Economy

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Economics and the Debate on Immigration II

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This article was originally posted on Socialist Economic Bulletin on the 6th of June.

The now notorious UKIP poster which suggested the entire population of the EU might come to Britain for work is designed to whip up racism. But it contains two fallacies that are unfortunately shared by many people who are not racists, and are therefore worth rebutting.

Myth 1
The first myth is that Britain is a uniquely attractive place within Europe in terms of pay or workers’ rights, or social security entitlements. The graphic below was produced by the UNITE union in Ireland in their argument for higher pay. But it is such a good graphic it is worth reproducing as it stands.

Graphic 1. Private Sector Hourly Compensation in Western Europe, € PPPs

Graphic 1. Private Sector Hourly Compensation in Western Europe, € PPPs

Compensation includes both pay and social wages such as pensions and other benefits. The data is in Purchasing Power Parity terms, so that they account for price differentials between European countries. The data is drawn from Eurostat database here.

The compensation for British workers is among the lowest in Western Europe. Britain is not a uniquely attractive destination for economic migration within the EU. Therefore it should come as no surprise that Britain has one of the lower levels of immigration of the Western European economies.

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Basic Income – An Idea Worth Exploring

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Basic Income is being discussed more and more.  It will be discussed at this weekend’s Basic Income Ireland seminar.  Basic Income is a weekly payment from the state to every resident without any means test or work requirement – a payment sufficient to afford a decent living standard.  It would work like this:  I receive a weekly payment from the state of approximately €200 per week (if that’s considered to afford me a decent living standard) whether I work or not.  Any income I earn above that is taxed.  If I choose not to work I still receive the €200 weekly payment.   In essence, BI breaks the link between work and income.

There have been considerable criticisms.

First, it has been dismissed on grounds of cost.  It certainly would be expensive, requiring very high tax rates on income from work.  Tax rates of 40 to 50 percent on all income have been proposed to pay for the programme.  And given the need to fund public services, additional social protection payments and investment it is hard to see how this could be introduced in the short-term.

Second is the impact on the labour market and work behaviour.  In short, if you give everyone an adequate income would they choose not to work?  This could create labour shortages in key sectors which would hamper growth and undermine the ability to fund BI.

Third is the inflationary impact.  Boosting incomes could put pressure on prices and drive up imports which in turn would require increasing the BI as it struggled to maintain value.  This could result in an inflationary spiral (of course, we could do with a little spiral to get us out of this deflation).

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Dude, Where’s My Anglo-Irish Promissory Note Dividend?

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Remember back to the renegotiation of the debt repayments on the Anglo-Irish promissory note last year?  Amidst the sound of champagne corks popping we were told we would get a budgetary dividend of approximately €1 billion.  Overnight, our deficit was projected to fall from an estimated 3 percent in 2015 to 2.2 percent.  Less tax increases, less spending cuts.  Of course, we had to be quiet about all this – for fear of frightening the monetary-financing horses over at the ECB.  But what it meant was less fiscal pain.

So what happened to the dividend?  In short, it’s disappeared.   Under the latest Government projections, the deficit has quietly but firmly gone back up again.

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After the deal, the deficit in 2015 was projected to fall to €3,955 million (prior to the deal it was projected to be €5,325).  However, in the Government’s latest Stability Programme Update, the deficit has increased – back up to €5,235.  In percentage terms, the projected deficit yo-yoed – falling from to 2.9 percent of GDP to 2.2 percent after the deal, only to bounce back up to 2.9 percent.

So, instead of facing into a budget that needs to find €2 billion in fiscal adjustments, we should have only needed an €800 million adjustment.  And when you factor in the ESRI’s claim that, apart from water charges revenue, we wouldn’t need any more fiscal adjustments, then we should be facing into a budget where the Government could run expansionary policies (increase spending, cut taxes) and still meet the EU budgetary targets.

So what went wrong?

Three things happened.

