Imagine this scenario: A developing nation decides to selectively share its precious natural resource, selling only to “friendly” countries and not “hostile” ones. Now imagine this is oil we’re talking about and the nation in question is the Islamic Republic of Iran…
Early news reports on Wednesday claimed that Iran pre-empted European Union sanctions by turning off the oil spigot to six member-states: the Netherlands, Spain, Italy, France, Greece and Portugal.
The reports were premature. According to a highly-placed source in the country, Iran will only stop its oil supply to these nations if they fail to adopt new trading conditions: 1) signing 3 to 5-year contracts to import Iranian oil, with all agreements concluded prior to March 21, and 2) payment for the oil will no longer be accepted within 60-day cycles, as in the past, and must instead be honored immediately.
Negotiations are currently underway with all six nations. Iran, says the source, expects to cut oil supplies to at least two nations based on their current positions. These are likely to be Holland and France.
Meanwhile, the other four EU member-states are in dire financial straits. They are knee-deep in the kind of fiscal crisis that has no hope of resolution unless they exit the union and go back to banana republic basics. Yet, they found the time to sanction Iran over some convoluted American-Israeli theory that the Islamic Republic may one day decide to build a nuclear weapon. I am sure arm-twisting was involved – the kind that involves dollars for votes.
But I digress. This blog is really about ideas. And not just ideas, but really ridiculous ideas.
New World Order Jump-Started by Iran?
Alternative sources of oil will be found in a jiffy for these beleaguered EU economies. But this isn’t so much about a few barrels of the stuff that fuels the world’s engines.
This is about the idea that a singular action taken amidst the political and economic re-set about to take place globally, can propel us in a whole new direction overnight.
The past few years have shown that there is no global financial leadership capable of pulling us back from the abyss. The US national debt hovers around the $15.3 Trillion mark. Its GDP in 2011 was just under $15 Trillion. You do the math – there is no fixing that one. The only next-big-thing coming out of that dead end will be the complete transformation of the current global economic order.
But how will that take place without leadership and clear direction? I’m betting hard that It will not come from the top, nor will it be directed. The new global economic order will be organic, regional and quite sudden.
What do I mean? Imagine: Iran stops selling oil to the EU; China tells the US to take a hike on currency values; India starts trading in large quantities of rupees; Russia’s central bank becomes a depot for holding dollars that don’t need to pass through New York; the creation of a global payment messaging system competing with SWIFT. Now imagine that a combination of actions – triggered only by an attempt to circumvent some really very silly sanctions – can suddenly unleash some unexpected possibilities that were beyond the realm of imagination a mere few years ago.
Imagine the emergence, say, of regional economic hubs, powered by the currencies of the local hegemonic powers, where bartering natural resources, goods and services becomes as commonplace as transactions involving currency transfers. Because of the frailty inherent in dealing with these new local currencies and a bartering system, nations tend to trade most with those closest to them in geography and culture. Shocking? Maybe not. Sometimes it just takes a need for change…and a handy tipping point.
“This is not the time to fan the flames,” someone should have told the United States. “You and your pals are sitting in a jalopy tottering on the cliff’s edge – why risk making moves now?” they should have warned. “Be a little less arrogant,” would have been sage advice.
But Washington is absolutely, irrevocably, dangerously fixated on showing Iran who’s boss, and spends a good part of every day trying to tighten the screws around the Islamic Republic. For the most part, the US’s pursuit of this dubious objective has instead stripped it of the vital political tools it once wielded. No more UN Security Council resolutions, no more unscrutinized military adventures. The only thing left is the nefarious tentacles of the United States Department of Treasury and its financial weapons. “The new tools of imperialism,” as once US-friendly central banker in the Mideast bluntly put it to me.
I only hear shrill desperation when politicos now parrot the “sanctions are biting” line. Here’s a juicy tidbit for those rolling their eyes right now: Goldman Sachs – America’s premier investment bank and Wall-Street God – has identified the Islamic Republic as one of the “Next 11” growth drivers of the global economy after the BRIC (Brazil, Russia, India, China) nations. BRIC was a term coined by Goldman Sachs, if you recall, and boy, were they right about that one.
Thirty years of “biting” sanctions and sanctions “with teeth” have achieved the following: “Strong or improving growth conditions,” said Goldman Sachs just last year, “combined with favorable demographics, form the foundation of the N-11 growth story.” The investment bank, furthermore, estimates “a measurable increase in the N-11’s share of global GDP, from roughly 12% in the current decade to 17% in 2040-2049.”
It’s a bad global economy we are facing right now, but Goldman Sachs’ charts illustrate that Iran is still one of five nations in the N-11 pot whose “productivity and sustainability of growth” is above average.
Shrugging off Dollar Dominance
A British investment research firm wrote in January: “Sanctions on the Central Bank of Iran effectively restricts Iranian oil sales to barter contracts or to state-to-state agreements utilizing non-G8 currencies…It represents a major irritation to the Iranians, rather than a chokehold.”
The authors specify the Chinese Yuan as the non-G8 currency, but in the past few days that scenario has busted open with the addition of the Indian Rupee into the mix.
The new trade deal inked between Iran and India ensures Rupee payment for 45% of Iranian oil imports, with the balance remaining in Indian banks to pay for exports to the Islamic Republic. This achieves two important things that are an unintended consequence of US sanctions: firstly, it eliminates the Dollar as the trading currency (note that oil prices have traditionally been priced in US Dollars); secondly, it significantly accelerates economic integration between Iran and one of the four largest emerging economies in the world.
D.S. Rawat, head of the Associated Chambers of Commerce and Industry in India, says of the agreement: “The potential of trade and economic relations between the two countries can touch the level of $30 billion by 2015 from the current level of $13.7 billion dollars in 2010-11.”
There’s more. During the course of the past two weeks, Iran has purchased around 1.1 million tons of cereals and wheat from international markets – including products originating in Germany, Canada, Brazil and Australia – which it has paid for entirely in currencies other than the Dollar.
The US Dollar, which has been the international reserve currency for close to a century, is on its way out anyway. America’s huge balance of payments deficit has weakened US fundamentals and made investors wary. The downside of the Dollar’s changing status is that the Federal Reserve loses a lot of flexibility in managing its currency and the US economy. That does not bode well for keeping the US competitive against the BRIC nations and other emerging economies.
Iran Sanctions Biting the US Right Back?
It takes one solid idea, in a world desperately seeking them, to start the creaky shift to a new global order. Emerging economies have been nipping at the heels of the world’s governing bodies for decades, demanding entry into the hallowed halls of the UN Security Council’s permanent members; insisting on a seat at the main table at the IMF, World Bank, World Trade Organization.
When European leaders went begging for scraps at the last G-20 meeting, the BRICs found their feet and yawned a collective “no.” It signaled a reversal of fortunes, that meeting, and the idea that they can forge their own path was born. The BRICs then announced their first joint foreign policy statement last November – on Syria, of all places. The idea matured.
But US/EU sanctions against Iran are giving the idea steam. One has to act when faced with a dilemma, after all – and that dilemma has been literally foisted in the faces of nonaligned countries the world around: “sanction Iran or else.”
Now they are just shrugging and finding ways around the maze of traps set up by the Department of Treasury. Why should they care much? What is the United States today but an unwieldy bully with few arrows left in its quiver?
This week the US is putting the screws on Belgian-based SWIFT. If you’ve ever wired money to another country, you have used SWIFT – it is essentially the messaging system between banks that alerts them to money transfers. The US wants to cut Iranian banks out of the SWIFT system, in effect making it practically impossible for anyone inside or outside Iran to send or receive funds.
Who knows what Iran will do if this comes to pass? It will probably just join non-aligned countries to create an alternative SWIFT, further undermining the western grip on global finance. Iran, after all, decided last year not to put up with the prospect of perpetual cyberwar with the west, and is forging ahead with plans to create a closed internet system for itself.
Each step the US and EU take to hinder Iran’s flexibility is countered with an innovative solution – one that includes more and more non-western players who are keen to craft a new global order. They used to worry about that kind of confrontation with the west, but the collapse of the current order has left few obstacles in their paths – and even offers incentives.
