RT | January 15, 2015
The UK government has refused to reveal whether the National Security Council approved or discussed China’s investment in a proposed £24.5 billion nuclear power plant in the UK, Hinkley Point C, citing “national security.”
Despite a BBC Freedom of Information request for information regarding China’s expected 30-40 percent stake in the new nuclear site in southwest England, the government denied further disclosure.
Cabinet Office official Roger Smethurst told the BBC: “There is a general public interest in disclosure of information and I recognize that openness in government may increase public trust in and engagement with the government. There is a definite public interest in members of the public being able to understand decisions taken on investment in critical national infrastructure.”
“I have weighed these public interests against a very strong public interest in safeguarding national security.”
The National Security Council’s job is to review and debate foreign investment projects and then to approve or deny them.
Derek Smith, head of communications for the NSC, told the BBC: “The government has put in place an approach which enables it to assess the risks associated with foreign investment and develop strategies to manage them.”
“The NSC brings together the economic and security arms of the government and is the forum that ultimately balances the risks and opportunities of inward investment decisions.”
In June last year, the government announced the civil nuclear agreement signed by the UK and China, which could be “worth hundreds of millions of pounds to British companies over several years.” This paved the way for Chinese companies to invest in Hinkley Point C.
Energy and Climate Change Secretary Ed Davey said at the time: “China and the UK stand united in our plans for more collaborative working that will help to achieve long lasting energy security in our own countries.”
The plant would be the first overseas venture for the China General Nuclear Power Corp.
Meanwhile, the French nuclear power developer EDF is expected to sign an investment agreement with Chinese partners for the new reactor at Hinkley Point by the end of March, to secure investment for the project.
According to the World Nuclear Association, the UK has 16 operational reactors generating around 18 percent of the country’s electricity. All but one of these will be retired by 2023.
China is reportedly negotiating plans to build four new reactors in Turkey. One-third of the nuclear reactors currently under construction worldwide are in China.
The nuclear plant is not the only UK energy project that China co-finances. The state-owned China General Nuclear Corporation is reportedly prepared to pay £100 million for an 80 percent stake in three UK wind farms.
By James Petras :: 12.23.2014
Introduction
China is in the midst of its second ‘cultural revolution’ in a half century. While the first (under Chairman Mao Tse Tung) was intended to ‘revitalize socialism’; the current is directed to ‘moralizing’ capitalism.
The first CR was a frontal attack on the hierarchy of power and privilege inside and outside of the Communist Party, launched from above by Mao Tse Tung, but taken up from below by Red Guards in order to bring about a more egalitarian society.
The current ‘cultural revolution’, launched by President Xi Jinping, is directed at ending widespread corruption, theft and pillage of the Chinese economy and society by high and low officials in government and the capitalist sector.
The two cultural revolutions are linked by Deng Xiaoping, the Chinese leader who officially put closure on the first and set in motion the policies and slogans (“Getting Rich is Good!”), necessitating a second cultural revolution three decades later.
The Socio-Economic Roots of the Cultural Revolution Today
Deng’s call to ‘get rich’ was directed at the Communist Party elite, their family, friends and overseas backers; it was an open invitation to the multi-nationals of the world to freely exploit China’s resources, infrastructure and labor – educated, nurtured and organized through the collective efforts of the preceding Communist regime. Deng ‘liberated’- or privatized – the means of production and rapidly turned public control and appropriation of earnings over to emerging private capitalists. The corollary was the elimination of all social rights, benefits and protections of labor. The dual incentives were designed to maximize private profits in order to attract long-term, large-scale investments and to achieve high growth in the shortest time possible. Deng telescoped a century of growth and exploitation into a few decades.
His strategy succeeded.
