Social Wealth Funds: A Key Ingredient of a New Alternative Economic Strategy

September 29, 2016

Tackling growing inequality will not succeed without fundamental reform of the current model of corporate capitalism and the “de-concentration” of capital ownership. One of the most powerful tools for achieving such change would be by the creation of one or more collectively-owned social wealth funds.

Since 2008, the Anglo-Saxon model of capitalism – with its emphasis on markets, weak regulation and the concentration of private capital – has been fast losing friends. The model, operated most forcefully in the UK and the United States, has led to entrenched inequality, and far from delivering stable, long term growth, has brought growing economic turbulence. Even former cheerleaders are questioning its sustainability. As the IMF recently asked, “Has Neo-liberalism been oversold”.¹

Yet despite the growing scepticism about its merits, the neo-liberal model of corporate capitalism remains largely intact. Driven by decades of rolling privatisation, de-regulation and an antipathy to collectivism, the fruits of economic activity in the UK have been increasingly colonised by a small business and financial elite, leading to one of the world’s heaviest concentrations of wealth and capital.

UK Plc is dominated by large companies. Those with over 250 employees account for 52% of total private sector turnover.²Great chunks of vital economic activity – from energy supply to food production and accountancy services – are controlled by a handful of giant firms. Big corporations wield disproportionate power over consumers, small businesses and sometimes – because they are “too big to fail” – government. Shareholding has become increasingly concentrated, speculative and destabilising, with less than 12% of shares owned by individuals. Big business has used the rise in the profit share since the 1980s to enrich a small financial and corporate elite, rather than to invest in the long term future of the economy.

Today, the UK is a society ever more divided between extreme affluence and mass impoverishment.³ Since 2008, the wealth gap has continued to widen. As the official wealth statistics have shown, aggregate wealth enjoyed by the top fifth as a ratio of the bottom fifth has risen from 92 to 117 since the 2008 Crash.⁴ Median real earnings are still well below their peak level in 2009, while relative child poverty is predicted to rise sharply.⁵ Far from countering these trends, the thrust of state policy since 2010 – loose monetary policy, austerity fiscal policy and regressive tax/benefit changes – has boosted asset values, while transferring income from the poorest quarter of the population to the affluent top.⁶

Big business has used the rise in the profit share since the 1980s to enrich a small financial and corporate elite, rather than to invest in the long term future of the economy.

There are plenty of voices calling for change. But most suggestions involve tinkering with the existing pro-inequality model. A serious attempt at reform needs to build an alternative “sharing political economy”, one that disperses capital ownership, power and wealth, and ensures that the fruits of growth are more equally divided. Central to such a model must be the de-concentration of capital ownership. Without such a break-up, inequality will continue to rise.

There are many ways of achieving such “de-concentration”. The French economist, Thomas Piketty, for example, favours a global tax on wealth, while accepting it is a somewhat utopian idea.⁷ Encouraging the spread of alternative business models – from co-operatives to partnerships – that allow the greater sharing of economic gain – would also help disperse ownership.

But an especially powerful weapon for building a sharing economy would be the building of collectively-owned social wealth funds. These are publicly owned financial funds, created from the pooling of existing resources and used for the wider social benefit of society. By helping to secure a more even economic balance between collective and private ownership and ensure that more economic gains are evenly shared, social wealth funds are a direct way of tackling the over-dominance of capital, and thus one of the key sources of inequality.

Such funds are widely used. More than 60 countries – from Singapore to China – have introduced state-owned sovereign wealth funds resourced through the exploitation of oil. While many of these are run in a non-transparent way as little more than the investment arm of the state, sometimes without obvious public benefit, several examples offer a blueprint for a model social wealth fund. Since the early 1980s for example, Alaska has operated a highly popular fund which pays an annual dividend to all citizens. Perhaps the most successful and transparent of these funds is the $700 bn Norwegian Fund. Overseen by an independent ethics committee, it holds one percent of global equities.⁸

The UK has had two key opportunities to create its own funds. The first came with the North Sea oil bonanza in the mid-1980s. But instead of investing for the long term, British governments have used oil revenue to finance tax cuts and boost current consumption, a clear example of recent political failure.

Estimates suggest that such a fund would have been worth between £450 billion (that’s bigger than the wealth funds of Kuwait, Qatar and Russia combined) and £850 billion today.⁹ If one had been created, the UK would today have a much larger asset base, and the public sector net worth (total public assets minus the national debt) would be positive instead of negative.¹⁰ There would be considerably less panic about the national debt and Britain’s economy would be operating on a much more secure footing. There is, rightly, much gnashing of teeth about corporate short-termism, yet Governments have been just as culpable and have fewer excuses.

The second missed opportunity came with the decision, again in the mid-1980s, to start selling off the family silver. Instead of the rolling privatisation juggernaut – another example of blatant jam-today politics – existing public assets (land, property and public companies) could have been pooled into a single ring-fenced fund to form a giant pool of commonly held wealth. Imagine the shape of the British economy today if such a fund had been established in the mid-1980s. With close to £200 bn sales since then, and part of the fund reinvested, it would have grown to represent a very sizeable chunk of the economy’s overall wealth, providing a powerful balance to private capital.

Despite these historic errors, it is not too late to establish such a fund. While billions of assets have been sold, remaining public assets are worth some £1.2 trillion.¹¹ Such a move would bring an end to today’s politically expedient sell-off of public assets, preserve what remains of the family silver and ensure that the revenue from the better management of such assets is used to boost essential economic and social investment.

Instead, the government is accelerating the privatisation programme, with the revenue used to help pay down the deficit. Yet it makes little sense to use long term capital assets to finance a temporary revenue gap. The family silver can only be sold once. Soon Britain will be all debt and no assets. This is indefensible short-termism that will be paid for heavily by subsequent generations.

Of course, the private sector will always have a big role to play in any progressive economic model and in the process of wealth creation. But most other countries are much less fixated about the virtues of private ownership and recognise the important role to be played by the state and by collectively organised activity. Fifteen nations – in Europe, Asia and the Middle East – have already created public ownership funds which manage all state-owned commercial assets. Many of these – from the Singapore to the Austrian fund – have achieved a higher annual return than the private sector, providing dividends to the Exchequer.

There are other ways one or more social wealth funds could be established. Although the UK has already spent most of its oil revenue, such a fund could be established using other sources of income including the dividends from other natural resources (that should be commonly shared) such as minerals, urban land and the electromagnetic spectrum. The occasional one-off taxes on windfall profits, such as those levied in the past on banks, energy companies and oil producers, could also be paid into such a dedicated fund, possibly in the form of shares. More radical options for funding might include a direct charge on those financial and commercial transactions – such as merger and acquisition activity – which contain a high element of rentier activity. Another alternative might be an annual charge on share ownership, a direct way of diluting private capital ownership.

The creation of one or more funds would help secure a more even economic balance between collective and private ownership.

Social wealth funds could play a vital role in the economy. In the 1960s, the Nobel Laureate, James Meade, advocated just such a fund to help promote a “property owning democracy” in which all citizens have access to assets. He argued that such a fund should be financed by the dilution of existing capital ownership, through, for example, an additional, modest levy on share ownership, with the annual revenue used to pay an annual citizen’s dividend, through a modest contribution from a very privileged social group.¹²

The creation of one or more funds would help secure a more even economic balance between collective and private ownership. By adding to the value of public assets, they would also greatly improve the public finance balance sheet. By extending the scale of common ownership and using the proceeds for wider community benefit, such as investment in social infrastructure, they would strengthen the productive base and help tackle inequality from both ends. Their benefits would be spread across generations. It’s time such an idea was given serious consideration by political leaders across the spectrum.

Featured image courtesy of: ZRyzner

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About the Author

Stewart Lansley is a visiting fellow at Bristol University. He is the author of A Sharing Economy: How Social Wealth Funds Can Reduce Inequality and Help Balance the Books, Policy Press, 2016; the co-author (with Joanna Mack) of Breadline Britain, Oneworld, 2015, and the author of the Cost of Inequality, Gibson Square, 2011.

