Editor's Note: In these articles, "liberalism" refers to what Americans might recognize as free-market fundamentalism. ljt/TO
Capitalism's Achilles's Heel
By Eric Le Boucher
Le Monde
Saturday 30 June 2007
One country among the biggest investors in India is ... the Island of Mauritius. It invests more than France, Great Britain or even the United States. Kannan Privanisavan, a professor at Melbourne in Australia, relates the why of this singularity. "The Maharajas invested their fortunes in London; the habit remains," he explains. "The nouveaux riches and many firms still - legally and illegally - place their profits in The City's banks. From there, the sums leave again in a long circuitous route that ends in the little paradise of Mauritius. Then, under different owner names, the money returns untaxed to India."
The NGO Global Witness revealed Tuesday that Denis Christel Sassou Nguesso, son of the president of the Republic of the Congo, spent "35,000 dollars produced by his country's oil sales for extravagant purchases in Paris, Marbella and Dubai," in August 2006. The NGO has photocopies of a long series of checks for Vuitton bags, etc., and another, more unexpected, for 2,500 Euros at Decathlon, which must make for an astonishing quantity of jogging shoes. The problem is that the Congo made commitments last year during the accords concluded for its debt remission that prohibited "all conflicts of interest in oil marketing." The junior Sassou Ngesso is director of Cotrade, a company that markets that crude oil. As we write, we do not know what the Congolese presidency's response was.
According to economist Gerald Epstein, the entire amount of money that has left Africa illegally since 1995 totals 274 billion dollars, or 145 percent of the continent's debt.
As elsewhere, fiscal optimization is a national sport in the United States. According to Democratic Senator Carl Levin, the IRS has been conned out of 100 billion dollars worth of income that has fled to the Cayman Islands and other fiscal paradises.
Embezzlement, corruption, tax evasion, but also trafficking, smuggling, drugs, prostitution, counterfeiting: Dirty money has taken on such proportions that it represents "a threat to global stability and prosperity," according to Raymond Baker, director of the CSIS (Center for Strategic and International Studies) in Washington. This mis-development that undermines so many African countries tends to spread elsewhere and to become capitalism's "Achilles's heel" ("Capitalism's Achilles's Heel: Dirty Money and How to Renew the Free Market System," published by Wiley).
During a colloquium he organized Thursday in the American capital, Raymond Baker explained that the structures of global finance, fiscal paradises, banking secrecy, Trustee and Nominee subsidiaries, false foundations, money laundering and the innumerable fiscal niches have set up global channels immensely favorable to the proliferation of trafficking and embezzlement. On top of that, it was discovered after 9/11 that terrorists use these same networks. "The illicit economy is set in the licit economy," added Moises Naim, director of Foreign Policy Magazine and author of "Illicit: How Smugglers, Traffickers, and Copycats are Hijacking the Global Economy" (Anchor).
This stolen, embezzled, fugitive money represents between 2 and 5 percent of global GNP. Drugs, between 120 and 200 billion dollars; counterfeiting, between 80 and 120; protection racketeering, between 50 and 100; the total money from crime is evaluated at between 300 and 550 billion dollars. The most voluminous source remains the practice of internal pricing by multinationals which exchange sub-products between their different subsidiaries at prices calculated to best escape taxation: between 700 and 1,000 billion dollars a year, according to Raymond Baker.
"The World Bank hardly concerned itself with these subjects before the 1990s," explained Daniel Kauffmann, director of that institution's Global Program. "Then we realized that corruption was rather notably ruining our development missions. 9/11 brought attention to bear on financial channels, then the Enron affair finished up by bringing on closer surveillance. But much remains to be done." With money laundering as a priority, according to Daniel Kauffmann, who preaches strengthening financial centers' rules in rich countries and pressuring for administrative transparency in poor countries.
Eva Joly, the former investigating magistrate in the Elf affair, wanted an international agency to fight corruption and dirty money to be created, and she worries about China's arrival on the scene - which has just complicated an already-very-difficult fight. She succeeded in getting Norway, her home country, to announce during the conference that it would "head up" the struggle against fiscal paradises and, in the immediate future, finance studies and data gathering in agreement with the World Bank and American senators, Republicans as well as Democrats. Mrs. Joly deplores the fact that Europe practices doubletalk on all these issues.
"Crime, like everything else, except the response of the law - our only defense against the Darwinian world of murder and money - has become global," Senator John Kerry, former unsuccessful candidate for the White House, wrote already ten years ago ("The New War," Simon & Schuster). Lord Daniel Brennan summarized the stakes: "We've gone from laissez-faire capitalism to brute capitalism. We must install a capitalism of responsibility."
Electricity: Free to the Point of Absurdity
By Gerard Aschieri, Bernard Defaix, Pierre Khalfa, Marc Mangenot and Christiane Marty
Le Monde
Friday 29 June 2007
July 1, France will complete the process of liberalizing electricity. After companies and professional offices, it will be individuals' turn to taste the delights of the opening up to competition. But that particular dish runs the risk of resembling junk food more than any gastronomic creation.
The result of opening to competition has, in fact, proven catastrophic in every country where it has been tried. Between 2001 and 2006, market prices have experienced a spectacular take-off: 39 percent in Spain, 49 percent in Germany, 67 percent in Finland, 77 percent in Sweden, 81 percent in the United Kingdom and 92 percent in Denmark! In France, those companies which chose to leave the regulated prices of the public service saw their electricity bills increase by 76 percent over the same period, while EDF [public service utility] prices remained basically stable.
