Iceland’s On-going Revolution August 6, 2011Posted by rogerhollander in Europe, Oregon, Revolution.
Tags: deena stryker, default, democracy, Economic Crisis, financial crisis, iceland, iceland constitution, IMF, neoliberal, revolution, roger hollander
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Democracy 2.0: Iceland crowdsources new constitution
by Jérôme E. Roos on June 11, 2011
just three years, Iceland went from collapse to revolution and back to
growth. What can Spain and Greece learn from the Icelandic experience
and its embrace of direct democracy?
Just two or three years after its economy and government collapsed, Iceland is bouncing back with remarkable strength. This week, the small island nation earned praise
from foreign investors despite allowing its banks to collapse and
refusing to pay back some of its debt — belying the dominant idea among
Europe’s ruling class that bank failures and defaults necessarily engender disastrous economic consequences.
in an historically unprecedented move, the government has decided to
draft a new constitution with the online input of its citizens —
the creation of Iceland’s real democracy. Rather than just involving
voters at the end of the process through a referendum, the Icelanders
have an opportunity, through social media, to be directly involved in
the writing process. It’s the ultimate affirmation of participatory
democracy. It’s Democracy 2.0.
How did Iceland get from there to here? And what are the lessons for Europe’s troubled periphery?
Back in 2009, months after the greatest banking collapse in economic history, the people of Iceland took to the streets en masse to
denounce the reckless bankers who had caused the crisis and the
clueless politicians who had allowed it to develop. Quietly, as the
world was busy watching the inauguration of President Obama, the people
of Iceland overthrew their government and demanded a referendum on the country’s debt.
the referendum, the Icelanders decided not to repay foreign creditors —
Great Britain and the Netherlands — who had so foolishly deposited
their savings in one of the world’s most over-leveraged banks, Icesave.
In fact, the President had already vetoed
the deal, so the referendum was largely symbolic, but still, the
outcome of the vote (93 percent against repayment) was a watershed in
the epic battle between people power and foreign financial interests.
what’s really interesting about the Icelandic case is not just the
referendum, but the fact that the consequences of the outcome were far
from being as disastrous
as Europe’s self-proclaimed economic ‘experts’ had predicted. In fact,
within just two years of the collapse of its government, Iceland is
bouncing back rapidly, and is actually being rewarded for it by foreign
investors. As the Wall Street Journal reported yesterday:
first international bond offering since its spectacular economic and
banking collapse late in 2008 has been snapped up by investors. The
five-year $1 billion deal, yielding just under 5%, is a milestone in
rebuilding confidence internationally and follows a turnaround in the
economy, forecast to grow 2.25% this year.
So it’s no surprise that Iceland became a rallying point for the ‘indignados‘
in Spain during the mass protests that broke out there last month.
Spanish demonstrators could be seen carrying placards reading “Iceland
is my goal” and “I think of Iceland.” The Icelandic model has also come
to inspire the indignant protest movement in Greece, which is rapidly picking up steam. So what are Iceland’s main lessons for Europe’s troubled periphery?
First of all, make sure to read this excellent piece
by Robert Wade, my former Professor at the London School of Economics,
to understand how Iceland’s mistakes in the lead-up to the crisis were
just an extreme version of what we did on the continent: capital account
liberalization combined with financial deregulation and unprecedented
political disinterest in the face of an epic bubble blowing up right in
front of our eyes.
Wade helps us understand what not to do. But perhaps at this stage, it’s more interesting to find out what we should do. In
this respect, one overwhelming lesson jumps out: while letting banks
collapse and refusing to pay back foreign lenders certainly has negative
consequences in the short run, those consequences are born largely by
the reckless bankers who instigated the crisis in the first place.
of socializing the losses of the banks, making ordinary people pay for a
crisis they never caused, the Icelandic model forced the bankers to pay
for their own stupidity. During the Icelandic crisis, all three of the
country’s largest banks collapsed. The government didn’t save them.
Secondly, Iceland actually went after
those responsible — both to enact justice and to set a precedent that
this type of reckless speculation on the livelihoods of real people will
simply not be tolerated in the future. Key figures in the banking
sector have been arrested and a former prime minister has been formally charged. Treating reckless speculation as a crime is a crucial first step towards real democracy.
Thirdly, Iceland did what no one is supposed to be doing according to neoliberal dogma: just like Malaysia did — to the dismay of the IMF — during the East-Asian crisis of 1997-’98, the Icelandic government instituted capital controls
to stem the outflow of hot money from the country in the wake of its
banking collapse. The EU should have done the same (and can still do the
same) to stem the outflow of capital from the periphery.
Fourthly, and this is obviously the most crucial lesson of all, the people of Iceland managed to sever the neoliberal straitjacket
that had kept their politicians enthralled to the interests of the
financial sector for so long. Through mass mobilization, the people
toppled the government and instituted a radically new form of political
participation. The crowdsourcing of the constitution is the most
powerful symbol this new, real democracy.
As a result, the Icelandic people are now slowly but surely beginning to recover
from the worst ever economic collapse of any country during
peacetime. By contrast, countries like Greece, Spain, Ireland and
Portugal are still struggling — and likely to remain mired in deep
recession, if not outright depression, for years to come.
Untold suffering and hardship
will fall on millions of people as the ECB, IMF and Germany continue to
expect full repayment while imposing draconian (and ultimately
counterproductive) austerity measures. A lost generation
will flee these countries in a desperate search for opportunity.
Countless lives, businesses, families and dreams will be destroyed. And
for what? A handful of bankers who refuse to take a haircut?
What Iceland teaches us is that it need not be that way. The Atlantic currents and Arab winds have already reached
the European periphery. It’s just a matter of time before the first
government on the continent will be toppled by its people. Democracy 2.0
is on its way. No one can stop it now.
Originally posted to Deena Stryker on Mon
Aug 01, 2011 at 08:47 AM PDT.
Bad News From America’s Top Spy February 17, 2009Posted by rogerhollander in Economic Crisis.
