanto-haiti/.
12 Holt-Gimenez, Eric. “Haiti: roots of liberty, roots of disaster.” Huffington Post, January 21 2010. http://www.huffingtonpost.com/eric-holt-gimenez/haiti-roots-of-liberty--r_b_431724.html.
13 Haitian Minister of Agriculture. Letter to Mr. Jerry Steiner, Executive Vice President for Sustainability and Corporate Affairs, Monsanto Company. March 26 2010.
14 Kenfield, Isabella. “Monsanto’s seed of corruption in Brazil.” North American Congress on Latin America. October 16 2010. https://nacla.org/node/1417 .
15 Bell, Beverly. “Haitian farmers commit to burning Monsanto hybrid seed.” Huffington Post. May 17 2010. http://www.huffingtonpost.com/beverly-bell/haitian-farmers-commit-to_b_578807.html.
16 Portnoff, Marc. “Prospects for solid and liquid biofuels in Haiti.” United States Agency for International Development. April 2007.
17 Inter-American Development Bank. “Country strategy with Haiti: 2007-2011.” November 2007. http://enet.iadb.org/idbdocswebservices/idbdocsInternet/IADBPublicDoc.aspx?docnum=1309702 .
18 Clapp, Stephen. “State Department official pledges to confront global biotech critics naysayers.” Informa.com. May 10 2010; Volume: 52, Issue: 09. Received via email on May 7 2010.
19 University of Michigan. “SNRE Professor Perfecto co-authors PNAS paper on family farms, biodiversity and food production.” ANN ARBOR, MI, February 22, 2010. http://www.snre.umich.edu/newsroom/2010-02-22/snre_professor_perfecto_co_authors_pnas_paper_on_family_farms_biodiversity_and_f
20 Final declaration of Haitian movements against Monsanto, June 4 2010.
21 Weekly News Update. “Haiti: Thousands of farmers reject Monsanto’s seeds.” http://weeklynewsupdate.blogspot.com/2010/06/wnu-1036-haitian-farmers-reject.html . June 7 201
The poorest country in the Western Hemisphere, Haiti shares the Caribbean island of Hispaniola with the Dominican Republic. About 65 percent of Haiti’s population lives in rural areas and are subsistence farmers. On January 12 2010, a devastating earthquake leveled Haiti’s capital city Port au Prince, and 800,000 urban refugees migrated to rural areas. According to Chavannes Jean-Baptiste, coordinator of the Papaye Peasant Movement (MPP) and a member of La Via Campesina’s international coordinating committee, “there is presently a shortage of seed in Haiti because many rural families used their maizeseed to feed refugees.”
With sales of $11.7 billion in 2009, US-based transnational corporation (TNC) Monsanto Company is the world’s largest seed company, controlling one-fifth of the global proprietary seed market and 90 percent of seed patents from agricultural biotechnology. In May Monsanto announced that it had delivered 60 tons of hybrid seed maizeand vegetables to Haiti, and over 400 tons of its seed (worth $4 million) will be delivered during 2010 to 10,000 farmers. The TNC United Parcel Service is providing transport logistics, While Winner, a $127 million project funded by the US Agency for International Development (USAID) and focused on “agricultural intensification”, is distributing the seed.1 According to Monsanto, the decision to donate seed to Haiti was decided at the World Economic Forum in Davos, Switzerland: “CEO Hugh Grant and Executive Vice President Jerry Steiner attended the event and had conversations with attendees about what could be done to help Haiti.”2 It is unclear whether any Haitians were included in the conversations in Davos.
