Posts Tagged ‘World Bank’

One you doesn’t need to be a Professor to realise that we’re in deep sh*t. But if you ever needed it explained just “How Deep”,  Prof. Steve Keen is the guy to do it. Empirical data trumps theories built on sand any day, however, the economies of the western world are based on a failed neoclassical model, and the ideology of austerity is a busted flush!

 

Prof. Steve Keen – Published on Sep 23, 2016

Some papers that are remarkably critical of mainstream economics have been published recently, not by the usual suspects like myself, but by prominent mainstream economists:
ex-Minneapolis Fed Chairman Narayana Kocherlokata,
ex-IMF Chief Economist Olivier Blanchard, and
current World Bank Chief Economist Paul Romer.

I discuss these papers in a tongue-in-cheek introduction to another key problems of unrealism in economics — the absence of any role for energy in both Post Keynesian and Neoclassical production functions.

I also address Olivier Blanchard’s desire for a “widely accepted analytical macroeconomic core”, explain the role of credit in aggregate demand and income, and identify the countries most likely to face a credit crunch in the near future.

I gave this talk to staff and students of the EPOG program at the University of Paris 13 on Friday September 23rd.

5 years ago spoke at Occupy Sydney. The day before terrorists attacked the Occupy Protestors.


The Modern Debt Jubilee

Bill Buckler, author of The Privateer http://www.zerohedge.com/news/modern-debt-jubilee 

The modern “debt jubilee” is characterised as “quantitative easing for the public”.

It has been boiled down to a procedure where the central bank does not create new money by buying the sovereign debt of the government.

Instead, it takes an arbitrary number, writes a cheque for that number, and deposits it in the bank account of every individual in the nation.
Debtors must use the newly-created money to pay down or pay off debt.
Those who are not in debt can use it as a free windfall to spend or “invest” as they see fit.
This, it is said, is the only way left to restart economic “growth” and finally get the spectre of unending financial crisis out of the headlines.
It is the latest of a long string of “print to cover” remedies.

The major selling feature of this “method” is that it provides the only sure means out of what is called the global “deleveraging trap”.
This is the trap which is said to have ensnared Japan more than two decades ago and which has now snapped shut on the whole world.

And what is a “deleveraging trap”?
It is simply the obligation assumed when one becomes a debtor.
This is the necessity to repay the debt.

There are only three ways in which a debt can be honestly repaid.

  • It can be repaid with new wealth which the proceeds of the debt made it possible to create.
  • It can be repaid by an excess of production over consumption on the part of the debtor.
  • Or it can be repaid from already existing savings.

If none of those methods are feasible, the debt cannot be repaid.
It can be defaulted upon or the means of “payment” can be created out of thin air, but that does not “solve” the problem, it merely makes it worse.

The “deleveraging trap”, so called, is merely a rebellion against the fact that you can’t have your cake and eat it too. So is the genesis of the entire GFC.

Debt can always be extinguished by means of an arbitrarily created means of payment. But calling that process QE or a Debt Jubilee doesn’t (or shouldn’t) mask its essence, which is simple and straightforward debt repudiation.

(A “debt jubilee” is the latest attempt to make a silk purse out of a sow’s ear. It is the latest pretence that we CAN print our way to prosperity, but only if we do it in the “right” way.)


Glossary of economic terms: http://www.zerohedge.com/taxonomy_vtn/voc/3


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A superb piece from George Monbiot, covering a lot of ground about a system that some people are not even aware exists. It is important that people start to wake up to the this. We are sleep walking our way towards disaster, be it climate change, economic and social collapse or catastrophic war.


Neoliberalism – the ideology at the root of all our problems

Financial meltdown, environmental disaster and even the rise of Donald Trump – neoliberalism has played its part in them all. Why has the left failed to come up with an alternative?

Ronald Reagan and Margaret Thatcher at the White House.

 

Imagine if the people of the Soviet Union had never heard of communism.

The ideology that dominates our lives has, for most of us, has no name.
Mention it in conversation and you’ll be rewarded with a shrug.
Even if your listeners have heard the term before, they will struggle to define it.

Neoliberalism: do you know what it is?
Its anonymity is both a symptom and cause of its power. It has played a major role in a remarkable variety of crises:
the financial meltdown of 2007‑8,
the offshoring of wealth and power, of which the Panama Papers offer us merely a glimpse,
the slow collapse of public health and education,
resurgent child poverty,
the epidemic of loneliness,
the collapse of ecosystems,
the rise of Donald Trump.

But we respond to these crises as if they emerge in isolation, apparently unaware that they have all been either catalysed or exacerbated by the same coherent philosophy; a philosophy that has – or had – a name.

What greater power can there be than to operate namelessly?

So pervasive has neoliberalism become that we seldom even recognise it as an ideology. We appear to accept the proposition that this utopian, millenarian faith describes a neutral force; a kind of biological law, like Darwin’s theory of evolution. But the philosophy arose as a conscious attempt to reshape human life and shift the locus of power.

Neoliberalism sees competition as the defining characteristic of human relations. It redefines citizens as consumers, whose democratic choices are best exercised by buying and selling, a process that rewards merit and punishes inefficiency. It maintains that “the market” delivers benefits that could never be achieved by planning.

Attempts to limit competition are treated as inimical to liberty. Tax and regulation should be minimised, public services should be privatised. The organisation of labour and collective bargaining by trade unions are portrayed as market distortions that impede the formation of a natural hierarchy of winners and losers.
Inequality is recast as virtuous: a reward for utility and a generator of wealth, which trickles down to enrich everyone.
Efforts to create a more equal society are both counterproductive and morally corrosive. The market ensures that everyone gets what they deserve.

We internalise and reproduce its creeds. The rich persuade themselves that they acquired their wealth through merit, ignoring the advantages – such as education, inheritance and class – that may have helped to secure it.

The poor begin to blame themselves for their failures, even when they can do little to change their circumstances.