Tags: administation, Afghanistan, Africa, al-qaida, bailout, banks, capitalism, china, chris hedges, christopher bond, corruption, crisis, default, Dennis Blair, department of defense, dof, economic collapse, economic growth, economy, europe, free market, government, hamas, health, hezbollah, ilo, IMF, intelligence, Iraq, islamic jihad, job loss, Latin America, martial law, marx, military, money, national intelligence, Obama, Pentagon, recession, riots, roger hollander, senate, senate intelligence, soviet union, Taliban, terrorists, violence, Wall Street, war
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Posted on Feb 16, 2009, www.truthdig.com
|AP photo / Petros Giannakouris|
By Chris Hedges
We have a remarkable ability to create our own monsters. A few decades of meddling in the Middle East with our Israeli doppelgänger and we get Hezbollah, Hamas, al-Qaida, the Iraqi resistance movement and a resurgent Taliban. Now we trash the world economy and destroy the ecosystem and sit back to watch our handiwork. Hints of our brave new world seeped out Thursday when Washington’s new director of national intelligence, retired Adm. Dennis Blair, testified before the Senate Intelligence Committee. He warned that the deepening economic crisis posed perhaps our gravest threat to stability and national security. It could trigger, he said, a return to the “violent extremism” of the 1920s and 1930s.
It turns out that Wall Street, rather than Islamic jihad, has produced our most dangerous terrorists. You wouldn’t know this from the Obama administration, which seems hellbent on draining the blood out of the body politic and transfusing it into the corpse of our financial system. But by the time Barack Obama is done all we will be left with is a corpse—a corpse and no blood. And then what? We will see accelerated plant and retail closures, inflation, an epidemic of bankruptcies, new rounds of foreclosures, bread lines, unemployment surpassing the levels of the Great Depression and, as Blair fears, social upheaval.
The United Nations’ International Labor Organization estimates that some 50 million workers will lose their jobs worldwide this year. The collapse has already seen 3.6 million lost jobs in the United States. The International Monetary Fund’s prediction for global economic growth in 2009 is 0.5 percent—the worst since World War II. There are 2.3 million properties in the United States that received a default notice or were repossessed last year. And this number is set to rise in 2009, especially as vacant commercial real estate begins to be foreclosed. About 20,000 major global banks collapsed, were sold or were nationalized in 2008. There are an estimated 62,000 U.S. companies expected to shut down this year. Unemployment, when you add people no longer looking for jobs and part-time workers who cannot find full-time employment, is close to 14 percent.
And we have few tools left to dig our way out. The manufacturing sector in the United States has been destroyed by globalization. Consumers, thanks to credit card companies and easy lines of credit, are $14 trillion in debt. The government has pledged trillions toward the crisis, most of it borrowed or printed in the form of new money. It is borrowing trillions more to fund our wars in Afghanistan and Iraq. And no one states the obvious: We will never be able to pay these loans back. We are supposed to somehow spend our way out of the crisis and maintain our imperial project on credit. Let our kids worry about it. There is no coherent and realistic plan, one built around our severe limitations, to stanch the bleeding or ameliorate the mounting deprivations we will suffer as citizens. Contrast this with the national security state’s strategies to crush potential civil unrest and you get a glimpse of the future. It doesn’t look good.
“The primary near-term security concern of the United States is the global economic crisis and its geopolitical implications,” Blair told the Senate. “The crisis has been ongoing for over a year, and economists are divided over whether and when we could hit bottom. Some even fear that the recession could further deepen and reach the level of the Great Depression. Of course, all of us recall the dramatic political consequences wrought by the economic turmoil of the 1920s and 1930s in Europe, the instability, and high levels of violent extremism.”
The specter of social unrest was raised at the U.S. Army War College in November in a monograph [click on Policypointers’ pdf link to see the report] titled “Known Unknowns: Unconventional ‘Strategic Shocks’ in Defense Strategy Development.” The military must be prepared, the document warned, for a “violent, strategic dislocation inside the United States,” which could be provoked by “unforeseen economic collapse,” “purposeful domestic resistance,” “pervasive public health emergencies” or “loss of functioning political and legal order.” The “widespread civil violence,” the document said, “would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security.”
“An American government and defense establishment lulled into complacency by a long-secure domestic order would be forced to rapidly divest some or most external security commitments in order to address rapidly expanding human insecurity at home,” it went on.
“Under the most extreme circumstances, this might include use of military force against hostile groups inside the United States. Further, DoD [the Department of Defense] would be, by necessity, an essential enabling hub for the continuity of political authority in a multi-state or nationwide civil conflict or disturbance,” the document read.
In plain English, something bureaucrats and the military seem incapable of employing, this translates into the imposition of martial law and a de facto government being run out of the Department of Defense. They are considering it. So should you.
Adm. Blair warned the Senate that “roughly a quarter of the countries in the world have already experienced low-level instability such as government changes because of the current slowdown.” He noted that the “bulk of anti-state demonstrations” internationally have been seen in Europe and the former Soviet Union, but this did not mean they could not spread to the United States. He told the senators that the collapse of the global financial system is “likely to produce a wave of economic crises in emerging market nations over the next year.” He added that “much of Latin America, former Soviet Union states and sub-Saharan Africa lack sufficient cash reserves, access to international aid or credit, or other coping mechanism.”
“When those growth rates go down, my gut tells me that there are going to be problems coming out of that, and we’re looking for that,” he said. He referred to “statistical modeling” showing that “economic crises increase the risk of regime-threatening instability if they persist over a one to two year period.”
Blair articulated the newest narrative of fear. As the economic unraveling accelerates we will be told it is not the bearded Islamic extremists, although those in power will drag them out of the Halloween closet when they need to give us an exotic shock, but instead the domestic riffraff, environmentalists, anarchists, unions and enraged members of our dispossessed working class who threaten us. Crime, as it always does in times of turmoil, will grow. Those who oppose the iron fist of the state security apparatus will be lumped together in slick, corporate news reports with the growing criminal underclass.