References

1. JD Ostry, P Loungani and D Furceri, ‘Neoliberalism: Oversold?’, Finance & Development, IMF, June 2016, Vol. 53, No. 2
2. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/377934/bpe_2014_statistical_release.pdf
3. S Lansley and J Mack, Breadline Britain, The Rise of Mass Poverty, Oneworld, 2015.
4. ONS, Chapter 2: Total wealth, Wealth in Great Britain, 2012 to 2014, ONS, 2015
5. J Brown and A Hood, Living standards, poverty and inequality in the UK: 2015-16 to 2020-21, IFS, 2016.
6. P De Agostini, J Hills and H Sutherland, ‘Were we rally all in it together?`, CASE Working Paper 22, LSE, 2015.
7. T Piketty, Capital in the Twenty-First Century, Harvard University Press, 2014.
8. S Lansley, How Social Wealth Funds Can Reduce Inequality and Balance the Books, Policy Press, 2016, ch 4.
9. Quoted in A Chakrobortty, ‘Dude: Where’s My North Sea Oil Money’, Guardian, 13 June, 2014.
10. AB Atkinson, Inequality: What Can Be Done?, Harvard University Press, 2015, p 176-177
11. S Lansley, How Social Wealth Funds Can Reduce Inequality and Balance the Books, Policy Press, 2016, ch 5.
12. J Meade, Efficiency, Equality and the Ownership of Property, Allen and Unwin, 1965.

A Reform Agenda for Post-Brexit Europe

September 29, 2016

By Andrea Montanino, Lilac Peterson, & Álvaro Morales Salto-Weis

Following Brexit, it is even more important that the European Union focus on further integration. It can do this by completing the Digital Single Market and the Capital Markets Union, concluding the Transatlantic Trade and Investment Partnership (TTIP), pursuing a larger European budget, and introducing Eurobonds.

Although it is highly uncertain which direction a European Union without the United Kingdom will take, we will lay out two possible scenarios. The first scenario will leverage European citizens’ fears that free movement of labour will limit job opportunities for locals, that free movement of people will increase terrorist attacks and destabilise local communities, and that free movement of capital will lead to foreign acquisitions of domestic companies. All these fears will induce voters to elect representatives who will work to curtail European integration and the role of EU institutions, which may not break up the Union per se but will render it ineffective.

A second scenario is that EU member states realise that they can only create more jobs and play a larger role in the globalised economy by enacting more coordinated policies. We focus on this second option, which may not be likely in the medium term, but we are convinced will create better conditions for sustained economic growth. Completing the single market and advancing the fiscal union are two milestones for a more efficient Union.

The Digital Single Market (DSM) was introduced in 2015 and is designed to remove regulatory barriers and market fragmentation while supporting e-commerce and intellectual property rights. If implemented properly, it could add as much as €415 billion to the EU economy each year. Key challenges facing this process include ending “geo-blocking”, which restricts user access or charges extra to use a website based in another EU country; and reforming European copyright law so that products made in different EU countries can be used and shared across borders. For example, online education regulations should be harmonised across Europe so that teachers can provide quality education without running into legal snares.

While integrating, the EU should avoid overregulating. In such a large Union of sovereign states, regulation is essential to guarantee evenhandedness and provide a common framework across countries.

On his very first day as the new Commissioner for financial services, European Commission Vice President Valdis Dombrovskis spoke at the Washington-based Atlantic Council about the relevance of creating a Capital Markets Union (CMU), a goal European Commission President Jean-Claude Juncker has also made one of his key priorities. Integrated capital markets will strengthen cross-border risk sharing through the deeper integration of bond and equity markets. This results in a broader range of funding sources, which can become a sorely needed shock absorber. CMU can also develop financing tools to fuel growth of small and medium enterprises (SME), infrastructure projects, competitiveness, and long-term investment financing to foster economic growth.

Compared to the United States, the European Union’s financing options, especially for high-growth SMEs, are not nearly as diverse: bank loans comprise more than three-quarters of external credit to non-financial companies in the European Union, compared to less than a third in the United States. According to New Financial, there is a shortfall in capacity of more than $1 trillion per year between what European companies raise in the capital markets and what they could potentially raise if capital markets were as developed and deep as American capital markets. In addition, 60% of the recent economic shocks the US experienced were absorbed by the private market, whereas the EU’s equity markets are not nearly as large nor well-equipped to handle this kind of responsibility.

In addition to the CMU, a major component of European integration will be conducted through the Transatlantic Trade and Investment Partnership (TTIP). According to the independent Centre for Economic Policy Research (CEPR), TTIP will increase the size of the EU economy by around €120 billion (or 0.5% of GDP) and the US by €95 billion (or 0.4% of GDP), and would lead to a permanent increase in the amount of wealth that the European and American economies can produce every year. It will increase exports for numerous sectors, including motor vehicles, metal products, and processed foods. It will also cement the transatlantic relationship, whose importance cannot be overstated.

While integrating, the EU should avoid overregulating. In such a large Union of sovereign states, regulation is essential to guarantee evenhandedness and provide a common framework across countries. However, citizens and companies can feel disaffected towards EU institutions when some of them have to follow duplicative and complex regulations.

Only by restoring trust in its institutions can the EU pursue the needed larger European budget, which is necessary for a closer Fiscal Union. I suggest increasing the budget from the current one percent to three percent of EU GDP. This is still a very slim portion compared to the United States, where the federal budget is 22.5 percent of GDP. However, this is a complicated task. On one hand, increasing the tax burden seems difficult, as most member states already face high fiscal pressure. An alternative would be to transfer competencies to the EU, in areas like public funds for R&D, infrastructure plans or some social assistance programs (an EU unemployment benefits program, for example).

We will likely move toward a Union resembling concentric circles, in which a core group of countries pursues the closest integration possible while maintaining their status as independent nations.

Integration should take place at an EU-wide level for the internal market and at the Eurozone level for fiscal policy. The completion of the internal market is a must, and should be done quickly. The European Union has the largest internal market in the world and among the world’s wealthiest citizens. Completing the internal market, finalising a free trade agreement with the US, and allocating more funds to an EU budget will show the economic benefits of the Union more clearly, and will likely prevent other “-exits” from the EU.

While completing the internal market, Eurozone countries should work for a closer fiscal union to complement the single currency. A rather revolutionary idea related to this that has been floating around is to issue Eurobonds. Eurobonds can be targeted to finance European projects for infrastructure, R&D, and human capital. If necessary, they can also provide resources to mitigate large and unanticipated shocks. A supranational European agency resembling the European Stability Mechanism (ESM) following some necessary legislative changes could issue up to five percent of Eurozone GDP in European debt to finance large projects. This can have a short term effect on jobs and a more structural long term effect on potential growth.

Eurobonds will likely receive a AAA credit rating and, given the current market conditions, will have close to a one percent yield on a ten-year bond. Such an issuance will not crowd out other sovereign debt and it is difficult to imagine that the costs will be higher than the return. Eurobonds can serve as a practical alternative to higher government spending, which isn’t viable for most EU countries due to their already high levels of public debt.

Integration is not for everybody, as the British referendum showed. It is probably time to forget the “two-speed Europe” which allows member states to choose when to join a common EU currency. We will likely move toward a Union resembling concentric circles, in which a core group of countries pursues the closest integration possible while maintaining their status as independent nations. Meanwhile, the other states can agree on a lighter form of integration. It is imperative that the three largest founder countries, Germany, France, and Italy, are part of the core. It is unclear, however, whether all 19 Eurozone countries will have the ability and the willingness to enter into the closest circle.

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About the Author

Andrea Montanino is the director of the Global Business & Economics Program at the Atlantic Council. He leads the Council’s work on global trade, growth, and finance. Montanino formerly acted as executive director of the International Monetary Fund (IMF), representing the governments of Italy, Albania, Greece, Malta, Portugal, and San Marino.

