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.”

The real cost of the bail outs – alternatives to consider

One estimate is that about US$17 trillion has so far been allocated for “economic emergency funds” by the USA, EU and other G8 nations to promote macroeconomic stabilization. However the basic question “what kind of stabilisation, of what, and for whose benefit?” is not being asked by many commentators.

A political economy analysis of these huge outlays would normally assess them in terms of their “opportunity costs” – the alternative uses of the funds that have been foregone, for example the money could have been used to increase expenditures on health, education and training and social infrastructure more generally and in so doing provide benefits and economic relief to the majority of the population.

The basic economic argument in favour of such a socially oriented approach is that the G8 policies are both overly expensive and unlikely to be fully effective – whether they reverse the slump remains to be seen (see my post on “green shoots”). The economic argument for increased social expenditures (e.g. on accessible education, affordable housing, health care and social programs) is that they have far more favourable effects on macroeconomic stabilization than financial bail-outs. Social expenditures raise aggregate demand in far greater measure than do outlays on financial bailouts. This is because poorer people spend more of their income than the wealthy. Thus smaller outlays result in a larger growth of consumption and demand – needed to reverse economic slump and to mitigate rising unemployment. A social approach would also result in much lower costs for taxpayers as they finance future government debt.

Looking beyond, we need to fundamentally rethink our social and economic policies in the longer and medium-term to promote a different kind of society. Restoring previous levels and patterns of consumption according to the present economic paradigm will simply return us to a socially and ecologically unsustainable path of development, to say nothing of the fiscal consequences of the current bailouts which will be imposed on not only ourselves but future generations. As things stand, G8 policies are principally governed by the dictates of a hyper-consumerist, energy intensive and individualistic paradigm, a kind of monoculture of the market and the mind, or what I call the global “market civilization”.

A fundamental rethink of the logic of market civilization is of course the work of many millions of people throughout the world – what I call the progressive organic intellectuals. By this I mean not only trained economists and ecologists with high degrees of technical expertise, but more broadly the very large numbers of progressive, engaged and thoughtful people across all walks of life dissatisfied with the current situation and pressing for change. They are found in schools, in health care institutions, in trade unions and in a range of social organizations and they are beginning to combine and assert their collective identity as a political force. They look towards the social and economic future not only preoccupied with immediate issues but also with a view to long term questions and initiatives.

Many of the social programs that I mentioned above were always treated by G8 governments as economically inefficient and impossible to finance – and inconsistent with the prevailing ideology of disciplinary neo-liberalism. Surely the scale and the immediacy of the 2008-09 global economic bailouts indicate that this was simply an ideological and political choice? With different political pressures and forces at work a radically new agenda for social and economic transformation becomes possible.

So what would such a radical economic reform agenda look like? I would suggest that this agenda might include initiatives to:

  1. Rethink the tax base in a more macro-economically efficient way whilst ensuring that the future distribution of tax burdens is equitable and sustainable. Whilst much has been made of the need to prevent tax avoidance and tax evasion, especially in offshore centres and to close loopholes in national tax codes, perhaps the biggest shift in taxation regimes over the past 30 years has been the increasing use of indirect taxation. Indirect taxes on the whole tend to be regressive and hit the poor hardest. On the other hand direct taxation on the wealthy and on corporations – taxes that used to be very high after the Second World War – have fallen considerably. So a fundamental rethink of the question of taxes is imperative especially as the costs of the bailouts will be borne by future taxpayers, and given that demographic changes which will also create enormous fiscal pressures (see 4., below).
  2. Develop comprehensive measures to ensure that the economy is regulated effectively and prudently, e.g. preventing financial institutions from excessively risky practices such as using financial derivatives and products that are not properly understood nor secure; measures to govern world trade that are democratically accountable and premised on meeting social objectives rather than on simply maximizing profits and enlarging the freedoms of capital at the expense of socially and democratically defined needs;
  3. Develop policies to revitalize our public and collective services such as public health systems as well as infrastructure such as public transport and public information and communications systems; these policies should be based upon more fundamental democratization of public institutions, legal systems and the governance of property rights;
  4. Deal with demographic shifts and related social issues: e.g. health issues and fiscal costs associated with the ageing society in Europe and Japan: breakdown the unhelpful dichotomies that govern policies in such areas such as “young” and “old” and so-called “productive” and “unproductive” members of society;
  5. As noted, to rethink policies to change the destructive logic of affluent lifestyles and thus minimize over-consumption, waste and bad diets and thus promote healthier ways of living, whilst preserving toleration and diversity of social choices.