The committee’s Republican vice chairman, Sen. Christopher Bond of Missouri, not quite knowing what to make of Blair’s testimony, said he was concerned that Blair was making the “conditions in the country” and the global economic crisis “the primary focus of the intelligence community.”
The economic collapse has exposed the stupidity of our collective faith in a free market and the absurdity of an economy based on the goals of endless growth, consumption, borrowing and expansion. The ideology of unlimited growth failed to take into account the massive depletion of the world’s resources, from fossil fuels to clean water to fish stocks to erosion, as well as overpopulation, global warming and climate change. The huge international flows of unregulated capital have wrecked the global financial system. An overvalued dollar (which will soon deflate), wild tech, stock and housing financial bubbles, unchecked greed, the decimation of our manufacturing sector, the empowerment of an oligarchic class, the corruption of our political elite, the impoverishment of workers, a bloated military and defense budget and unrestrained credit binges have conspired to bring us down. The financial crisis will soon become a currency crisis. This second shock will threaten our financial viability. We let the market rule. Now we are paying for it.
The corporate thieves, those who insisted they be paid tens of millions of dollars because they were the best and the brightest, have been exposed as con artists. Our elected officials, along with the press, have been exposed as corrupt and spineless corporate lackeys. Our business schools and intellectual elite have been exposed as frauds. The age of the West has ended. Look to China. Laissez-faire capitalism has destroyed itself. It is time to dust off your copies of Marx.
Ecuador: Paradox or Paradigm December 23, 2008Posted by rogerhollander in Ecuador Politics, History, Government, Culture, Ecuador Writing, Ecuador: Paradox or Paradigm.
Tags: alarcon, alvaro noboa, arteaga, brady bonds, bucaram, default, Ecuador, Ecuador Government, Ecuador history, ecuador poverty, external debt, Latin America, mahuad, roger hollander
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(This is an article I wrote (October 5, 1999) and submitted somewhere, I don’t remember. In any case it was rejected. It summarizes Ecuador’s political and economic climate and suggests that it might be a paradigm for the rest of Latin America.)
Whereas the vast majority of Ecuadorians would not know what a Brady Bond is any more than they could identify the Brady Bunch, it can only be fear of violent Ecuadorian public reaction to further “belt tightening” measures that prompted the fundamentally conservative center-right government of President Jamie Mahuad to default on $44.5 million in Brady Bond interest payments earlier this month. While Ecuador may be one of the smallest and least economically developed amongst its Latin American neighbors and thereby easily dismissed as not comparable to the economic “giants” such as Brazil, Mexico or Argentina, to overlook the significance of this event for that reason is to ignore a continent-wide unrest of which Ecuador is as representative as any other Latin American republic.
The relatively mild international reaction to Ecuador’s unprecedented action would indicate that the world banking community is convinced that the tail is not likely to wag the dog. This, on the one hand, overlooks several key characteristics that Ecuador shares with its Latin American neighbors – large gaps between rich and poor, entrenched governmental corruption and instability, deep poverty, small and shrinking middle classes, overwhelming external debt, and dependency upon unstable world commodity markets. More importantly, it fails to take into account the single most critical factor that economists love to under-rate: the angry passions of desperate masses.
Ecuador is blessed with abundant natural resources. It is the world’s largest exporter of bananas and is also a major producer of cocoa, coffee, fresh flowers, coconut, pineapple, rice, and sugar cane. Its offshore and inland fishing industry yields massive quantities of lobster, shrimp, tuna, tilapia, and other high demand seafood products. The discovery of large oil deposits in its tropical rainforests in the 1970’s has thrust Ecuador amongst the leading petroleum producing nations of the Americas. The same Oriente region is potentially rife with precious metals such as silver and gold. With such natural riches, a diversity of bio-geographic regions (tropical rainforest, the Andes cordillera, lush coastal plains, and the Galápagos Islands) that is amenable to high yield agriculture and aquaculture production as well as regional and international tourism, and with a small population of just under thirteen million, Ecuador should be among the wealthiest nations on earth.
Yet, it is one of the poorest and it suffers perpetual economic crisis. Ecuador has both the highest inflation rate and per capita external debt in all Latin America. It has high rates of infant mortality and illiteracy that reflect a minimal public investment in health and education. Nearly one quarter of its adult population is unemployed and half of those employed are underemployed, managing a bare existence by selling everything from hard candy to tropical fruit, tooth paste to toilet paper, on city streets. The poverty rate is estimated at 80 per cent, with more than half of that considered to be deep poverty. It is not uncommon to see children as young as four and five years of age begging and/or working on the streets of Guayaquil, a seaport of over two million inhabitants, which is the country’s largest city and which suffers from a dilapidated infrastructure, disease epidemic due to inadequate sanitation, air and water pollution, and which is experiencing the proliferation of bamboo housing slums on its borders due to the influx of refugees from even more severe rural poverty.
Ecuador returned to constitutional government after a military dictatorship that lasted throughout the 1970’s. Its political culture is characterized by corruption, greed and incompetence. Its judicial system is almost entirely politicized. Over a dozen political parties jockey for power, and the inability of the legislative and executive branches to find common ground leaves the country in a state of almost perpetual political paralysis. There is constant labor strife, fueled, among other things, by the fact that government workers, particularly teachers and health workers whose salaries are embarrassing low to begin with, are compelled to initiate work stoppages to force government ministries to release their pay checks, which are often several months in arrears. In addition, there is chronic unrest amongst students, petroleum and utilities workers, Indigenous peoples and campesinos, and other sectors of society as a result unpopular policies that are perceived as throwing the burden of economic crisis on the backs of the poorest and most vulnerable members of society. Even the Catholic Church, despite its essentially conservative nature, often finds itself along side more traditional dissidents in chastising the government.
In 1996, Abdalá Bucaram, a demagogic and unbelievably vulgar “populist,” representing a party with left wing rhetoric and right wing policies, won the presidency and ring-mastered a governmental circus that was overthrown by a Congress-led, military supported and bloodless coup d’etat which followed two days of massive nation-wide general strike in February of 1997. With more than a bit of theatric irony, Bucaram, who proudly calls himself El Loco, was ousted by the Ecuadorian Congress on the constitutional ground of “mental incompetence,” and went into exile in Panama. Immediately, the Congress, in violation of the constitution, appointed its own leader, Fabian Alarcón, as interim president, bypassing the legitimate successor, the elected Vice President, Rosalía Arteaga, who had the misfortune to have been born of the wrong gender.