Like the proverbial finger in the dyke to block a leak…the water will always find another way out and possibly even bust open the dam. A warning to Washington: the burden of anxiety will always fall on the one who needs the dam most.
Sharmine Narwani is a commentary writer and political analyst covering the Middle East. You can follow her on twitter @snarwani.
“In the financial world, the United States cannot order SWIFT to kick Iran out. But it has leverage in that it can punish the Brussels-based organization’s board of directors individually, possibly freezing their assets or limiting their travel.”
February 17, 2012
Posted by aletho |
Economics, Timeless or most popular, Wars for Israel | BRIC, European Union, Goldman Sachs, India, Iran, United States, United States Department of Treasury |
Leave a comment
An examination of the proposed U.S. budget submitted by President Barack Obama to the U.S. Congress this week shows that although billions of dollars will be cut from domestic programs and the U.S. military, annual aid to Israel remains intact, and includes an increase of $25 million from last year.
Last year, the U.S. government gave $3.075 billion in unrestricted aid to Israel, and this year’s proposed budget includes $3.1 billion. This aid is given in addition to around $3 billion in loan guarantees which, unlike other loans, do not have to be paid back.
The cuts in this Congressional budget include an 18% cut in aid to former Soviet republics in Eastern Europe, all of which have much lower GDPs than Israel. In fact, Israel is the only country receiving US aid to be above the 50th percentile economically – Israel is ranked in the richest one-third of countries in the world.
The U.S. State Department will receive a 10% decrease in funding for its programs in Iraq, despite the increased role of the State Department following the withdrawal of the U.S. military. U.S. combat operations overseas will be cut 23%, largely due to the military pullout from Iraq.
President Obama proposed the budget, which equals $3.8 trillion and includes over $1 trillion in cuts, in order to address the massive deficit left by former President George W. Bush. A bi-partisan committee, known as the ‘budget supercommittee’, tasked with recommending cuts last October failed to reach an agreement on what to cut, leaving it up to the President to propose a budget that would significantly reduce the deficit.
U.S. aid to Israel has been a part of each annual Congressional budget since 1967, and the amount has increased over time. Upon taking office, Obama recommended that U.S. aid to Israel continue at the $3 billion a year rate for the next ten years, totaling at least $30 billion (without counting loan guarantees and gifts of weaponry). The U.S. Congress overwhelmingly agreed with this assessment.
February 16, 2012
Posted by aletho |
Economics, Progressive Hypocrite, Wars for Israel | Israel, Obama, United States Congress, United States Department of State |
Leave a comment
The first to discover that teachers make perfect scapegoats was George W. Bush. When he ran for president for the first time twelve years ago, Bush had a problem. He wanted lower taxes to be his rallying cry, but while taxes in Texas, the state where he was governor, were indeed low, the schools in Texas were notoriously bad.
The numbers are no better today: Texas ranks 47th in the county in literacy, 49th in verbal SAT scores and 46th in math scores. To blind the public to the evidence of what low taxes do, Bush produced evidence of a miracle: When it comes to education money is not what matters, he declared; what matters is holding teachers accountable. In Houston, Bush told voters, the superintendent of schools held teachers accountable, and as a result Houston saw a dramatic improvement in school quality, particularly when measured by high school graduation rates. So convincing was the miracle that as soon as he took office Congress agreed to pass the Bush tax cuts and the No Child Left Behind law.
Eight years later the “Texas miracle” was exposed. It turned out that the numbers had been cooked: Instead of the 1.5% drop-out rate that Houston had reported, the actual rate was somewhere between 25 and 50 percent. And in order to boost test results children who were considered weak in even just one subject were prevented from entering the 10th grade, the year in which the tests were administered. But by then the truth no longer mattered because the ideas that taxes are not needed to run a democratic government and that teachers, not budgets, are responsible for the failure of schools had invaded the body politic.
When Bush ran for office the rate of unemployment was low and there was a surplus in the government coffers, rather than a deficit. Today the economic situation is dire and most Americans believe that inequality is the biggest problem that the country faces. Occupy Wall Street blames the 1% — but the 1% and their elected officials have found someone else to blame: Bad teachers are back.
A new study just out from economists at Harvard and Columbia would seem to offer the proof. The study does not claim that the measurement of teachers will produce better students–this was Bush’s claim and it has already been exposed–but instead that the measurement of teachers will make students richer as adults.
President Obama echoed themes from the study when in his State of the Union Address, instead of acknowledging Occupy Wall Street, he stuck it to teachers: ”A great teacher can offer an escape from poverty to the child who dreams beyond his circumstance,” he said. “Give them [schools] the resources to keep good teachers on the job, and reward the best ones…and to replace teachers who just aren’t helping kids learn.”
Unlike the Texas miracle, the Harvard-Columbia revelations are not based on fraudulent numbers. But what is deeply problematic is the spin that the authors give to their findings. The study examined the incomes of adults who, as children in the 4th through the 8th grades, had teachers of different “Value Added” scores, with Value Added defined as improvement in the scores of students on standardized tests. The study claims that the individuals who had excellent teachers as children have higher incomes as adults; we will examine the validity of this claim below. But first we must ask what these higher incomes mean. When they were children, these individuals were poor. What the H-C authors fail to mention is that even when they had excellent teachers as children and therefore have higher incomes as adults, these individuals, despite their higher incomes, remain poor.
The devil is in the details: the average wage and salary of a 28 year old in the H-C study who had an excellent teacher was $20,509 in 2010 dollars, $182 higher than the average annual pay of all 28 year olds in the study. How does this compare to the average salary and wage of a 28 year old in this country? The authors excluded from their study people whose income was higher than $100,000. As we shall see, this exclusion is problematic; but to do the comparison we must do the same. The average salary and wage in 2010 of a 28 year old who earned less than $100,000 a year was $29,041, 42% higher than the income of a 28 year old in the H-C who had an excellent teacher. In other words, even if we accept the numbers that the authors of the H-C study choose to spin, having an excellent teacher cannot pull people out of poverty.
The exclusion of people with high incomes involved some 4,000 individuals, or 1.2% of the sample. The authors justify it by claiming that such people are outliers. But what if it turned out those high income earners had “bad” teachers? Including them in the study would have completely changed the results. Excluding a large number of the best performers from a study about the effect of teaching seems strange.
There’s more. While the H-C study found a statistically significant, if meaningless, relationship between the “value added” of teachers and incomes at age 28, the authors did not find a statistically significant result at age 30. Why? In the study the authors explain this by the small number of 30 year olds in their sample. In their interviews with the media and in public presentations the authors do not mention this result at all. Yet the number of 30 year olds in their sample is 61,639, and these are all students who went to school in the same city. Is this a small sample? To gain an appreciation for the size of the sample consider the fact that in order to estimate the unemployment rate that it publishes every month, the Bureau of Labor Statistics relies on a national survey of 60,000 households with an average of 1.95 adults in each. Surely if 120,000 peoples are a good size sample to study a labor force of 150 million people spread all over the country, a sample of 61,639 is a good size sample to study a population of fewer than 5 million elementary school students who all come from the same school system. By any measure the sample size is not only adequate, it is fantastically huge, and the result is not statistically significant.
But the statistically insignificant results for 30 year olds may have been inconvenient for the authors for another reason. An increase of $128 a year is small by any standard, so the authors resorted to estimating a lifetime increase in earnings due to this increase. To do that they assumed that the percentage increase in income, 0.9 of one percent, which they estimated for age 28, holds for each year of a person’s working life. And perhaps this is why the authors chose to ignore the results for the 30 year olds. All that their findings permit them to claim truthfully is that an excellent teacher increases average annual income by $128 at age 28, and that this effect disappears at age 30. But then there would have been nothing to report.
Doesn’t teacher quality matter? Not when it comes to explaining the deliberate assault on the wages of workers by executives with the support of most of our elected officials. A federal law permits states to pass the doublespeak Right to Work law. Boeing, a major recipient of government largess, has just moved production from Washington State to South Carolina because, according to Governor Nikki Haley, “We are fighting the unions every step of the way. We are a strong Right to Work state and going to stay that way.” The Supreme Court has recently ruled that executives can use shareholders’ money to their heart’s desire to influence elections. Executive pay remains totally out of control and totally unregulated. Government workers have lost the right to bargain collectively in several states. These are the laws that must be changed if we are to fight poverty. Does the president really believe that teachers can change all these laws by themselves when he says that “a great teacher can offer an escape from poverty?”
