Category Archives: global crisis

The Politics of the New Austerity

The strategies adopted to bail out Wall Street, the City of London, and banks in Frankfurt, Paris and other capitals have resulted in very high levels of public debt for a number of countries.  The costs of the planned austerity measures to pay for the bailouts in Greece, Ireland, the UK and France for example, will fall disproportionately on the backs of the poor. In the UK, the Conservative-Liberal coalition government has announced the elimination of about 500,000 public sector jobs involving deep cuts to education, welfare and policing budgets to pay for the huge bailouts of City of London firms. These job losses will also affect women the most (about 350,000 of the jobs scheduled to be terminated).

This explains why political struggles over the new austerity are intensifying, e.g. in France as of October 2010. The struggles point to questions that have been largely missing from the way that conservative and social democratic governments have defined their responses to issues of public finance. These questions include: (a) what could have been the alternative uses of these gigantic sums of public money? (b) Who will pay for these debts?

The answer given to question (b) by the International Monetary Fund, and most G20 governments is, “the people.”  The IMF has said that it will take 10 to 20 years of austerity measures, involving cuts in public sector wages, jobs and public services, raising the retirement age, and increased privatization of public assets to pay back not only the large government debts incurred in bailing out the banks but also to pay for “future” bailouts. As the Director-General of the International Labour Organisation noted in 2009, the bailout strategies involve “billions for the banks and pennies for the people”. Now the people are being made to pay for the bailouts with the new austerity measures.

The new austerity is something that has feature of the economies of the global South for much longer, at least 30 years  — in many parts of the world the austerity is not all that “new”.  More to the point, the debt crisis is therefore becoming more “global” in the sense that it is experienced in both North and South, and it operates not only at the level of the sovereign debt of countries such as Greece but also at the level of firms and workers.

In some parts of the global South – for example in Latin America – austerity has not prevented the emergence of progressive alternatives – what has come to be called “21st century Socialism”.  However – up until recently – in much of the global North, in the absence of significant political pressures, governments have simply responded to the crisis in favour of the interests of financial capitalism – or what I call “financial orthodoxy”.

For example, in its response to the Greek debt crisis in May 2010 the European Union formed a kind of European version of the IMF, with new bailout funds of €1 trillion in an attempt to “stabilize the financial markets”.  However, hardly debated at the time was how much of the debt of countries such as Greece is owed to private banks in Germany, France and the United States, so the Greek bailout was as much a bailout of these banks as it was for the government of Greece. In response Greece has made draconian cuts in social benefits and pensions that reverse approximately 30 years of workers’ gains. Of course the Greek fiscal crisis has also been caused by poor tax collection (allowing wealthy people and middle-class professionals to evade paying taxes) as well as by previous governments manipulating statistics and using financial innovations with the help of big private banks such as Goldman Sachs in order to camouflage the true condition of government finances.

The key point however is there has been little or no public debate upon the alternative ways in which such resources could be used. A very different kind of (and indeed a much larger) European Monetary Fund should be created, linked to more socially sustainable economic development, and geared to improve education, health and the environment. This would produce a greener and more socially just form of economic growth that would in turn improve the public finances of European governments – provided that tax collection was improved and made more equitable. This fund in turn should be much more democratically governed than the present “independent” European Central Bank, which is responsive mainly to private financial interests.

What we have learned during the present crisis in Europe is that banking is much too important to be left to either to mainstream politicians or the bankers themselves. Indeed there are many gifted, critical and more democratic economists who could be recruited to help build such an institution and run it effectively.

I raised some of these issues in a 20-minute presentation at the public event, Critical Perspectives on Global Governance, University of Helsinki, 7 May 2010; the talk was called The Greek Tragedy and the Global Debt Crisis.

This talk explains aspects of the Greek financial bailout of May 2010. It argues that we should not witness events such as those in Greece in response to austerity measures, as if we are simply the passive audience of a drama, a “Greek tragedy” as it were.  Progressive forces should press for socially just responses to the crisis and for more democratically accountable institutions of economic governance.

For the video see

As a footnote, viewers of the video will note how at one point a videographer in the audience interrupts me; in case it is not clear from the narrative, what I was referring to was the way that a computer error transposed an automated market “sell” trade of $16 million dollars in shareholdings as $16 billion.  This massive sell-off of stocks immediately caused the market value of many shares on the New York Stock Exchange to drop as if the companies were going bankrupt.  The example highlights the way that the turnover time of financial capital is accelerated by computerization and 24/7 trading strategies.

Audio podcasts of all the presentations at the Critical Perspectives on Global Governance, were posted on: (Posted May 2010).