  • Never mind structural unemployment: if you don’t have a job it’s because you are unenterprising.
  • Never mind the impossible costs of housing: if your credit card is maxed out, you’re feckless and improvident.
  • Never mind that your children no longer have a school playing field: if they get fat, it’s your fault.

In a world governed by competition, those who fall behind become defined and self-defined as losers. Among the results, as Paul Verhaeghe documents in his book What About Me? are epidemics of self-harm, eating disorders, depression, loneliness, performance anxiety and social phobia.

Perhaps it’s unsurprising that Britain, in which neoliberal ideology has been most rigorously applied, is the loneliness capital of Europe. We are all neoliberals now.

The term neoliberalism was coined at a meeting in Paris in 1938.

Among the delegates were two men who came to define the ideology, Ludwig von Mises and Friedrich Hayek. Both exiles from Austria, they saw social democracy, exemplified by Franklin Roosevelt’s New Deal and the gradual development of Britain’s welfare state, as manifestations of a collectivism that occupied the same spectrum as nazism and communism.

In The Road to Serfdom, published in 1944, Hayek argued that government planning, by crushing individualism, would lead inexorably to totalitarian control.
Like Mises’s book Bureaucracy, The Road to Serfdom was widely read. It came to the attention of some very wealthy people, who saw in the philosophy an opportunity to free themselves from regulation and tax. When, in 1947, Hayek founded the first organisation that would spread the doctrine of neoliberalism – the Mont Pelerin Society – it was supported financially by millionaires and their foundations.

With their help, he began to create what Daniel Stedman Jones describes in Masters of the Universe as “a kind of neoliberal international”: a transatlantic network of academics, businessmen, journalists and activists.

The movement’s rich backers funded a series of thinktanks which would refine and promote the ideology. Among them were the American Enterprise Institute, the Heritage Foundation, the Cato Institute, the Institute of Economic Affairs, the Centre for Policy Studies and the Adam Smith Institute. They also financed academic positions and departments, particularly at the universities of Chicago and Virginia.

As it evolved, neoliberalism became more strident. Hayek’s view that governments should regulate competition to prevent monopolies from forming gave way – among American apostles such as Milton Friedman – to the belief that monopoly power could be seen as a reward for efficiency.

Something else happened during this transition: the movement lost its name. In 1951, Friedman was happy to describe himself as a neoliberal. But soon after that, the term began to disappear. Stranger still, even as the ideology became crisper and the movement more coherent, the lost name was not replaced by any common alternative.

At first, despite its lavish funding, neoliberalism remained at the margins. The postwar consensus was almost universal: John Maynard Keynes’s economic prescriptions were widely applied, full employment and the relief of poverty were common goals in the US and much of western Europe, top rates of tax were high and governments sought social outcomes without embarrassment, developing new public services and safety nets.

But in the 1970s, when Keynesian policies began to fall apart and economic crises struck on both sides of the Atlantic, neoliberal ideas began to enter the mainstream. As Friedman remarked, “when the time came that you had to change … there was an alternative ready there to be picked up”.
With the help of sympathetic journalists and political advisers, elements of neoliberalism, especially its prescriptions for monetary policy, were adopted by Jimmy Carter’s administration in the US and Jim Callaghan’s government in Britain.

After Margaret Thatcher and Ronald Reagan took power, the rest of the package soon followed:
massive tax cuts for the rich,
the crushing of trade unions,
deregulation,
privatisation,
outsourcing and
competition in public services.
Through the IMF, the World Bank, the Maastricht treaty and the World Trade Organisation, neoliberal policies were imposed – often without democratic consent – on much of the world.

Most remarkable was its adoption among parties that once belonged to the left: Labour and the Democrats, for example. As Stedman Jones notes, “it is hard to think of another utopia to have been as fully realised.”

It may seem strange that a doctrine promising choice and freedom should have been promoted with the slogan “there is no alternative”.
But, as Hayek remarked on a visit to Pinochet’s Chile – one of the first nations in which the programme was comprehensively applied –

“my personal preference leans toward a liberal dictatorship rather than toward a democratic government devoid of liberalism”.

The freedom that neoliberalism offers, which sounds so beguiling when expressed in general terms, turns out to mean freedom for the pike, not for the minnows.

Freedom from trade unions and collective bargaining means;
the freedom to suppress wages.
Freedom from regulation means the freedom to poison rivers,
endanger workers,
charge iniquitous rates of interest and
design exotic financial instruments.
Freedom from tax means freedom from the distribution of wealth that lifts people out of poverty.

As Naomi Klein documents in The Shock Doctrine, neoliberal theorists advocated the use of crises to impose unpopular policies while people were distracted: for example, in the aftermath of Pinochet’s coup, the Iraq war and Hurricane Katrina, which Friedman described as; “an opportunity to radically reform the educational system” in New Orleans.

Where neoliberal policies cannot be imposed domestically, they are imposed internationally, through trade treaties incorporating “investor-state dispute settlement”: offshore tribunals in which corporations can press for the removal of social and environmental protections.

When parliaments have voted to restrict sales of cigarettes, protect water supplies from mining companies, freeze energy bills or prevent pharmaceutical firms from ripping off the state, corporations have sued, often successfully. Democracy is reduced to theatre.

Another paradox of neoliberalism is that universal competition relies upon universal quantification and comparison. The result is that workers, job-seekers and public services of every kind are subject to a pettifogging, stifling regime of assessment and monitoring, designed to identify the winners and punish the losers.
The doctrine that Von Mises proposed would free us from the bureaucratic nightmare of central planning has instead created one.

Neoliberalism was not conceived as a self-serving racket, but it rapidly became one. Economic growth has been markedly slower in the neoliberal era (since 1980 in Britain and the US) than it was in the preceding decades; but not for the very rich.
Inequality in the distribution of both income and wealth, after 60 years of decline, rose rapidly in this era, due to the smashing of trade unions, tax reductions, rising rents, privatisation and deregulation.

