[E-rundbrief] Info 747 - S. George: Poverty in Neo-Liberal Europe

[Matthias Reichl]

E-Rundbrief - Info 747 - Susan George (F): Predictable Poverty: The 
Inevitable Legacy of a Neo-Liberal Europe

Bad Ischl, 21.10.2008

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Predictable Poverty: The Inevitable Legacy of a Neo-Liberal Europe

by Susan George

October 21, 2008 13:15

The requirements for reducing or eliminating poverty, in Europe and 
world-wide, are known and the money is there, but the weight of the 
financial lobby is such that political will at present seems non-existent.

'All for ourselves and nothing for other people' seems, in every age of 
the world, to have been the vile maxim of the masters of mankind. As 
soon, therefore, as [the great proprietors] could find a method of 
consuming the whole value of their rents themselves, they had no 
disposition to share them with any other persons. For a pair of diamond 
buckles, perhaps, or for something as frivolous and useless, they 
exchanged the maintenance, or what is the same thing, the price of the 
maintenance of a thousand men for a year.
Adam Smith, The Wealth of Nations, 1776.(1)

Introduction

In the early twenty-first century, poverty on a world -wide, 
massive-scale is not merely unnecessary but inexcusable. This is indeed 
its most striking feature. One could argue, following Adam Smith [who 
considered himself a "moral philosopher" not an economist] that it was 
equally avoidable in the Great Britain of 1776, but that is a matter for 
historians. Here we shall stay in our own century while keeping Adam 
Smith's words of indictment in mind. The "vile maxim of the masters of 
mankind" is, alas, alive and well; the masters are still trying to keep 
all for themselves and allow nothing for other people. Whenever they 
can, which is most of the time, they organise public policy in such a 
way that their goals can be met.

In contemporary Europe we are living in such a time. Europe could 
eliminate poverty on its own soil, reliably estimated in 2006 to strike 
72 million people, around 15 percent of its total population.(2) It 
could also contribute hugely to eradicating poverty in the world, taking 
the lead in the OECD countries in that regard. It has the wealth and the 
[unused] policy space to do both. Like other OECD countries, however, 
Europe refuses to confront the obvious solutions which would involve 
very small changes in the lifestyles of the rich, and a few, somewhat 
larger ones, for banks and transnational corporations. So it seems to me 
that the first duty of a participant in a conference concerning "the 
fight against poverty" is to examine wealth.

Whatever might have been possible, politically speaking, in the 
eighteenth century had people been obliged to share more equally, it was 
still a time when genuine crop failures could take place; trade was 
expensive and sometimes the necessities of life were in short supply. 
Here I shall argue that today, for the first time in human history, 
poverty retains not a shred of mystery nor of inevitability; one need no 
longer ask if, technologically and materially speaking, it could be 
eradicated. The answer is simple and straightforward: yes, it could . 
Politically, however, as I shall also argue, the European Union, with 
the complicity of its Member States, is doing whatever lies in its 
considerable power to prevent this happening both in Europe itself and 
in the world. This will be the second focus of my contribution.(3)

I. Wealth and inequality

Now, nearly two and a half centuries after the opening quote from Adam 
Smith, the father of modern capitalist theory, let us hear the 
stylistically less well-crafted but nonetheless heartfelt cry of the 
"Lowtax Network Editorial Team":


There is such a lot of money!
Despite a presumably temporary dip in asset values as a result of 
shell-shocked markets post sub-prime, HedgeFund.net said recently that 
total hedge fund assets stood at $2.848tn at the end of March 2008. (4)


Not quite three trillion dollars in hedge funds, or $2.848.000.000.000? 
So claims Investors Offshore. Although such a sum may sound enormous and 
indeed amounts to more than twenty percent of the entire GDP of the 
European Union, it is modest compared to the real private money that is 
out there. Merrill-Lynch and Cap Gemini have recently published their 
twelfth annual World Wealth Report , a trustworthy source given that 
Merrill-Lynch wants to manage as much wealth as possible and therefore 
has an interest in getting the figures right. Their Report for 2008 
counts a shade over ten million "High Net Worth Individuals" in the 
world-about one in every 670 people. These HNWIs, including the far 
richer and more exclusive group of "Ultra-HNWIs", in 2007 together 
controlled $40.7 trillion, that is, $40.700.000.000.000.

By the year 2012, Merrill-Lynch believes this group will have 
collectively accumulated $59 trillion. This projection is reasonable 
given that the increase of the HNWI's total wealth in 2007 compared to 
that of the HNWIs of 2006 was more than nine percent. Furthermore, since 
2002 the total wealth of this growing class of HNWIs has increased by 
more than 50 percent. In other words, every year there are more HNWIs 
[although only a slight increase in their numbers compared to the total 
world population] and every year their nest-egg grows so that it has now 
reached dinosaurian proportions.