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Greek EU Elections: A Clear, Historical, But Still Not Decisive SYRIZA Victory

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The Greek EU elections have produced what is clearly a historical result, not only for Greece but for the European Union as well. SYRIZA won by a clear margin of almost 4% (3.8% to be more precise), scoring 26.5% against 22.7% of ND, the governing right party. Moreover, in the municipal and regional elections SYRIZA gained an impressive victory in Attica district with Rena Dourou, though it failed to elect Sakellaridis in Athens, who lost by a small margin to Kaminis.

SYRIZA’s victory is widely discussed by the European mass media, together with Marine Le Pen’s impressive first place in France, as the two most striking and weighty EU elections results. But while important on a general level, SYRIZA’s success is even more important for the European Left. It is the first time in recent history of Western Europe that a party of the Left gains first place since 1984, when the Italian Communist Party had achieved the same, just after Enrico Berlinguer’s death. However, SYRIZA’s victory comes at a much graver occasion, when the specter of fascism, racism and reaction hangs heavily over the continent. In this connection, it is crucial in showing that there is another road for Europe apart from the turn to the ultra Right, observed not only in France but in several other EU countries (Austria, Denmark, Sweden, Hungary, etc.) as well.

Yet, precisely because it is historical, SYRIZA’s victory must be analyzed in a serious way and not be idealized or overestimated. This is not only because it was accompanied by a new rise of the neo-Nazi Golden Dawn party, but also because, if closely viewed, it points to some weaknesses of SYRIZA, without which it could have been even larger. Moreover, the Greek EU election results show some interesting tendencies with regard to the other parties as well, reflecting underground social trends which may be relevant for other EU countries too.

We will proceed therefore to a commentary of the Greek EU elections, hoping to highlight some of these aspects. But first of all let us give the results themselves (we also cite the May and June 2012 parliamentary elections results for the sake of comparison).

Party

%

Seats

May 2012

June 2012

SYRIZA

26.5

6

16.8

26.9

ND

22.7

5

18.9

29.7

Golden Dawn

9.4

3

7.0

6.9

Elia

8.0

2

13.2

12.3

Potami

6.6

2

-

-

KKE

6.0

2

8.5

4.5

ANEL

3.5

1

10.6

7.5

LAOS

2.7

2.9

1.6

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European Elections 2014: 2020 Hindsight

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The results of the European Union’s Parliamentary elections are just in. They are twofold: first, there is a clear disinterest in the European Parliament as expressed by very low voting turnouts and second, of the few Europeans that did bother to vote, many have decided that it is time for a change.

Non-voters in the European Parliamentary elections are the majority in those nations without compulsory voting. The European turnout was 43% with 57% not voting or spoiling their vote. In Germany 48% voted, 46% voted in France, 36% in the UK and 35% in Portugal. There was extreme disinterest in the European elections in much of Eastern Europe: with 24% turnout in Croatia; 23% in Poland, 19% in The Czech Republic; and the Slovakians with a 13% turnout.

Christoph Hasselbach of Deutsche Welle’s Europe desk noted: “As for turnout, the picture is mixed: in some countries more people voted than before, but those votes often went to Euro-skeptic parties.” “All in all”, he added “the general public’s interest in the EU is shockingly low”.

As to the changes in voting patterns, highlights of the wave of political change include the rise of the German anti-EU AfD party (Alternative für Deutschland) which gained their first seats in the European Parliament; France, where Marine Le Pen’s party was the overall winner of 24 seats with more than 25% of the vote; Spain, which now has a new fourth party called “Podemos” with an anti-EU/Troika and an anti-capitalist stance which may have taken many of the PP and PSOE’s 17 lost seats; and the UK where non-finalised counts indicate that the right-of-centre anti-EU party UKiP (United Kingdom Independence Party) has won the election gaining, for the first time ever, more MEPs than either the Tory or Labour parties; finally there is Greece, where the “SYRIZA” far left alliance has come out on top with 27% of the national vote and seven MEPs.