In August of 1998, under the banner of the center-right Popular Democracy party, Jamil Mahuad, a former mayor of Quito, Ecuador’s capital city, began a four year presidential term, having barely edged out Alvaro Noboa, heir to Ecuador’s largest banana fortune and the country’s wealthiest individual, a man with no prior political experience other than an appointed position in the government of Bucaram, who would no doubt have returned from exile should Noboa have won. Mahuad proceeded to implement a “paquetizo,” a package of economic policies far more stringent and devastating than those proposed by and which lead to the ouster of Bucaram. By mid-1999 the government had more than doubled the price of gasoline, devalued the currency, and raised the cost of public utilities as much as five hundred percent. A nation-wide banking crisis in the spring had lead to a week-long closure of all banks and was followed by the freezing of bank accounts. Hundreds of thousands of Ecuadorians lost their life savings. Things came to a head in early July, when a two day general strike called for by transportation workers ended up shutting down Ecuador’s inter-regional transportation for nearly two weeks.
The only political party in Ecuador with representation in Congress that as a matter of policy advocates the cessation of external debt payments is the Marxist-Leninist oriented Movement for Popular Democracy (MPD), which draws its major support from the teachers’ union and middle class professionals. A handful of so-called “center-left” parties, who always morph into center-right should they capture the presidency, will sometimes echo such demand while in opposition. However, nothing less than extraordinary circumstances can explain the unilateral withholding of a scheduled debt payment, particularly when such an action is taken by a government with no pretence toward or prior history of radicalism.
It is interesting to note that Ecuador is not among those countries for which the IMF is seriously considering the forgiving of past debt. Ostensibly this is because of Ecuador’s relative “wealth,” which fails to take into account its skewed distribution, and because of the endemic corruption within the political process. However, even if Ecuador were to be magically freed of the Albatross of external debt, apart from some undeniable short term benefit, this would not begin to solve the structural problems that lie at the root of the nation’s tragic history.
Crippling external debt is the symptom not the cause of Ecuador’s woes, and it can be argued that the same is substantially the same for virtually every Latin American nation. In short, given its history of external resource exploitation which presents us with today’s reality, a reality characterized by brutal discrepancies in the distribution of wealth and an overall dearth of both physical infrastructure (roads, utilities, sanitation) and social infrastructure (health, education, democratic government), Ecuador simply is not a viable political/economic unit. As government after government has proven, no amount of reform, be it of the strong armed neo-Liberal variety, which is the current style, or the more traditional borrow and spend (or steal) it variety, will get to the root of the problem.
Ecuador lacks a responsible leadership class. Election to public office is considered tantamount to a license to accumulate wealth. Presidents, Vice-Presidents, and Congressmen who leave office are almost as likely to go into exile in Panama, Chile, Costa Rica or Miami as they are to return to private life in Ecuador. There is no sense amongst Ecuadorians that its crisis can be solved at the political level as it presently exists. An example of this was the Popular Assembly, a by-product of the February 1997 uprising that lead to the ouster of Bucaram, which was seen as a way to reform the Constitution over the head of the Congress, which was considered too mired in corruption to achieve meaningful change. The interim government, however, set the ground rules for the Assembly, which resulted in the existing political parties being able to get their loyal supporters elected to and in control of the Assembly, which in turn produced nothing that constituted genuine change.
On the other hand, one does find in Ecuador a relatively strong union movement, militant teachers, angry students, a highly organized and effective Indigenous movement, a nascent and growing women’s movement, a discontented and fearful professional class, and millions of suffering and disillusioned “ordinary people.” Like the Guagua Pinchincha volcano, which as been on low boil for nearly a year and only this week has begun to spew tons of ash and dust over nearby Quito, the repressed and volcanic passions of this small but not atypical Latin nation may erupt at any moment, and without warning.
And the rest of Latin America may not be that far behind.
Latin America summit excludes U.S. and welcomes Cuba December 17, 2008Posted by rogerhollander in Economic Crisis, Latin America.
Tags: Brazil, caribbean, carmen munari, Cuba, default, Economic Crisis, Ecuador, emargo, Hugo Chavez, julio villaverde, kieran murray, Latin America, lugo, Lula, mercosur, oas, Obama, paraguay, Rafael Correa, raul castro, raymond colitt, rio group, roger hollander, summit
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Reuters UK, December 17, 2008
By Raymond Colitt
COSTA DO SAUIPE, Brazil (Reuters) – Latin American leaders on Tuesday blamed the global economic crisis on rich countries and welcomed Communist-run Cuba at a summit meeting designed to weaken U.S. influence in the region.
The presence of Cuban President Raul Castro at the meeting in northeastern Brazil was touted as a sign of Latin America’s growing independence from the United States, a far cry from the Cold War era when Cuba was expelled from the Washington-based Organisation of American States.
“Cuba returns to where it always belonged. We’re complete, we’re forming a team, a good team,” said Venezuelan President Hugo Chavez, the region’s most vehement U.S. critic and Cuba’s closest ally.
“The most positive thing for the independence of our continent is that we meet alone without the hegemony of the empire,” Chavez said in reference to the United States.
Previous summits of Latin American and Caribbean leaders have always included former colonial powers Spain and Portugal or the United States.
Castro, on his first foreign trip since taking over from his ailing brother Fidel Castro earlier this year, said an unfair, world economic order benefiting rich countries and multinational companies was in crisis.
“It’s the demise of an economic model,” he said.
Cuba’s admission on Tuesday into the long-standing Rio Group of more than 20 Latin American and Caribbean countries brought renewed calls for an end to the U.S. embargo against Cuba.
Castro said on the eve of the summit meeting here that he was open to meeting with U.S. President-elect Barack Obama to discuss the issue.