The attack on “bad teachers” is a dishonest diversion, and nothing more than a reincarnation of the Texas Miracle. The problem is the power of the 1%; the solution is to pass it to the 99%.
Moshe Adler teaches economics at Columbia University and at the Harry Van Arsdale Center for Labor Studies at Empire State College. He is the author of Economics for the Rest of Us: Debunking the Science That Makes Life Dismal (The New Press, 2010), which is available in paperback and as an e-book.
February 14, 2012
Posted by aletho |
Deception, Economics, Progressive Hypocrite, Science and Pseudo-Science, Timeless or most popular | George W. Bush |
Leave a comment
What’s Driving Economic Inequality
Let me begin with the good news. Our nation has tackled this problem before — and successfully so. A century ago, during the original “Gilded Age,” we experienced extremely high levels of inequality, levels comparable to those we are seeing today. Over the span of several decades, policymakers, backed by strong labor unions and other social movements, turned that inequality around. Through fair taxation and effective social programs and standards, we had achieved much lower levels of inequality by the middle of the twentieth century. We had laid the foundation for a strong and stable economy and put in place a middle class that was broader than any the world had ever seen. There is much to learn from that experience.
Executive compensation as a key driver of inequality
The Institute for Policy Studies has particular expertise in one aspect of our nation’s drift into deep and extreme inequality: executive compensation.
For nearly 20 years, we at IPS have been publishing an annual analysis of the upward spiral in CEO pay. Our Executive Excess series has helped track and explain this trend, which has contributed significantly to the rising share of national income that flows to our nation’s top 1 percent. Increases in executive compensation do not tell the whole story behind our growing economic divide, but they do offer an important lens into the broader problem.
Some select indicators of just how disproportionately large rewards for executives have become: The ratio between CEO and worker pay has risen from 42-to-1 in 1980 to 107-to-1 in 1990 to 325-to-1 in 2010.1
Average compensation for S&P 500 CEOs reached $10.8 million in 2010, more than six times the level for large company CEOs in 1980, after taking inflation into account, and triple the level in 1990.2
Executives and financial professionals account for 70 percent of the increase in the share of national income going to the top 0.1 percent between 1979 and 2005.3 Combined compensation for the top five executives by corporate enterprise increased as an average percentage of corporate profits from 5 percent in the period 1993-1995 to nearly 10 percent in the period 2001-2003.4
Why should policymakers be concerned about excessive executive compensation?
1. Excessive compensation encourages executive behavior that harms the broader economy
Over nearly two decades, my colleagues and I at the Institute for Policy Studies have examined how extremely high levels of compensation affect executive behavior. Such massive jackpots, we’ve found, give executives incentives to behave in ways that may boost short-term profits and expand their own paychecks at the expense of our nation’s long-term economic health.
Among our research findings:
- In last year’s annual Executive Excess report, we looked at the intersection between executive compensation and tax dodging. We found that among the top 100 highest-paid CEOs in 2010, 25 had made more in personal compensation than their companies had paid in federal income taxes.5
- In 2010, we found that CEOs of the 50 firms that had laid off the most workers since the onset of the economic crisis had made nearly $12 million on average, 42 percent more than the CEO pay average at S&P 500 firms as a whole.6
- In 2009, we found that the top five executives at the 20 banks that had accepted the most federal bailout dollars had averaged $32 million each in personal compensation during the three years leading up to the 2008 meltdown.7
- In 2004, we found that CEOs at companies which had outsourced the most U.S. jobs to other countries were rewarded with bigger paychecks than their peers. Average CEO compensation at the 50 firms that had outsourced the most service jobs increased by 46 percent in 2003, compared to a 9 percent average increase for all large company CEOs. Top outsourcers earned an average of $10.4 million, 28 percent more than the average CEO compensation of $8.1 million.8
- In 2002, we found that top executives at 23 companies under government investigation for their accounting practices had earned far more during the preceding three years than average CEOs. CEOs at the firms under investigation had earned an average of $60.1 million during 1999-2001, 65 percent more than the average of $36.5 million for all leading executives for that period.9
Tax dodging, mass layoffs, reckless financial deals, offshoring jobs, “creative accounting”—all of these appear to boost CEO pay. But they have dealt one body blow after another to the American middle class, leaving a deeply skewed distribution of income and wealth.
2. Extreme CEO-worker pay gaps undermine business enterprise effectiveness
Our nation’s long-term economic health depends to a great extent on the effectiveness of our U.S. enterprises. A growing body of research indicates that extreme inequality within firms leaves enterprises less productive and effective. A Stanford University review of several studies found that organizations with highly differentiated pay between top and bottom earners tended to experience a decline in employee morale and job satisfaction.10 Another study showed that in corporations with relatively narrow pay gaps, employees tended to produce higher quality products.11 Additional research indicates that wide pay gaps lead to higher employee turnover rates.12
John Mackey, CEO of Whole Foods, limits his cash compensation to no more than 19 times the average for workers at his firm. In the Harvard Business Review, he wrote “Because of the yawning gap between the leaders and the led, employee morale is suffering, talented performers’ loyalty is evaporating, and strategy and execution is suffering at American companies.”13
Peter Drucker, the father of modern management theory, pointed out in the early 1980s that in any hierarchy, every level of bureaucracy must be compensated at a higher rate than the level below. The more levels, the higher the pay at the top. This gives CEOs a personal interest in maintaining rigid hierarchies that are disempowering for workers. Drucker’s solution was to limit executive pay to no more than 20 times the compensation of their employees.14 A landmark Brookings Institution report by David Levine supported this general view, stating “large differences in status can inhibit participation.”15
Jim Collins, the author of several best-selling books on management science, spent five years trying to determine “what it takes” to turn an average company into a “great” one. He eventually identified 11 firms that had successfully generated off-the-charts stock returns over 15 years. Not a single one had a high-paid CEO. A celebrity CEO, Collins wrote, turns a company into “one genius with 1,000 helpers.”16
Recent reforms to address excessive executive compensation
Executive pay is not just an issue for shareholders. As the Wall Street meltdown made vividly clear, excessive pay packages contribute to a reckless corporate culture that endangers the well-being of the broader public. Responsible action is needed to encourage more rational pay practices.
Dodd-Frank Pay Reforms: In the wake of the 2008 crash, Congress did include a number of modest executive compensation provisions in the Dodd-Frank financial reform bill. One of the most innovative of these provisions, Section 953b, requires all U.S. corporations to compute and report the ratio between CEO and median employee pay. This disclosure requirement will improve information available for shareholders and the public on a metric fundamental to enterprise success. Hopefully, it will also encourage corporate boards to narrow this gap by raising median worker pay and/or reducing pay at the top.17
However, in the face of an intense backlash from corporate lobby groups, the SEC has delayed implementation of this new law. Regulators are facing strong pressure to water down several additional Dodd-Frank pay provisions, including Section 956, which would give regulators the power to prohibit pay packages for financial executives that encourage inappropriate risks.
Limits on the Tax Deductibility of Executive Pay: Congress also set an important precedent in the Troubled Asset Relief Program by establishing a $500,000 cap on the tax deductibility of executive compensation at bailout firms. A similar provision was included in the 2010 health care reform legislation with regard to health insurance companies. These provisions took an important step towards filling a loophole in the tax code that encourages excessive pay.
Currently, there are no meaningful limits on how much corporations can deduct from their taxes for the expense of executive compensation. The more they pay their CEO, the more they can deduct from their taxes. Other taxpayers bear the brunt of this loophole, either through the increased taxes needed to fill the revenue gaps or through cutbacks in public spending. A tax deductibility cap on executive compensation should be established for all corporations. Ideally, it would deny all firms tax deductions on any executive pay that runs over 25 times the pay of a firm’s lowest-paid employee or $500,000, whichever is higher.