Lilac Peterson is an intern with the Global Business & Economics Program. She previously worked at the US Treasury Department. Peterson is a junior at the University of California, Berkeley, where she studies Economics, Chinese, and Public Policy. She has published two books in China.

Álvaro Morales Salto-Weis served as a Program Assistant with the Global Business & Economics Program. He now works at the European Commission. He received his Master’s in public economics from the Universiteit van Amsterdam.

Rio 2016 and the (Broken) Promises of the Olympic Games

September 23, 2016

rio_featured — Onlookers watch the Rio Games’ opening ceremony from the city’s favelas.

By Simon Darnell and Rob Millington

The 2016 Olympics in Rio de Janeiro were to catalyse and signify Brazil’s final transition into a modern, developed nation. Yet, many were skeptical of the city and country’s ability to host the event successfully, citing levels of pollution, crime, and a lack of infrastructure. Could hosting in a city like Rio simply exacerbate such issues?

By all accounts, Rio de Janeiro’s successful bid for the 2016 Olympic Games was remarkable. For the first time since 1968, the IOC awarded the Games to a city in a “developing” nation within the global South, and for the first time ever bestowed the Olympics upon a city in South America. Many within Brazil saw this successful bid as affirmation of the country’s newfound standing within the international community, and a catalyst for its final push towards becoming a modern, developed nation. Then President Lula da Silva made clear the significance of the Olympics in this regard, declaring that the Games marked “Brazil’s chance to present itself to the world, [by leaving behind] its status as a second class nation.”¹ Lula’s claims drew on the popular logic of Olympic hosting, namely that holding a sports mega-event provides an opportunity for a host city and country to unlock significant capital towards the reconfiguration of cityscapes, particularly the construction of facilities, transportation, and commercial and tourist areas, as well as an opportunity to broadcast an image of a modern, advanced state to the rest of the world.² Notably, Lula also claimed that the event would provide “an opportunity to improve the living conditions of the people of a country,”³ a particularly significant statement given Rio and Brazil’s legacy of poverty and inequality, as well as the rather dubious track record of the Olympic Games when it comes to leaving a positive, sustained social legacy.

Nonetheless, the promises attached to Rio 2016 were not out of the ordinary. Such potential benefits of hosting an Olympic Games – as well as other sport mega-events like the FIFA World Cup – have become increasingly attractive for emerging nations like Brazil that seek to project an image of “development” to an international audience and to reap the benefits of increased tourism, foreign investment, and international prestige. Thus, the awarding of the 2016 Games to Rio continued the trend of sport mega-events being taken up by non-traditional powers as part of their development strategies, with the 2008 Olympics in Beijing, China, the 2010 World Cup in South Africa, the 2010 Commonwealth Games in Delhi, India, the 2014 Olympics in Sochi, Russia, and the 2014 World Cup in Brazil all serving as prior examples.

However, while the development potential of Rio 2016 was promoted from the outset, it was quickly accompanied by doubts and fears surrounding the city’s ability to stage such an event successfully, with many citing crime rates, pollution levels, and the lack of infrastructure as barriers to hosting the Games. During the event, such concerns intensified. Coverage of Rio 2016 was replete with tales of incomplete competition venues and accommodations, polluted water for aquatic sports, poor event management, crime, and general civil unrest throughout the city. Such reports fed the notion that the Brazilian Organizing Committee was not prepared to host the event, or worse, that a “developing,” global South nation is unable to host an event of the magnitude of the Olympic Games.

Potential benefits of hosting an Olympic Games have become increasingly attractive for emerging nations like Brazil that seek to project an image of “development” to an international audience and to reap the benefits of increased tourism, foreign investment, and international prestige.

At the same time, such concerns about the practicality of staging the Olympic fortnight in a city like Rio are only the tip of the iceberg. A plethora of critical scholars and social activists cited concerns about the efficacy of hosting the Olympics in Rio during the entire 7-year run-up to the event. In particular, they argued that while the benefits of hosting sports mega-events are attractive to emerging, semi-peripheral or non-traditional states, the stakes are higher for such polities, with fewer resources available and slimmer margins for error as compared to traditional host cities.⁴ From this perspective, a city like Rio was always in a precarious position as host; when unforeseen problems emerged or costs overran (as they inevitably have done in the recent history of the Games), the “winners curse” meant that resources simply had to be found. In turn, the opportunity costs are higher – in Rio and Brazil where poverty and inequality is multi-generational, and basic public services lacking amidst a crippling recession, the fact that so much money was spent on a sports event is increasingly difficult to justify.

These examples might suggest particular struggles or challenges for Rio and Brazil in its attempt to host a successful Olympics. From our perspective, however, such issues are illustrative of the broader politics of hosting sports mega-events. Again, scholars and activists have long argued that hosting events like the Olympics and World Cup does little to overcome social inequality and economic stratification and indeed largely exacerbates such problems through displacement and gentrification. In turn, the intense commercialisation of such events often results in public money being funnelled to private interests and hands. Thus, despite being promoted as a boon to social and economic development (in global North and global South nations alike), the fanfare surrounding sports mega-events tends to obfuscate the neoliberal tendencies underpinning them, forces that result in the private accumulation of wealth, the displacement of marginalised populations, and the privatisation of land and resources to the detriment of the natural environment.

This has been particularly acute in Brazil, where the size and cost of Rio 2016 has intensified social and economic inequalities, and raised questions about matters of human rights and social justice. Jules Boykoff has argued that the Olympic Games often take place in a “state of exception” whereby normal policy priorities are compromised and individual rights sometimes suspended in the name of hosting a world class sport event.⁵ This is perhaps best illustrated in Brazil by the repossession of land from informal housing communities known as favelas through “Police Pacification Units” (UPP), whereby police/military units enter such spaces, remove prominent drug traffickers, and occupy the area. While the state has argued that the UPPs are of benefit to local communities, local activists have shown that these evictions are often conducted at random, through the use of violence, and with the intent of consolidating land and wealth under the pretence of health and safety. Tellingly, such activities have been criticised by both the United Nations Human Rights Council and Amnesty International.⁶

Rio has seen regular street protests against this appropriation of land and displacement of local populations, as well as the lack of investment in impoverished areas, not to mention health care, education, and transportation. Indeed, most of the public funding for the Games has come from Rio’s city government, which in June declared a state of financial emergency requiring the release of federal emergency funds. As a result, Rio state employees and pensioners are owed wages, with many hospitals and police stations adversely affected.⁷ The point here is not that the political contestability of hosting the Olympics is unique to Rio and Brazil; rather, given its precarious position, the stakes of Olympic hosting are higher for Rio, and the negative effects and opportunity costs of hosting have proved more difficult to overcome or ignore compared to other Olympic cities.

The scale of the Olympics is now such that hosting seems increasingly unsustainable, socially, economically, and environmentally; the 2014 Sochi Winter Olympics, for instance, reportedly cost close to $51 billion (US) .

All of this raises the question of whether the residents of Rio, and the population of Brazil more broadly, will see any benefits from the event. It is perhaps the case that the attention paid to the city and country during the Games will lead to subsequent benefits in tourism, investment and trade. There is also the possibility – often used to justify Olympic spending – that the demonstration of Olympic sport will inspire a new generation of Olympic athletes and a more active population, leading in turn to a healthier, happier and more prosperous nation. However, given that the global media coverage of Rio’s hosting of the Games has been mixed at best, the resulting image of Rio and Brazil may turn out to be less than positive. In turn, given Brazil’s structural inequality, any investment in tourism and trade that may occur as a result of Rio 2016 is not guaranteed to find its way to those who need it most. As for the sporting benefits, investment in elite athletes does not necessarily mean that there are more opportunities or even incentives for average citizens to participate in sport. Indeed, in the aftermath of the pacification and displacement of Rio’s most marginalised citizens, it seems unlikely that they would be motivated to take up sport in the spirit of Olympic legacy.