PROGRESS AT RISK
The global crisis, which has cut off credit lines and hit demand for the commodity exports of many countries, has threatened to undo years of economic and social progress in the region, Brazil’s President Luiz Inacio Lula da Silva said.
“Crises like the current one reveal the perversities of the current economic system,” Lula said.
Ecuador’s President Rafael Correa, who defaulted on a foreign debt payment this week, said emerging market economies didn’t cause the crisis but would end up paying a high price for it.
He said Latin American countries should pool their international reserves and speed up the creation of a regional development bank to help overcome the global credit crunch.
“The answer is integration,” said Correa.
Leaders also agreed to create a South American defence council aimed at preventing local conflicts and reducing dependence on U.S. weaponry. Brazil is the largest arms manufacturer in South America and could gain ground against U.S. manufacturers if the region’s governments came together on some defence issues.
“The idea is cooperation for the basis of a (common) defence industry,” Brazil’s Foreign Minister Celso Amorim told reporters
But behind the scenes, the show of unity looked fragile.
The newly-formed South American Union failed on Tuesday to agree on a secretary-general to lead it, and the regional customs union Mercosur failed to eliminate double taxation on imports that have held up negotiations with other trade blocs.
Paraguayan President Fernando Lugo said he was studying the legality of his country’s foreign debt, echoing the arguments made by Ecuador this week and raising the possibility of another default that would reinforce doubts about Latin America’s investment climate.
(Additional reporting by Carmen Munari and Julio Villaverde; Editing by Kieran Murray)
Rep. Dennis Kucinich on His Battle With the Banks December 15, 2008Posted by rogerhollander in Economic Crisis.
Tags: assassination, banks, budget, business, campaign, cei, cleveland, cleveland trust, congress, corruption, default, election, energy, government, history, kucinich, Media, money, muny light, national city, ohio, oversight, power, roger hollander, taxes
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Dec 15, 2008
|AP photo / Kevin Wolf|
Once they were as gods, but the deities of the American banking system are now in ruins, plunged from their pedestals into the maw of taxpayer largesse. Congress voted to give the banks $700 billion, lifting them temporarily out of their sepulcher of debt, while revealing a deep truth about the condition of America’s financial powers:
They never had the money they said they had as they constructed their debt-based monetary system which now lies in ruins. Their decisions on behalf of depositors, shareholders and investors were lacking in basic integrity and common sense. Green gods bailing out with their golden parachutes.
There was a time when their power was real. Come with me to Cleveland 30 years ago today.
Dec. 15, 1978, Cleveland, Ohio
I awoke to find a curt payment demand that was dropped on my front step by a grandfatherly man who supplemented his Social Security delivering the morning newspaper. The headline plastered across the front page:
Cleveland Trust: Pay Up. Bank would relent if Muny Light were sold, Forbes believes.
One of America’s largest banks, Cleveland Trust, led local banks in demanding immediate payment from the city by midnight, Dec. 15, of $14.5 million in short-term loans.
I regarded the headline skeptically. Having lived in 21 different places by the time I was 17, including a couple of cars, I had come to an encyclopedic knowledge of dun letters, sent to my parents by battalions of bill collectors seeking immediate payment for televisions, cars and a variety of household appliances that never seemed to work. I first came to regard these credit alarms with trepidation, later with impassiveness, with the expectation that as our family grew to two adults and seven children it would soon be on the move again, incurring new delinquencies with each new address. Lack of access to money, housing and credit seemed to be a permanent condition.
Now, having fought through a thicket of consequence to become America’s youngest mayor, elected on a promise to stop the privatization of the city’s electric system, I was faced with paying off loans taken out by the previous mayor, for the financing of municipal projects of dubious value.
The banks refused to extend terms of payment and connived with City Council members to block alternative payment plans, such as the sale of city land or tax revenues. The banks knew the city couldn’t otherwise pay. They demanded instead the sale of the city’s electric system, Muny Light, to an investor-owned electric company, the Cleveland Electric Illuminating Co. (CEI). The president of the Cleveland Council, George Forbes, had met with the head of Cleveland Trust bank, who insisted on the sale of Muny Light as a precondition for extending the city credit. This was a case of the bank blackmailing the city, pure and simple.
The alternative to accepting the bank’s blackmail was default. Cleveland could become the first city since the Depression to default on its financial obligations. Cities rely on credit for everyday operations and for meeting long-term financial obligations, such as infrastructure improvements. If banks called in their loans, the city would head toward dire straits. No one knew that better than the law firm of Squire Sanders and Dempsey, which had served as bond counsel for the city of Cleveland while the city entered fiscal peril and was simultaneously, though not coincidentally, the principal law firm for the Cleveland Electric Illuminating Co. Through Squire Sanders and Dempsey, CEI had access to the intricacies of the city of Cleveland’s financial records.
Under the previous administration, the city began using bond funds for general operating purposes. As mayor, I inherited $40 million worth of debt that had to be refinanced before the end of my first year in office. Under my predecessor, the city had illegally spent money it did not have, and yet it had the key to every bank in town and the confidence of the bond rating houses, at precisely the same time it was preparing for the sale of the municipal electric system to CEI.
Cleveland Trust and another bank demanding the sale of Muny Light, National City, were principal stock owners in CEI. Several members of CEI’s board sat on the boards of local banks as interlocking directorates. There was a myriad of bank-utility business relations. Cleveland Trust bank, which handled CEI’s demand deposits, pension funds and other assets, would directly profit from the sale of Muny Light. In a way, the banks were the private utility. With the sale, CEI would have an electricity monopoly in Cleveland and would be able to name its price for electricity and get it. Everyone in the Muny Light territory would receive at least a 20 percent rate increase as the rates would be raised to CEI’s levels.