Some have charged that the Monsanto representative in Haiti is Jean-Robert Estimé, who served as foreign minister during the brutal 29-year Duvalier family dictatorship.3 While Monsanto vehemently denies this claim4, Estimé is included in an email exchange about the donation between Elizabeth Vancil, Director of Global Development Partnerships at Monsanto and Emmanuel Prophete, a Haitian agronomist working for the Minister of Agriculture.5 The domain for Estimé’s email address is for Winner (www.winner.ht).6
Many Haitians consider Monsanto’s seed donation to be part of a broader strategy of US economic and political imperialism. "The Haitian government is using the earthquake to sell the country to the multinationals," stated Jean-Baptiste. Vancil stated that opening up Haitian markets to Monsanto’s products “would be good.”7
Monsanto is emphasizing that the donated seed is hybrid and not genetically-modified (GM)8. However, hybrid seed will not increase Haitian farmers’ food sovereignty or self-reliance; Monsanto acknowledges that they will be unable to save seed to plant in the future9, and that although the seed is being provided free of charge, farmers will pay for it. “Providing an outright donation of seed would undercut one of the basic pieces of Haiti’s agricultural and economic infrastructure,” says Monsanto10, which is donating the seed to the government to sell to farmers. Winner is distributing the seed through farmer association stores, which will use the revenue to reinvest in other inputs, and help “farmers decide whether to use additional inputs (including fertilizer and herbicides) and…how to handle next year’s planting season.” 11
Haiti’s agricultural sector has already been decimated by US interference. In 1991, Jean Bertrande Aristide, Haiti's first democratically-elected president, was removed in a US-supported military coup. As a condition for his return, the US, IMF and World Bank required that Aristide open up Haiti to free trade. Tariffs on rice (Haiti’s staple grain) were reduced from 35% to 3%, government funding was diverted away from agricultural development to the nation's foreign debt, and subsidized rice from Arkansas (it was the Clinton administration) flooded the Haitian market. Haitian rice farmers were decimated12, and today almost all of the rice consumed in Haiti is imported. Sacks marked ‘US Rice’ are everywhere in the markets and neighborhood stores, on peoples’ heads and the backs of mules.
The US is now undermining Haiti’s food system from the ground. A letter from the Haitian Minister of Agriculture to Monsanto implies that GM seed may have been offered in addition to hybrid. “In the absence of a law regulating the use of genetically-modified organisms (GMO) in Haiti, I am not at liberty to authorize the use of Roundup Ready seed or any other GMO material,” stated Juanas Gue, Haitian Minister of Agriculture, in a letter to Monsanto13, which has already proven the length it will go to open new markets in developing countries for its GM seed and toxic chemicals. In 2005, Monsanto was found guilty by the US government of bribing high-level Indonesian officials to legalize GM cotton. Evidence indicates that in Brazil in 2004, Monsanto sold a farm to a senator for one-third of its value in exchange for his work to legalize glyphosate, the world’s most widely used herbicide (sold by the corporation as Roundup).14
According to Paulo Almeida, 31, a member of the Brazilian Movement of Landless Rural Workers who has been in Haiti since 2009 on a solidarity brigade organized by Via Campesina-Brasil, Monsanto also encouraged Brazilian farmers to illegally plant Roundup Ready soybeans. “They want to implant the technological package of the Green Revolution, which isn’t possible here in Haiti. There is no way to survive with monoculture here.”