On a national level Europe’s political structure has been reasonably stable since the Second World War and more specifically since the first waves of growth of the Common Market in the 1970’s. This has been broadly reflected in the European Parliamentary party groups since the Parliament began in 1979. Until today the main groups in the European Parliament reflected two broad nation political categories. The centre-left grouping in the European Parliament is the S&D “The Group of the Progressive Alliance of socialists and Democrats” which includes the German SPD, the PSOE in Spain, the French Socialist Party and Labour in the UK, among others. The large centre-right grouping in the European Parliament is called the EPP “The Group of the European People’s Party (Christian Democrats)”, it includes Germany’s CDU party, the Spanish PP and the UK Tory party. Provisional results at 11:00AM/CET on Monday, May 26 show the S&D lost seven seats since the last (2009) elections falling to 189 MEPs but the EPP did even worse, losing 60 seats to 214 seats. There are 63 new ultra-left-wing MEPs and 63 new ultra right-wing MEPs who have not yet aligned themselves to European party groups. This change is a clear demonstration of the radicalization of European politics.

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Greek Elections Update: A Small Step for SYRIZA, a Medium Step for Golden Dawn

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The first round of the Greek municipal and regional elections is over. The results, while indecisive, present a number interesting aspects, which give some idea about what may be expected in the second round as well in the European Parliament elections next Sunday. We shall summarize and comment them here.

First of all, abstention was quite high, though not higher than that in the previous, 2010 municipal and regional elections. It ranged between 53% in the city of Athens (it was 57% in 2010) to 35% in smaller provincial cities. This fact shows that the crisis of the political system still continues, without however SYRIZA or any other party clearly benefiting from it.

There was an interesting incident with the exit polls at 7 p.m. Sunday afternoon showing that SYRIZA was heading for a spectacular win in the biggest municipality and district, respectively Athens and Attica. They forecasted a win for Dourou, SYRIZA’s candidate for the Attica district, with a margin of 6-7% against the center-left “independent” Sgouros, and also a small precedence of Sakellaridis, SYRIZA’s candidate in Athens, against the equally “independent” center-left Kaminis. This created euphoria in SYRIZA with its leader, Alexis Tsipras, making some enthusiastic comments. However, these forecasts, which would indeed mean not only an overturn of all polls, but also a triumph for SYRIZA in the decisive battles, failed to materialize. As results began to roll in, it became clear that Dourou’s margin was much lower, of the order of 2%, while Sakellaridis was second after Kaminis, even if marginally. Still, the final result was a very descent one for Dourou and Sakellaridis. Meanwhile, it turned out the neonazi Golden Dawn scored better than in forecasts, achieving two quite positive results: 16,12% of the well known Kasidiaris in Athens and 11,11% of Panagiotaros in Attica district. Both in Athens and Attica the ruling party’s ND candidates failed to make it to the second round.

Had the picture in the rest of Greece been the same, with regard to SYRIZA and ND, than even that result would be a clear victory for SYRIZA. However, this was not the case. In most districts and in the other big municipalities (Thessaloniki, Piraeus, Patra) SYRIZA’s candidates scored well below that, roughly at 15%. The governmental district candidates, on the other hand, apart from the disastrous Attica result (where the ND candidate, Koumoutsakos, took just 14.13%) averaged somewhere between 25-30% (or even more in some cases).

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What 5 Cents on a Big Mac Would Mean for Hospitality Workers

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Yesterday was International Fast Food Day.  It started in the US where workers in the fast-food industry are staging protests nationwide, seeking a $15 per hour wage (the Federal minimum wage is $7.25 but President Obama is seeking an increase to $10.10 per hour while states and local governments have a higher minimum levels).

The protest has spread internationally and is expected to take place in 80 cities in more than 30 countries, from Dublin to Venice to Casablanca to Seoul to Panama City.

Fast-food workers are some of the lowest paid workers in the Irish economy with poor working conditions.  Average weekly earnings in the Accommodation and Food sector (we don’t have official data for the fast-food sector) were a mere €321 per week in the final quarter of last year.