So what might an alternative and more equitable approach to hosting the Olympic Games look like? The scale of the Olympics is now such that hosting seems increasingly unsustainable, socially, economically, and environmentally; the 2014 Sochi Winter Olympics, for instance, reportedly cost close to $51 billion (US).⁸ The lack of bid cities for the 2022 Winter Olympics (eventually awarded to Beijing) perhaps signals a sea change, as does current IOC President Thomas Bach’s Olympic Agenda 2020 reforms. Still, no matter where future Games are held, there is currently little reason to believe that they will benefit all or even most residents of host cities, particularly if held in emerging countries. From our perspective, what is required at the very least is a re-configuration of the stakeholder groups involved in any Olympic bid and hosting processes so that priorities of social development are more firmly prioritised. More broadly, the tribulations of Rio 2016 demonstrate the need for an ongoing discussion about how to secure rights and justice for local populations, and particularly marginalised groups, who often live in the shadow of the Olympic spectacle.

In sum, while the Olympic Games are largely produced and consumed outside of discussions of politics and economics in an effort to respect the achievement of the athletes, Rio 2016 reminds us that hosting the Olympics is inherently political. The banishment of Apartheid South Africa at the 1964 Games, the student and civil rights protests at the 1968 Games in Mexico City, and the boycott of the 1980 Games in the Soviet Union are all examples of the Games’ political dimensions, as are more recent protests surrounding environmental damages and economic costs at Vancouver 2010 and London 2012, and human rights abuses at Beijing 2008 and Sochi 2014. For us, now is the time for a more sustained discussion of, or even resistance to, the divisive and detrimental politics and policies that often underpin Olympic hosting.

Featured image courtesy of: Getty Images

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About the Author

Simon C. Darnell is an Assistant Professor in the Faculty of Kinesiology and Physical Education at the University of Toronto. His research focuses on the relationship between sport and international development and peace building efforts, the development implications of sports mega-events, and the place of social activism in the culture of sport.

Rob Millington is a SSHRC Post-Doctoral Research Fellow in the Faculty of Kinesiology and Physical Education at the University of Toronto. His research focuses on how international organizations like the United Nations and International Olympic Committee implement sport-for-development in policy and practice, in both historical and contemporary contexts.

References

1. O’Conner, A. (2009, April 4). Brazil deserves the 2016 Olympic Games. The Times. Retrieved from http://www.timesonline.co.uk/tol/sport/olympics/article6032127.ece
2. Cornelissen, S. (2010). The Geopolitics of global aspiration: Sport mega-events and emerging powers. The International Journal of the History of Sport, 27(16-18), 3008–3025; see also Gaffney, C. (2010). Mega-events and socio-spatial dynamics in Rio de Janeiro 1919-2016. Journal of Latin American Geography, 9(1), 7–29.
3. O’Conner, A. (2009).
4. Black, D. (2008). Dreaming big: The pursuit of ‘second order’ games as a strategic response to globalization. Sport in Society, 11(4), 467-480.
5. Boykoff, J. (2013). Celebration Capitalism and the Olympic Games. Abingdon: Routledge.
6. Millington, R. & Darnell, S.C. (2014). Constructing and contesting the Olympics online: The internet, Rio 2016 and the politics of Brazilian development. International Review for the Sociology of Sport, 49(2), 190-210.
7. BBC News (2016, June 17). Rio state declares ‘public calamity’ over finances. Retrieved from http://www.bbc.com/news/world-latin-america-36565901
8. The Associated Press (2015, February 5). Sochi Olympics leaving costly legacy 1 year alter. Retrieved from http://www.cbc.ca/sports/sochi-olympics-leaving-costly-legacy-1-year-later-1.2946291

Japan’s Impending Monetary Exhaustion

September 23, 2016

By Dan Steinbock

Japan’s monetary gamble and Abenomics are approaching the end of the road. Neither Brussels nor Washington is immune to the adverse consequences of Tokyo’s monetary exhaustion, says Dan Steinbock.

Recently, Japan’s second quarter GDP growth was revised up to 0.7 percent, after four consecutive quarters of stagnation. But don’t set your hopes too high.

More than three years ago, the conservative caution of the Bank of Japan (BOJ) Governor Masaaki Shirakawa faded into history as his successor Haruhiko Kuroda pledged to do “whatever it takes” to achieve the 2 percent inflation target. Yet, today inflation remains close to zero and Japan’s stock market is down 13 percent.

Irrespective of the outcome of its recent meeting, the BOJ can only postpone the inevitable. Nevertheless, cyclical fluctuations in Japan or elsewhere will in no way mitigate secular challenges.

Failure of Monetary Gamble

Under Kuroda, the BOJ has boosted quantitative and qualitative easing with negative interest rate policy. Base money and the central bank’s holdings of Japanese government bonds (JGBs) each have swollen to almost ￥400 trillion ($3.9 trillion), which is now 80 percent of the country’s GDP, and they continue to expand at a pace of￥80 trillion ($780 billion) annually.

What Kuroda is doing would be comparable to Fed chief Janet Yellen boosting base money and the Fed’s treasuries up to $14.9 trillion, while easing at $3 trillion per year, with no specific limit in sight. In Washington, that would mean an economic kamikaze and political suicide. Until recently, Japan was a different story.

Now divisions are spreading in the BOJ. Kuroda’s fractured majority is sticking with the original plan of large-scale JGBS and negative rates to boost growth and inflation. However, some advocate greater flexibility – ￥70 trillion to ￥90 trillion per year – in purchases, hoping that would make a difference. In contrast, skeptics would like to curb the BOJ’s purchases, even at the risk of perceptions of tightening, rising yen and plunging markets.

Nonetheless, all three seem to believe that Japan’s fortunes can be reversed by monetary policies alone and that these policies are not part of the problem.

Failure of Abenomics

In December 2013, when the Liberal Democratic Party returned to leadership with Abe as its minister, the LDP campaigned on renewed fiscal stimulus, aggressive monetary easing from the BOJ, structural reforms to boost competitiveness and eventual fiscal consolidation. The devaluation of the yen, critical to Japanese exporters, was the tacit denominator of the proposed changes.

In addition to a huge liquidity risk, Tokyo took another risk in timing, as I argued then. It sought to implement the fiscal stimulus in 2013, while fiscal consolidation would follow. Obviously, unease increased in 2014. As Abe went ahead with the sales tax hike that spring, the recovery was too fragile for consolidation. Instead of strong expansion, Japan slid into recession and began its third lost decade.

Ironically, yen continues to rise, thanks to stagnation in the West and the dated perception that yen remains a safe haven currency.

Last summer, the International Monetary Fund (IMF) finally acknowledged Abenomics is not working. “The targets for growth, inflation, and the primary balance remain out of reach under current policies,” it reported. As Tokyo’s policy authorities recognised the risks, they have delayed the proposed consumption tax hike, adopted new structural reforms and a negative interest policy.

Yet, outlook remains weak with real GDP growth less than 1 percent until early 2020s. Meanwhile, time is running out.

Hitting the Ceiling

If the BOJ will continue to purchase JGB debt, it will own almost half of all JGPs outstanding by fall 2017. That would leave another half of the JGBs available for the BOJ to buy. Yet, banks need some JGBs for collateral, while insurers must have their long-term JGBs. So a year ago, even the IMF had to conclude that the BOJ would hit its JGB purchase ceiling “sometime in 2017 or 2018”.

Now there is the additional challenge of the flat yield curve. After the BOJ’s negative rates in January, the JGB curve has flattened drastically. Coupled with low rates, persistently flatter yield curves are likely to weaken financial intermediation and penalise banks, insurers and pension funds, reducing their risk-taking.

Worse, Kuroda’s monetary gamble does not only involve bond markets, but equities as well. Under its stimulus plan, the BOJ buys 3 trillion yen ($29 billion) of exchange-traded funds (ETF) annually. In spring, these purchases made it a top-10 holder in about 90 percent of all Japanese stocks, according to Bloomberg data. In late July the BOJ doubled its ETF buys to 6 trillion yen ($59 billion) per year. It could become the No 1 shareholder in some 40 Nikkei 225 companies by early 2018.

