Interview: Common Ground
Industrial: A Low Act
Unions: The Number of the Least
Politics: The Smoking Gun
Economics: Microcredit, Compulsory Superannuation and Inequality
Environment: Low Voltage
History: The Art of Social Justice
Review: Work’s Unhealthy Appetite
Culture: A Forgotten Poet
From Green House to Glass House
Microcredit, Compulsory Superannuation and Inequality
What is the link between the Nobel Prize winner Muhammad Yunus and his microcredit Grameen Bank and the superannuation/private pension systems that Australia, the UK and the USA have in place?
It is the private nature of these systems that are seen to be answers to ensuring sustainable incomes for working people. Both systems have developed as part of the neo-liberal economic agenda and both seem to have the backing of many progressive commentators as well as of the neo-liberal elites. Why is this so?
Explanations are forthcoming from those who endorse Karl Marx's favourite motto: "Everything should be doubted" and engage in "ruthless criticism of all that exists".
On the face of it Yunus and microcredit schemes would seem an efficient and sensible way of lending money, in the face of the massive defaulting by many "third world" countries from the 1980s onwards which accounted for billions of dollars and has been attacked by for example the Jubilee 2000 campaign seeking to write off such debts.
Others have pointed out these loans have imposed an incredible burden on ordinary people in third world countries, who did not seek the loans (which generally came from the greed of corrupt elites or were later re-imposed by the IMF or the World Bank in return for "structural adjustment" and "land reform" which generally further impoverished many who until then had been at least self-sufficient on the land but now found they were not allowed to be.
In the so-called first world things are no better for the workers. Robin Blackburn writing in New Left Review has been examining the financialisation of our lives:
"...financial profits over the last decade have mainly taken the form of the cancellation of promises made to employees--exploitation over time--the erosion of small capital holdings by large and unscrupulous money managers and the swallowing of shoals of tiny fish by a shark-like financial services industry. Few of the gains from the reallocation of capital through superior risk assessment have been channelled to production. Financial profits have instead prompted a surge in upscale real-estate prices and the turnover of the luxury goods sector. The mass of employees and consumers have sunk deeper into debt."
As Doug Henwood put it in Left Business Observer:
"It's a mystery why the stock market should do any better at solving the demographic problem of Baby Boomer retirement - if it is as serous a problem as is claimed - than the public system. Over the long term, the stock market should grow roughly in line with the overall economy; the only way it could greatly exceed the underlying growth rate is if the profit share of GDP were to increase continuously".
As we have seen with the spate of corporate collapses and theft on a grand scale from superannuation funds, the stock market is in fact worse than the public purse at dealing with retirement. Slavoj Zizek has noted that the risk is borne by the worker and the choices are made by the controllers and if the risk turns bad the controllers get out with a golden parachute and the workers retire into poverty.
The impetus for the shift away from government was termed the "fiscal crisis of the state" and from the mid 1970s this notion has been behind the privatisation and financialisation of everything.
So combined with the scale of loans and the harsh measures that are instituted by the ruling classes to ensure the third world repays its debt, and the winding back of the gains of the workers and social movements in the first world the neo-liberal elite the roles of the state are seen to be to just ensure that private sector financial institutions can operate as they wish.
The public pensions system is deemed unsustainable, and state planning by progressive governments is undermined by international finance and US covert and overt agencies.
The happy fairytale of the Grameen Bank financing third world women is a nice badge to wear. To give individual workers "choice" on how they invest their retirement earnings is also a good promotion tool. Sadly it seems that is leading to "The End of Retirement" as Teresa Ghilarducci puts it. Peter Costello has been bashing us with this for some time. It has also lead many into penury as they struggle to pay debts and certainly hasn't impoverished the Nobel Prize winner. It has lead many in western societies into debt with the banks or the money lenders, who have sold off their debts to international mortgage brokers, who deal on the finance markets and thus endanger that security you think you have bought with your house.
What other choices might there be? Well the basis of public social and physical infrastructure building came about for a number of reasons. Some of which were to ensure that the capitalists could market their goods as quickly as possible with minimal costs to themselves and maximum costs to the public who would also buy the stuff. Much of it however, came from collective action by the millions through their workplaces or their communities where they demanded better public health, better community facilities, better wages and conditions, better transport services and the general host of things that ward off squalor.
Robert Pollin clearly stated the real options that have been carried out very successfully by some when he told Alexander Cockburn:
"the East Asian Tigers, like South Korea and Taiwan, relied for a generation on massive publicly-subsidised credit programs to support manufacturing and exports.