The privatisation or marketisation of public services such as energy, water, trains, health, education, roads and prisons has enabled corporations to set up tollbooths in front of essential assets and charge rent, either to citizens or to government, for their use. Rent is another term for unearned income.
When you pay an inflated price for a train ticket, only part of the fare compensates the operators for the money they spend on fuel, wages, rolling stock and other outlays.
The rest reflects the fact that they have you over a barrel.

Those who own and run the UK’s privatised or semi-privatised services make stupendous fortunes by investing little and charging much. In Russia and India, oligarchs acquired state assets through firesales. In Mexico, Carlos Slim was granted control of almost all landline and mobile phone services and soon became the world’s richest man.

Financialisation, as Andrew Sayer notes in Why We Can’t Afford the Rich, has had a similar impact. “Like rent,” he argues, “interest is … unearned income that accrues without any effort”.
As the poor become poorer and the rich become richer, the rich acquire increasing control over another crucial asset: money.
Interest payments, overwhelmingly, are a transfer of money from the poor to the rich.
As property prices and the withdrawal of state funding load people with debt (think of the switch from student grants to student loans), the banks and their executives clean up.

Sayer argues that the past four decades have been characterised by a transfer of wealth not only from the poor to the rich, but within the ranks of the wealthy: from those who make their money by producing new goods or services to those who make their money by controlling existing assets and harvesting rent, interest or capital gains.
Earned income has been supplanted by unearned income.

Neoliberal policies are everywhere beset by market failures. Not only are the banks too big to fail, but so are the corporations now charged with delivering public services. As Tony Judt pointed out in Ill Fares the Land, Hayek forgot that vital national services cannot be allowed to collapse, which means that competition cannot run its course.
Business takes the profits, the state keeps the risk.

The greater the failure, the more extreme the ideology becomes.
Governments use neoliberal crises as both excuse and opportunity to;
cut taxes,
privatise remaining public services,
rip holes in the social safety net,
deregulate corporations and
re-regulate citizens.

The self-hating state now sinks its teeth into every organ of the public sector. Perhaps the most dangerous impact of neoliberalism is not the economic crises it has caused, but the political crisis.
As the domain of the state is reduced, our ability to change the course of our lives through voting also contracts.
Instead, neoliberal theory asserts, “people can exercise choice through spending”.
But some have more to spend than others: in the great consumer or shareholder democracy, votes are not equally distributed. The result is a disempowerment of the poor and middle.
As parties of the right and former left adopt similar neoliberal policies, disempowerment turns to disenfranchisement.
Large numbers of people have been shed from politics.

Chris Hedges remarks that;

“fascist movements build their base not from the politically active but the politically inactive, the ‘losers’ who feel, often correctly, they have no voice or role to play in the political establishment”.

When political debate no longer speaks to us, people become responsive instead to slogans, symbols and sensation. To the admirers of Trump, for example, facts and arguments appear irrelevant.

Judt explained that when the thick mesh of interactions between people and the state has been reduced to nothing but authority and obedience, the only remaining force that binds us is state power.
The totalitarianism Hayek feared is more likely to emerge when governments, having lost the moral authority that arises from the delivery of public services, are reduced to “cajoling, threatening and ultimately coercing people to obey them”.

Like communism, neoliberalism is the God that failed.
But the zombie doctrine staggers on, and one of the reasons is its anonymity. Or rather, a cluster of anonymities.

The invisible doctrine of the invisible hand is promoted by invisible backers. Slowly, very slowly, we have begun to discover the names of a few of them. We find that the Institute of Economic Affairs, which has argued forcefully in the media against the further regulation of the tobacco industry, has been secretly funded by British American Tobacco since 1963. We discover that Charles and David Koch, two of the richest men in the world, founded the institute that set up the Tea Party movement.
We find that Charles Koch, in establishing one of his thinktanks, noted that
“in order to avoid undesirable criticism, how the organisation is controlled and directed should not be widely advertised”.

The words used by neoliberalism often conceal more than they elucidate. “The market” sounds like a natural system that might bear upon us equally, like gravity or atmospheric pressure. But it is fraught with power relations.
What “the market wants” tends to mean what corporations and their bosses want.

“Investment”, as Sayer notes, means two quite different things.

One is the funding of productive and socially useful activities,
the other is the purchase of existing assets to milk them for rent, interest, dividends and capital gains.

Using the same word for different activities “camouflages the sources of wealth”, leading us to confuse wealth extraction with wealth creation.

A century ago, the nouveau riche were disparaged by those who had inherited their money. Entrepreneurs sought social acceptance by passing themselves off as rentiers. Today, the relationship has been reversed: the rentiers and inheritors style themselves entrepreneurs. They claim to have earned their unearned income.

These anonymities and confusions mesh with the namelessness and placelessness of modern capitalism:

The anonymity of neoliberalism is fiercely guarded.
Those who are influenced by Hayek, Mises and Friedman tend to reject the term, maintaining – with some justice – that it is used today only pejoratively. But they offer us no substitute.
Some describe themselves as classical liberals or libertarians, but these descriptions are both misleading and curiously self-effacing, as they suggest that there is nothing novel about The Road to Serfdom, Bureaucracy or Friedman’s classic work, Capitalism and Freedom.

For all that, there is something admirable about the neoliberal project, at least in its early stages. It was a distinctive, innovative philosophy promoted by a coherent network of thinkers and activists with a clear plan of action. It was patient and persistent. The Road to Serfdom became the path to power.

 

ANOTHER FANTASTIC MUST READ ARTICLE By George Monbiot!

http://www.theguardian.com/commentisfree/2015/mar/18/corruption-rife-britain

 

It just doesn’t compute. Almost every day the news is filled with stories that look to me like corruption. Yet on Transparency International’s corruption index Britain is ranked 14th out of 177 nations, suggesting that it’s one of the best-run nations on Earth. Either all but 13 countries are spectacularly corrupt or there’s something wrong with the index.