Unite, using EU data, showed that our hospitality workers are some of the worst paid in the advanced European economies (see Table on Page 18 here).

Their conditions have deteriorated since the start of the recession.  Average weekly earnings in the whole economy fell by 4.6 percent since 2008; in the Accommodation and Food sector, they fell by 7.7 percent.  The low-paid are even more so.

With the minimum wage frozen since 2007, the revamped Joint Labour Committees having less powers than previous (e.g. they can’t negotiate Sunday premiums) and the cost of living, especially rents, rising, hospitality workers are under increasing pressure.

It is often said that since the hospitality sector is so labour-intense, wage increases would have a major impact on costs but this is over-stated.  It is true that wages (and for the purposes of this post I will use Accommodation and Food sector data unless stated otherwise) make up a high proportion of turnover.  They make up approximately a third of total turnover which is high.

However, a wage increase for the lowest paid in this sector would have only a minimal impact on prices but would have a major benefit to the workers, to businesses reliant upon their spending, the economy as a whole and the Exchequer.  Let’s do out some numbers – and this is a very approximate estimation based on one sector.

The CSO data suggests that if every hospitality employee (and this would include managers and professionals in the sector) were to receive a €1 per hour pay increase, it would cost the sector €160 million in personnel costs.  Sounds like a lot but it makes up only 2 percent of turnover.

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Another Crisis? Blame the Workers!

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We have a housing crisis.  90,000 on the social housing waiting list of which 60 percent have been waiting for two years or longer.  The private rental sector is not fit for purpose for many household types (and, in any event, is a highly fragmented, mom-and-pop operation).  There are over 100,000 in arrears and that doesn’t count buy-to-let mortgages.  The planning system is unreformed and we are stuck with inefficient and costly suburban sprawl.  And there is a major supply problem in the main urban areas, especially Dublin, where rents are experiencing double-digit inflation.

So what’s the answer?  Blame the workers, of course.

Prime Time had a feature on the housing crisis followed by a panel discussion.  And what comes up?  The alleged high cost of labour in the construction sector.  There were two parts of these assertions.

Hubert Fitzpatrick of the CIF claimed:

House prices today are approximately 50 percent of where they were seven years ago but the cost of actually building those houses has not fallen by the same extent.  

Economist Ronan Lyons stated:

The Government needs to be very forensic in saying if we have labour costs in construction that are 25 percent higher than in West Germany, why?  Is there a reason for that?  Can we get our labour costs in line with Eurozone partners? 

We have had a spectacular roller-coaster ride in the property market, fuelled by speculation, non-regulation, massive capital inflows and, then, outflows – and we come back to ‘wages are too high’.  You really would weep.

How valid are these assertions?  Not very when you look up some basic facts.

First, it is true that property prices have fallen substantially.  It is also true that building costs haven’t fallen by the same extent.  But during the boom period house prices rose at an exponential rate compared to building costs.

hcc_chart1

Between 1994 and 2007, new house prices more than quadrupled.  Construction costs didn’t even double.  If house prices were to fall back in line with the cost of building a house, they’d have to fall even further, by more than a third.   If there are problems in investment returns or margins, it’s not coming from the cost of building a house – of which wages are a significant component.

What about the claim that construction labour costs are 25 percent higher than West Germany?  Here is the latest data from the European Labour Force Survey which measures labour costs per hour.

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What is the Current Phase of Imperialism?

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A new situation requires a new analysis, and each new factor in the situation requires a specific and concrete analysis, placing it and its weight correctly in the overall situation.

In world politics, the new situation is that the US was unable to bomb Syria, it finds itself negotiating with, rather than bombing Iran, and its coup in the Ukraine may not be entirely successful in drawing Russia’s neighbour into NATO’s sphere of influence.