Many industries, moreover, demand the option of returning to the universe of regulated prices. A situation so uncomfortable that the French government completed the December 2006 law relative to the energy sector with a scheme allowing a partial return to regulated prices for unsatisfied industrial companies!
Consequently, we are in a paradoxical situation. The good apostles of neo-liberalism tell us that opening up to competition allows price reductions. That argument was already jeopardized during the liberalization of other services in the public network, such as, for example, telecommunications. In those sectors, liberalization meant the end of the price harmonizing that allowed the most profitable services to finance those that were less or not at all profitable.
Consequently, opening to competition entailed a "re-equilibration of the price schedule," to use the European Commission's savory expression, with a reduction in price for big consumers, especially companies. While, on the contrary, the great mass of the population saw prices take off. The zealots of liberalization explained that this "price schedule re-equilibration" would allow companies to reduce their prices, a winning equation for individuals in the long run. Here, we can only quote what Keynes said to the liberal economists of his own era: "In the long run, we are all dead."
We knew after the first liberalizations of public services that the promise of a reduction in prices was pure propaganda as far as the vast majority of the population was concerned. In the case of electricity, even most companies don't benefit from it! There is a perfect example of the dogmatic application of neo-liberal precepts.
But that's not all. Opening to competition pushes companies to under-invest; all the more so given that it is accompanied by the privatization of public operators. To invest in network services is expensive. In the case of electricity, it is all the more expensive in that it is necessary to invest in production capacity that only produces a return over a long period. Consequently, it is far-removed from the short-term logic of financial capitalism. Price volatility in electricity markets and the inability to foresee price evolution reinforces still further this tendency to under-invest, which inevitably produces breaks in users' supply.
On top of that, you can't keep an inventory of electricity. Consequently, one must permanently adjust supply to demand. That balance is already not simple to assure with a single operator. It becomes very complicated with opening to competition when the number of stakeholders increases, especially when those stakeholders' first concern is financial profitability. Consequently, the risk that disequilibrium in the network proves impossible to manage is very high.
Finally, the transport of electricity involves significant losses in the lines. It is, consequently, economically and ecologically absurd to produce electricity in one country to go sell it thousands of kilometers away from there. Consequently, the European Commission's ambition to have a "great European electricity market" is a dangerous absurdity.
The more interconnected the networks are, the more serious become the risks of major dysfunction linked to under-investment and to breaks in the network's balance. California's case is emblematic, but not unique. The giant blackouts in Spain, Italy, and - in November 2006 - across Europe are the most visible manifestations of this phenomenon.
Finally, liberalization is incompatible with the priority objective of energy sobriety that is indispensable to the resolution of the ecological crisis: no enterprise wants to see its gross turnover decrease and consequently no enterprise has any interest in a reduction of consumption! At a time when the energy debate becomes a citizen's issue simultaneously integrating global warming, sustainable development and the precautionary principle, it is doubtful that competition is the best means to open this debate and to conduct it democratically.
All those who have spent a minimum of time reviewing this issue know all that. This analysis is no longer really disputed today. And yet, the European Commission does not give up and governments follow it. On this subject, the "rupture" Nicolas Sarkozy promised will wait ... unless, in the next few days, reason wins out and the government proclaims a moratorium on the process of liberalization. Still, let us not dream: the apostles of neo-liberalism have demonstrated that they don't burden themselves with the reality principle.
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Gerard Aschieri is secretary general of the FSU [Federated Union for Public Workers]. Bernard Defaix is president of the convergence for public services. Pierre Khalfa is the national secretary of the Union syndicale Solidaires [a labor union]. Marc Mangenot is from the Fondation Copernic. Christiane Marty is a member of the Board of Attac.
A Nation with No Vacation
By Eric Leser
Le Monde
Friday 29 June 2007
Americans envy the "endless" vacations of the French. They have several reasons to be jealous, but they themselves also bear a share of responsibility for their situation. A recent study by the Center for Economic and Policy Research (CEPR) talks about the United States as a "no vacation nation." According to the travel sales site expedia.com, one third of Americans, or 51 million people, don't take the 14 days of annual paid leave to which they are, on average, entitled. And of those who do go away, close to a quarter remain in contact with their company, consulting electronic message systems or voicemail.
Not only do Americans have the lowest number of vacation days of all developed countries, fewer even than Japan, but the United States is the only industrialized country where the law quite simply does not force employers to grant paid leave. According to the CEPR, one out of four private sector employees quite simply have no right to any leave. And the situation continues to deteriorate.
The daily Christian Science Monitor deplores that vacations in the United States are experiencing the same fate as the family dinner. They are disappearing little by little, which, according to that newspaper, is not without harmful consequences for the good functioning of the American family unit. According to the association Take Back Your Time - which wants to make the passage of three weeks of paid vacation an issue in the next presidential election - today, one third fewer American families than during the 1970s take a vacation together.
The main argument advanced by those who limit their vacations: lack of time. According to expedia.com, the other reasons are financial - employees receive compensation for not going - and relate, above all, to workplace pressure. It's difficult to leave on vacation when one's colleagues do not.
"For some workers, being at work all the time is a way of proving their loyalty," explains Jeffrey Pfeffer of Stanford University. "That creates a vicious circle. No one takes vacation for fear of being thought lazy or selfish, while everyone, or almost everyone, wants to."
Yet, numerous American university studies demonstrate the benefits of days off. They allow a person to recuperate on both a physical and morale level, to be more creative, and, finally, happier at work. "In the month or months that follow one or two weeks of vacation, productivity can increase by as much as 60 percent," asserts Wallace Huffman, professor at the University of Iowa.
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