A broader agenda to reverse extreme inequality
While Congress has made some small steps forward in recent years, much more needs to be done to rein in executive pay, as part of a broader effort to reverse extreme inequality. This broad agenda will need to include initiatives to lift up the bottom through living wages and more accessible high-quality health care and education, as well as efforts to address corporate concentration, campaign finance laws, and other obstacles to shared prosperity. But a look back at the previous era’s efforts to tackle inequality reveals that one of those reformers most important tools was progressive taxation.
In the middle of the last century, the U.S. tax system did a great deal to offset maldistributions of income and wealth. A major reason corporate boards did not compensate executives at such exorbitant levels during that period was that the bulk of that excessive pay would have simply been taxed away.
During the 1950s and early 1960s, the top marginal tax rate on income over $400,000 a year (the equivalent of less than $3 million today) faced a tax rate just over 90 percent. During that time, the share of the nation’s total pre-tax income going to the top 1% hovered around 10 percent, according to one academic study.18 As taxes on the wealthy have declined over the past 50 years, we’ve seen a steady increase in wealth and income concentration at the top. Today, with a top marginal rate of only 35 percent, the top 1% enjoy more than 20 percent of the nation’s income.19 Not only did the “high-tax” decades coincide with lower inequality rates, they were also marked by relatively high GDP growth rates.
A recent report by the Congressional Budget Office found similar trends towards rising inequality in after-tax income during the period 1979-2007. According to their calculations, the top 1 percent of the population with the highest income saw an increase in their average real after-tax household income of 275 percent during this period, compared to only 65 percent for the rest of the highest quintile (the 81st through 99th percentiles); 37 percent for the population in the middle of the income scale (the 21st through 80th percentiles); and 18 percent for the lowest quintile.20
Preferential treatment and loopholes have allowed the richest Americans to pay far less than the statutory tax rates. The richest 400 U.S. taxpayers have seen their effective tax rate decline from over 40 percent of their income in 1961 to just 18.1 percent in 2010.21 In 2009, the most recent data available, 1,500 millionaires paid no income taxes, largely because they made use of off-shore tax schemes, according to the Internal Revenue Service.22
Key elements of tax reform to reverse extreme inequality
This section draws heavily from the forthcoming book by my Institute for Policy Studies colleague Chuck Collins, 99 to 1: How Wealth Inequality is Wrecking the World and What We Can Do About It (Berrett-Koehler, March 2012).
New income tax brackets for the 1 percent. Under our current tax rate structure, households with incomes over $350,000 pay the same top income tax rate as households with incomes over $10 million. In the 1950s, there were 16 additional tax rates over the highest rate (35 percent) that we have today.
A tax on financial speculation. The richest 1 percent of Americans contributed to the 2008 economic meltdown by moving vast amounts of wealth into the speculative shadow banking system. Our society is still paying the mammoth social costs of this meltdown — through home foreclosures, unemployment, and the destruction of personal savings. A modest federal tax on every transaction that involves the buying and selling of stocks and other financial products would both generate substantial revenue and dampen short-term speculation. For ordinary investors, the cost would be negligible. A financial speculation tax would amount to a tiny insurance fee to protect against financial instability.
A higher tax rate on income from wealth. Giving tax advantages to income from wealth also encourages short-term speculation. With carefully structured rate reform, we can end this preferential treatment for capital gains and dividends and, as Warren Buffett and other analysts have noted, encourage long-term investing.
A progressive estate tax on the fortunes of the 1 percent. The wealthiest Americans have all benefited from generations of investments in pubic goods that have left the United States with an infrastructure — in everything from education and roads to dispute resolution — that enables wealth creation. Our wealthy have a responsibility to give back to the society that has given them so much. The current estate tax on inherited wealth stands at 35 percent and only applies to estates over $5 million ($10 million for a couple). Congress could raise additional revenue from those with the greatest capacity to pay by establishing a progressive estate tax with graduated rates and a 10 percent surtax on the value of an estate above $500 million, or $1 billion for a couple.
An end to tax haven abuse. By one estimate, the use of tax havens by corporations and wealthy individuals costs the federal treasury $100 billion a year.23 These havens are transferring wealth out of local communities into the foreign bank accounts of the world’s wealthiest and most powerful.24 Tax havens, or more accurately “secrecy jurisdictions,” can also facilitate criminal activity, from drug money laundering to the financing of terrorist networks.
A wealth tax on the top 1 percent. A “net worth tax” could be levied on household assets, including real estate, cash, investment funds, savings in insurance and pension plans, and personal trusts. Such a tax could be calibrated to tax wealth only above a certain threshold. For example, France’s solidarity tax on wealth only kicks in on asset value in excess of $1.1 million.
The elimination on the cap on social security withholding taxes. Extending the payroll tax to cover all wages, not just wage income up to $110,100, would be an important step. Some of our richest Americans are done paying withholding taxes in January, while ordinary working people pay all year.
Conclusion
Our current levels of extreme inequality did not suddenly appear. They have grown steadily over the past 30 years. Reversing this inequality trend will be a long-term challenge. But we have transformed a highly divided nation into a more stable and equitable society before. We can certainly do it again.
Sarah Anderson is director of the Institute for Policy Studies’ Global Economy Project.
NOTES
1 Figures from 1980 and 1990 are from BusinessWeek, April 26, 1993. Figure for 2010 is from Sarah Anderson, Chuck Collins, Scott Klinger, Sam Pizzigati, “Executive Excess 2011: The Massive CEO Rewards for Tax Dodging,” Institute for Policy
2 Ibid.
3 The share of national income (excluding capital gains) received by the top 0.1 percent increased from 2.83 percent in 1979 to 7.34 percent in 2005. Source: Jon Bakija, Adam Cole, and Bradley T. Heim, “Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from U.S. Tax Return Data,” National Bureau of Economic Research, October 2010. Available at: http://www.nber.org/public_html/confer/2010/PEf10/Bakija_Heim_Cole.pdf
4 Lucian A. Bebchuk and Yaniv Grinstein, “The Growth of Executive Pay,” Oxford Review of Economic Policy, Summer 2005. Available at: http://www.law.harvard.edu/faculty/bebchuk/pdfs/Bebchuk-Grinstein.Growth-of-Pay.pdf
5 Sarah Anderson, Chuck Collins, Scott Klinger, and Sam Pizzigati, “Executive Excess 2011: The Massive CEO Rewards for Tax Dodging,” Institute for Policy Studies, August 31, 2011. Available at: http://www.ips-dc.org/reports/executive_excess_2011_the_massive_ceo_rewards_for_tax_dodging/
6 Sarah Anderson, Chuck Collins, Sam Pizzigati, and Kevin Shih, “Executive Excess 2010: CEO Pay and the Great Recession,” Institute for Policy Studies, September 1, 2010. Available at: http://www.ips-dc.org/reports/executive_excess_2010
7 Sarah Anderson, John Cavanagh, Chuck Collins, and Sam Pizzigati, “Executive Excess 2009: America’s Bailout Barons,” Institute for Policy Studies, September 2, 2009. Available at: http://www.ips-dc.org/reports/executive_excess_2009
8 Sarah Anderson, John Cavanagh, Chris Hartman, and Scott Klinger, “Executive Excess 2004: Campaign Contributions, Outsourcing, Unexpensed Stock Options and Rising CEO Pay,” Institute for Policy Studies, August 31, 2004. Available at: http://www.ips-dc.org/reports/executive_excess_2004
9 Sarah Anderson, John Cavanagh, Chris Hartman, Scott Klinger, and Holly Sklar, “Executive Excess 2002: CEOs Cook the Books, Skewer the Rest of Us,” Institute for Policy Studies and United for a Fair Economy, August 26, 2002. Available at: http://www.ips-dc.org/reports/executive_excess_2002_ceos_cook_the_books_skewer_the_rest_of_us
10 Jeffrey Pfeffer, “Human Resources from an Organizational Behavior Perspective: Some Paradoxes Explained,” Journal of Economic Perspectives, Vol. 21, 2007. Available at: http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.21.4.115
11 Douglas Cowherd and David Levine, “Product Quality and Pay Equity Between Lower-Level Employees and Top Management,” Administrative Science Quarterly, Vol. 37, 1992. Available at: http://findarticles.com/p/articles/mi_m4035/is_n2_v37/ai_12729185/
12 Matt Bloom and John Michel, “The Relationships Among Organizational Context, Pay Dispersion, and Managerial Turnover,” Academy of Management Journal, 2002. Available at: http://www.jstor.org/pss/3069283 See also James Wade, Charles O’Reilly III and Timothy Pollock, “Overpaid CEOs and Underpaid Managers: Fairness and Executive Compensation,” Organization Science, 2006. Available at: http://test.scripts.psu.edu/users/t/x/txp14/pdfs/os06.pdf
13 John Mackey, “Why Sky-High CEO Pay Is Bad Business,” Harvard Business Review, June 17, 2009. Available at: http://blogs.hbr.org/hbr/how-to-fix-executive-pay/2009/06/why-high-ceo-pay-is-bad-business.html
14 Peter F. Drucker, The Changing World of the Executive. New York: Times Books, 1982, p. 22.
15 David I. Levine, Reinventing the workplace: how business and employees can both win. Brookings Institution Press, April 1, 1995, p. 53.