This overturns recent history. The overthrow of the Soviet Union in 1991 was accompanied by the US-led Gulf War. Since that time, the US and its various allies have bombed, invaded or intervened in Somalia (twice), Yugoslavia, Haiti, Afghanistan, the Philippines, Liberia, Iraq, the Maghreb, Yemen, Libya, Pakistan, Libya and South Sudan. The US has also led, organised or outsourced countless other interventions, overthrown governments and destabilised economies in pursuit of its interests. There has also been a series of coups and attempted coups in Latin America with varied success, and the so-called ‘colour revolutions’ in Eastern Europe to install pro-US, pro-NATO governments, as well as the US hijacking of the Arab Spring.

However, the economic rise of China has warranted a strategic ‘pivot’ towards Asia in an attempt to curb the rise of the only economy that could rival US supremacy in the foreseeable future. Given this absolute priority and the reduced circumstances of the US economy, it has been necessary to suspend new large-scale direct military interventions elsewhere.

This curb on US power has had immediate and beneficial consequences for humanity. Syria could not be bombed and neither could Iran. In these, Russian opposition to US plans was a key political obstacle, especially as the US wanted to deploy multilateral and multinational forces to do its bidding and needed the imprimatur of the UN Security Council. The US response to this blockage has been to increase pressure on Russia, most dramatically with its ouster of the elected Ukrainian government in a coup and its attempt to breach the country’s agreed neutrality by bringing it into NATO.

This curb on US power, however limited or temporary, should be welcomed by all socialists, by all democrats and simply by all those who desire peace. Instead, we have the strange spectacle that some on the left have raised the charge that Russia is imperialist, or that China is, or countries such as Brazil, or India or South Africa are ‘sub-imperialist’!

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Greece on the Eve of Municipal and European Parliament Elections: a Riddle Waiting to be Solved

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The double Greek elections of May 18th and 25th –municipal and regional on 18th and the European Parliament elections together with the second round of municipal and regional ones where necessary on 25th– will undoubtedly influence decisively the course of the country. They will reflect the evident as well as underground trends in Greek social and political life developed in the period after the elections of May and June 2012.

Given the specificity of the situation in Greece, which became during the last few years the workshop and test field for the most brutal neoliberal policies, forged by the Brussels European Union directory and applied by the conservative Greek government of New Democracy and PASOK, Greek elections are perhaps more critical than the respective ones in other European countries. The elections will be a crucial test for the two major political parties, the ruling conservative New Democracy (ND) party and the left opposition, SYRIZA, but they will also be critical for all other Greek political forces. The main issue, which is of great importance not only for the Greek but for the European Left as well, is whether SYRIZA, the stronger left formation presently in Europe, will be able to achieve a clear electoral victory, or if the ruling ND party will achieve a satisfactory result, such as a defeat –let alone a victory– on points. There are, of course, a series of other questions, less critical but not negligible, to be answered in these two evenings, regarding the results of the other parties.

However, with just about a week separating us from the first Sunday, most commentators agree on only one thing: that everything is completely vague and the election night will certainly present us with some big surprises. This impression is further strengthened by recent developments, shortly before and during the election period, which did not give a clear lead or superiority to any party: on the one hand, the Baltakos case undoubtedly cost the government a lot; on the other, some retractions by SYRIZA on the selection of candidates and also on the issue of the Turkish speaking minority in Thrace did not make a good impression. The situation reveals a similarly confusing picture in relation to the other political forces. While some trends do emerge, it is not at all certain how they will crystallize. The prevailing big uncertainty is reflected in most polls so far, which often produce greatly conflicting results for all parties.

In the following, we will consider first the general political scene and its tendencies in recent years. Then we will examine the developments and contrasts in the main formations of the Left, SYRIZA, KKE and ANTARSYA, and the problems of strategy and tactics that have been raised mainly in connection with the country’s relations with the EU, which are also a key dimension of the ongoing political controversy.