The hybrid seed maize donated by Monsanto was treated with the fungicide Maxim XO, and the calypso tomato seed were treated with thiram, a chemical so toxic that the US government requires agricultural workers to wear protective clothing when handling seed treated with the fungicide. Monsanto's communications to the Ministry of Agriculture contains no explanation of the danger of these chemicals, or any offer of special clothing or training for Haitian farmers.15
Development of industrial agriculture in Haiti is related to plans to develop an export-oriented agrofuels industry in the country. In 2007 USAID published a report on the ‘prospects for solid and liquid biofuels in Haiti’16, while the Inter-American Development Bank’s Haiti strategy document for 2007-2011 states that removing “obstacles to export of agricultural products are a top priority,” and that “biofuel promotion is being explored specifically.”17
The Obama administration has a hypocritical and inconsistent policy on Monsanto and GM crops. When the Obamas moved into the White House they planted an organic garden, and one can only assume they did not plant GM or hybrid seed. In the US Monsanto monopolizes 60 percent of the entire seed maizemarket and 80 percent of the GM seed maizemarket. In March the administration convened public anti-trust hearings on competitiveness in the US seed market, and has yet to publish its conclusions. Yet the Obama administration is strongly promoting the interests of US agricultural biotechnology TNCs abroad. At the Biotechnology Industry Organization's annual convention in May, Jose Fernandez, assistant secretary for the Bureau of Economic, Energy and Business Affairs, stated that the US State Department (which controls USAID) will aggressively confront critics of agricultural biotechnology.18
Meanwhile, the US Supreme Court is presently deliberating Monsanto Co. vs Geertson Seed Farms, a case about the ecological and economic effects of genetic contamination of organic seed from GM pollen. A favorable decision for Monsanto will lead to the widespread contamination of organic alfalfa, which will destroy the organic milk industry in the US. Though Monsanto’s GM pollen has been contaminating Mexican corn for a decade, the corporation recently received license from the country’s government to conduct open field trials of GM maize in four states. Mexico is the cradle of maize, with thousands of native varieties. Contamination of Haitian maize with pollen from Monsanto’s hybrid corn will also occur, and could render the Haitian varieties unusable for saving and replanting, forcing farmers to become dependent upon the corporation.
“The entrance of Monsanto into Haiti will spell the disappearance of the peasants,” said Doudou Pierre Festil, a member of the Peasant Movement of the Congress of Papaye and coordinator for the National Haitian Network for Food Sovereignty and Security. “If Monsanto’s seed come into Haiti, the seed of the peasants will disappear. Monsanto’s seed will create problems of health and for the environment. Thus it is necessary for us to struggle against this project of death to do away with the peasants.”
“If the US government truly wants to help Haiti, it would help the Haitians to build food sovereignty and sustainable agriculture, based on their own native seed and access to land and credit. That is the way to help Haiti,” says Dena Hoff, a diversified organic farmer in Montana and member of Via Campesina’s international coordinating committee.
The United Nations estimates that 75 percent of the world’s plant genetic diversity has been lost as farmers have abandoned their local seed for genetically-uniform varieties offered by TNCs, and as GM and hybrid seed have contaminated native varieties. Genetic homogeneity increases farmers’ vulnerability to sudden changes in climate and the appearance of new pests and diseases, while seed agrobiodiversity, adapted to different microclimates, altitudes and soils, is fundamental for adapting to climate change.
Critics of Monsanto’s donation argue that the best way to ensure enough seed for Haiti is through the collection, conservation and propagation of local, native varieties in community seed banks. Haiti’s native seed varieties have developed and adapted to the different regions of Haiti over generations, in tandem with its people. Saving and replanting seed strengthens crops’ genetic plasticity, e.g. their capacity to adapt rapidly over generations to changing growing conditions, and also increases agrobiodiversity.
Island nations are particulalry vulnerable to climate change. If the US does not get its’ policy for Haiti right this time, there will not be another chance. Given the extent of food insecurity and environmental degradation in Haiti, the country must adopt a policy for food sovereignty in order for its people and biodiversity to survive. Ninety-eight percent of Haiti’s original tropical forest cover has been lost, there is widespread soil erosion, and desertification is increasing. Haiti cannot sustain further ecological destruction from the imposition of industrial agriculture. Alternatively, if the Obama administration supports a policy of food sovereignty in Haiti, the country could construct a model food system that could feed all Haitians healthy food, increase biodiversity and ecological resilience, and contribute to local, sustainable economic development. Recent research by agroecologists at the University of Michigan shows that sustainable, small-scale farming is more efficient at conserving and increasing biodiversity and forests than industrial agriculture.19 In order to implement a policy for food sovereignty, Haiti must develop without Monsanto’s seed.