In the next few years, the BOJ could not only own most of the Japanese bond market, but virtually most Japanese stocks; even as Japan’s gross debt will exceed 250 percent of its GDP. It is a disastrous path.

The Selloff Twist

Usually, political opposition can undermine failed economic policies. Yet, Japan’s main opposition Democratic Party has been struggling since it lost to Abe in 2012. In turn, Emperor Akihito has even sought to abdicate the throne in his lifetime to prevent Abe from reviving the pre-war Imperial Japan.

If countervailing forces linger in domestic economy and politics, even internationally, market volatility is a different story.

Japan remains the world’s third-largest economy and the second-largest debt market.

Since the summer, Japan has been suffering from a bond tantrum as its sovereign debt has had its worst rout in a decade. Some expect the BOJ next to pursue a reverse “Operation Twist”. It could sell long-end bonds, while buying the short-end to make the easing more sustainable over time. But as trillions in long-dated JGBs continue to carry negative yields, an abrupt withdrawal from the long-end could roil the market.

Japan remains the world’s third-largest economy and the second-largest debt market. Moreover, correlations among major markets have increased significantly since 2008. A perceived policy reversal could unleash a dramatic selloff in JGBs, while global fixed-income markets would not remain immune.

If that selloff will not ensue in the fall or 2017-18, it will only grow into a more devastating market tsunami over time.

The slightly shorter original version was released by South China Morning Post on September 21, 2016

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About the Author

Dan Steinbock is the founder of the Difference Group and has served as the research director at the India, China, and America Institute (USA) and a visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more information, see http://www.differencegroup.net/

What does the EU Stand for: Globalisation or Universalism?

September 23, 2016

By William Hawes

The EU now stands for globalisation and all its discontents. The dreary, neoliberal perspective of leaders must be replaced for Europe to thrive and maintain global influence. By embracing universalism, the roots of world conflict can be addressed.

What is the purpose of the European Union? This question has been on the minds of everyone following the UK vote in favour of Brexit. Yet in the mad scramble to make sense of the United Kingdom’s rejection of the EU, little lucid commentary has been made. European leaders, the fawning media, and UK citizens alike portrayed the vote as either a refusal of EU austerity, or unhappiness with immigrants and open borders.

So which one was it: a rejection of austerity or immigration? Were UK citizens fed up with austerity measures, and with unreasonable and onerous regulations and taxes paid to the EU bureaucracy? Or were Brexiters caught up in a fever of anti-immigrant nationalism and populist demagoguery, egged on by the odious Boris Johnson and Nigel Farage?

In truth, this is a misleading either/or question: UK citizens were fed up with both lax immigration controls and EU-imposed austerity. By framing the question this way, political commentators miss the larger picture: it is globalisation that is the cause of the disintegration of Western political systems and civil society, and it is globalisation, i.e. predatory capitalism, that is the root cause of the anger and rage felt by voters of Brexit.

This rage was displaced: for white, working class UK citizens facing declining living standards and social mobility, immigrants are easy targets for their fury to be unleashed on. The undemocratic, sclerotic, neoliberal rule emanating from the EU also made for a useful scapegoat. No one can doubt the contempt and disregard EU leaders have for ordinary citizens, and for a genuine people’s democracy. Besides each member nation offering citizens their own referendum to stay or leave, what else can be done?

This brings us full circle, back to the question: what does the EU stand for? Reduced to a single word, there can be no doubt that at the moment, the EU’s leadership unflinchingly promotes globalisation, the tentacle-like network of transnational capitalism, along with all its militarist, industrialist, oligarchic, and kowtowing media trappings.

What seems to have gone unnoticed, except for a few astute observers, was the lack of talk about the UK and EU’s role in the wider world. As the venerable Andre Vltchek explains:

“Almost no commentator bothered to notice what was truly shocking about the entire referendum process: an absolute lack of progressive ideology, of internationalism and concern for the world as a whole. Both sides (and were there really two sides there) presented a fireworks of shallow selfishness and of pettiness. The profound moral corruption of the West was clearly exposed…Everybody in Europe now wants more, more and more. Screw austerity! ‘Give us more benefits!’ Provide us with better wages, job security, and shorter working hours!”

The EU’s leadership unflinchingly promotes globalisation, the tentacle-like network of transnational capitalism, along with all its militarist, industrialist, oligarchic, and kowtowing media trappings.

A cautionary tale was revealed last year when former Greek Finance Minister Yanis Varoufakis explained his dealings with the Eurogroup, which convenes to discuss Euro currency matters. After the Eurogroup issued a communiqué without him, Varoufakis rightly asked for clarification. Here’s the response:

“The meeting was briefly halted. After a handful of calls, a lawyer turned to him and said, ‘Well, the Eurogroup does not exist in law, there is no treaty which has convened this group.’”

Varoufakis elaborates:

“What we have is a non-existent group that has the greatest power to determine the lives of Europeans. It’s not answerable to anyone, given it doesn’t exist in law; no minutes are kept; and it’s confidential. No citizen ever knows what is said within . . .These are decisions of almost life and death, and no member has to answer to anybody.”

This is the new boss, same as the old boss. EU finance leaders are unaccountable to their citizens, just as European and world business leaders are plotting to unravel national and supranational regulatory structures by imposing the TTIP, TISA, and TTP trade deals.

Yet there is another vision of Europe which can supplant the consumerist, neoliberal mould that the EU is turning into, ostensibly in order to compete with the US and China. The idea of a universal world culture, with dignity and egalitarian democracy for all peoples, is what Europeans should strive for. This is hinted at in the UN Universal Declaration of Human Rights, which sets the tone for future forms of limited international governance and worldwide social justice initiatives, cultural and environmental rights, and individual liberties.

This sketch of a liveable future world confederation, with nonviolent social relations, has its roots in the great Immanuel Kant’s “Perpetual Peace”. Imagine if all EU policy-makers were required to read such a revelatory work, and form legislation based on it.

Of course, the pro-capitalist EU leadership won’t take action without momentum from civil society. For this to happen, what Bassam Tibi calls a Leitkultur (“Leading Culture”) must develop. This means that the postmodern illusions of superficial multiculturalism and cultural relativism must be squashed. For Tibi, Enlightenment values, based on universal rights, secularism, pluralism, and democracy must be protected and expanded for all Europeans, which could re-engage and spark interest among citizens to rework the wider social fabric. Additionally, this may have the effect of dislodging people in the West from their Eurocentric bubbles. With significant progress, widening empathy for others could foster the internationalism needed to provide poorer countries with the resources, technology, and solidarity to vanquish poverty, improve quality of life, and fight against Western-backed tin-pot dictators in the developing nations.

In his essay “The Idea of Europe”, George Steiner explains the need to rise above our corporate, consumer worldview:

“It may be that the future of the ‘idea of Europe’, if it has one, depends less on central banking and agricultural subsidies, on investment in technology or common tariffs, than we are instructed to believe. It may be that the OECD or NATO, the further extension of the Euro or of parliamentary bureaucracies on the model of Luxembourg are not the primary dynamics of the European vision. Or if, indeed, they are, that vision is hardly one to rouse the human soul…Making money and flooding our lives with increasingly trivialised material goods is a profoundly vulgar, emptying passion.”

While Steiner is in favour of European integration, for him, a proviso is necessary: Europe must not give in to the standardisation, to the tyranny of the masses, and the homogeny of Anglo-American culture, or the authoritarianism of the emerging East Asian model. Europeans must embrace their differences, their local traditions, even as they maintain a wider Union to stave off warfare and unbridled economic competition.

For Europe to thrive and maintain global influence, the traditions of great art, literature, and radical humanism should be nurtured, with economic preferences given to small businesses and cooperatives. This is in contrast to the US-UK “merchant model” of the transnational conglomerates, or their Asian counterparts, the Korean Chaebols and Japanese Keiretsus.