Let us also be clear about the meaning of "wealth" in this context: The 
Merrill-Lynch Cap Gemini definition limits it to investable wealth of 
which the HNWIs all have at least a million dollars "excluding 
collectibles, consumables, consumer durables, and primary residence". In 
other words, art and wine collections, mansions, luxury cars, 
top-of-the-line kitchen equipment and other relatively illiquid assets 
don't count. As a point of comparison, needed when scaling these 
dizzying financial heights, the $40.7 trillion in the hands of these ten 
million HNWIs come to more than three times the GDP of either the United 
States or the European Union, nearly six times that of China and 
thirteen times the GDP of India.

Europe's share of this valuable pie is roughly a quarter and has 
remained constant as the total pie has grown. Increasingly large sums 
and shares now go to Asians, Latin Americans and Middle-Easterners. At 
3.7 percent, Europe has the lowest growth rate in the numbers of the 
HNWIs-who now count 3.100.000 Europeans, compared to over 15 percent 
growth in the numbers of Mid-Easterners and 12 percent of Latin 
Americans. The wealth accruing to these geographical regions remains, 
however, modest compared to the total and two-thirds of that wealth is 
still in North America and Europe.

So the investable cash the hedge funds have garnered, those $2.8 
trillion that the Lowtax Network brags about, is plainly peanuts-not 
even seven percent of the pile the HNWIs are sitting on worldwide.

Various other measures of private wealth exist, such as the Forbes 
Magazine list of billionaires world-wide, again measured in $US. The 
2006 list [published in 2007] gave 943 names; the one for 2007 published 
in early March 2008 had grown to 1125 people whose wealth is usually 
based on corporate shares. I did not have the courage to do the 
adding-up myself and Forbes does not give totals. Some have said that 
the total wealth of the 2006 list of fewer than a thousand individuals 
came to $3.5 trillion. I have lazily added up only the fortunes of the 
people at the top in 2007: the first three have $180, the first ten $426 
billion.

Now try the following simple calculation. If you have "only" one billion 
dollars, like pages and pages of people at the end of the Forbes list, 
and if you are such an incompetent investor that you make a return of 
"only" $50 million or five percent a year; then every day of the year, 
Sundays and holidays included, you must spend $137.000 in pure 
consumption or you will automatically become richer. In other words, 
once you reach this level, it is virtually impossible ever to be poor or 
even just affluent.

We can indeed join in the Lowtax Network Team's shout of triumph: "There 
is such a lot of money!" There is indeed. The world is awash in it and 
there is quite enough for everyone. But as the simple calculation above 
indicates, beyond a certain level, it's very hard not to become richer. 
The natural, mathematical tendency of wealth is to become concentrated 
where it already is-at the top. The 20/80 "power law" takes over. Twenty 
percent of the population will have 80 percent of the wealth; 80 percent 
of the population will have 20 percent of the wealth. Today these 
figures are even more exaggerated and this will be the case so long as 
no political intervention or regulation is tolerated. This is precisely 
the position defended by the European Union and its Member States: allow 
nature to take its course. .(5)

However, before inquiring into the purely European responsibilities 
concerning the persistence of poverty and what might be done about it, 
let us quickly look at the collective inequality data for the world, of 
which the best assessment is undoubtedly the WIDER study published in 
December 2006. .(6)

The main WIDER findings were not surprising for those who have studied 
the subject: In the year 2000, 2 percent of adults in the world owned 
more than half of global household wealth. The richest 1 percent alone 
accounted for the ownership of 40 percent of global assets while the top 
5 percent captured 71 percent and the top 10 percent held 85 percent of 
the wealth. The bottom half of humanity got along on barely 1 percent of 
total assets. These figures show the operation of the power law in high 
gear, especially since the WIDER definition of "wealth" was broader than 
that of Merrill-Lynch. The WIDER scholars used the classic "net worth" 
definition, meaning all physical and financial assets, including homes, 
the principle asset for most people who own anything, less debts.

Who's who, and where, in these WIDER percentages and how much wealth do 
they have? The good news is that to belong to the category of the "top 
half" of the human race, you needed only the modest sum of $2200 worth 
of assets. The bad news is that most people would still feel exceedingly 
poor at that level, even in terms of Purchasing Power Parity [PPP], the 
measure now used in most official comparisons. Top 10 percent membership 
meant owning $61.000; the top 1 percent required $500.000 plus. This 
latter amount, let us recall, is not nearly enough to get you into the 
really exclusive ranks of the Merrill-Lynch HNWI club-37 million people 
are in the top 1 percent according to WIDER whereas only 10 million are 
of interest to Merrill-Lynch.

The WIDER authors estimate that the world's households together possess 
$125 trillion in wealth, about triple global GDP. If the wealth were 
shared equally, everyone on earth would have $26.000 worth of assets 
[WIDER calculates this figure in terms of PPP]. No one expects ever to 
arrive at complete equality-it probably would not be a good idea even if 
it were attainable-but these calculations do tend to show that the world 
as a whole is certainly not "poor" by any standard measure.