They are now approaching West European living standards. Poor countries now need to adapt the East Asian macro-credit model to promote not simply exports, but land reform, marketing cooperatives, a functioning infrastructure, and most of all, decent jobs."
The trouble with publicly-subsidised credit programs is that they're public and they're large and run contrary to the neoliberal creed. That's why Mohammed Younus got his Nobel Prize, whereas radical land reformers get a bullet in the back of the head.
Whilst this is clearly subsiding the wealthy to make even more wealth, it has directly raised wages and welfare in the countries where these programs have been undertaken.
The rise of the Irish economy from double digit inflation and unemployment and the poorest nation in Europe in the 1980s with net population decline due to the young shipping out to now an incredibly dynamic producer of brains, software, hardware with high union membership has occurred for similar reasons. Public investment and infrastructure support for new industries and free university entry amount to the dreaded industry policy that is not spoken of here.
Such policies amount to national policies with national goals of ensuring decent jobs, decent incomes and decent social and physical infrastructure. These projects are at a national level. We can aim at national level projects that will have international impacts by targeting alternative energy, quality jobs and quality products, all of which will help ensure high standards of living for all. These are undertaken by government with social goals, not by individuals borrowing to feed their families of by corporations borrowing to increase their profits or leaning on governments to ensure those profits at the expense of their own employees and the community generally.
Superannuation is aimed at private individuals so cannot be a source of economic growth as it is thus individual revenue not public investment. Private returns must be maximised in whatever way possible that will mean returns generated overseas or locally that are not to the benefit of the public. The invisible hand is still a myth.
The idea of superannuation being forced into National Development Funds has been criticized as well. As the super is workers savings (wages forgone) to channel it into such funds risks the individual worker returns unless there are strong controls. The risk is also that wages will be squeezed now to pay for retirement incomes elsewhere. This confronts the fact that most retirement income is drawn directly from current savings not historical savings. Again the burden is on the worker, not the economy as a whole through a progressive tax system. The share of the wages in national income has declined substantially since compulsory superannuation was introduced despite much crowing about the number of jobs being created. In this case the revenue that has clearly flowed to profitability needs to be accessed by those who have generated it by the taxation system to ensure good health and other infrastructure for the people. Taxes are based on current incomes by individuals and companies. Interest and dividends draw funds from future production that someone else will produce.
Private micro-lending is a similar process and serves to deliver individuals into the hands of loan sharks without adding to better public infrastructure. It provides credit for farmers who never needed it, thus helping deliver then into the industrial agriculture system where they purchase inputs and sell outputs to multinationals and failure in these outputs increases the debt and has increased the suicide rate for previously poor but debt free farmers
As Pollin's point about the bullets highlights, "Third World" leaders who seek land reforms to deal with rural poverty are giving themselves a death sentence. The outcry over Hugo Chavez and his people oriented policies in Venezuela are the current example. Results of state elections in India also show that the people want public leadership not privet borrowings as a way to ensure their livelihoods.
As we too often forget, it is the rich and powerful in all countries who maintain control and inequality however they can, and the poor and the waged and the powerless in all countries who strive for equality, fairness and justice.
A Nobel Loan Shark? October 19, 2006
By Patrick Bond (Znet commentary) www.zmag.org
Doug Henwood. Pension fund socialism: the illusion that just won't die
comments on Robin Blackburn's Banking on Death delivered at the conference "Pension Fund Capitalism and the Crisis of Old-Age Security in the United States," sponsored by the New School University, September 11, 2004 http://www.leftbusinessobserver.com/NSPensions.html
Robin Blackburn 2006. Finance and the Fourth Dimension. New Left Review Series 2 no 39 May-June. www.newleftreview.org
Alexander Cockburn (2006). A Nobel Peace Prize for Neoliberalism? The Myth of Microloans
Teresa Ghilarducci (2006). The End of Retirement. Monthly Review vol. 58, no 1 May
See http://www.jape.org/jape200406.htm for the following:
Dick Bryan.(2004) Superannuation: the Ricardian Crisis. Journal of Australian Political Economy. no 53 June
Nick Coates (2004) Still 'Saving the Nation' Twelve Years On? Journal of Australian Political Economy. no 53 June
Nick Coates (2004) Superannuation and Accumulation: a Rejoinder. Journal of Australian Political Economy. no 53 June
Tony Ramsay (2004) The Socialisation of Investment in a Contemporary Setting.
Journal of Australian Political Economy no 53. June
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