Yes, it’s the index. The definitions of corruption on which it draws are narrow and selective. Common practices in the rich nations that could reasonably be labelled corrupt are excluded; common practices in the poor nations are emphasised.

This week a ground-changing book called How Corrupt is Britain?, edited by David Whyte, is published. It should be read by anyone who believes this country merits its position on the index.
Would there still be commercial banking sector in this country if it weren’t for corruption? Think of the list of scandals: pensions mis-selling, endowment mortgage fraud, the payment protection insurance scam, Libor rigging, insider trading and all the rest. Then ask yourself whether fleecing the public is an aberration – or the business model.

No senior figure has been held criminally liable or has even been disqualified for the practices that helped to trigger the financial crisis, partly because the laws that should have restrained them were slashed by successive governments. A former minister in this government ran HSBC while it engaged in systematic tax evasion, money laundering for drugs gangs and the provision of services to Saudi and Bangladeshi banks linked to the financing of terrorists. Instead of prosecuting the bank, the head of the UK’s tax office went to work for it when he retired.

The City of London, operating with the help of British overseas territories and crown dependencies, is the world’s leading tax haven, controlling 24% of all offshore financial services. It offers global capital an elaborate secrecy regime, assisting not just tax evaders but also smugglers, sanctions- busters and money-launderers. As the French investigating magistrate Eva Joly has complained, the City “has never transmitted even the smallest piece of usable evidence to a foreign magistrate”. The UK, Switzerland, Singapore, Luxembourg and Germany are all ranked by Transparency International as among the least corrupt nations in the world. They are also listed by the Tax Justice Network as among the worst secrecy regimes and tax havens. For some reason, though, that doesn’t count.

The Private Finance Initiative has been used by our governments to deceive us about the extent of their borrowing while channelling public money into the hands of corporations. Shrouded in secrecy, stuffed with hidden sweeteners, it has landed hospitals and schools with unpayable debts, while hiding public services from public scrutiny….

State spies have been engaged in mass surveillance. And the police, adopting the identities of dead children, lying in court to assist false convictions and fathering children by activists before disappearing, have infiltrated and sought to destroy peaceful campaign groups. Police forces have protected prolific paedophiles, including Jimmy Savile, and – it is now alleged – a ring of senior politicians who are also suspected of the murder of children.

Savile was shielded too by the NHS and the BBC, which has sacked most of the those who sought to expose him while promoting people who tried to perpetuate the cover-up.

There’s the small matter of our unreformed political funding system, which permits the very rich to buy political parties. There’s the phone-hacking scandal and the payment of police by newspapers, the underselling of Royal Mail, the revolving door allowing corporate executives to draft the laws affecting their businesses, the robbing of the welfare and prison services by private contractors, price-fixing by energy companies, daylight robbery by pharmaceutical firms and dozens more such cases.

Is none of this corruption? Or is it too sophisticated to qualify?

It just doesn’t compute. Almost every day the news is filled with stories that look to me like corruption. Yet on Transparency International’s corruption index Britain is ranked 14th out of 177 nations, suggesting that it’s one of the best-run nations on Earth. Either all but 13 countries are spectacularly corrupt or there’s something wrong with the index.

Yes, it’s the index. The definitions of corruption on which it draws are narrow and selective. Common practices in the rich nations that could reasonably be labelled corrupt are excluded; common practices in the poor nations are emphasised.

This week a ground-changing book called How Corrupt is Britain?, edited by David Whyte, is published. It should be read by anyone who believes this country merits its position on the index.

Would there still be commercial banking sector in this country if it weren’t for corruption? Think of the list of scandals: pensions mis-selling, endowment mortgage fraud, the payment protection insurance scam, Libor rigging, insider trading and all the rest. Then ask yourself whether fleecing the public is an aberration – or the business model.

No senior figure has been held criminally liable or has even been disqualified for the practices that helped to trigger the financial crisis, partly because the laws that should have restrained them were slashed by successive governments. A former minister in this government ran HSBC while it engaged in systematic tax evasion, money laundering for drugs gangs and the provision of services to Saudi and Bangladeshi banks linked to the financing of terrorists. Instead of prosecuting the bank, the head of the UK’s tax office went to work for it when he retired.

The City of London, operating with the help of British overseas territories and crown dependencies, is the world’s leading tax haven, controlling 24% of all offshore financial services. It offers global capital an elaborate secrecy regime, assisting not just tax evaders but also smugglers, sanctions- busters and money-launderers. As the French investigating magistrate Eva Joly has complained, the City “has never transmitted even the smallest piece of usable evidence to a foreign magistrate”. The UK, Switzerland, Singapore, Luxembourg and Germany are all ranked by Transparency International as among the least corrupt nations in the world. They are also listed by the Tax Justice Network as among the worst secrecy regimes and tax havens. For some reason, though, that doesn’t count.

The Private Finance Initiative has been used by our governments to deceive us about the extent of their borrowing while channelling public money into the hands of corporations. Shrouded in secrecy, stuffed with hidden sweeteners, it has landed hospitals and schools with unpayable debts, while hiding public services from public scrutiny.

State spies have been engaged in mass surveillance. And the police, adopting the identities of dead children, lying in court to assist false convictions and fathering children by activists before disappearing, have infiltrated and sought to destroy peaceful campaign groups. Police forces have protected prolific paedophiles, including Jimmy Savile, and – it is now alleged – a ring of senior politicians who are also suspected of the murder of children. Savile was shielded too by the NHS and the BBC, which has sacked most of the those who sought to expose him while promoting people who tried to perpetuate the cover-up.