In the 21st century we thus have a broad and increasingly detailed 
knowledge about who is rich and who is not, where they live, how many 
they are, what their wealth is based on and so on. Still, many might say 
that globalisation is the famous tide that lifts all boats so the poor 
are benefitting from it too. They are said to have risen from an even 
lower level on the human scale and their absolute and relative numbers 
are said to be decreasing [although everyone recognises that if China 
and India are left out of this equation, the argument collapses]. Leave 
globalisation and the market, we are told, to increase economic growth 
and the boats of the poor will rise on the tide with the rest.

This is unfortunately not the case. Inequalities are growing mightily 
both within and between countries and as over thirty recent food riots 
have shown, market events can plunge tens of millions back into absolute 
destitution. Tony Addison and Giovanni Andrea Cornia explain why we 
cannot usefully speak about combating poverty without examining 
inequality. Inequality matters a great deal where poverty reduction is 
concerned. It impedes rather than encourages growth and it swamps or 
punches holes in the boats of the poor. We must recognise that


inequality has risen in many countries over the last two decades... . 
This is disturbing since little progress can be made in poverty 
reduction when inequality is high and rising. Moreover, contrary to 
earlier theories of development, high inequality tends to reduce 
economic growth, and therefore poverty reduction through growth. .(7)


Their paper provides evidence of strong negative relationship between 
inequality and growth and they show that


'Traditional' sources of inequality must be addressed through land 
reform, and more public spending on the human capital of the poor.


These measures, however, even if applied, will not be sufficient since


new causes of rising inequality must also be tackled by redesigning 
stabilization programmes to avoid sharp anti-poor demand compression and 
to protect pro-poor spending; regulation of privatized enterprises to 
protect disadvantaged poor consumers; and more pro-poor education 
investment to offset the tendency of trade liberalization to increase 
income inequality.


More explicitly, avoiding "anti-poor demand compression" and 
compensating for same with "stabilisation programmes" means that sharp 
price increases [food, energy, water...] will hit the poor hardest and 
leave them without the necessities of survival if governments do not 
act. "Regulation of privatised enterprises" means that these authors 
assume that privatisation is a fait accompli. So it is, after decades of 
structural adjustment at the hands of neo-liberal institutions like the 
World Bank or the IMF applying "Washington Consensus" anti-poor 
medicine. These policies also have primacy in neo-liberal Europe, one of 
whose goals is to facilitate the inclusion of all human activities in 
the marketplace.

Thus for Cornia and Addison, at the very least, these now privatised 
utilities, transport networks, health-care systems, education; but also 
formerly government-managed food stocks, veterinary services, municipal 
water systems, rubbish collection and so on must be regulated, that is, 
overseen by public authorities [if these services haven't disappeared 
altogether]. They don't ask for re-nationalisation or other forms of 
public ownership, merely for "regulation".

"Pro-poor education investment" to ward of f exclusion of the poor from 
labour markets when trade is liberalised and subsequently "increases 
income inequality" is another means of adjusting to contemporary reality 
and trying to alleviate the plight of the poor. But as we shall see in a 
moment, fully a third of the European labour force is estimated by the 
Commission itself to be of "low educational attainment" and there are 
few signs that Europe has any intention to do anything about it, despite 
the "Lisbon Strategy". Annual assessments of progress towards the Lisbon 
goals show Member States falling behind in crucial areas.

In other words, neo-liberal globalisation will necessarily create 
inequalities and the greater the inequalities, the more the poor will be 
made poorer and more vulnerable.

A good part of the "social" or non-monetary wage is wiped out through 
privatisation and higher prices for basics like water, transport or 
electricity. Lack of public investment in health and education has, in 
many places, made recourse to private systems an attractive option for 
anyone who can afford them-which not everyone can. If one hopes to 
reduce, much less eradicate poverty, then specific, targeted public 
policies are required in Europe or elsewhere. It is wishful, if often 
convenient, thinking to believe that such a result can be achieved 
through "growth" and some imaginary "magic of the marketplace". Markets 
reward the haves, not the have-nots for the excellent reason that it 
cannot even "see" those who contribute little to capitalist production 
and buy so little that they are nearly invisible to capitalist 
consumption. We have known for decades that growth does not "trickle down".

If one is serious about reducing or eliminating poverty, the obvious 
road to take in Europe is the Keynesian one of cross-border taxation and 
redistribution, re-establishment of the social wage through 
high-quality, integrated [cross border] public services including 
health-care and life-long education, a responsible fiscal policy 
including the elimination of tax havens, regulation of financial 
transactions and imposition of accounting practices that do not allow 
transnational corporations to use transfer pricing and other dodges; a 
European Central Bank with a mandate to practice policies leading to 
full-employment and so on. The European Union is actively avoiding all 
such practices and in some cases rendering them legally impossible.