16 Jim Collins, “Good to Great,” Fast Company, October 2001. Available at: http://www.jimcollins.com/article_topics/articles/good-to-great.html
17 See: Institute for Policy Studies Comments to the SEC on Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, March 16, 2011. Available at: http://www.sec.gov/comments/df-title-ix/executive-compensation/executivecompensation-62.pdf
18 Thomas Piketty and Emmanuel Saez, “Income Inequality in the United States, 1913-1998,” Quarterly Journal of Economics, 118(1), 2003. Updated at http://emlab.berkeley.edu/users/saez.
19 Ibid.
20 Congressional Budget Office, “Trends in the Distribution of Household Income Between 1979 and 2007,” October 2011. Available at: http://www.cbo.gov/ftpdocs/124xx/doc12485/10-25-HouseholdIncome.pdf
21 Sam Pizzigati, “The New Forbes 400— and Their $1.5 Trillion,” Institute for Policy Studies, September 25, 2011. Available at: http://inequality.org/forbes-400-15-trillion.
22 Amy Bingham, “Almost 1,500 millionaires Do Not Pay Income Tax,” ABC News, August 6, 2011. Available at: http://abcnews.go.com/Politics/1500-millionaires-pay-income-tax/story?id=14242254#.TrwQYWDdLwN
23 U.S. Senate, “Tax Haven Banks and U.S. Tax Compliance,” Staff report, Permanent Subcommittee on Investigations, July 17, 2008. See: http://hsgac.senate.gov/public/_files/071708PSIReport.pdf
24 Nicholas Shaxson, Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens, 2010. See: http://treasureislands.org/
This article is adapted from Sarah Anderson’s testimony to the Senate Budget Committee on Inequality, Mobility, and Opportunity, from Sarah Anderson, Global Economy Program Director
February 9, 2012
Posted by aletho |
Corruption, Economics, Timeless or most popular | Dodd–Frank Wall Street Reform and Consumer Protection Act, Executive pay |
Leave a comment
A top official at Korea’s banking sector says Seoul’s trade flow with Iran will not be constricted by western sanctions despite causing a halt in cooperation with Iran’s Bank Tejarat.
“We halted wire transfers of cash to accounts of Bank Tejarat, but this doesn’t hurt exporters at all. Most of exporters take payments from the Central Bank of Iran anyway,” Korea Herald reported Jeon Gwang wook head of the foreign exchange desk at the Industrial Bank of Korea (IBK) as saying.
Jeon added that the extended sanctions are unlikely to slow trade flows with Iran as most Korean exporters can still make settlements with Iran’s Central Bank using accounts based on the won (Korea’s national currency).
On December 31, 2011, US President Barack Obama signed into law new sanctions against Iran, which seek to penalize foreign institutions that do business with Iran’s central bank and oil sector.
Under pressure by US-led sanctions against Tehran, two state-run South Korean banks, Woori Bank and the Industrial Bank of Korea, halted transactions with Iran’s Bank Tejarat as of January 23.
The US demands that Seoul halt trade activities with Iran which would reportedly jeopardize over $7 billion in South Korea’s annual exports and about 10 percent of its crude imports.
February 9, 2012
Posted by aletho |
Economics, Wars for Israel | Central Bank of the Islamic Republic of Iran, Iran, Sanctions against Iran, South Korea |
Leave a comment
Greece’s two largest unions have announced a 48-hour strike over the new austerity measures endorsed by the government in return for bailout loans.
The unions, General confederation of Workers of Greece (GSEE) and Civil Servants Supreme Administrative Council (ADEDY), announced on Thursday that their members will go on a two-day strike from Friday in protest at the controversial decision.
“We will hold a general strike on Friday and Saturday along with the civil servants’ union,” said a spokeswoman with GSEE which represents the private sector.
ADEDY’s Secretary General Ilias Iliopoulos described the measures as “painful” which will “create misery for youths, unemployed and pensioners do not leave us much room.”
“We are moving to a social uprising,” said Iliopoulos.
Greece has been the scene of repeated strikes since the country first resorted to bailouts from international lenders in 2010.
Leaders of the three parties backing Greece’s coalition government approved new austerity measures on Wednesday but failed to agree to creditors’ demands to make 300 million euros ($398 million) in pension cuts.
The country’s Prime Minister Lucas Papademos still hopes that the coalition leaders will strike a comprehensive deal by Thursday evening, his office said on Wednesday.
To secure a bailout package of 130 billion euros, Athens must first persuade the troika — the European Union (EU), International Monetary Fund (IMF), and the European Central Bank (ECB) — that it will implement long-delayed reforms and make further spending cuts.
Greece’s current debt stands at 340 billion euros ($440 billion) — a sum that equals around 31,000 euros debt per person in the country of 11 million people.
The country has, accordingly, the biggest debt burden in proportion to the size of its economy in the entire 17-nation eurozone.
February 9, 2012
Posted by aletho |
Economics, Solidarity and Activism | Austerity, European Central Bank, European Union, General Confederation of Greek Workers, Greece, International Monetary Fund |
Leave a comment
Caracas – Member countries of Latin America’s alternative integration bloc, the Bolivarian Alliance for the Peoples of Our America (ALBA), met in the Venezuelan capital this weekend in order to discuss the advancement of the organisation at its 11th official summit.
Following a meeting on Friday to draft proposals and set an agenda, the presidents discussed a series of themes relating to ALBA’s role within the regional economy and various foreign policy issues. The body also approved several declarations relating to global political concerns, including pronouncements on Syria and the current diplomatic altercation between the UK and Argentina with relation to the Falkland Islands.
Bank of the ALBA
At the end of the summit’s first day, Venezuelan President Hugo Chavez announced that member countries had agreed to contribute 1% of their international reserves towards the bloc’s main bank in order to create a reserve fund.
The Bank of the Alba was established in 2008 with the intention of providing economic support to people-centred regional projects and to contribute to sustainable social and economic development across the region. The Bank is also cited as acting as a continental alternative to the International Monetary Fund.
At the summit, ALBA member countries agreed that the financial reinforcement of the bank would be pivotal to the development of the bloc. Chavez also reaffirmed Venezuela’s commitment to funding regional development projects by announcing his intention to increase petroleum production in the Orinoco Belt to that end.
“We should increase oil production from 3 to 3.5 million barrels a day, and by 2014 we should be at 4 million barrels. This is going to allow us greater flexibility in all of these projects,” said the head of state.
According to Chavez, Venezuela’s contribution to the bank will amount to around US$300 million.
Regional Currency
The heads of state also discussed the possibility of increasing the commercial use of the sucre, the bloc’s virtual currency. The sucre is currently used for direct trading between the ALBA countries, allowing them to circumvent the U.S dollar and minimise the foreign-exchange risk.
According to Ricardo Menendez, Venezuelan Vice-minister of Production and Economy, 431 financial transactions using the sucre were carried out between ALBA countries last year, amounting to over US$216 million worth of trade. However, Ecuadorean president, Rafael Correa, called for the use of the currency to be increased.
“Those free trade agreements, free markets, [with]…zero indemnity, annihilating the weak, that’s suicide for our countries…We should encourage fair trade; unite our reserves and financial capacity in the Bank of the Alba and avoid using foreign currencies,” he urged.