Fortunately, Haitian peasants have a long history of resistance and struggle. Haiti was the first colony in the Western Hemisphere to have a successful slave revolt that resulted in an independent nation in 1804. Haiti became a global pariah to the emerging global powers, especially the US. “We defend peasant agriculture, we defend food sovereignty, and we defend the environment of Haiti until our last drop of blood,” states the Final Declaration of the march against Monsanto. “We commit to unite our forces to change this anti-peasant, anti-national state. We want to construct another kind of state, a state that defends peasant agriculture, a state that assists the rural men and women in the protection of the environment, and the conservation of soil and forest.” 20
Speaking from a stage in Charlemagne Péralte plaza, named for the Hinche-born leader of an armed movement against the 1915-1934 US occupation of Haiti, Jean-Baptise symbolically set Monsanto seed on fire, while others began to distribute packets of native seed maize to the cheering crowd. "We have to fight for our local seed," Jean-Baptiste told them. "We have to defend our food sovereignty." 21
Via News – June 15 2010
1 PR Newswire. “Monsanto Company Donates Conventional Maizeand Vegetable Seed to Haitian Farmers to Help Address Food Security Needs.” May 13 2010. http://www.prnewswire.com/news-releases/monsanto-company-donates-conventional-corn-and-vegetable-seed-to-haitian-farmers-to-help-address-food-security-needs-93713444.html.
2 Monsanto Company. “Monsanto donates maizeand vegetable seed to Haiti.” Monsanto Blog May 13 2010. http://www.monsantoblog.com/2010/05/13/monsanto-donates-seed-to-haiti/. Accessed June 7 2010.
3 Urfie, Fr. Jean-Yves. “A new earthquake hits Haiti: Monsanto’s deadly gift of 475 tons of genetically-modified seed to Haitian farmers.” Global Research. Canada. May 11, 2010.
4 Monsanto Company. “Haiti seed donation timeline.” http://www.monsanto.com/features/helping_haitian_farmers_timeline.asp. Accessed June 15 2010 @ 10:46 EST.
5 Email exchange dated April 1st between Elizabeth Vancil and Emmanuel Prophete, in which Jean Robert Estimé is included at a Project Winner email domain.
6 project winner.
7 Katz, Jonathan M. “Monsanto gives Haiti $4 million in hybrid seed.” Associated Press. May 14, 2010. http://www.politicalfriendster.com/showConnection.php?id1=6093&id2=238.
8 Monsanto Company. “Five answers on Monsanto’s Haiti seed donation. Monsanto blog May 20 2010. http://www.monsantoblog.com/2010/05/20/five-answers-monsanto-haiti/.
9 Katz, Jonathan M. “Monsanto gives Haiti $4 million in hybrid seed.” Associated Press. May 14, 2010. http://www.politicalfriendster.com/showConnection.php?id1=6093&id2=238.
10 Monsanto Company. “Monsanto donates maizeand vegetable seed to Haiti.” Monsanto Blog May 13 2010. http://www.monsantoblog.com/2010/05/13/monsanto-donates-seed-to-haiti/.
11 Monsanto Company. “Five answers on Monsanto’s Haiti seed donation. Monsanto blog May 20 2010. http://www.monsantoblog.com/2010/05/20/five-answers-monsanto-haiti/.
12 Holt-Gimenez, Eric. “Haiti: roots of liberty, roots of disaster.” Huffington Post, January 21 2010. http://www.huffingtonpost.com/eric-holt-gimenez/haiti-roots-of-liberty--r_b_431724.html.
13 Haitian Minister of Agriculture. Letter to Mr. Jerry Steiner, Executive Vice President for Sustainability and Corporate Affairs, Monsanto Company. March 26 2010.
14 Kenfield, Isabella. “Monsanto’s seed of corruption in Brazil.” North American Congress on Latin America. October 16 2010. https://nacla.org/node/1417 .
15 Bell, Beverly. “Haitian farmers commit to burning Monsanto hybrid seed.” Huffington Post. May 17 2010. http://www.huffingtonpost.com/beverly-bell/haitian-farmers-commit-to_b_578807.html.
16 Portnoff, Marc. “Prospects for solid and liquid biofuels in Haiti.” United States Agency for International Development. April 2007.
17 Inter-American Development Bank. “Country strategy with Haiti: 2007-2011.” November 2007. http://enet.iadb.org/idbdocswebservices/idbdocsInternet/IADBPublicDoc.aspx?docnum=1309702 .