 1. The General Political Picture

What impresses one, even at first glance, is the fragmentation and liquidity of the Greek political scene today. This is a feature of the new political system that emerged in the May 2012 elections, replacing the ND and PASOK two-party system which had been dominant since 1977. However, given the partial polarization in the elections of June 2012, one would expect a relative domination of the two major parties, albeit not to the extent of the ND and PASOK before the onset of the crisis. Quite the opposite is true, with a number of 46 parties taking part in these European elections, a great record compared with the 27 of the previous ones.

Certainly, most of these “parties” do not claim a serious political role. They include 4 or 5 far Left groups, which usually elicit a few votes from the elderly and illiterate voters of the KKE, who confuse their ballot with that of the Communist Party. One will find even some fans of John Kapodistrias (the first governor of Greece after the 1821 revolution), two parties with the word “Hope” in their title, a party called “Drachma” (the old national currency before the country’s accession to the euro), the “Rural Livestock Party of Greece”, the “Party of Greek Hunters” (which however usually receives a decent 1%) and so on.

There’s even a party whose title may contain more words than the number of votes it will get in the elections. It is called “Independent Left Renewal, Right Renewal, PASOK Renewal, ND Renewal, No to War, Party of the I Donate Land Business, I Annul Debts, I Save Lives, I’m Saving the Riches of the Greeks, Greek All Workers Labor Movement”. Its completely unknown leader, Miltiadis Tsalazidis, may not be a good politician, but seems to be at least a good humorist…

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By This Time Next Year We Could End Homelessness

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Let’s start with the conclusion: if by this time next year if there are people still homeless, it’s because the Government made a policy choice.  And the policy choice was to tolerate homelessness.

Now, back to the beginning.

The Government will be spending €7.1 billion this year.  It won’t be spent on public services, or social protection or investment.  And there will be no debate on it.  There will be no current affairs programmes, no panel discussions, no commentaries in the print media.  The Government will spend €7 billion this year and very few will know.

This €7 billion is being spent on paying down debt.  It comes from the Government’s considerable cash balances.  At the end of 2013, the Government held €18.5 billion in cash.  This is made up of money that has already been borrowed and revenue from bank investments (e.g. bonds held in Bank of Ireland, etc.).  The Government is taking the €7 billion and paying down Government debt to lower the debt/GDP ratio.  This is how it works:

chart1

As seen, debt at the beginning of the year is estimated to €203 billion.  The Government will be borrowing €8.7 billion.  This results in a debt of €211.5 billion.  Debt is rising – both in absolute terms and as a percentage of GDP.  That’s because economic growth is low and we still have a deficit.

However, the Government will be taking €7 billion from their cash balances to write down debt.  This changes the level of debt.  Let’s continue the table above.

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H2Whoa – What We Don’t Know About Water Charges Could Really Hurt Us

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Keep these people in mind when reading this post:  Mary, a single parent working a part-time minimum wage job as a cleaner in Dublin hotel; John, a long-term unemployed construction worker who manages to get a few days’ work a month; Moira and Barry, she lost her job and Barry lost hours – raising two children and falling further into mortgage arrears.  I’ll come back to them at the end of this post.

The Government has finally announced its plans for water charges.  Minister Hogan was on RTE Prime Time and RTE News and provided the following information:  the average single person consumes 78,000 litres of water a year; they will face an average bill of €138 per year.  By taking water expenditure off the books (i.e. it is no longer considered a Government expenditure, it now belongs to a public enterprise company) the Government will save €700 million per year annually (but not next year, I’m assuming).

Apparently, the Government has done its own surveys – it would be helpful if they released this data so we could get a greater insight into consumption patterns for different household types, ages and income-levels; but don’t hold your breath.  So let’s work with what we’ve got (these calculations are different from what appears in the Irish Times – they use average per capita and family household – but they are close enough; these are all just estimates).

It would appear, from the above information, that a litre of water will cost a little less than a 1/3 of a cent per litre (0.0029).  This is derived from 48,000 litres of water that will be billed (the average single person’s consumption of 78,000 minus the free allowance of 30,000).  This comes to about €2.65 per week.