Critical Perspectives on Global Governance

University of Helsinki, Friday 7 May 2010, 10:00-17:00
Venue: Small Assembly Hall, Fabianinkatu 33, University of Helsinki

There will be a landmark one-day event, open to the public, in Helsinki organized in conjunction with my Visiting Chair at the Collegium for Advanced Studies. It is devoted to critical reflections on the current global crises, the question of political leadership and the nature and future of global governance. The event includes some of the world’s leading critical thinkers on global political economy, law and international relations. They will address the challenges of achieving sustainable and democratic global governance in the 21st century.

For full details please follow this link:

In aphabetical order, the participants are:

ISABELLA BAKKER, Professor of Political Economy and former Chair of Political Science at York University, Toronto.

UPENDRA BAXI, Emeritus Professor of Law in Development, University of Warwick. He was previously Professor of Law, University of Delhi (1973-1996) and was its Vice Chancellor (1990-1994).

SOLOMON (SOLLY) BENATAR, Emeritus Professor of Medicine, University of Cape Town and Professor, Dalla Lana School of Public Health, University of Toronto.

CLAIRE CUTLER, Professor of International Relations and International Law in the Political Science Department at the University of Victoria, Canada.

HILAL ELVER, Visiting Professor in Global and International Studies at the University of California Santa Barbara.

RICHARD FALK, Albert G. Milbank Professor Emeritus of International Law at Princeton University and Visiting Distinguished Professor in Global and International Studies at the University of California, Santa Barbara.

ADAM HARMES, Associate Professor in Political Science at the University of Western Ontario, Canada.

MUSTAPHA KAMAL PASHA, Professor and Chair of the Department of Politics and International Relations at the University of Aberdeen, UK.

NICOLA SHORT, Associate Professor of Political Science at York University, Toronto.

TEIVO TEIVAINEN, Professor of World Politics at the University of Helsinki as well as Director of the Program on Democracy and Global Transformation at the San Marcos University in Lima, Peru.


Participants will develop a dual perspective on the nature, and future of global leadership and governance.

First, they will consider global governance as the practices associated with enduring forms of international rule beyond the purview of individual nations – that is as it has been normally understood in politics and diplomacy since ancient times. Thus global governance involves consideration of the main mechanisms that have emerged to stabilize, modify and legitimate the global status quo, such as the G8 or the G20. Thus global governance is mainly evaluated from the perspective of the most powerful states and economic interests. In this sense global governance today involves devising durable methods, mechanisms, and institutions – including those of peace and war – to help sustain an international order that is premised on the primacy of capitalism and the world market as the key governing forces of world politics.

Second, participants will also develop critical perspectives on global governance – involving not only a demystification of the power relations between leaders and led, but also assessment of the potential for changes in those relations. Participants will analyze global governance not just from the vantage point of dominant power but from the perspectives of subaltern forces. Participants will question the necessity, desirability and sustainability of existing institutional arrangements in light of global economic, social and ecological crises and challenges.

Thus a central question to give political focus to our considerations is encapsulated in this quotation:

“In the formation of leaders, one premise is fundamental: is it the intention that there should always be rulers and ruled, or is the objective to create the conditions in which this division … of the human race … is no longer necessary?” (Antonio Gramsci, Selections from the Prison Notebooks, 1971).

The speakers in Helsinki will therefore engage with contested political issues such as: the legitimacy of global institutions; social justice, taxation and redistribution; privatized security governance; gender, race and equitable development; environmental issues and climate change; global health; the rights of subordinated peoples in an era of globalization: Islamic conceptions of justice and leadership; corporate social responsibility and public-private partnerships; and various mechanisms of regulation in finance, the workplace and in trade and investment.

The Global Organic Crisis: Paradoxes, Dangers and Opportunities

The capitalist world has experienced its deepest economic meltdown since the Great Depression of the 1930s. Paradoxically, whereas the earlier period saw the breakdown of liberal capitalism, the rise of fascism and Nazism, and the Soviet alternative to liberal capitalism (the Soviet Union), today neo-liberalism and capitalist globalization still remain powerful, and apparently supreme, on the stage of world history. Despite the financial implosion on Wall Street and its “near-death experience” for financial capitalism and the G8’s somnambulant political leaders, few coherent left alternative programs have commanded sufficient political organization or popular support to mount a serious challenge or to pose credible alternatives.

So what arguments can progressive political forces use to begin to mobilize transformative resistance in ways that can give credibility to new forms of politics and society? We start with the simple observation that appearances can be deceptive and indeed this is to be expected in the present politically paradoxical global conjuncture. This conjuncture corresponds, in part, the Chinese character for crisis, a character that combines moments of danger and opportunity. It is linked to the fact that the current global political situation involves far more than a crisis of capitalist accumulation since it is pregnant with the following paradox: “The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear.”