The city was self-sufficient with Muny Light for many years. Muny provided power to 46,000 homes with low electric rates, which contributed to the economic growth of the city. That was until the late 1960s and early ’70s, when a series of suspicious mechanical failures and power outages diminished the system’s reliability. At that time, under heavy lobbying from CEI, the Cleveland City Council delayed the passage of legislation for $9.8 million in repairs to Muny Light’s generators, thereby forcing the city to purchase power at a premium from its competitor, CEI. The city became increasingly dependent on an interconnection between CEI and Muny Light, a high-voltage line over which power could be transferred from CEI to the city, to ensure reliability. The city’s power system began to experience more unexplained power failures. CEI began to make public overtures to purchase Muny Light. The sale of Muny Light to CEI was soon supported by most of Cleveland’s media, business, political and labor interests.
In November 1976, the City Council passed legislation authorizing the sale of Muny Light for a fraction of its value. I was clerk of Cleveland’s Municipal Court at the time and I objected to the sale. I was advised that there was no way to stop the sale, but I saw it differently. Cleveland had a long history of municipal power. I could sense a terrible injustice was being visited upon the people of the city by its leading institutions, which were conspiring to deprive the city of its public power system.
I organized a petition drive that attracted support from city neighborhoods served by Muny Light. A full civic campaign was born with an intense effort made under brutal weather conditions to gather the signatures necessary to put the issue on the ballot. There was much at stake besides the monetary value of the system: The people’s right to own an electric system. And the historic position of Muny Light, one of America’s first municipal electric utilities, founded 70 years earlier by Cleveland Mayor Tom Johnson. Muny Light provided electricity to about one-third of the homes and businesses in the city at a peak savings of 20-30 percent over the rates charged by CEI. Additionally, Muny Light provided millions of dollars annually in savings to taxpayers by serving 76 city facilities. It also provided Cleveland’s street lighting. High electric rates and higher taxes would follow if Muny were sold. The private sector was forcing the sale for its own profit at the expense of the community.
On Jan. 4, 1977, the Atomic Safety and Licensing Board (ASLB), in an antitrust review required of any company applying to operate a nuclear power plant, ruled that CEI had conspired to put Muny Light out of business. CEI tried to force Muny Light into price-fixing and blocked Muny expansion, stopped the installation of Muny Light pollution-abatement equipment and forced the city to buy power it didn’t need. In addition, the ASLB uncovered a CEI budget planning report for 1971 that spoke of a five-year plan “to reduce and ultimately eliminate” Muny Light.
The ASLB determined that CEI deliberately caused a Christmas-season blackout on the Muny Light system and sent salesmen into Muny Light territory offering “reliable CEI service.” The private utility illegally tripled the cost of purchased power, thereby driving up Muny Light’s operating costs. CEI illegally blocked Muny Light’s access to power from other companies, all in violation of federal antitrust law. As a condition of receiving its license to operate a nuclear power plant, CEI had to provide Muny Light with access to cheap power. Documents showed that CEI executives believed the purchase of Muny Light would increase CEI’s earnings by $2.732 a share, eliminate a competitive threat, and push the company’s growth rate to 10 percent, further enhancing investment.
Documents in the case also demonstrated CEI’s successful attempts to subvert media editorial policy through cunning use of the company’s large advertising budget. Over the years, several local reporters lost their jobs after writing reports unfavorable to CEI, and CEI bragged internally about placing verbatim company-written propaganda as general media editorial content.
Confronted with the federal finding that bolstered a previously filed $330 million antitrust damage suit, the Cleveland city administration’s response was incredible: “Now CEI has to buy Muny Light!”
At the same time the campaign to sell Muny Light accelerated, a high-powered rifle shot ripped through my house, just missing my head.
A cavalcade of media editorials commenced favoring the transfer of Muny Light to CEI.
During an ensuing legal battle over the validity of the referendum petitions, I became a candidate for mayor. I promised that if elected I would save the system. I won the election. My first act in office was to cancel the sale of Muny Light. I next had to pay off a $14 million CEI electricity bill that the previous administration owed and wanted to satisfy through the sale of the light system.
I had been in the mayor’s office barely a year, facing a municipal horror story of huge snow storms, massive water main breaks and a police strike. I had cut city spending by 10 percent through eliminating corrupt contracts, payroll padding and attritional cutbacks. Through the year, I struggled with a recall attempt for firing a police chief. The recall was backed by banks, utility and real estate interests with a last-minute appeal printed by the Plain Dealer to sell Muny Light. Credit rating agencies, which had looked the other way while CEI was attempting to gain Muny Light in the previous administration, downgraded the city’s finances.
Another Muny Light-related attempted assassination was averted when I was rushed to a hospital vomiting blood from a profusely bleeding ulcer. Some years later, a congressional investigation produced information from an undercover agent of the Maryland State Police that the assassination attempt was to occur while I was the grand marshal in a local parade. A local television investigative report claimed the assassin’s services were purchased because I refused to sell the electric system.
One month later, I was back at work trying to find a way to save Muny Light. The utility’s financial difficulties, though contrived largely through interference with the system by CEI, were depicted as so overwhelming that only the sale of the electric system itself would save the city from financial catastrophe. I held several meetings with bank officials. and it became clear we were heading for trouble on the question of refinancing. The banks were going to try to force me to sell the electric system. I went public with a plea for an income tax increase to protect the city’s solvency.
On Dec. 15, I made a last-minute appeal to Cleveland Trust. It was 8 o’clock in the morning. I met with Brock Weir, the chairman of Cleveland Trust, Council President Forbes and our host, a local businessman. I had the intention of protecting Muny Light and avoiding a default.
“There’s just one thing you’ve got to do,” said the Council president, who strongly favored the sale.
Weir, the bank CEO with the stern visage: “If you sell Muny Light, we’ll roll over the notes. I can get you $50 million in new financing. We’d get other banks to participate.” It was a bribe.
My thoughts went to the street just outside the boardroom. Some 20 years earlier, a few blocks from where this meeting was taking place, I slept with my brothers and sister and parents in a car, homeless. I remembered an apartment where my parents sat underneath the pale yellow light of a kitchen wall lamp, counting their pennies on an old porcelain-topped table. The pennies dropped, click, click, click. Pennies to pay the utility bills.