There’s the small matter of our unreformed political funding system, which permits the very rich to buy political parties. There’s the phone-hacking scandal and the payment of police by newspapers, the underselling of Royal Mail, the revolving door a llowing corporate executives to draft the laws affecting their businesses, the robbing of the welfare and prison services by private contractors, price-fixing by energy companies, daylight robbery by pharmaceutical firms and dozens more such cases. Is none of this corruption? Or is it too sophisticated to qualify?

Among the sources used by Transparency International to compile its index are the World Bank and the World Economic Forum. Relying on the World Bank to assess corruption is like asking Vlad the Impaler for an audit of human rights. Run on the principle of one dollar, one vote, controlled by the rich nations while operating in the poor ones, the bank has funded hundreds of white-elephant projects that have greatly enriched corrupt elites and foreign capital while evicting local people from their land and leaving their countries with unpayable debts. To general gasps of astonishment, the World Bank’s definition of corruption is so narrowly drawn that it excludes such practices.

The World Economic Forum establishes its corruption rankings through a survey of global executives: the beneficiaries of the kind of practices I’ve listed in this article.

Its questions are limited to the payment of bribes and the corrupt acquisition of public funds by private interests, excluding the kinds of corruption that prevail in rich nations.

Transparency International’s interviews with ordinary citizens take much the same line: most of its specific questions involve the payment of bribes.

How Corrupt is Britain? argues that such narrow conceptions of corruption are part of a long tradition of portraying the problem as something confined to weak nations, which must be rescued by “reforms” imposed by colonial powers and, more recently, bodies such as the World Bank and the IMF.

These “reforms” mean austerity, privatisation, outsourcing and deregulation.

They tend to suck money out of the hands of the poor and into the hands of national and global oligarchs.

For organisations such as the World Bank and the World Economic Forum, there is little difference between the public interest and the interests of global corporations.

What might look like corruption from any other perspective looks to them like sound economics. The power of global finance and the immense wealth of the global elite are founded on corruption, and the beneficiaries have an interest in framing the question to excuse themselves.

Yes, many poor nations are plagued by the kind of corruption that involves paying bribes to officials. But the problems plaguing us run deeper. When the system already belongs to the elite, bribes are superfluous.

 

If the largest appropriators of the planet’s wealth want to pose as grand philanthropists, should NGOs really line up to take their cash?

I am reblogging this from here:

I thought it complemented a blog item I posted here highlighted by Renzo Martens at this year’s Artes Mundi exhibition – “The Institute Of Human Activities”.

the business of charity

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NGOs are no longer seen as the blameless agents of benevolence. By Dinyar Godrej / newint.org

Witness the growth spurt in non-governmental organizations (NGOs) and you would be forgiven for thinking the world becomes a more caring place every day.

These legions of not-for-profit groupings that fan out across the world, intent on ‘capacity building’, ‘reducing poverty’ and ensuring that the ‘voices of the most marginalized’ are heard, surely reflect an acceptance that too many have suffered for too long, and the tide can turn with the right kind of wind behind it.

History, however, teaches us that the exact opposite may be true.

Whereas organized charities go back over 100 years, the term non-governmental organization is more recent, dating to the formation of the United Nations in 1945, when a select club of international non-state agencies were awarded observer status to some of its meetings. The common factor uniting this group, apart from the fact that they were neither government agencies nor businesses in the traditional sense, is that they would have an avowed mission to work for a social good – whether it was as torchbearers for human rights, the environment or just old-fashioned ‘development’ (a new-fangled idea back then).

Fast forward a few decades and we witness an explosion of NGOs. The spur was the rise of neoliberal ideology, eventually enshrined in the Reagan-Thatcher years. Predatory capitalism and the so-called free market were the answer; government needed to be hands-off with regard to all notions of public provision (healthcare, education, the lot).

Increasingly, governments began looking to NGOs to provide cheap services, a role that continues to grow with austerity policies. However, rarely does government funding to NGOs match the scale of the cuts. Aid to ‘developing’ nations also began increasingly to be funnelled via NGOs rather than through government organs – between 1975 and 1985 the amount of aid taking this NGO route shot up by 1,400 per cent.1

With the fragmentation of the Left under the neoliberal attack, much of the energy that could have gone into fighting the power went into forming the NGO – they became repositories of a residual idealism still reeling from the onslaught.

Arundhati Roy describes the transformation achieved:

‘Armed with their billions, these NGOs have waded into the world, turning potential revolutionaries into salaried activists, funding artists, intellectuals and filmmakers, gently luring them away from radical confrontation.’2

Today, 30 new ones are formed every day in Britain; and there are 1.5 million in the USalone.3 Fully 90 per cent of currently existing NGOs have been launched since 1975.4Roy calls them ‘an indicator species’, saying: ‘It’s almost as though the greater the devastation caused by neoliberalism, the greater the outbreak of NGOs.’5

Partnership or challenge?

Along with governments and corporations, the two torrents of power in the global landscape, NGOs are seen as a third force. Indeed, the big international ones – the BINGOs – with budgets of hundreds of millions of dollars are pretty powerful. But are they a countervailing force, striving tirelessly for social justice and the underdog? Poverty alleviation may be the rhetoric, critics argue, but in practice little that is lasting has been achieved on this front by NGO activism.

There is the compromising nature of their funding to consider – today contributions from governmental and intergovernmental aid agencies and from corporate donors often form the largest chunks of their income. Although some BINGOs will still deny it, this influences their outlook, making them increasingly accommodated to the wishes of their donors. Their language becomes all about forming partnerships with these interests, rather than challenging them. Work within the system, and business will transform the lives of the poor – it’s the Bono school of development, but with taxes.