We know what the EU stands for now: globalisation and all its discontents. The dreary, neoliberal perspective of leaders like Hollande and Merkel must be replaced: it is the most radical ideas of visionaries like Kant, Tibi, and Steiner that should be upheld. In doing so, the myopia and selfishness of the capitalist worldview becomes all too clear. By embracing universalism, the roots of world conflict can be addressed: material poverty in the developing nations would be history within a few short years, if, for example, the West reallocated their military budgets to such ends. Conversely, the spiritual emptiness of rampant consumerism and sensationalist media could be vanquished in the West, if compassion and solidarity is expanded towards Asia, Africa, Latin America, and indigenous peoples across the globe. Capitalism, and the expanded version of globalisation are Europe’s past: the only possible future is to embrace universalism.

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About the Author

William Hawes is a writer specialising in politics and environmental issues. His articles have appeared online at Global Research, Countercurrents, and Dissident Voice. You can find his ebook, Planetary Vision: Essays on Freedom and Empire, on Amazon.

September – October 2016

September 20, 2016

Philippines
The Duterte Whirlwind: The Reawakening of the Philippines
Dan Steinbock

Duterte curses Barack Obama in a remark about Filipino sovereignty
Tunde Olupitan

US Election
What if Clinton Wins US Presidential Election 2016
Dan Steinbock

Calling Both Clinton and Trump Unpopular and Untrustworthy is Seriously Misleading
Neil Buchanan

Decline of Parties, Rise of Hucksterism (and Trump)
Timothy Braatz

Blinded by Nostalgia
Yuval Levin

Korea
The Strategy for Korea’s Economic Success
Hwy-Chang Moon

International Business
The Business of People: Effective Strategies to Drive Success in Global Business
Sharon Schweitzer

European Union
What does the EU Stand for: Globalisation or Universalism?
Williams Hawes

A Reform Agenda for Post-Brexit Europe
Andrea Montanino, Lilac Peterson, & Álvaro Morales Salto-Weis

Olympics
Rio 2016 and the (Broken) Promises of the Olympic Games
Simon Darnell and Rob Millington

Latin America
Latin America’s Challenge: More and Better Saving for Development
Eduardo Cavallo and Tomas Serebrisky

Africa
Becoming Better Positioned to Lead the Africa Growth Story
Zipho Sikhakhane

Implications of Islamic Finance in Africa’s Socio-Economic Development
Basheer Oshodi

India
The Informal Sector in India: Prosperity or Persistence of Misery?
Saumya Chakrabarti, Daipayan Sarkar and Ankita Biswas

Sharing Economy
Social Wealth Funds: A Key Ingredient of a New Alternative Economic Strategy
Stewart Lansley

Sharing Strikes Back: A New Era of Urban Commoning
Duncan McLaren and Julian Agyeman

Assad’s Death Warrant

September 19, 2016

By Mike Whitney

The conflict in Syria is not a war in the conventional sense of the word. It is a regime change operation where the main driver of the conflict is the country that’s toppled more than 50 sovereign governments since the end of World War 2, the United States.

“Secret cables and reports by the U.S., Saudi and Israeli intelligence agencies indicate that the moment Assad rejected the Qatari pipeline, military and intelligence planners quickly arrived at the consensus that fomenting a Sunni uprising in Syria to overthrow the uncooperative Bashar Assad was a feasible path to achieving the shared objective of completing the Qatar/Turkey gas link. In 2009, according to WikiLeaks, soon after Bashar Assad rejected the Qatar pipeline, the CIA began funding opposition groups in Syria.”

– Robert F. Kennedy Jr., Why the Arabs don’t want us in Syria, Politico

The conflict in Syria is not a war in the conventional sense of the word. It is a regime change operation, just like Libya and Iraq were regime change operations.

The main driver of the conflict is the country that’s toppled more than 50 sovereign governments since the end of World War 2. (See: Bill Blum here.) We’re talking about the United States of course.

Washington is the hands-down regime change champion, no one else even comes close. That being the case, one might assume that the American people would notice the pattern of intervention, see through the propaganda and assign blame accordingly. But that never seems to happen and it probably won’t happen here either. No matter how compelling the evidence may be, the brainwashed American people always believe their government is doing the right thing.

But the United States is not doing the right thing in Syria. Arming, training and funding Islamic extremists – that have killed half a million people, displaced 7 million more and turned the country into an uninhabitable wastelands – is not the right thing. It is the wrong thing, the immoral thing. And the US is involved in this conflict for all the wrong reasons, the foremost of which is gas. The US wants to install a puppet regime in Damascus so it can secure pipeline corridors in the East, oversee the transport of vital energy reserves from Qatar to the EU, and make sure that those reserves continue to be denominated in US Dollars that are recycled into US Treasuries and US financial assets. This is the basic recipe for maintaining US dominance in the Middle East and for extending America’s imperial grip on global power into the future.

The conflict in Syria is not a war in the conventional sense of the word. It is a regime change operation, just like Libya and Iraq were regime change operations.

The war in Syria did not begin when the government of Bashar al Assad cracked down on protestors in the spring of 2011. That version of events is obfuscating hogwash. The war began in 2009, when Assad rejected a Qatari plan to transport gas from Qatar to the EU via Syria. As Robert F Kennedy Jr. explains in his excellent article “Syria: Another pipeline War”:

“The $10 billion, 1,500km pipeline through Saudi Arabia, Jordan, Syria and Turkey… would have linked Qatar directly to European energy markets via distribution terminals in Turkey… The Qatar/Turkey pipeline would have given the Sunni Kingdoms of the Persian Gulf decisive domination of world natural gas markets and strengthen Qatar, America’s closest ally in the Arab world.

In 2009, Assad announced that he would refuse to sign the agreement to allow the pipeline to run through Syria “to protect the interests of our Russian ally…

Assad further enraged the Gulf’s Sunni monarchs by endorsing a Russian approved “Islamic pipeline” running from Iran’s side of the gas field through Syria and to the ports of Lebanon. The Islamic pipeline would make Shia Iran instead of Sunni Qatar, the principal supplier to the European energy market and dramatically increase Tehran’s influence in the Mid-East and the world…”

Naturally, the Saudis, Qataris, Turks and Americans were furious at Assad, but what could they do? How could they prevent him from choosing his own business partners and using his own sovereign territory to transport gas to market?

What they could do is what any good Mafia Don would do; break a few legs and steal whatever he wanted. In this particular situation, Washington and its scheming allies decided to launch a clandestine proxy-war against Damascus, kill or depose Assad, and make damn sure the western oil giants nabbed the future pipeline contracts and controlled the flow of energy to Europe. That was the plan at least. Here’s more from Kennedy:

Repeat: “the moment Assad rejected the Qatari pipeline”, he signed his own death warrant. That single act was the catalyst for the US aggression that transformed a bustling, five thousand-year old civilisation into a desolate Falluja-like moonscape overflowing with homicidal fanatics that were recruited, groomed and deployed by the various allied intelligence agencies.