II. European responsibilities

The arguments concerning poverty laid out above could be illustrated and 
supported for pages more, but this paper has no pretentions to being 
exhaustive. Nor do I believe it possible to convince anyone not already 
convinced of the harmful effects of neo-liberal policies. These 
policies, as now applied throughout Europe and the world, were 
consciously designed to do exactly what they have done: amass maximum 
wealth at the top while ignoring the consequences of greater poverty and 
inequality below. .(8)

No one now denies the rise in inequality and wealth concentration but 
the standard answer to corrective policy changes is always the same. We 
heard it most recently at the failed mini-ministerial meeting of the WTO 
in Geneva this summer. Have faith in "market-based solutions" and the 
market will solve your problems. Let us now look briefly at how Europe, 
specifically the European Union, with the acquiescence and active 
cooperation of its Member States, fits into this picture.(9)

Since the Single European Act of 1986, the purely economic orientation 
of the EU has grown ever-clearer. The amendments to previous treaties 
contained in this Act were designed to increase the capacity of Europe 
to establish a truly common market. It was also the first time that 
social policies and democratic aspirations were explicitly pushed aside. 
The then-President of the Commission, the social-liberal Jacques Delors, 
explained that these would come "later". We are still waiting.

Nearly twenty years later, under the Barroso Commission which many 
consider the most neo-liberal in EU history, the Treaty for a European 
Constitution [TEC] drafted by an unelected convention made the market 
orientation even more explicit. The word "market" occurred 78 times in 
the text, "competition" [usually accompanied by the phrase "free and 
undistorted"] was given 25 mentions, "social policy" got three and 
"unemployment" none. The "four freedoms" were the paramount objective of 
the TEC: the free movement of "goods, persons, services and capital", 
interpreted as we shall see shortly in the broadest possible way so as 
to reduce other rights to the barest minimum.

The French debate in 2005 on the TEC and the future of Europe was the 
most ardent I had witnessed since May 1968: contrary to the assertions 
of the Commission, the French knew exactly what they were voting 
for/against. It was a class vote, with everyone but the managerial class 
voting No and when the French people voted decisively [54.7%] against 
the TEC [as did the Dutch even more decisively-61.6%-- shortly 
thereafter], the Commission and European elites discarded all democratic 
pretence. The people had voted wrongly, therefore the people were wrong 
and should be ignored. Or, as Commission Vice-President Gunter Verheugen 
put it even more brutally after the French/Dutch votes, "We must not 
give in to blackmail". So much for universal sovereignty.

The Lisbon Treaty, drafted in an even more secretive fashion and even 
more difficult to decipher, followed in due course and incorporated 
virtually all the provisions of the defunct Constitution, passing over 
the popular rejections as if they had never occurred. According to the 
principle author of the TEC, Valéry Giscard d'Estaing, Lisbon provided 
only "cosmetic changes" to make it "easier to swallow". Nicolas Sarkozy 
admitted that if the French were allowed to vote again, they would again 
vote No, as would the people of many other nations. Therefore they 
should not be allowed to vote. The same authoritarian treatment given 
the French and the Dutch is now being meted out to the Irish. Disregard 
for one's own rule of unanimity is clearly preferable to another failure 
and one can be sure that the Commission will not rest until it has 
obtained the Treaty it wants in order to steamroll ahead with its own 
profoundly undemocratic, economically divided Europe.(10)

Among the poverty-enhancing attributes of the texts Europeans are being 
forced to swallow are the provisions on public services or rather 
"services of general economic interest" which are specifically made 
subject to competition. Unanimity is required for any common social or 
fiscal policy, meaning that competition will push these downwards. 
Lisbon obliges EU members to "improve their military capabilities" 
[while making them subservient to the US and NATO] which means that 
other budgets will necessarily suffer. Although "enhanced cooperation" 
is quite easy to realise among like-minded European governments in the 
military sphere, it is extremely difficult if not impossible to organise 
cooperation regarding social and fiscal policies. And of course the four 
freedoms trump all other considerations.

The twelve central/eastern European newcomers will not receive anything 
like the structural funds generously apportioned to Spain, Portugal, 
Greece and Ireland in earlier days; everything points to the deliberate 
use of these newcomer countries as reservoirs of cheap labour. In 2005, 
the "Bolkestein" or services directive was roundly denounced as 
organising unfair competition between the workers of higher- and 
lower-wage countries. The characteristically neo-liberal directive 
stipulated that firms from Eastern Europe need not even register with 
the authorities of a western European country in order to supply 
services there, at the going wage and working conditions in the "country 
of origin". Faced with an outcry, even from the usually docile European 
Trade Union Confederation, the Commission and Parliament were obliged to 
soften the directive to some degree and exclude some vital social 
services from its remit.

The Commission, however, true to form, decided that it would get what it 
wanted through another channel and has now passed on the matter to the 
European Court of Justice.

The result has been consistent jurisprudence in 2007-2008 weakening 
labour protection and the right to strike, while forbidding a national 
Member State to consider its own labour code as "public policy". The 
relevant cases, known as the Vaxholm-Laval, Viking, Ruffert and 
Luxembourg decisions, have all diminished hard-won worker rights.

The Vaxholm-Laval decision forbade Swedish unions to organise industrial 
action to force a Latvian company [Laval] to pay Swedish wages to its 
Latvian workers engaged in construction work in the Swedish town of Vaxholm.