It matters how much people pay for electricity. It matters if the public owns its own system and has political and financial control over rates. I could hear the pennies dropping, click, click, click, as Mr. Weir insisted on the sale of Muny Light. I remembered my family and the struggles of people like them. I couldn’t do it. I couldn’t sell. Not for $50 million, not for anything.
“I’m not going to sell, even if it means my career,” I said, as Council President Forbes looked on in surprise.
“Why do you want to end your career? Sell the system. Get rid of it!” he said.
“Is there some other way we can work this out?” I asked Brock Weir.
He shook his head “No.”
Throughout that day, every media outlet in Cleveland echoed the sentiment of Cleveland Trust’s chairman, including the morning newspaper headline, with such depth of coverage and intensity that it seemed the city itself would crumble unless I agreed to the sale, which also included a provision dropping the $330 million antitrust damage suit.
The objective condition of the city’s finances received no honest review. The sale of Muny Light was depicted as the only way the city could avoid fiscal disaster. The majority leader of the City Council held a news conference live on the 6 o’clock news. He declared that if I sold Muny Light, “the chairman of the Cleveland Trust bank has informed the council that his bank will purchase $50 million worth of city bonds. So, in effect, we have a plan sitting on the mayor’s desk that will absolutely end the city’s financial problems, if he will put his signature on it.”
The $50 million bribe had been brought out into the open in a manner that now suggested it was a legitimate offer, a fake solution to a fake crisis. I refused to sell.
As Cleveland television stations covered the event live, with a countdown clock that looked like a twisted version of New Year’s Eve, midnight struck. Television networks of several countries recorded the grim event: The city of Cleveland became the first American city to go into default since the Great Depression. The default was over just $14.5 million dollars in credit.
When I called for a congressional investigation a few days later, Cleveland Trust denied it wanted Muny Light, CEI denied it wanted Muny Light, the council president denied the chairman of Cleveland Trust wanted Muny Light, and the majority leader said he was mistaken when he said live on the 6 o’clock news that the bank chairman offered $50 million in credit for Muny Light. Muny Light was no longer the issue. It was the mayor and his obstinacy that caused the crisis. So went the waltz into a netherworld devoid of truth, justice, reality or morality.
Though the people of Cleveland supported keeping Muny Light by a margin of 2 to 1 in a referendum a few months later, and passed an income tax increase by the same margin in order for the city to pay off the defaulted bond anticipation notes, the state of Ohio intervened and put the city into fiscal receivership. I lost the mayor’s race in 1979. The banks renegotiated the defaulted notes, at a profit. The city lost its antitrust suit against CEI in 1981, in a hung jury. An appeal failed.
I was out of major public office for almost 15 years until, in 1993, Cleveland announced an expansion of Muny Light (now called Cleveland Public Power). At that time, the City Council and others decided that I had made the right decision in refusing to sell Muny Light. The city and its residents had saved hundreds of millions of dollars through Muny Light’s reduced electric rates and the savings the taxpayers enjoyed from Muny’s lower-cost power for street lighting and city buildings.
I attempted another political comeback and this time succeeded, getting elected to the state Senate with the motto: “Because he was right.” My campaign literature showed a radiant light bulb behind my name. Two years later, I was elected to Congress, with the slogan “Light up Congress.” Today I am the chairman of the House Government Oversight Domestic Policy Subcommittee, which has broad jurisdiction over most government departments and agencies, including the Nuclear Regulatory Commission, and electric utility matters generally.
The Cleveland Electric Illuminating Co. is now a subsidiary of First Energy Co., which was fined by the NRC for various safety violations and, a few years ago, was found to have primary responsibility for the 2003 blackout that left 50 million people throughout the northeastern United States without electricity.
Cleveland Trust no longer exists. No other bank involved in the default survives, except for National City, which next week faces extinction through shareholder approval of a takeover by PNC bank. I have spent much time trying to save National City.
One newspaper, the Cleveland Press, which advocated that CEI be Cleveland’s sole electricity provider, ceased publication. The other strong proponent of the sale of Muny Light, the Plain Dealer, struggles to survive.
The city’s electric system endures and this past year celebrated its 100th anniversary.
Fears Rise Over Possible Ecuador Default November 23, 2008Posted by rogerhollander in Ecuador, Latin America.
Tags: default, Ecuador, Ecuador external debt, Ecuador Government, Ecuador history, external debt, global bonds, MarketWatch, Moody, polya lesova, Rafael Correa, roger hollander, S&P
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”La Cruda Realidad” (The Crude Reality), Foto: Lou Dematteis
I regularly receive reports from www.amazoniaporlavida.org, an environmental organization that is waging a campaign to prevent exploitation of petroleum in Ecuador’s ecologically sensitive Yasuni region.
A recent e-mail made reverence to a former U.S. agent, John Perkins, who describes himself as a former “economic hit man,” in a tell-all book.
I found an interesting interview with Perkins on Amy Goodman’s “Democracy Now!” radio program, which sheds light on the problem as seen by today’s Ecuadorian environmental and anti-neoliberal activists.
First, my translation of the “Amazonia por la Vida” Report:
“In the Agenda of the United States and Its Intelligence Services”
When John Perkins was contracted by MAIN (a CIA front) to intervene in the political economy of Indonesia, Ecuador and Panama, he was told that by using macroeconomic statistics, he should be able, for example, to inflate the rate of economic growth in Indonesia from 6% to 19%. In the case of Ecuador, where he served as an economic advisor, he was told that, by manipulating its macroeconomic statistics, he should be able to put the country in debt to the point where they are trapped with the impossibility of repayment.
The CIA succeeded in manipulating Ecuadorian macroeconomic information to the point where in twenty years the country was in bankruptcy and had to over exploit and privatize its [natural] resources in order to deal with the debt.
In defining the statistics and the conditions of work in transnational corporations at that time [the 1970s] Texaco played an essential part. The former agent [Perkins] has revealed how Texaco was able to enter Ecuador via the Instituto Lingüístico de Verano [ILV, Summer Institute of Linguistics, a U.S. evangelical missionary organization, also known as the Wycliffe Bible Translators, with ties to the CIA], with whom he was also associated.