For this to be possible the language of political economy and public policy needs to be reinvented and progressive organic intellectuals need to engage in education at a variety of levels — to help transform the way in which people conceive of political, material and ecological conditions which govern the limits of the possible both now and in the future. In so doing the goals would be to forge a new commonsense concerning the nature of the world and its potential future. This means that new policies and institutions in education, in the media, and more broadly a series of initiatives that can begin to respond to the challenges and ethical questions we face, both locally and globally. This would imply significant changes in not only the field of economics but also across the social, human and natural sciences to produce a more integral and forward looking understanding that can help to promote sustainability and social justice.

The green shoots of misplaced optimism

Readers of the mainstream business and political press may have noted that a consensus is emerging amongst policymakers and the financial community – that the world has now seen the worst of the recession and that a full-blown economic depression will be avoided.

The leading optimists who express this view – such as the Head of the European Central Bank Jean-Claude Trichet – argue that the evidence now shows that the pace of global economic decline has been slowing and the “markets” may be “bottoming out”. The more optimistic, indeed Panglossian members of this fraternity, including market traders (this fraternity includes few women) are betting that signs of the so-called “green shoots” of recovery are now visible, heralding as it were the birth of a new spring for global capitalism. Here is an example from a Financial Times editorial on May 8 2009 titled “World discovers it is still breathing”

The end of the world has been cancelled for now, if we are to believe recent market movements. Confidence is slowly returning to investors, who have discovered they are still alive after last autumn’s near-death experience. Government policies – from unorthodox central banking to stress testing – have soothed the worst fears. The signs of rekindled optimism are everywhere. A long rally has brought equity markets back from the abyss reached earlier in the year. The oil price, though still far below recent records, is pointing up. So are sovereign bond yields –indicating investors’ wariness of where public finances are headed but also a renewed willingness to tolerate volatility in stocks. The mood has changed so much that people are even willing to buy bank shares.

The ideological function of reports such as this is to justify bailout measures that have been designed principally to socialize the losses of capital – whilst demanding little from the financial sector which was the leading force that propelled the world economy into this disaster in the first place.

Rarely mentioned in the mainstream media is the degree to which these measures are skewed heavily in favour of capital and how the bailouts have to be judged in terms of the opportunities forgone to spend the money in a variety of other ways (see my post on the opportunity costs of the G8 bailouts). Moreover, many of the conditions imposed involve very little real accountability and public commitments on the very financial institutions and regulatory authorities that are largely responsible for the mess.

Pangloss was the eternally optimistic philosopher in Voltaire’s novel Candide, who claimed in the face of 18th century famines, waves of religious persecution and other man-made disasters that humanity as a species lives the best of all possible lives in the best of all possible worlds, a world that therefore it would be fruitless to attempt to change. It would take a Panglossian of the first order – or perhaps an editorial writer suffering from market-induced euphoria associated with the “green shoots” hypothesis – to ignore how the real burdens of the current global economic emergency are felt most intensely amongst ordinary people throughout the world – as their basic livelihood and security is threatened. Indeed the Financial Times had earlier noted this aspect of the global crisis just over a month ago:

Almost unnoticed behind the economic crisis, a combination of lower growth, rising unemployment and falling remittances together with persistently high food prices has pushed the number of chronically hungry above 1bn for the first time”. (Financial Times April 6 2009).

Throughout the world governments and companies are using the crisis to force pay cuts and demand greater “flexibility” on the part of workers – perhaps another reason for misplaced market optimism? Pay cuts are economically irrational in a slump when aggregate demand is falling – higher wages and expanded social benefits for ordinary workers would help to produce greater economic stimulus.

One of the key causes of the global financial collapse was the way that real wages of American workers stagnated and in some cases fell over the past 25 or 30 years – such that workers’ growing consumption and expenditures on housing was financed by ever-higher levels of indebtedness. Wall Street compounded the problem by pressing for the deregulation or self-regulation of finance which allowed what is euphemistically called “financial innovation” to develop – specifically the bundling of mortgage and other securities in complex derivatives, as well as practices associated with a very risky borrowing and investment. This potent mixture triggered the crash in the United States which has now spread globally.

International Relations: a radical view

On May Day 2009, capitalism is in crisis. For academic readers interested in theoretical approaches to International Relations and world capitalism, here is a copy of the English version of an entry I wrote for the Critical Dictionary of Marxism which was published in 2004. It outlines various approaches to International Relations and contrasts them with critical approaches including those of Marx and Engels and what has come to be known as the Neo-Gramscian perspective.

The PDF can be downloaded here.

The Constitution of Global Capitalism

Here is an article that contains some of the key ideas and arguments that I will be working on during 2009-10 when I am the Erkko Professor at the Collegium for Advanced Studies at the University of Helsinki. It contains the conceptualization of two of the constitutive structures of contemporary capitalism — what I call disciplinary neo-liberalism and the new constitutionalism.