In a recent article Dhananjayan Sriskandarajah, the secretary-general of Civicus, a global network of civil society organizations and activists, wrote: ‘We have become a part of the problem rather than the solution. Our corporatization has steered us towards activism-lite, a version of our work rendered palatable to big business and capitalist states. Not only does this approach threaten no-one in power, but it stifles grassroots activism with its weighty monoculturalism.’6

In a short educational film called ‘Does aid work?’ made by Oxfam (‘produced with the financial assistance of the European Union’) the argument is that increased aid by rich countries will help people lift themselves out of poverty and make it a thing of the past.7 How exactly? By providing health interventions (anti-retroviral drugs for 1.4 million people in the last few years) and education (40 million children being educated). These are excellent things, no doubt about it. But Oxfam fails to mention how a poor, educated person on anti-retrovirals manages to magic themselves out of poverty in a system that is only interested in extracting their labour at the cheapest possible price.

On the other hand its latest report, ‘Even it Up: time to end extreme inequality’, is more to the point, informing us that the world’s richest 85 people have grabbed wealth equivalent to the poorest half of the world’s population.8 It makes an urgent case for progressive taxation, action on tax evasion and for governments to invest in public services. It details some of the violence inequality does, cautiously praises some countries (Brazil, China – but oddly not the more revolutionary Venezuela) for achieving higher wages for workers, and is a model of reasonableness. It makes a series of excellent recommendations – including telling governments to govern in the public interest – but stops short of calling full out for a redistribution of this obscene wealth. Instead it suggests a cap on the income of the richest 10 per cent equivalent to that of the poorest 40 per cent. A fine advocacy document no doubt, but the coalface is elsewhere.

And we have heard such noises before. Indeed, many a campaign to hold transnationals to account has petered out into ‘working with business’ and corporate social responsibility projects. We are at such a pass that some BINGOs actively seek corporate ‘partners’ with the promise to make the latter look good by association (see ‘The company they keep’).

Funding dependency and a hierarchical, corporate culture – many heads of BINGOs come from the business world – are a large part of the problem. According to Sriskandarajah: ‘Our conception of what is possible has narrowed dramatically. Since demonstrating bang for your buck has become all-important, we divide our work into neat projects, taking on only those endeavours that can produce easily quantifiable outcomes. Reliant on funding to service our own sizeable organizations, we avoid approaches or issues that might threaten our brand or upset our donors. We trade in incremental change.’6

Doing it for the donors

NGOs, not just the giants, face huge, entrenched, complex problems; due to donor pressure they are increasingly forced to respond with a discrete project with x number of deliverable outcomes. They reach out to us, too, in this way – ‘your $50 will buy mosquito nets for a family of four’. Social change doesn’t work like that, yet, increasingly, NGOs striving for it are forced to.

On assignment to cover the human cost of the military dictatorship in Burma in 2008, I came into contact with a number of NGOs run by Burmese people operating just across the border in Thailand. I was a bit taken aback by the number of reports thrust into my hands; obviously the funding of reports was popular among donors.

One particular feminist grouping impressed me with the breadth of their concerns. The usual report writing, educational and income-generation activities, were just the tip. Below the radar they were in dialogue with Burmese opposition political groupings, building up everyday feminist values, promoting co-operative social organization within the refugee camps, acting as big sisters to children orphaned by the military, doing their best to shelter other refugees who were in hiding as ‘illegals’ in Thailand. The group was reaching out, undercover, to communities back in Burma and above all keeping alive the flame of active resistance to the military regime, when it would have been all too easy to give up hope.

NGOs come in all stripes:

INGO – International NGO

BINGO – Big international NGO

TANGO – Technical assistance NGO

RINGO – Religious NGO

CONGO – Corporate-organized NGO

DONGO – Donor-organized NGO

GONGO – Government-organized NGO (not really an NGO)

PANGO – Party NGO (set up by a political party, not really an NGO)

Briefcase NGO – NGO set up only to draw donor funds

CBO – Community-based organization

These women seemed able constantly to adapt to new challenges and were respected by the people they worked with. Little of this was fundable. So they also did the conferences and presentations in hotels and labyrinthine project applications that foreign funders required. I couldn’t help thinking that their real achievements were despite what was expected of them.

Most media scrutiny of NGO accountability is of how they use funds, their accountability to donors. But what of their accountability towards the recipients of their interventions?

A common complaint is that the linkages of aid whichNGOs deliver set a predetermined agenda on the kind of services they offer. Historian Diana Jeater writes of her experience: ‘When I first started working in Zimbabwe in the 1980s, I was impressed by how all the NGO workers I met emphasized the need to listen to rural women. I was quickly disillusioned when I realised that “listening” meant “finding out how to present what we want to deliver in ways that make them acceptable to rural women”.’9

More serious are the charges that they NGOize popular resistance movements, acting as unelected spokespersons, deflecting energy away from confrontation with self-help projects and the like, and dividing communities struggling against dispossession. ‘They take sections of people into their fold,’ said one Indian activist, ‘and restrict their concern for these people, while others do not exist. They breed small hopes, solve small issues and take small actions while the movement process is attempting to address the larger issues of displacement facing all our people, NGO beneficiary or not.’10

Indeed, many of the most radical popular movements today refuse any funding fromNGOs, only forming alliances when the NGO could help spread their message.

Do they help?

So, to turn to the question posed at the beginning: do they help?

We could start with Bangladesh, which has the world’s largest national NGOs, effectively operating as a parallel government – they put more money into development activities than the government does. Most of their beneficiaries remain firmly below the poverty line. There is criticism, too, of the market model of development they have followed. This has been over-reliant on microcredit, which produces ‘rational profit-seeking individuals’ rather than community efforts – to say nothing of the debt traps many have found themselves in.

Or we could look at the Philippines, where I had the opportunity to observe first-hand how joined up small radical NGOs were, both with each other and the communities they were reaching out to, unafraid of supporting people’s resistance. Successive governments have actively encouraged NGO participation in government departments and on all kinds of local boards. Has this co-opted them? The successes they have achieved remain localized. They have been able to make no dent in the fundamental problem that has plagued the country – the concentration of wealth and land in just a few hands and continued élite governance. The 25 richest Filipinos continue to grow richer, with assets almost equal to the annual income of the country’s 55 million poorest citizens.11

It is perhaps unrealistic to expect such large structural changes to be delivered by NGOs when governments don’t tackle them either.