Daniel Ortega, the Sandinista president of Nicaragua, also expressed his desire to boost the use of the bloc’s currency. In statements, Ortega said that he hoped to begin using the sucre within the next few weeks, subject to approval from Nicaragua’s national assembly.
Anti-imperialist Agenda
As well as condemning what it referred to as the “systemic policies of destabilisation and interventionism” currently being implemented in Syria, the bloc also signed a document in support of Puerto Rico’s right to self-determination and full independence.
Further, ALBA reiterated its support for the Argentinean government in its diplomatic dispute with the UK over the Falkland Islands. In a special communication, the bloc called for a negotiated settlement to the Falkland’s question which does not violate the United Nation’s 31/49 resolution. The ALBA’s statements come as Venezuelan President Hugo Chavez also expressed his solidarity with the Argentinean President Cristina Kirchner on Saturday, stating that the South American nation would “not be alone” in the event of a conflict.
Correa suggested that the bloc should move to impose sanctions against the UK government due to its unwillingness to engage in dialogue with the Argentinean government to resolve the issue. Last week, the UK’s Foreign Secretary, William Hague, revealed that he had sent a warship to the Falklands as a “routine” measure.
Chavez has confirmed that the ALBA group will now review what sanctions may be taken in response to the “negative dialogue” and “ridiculous military threat” from David Cameron’s coalition government.
The ALBA also struck out against the Organisation of American States for its exclusionary stance with regards to Cuba. In accordance with a proposal from Correa, the bloc said it would consider not attending the Summit of the Americas, due to be held in Colombia this April, if Cuba were not invited.
“We could take this to the host country, which is the Colombian government, with whom we have re-established political and commercial relations… I am in agreement with Rafael Correa, if Cuba isn’t invited, we will consider not attending, it’s a matter of dignity,” concluded Chavez.
Helping Haiti
As part of the summit, the ALBA agreed to step up its humanitarian assistance to Haiti through the formation of an ALBA-Haiti work plan. The project will be aimed at providing emergency relief and facilitating reconstruction efforts in the Caribbean nation, which is still suffering the effects of the earthquake of January 2010.
Member countries also agreed to establish a Haiti fund in order to execute the projects and provide the country’s energy plants with fuel. Details will be finalised at a foreign ministers meeting in Haiti at the beginning of March.
In comments to the Venezuelan press, Haitian President Michel Martelly thanked the ALBA for its continued efforts to help the Caribbean nation in the wake of its humanitarian catastrophe. He added that the new ALBA plan would go towards alleviating extreme poverty in Haiti. Venezuela and Haiti also signed an independent bilateral agreement to increase cooperation between the two countries.
ALBA Expands
In the final act of the summit, the ALBA ratified St. Lucia and Surinam as two new honorary members to the bloc and confirmed that soon both countries would be full members of Venezuela’s energy integration organisation, Petrocaribe.
Other proposals that the group will now pursue include the creation of regional schools for social movements and the establishment of a communications secretary general; as well as the proposal to create a “defence counsel” for the bloc, which was submitted by Bolivian President Evo Morales.
Formed in 2004 by Venezuela and Cuba, the ALBA is an alternative to U.S free trade agreements in the region and seeks to address unjust terms of trade by engaging in commerce on the basis of solidarity and cooperation. ALBA nations currently include; Cuba, Venezuela, Nicaragua, Ecuador, Bolivia, Dominica, St. Vincent and the Grenadines and Antigua and Barbuda. The governments of Haiti, Surinam and St. Lucia also attended the event as “participant observers”.
February 6, 2012
Posted by aletho |
Economics, Solidarity and Activism, Timeless or most popular | ALBA, Bolivarian Alliance for the Americas, Hugo Chávez, Rafael Correa, Venezuela |
Leave a comment
Sri Lanka may follow India in avoiding US sanctions on Iranian crude by purchasing it in a currency other than dollars, officials said on Sunday.
In a sign that US officials will struggle to enforce the ban, a number of countries are seeking ways to avoid the sanctions.
The Indian Ocean island nation is facing the most potential collateral damage from the sanctions, which are meant to cut off the dollars Washington claims are used to fund Iran’s nuclear ambitions.
Sri Lanka imports 93 percent of its oil from Iran, OPEC’s second biggest producer, and its sole refinery, the 50,000 barrel-per-day Sapugaskanda plant, can only refine Iranian crude and three or four others that are in short supply.
US Deputy Assistant Secretary of the Treasury for Terrorist Financing, Luke Bronin, flew in for a one-day visit on Thursday to meet a host of government officials to explain the options available and the impact on Sri Lanka.
A senior government official directly involved in Sri Lanka’s payments to Iran who met with Bronin said he offered a potential solution.
“I don’t know whether it was deliberate or it was accidental, but he said they are only concerned about transactions done in dollars, so that was a hint to us,” the official told Reuters on condition of anonymity.
Sri Lanka’s central bank pays its Iranian counterpart on behalf of the state-owned Ceylon Petroleum Corporation through the Asian Clearing Union (ACU), a nine-nation trade clearing house set up in Tehran in 1974.
Sri Lanka would be following India’s lead in seeking to avoid the sanctions. New Dehli is currently considering rupee-denominated transactions and other similar options to pay for its Iranian crude needs.
“It gives us the option of doing it in Indian rupees or some other currency, although we would prefer to do it in Sri Lankan rupees,” the official said.
President Mahinda Rajapaksa last week complained Sri Lanka and other small nations were being unfairly squeezed in a fight not of their making, and said he had asked his officials to find out what alternatives the United States could offer.
The effectiveness of the sanctions depends largely on how well policed they are internationally. Russia has already stated its opposition to the sanctions, with Foreign Minister Sergey Lavrov saying last week they would only “stifle” the Iranian economy and hurt the population.
If a number of larger economies avoid the sanctions and continue trading with the oil-rich nation then the West will struggle to inflict further damage on the Iranian economy.
(Reuters, Al-Akhbar)
February 5, 2012
Posted by aletho |
Economics, Wars for Israel |
Leave a comment
Finally, India is getting its act together in its Iran policy. The ‘breaking news’ that India proposes to robustly explore expanding its trade with Iran signals a new approach to stepping up oil imports from Iran while at the same time rectifying the imbalance in trade, which heavily favours Iran traditionally, and to make this happen within a paradigm that resolves the current problem over the payment mechanism.
The new thinking is an acknowledgement of Iran’s importance as a strategic partner. That is where the rub lies. Delhi has lumped far too long the blackmail tactic by Washington with the malicious intention to erode India’s ties with Iran. Indeed, as result, for no real fault of Tehran, the India-Iran relationship suffered needless setbacks in the recent years.
Delhi should never accept that this is a zero sum game – India’s relationships with the US and Iran respectively. Iran is far too important a regional power in India’s extended neighbourhood to be neglected. There is no need to dilate on this thought.
Other Asian countries like Japan, South Korea or Malaysia have successfully managed to have positive relationships with both Iran and the GCC states. Also, GCC states themselves have maintained highly nuanced relationships with Iran. In a long term perspective, it is far from inevitable that Iran’s rise is an irreconcilable eventuality for the GCC states.
Much of the present-day tensions in the Persian Gulf is also to be attributed to the imperial policy of ‘divide-and-rule’ that the West continues to pursue in the region for the sake of perpetuating their hegemony. Finally, the US-Iran standoff itself is increasingly becoming unsustainable if Washington is to optimally develop a regional strategy. The point is, Iran has already bolted away.
China sees all these trends very clearly and is successfully developing a multi-tiered regional strategy that creates space for pursuing fruitful relations with Iran and GCC – and even Israel – alike.
Indeed, it is also best for a healthy US-India partnership that it is an equal relationship where neither side takes undue advantage or tries to browbeat or resorts to prescriptive approaches and arm-twisting. In this case, the US policy toward Iran also happens to be vacuous, lacking sincerity of purpose; it is opaque and brittle – and increasingly, US comes to realise that even its European allies are reluctant to follow its lead. Therefore, it is simply appalling that US has chosen to harbour expectations of dictating to Delhi the directions and content of its Iran policy.