For the pdf click here

The Risky Business of Global Finance

Attached is a December 1995 draft for a chapter that was published in 1997 for a book I edited for the United Nations University: Globalization, Democratization and Multilateralism (see Publications page for full details).

It sketches the global financial system of the mid 1990s — a system that contained many of the seeds of the enormous and catastrophic collapse that has just occurred. The article links global finance to the everyday lives of individuals and families — and specifically to how levels of personal indebtedness were on the rise in the USA partly due to stagnating real wages and growing family expenditures — an unsustainable situation.

The second half of the essay “The Risky Business of Global Finance” shows how the financial system emerging during the Clinton Administration was not only built on these “real” foundations of indebtedness of individuals and families, but also how it was prone to collapse at it highest levels, not least because of the way the expansion of financial firms and banks was partly based on the proliferation of risky financial derivatives. Created largely on Wall Street, the essay suggested that derivatives formed an equivalent of a “black hole” at the epicentre of the interconnected universe of high finance.

Partly at issue then — as of course now — is the neglect by governments (notably the US and UK) of the need for prudential regulation to make the system safe, accountable and secure from collapse. The essay therefore calls for more “democratic surveillance” of financial systems to protect the life savings and incomes of the vast majority of the population.

Perhaps this proposal could be taken up today?

To view the pdf click here

Economic crises open spaces to new politics

An article “Economic crises open spaces to new politics” reported on the Finland Capitalism 2009 Conference. It focused on the part of my argument that highlighted how the global crises open up possibilities for new political movements, not only the progressive movements but also for reactionary movements as well as for authoritarian political responses — in the context of wrenching social and economic dislocations.

It was published on 30 April 2009 in the Finnish newspaper Kansan Uutiset. See the internet-version of the newspaper here: http://www.kansanuutiset.fi/nakoislehti/20090430/ See pages 22-23

Spending 2009-2010 academic year at the University of Helsinki

From autumn of 2009 I will be located at the Helsinki Collegium for Advanced Studies, University of Helsinki, as the Erkko Professor in the Study of Contemporary Society.

For more information contact Maria Soukkio, maria.soukkio@helsinki.fi.

The University’s press release on this appointment can be found here.

The University magazine will also publish an article about my work in the next few weeks and outline plans for the coming academic year in Helsinki. To obtain this please contact the University press officer, Elina Mattila-Niemi, elina.mattila-niemi@helsinki.fi.


After Bush

In November 2008 I gave a short presentation to open the discussions at a conference in Berlin called After Bush. The purpose of the conference was to look forward to the outlook for American domestic and foreign policies following the 2008 Presidential election. For those interested in my arguments about the likely shape of President Obama’s policies, a podcast of my presentation may be downloaded from the Brecht Forum’s website here.

I argued that expectations of significant and progressive change in the main aspects of American economic and foreign policy under the new president were likely to be disappointed. All of the main advisers in his economics team were likely to follow the Wall Street-dominated economic policies that the US has pursued since the Clinton administration, and that were continued through the Bush presidency after 2000. Likewise, American foreign policy – at least in its strategic objectives – was likely to continue since its purpose was to sustain a socio-economic system that consumes the lion’s share of the world’s resources.

The Powerpoint presentation to go along with this podcast can be downloaded here.


Reflections on the global crisis

This is the launch of my website — much more will follow!

Below is the abstract & outline of a lecture I delivered in Helsinki, Finland to the Capitalism 2009 conference organized by the Finland Left Forum. An edited version of the talk will be posted on the Left Forum website relatively soon.

Political Reflections on the Global Economic & Financial Crisis

The financial and economic crisis – which appears to be simply a crisis that is internal to the functioning of global capitalism – is in reality part of a much wider and deeper global crisis. In this state of economic emergency, those mainly responsible for the policies that led to the financial collapse have claimed the right to produce the solutions with relatively little significant challenge from the progressive lefts. What is needed however is a new way to think through global challenges in ways that go beyond the confines of narrow solutions that simply favour capital. In my lecture I will therefore outline some principles and policies for the progressive lefts to consider: in fiscal policy, on lifestyles and sustainability, on public services, on the ageing society and in education and culture.

A Powerpoint which formed the outline of the lecture can be downloaded here and a smaller Word document of the same can be found here.

The conference web page and abstracts of the other presentations can be found here.

For those of you who read Finnish, here is a link to a newspaper article based upon an interview where some of the main points of my lecture are discussed: Helsingin Sanomat, 23/4/09 (1MB PDF).