Profits soared. By the late 1980’s and early 1990’s millionaires multiplied like mushrooms after a downpour. Then came the billionaires. Aided and abetted by the wholesale privatization of lucrative industries and public lands, a new class of real estate speculators and so-called ‘developers’ emerged , closely linked to corrupt local municipal, regional and national state officials. Millions of peasants were dispossessed and barely (if ever) compensated; hundreds of millions of workers were employed at starvation wages without the free housing, medical care, education, recreational benefits and lifetime employment of the past, socialist system.
China’s GNP exploded at a double-digit rate for three decades – an unprecedented performance. Most of the profits circulated among a narrow elite of party – state officials and capitalists, while a smaller share ‘trickled down’ to middle and low level functionaries. The seizure of public wealth, followed by three decades of intense exploitation of labor and the private land grabbing of farmland and homesteads, spurred the boom in real estate profits and laid the basis for all pervasive and large-scale corruption .The pillage of the public treasury led to large-scale conspicuous consumption – of imported luxury goods, multi-tiered mansions in gated communities, multiple purchases of luxury condos for offspring, mistresses and bribe-takers and givers.
By the mid 2000’s the concentration of wealth, property and privilege had reached astronomical heights: hundreds of billions accrued to the top 2%, millions to the top 10%, and hundreds of thousands to the top 15% – the self-styled ‘middle class’ who thrived on lesser but equally pervasive corruption and theft and who aped the elite and imitated their life style of luxury consumerism.
Beginning in the mid-2000s, hundreds of strikes by exploited factory workers demanded and secured higher wages; millions of households, farmers and peasants fought against municipal party officials, linked to real estate capitalists, who were attempting to ‘grab’ their land, homes and neighborhoods. Hundreds of millions of Chinese in the countryside protested exorbitant medical and educational costs, induced by the privatized health and educational system, which had bankrupted millions of households. They quickly became aware of the luxurious private medical facilities and specialized clinics for the rich -capitalists and corrupt officials. The internal migrant workers, who built the hyper-luxury condos and mansions, lived in paper shacks, far from the twelve-course banquets celebrating the ‘grand openings’ by business swindlers and ‘bought officials’. As wealth grew among the elite, so did the people’s hostility and rejection of the Party and the State, which they personified.
The ever-cautious klepto-capitalists and public pillagers, fearing for their illicit fortunes, smuggled out enormous wealth. Big swindlers, with big fortunes engaged in massive money laundering while publicly demanding the ‘de-regulation” of the financial sector (i.e. to make it easier to launder and hide their fortunes in overseas accounts). Between 2005-2011 China hemorrhaged over $2.83 trillion in illegal overseas financial outflows.
Part II: The Consequences of Corruption, Pillage and Exploitation
The illicit flow of Chinese wealth overseas resulted from the elite’s savage and illegal exploitation of labor (failure to meet minimum official standards concerning pay, work safety, child labor, excessive hours). Wealth from bribes, kickbacks on government contracts, speculation on illicit seizures of land, and making false invoices overpricing imports and underpricing exports, flowed upward and outward. While China was profiting from double-digit growth the regime could ‘tolerate’ corruption and illicit outflows. However, by the beginning of the second decade of the 21st century, when China’s economy de-accelerated to about 7 – 7.5%, the regime became less tolerant of wholesale corruption accompanied by capital flight.
Moreover, the new billionaires, millionaires and affluent middle class indulged in what Thorsten Veblen described as “conspicuous consumption”, the purchase and ostentatious display of superfluous luxury products as status symbols of “success”. According to a Special Report on “Luxury” in the Economist (12/13/14, p.8 -10) “nearly one-third of all personal luxury goods sold worldwide are bought by Chinese consumers.” Since the global crises of 2009, 70 – 80% of global growth in the (luxury) sector has come from China.
China’s emerging private-public ruling class has advanced from concentrating wealth, to consolidating political power to seeking prestige and social status – recognition from their domestic and foreign peers. Ideologically, they are decidedly neo-liberal and pro-Western – as evidenced by the billions they spend in the top-end real estate markets of North America, Europe and Australia as well as the millions they spend on their pampered offspring for ‘elite’ private education. Their children live in half-million dollar condos in Cambridge, Massachusetts, Oxford and Cambridge (England), Toronto and Vancouver (Canada), Sydney and Melbourne Australia. The Chinese oligarchs “make the market” for six-figure Swiss watches, five figure handbags and four digit French cognac.