The Finnish Viking Line wanted to reflag one of its vessels staffed with 
a largely Finnish crew in Estonia so it could hire an Estonian crew not 
benefiting from a collective agreement negotiated by the Finnish 
Seaman's Union. The decision found that "Social policy objectives do not 
automatically take precedence over the objective of having a properly 
functioning common market", in this case "freedom of establishment" in 
Estonia.

The Ruffert case concerned the right of German public authorities, when 
awarding work contracts, to demand that tendering companies commit to 
paying wages to foreign workers in line with rates specified in 
collective agreements applicable to German workers. The European Trade 
Union Confederation General Secretary called the ECJ decision refusing 
this demand "another destructive and damaging judgement [after 
Vaxholm-Laval]. They both assert the primacy of the free movement of 
services over existing labour regulations which apply to the place where 
the service is provided".

The ETUC also called the Ruffert decision "an open invitation for social 
dumping, which will not only threaten workers' rights and working 
conditions, but also the capacity of local (small and medium) 
enterprises to compete on a level playing field with foreign 
(sub)contractors."(11)

Most ominous of all, however, is doubtless the "Luxembourg" case brought 
by the European Commission against its own EU Member State. The 
Commission claimed that Luxembourg had violated the EU "Posting of 
Workers Directive" [PWD] when it transposed this directive into national 
law. Luxembourg argued that its national "public policy" [which could 
therefore legally replace the terms and conditions expressly listed in 
the PWD] included among other provisions written employment contracts, 
automatic indexation of wages to the cost of living, regulation of 
part-time and fixed-time work and respect of collective labour 
agreements. Luxembourg therefore claimed it was justified in requiring 
foreign employers to conform to its "public policy" which is "to protect 
workers".

The ECJ upheld the Commission on all points: Luxembourg's interpretation 
was "excessive"; its legislation went beyond what is allowed by the PWD 
because the latter embodied an "autonomous principle of Community law 
and can be monitored by the European judge accordingly...National labour 
law as a whole cannot constitute public policy". .(12)

These four decisions create a huge incentive for companies to 
subcontract work to subsidiaries that are, on paper at least, located in 
low-cost EU countries. Downward pressure on standards, wages and social 
rights will necessarily increase.

Thus the EU is organising the race to the bottom among workers. Its own 
statistics show that it has already been successful in reducing the 
gains of labour while enhancing those of capital. The statistics 
relating to the labour/capital share of added value can be calculated in 
different ways, using different bases and different 
time-lines--economists enjoy arguing about the best ones to use. But the 
EU itself, in its own most recent Employment in Europe Report 2007 shows 
that after hitting a peak in 1975 when the labour share of added value 
was 70 percent [69.9% to be precise], by 2006 it had declined gradually 
by over 12 percentage points, to 57.8 percent, with, of course, 
equivalent increases in capital's share from 30 to 42.2 percent.

In some countries the decline has been even steeper, as in France which 
now stands at 56.7 percent labour share of added value. The erosion of 
the labour share in the new Member States is even more drastic. In 2005 
and 2006, Poland stood at 48.6, Bulgaria at 44.6 and Slovakia at only 
42.3 percent. Malta, of particular interest to us here, averaged a 51 
percent share of added value for labour over the period 1990-2006, 
peaking in 2003 at 53.3. It has since slipped back to 50 percent. .(13)

In the EU, the drop for labour was more than double that of the United 
States. Although in the US, over the whole period 1960-2006 the share of 
labour never exceeded 66 percent, with that high point reached in 1970, 
it was more stable. The low point came in 2005, at 61 percent, for a 
total loss of "only" five percentage points compared to 12 for the EU. 
As for Japan, long known as the most egalitarian developed country, it 
reached a remarkable 76 percent share for labour in 1975-1977 but had 
plummeted to 60 percent by 2006. In terms of labour share, Europe still 
remains the worst performer among these major OECD countries-or the best 
for capital, depending on how one measures.

As noted above, economists don't necessarily agree on the details of 
calculating added value shares between labour and capital, but as the EU 
points out in its own Report, all the other credible sources-the Bank 
for International Settlements, the IMF or the OECD-- show exactly the 
same patterns though the actual numbers may vary.

Not being an economist, I am unqualified to assign proportional 
responsibility for the decline in the labour share [never forgetting the 
improved share for capital] but it is easy to point to at least some of 
the factors that have contributed to it. Globalisation has given capital 
greater bargaining power over labour and changes in this rapport de 
forces between the two have surely played a part. Offshoring, 
de-industrialisation with the consequent loss of well-paid manufacturing 
jobs and the simultaneous rise of less well-paid service jobs also must 
have had something to do with this trend. Privatisation , like the 
relentless search for "shareholder value" have gone hand in hand with 
massive layoffs.

The unexamined question in the changes in value-added shares seems to me 
the role of the financial sector which exploded especially during the 
past decade. At least during the period from 2000-2006, profits of the 
banking and financial secotrs were nearly double those of any other 
industry. Investors had little incentive to invest in the real, 
job-creating economy. Financial institutions were furiously innovating, 
leveraging, and passing the hot potato of shaky loans, packaged as 
"Structured Investment Vehicles" or "Collateralised Debt Obligations", 
on to other unwary institutions-with the private ratings agencies egging 
them on.