Of course, the American side is not to bear the entire blame, either. Somehow, the Indian elites (including bureaucrats) and strategic pundits have come to develop an atavistic fear that US-Indian partnership is highly perishable unless Delhi keeps harmonising its policies with the US global strategies even by sacrificing its interests. This sort of inferiority complex is completely unwarranted.
The heart of the matter is that the US is a highly experienced practitioner of diplomacy. If it began abandoning its historic cussedness toward India sometime during Bill Clinton administration’s second term, it was because Washington saw the growth potential of India and the great possibilities that would arise for a beneficial relationship.
Even today, that consideration is the prime mover of the US polices toward India. It is a well-known fact that after being grumpy for a few weeks after India spurned the US offer for the 10-billion dollar multi-purpose aircraft tender, Washington moved on.
We could also learn from the Americans – how doggedly they keep pursuing their regional strategies through the Afghan endgame, no matter what Delhi thinks of it. Suffice to say, the high probability is that India’s Iran policy may displease Washington for a while and then life will move on. As for the fear complex of the Indian elites or pundits, it is borne more out of their own insecurities vis-a-vis the US establishment and it should remain their private affair.
February 3, 2012
Posted by aletho |
Economics | India, Iran |
Leave a comment
Sri Lanka has lashed out at the recent US-backed sanctions targeting the Iranian energy sector, stressing that the bans will inflict heavy losses on the country’s economy.
Sri Lankan President Mahinda Rajapakse said Tuesday that the island’s only oil refinery is designed to work with Iranian light crude and any disruption to oil imports from Iran deals a blow to Colombo.
He also noted that by imposing an embargo on the Iranian oil industry, the US and its Western allies “are not punishing Iran, but us… the small countries.”
On December 31, 2011, US President Barack Obama signed into law new sanctions which seek to penalize countries importing Iran’s oil or doing transaction with the country’s central bank.
In their latest meeting in Brussels on January 23, EU foreign ministers also imposed new sanctions on Iran which include a ban on purchasing oil from the country, a freeze on the assets of Iran’s Central Bank within the EU, and a ban on the sale of diamonds, gold and other precious metals to Iran.
The United States, Israel and some of their allies accuse Tehran of pursuing military objectives in its nuclear program and have used this pretext to impose four rounds of international embargos and a series of unilateral sanctions against the Islamic Republic.
Iran has refuted the allegations, arguing that as a signatory to the Nuclear Non-Proliferation Treaty and a member of the International Atomic Energy Agency, Tehran has a right to use nuclear technology for peaceful use.
February 1, 2012
Posted by aletho |
Economics, Timeless or most popular, Wars for Israel | Sanctions against Iran |
Leave a comment
Washington’s double-edged sword of policies towards the Islamic Republic is not only exhausting the patience of the Iranian nation but it is provoking the ire of international conscience as well.
Goaded by Washington, EU foreign ministers decided on January 23 to impose a ban on oil imports from Iran under the fickle excuse that the country is pursuing a clandestine nuclear weapons program.
In a recent stance, Iran has threatened that it would never let a situation prevail where regional states could sell their oil while Iran couldn’t. Ali Akbar Velayati, senior adviser to the Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei, has said, “When there is an absence of Iranian supply, oil prices will soar up dramatically and the western countries are well aware of this fact; However, Iran will never allow itself to land in a situation in which it cannot sell oil but other regional states can.”
It hardly needs saying that such a firm stance on the part of Iran has been given considerable thought and that the European Union should be prepared to face the consequences of their irrationality and blind servitude to Washington.
Earlier Iran had warned that it would close the Strait of Hormuz, a move which, as the IMF has said, “could trigger a much larger price spike including by limiting offsetting supplies from other producers in the region.”
The sanctions on Iran oil, which will be effective in July, will surely have drastic repercussions for the European Union as Iran is mulling banning the sale of oil to Europe, a proactive move which will salvage the country’s economy on the one hand and will also lead to a drastic hike in oil prices on the other.
Undoubtedly, the EU decision to impose sanctions on Iran’s oil exports is, as Velayati has said, “a political maneuver,” and that “Iran doesn’t need any favor from any country to sell its oil, because global demand is always there.”
In the long run, Western oil firms and consumers may “emerge the biggest losers.” The IMF has predicted that crude oil prices could rise up to 30 percent namely to over USD 140 per barrel if Iran ever decided to retaliate by halting its oil exports altogether. Saudi Arabia has vowed to fill the gap.
But what if Saudi Arabia is bluffing? What if she cannot make up for the supply deficiency?
At all events, oil is fungible and Iran will easily find its own customers in Asian markets.
Europe has seen better days and now is not surely the best time for the imposition of sanctions on Iran’s oil as they will suffer most. For some European countries such as Italy, Spain and Greece, it will not be really easy to participate in the ban on Iran oil as they largely rely on Iran imports. As for Greece which is receiving oil from Iran on credit, it will be an utterly wrong decision to join other European countries which have secret plans to disintegrate the country.
Much to the chagrin of Washington and the Zionist regime, a number of countries such as China, India, Russia, Turkey, Japan, and South Korea have already refused to abide by the new measures. Russia has slammed the new package of sanctions and in a tough-worded statement, the Russian Foreign Ministry described the EU move as “deeply erroneous.”
“Under such kind of pressure Iran will make no concessions and no correction of its policy,” it said. Foreign Minister Sergei Lavrov told reporters that there was nothing to prove that Iran was trying to build an atomic weapon.
Russia has also warned the West against a US-led invasion of Iran, saying that this would incur a chain reaction and that the catastrophic consequences will affect the entire region.
It is manifest that Iran will do without the EU and will find its customers elsewhere in Asian markets. In other words, Iran will not lose in the passive war of sanctions engineered by Washington.
Indeed, sanctions are to be seen as part of Washington’s policy of coercion to break the back of the Iranian government and bring the nation to its knees. However, it should be noted that Iran has been mercilessly under severe sanctions for over 30 years and that it has turned the sanctions into opportunities to attain self-sufficiency and stand on its feet again. The entire gamut of the sanctions designed and spurred by the US and now followed by the EU is also tailored to suit the interests of Israel, the archenemy of Iran and thus the bosom buddy of Washington.
Ever since its inception, the Islamic Republic has been the target of Washington’s inveterate animosity.
In his book Spider’s Web: The Secret History of How the White House Illegally Armed Iraq (1993), Alan Friedman reveals how the US government aided the regime of the executed dictator Saddam Hussein in his invasion of Iran. Ironically, the once good pal of the United States suddenly turned into a parasite to be eliminated from the face of the earth. According to Friedman, Washington generously doled out its assistance in various forms to Iraq including billions of dollars worth of economic aid, the sale of dual-use technology, non-US arms, military intelligence, Special Operations training, and active participation in war against Iran. An Atlanta branch of Italy’s largest bank, Banca Nazionale del Lavoro funneled over USD 5 billion to Iraq from 1985 to 1989. This piece of information had been concealed by the CIA.
An appalling report revealed that the US government provided Saddam’s regime with chemical weapons. Released on May 25, 1994 by the US Senate Banking Committee, the report detailed the export of pathogenic (‘disease producing’), toxigenic (‘poisonous’), and other biological materials to Iraq after licensing by the US Department of Commerce. The report revealed 70 shipments (including Bacillus anthracis) from the US to Iraq over a span of three years.
The Iraqi regime used the chemical weapons provided by the US against the Iranian combatants and civilians, thus leaving them in a life-in-death situation. Around 100,000 Iranians were affected by nerve and mustard gases, and around one in 10 died before receiving any medical treatment. About five to six thousand are still under medical treatment, of whom around a thousand are critically ill.
The Iranian chemical victims are still dying on a daily basis.
So, Washington’s enmity towards the Islamic Republic goes far beyond its peaceful nuclear program which has constantly been used as a political leverage to stunt the economic and political growth of an anti-imperialism state and prevent the emergence of a Muslim superpower.
The depiction of Iran as a nuclear nightmare and as a global threat is only a saga manufactured by Washington in order to smother a voice so overpoweringly critical of the myriad morbid policies of a government whose American dream is dead and gone.
~
Dr. Ismail Salami is an Iranian writer, Middle East expert, Iranologist and lexicographer. He writes extensively on the US and Middle East issues and his articles have been translated into a number of languages.