When it comes to emergency humanitarian assistance, certain specialist NGOs are the first port of call. Criticism often follows later about duplication of efforts, mishandling of the situation or of not being consultative enough in reconstruction efforts. But no assistance is the worse option in this instance.

On the environmental front we have some of the most activist large NGOs, whose members are unafraid to put their bodies on the line, as well as some of the most corporate friendly and compromised (read about the latter on page 20).

NGOs have achieved much in single-issue campaigning, ranging from the abolition of slavery to the landmines ban and access to HIV medication.

When it comes to defending human rights, whether it be espousing the causes of political prisoners or mounting challenges to the persecution of sexual minorities, they have often invited the ire of governments. It is this kind of work that governments want to shut down when they seek to ban NGOs or to stop them receiving foreign funds.

Sadly, this is not a disinterested field with universal values. Western NGOs can be quicker to condemn human rights abuses in the Majority World than in their own. Human Rights Watch has come under fire for its revolving door with the USgovernment: in 2009 its advocacy director Tom Malinowski, who had previously served as special assistant to Bill Clinton and speechwriter to Madeleine Albright, even justified CIA renditions ‘under limited circumstances’.12 It has also shown bias in its reporting of war crimes committed by Israel and Palestine.13

Even the clumsy, lumbering BINGOs achieve much in material terms, but will they really put their shoulders to the wheel behind the greatest liberation struggle of our times, the struggle of the 99 per cent for greater equality? If the largest appropriators of the planet’s wealth want to pose as grand philanthropists, should NGOs really line up to take their cash? Can they please get beyond donor benevolence – and being delivery vehicles for highly politicized and often harmful aid – to reconnect with people’s struggles for justice?

NGOs are expected to be non-political, but everything they do, operating within highly skewed systems of power, cannot but be political. They might as well get their hands truly dirty.

  1. Ji Giles Ungpakorn, ‘NGOs: enemies or allies?’, International Socialism, October 2004; nin.tl/1xAbhWD

  2. In ‘Capitalism: A Ghost Story’, Outlook, 26 March 2012; nin.tl/1sztS0w 

  3. Paul Vallely, ‘Giving to charity: Are we getting as good as we give?’, The Independent, 10 September 2014; and Wikipedia. 

  4. Dhananjayan Sriskandarajah, ‘NGOs losing the war against poverty and climate change, says Civicus head’, The Guardian, 11 August 2014. 

  5. In ‘Help that hinders’, Le Monde diplomatique, November 2004. 

  6. ‘NGOs losing the war against poverty and climate change, says Civicus head’, The Guardian, 11 August 2014. 

  7. Oxfam website, film posted on 28 April 2010; nin.tl/1rz9A7r 

  8. Posted 29 October 2014; nin.tl/1zNoTTT 

  9. In ‘Zimbabwe: International NGOs and aid agencies – Parasites of the Poor?’, 5 August 2011, African Arguments;nin.tl/1u76L4U 

  10. Dip Kapoor, ‘Social action and NGOization in contexts of development dispossession in rural India: Explorations into the un-civility of civil society’, in NGOization: Complicity, contradictions and prospects, edited by Aziz Choudhry and Dip Kapoor, Zed Books, 2013. 

  11. Sonny Africa, ‘Philippine NGOs: defusing dissent, spurring change’, in NGOization, see 10 above. 

  12. Open letter by Nobel Peace Laureates among others, 12 May 2014, AlterNet; nin.tl/1tDiXIr 

  13. Jonathan Cook, ‘Shock and awe in Gaza’, Counterpunch, vol 21 no 7, 2014. 

Front cover of New Internationalist magazine, issue 478 This special report appeared in the ngos issue of New Internationalist.

 


The Company they keep

by Ian Brown for newint.org

‘We’re at a critical moment for the world’s children,’ warns Justin Forsyth in Save the Children’s 2013 annual report. The chief executive of the British grouping of this international NGO could not be more right. Needless wars, dispossession through climate change, the rise of ugly rightwing politics – the human toll is high. Children and women, as ever, bear the brunt.

‘We face a moment of opportunity, challenge and responsibility,’ Forsyth continues. ‘If we’re going to achieve even more impact for children, we need to work in different, innovative ways.’ Mark Goldring, Oxfam GB’s boss, echoes such sentiments: ‘Our challenge is not only to continue to do this work, but to scale it up.’ CARE International is no less ambitious, determined to focus even more efforts to empower women and girls.

Despite economic recession, these three international NGOs mustered combined funds of $3.2 billion to spend on the poor last year.1 Save the Children UK managed a 20-per-cent jump during 2012-13, bringing its income up to a record $525 million, due in part to corporate donations, up a third from 2012 to $40 million in 2013.

Partners unlimited

Corporate funding of international NGOs is nothing new. CARE USA has collaborated with Coca-Cola for three decades. ‘We are extremely grateful for the trust placed in us by compassionate donors and partners,’ says CARE in its 2013 annual report. As well as Coca-Cola, CARE counts arms manufacturers General Electric and Boeing, and clothing companies Nike and Gap, among its major donors. Oxfam, too, has embraced the corporate agenda and ‘is proud to be at the forefront of partnerships between the business sector and the NGO community’. Save the Children’s message couldn’t be clearer: ‘Teaming up with Save the Children to market a new or existing product could boost your sales, profile and customer base.’