18 Clapp, Stephen. “State Department official pledges to confront global biotech critics naysayers.” Informa.com. May 10 2010; Volume: 52, Issue: 09. Received via email on May 7 2010.
19 University of Michigan. “SNRE Professor Perfecto co-authors PNAS paper on family farms, biodiversity and food production.” ANN ARBOR, MI, February 22, 2010. http://www.snre.umich.edu/newsroom/2010-02-22/snre_professor_perfecto_co_authors_pnas_paper_on_family_farms_biodiversity_and_f
20 Final declaration of Haitian movements against Monsanto, June 4 2010.
21 Weekly News Update. “Haiti: Thousands of farmers reject Monsanto’s seeds.” http://weeklynewsupdate.blogspot.com/2010/06/wnu-1036-haitian-farmers-reject.html . June 7 201
Tuesday, July 13, 2010
Gunnar Tómasson letter to members of the Althing in Iceland
Distinguished members of Althing.
The envisaged reconstruction of the Icelandic economy is behind schedule, to put it mildly.
Gross national product (GDP) in constant IKR prices contracted by 6.5% in 2009 (original forecast was 9.5%) but its FX/dollar value fell by 28% (original forecast was 20%). As detailed further in my attached letter of last April 26 to Poul M. Thomsen, the IMF official in charge of Iceland issues, the IMF projects GDP in 2013 to be 4.3% higher in constant IKR prices than in 2008 but 25% lower in FX/dollar terms. I made certain related comments in the letter on Iceland's debt servicing capacity in light of the Brussels Icesave guidelines to which Mr. Thomsen has not responded. Therefore, it is timely for Iceland's Althing to undertake a detailed review of the economic program agreed with the IMF so that, absent change of course, further damage to the economy may be avoided.
In this connection I believe that the increased income and consumption taxes (and related increase of indexed loan principals) recommended by the IMF would make a bad situation worse and serve to postpone difficult actions to strike at the roots of financial disequilibrium in the economy. Iceland's Supreme Court has taken the first step in that direction with its decision ruling the FX-indexation of IKR loans illegal, but Althing must take the initiative to abolish the price-indexation of IKR loans. FX- and price-indexation of IKR loans have not only stood in the way of professional and effective monetary management over the years, but they are also weapons of choice for ruthless promotion of their self-interest by financial market parties which contributed greatly to - with some benefiting from - the collapse of the króna and the entire economy in October 2008.
The economic program agreed with the IMF was partly based on ideas in the field of mainstream monetary economics on which Alan Greenspan, former US Fed Chairman, commented before a congressional committee on 23 October 2008. "Those of us [who considered those ideas sound] are in a state of shocked disbelief [because] the whole intellectual edifice collapsed in the summer of [2007]," Greenspan said. For the past "40 years or more [he had been going] with very considerable evidence that that they were working exceptionally well." The IMF Executive Board has been of the same view for just as long but it has not re-examined its own modus operandi, cf. the monetary aspects of the AGS economic program which reflects an old and collapsed world-view.
The same is true of the Central Bank of Iceland, but its most recent statistics suggest that in the first half of 2010 the CBI provided 50 billion IKR in interest income on an annual basis to financial institutions for deposits with the CBI whose national economic value is hard to discern. Absent evidence to the contrary, here is about 50 billion IKR in government sector outlays which could be cut without any adverse effects - and might encourage financial institutions to search out profitable loan opportunities in the economy. But the main problem in government sector finance in the period ahead is how to create financial space for the Treasury to address urgent tasks following the Supreme Court's ruling on FX-indexation of IKR loans and, if Althing rises to the occasion, the abolition of IKR loan price-indexation.