The full version of this article has been published online by Monthly Review. To access the full text, click here.

UNICEF 2 AIG 0 (Homage to Catalonia)

I was one of the hundreds of millions of television fans who watched the 2009 European Champions Cup Final between Manchester United and FC Barcelona, a football match that the Catalan giants deservedly won, mesmerizing Manchester United with the wizardry of their brilliant passing game.

Those watching the Champions League Final might also have noticed that each team wore logos on its shirts.

Barcelona wears the UNICEF logo, the United Nations Children’s Emergency Fund which is dedicated to improving the lives of billions of poor children and women throughout the world. In 2007, its annual revenues which largely come from governments, were US$ 3.013 billion.

By contrast, Manchester United wears the logo of AIG, American International Group which is listed on the stock exchanges but in effect is now owned by US taxpayers. AIG was the largest insurance firm in the world when it collapsed in 2008. Since then, according to BBC figures, it has received a total of US$180 billion in bailout funds from the US Federal Government: a sum almost 60 times the annual revenues of UNICEF.

AIG was one of the many Wall Street corporations that engaged in extremely risky and highly leveraged financial derivatives and it was at the very heart of the Wall Street Crash of 2008-09 that almost brought down much of the US and world economy.

There are a couple of other things that we might highlight with respect to the logos.

First, AIG corporate security has warned its employees not to wear the AIG logo in public because it fears they may be subject to violent attacks from members of the public. Presumably this does not apply to the MUFC players?

Second, although Barcelona have no shirt sponsor, they are still a wealthy club and one of the most heavily sponsored teams in world football.

Nevertheless, again according to BBC reports MUFC will receive around £14m per year from AIG until 2010, whereas Barcelona make a 1.5m Euros annual donation to UNICEF as part of their agreement.

A tale of two teams

No single entity, and certainly not a private business, owns FC Barcelona. Barca is essentially an association with 155,000 members, who each pay up to 140 Euros annually in membership fees, fees that entitle them to privileges and discounts on tickets. They govern the club by electing a President to the Board of Directors every four years — making Barcelona one of the most democratically controlled football teams in the world. In addition, randomly selected members become delegates who participate in the general assembly that approves the annual budget of the club.

By contrast, Manchester United is controlled by an American billionaire, Malcolm Glazer, who bought the team in 2005 against fierce opposition from the team’s supporters. The BBC has listed Glazer’s net worth at US$2.2 billion. Glazer also owns the Tampa Bay Buccaneers, an American football team that benefits from a favourable lease agreement on a state of the art local stadium that was built at public expense. The stadium cost US$200 million and it was funded by an increase in local sales taxes. [Americans call their national game of gridiron “football” and the beautiful game “soccer”].

Glazer turned Manchester United into a private company, saddling it with large debts when he took it over. In protest, thousands of fans did not renew their season tickets, arguing that the club should be controlled by the supporters, and not by a private businessman. Since Glazer took control at Old Trafford, in a period of very low inflation, ticket prices to the so-called “Theatre of Dreams” have increased by 42%.

Barcelona beat another “English” team, Chelsea, in the semi-final of the European Champions tournament. Chelsea is also owned by a billionaire, Roman Abramovich, who obtained his large fortune during the post-Soviet privatizations of the 1990s that were promoted by the regime of Boris Yeltsin — a regime in which Abramovich served. According to Forbes Magazine, in 2009 Abramovich is the 51st richest person in the world with a net worth of US$ 8.5 billion, a sum that shrank by several billion dollars as a result of the drain on his assets due to the global financial and economic crisis.

Today, Barcelona as a club stands in stark contrast to a sporting world where teams are routinely bought and sold as commodities by the plutocrats, potentates, speculators and investors that are the principal beneficiaries of the new era of capitalist globalization, and that are gaining control of the “global sports market”.

Finally, we might also remember that football in Spain has never been simply a form of recreation or a cultural institution — it is also a political affair. As Orwell wrote, Catalonia and Barcelona were the epicentre of resistance to the Fascist dictatorship of Franco which took power after the Civil War of 1936-39 (Barca’s traditional rivals, Real Madrid, were the Fascist regime’s team). As many as 500,000 died in the Spanish conflict — a war that in important ways anticipated World War II, 1939-45. For Barcelona fans, football is a representation of their history, their resistance and their struggle for freedom and autonomy.

So perhaps football fans around the world can celebrate a victory of sorts, and not only for a team that epitomizes what Pele called “the beautiful game.”