As we know, this bubble has burst, with dire consequences. Working 
people have already paid several times: first when jobs in the real 
economy became scarcer and less well paid because of the rush to invest 
in financial products, not "real" ones; second when many lost their 
homes or the "equity" [capital] placed in their homes; finally when the 
bubble burst and taxpayers had to step into the breach to save the 
financial system. Now they will pay once more as we sink into 
generalised recession.

Europe's growth problem-and it is a problem-is seen to lie not in the 
dominance of runaway finance but in the "rigidity of the labour market". 
The remedy, seen from Brussels, is "Flexicurity". This hideous neologism 
is supposed to combine to best effect flexibility and security but it is 
also dangerous: the GUE-NGL [progressive left] group in the European 
Parliament has already labelled it "Flexploitation". Theoretically, the 
idea is to export the Danish model to the rest of Europe. The Danes have 
little protection with regard to hiring and firing, but a lot of support 
if they are between jobs or unemployed. Unfortunately, it's not possible 
to generalise this system without a great many other changes which the 
EU and most of its Member States are unwilling or unable to undertake.

For example, the Danes [and other Scandinavians] don't want to hear 
about a "European Minimum Wage" which would be a progressive measure for 
some other countries, because they know that their own wages [no minimum 
is set] are higher than an EMW would be. The Scandinavians also live in 
societies where the social consensus accepts high taxes and expects very 
high rates of participation in trade unions and collective bargaining 
among social partners. So while the goals of full employment, high 
levels of security, willingness to change jobs and access to life-long 
learning are certainly worthy ones, more emphasis for the moment seems 
to be placed on flexibility than on security, as the mounting 
proportions of casual and unwilling part-time employment seem to attest.

Furthermore, the 2008 Commission Report on Education brings the 
unwelcome news that illiteracy [called officially "low performance in 
reading literacy"] in Europe "actually increased by 10 percent between 
2000-2006 and has reached 24.1 percent". These illiterates, unless they 
can somehow be rescued, will soon join the ranks of the "almost 108 
million people [who] still have low educational attainment, about one 
third of the labour force", which is to say that they are virtually 
unemployable except in purely manual, unskilled jobs which are in 
shorter and shorter supply. These people constitute an exceptionally 
large reservoir of present and future poverty.

It would be wrong to leave the subject of European policy's own 
contributions to poverty without examining, however briefly, the impact 
of the EU on poverty in the South. Here we have a rich field to choose 
from. I have argued elsewhere that Europe should commission systematic 
research on the contribution of its own policies to the "push factors" 
causing massive immigration which is now treated entirely as a 
security-police-military problem. My argument is that we have helped to 
close off every avenue of socio-economic success, particularly in the 
countries of North and Sub-Saharan Africa and having done this, we are 
then surprised when the inhabitants of these countries risk their lives 
trying to move to Europe.(14)

I will not elaborate on this theme here other than to say that in my 
research proposal to the EU Research Directorate, I included in my list 
of topics which should be examined in relation to migration pressures : 
the continuing existence of large amounts of external debt and 
structural adjustment which impede personal development, the acquisition 
of skills, promote exports over local needs, and so on. Other areas are 
commodity prices; agriculture, notably the CAP; fisheries, climate 
change [beyond Europe's sole control] and unfair trade. Here I would 
like merely to touch on EU trade strategies, particularly the Economic 
Partnership Agreements [EPAs] under negotiation with ACP countries and 
the likely results-namely to increase poverty in some of the poorest 
countries in the world.

"Free trade" is the most sacred of the neo-liberal doctrines and the EU 
Trade Commissioner Peter Mandelson is a true believer. In October 2006, 
he launched the strategy "Global Europe" which concerns Europe's place 
in the world through commerce. Particularly since the "Doha Round" of 
the World Trade Organisation has become stalled if not comatose, 
Mandelson has concentrated on bilateral and plurilateral negotiations 
and has given the Economic Partnership Agreement with the 78 
African-Pacific-Caribbean countries his particular attention.

The definition of "free trade" has shifted enormously in the past 
decade. Although lowering of tariffs on incoming goods is still an 
important component of trade agreements, what Mandelson and others refer 
to as "Beyond Borders Barriers" are as important if not more so. BBBs or 
"non-tariff barriers" in the European vocabulary mean any obstruction 
not only to sales of EU goods and services but also "barriers to 
investment" by European transnational corporations in any area. They 
want equality of access to government contracts and the elimination of 
government regulations Europe interprets as "disguised barriers to 
trade". The WTO is also concerned with all these, but bilateral and 
plurilateral trade agreements are all "WTO Plus", meaning that by 
definition they must allow freer movement and fewer "barriers" than WTO 
agreements do.