According to CBI economic statistics deposits with deposit institutions were about 1640 bn. IKR at end-March 2010. Chances are that a large portion of deposits in excess of 5-10 million IKR are the product of opportunities for wealth accumulation present in the bubble economy which burst in October 2008, leaving a heavy debt burden for Iceland and its people. Information is not at hand on the distribution of deposits by amount, but if deposits in excess of 5-10 million IKR as of 30 June were about 1500 bn. IKR, then 10-20% taxation of such deposits would yield about 150-300 bn. IKR to the Treasury. Icelanders are not all equally able to lend support to Iceland's economic independence, but it cannot be truthfully said that wage-earners in general, the elderly and the disabled have not shouldered their responsibilities in this hour of urgent need.
Respectfully,
Gunnar Tómasson, economist
The envisaged reconstruction of the Icelandic economy is behind schedule, to put it mildly.
Gross national product (GDP) in constant IKR prices contracted by 6.5% in 2009 (original forecast was 9.5%) but its FX/dollar value fell by 28% (original forecast was 20%). As detailed further in my attached letter of last April 26 to Poul M. Thomsen, the IMF official in charge of Iceland issues, the IMF projects GDP in 2013 to be 4.3% higher in constant IKR prices than in 2008 but 25% lower in FX/dollar terms. I made certain related comments in the letter on Iceland's debt servicing capacity in light of the Brussels Icesave guidelines to which Mr. Thomsen has not responded. Therefore, it is timely for Iceland's Althing to undertake a detailed review of the economic program agreed with the IMF so that, absent change of course, further damage to the economy may be avoided.
In this connection I believe that the increased income and consumption taxes (and related increase of indexed loan principals) recommended by the IMF would make a bad situation worse and serve to postpone difficult actions to strike at the roots of financial disequilibrium in the economy. Iceland's Supreme Court has taken the first step in that direction with its decision ruling the FX-indexation of IKR loans illegal, but Althing must take the initiative to abolish the price-indexation of IKR loans. FX- and price-indexation of IKR loans have not only stood in the way of professional and effective monetary management over the years, but they are also weapons of choice for ruthless promotion of their self-interest by financial market parties which contributed greatly to - with some benefiting from - the collapse of the króna and the entire economy in October 2008.
The economic program agreed with the IMF was partly based on ideas in the field of mainstream monetary economics on which Alan Greenspan, former US Fed Chairman, commented before a congressional committee on 23 October 2008. "Those of us [who considered those ideas sound] are in a state of shocked disbelief [because] the whole intellectual edifice collapsed in the summer of [2007]," Greenspan said. For the past "40 years or more [he had been going] with very considerable evidence that that they were working exceptionally well." The IMF Executive Board has been of the same view for just as long but it has not re-examined its own modus operandi, cf. the monetary aspects of the AGS economic program which reflects an old and collapsed world-view.
The same is true of the Central Bank of Iceland, but its most recent statistics suggest that in the first half of 2010 the CBI provided 50 billion IKR in interest income on an annual basis to financial institutions for deposits with the CBI whose national economic value is hard to discern. Absent evidence to the contrary, here is about 50 billion IKR in government sector outlays which could be cut without any adverse effects - and might encourage financial institutions to search out profitable loan opportunities in the economy. But the main problem in government sector finance in the period ahead is how to create financial space for the Treasury to address urgent tasks following the Supreme Court's ruling on FX-indexation of IKR loans and, if Althing rises to the occasion, the abolition of IKR loan price-indexation.
According to CBI economic statistics deposits with deposit institutions were about 1640 bn. IKR at end-March 2010. Chances are that a large portion of deposits in excess of 5-10 million IKR are the product of opportunities for wealth accumulation present in the bubble economy which burst in October 2008, leaving a heavy debt burden for Iceland and its people. Information is not at hand on the distribution of deposits by amount, but if deposits in excess of 5-10 million IKR as of 30 June were about 1500 bn. IKR, then 10-20% taxation of such deposits would yield about 150-300 bn. IKR to the Treasury. Icelanders are not all equally able to lend support to Iceland's economic independence, but it cannot be truthfully said that wage-earners in general, the elderly and the disabled have not shouldered their responsibilities in this hour of urgent need.
Respectfully,
Gunnar Tómasson, economist
Monday, July 12, 2010
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