But do such partnerships offer the win-win solution claimed by the NGOs and their corporate funders, or are there losers? Does Erinch Sahan, an Oxfam private-sector adviser, have a point when he blogs: ‘I want to believe that pursuing profits will result in a sustainable world and the end of poverty’? One such partnership involves Save the Children and pharmaceuticals giant GlaxoSmithKline (GSK). Since 2011 Save the Children has benefited from GSK’s initiative to reinvest 20 per cent of the profits it makes in the world’s least developed countries (a fraction of its global $7.5 billion profit in 2013) back into projects which strengthen healthcare infrastructure and support the research and development of child-friendly medicines. Save the Children’s website claims a million children will be helped as a result of a ‘ground-breaking’ deal signed with GSK to improve children’s health in some of the poorest countries of Africa.

‘Teaming up with Save the Children to market a product could boost your sales, profile and customer base’ – Save the Children’s assurance to potential corporate partners

No mention on Save the Children’s website, however, of one of GSK’s less child-friendly products – the antidepressant Paxil (Seroxat/paroxetine). In 2012 the company was fined $3 billion by the US government after pleading guilty to criminal charges, including bribing doctors and encouraging the prescription of Paxil to children, even though the drug was unsuitable and unapproved for this use.2 ‘We would never refrain from speaking out on an issue because we had a partnership with a particular company. That would clearly compromise our values,’ claims Save the Children. When contacted for a response, it admitted it was ‘aware of reports on the historic issues relating to Paxil… but our belief is that the risks are outweighed by the benefits of the partnership.’3

Oxfam’s uncompromising vision of a world where everyone has enough to eat is embodied in the high-profile ‘Behind the Brands’ campaign, which promises to ‘provide people… with the information they need to hold the Big 10 [global food and beverage producers] to account’. One such is Unilever, about whom Oxfam was, until recently, rightly critical: ‘[Unilever’s] record on land rights leaves plenty to be desired’.4 By its own Responsible Sourcing policy, Unilever will not require 80 per cent of its suppliers to consider the rights of women to land ownership until the end of 2017. In the past Greenpeace has accused Unilever of sourcing its palm oil from Indonesian suppliers whose activities included ‘tearing up areas of pristine forest then draining and burning the peatlands’.5 The company was recently fined $120 million by the European Commission for establishing a price-fixing cartel in Europe along with Proctor & Gamble.6

Yet despite all the criticism, ‘Unilever is a vocal advocate for tackling climate change and new business models that benefit poor farmers,’ according to Penny Fowler, head of Oxfam’s private sector team. ‘[W]e will continue to engage with Unilever and other companies because reducing global poverty and inequality is good for business and us all.’ Oxfam currently helps the transnational under its ‘Corporate engagement’ programme ‘to incorporate thousands of smallholder farmers into their [Unilever’s] global supply chain’. But is this really an innovative way of ending poverty or is Oxfam helping a rich company get richer at the expense of poor farmers? Paul Polman, CEO of Unilever, is in no doubt of the benefits to the company, giving thanks to ‘partners who are assisting us to deliver this new business model’.

CARE USA similarly waxes lyrical about working with transnationals. ‘[We] believe that dynamic partnerships are critical to solving global challenges. Our partners are committed to developing and supporting socially responsible initiatives that build stronger communities in the developing world while enhancing business and development goals.’ Committed to donating 1.6 per cent of pre-tax profits to good causes, the Nike Foundation is one such partner, working ‘to unleash the unique potential of adolescent girls to end poverty for themselves and for the world’. Nike calls it ‘the girl effect’.

In 2000 a BBC documentary uncovered child labour and poor working conditions in a Cambodian factory used by Nike. The documentary focused on 7 girls as young as 12 who all worked 7 days a week, often 16 hours a day.7 Nike has been castigated the world over for its use of sweatshops since the 1990s, yet as late as 2013 Nike stated that a third of its contracted factories, or potentially 300,000 workers, still did not meet the company’s own minimum standards for worker treatment.8

Close companions

Is Nike really a ‘compassionate’ donor to be proud of, as CARE would have us believe? Or have all three NGOs become too close to big, unscrupulous corporations, preferring to mount large-scale, high-profile schemes that deliver food and medicine to the needy and greater profit margins to the transnationals, at the expense of grassroots work to tackle the endemic, structural causes of poverty?

Just how close the corporate and international charity worlds have become is evident from a look at those at the top of the NGOs. Alex Cummings is both treasurer of CARE USA and executive vice-president of Coca-Cola. Save the Children’s director of human resources, Paul Cutler, is a former employee of GSK. Oxfam trustee Dame Marjorie Scardino, a Forbes rich-lister, is a non-executive director of Nokia, an Oxfam donor. Connections to powerful political figures are close, too. Save the Children’s $200,000-a-year chief executive Justin Forsyth and Oxfam trustee David Pitt-Watson are both former advisers to New Labour’s controversial prime ministers, Tony Blair and Gordon Brown respectively. Much more worrying, however, is the accusation that large international NGOs are helping to legitimize companies like GSK, Coca-Cola, Nike and Unilever, rather than holding them to account for serious malpractice. With transnationals treating corporate social responsibility schemes as little more than a necessary expense to whitewash their reputations, do NGOs really need to get in on the act?

Ian Brown managed aid programmes for 15 years in Africa, the Middle East and Southeast Asia for Oxfam, the Mines Advisory Group and Terres des homes.

  1. CARE International had revenues of $0.7 billion, Oxfam International $0.6 billion and Save the Children International $1.9 billion. 

  2. ‘Pharma overtakes arms industry to top the league of misbehaviour’, 8 July 2012, The Observernin.tl/gskfine 

  3. Statement from Save the Children to the author, 9 October 2014. 

  4. Behind the Brands, nin.tl/oxfambandj accessed on 8 October 2014. The page was updated by Oxfam and the criticism removed on 9 October 2014. 

  5. ‘Palm Oil: Cooking the climate’, 8 September 2007, Greenpeace International; nin.tl/cookingclimate 

  6. ‘Unilever and Proctor & Gamble in price fixing fine’, 13 April 2011, BBC News. 

  7. BBC Panorama, 15 October 2000. 

  8. Nike Inc; nin.tl/niketargets 

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