Now let’s look at some issues.

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Basic Income Ireland 2014 Summer Forum

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Basic Income Ireland invites you to our

2014 Summer Forum

A half-day conversation about Basic Income.

Date: Saturday 7 June 2014

Time: 1:00 to 5:00, with informal discussion afterwards

Venue: Carmelite Community Centre – 56 Aungier Street, Dublin 2

No charge. Donations/membership subs will be accepted on the day.

Registration: Please register in advance at http://www.basicincomeireland.com/basic-income-2014-summer-forum-signup.html

 A Basic Income is a payment from the state to every resident on an individual basis, without any means test or work requirement.

It would be sufficient to live a frugal but decent lifestyle without supplementary income from paid work.

The idea of Basic Income is being advanced world-wide as part of the solution to the issues facing today’s world.

Come join us to discuss the Basic Income solution and to plan activities for the coming 12 months.

 Programme:

1:00-1:45 Welcome and light lunch

1:45-3:10 Recent developments in Basic Income internationally

Keynote speaker: Yannick Vanderborght, one of the leading figures in the new wave of basic income activists. Professor of Political Science at Saint-Louis University, Brussels; Chair of Regional Coordination Committee of Basic Income Earth Network; co-author with Philippe Van Parijs of L’allocation universelle (2005) and co-editor of Basic income: An anthology of contemporary research (2013) and other books on basic income.

Yannick will speak on transnational cooperation in the campaign for basic income and on recent developments in the theory and politics of basic income. Followed by a participatory discussion.

3:10-3:30 Tea and coffee break

3:30-5:00 Advancing Basic Income in Ireland

Brief presentation and participatory discussion

Afterwards: social gathering in The Swan, Aungier Street.

Further information on basic income is available at basicincomeireland.com and on Facebook – Basic Income Ireland and Twitter: @basicincomeirl.

Register now: http://www.basicincomeireland.com/basic-income-2014-summer-forum-signup.html

Further information: Basic.Income@nuim.ie

Please circulate this notice to your friends and contacts.

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In Defence of China

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This article originally appeared in Jude Woodward’s new blog, New Cold War on the 2nd of May. NCW deals with the USA’s attempts to launch a new Cold War against China. 

The United States has launched a confrontation with China that it is attempting to project as of Cold War dimensions. Its clear aim is to isolate China diplomatically and politically, threaten it militarily, force it to divert investment from the productive economy to military spending, exclude it from world markets and label it a ‘pariah’ state.

In pursuit of this, the US is decisively stepping up its naval and military presence directed at China – the so-called ‘pivot to the Pacific’. It is encouraging China’s neighbours to step up their own military spending and take a more aggressive stance to China. Initiatives like the Trans Pacific Partnership and the Transatlantic Trade and Investment Partnership are aimed at creating huge preferential trade blocs led by the US that specifically exclude China.

The US is trying to isolate China politically, not just at the level of states, but by confusing and dividing those that might otherwise oppose this offensive, particularly through hypocritical and exaggerated campaigns on China’s record on human rights and labour standards and presenting China as aggressive and expansionist when it responds to legitimate security concerns or local challenges.

The core of the US’s re-orientation to contain and confront China is a shift to station 60% of the US’s total naval capacity in the Pacific, the first time since 1945 that the majority of US forces will have been out of the Atlantic-Mediterranean arena.

To facilitate this the US has won agreement to a new base in Australia, up-graded its Guam facilities, negotiated with Japan to stay on in Okinawa, is building a major new base in South Korea, and has agreed with the Philippines that its ex-base at Subic Bay is once more at the disposal of the US navy. It has sold a new raft of arms to Taiwan, upped its deal for F-16s with Indonesia, strengthened its military alliance with Japan and encouraged the other countries surrounding China to re-arm.

The fundamental question that this American policy towards China poses is what position should the left, the anti-war movement and progressive forces world-wide take on the confrontation?

The answer should be crystal clear – to defend China against this imperialist offensive.

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