All the successful, now-industrialised countries, including the most 
recent ones like Korea or Taiwan, reached their present economic status 
by protecting their infant industries, using targeted government 
spending and subsidies and maintaining tariffs often as high as 40 or 50 
percent on incoming goods, but these protections are no longer allowed 
for newcomers. Some of the ACP countries, especially the poorer ones, 
receive a hefty slice of their revenues from tariffs but are now being 
asked to forego these without compensation.

Mandelson's chief aim, however, seems to be totally unrestricted entry 
for European transnationals, so he is calling for the dismantling of 
national investment codes so as to eliminate restrictions on the sectors 
a TNC can invest in, the number of investors allowed in each sector, 
quantitative or proportional limitations on investment [for example 49 
percent] or repatriation of profits, requirements for local hiring and 
local content and so on. EPAs can only be described as "leonine". So why 
do poor countries accept them, as many have done with a few notable 
exceptions like Senegal? They have signed because the EU has told them 
that if they don't, their development aid will be cut and the EU will 
buy fewer of their products. It is also demanding access to government 
public procurement contracts, often reserved for local firms, as well as 
access to raw materials.

No country seems too small or insignificant to pry open-in the early 
days of the services negotiations in the Doha Round, NGOs [legally] 
obtained copies of the correspondence between the Commission and the 
major European water companies in which the former asked the latter 
which countries they wanted to expand in, supplying which services, in 
which modes. The result was 73 GATS [General Agreement on Trade in 
Services] requests for market opening in the "request-offer" process, 
often to extremely poor countries.

Conclusion

The solutions to poverty, both European and world-wide are quite obvious 
and, naturally, the financial industry and many other interests lobby 
consistently against them. As there are between 10.0000 and 15.0000 
lobbyists in Brussels, they have a lot of help.

--With regard to the financial crisis-cum-recession, transparency is 
vital. Banks at present won't lend to each other because nobody knows 
how much debt the other one has and how bad its balance sheet really is. 
So they are pulling back from most lending and making loans much more 
expensive. This is known as the "credit crunch" based on lack of trust, 
not of money.

--The private ratings agencies which gave the toxic SIVs and CDOs triple 
AAA ratings need to be placed under government control; they should be 
paid by the buyers, not the sellers of securities to eliminate their 
present perverse incentives.

--The finance wonder-boy innovators have to be prevented from passing on 
the hot potato of toxic debt and obliged to keep a good proportion of 
their own products on their own books. Leverage [through which $1 can 
easily become $40, $50 or even $100] must be controlled by enforcing 
capital requirements with real assets.

--Stop allowing the socialising of losses and make shareholders pay the 
real costs of the debacle.
In a general way, we are neglecting to use existing tools. Here are a few:

--Cancel the debt of poor Southern countries, but [this is my personal 
view, not that of any particular NGO] in exchange for involvement of the 
people in the concerned countries in determining how the savings should 
be spent. The government should not be allowed to do this by itself. The 
argument that "one cannot apply conditions" is laughable, given that we 
have been doing so for decades, but the wrong conditions, those of the 
Bank-IMF.

--Close down tax havens, particularly those in Europe used by Europeans 
and European companies. The Tax Justice Network estimates that rich 
individuals have placed well over $11 trillion in such havens; the OECD 
has branded three major European ones-Andorra, Monaco and 
Lichtenstein-as completely uncooperative. Tax avoidance and evasion are 
now major industries.

--Tax cross-border financial flows, whether of currencies [recently 
traded at the rate of $3.2 trillion a day], stock market purchases, or 
transnational corporation profits. A very small property tax above a 
certain level would be helpful. Let us hire Price-Waterhouse or the 
equivalent to tell us how to levy another small tax on the billionaires 
and the HNWIs. The technical means to do all these exist, the obstacles 
involved are purely political.

--Seek fair trade, not free trade, taking into account the real, 
long-term interests of Europe, especially with the Mediterranean 
countries and Sub-Saharan Africa. Recognise food sovereignty as a basic, 
inviolable right.

--Invest in education and ecology. Require the banks that have been 
bailed out time and again reserve a certain portion of their loans at 
very low interest rates for these areas.


It is now generally known that there is no such thing as "aid flows" 
from North to South. Rather, the "aid" is coming from the South, or from 
Southern nationals, to the North and net flows are massively in the 
North's favour. Worker remittances from migrant workers to their home 
countries dwarf anything that Europe is sending to them under the 
heading of "Development Aid" and market opening will proceed by one 
means or another. Debt service from Sub-Saharan Africa alone continues 
at the rate of $25.000 every minute. Transnationals set up more or less 
where they like and disregard the needs of the local people when they do 
not simply steal their land. We can expect further impoverishment as a 
result.

It is not an accident that many NGOs and social movements have given up 
on the European Union as it presently exists although they continue to 
fight against its policies. Yet Europe could be a model for a new kind 
of society if it abandoned the meretricious, damaging values of 
neo-liberalism and returned to its Enlightenment roots which would now 
include enlightened Keynesian policies of taxation and redistribution, 
at the European and global levels. Europe still has the best social 
model in the world, based on rights and economic security and this can 
be mathematically proven.(15)

The requirements for reducing or eliminating poverty are known and the 
money is there. The political will at present seems non-existent, but 
social movements will continue as best they can to defend a different 
future, as I have tried to do here.