But what’s particularly interesting about this story is that the US attempted a nearly-identical plan 60 years earlier during the Eisenhower administration. Here’s another clip from the Kennedy piece:

“During the 1950’s, President Eisenhower and the Dulles brothers… mounted a clandestine war against Arab Nationalism – which CIA Director Allan Dulles equated with communism – particularly when Arab self-rule threatened oil concessions. They pumped secret American military aid to tyrants in Saudi Arabia, Jordan, Iraq and Lebanon favouring puppets with conservative Jihadist ideologies which they regarded as a reliable antidote to Soviet Marxism…

The CIA began its active meddling in Syria in 1949 – barely a year after the agency’s creation… Syria’s democratically elected president, Shukri-al-Kuwaiti, hesitated to approve the Trans Arabian Pipeline, an American project intended to connect the oil fields of Saudi Arabia to the ports of Lebanon via Syria. (so)… the CIA engineered a coup, replacing al-Kuwaiti with the CIA’s handpicked dictator, a convicted swindler named Husni al-Za’im. Al-Za’im barely had time to dissolve parliament and approve the American pipeline before his countrymen deposed him, 14 weeks into his regime…

(CIA agent Rocky) Stone arrived in Damascus in April 1956 with $3 million in Syrian pounds to arm and incite Islamic militants and to bribe Syrian military officers and politicians to overthrow al-Kuwaiti’s democratically elected secularist regime…

But all that CIA money failed to corrupt the Syrian military officers. The soldiers reported the CIA’s bribery attempts to the Ba’athist regime. In response, the Syrian army invaded the American Embassy taking Stone prisoner. Following harsh interrogation, Stone made a televised confession to his roles in the Iranian coup and the CIA’s aborted attempt to overthrow Syria’s legitimate government… (Then) Syria purged all politicians sympathetic to the US and executed them for treason.” (Politico)

See how history is repeating itself? It’s like the CIA was too lazy to even write a new script, they just dusted off the old one and hired new actors.

Fortunately, Assad – with the help of Iran, Hezbollah and the Russian Airforce – has fended off the effort to oust him and install a US-stooge. This should not be taken as a ringing endorsement of Assad as a leader, but of the principal that global security depends on basic protections of national sovereignty, and that the cornerstone of international law has to be a rejection of unprovoked aggression whether the hostilities are executed by one’s own military or by armed proxies that are used to achieve the same strategic objectives while invoking plausible deniability. The fact is, there is no difference between Bush’s invasion of Iraq and Obama’s invasion of Syria. The moral, ethical and legal issues are the same, the only difference is that Obama has been more successful in confusing the American people about what is really going on.

Repeat: “the moment Assad rejected the Qatari pipeline”, he signed his own death warrant.

And what’s going on is regime change: “Assad must go”. That’s been the administration’s mantra from the get go. Obama and Co are trying to overthrow a democratically-elected secular regime that refuses to bow to Washington’s demands to provide access to pipeline corridors that will further strengthen US dominance in the region. That’s what’s really going on behind the ISIS distraction and the “Assad is a brutal dictator” distraction and the “war-weary civilians in Aleppo” distraction. Washington doesn’t care about any of those things. What Washington cares about is oil, power and money. How can anyone be confused about that by now? Kennedy summed it up like this:

“We must recognise the Syrian conflict is a war over control of resources indistinguishable from the myriad clandestine and undeclared oil wars we have been fighting in the Mid-East for 65 years. And only when we see this conflict as a proxy war over a pipeline do events become comprehensible.”

That says it all, don’t you think?

This article was first published on counterpunch.org on September 15, 2016

Featured image courtesy of: Serkan Senturk | Shutterstock.com

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About the Author

Mike Whitney lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at [email protected].

Duterte vs Barack Obama In A Remark About Filipino Sovereignty

September 15, 2016

By Tunde Olupitan

Latest news on the Philippine President Rodrigo Duterte, is of his calling USA President Barack Obama a son of a b***h. We can expect that Duterte’s comment against Obama, is only the opening shot in what promises to be a long running battle between the Philippines and Washington and its imperialist ambitions.

Duterte curses Obama in a remark about Filipino sovereignty telling Obama and the USA – “mind your own business”.

Latest Duterte news sees Duterte calling Obama a son of a b***h. An unstateman-like comment no doubt, but a comment which is a reminder of the frustration and indignation of leaders in emerging nations who often feel that after years of independence, they are accorded limited sovereignty over their own affairs and like vassal states are called upon to account to past colonial masters on matters relating to their internal policies. These are often colonial masters who have not been held to account for past and current misdeeds.

I Answer To No One

A few days ago at a press conference in Manila, President Duterte on his way to the ASEAN Summit in Laos stopped to brief the press and to take questions. A reporter from Reuters asked him about how he would address the issue of extra judicial killings in the Philippines in front of other foreign leaders.

The Philippines, he reiterated, is an independent nation, it is not answerable to any other country except to its people.

“To whom shall I address myself? And who will be asking this question, may I know?”, asked Duterte. The response came back “President Obama”. And this apparently set Duterte off, and here is part of his answer:

“…the Philippines is not a vassal state. We have long ceased to be a colony of the United States. … We look upon Obama and the United States as if we are the lap dogs of that country. I do not respond to anybody but to the people of the Republic of the Philippines…who is he? When as a matter of fact, at the turn of the century, before the Americans left the Philippines in the pacification campaign of the Moro in this island, there were about 6 million population of the Moro. How many died?¹… If you can answer that question and give the apology, I will answer him. I am not beholden to anybody…who is he? I am a president of a sovereign state and we have long ceased to be a colony. I do not have any master except the Filipino people. Nobody but nobody. You [Obama] must be respectful. Do not just throw away questions and statements. P****g ina,’ I will swear at you in that [ASEAN] forum. …who is he to confront me? As a matter of fact…America has one too many to answer for the misdeeds in this country. … Look at the human rights of America along that line², the way they treat the migrants…”

Duterte’s cursing of Barack Obama was reported widely, the whole world was fixated on the swear words, but the context went unreported and the transcript above shows that Duterte’s anger was triggered by the question that he would be expected to answer to Barack Obama for matters which he considered to be matters entirely within the internal affairs of the Philippines. The Philippines, he reiterated, is an independent nation, it is not answerable to any other country except to its people.

Duterte’s Entente with the Communist Party of the Philippines

While no one could condone extra judicial killings (2400 alleged drug dealers/addicts killed in the last 2 months), Duterte’s indignation and irritation is consistent with his anti imperialist stance against the USA. Since coming to power, Duterte has welcomed the Philippine Communist Party to the government, three members of the National Democratic Front of the Philippines (NDF) are cabinet members in Duterte’s government. His election was supported and welcomed by the NDF. In an article on their website on 15 May 2016, titled “Prospects under a Duterte Presidency”, NDF noted:

“With Duterte set to become GRP president, for the first time, the Philippine client-state is to be headed by one who is not completely beholden to the US imperialists.”

Duterte has been in peace talks with the Communist Party and has been seeking the return of Jose Maria Sison, founder of the Communist Party of Philippines who has been exiled in the Netherlands since 1987.

Can the Filipino Voters be Trusted to Decide for Themselves?

Not surprisingly, the NDF applauded Duterte for cursing Obama and the US out. On its website it said:

“The National Democratic Front in Southern Mindanao commends GPH Pres. Rodrigo R. Duterte for his unprecedented statements against US imperialist intervention in the Philippines. No other Philippine president has ever publicly censured and taken US imperialism to task for its atrocious crimes against sovereign nations and peoples of the world.”

It will be interesting to see how a newly elected president in Washington deals with the increasing rapprochement between Duterte and The Communist Party of the Philippines given American’s well known obsession with all things communist. Will it intervene? Are these matters too important for the Filipino voters to be left to decide for themselves?*

We can expect that Duterte’s comment against Obama, is only the opening shot in what promises to be a long running battle with Washington, with the Philippines now developing closer ties with China, the stage is set for confrontation between any imperialist ambitions of any p****g ina on the one side and Duterte in the Philippines.

You can watch the video in which Duterte swore at Obama when you go online to this excerpt.

*Kissinger was once quoted as saying:

“I don’t see why we need to stand by and watch a country go communist due to the irresponsibility of its people. The issues are much too important for the Chilean voters to be left to decide for themselves.”

A version of this article was first published on peelfirst.com.

Featured image courtesy of: http://mmc-news.com

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About the Author

Tunde Olupitan is the Managing Editor Europe & Americas for The European Financial Review, The European Business Review and The European Law Review.

References
1. Rodrigo Duterte: “How many died? Six hundred. … Can he explain the 600,000 Moro massacred in this island?” Monday, September 5, 2016. Transcript lifted from http://cnnphilippines.com/news/2016/09/06/duterte-departure-for-asean-summit-speech.html
2. Referring to the Mexico border.