January 28, 2012
Posted by aletho |
Economics, Timeless or most popular | European Union, Iran, Sanctions against Iran |
Leave a comment
President Barack Obama blew a kiss to Apple in the State of the Union speech, praising the entrepreneurial spirit of its founder, the late Steve Jobs, as the cameras panned to his widow in the audience.
Obama’s timing couldn’t be weirder. In the last month, Apple has released a damning audit which found that almost 100 of Apple’s supplier factories force more than half their workers to exceed a 60-hour week. The company announced responsibility for aluminum dust explosions in Chinese supplier factories that killed four workers and injured 77. Hundreds more in China have been injured cleaning iPad screens with a chemical that causes nerve damage.
Apple was just subjected to a “This American Life” radio special reporting on its abysmal factory conditions in China (Jon Stewart gigged ‘em on the issue, too). Last weekend a front-page New York Times story asked why the company offshored all of its manufacturing, mostly to China. (The answer is found in the what its executives call “flexibility.” Tens of thousands of workers there live in factory dorms on-site, where, the Times reports, they are woken in the middle of the night and forced onto 12-hour shifts when Apple decides a product needs tweaking.)
In the face of all this bad press, the tech darling’s response has been to reveal its supplier factories and to announce a partnership with the Fair Labor Association to do stepped-up factory inspections. The FLA is the partly corporate-funded group that until now only monitored apparel factories, and which Nike helped establish after its own scandals in the ’90s.
In sum, Apple is now doing what Nike has been doing for nearly 15 years: the apology-plus-transparency formula, straight out of the manuals offered by “reputation management” consultants.
This was certainly enough for most mainstream media and even some activists. Some were a bit more dubious but still pinned their hopes for stemming the abuses on the chimera of “consumer pressure.” For those who may believe that rich-country consumer pressure should not be so summarily dismissed, I believe that it’s useful to turn to Jeffrey Swartz, until mid-2011 the CEO of Timberland, who says that consumers don’t care at all about workers’ rights. In a late-2009 article he wrote, “With regard to human rights, the consumer expectation today is somewhere in the neighborhood of, don’t do anything horrible or despicable… if the issue doesn’t matter much to the consumer population, there’s not a big incentive for the consumer-minded CEOs to act, proactively.” In a 2008 interview he mused about his desire to “seduce consumers to care” so that Timberland’s CSR report was not mere “corporate cologne”.
It must be said that Apple looked more serious this week than it did two years ago, when it shrugged off 18 worker suicides at its main supplier, Foxconn, in China. Steve Jobs told the press that the high number of suicides was about average for the Chinese population as a whole. Just last week, Terry Gou, CEO of Foxconn, referred to his workers as “animals” during an appearance at the Taipei City Zoo—not a lot of empathy there, either.
Change the Image, Not the Actual
When anti-sweatshop campaigners in the ’90s relentlessly called Nike out for its miserable, toxic factories around the world, sneaker-buying Americans did have an impact on Nike.
U.S. sales fell for four successive years, despite billion-dollar marketing outlays every year. So CEO Phil Knight rented the National Press Club and told reporters his shoes were “synonymous with slave wages, forced overtime and arbitrary abuse.” He vowed to put things right.
Since then, Nike has spent hundreds of millions of dollars on factory “monitoring” and hired on a “corporate social responsibility” staff of over 200. Nike became a charter member of the FLA in 1999, and has a representative on its board.
What has it wrought? Very little. Richard Locke, a highly-regarded business professor and long-time observer of Nike, has been granted extraordinary access by the shoe giant. “A decade’s-worth of high-profile efforts to change sweatshop conditions in overseas apparel factories hasn’t worked,” Locke concludes.
Why hasn’t it? He who pays the piper calls the tune. All these new workers’ rights experts work for the corporations they’re monitoring—either directly, as on Nike’s social responsibility staff, or in NGO mode. NGOs sell their monitoring services to the big brands that are seeking cover while their supplier factories continue the same profitable patterns of worker abuse.
The most recent example where this kind of voluntary monitoring has proved ineffective comes from Indonesia. An Indonesian union won in court a $950,000 settlement this month for 4,500 workers at a factory that supplied Nike. They were forced to work seven days a week without overtime pay—at a big factory supposedly under FLA monitoring for a decade. (It’s easy to miss 570,000+ unpaid overtime hours, right?)
A decade’s-worth of high-profile efforts to change sweatshop conditions in overseas apparel factories hasn’t.
This is not to say that these high-profile monitoring operations are worthless. Just ask the shareholders who saw Nike bounce back from being equated with slavery to join the top rankings of “responsible” companies. “Corporate social responsibility” has proved invaluable at repairing brand images and wrong-footing the anti-sweatshop movement – maybe what Bill Clinton had in mind when launching the Apparel Industry Partnership, precursor to the FLA.
In fact, one could argue that the FLA has made the situation worse. It has been monitoring and certifying “compliance” for Nike and other apparel giants for more than a decade, apologizing for the corporations as they continue to squeeze suppliers, crush worker organizing, and cheat workers out of severance pay when their factories flee to lower-cost havens.
FLA CEO Auret van Heerden has excused Nike and its other corporate “partners” for the below-subsistence prices paid to sweatshop contractors, saying “simply blaming buyers and the prices they pay is too simple.”
Meanwhile sportswear companies unabashedly gloat over the power they have to dictate prices paid to supplier factories.
When Reebok and Adidas merged in 2006, an executive bragged on an investor call about negotiations “with all our key footwear and apparel suppliers to lock in cost savings for 2007 that should be in the double-digit million range.”
A New Hope?
With Apple, however, we may be able to turn the FLA’s involvement to the workers’ advantage.
An independent Hong Kong-based group, Students and Scholars Against Corporate Misbehavior (SACOM), has years of experience interacting with Foxconn workers.
The situation is similar to what we’ve seen happen with United Students Against Sweatshops, which has developed on-the-ground relationships with garment worker organizations in Latin America for a decade.
USAS and the Worker Rights Consortium, an independent factory monitor funded by its member colleges, have used a combination of pressure inside boardrooms and outside retail stores.
When companies that supply garments to colleges close their contracted factories in the face of worker organizing, or subject workers to unsafe working conditions, the WRC investigates and USAS students agitate.
Through pressure on the corporations at the top of the supply chain, several factories have reopened and hired back workers—with a union.
In China, it is quite possible that SACOM could bird-dog the FLA, insisting on real-time sharing of its reports, for example.
So far Apple, following Nike’s playbook, has produced audits that say violations are occurring, but does not reveal in which factories they’re happening. The FLA also doesn’t insist on that level of transparency, essentially saying “trust us.”
The WRC, by contrast, insists on knowing where the factory is and what’s happening, so it can gauge progress. The FLA could use some pressure to do the same.
One of the most refreshingly honest voices in the global worker rights field is the business professor, Prakash Sethi. For years he was the architect of Mattel’s supply chain code-and-monitoring apparatus and has done consulting work in this field for several other Fortune 500 firms (including – ugh! – Freeport McMoRan). He says that the major global players – the World Bank, OECD countries and the International Labor Organization – have failed to apply pressure on low-cost producing countries that do not protect workers’ human rights or health and safety. He has also called on corporations to pay restitution to developing-world workers for ‘years of expropriation’ enabled by corrupt, repressive regimes. (Particularly poignant was his brusque assertion in a New York Times interview that ‘bigotry’ was at the root of most companies’ refusal to even try to grapple with some of these issues.) Mattel ended its supplier-factory monitoring in 2009 and there were no untoward consequences, such as negative press reports.
In any case, more attention paid to Apple’s supplier factories will further anti-sweat groups’ communications with workers, and help build networks through social media and texting. It’s not the UAW in the ’30s yet, but it’s a beginning.
Jeff Ballinger is a researcher and writer on sweatshop monitoring. He is a member of Worker Rights Consortium’s advisory council. Follow his tweets @press4change & ballingerjd@gmail.com is the e-mail
January 27, 2012
Posted by aletho |
Economics, Timeless or most popular | Apple, China, Fair Labor Association, Nike, Sweatshop |
Leave a comment
Aletho News