This was Susan George's contribution to "The fight against poverty" 
civil society project conference 2008 at the Jean Monnet Centre Of 
Excellence, University Of Malta, 8 October 2008. Susan George is Chair 
of the Board of the Transnational Institute. Her latest books are 
Hijacking America: How the religious and secular right changed what 
Americans think, and We the peoples of Europe.

Notes

(1) Book III, Chapter IV, p.512 in the Andrew Skinner edition, London, 
Penguin 1974

(2) Sarah Bouquerel and Pierre-Alain de Malleray, "L'Europe et la 
Pauvreté: Quelles réalités ? » Note no. 31 for the Robert Schumann 
Foundation, April 2006

(3) The elites of the United States, Asia, Brazil, etc. are also trying 
to prevent redistribution and eradication of poverty but this conference 
centres on Europe.

(4) See Investorsoffshore.com, "Private Wealth Management" by the Lowtax 
Network Editorial Team, August 2008. This network appears to be based in 
London although this is not clear from the data on the site..

(5) The "power law" holds true in an amazing number of areas: 20% of the 
banks have 80% of the accounts; 20% of publishers publish 80% of the 
books; 20% of US colleges receive 80% of the applications and so on.

(6) United Nations University World Institute for Development Economics 
Research [UNU-WIDER] The World Distribution of Household Wealth [James 
Davies, Susanna Sandstrom, Anthony Shorrocks, Edward Wolff] , Helsinki, 
December 2006

(7) Tony Addison and Giovanni Andrea Cornia, "Income Distribution 
Policies for Faster Poverty Reduction", WIDER Discussion Paper no. 2001/93

(8) For the means by which neo-liberal policies became the new "common 
sense" in the US, see Susan George, Hijacking America: How the Religious 
and Secular Right Changed What Americans Think, Polity Press, Cambridge, 
2008. For more on the enthusiastic participation of the EU in these same 
policies, see Susan George, We the Peoples of Europe, Pluto Press, 
London, 2008.

(9) Because critics of the Constitution and now the Lisbon Treaty have 
so often been shoved into the category of "allies of the right" or 
"anti-Europeans", allow me to make clear that this is not the case for 
me, for the Attac movement [I am honorary president of Attac France], 
for the coalition most active in organising the No campaign in France, 
nor for the many other progressive Europeans I meet. While willingly 
recognizing my non-elected status and lack of representativity, I find 
all around me, in many European countries and contexts, something like 
furor, even hatred for the Commission and the present structures of 
Europe emerging. Those who feel this way are almost invariably 
enlightened, fervent Europeans but they want a social, ecological, 
democratic European Union, not the autocratic, corporate-friendly one 
being imposed on us now. The more official Europe displays its contempt 
for the people, the more dangerous this situation could become. 
Unfortunately, everything indicates that the Commission itself, like the 
top European bureaucrats, are utterly oblivious to this danger.. .

(10) Bruno Waterfield, "EU polls would be lost says Nicolas Sarkozy" The 
Daily Telegraph, 15 November 2007; . Giscard d'Estaing in hearings 
before the Constitutional Affairs Committee of the European Parliament 
17 July 2007, see also his 'Tribune libre" in Le Monde of 14 June 2007 
in which he explains that through Lisbon,, which was the Constitution 
rendered "colourless and painless" , "public opinion would be 
unwittingly led to adopt the provisions that [governments} didn't dare 
present to them straightforwardly". Many other major European figures 
[Barroso, Merkel, d'Amato, Zapatero, Bertie Ahern, the Belgian foreign 
minister, etc].all explained that Lisbon was the same thing as the 
Constitution ; many added that it had been deliberately made much more 
difficult to understand. .

(11) See press releases on the ETUC site

(12) Posting of Workers Directive 96/71/EC; European Court of Justice, 
Commission vs. Luxembourg C319/06 and ETUC Briefing Note on the case. 
The decision was handed down on 19 June 2008, a week after the Irish 
referendum favouring the No. The formal name of this court is the Court 
of Justice of the European Communities.

(13) .Employment in Europe Report 2007, Chapter 5, "The labour income 
share in the European Union"., European Commission, 2007; using country 
or area specific tables and charts.

(14) Susan George, Paper for the EU Research Directorate, programme 
"Responding to Global Challenges"; "Examining Relationships between 
European Union Policies and Migratory Pressures" [April 2008, to be 
included in an as yet unpublished collection of proposals issuing from 
the Global Challenges workshop.

(15) See the final chapter of Susan George, We the Peoples of Europe, 
op.cit. which is based on the International Labour Organisation report 
Economic Security for a Better World; 2006, an exhaustive survey 
classing countries according to seven types of security. European 
countries, including many in eastern Europe, come out on top; the United 
States is no. 25.

http://www.spectrezine.org/europe/george8.htm

see also: http://www.spectrezine.org/europe/george7.htm


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