Obama-Duterte Blow Up: What the Corporate Media Doesn’t Get

September 14, 2016

By Wayne Madsen

The western corporate media generalised the Duterte-Obama feud as one between a statesmanlike US president and a Filipino Donald Trump. For Obama to lecture Duterte on human rights was the ultimate in hubris. Duterte is a fiery pragmatist who is on guard against Obama and the neoconservative war hawks.

The explanation by the Western corporate media, which caters to a very basic secondary school level of education, about the reasons behind the recent war of words between US President Barack Obama and Philippines President Rodrigo Duterte, had little to do with the leader of the Philippines calling Obama a «Putang ina» or «son of a whore» in Tagalog. The breakdown in relations between the Philippines, a former and much-abused American colony, and the United States is based on renewed Philippines nationalism, a disgust by Duterte for the selective human rights agenda of the Obama administration, and the Philippines leader’s antipathy for those schooled in Muslim beliefs in neighbouring Indonesia.

Duterte knows full well that Obama prayed in a mosque and recited from the Koran in his early childhood years at a quasi-Islamic state school in Jakarta. And for Duterte, a former mayor of Davao City in Mindanao, – a southern Philippine island plagued by Saudi-financed Abu Sayyaf Group Wahhabist terrorism nurtured from radicalised mosques across the Sulu Sea in Indonesia – Obama’s upbringing in Southeast Asia is very germane.

Duterte’s reference to Obama’s mother was not uttered in a vacuum of history. Duterte fully understands Stanley Ann Dunham Obama-Soetoro’s role in the aftermath of the 1965 bloody Muslim – and Central Intelligence Agency – backed coup that toppled Indonesia’s secular president, Sukarno. The coup, in which Obama’s Indonesian stepfather, Lieutenant Colonel Lolo Soetoro, participated as a brutal thug out to identify and execute as many Communists and ethnic Chinese Indonesians as possible, was staffed out of the US embassy in Jakarta.

In 1967, Obama’s mother took young Barack Obama to join her war criminal husband in Jakarta. After her arrival in the country with the world’s largest Muslim population, Obama’s mother worked for the CIA-linked US Agency for International Development (USAID) fanning out across central Javanese villages with orders to collect as many names of Communists as possible.

Duterte fully understands Stanley Ann Dunham Obama-Soetoro’s role in the aftermath of the 1965 bloody Muslim – and Central Intelligence Agency – backed coup that toppled Indonesia’s secular president, Sukarno.

Indonesian intelligence files document Obama’s mother’s involvement in Javanese village-and rural-based Indonesian Communist Party (PKI) and Sukarno cadre eradication efforts in the years following the coup, an operation that relied on USAID-financed anthropologists like Ann Dunham-Soetoro and which was code-named Project PROSYM. PROSYM, run by the CIA, had a number of counterparts throughout Southeast Asia.

The program’s counterpart in South Vietnam, which targeted Vietcong and Vietcong sympathizers for eradication, was known as Civil Operations and Revolutionary Development Support (CORDS), also known as the Phoenix Program. In Laos, the eradication programme, which targeted Communist Pathet Lao forces and North Vietnamese troops, was known as the Rascal Program.

Under Duterte’s predecessor, Benigno Aquino, Obama had a willing military partner prepared to establish a new version of the defunct Cold War-era South East Asia Treaty Organization (SEATO), which would ally Washington with various South East Asian nations to militarily and politically confront China over control over western Pacific. A «SEATO II,» where US warships and fighter planes would, once again, have full base rights in the Philippines for their «WESTPAC» deployments, was the intention of Obama and his generals and admirals in the Pentagon and Pearl Harbor, Hawaii. After being elected president on a nationalist platform, Duterte began engaging with China and signaled he was prepared to come to an accommodation with Beijing that would allow Filipino trawlers to continue fishing around disputed South China Sea islands, including the contentious Scarborough Shoal, a rocky outcrop in the South China Sea.

Accommodating Beijing is the last thing on Obama’s mind. Therefore, Obama was prepared to issue a demarche in person to Duterte at the ASEAN summit in Laos over his human rights record and his policy on the extrajudicial execution of drug dealers in the Philippines. After US ambassador to the Philippines Philip Goldberg publicly rebuked Duterte for his crackdown on drug dealers, the Philippine president called him a «gay son-of-a-bitch.» Goldberg has a background of undermining countries to which he has been assigned. He was expelled by Bolivian President Evo Morales for meeting with right-wing Bolivian opposition members in order to foment an Obama-sanctioned coup in Bolivia.

Duterte, of course, as aware of the ties that Obama and Goldberg have to the CIA. The Philippine president, who Obama referred to as «colorful,» is not, as claimed by the Western corporate media, a «Filipino Donald Trump.»

Instead, Duterte is a fiery pragmatist who is on guard against Obama and the neoconservative war hawks and Wahhabi and Salafist accommodators who dominate America’s CIA and State Department. Duterte and his supporters know fully well that the bloody CIA purge of PKI members and sympathizers, along with ethnic Chinese, in Indonesia would not have been possible without the support of Indonesia’s Sunni Muslim hierarchy – a group in which Obama’s mother and stepfather were in total lockstep.

Before and after the 1965 CIA coup in Indonesia, the Muslim political party, the Crescent Star Party, received financial assistance from the CIA in their declared jihad against the PKI, Indonesian Chinese, and Indonesian Christians. The Crescent Star Party, which is still active in Indonesia, favors the adoption of Islamic sharia law in what has been a largely secular country since the end of World War II.

Duterte is a fiery pragmatist who is on guard against Obama and the neoconservative war hawks and Wahhabi and Salafist accommodators who dominate America’s CIA and State Department.

The Indonesian Muslim political movement was particularly strong in Java, where Obama’s mother and her Muslim husband, Lolo Soetoro, had extensive contacts down to the town, village, and hamlet levels. The problem for counter-insurgency forces in the Philippines is that the Indonesian Muslims were also active in Kalimantan (Borneo) and across the border in British North Borneo (now Sabah), areas uncomfortably close to Muslim Moro separatists active in a rebellion in Mindanao, Duterte’s home island. The Philippines also has a longstanding claim to the state of Sabah in northern Borneo.

Cross border Muslim terrorism continues to plague Mindanao, Sabah, and Indonesian Kalimantan. More vexing to the Philippine government is that Obama’s stepfather was in cahoots with a Filipino Jesuit priest named Father Jose Blanco, a CIA agent who formed KAMI, an anti-Chinese and Muslim-oriented Indonesian student organization that fomented street protests in 1965 against Sukarno in Jakarta and across the Indonesian archipelago. The CIA’s Indonesian proxies also began stirring up anti-Chinese sentiment in the Malaysian state of Sarawak.

All of these CIA operations were conducted under the imprimatur of SEATO, an organization that Obama and Hillary Clinton would like to see resurrected in a new form in order to plunge Southeast Asia into a new Cold War. Duterte is displaying the same sort of nationalism and populism that is spreading across the planet against the twin evils of globalism and multilateralism.

The western corporate media, which knows about as much about the history of Indonesia, the Philippines, and the surrounding region as a 7-year old child, generalized the Duterte-Obama feud as one between a statesmanlike US president and a «Filipino Donald Trump.»

Duterte is the first Mindanaoan to be elected president of the Philippines. As a Mindanaoan, who knows more about the history across the Sulu Sea than many of his countrymen, Duterte has little time for an American president whose Indonesian clan has the blood of innocent Southeast Asians on its hands. For Obama to lecture Duterte on human rights was the ultimate in hubris. Duterte, who survived political office in violence-prone and Islamist guerrilla-rife Mindanao, let Obama know exactly what he thought of the American upstart.

This article was first published on Strategic Culture on September 9, 2016.

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About the Author

Wayne Madsen is an investigative journalist, author and syndicated columnist. A member of the Society of Professional Journalists (SPJ) and the National Press Club

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