The CIA strategy was to establish the conditions for the re-taking of natural resources after they had been partially nationalized. Texaco, the company most affected, found itself in conflict with [Ecuadorian President] Jaime Roldós, who not only expelled the ILV from the country, but also refused the conditions to which Texaco aspired. After the assisination [of Roldós], [his successor] Oswaldo Hurtado reinstated the ILV and Texaco began its greatest campaign of explorations (John Perkins, “Confessions of an Economic Hitman,” 2004).
Evolution of the Total Ecuadorian External Debt (in millions of U.S. Dollars)
CEIDEX (Comisión Especial de Investigación de la Deuda Externa del Ecuador)
Now to John Perkins:
From the prologue to the “Democracy Now!” interview:
John Perkins, was a former respected member of the international banking community. In his book Confessions of an Economic Hit Man he describes how as a highly paid professional, he helped the U.S. cheat poor countries around the globe out of trillions of dollars by lending them more money than they could possibly repay and then take over their economies.
20 years ago Perkins began writing a book with the working title, “Conscience of an Economic Hit Men.”
Perkins writes, “The book was to be dedicated to the presidents of two countries, men who had been his clients whom I respected and thought of as kindred spirits–Jaime Roldós, president of Ecuador, and Omar Torrijos, president of Panama. Both had just died in fiery crashes. Their deaths were not accidental. They were assassinated because they opposed that fraternity of corporate, government, and banking heads whose goal is global empire. We Economic Hit Men failed to bring Roldós and Torrijos around, and the other type of hit men, the CIA-sanctioned jackals who were always right behind us, stepped in.
John Perkins goes on to write:
“I was persuaded to stop writing that book. I started it four more times during the next twenty years. On each occasion, my decision to begin again was influenced by current world events: the U.S. invasion of Panama in 1980, the first Gulf War, Somalia, and the rise of Osama bin Laden. However, threats or bribes always convinced me to stop.
John Perkins, from an interview with Amy Goodman on “Democracy Now!” November 9, 2004.
… I was initially recruited while I was in business school back in the late sixties by the National Security Agency, the nation’s largest and least understood spy organization; but ultimately I worked for private corporations.
… when the National Security Agency recruited me, they put me through a day of lie detector tests. They found out all my weaknesses and immediately seduced me. They used the strongest drugs in our culture, sex, power and money, to win me over. I come from a very old New England family, Calvinist, steeped in amazingly strong moral values. I think I, you know, I’m a good person overall, and I think my story really shows how this system and these powerful drugs of sex, money and power can seduce people, because I certainly was seduced. And if I hadn’t lived this life as an economic hit man, I think I’d have a hard time believing that anybody does these things
Basically what we were trained to do and what our job is to do is to build up the American empire. To bring—to create situations where as many resources as possible flow into this country, to our corporations, and our government, and in fact we’ve been very successful. We’ve built the largest empire in the history of the world. It’s been done over the last 50 years since World War II with very little military might, actually. It’s only in rare instances like Iraq where the military comes in as a last resort. This empire, unlike any other in the history of the world, has been built primarily through economic manipulation, through cheating, through fraud, through seducing people into our way of life, through the economic hit men. I was very much a part of that.
Well, the company I worked for was a company named Chas. T. Main in Boston, Massachusetts. We were about 2,000 employees, and I became its chief economist. I ended up having fifty people working for me. But my real job was deal-making. It was giving loans to other countries, huge loans, much bigger than they could possibly repay. One of the conditions of the loan—let’s say a $1 billion to a country like Indonesia or Ecuador—and this country would then have to give ninety percent of that loan back to a U.S. company, or U.S. companies, to build the infrastructure—a Halliburton or a Bechtel. These were big ones. Those companies would then go in and build an electrical system or ports or highways, and these would basically serve just a few of the very wealthiest families in those countries. The poor people in those countries would be stuck ultimately with this amazing debt that they couldn’t possibly repay. A country today like Ecuador owes over fifty percent of its national budget just to pay down its debt. And it really can’t do it. So, we literally have them over a barrel. So, when we want more oil, we go to Ecuador and say, “Look, you’re not able to repay your debts, therefore give our oil companies your Amazon rain forest, which are filled with oil.” And today we’re going in and destroying Amazonian rain forests, forcing Ecuador to give them to us because they’ve accumulated all this debt. So we make this big loan, most of it comes back to the United States, the country is left with the debt plus lots of interest, and they basically become our servants, our slaves. It’s an empire. There’s no two ways about it. It’s a huge empire. It’s been extremely successful.
[I worked] … very closely with the World Bank. The World Bank provides most of the money that’s used by economic hit men, it and the I.M.F.
Here is Perkins’ blood chilling account of the alleged assassination of Panama’s Omar Torrijos:
“Omar Torrijos, the President of Panama. Omar Torrijos had signed the Canal Treaty with Carter much—and, you know, it passed our congress by only one vote. It was a highly contended issue. And Torrijos then also went ahead and negotiated with the Japanese to build a sea-level canal. The Japanese wanted to finance and construct a sea-level canal in Panama. Torrijos talked to them about this which very much upset Bechtel Corporation, whose president was George Schultz and senior council was Casper Weinberger. When Carter was thrown out (and that’s an interesting story—how that actually happened), when he lost the election, and Reagan came in and Schultz came in as Secretary of State from Bechtel, and Weinberger came from Bechtel to be Secretary of Defense, they were extremely angry at Torrijos—tried to get him to renegotiate the Canal Treaty and not to talk to the Japanese. He adamantly refused. He was a very principled man. He had his problem, but he was a very principled man. He was an amazing man, Torrijos. And so, he died in a fiery airplane crash, which was connected to a tape recorder with explosives in it, which—I was there. I had been working with him. I knew that we economic hit men had failed. I knew the jackals were closing in on him, and the next thing, his plane exploded with a tape recorder with a bomb in it. There’s no question in my mind that it was C.I.A. sanctioned, and most—many Latin American investigators have come to the same conclusion. Of course, we never heard about that in our country.”