Corruption, conspicuous consumption and class polarization has delegitimized the ruling Communist Party elite in the eyes of the great mass of the Chinese working class, as well as the professionals and salaried employees who make-up the lower middle class.
The ‘political rot’- the privileged social networks derived from kinship ties-is leading to a relative closed ruling class – excluding the mass of urban workers and rural peasants, with potentially explosive social consequences.
Already thousands of local protests, strikes and other forms of direct action occur every year, even as they are repressed or resolved.
In addition to the social and political dangers resulting from the massive illegal, ‘squandering and theft of wealth’, the illicit outflow of wealth is undermining domestic investment and productive overseas investments, and corruption is preparing the way for stagnation and financial crisis.
The stars are lining up for a ‘perfect political storm’ – which has unfolded in the form of President Xi Jingping’s launch of China’s second cultural revolution (CR).
Xi Jingping’s Cultural Revolution
From the start of the 2nd CR in 2012 to mid-2014, the Chinese Communist Party’s internal corruption body has prosecuted and punished 270,000 cadres. That figure includes both the “tigers” (high officials) and the “flies” (low level functionaries). “Over three dozen officials with ranks of ministers or above, including former security Tsar and Politburo Standing Committee member Zhou Yongkang”, have been arrested and jailed (Financial Times 12/4/14, p. 4). Earlier, the former Railways Minister was arrested and sentenced to death for rigging contracts worth about $26 billion dollars over his seven-year tenure. Hundreds of thousands of private business people, paying bribes, have been arrested and sentenced.
President Xi’s campaign has attacked bribes, ‘gift giving’, frequent ostentatious banquets serving expensive delicacies, and high Party officials’ lodging in five star hotels for weeks on end, ostensibly “tending to business”, but more frequently ‘cavorting with their mistresses’.
To be precise, President Xi is attacking the triple evils of corruption, conspicuous consumption, and pillage of public wealth. The new austerity agenda and the public revelations of ill-gained wealth are focused on exposing public officials and private business people in order to regain public legitimacy. And it is succeeding,…. as far as it goes. Public indignation at the revelations is matched by high approval for the Xi leadership’s anti –corruption campaign.
What makes this far more than just a “power struggle among privileged elites” as the Wall Street Journal and the Financial Times have routinely claimed, are: 1. the duration of the campaign of over 2 years, 2. the scope of the campaign, covering top officials and Chinese business equivalents of Wall Street moguls, 3. The nature of the punishment including long prison terms and even death sentences (rather than the mere ‘slap on the wrists and paltry fines’ that US regulators have given to Wall Street’s billion-dollar swindlers), and 4. the ongoing nature of the process. The sweep and magnitude of Xi’s campaign has all the makings of a ‘cultural revolution’ – not the episodic ‘blowing off steam’ or ‘scapegoating of rivals’ described in the Western press.
The Nature of Xi’s Cultural Revolution
Xi’s ‘cultural revolution’ is directed and driven from above – established legal authorities are in charge – the masses are excluded, and preemptory justice is eschewed: regular court proceedings decide guilt and sentencing.
Secondly, Xi’s ‘cultural revolution’ does not, in any way or place, call into question capitalist property relations, foreign investors, or large-scale inflows and outflows of investment or legally registered speculative capital. Nor has Xi called into question existing capital-labor relations.
Xi’s ‘cultural revolution’ is an attempt to sanitize existing capitalist relations, and to infuse a new capitalist ethic. He wants to ‘revise’ Deng’s famous precept “Getting Rich is Good” to read “Get Rich Lawfully . . . or Face Jail”. China is rated number 100 out of 175, on a corruption scale published by Transparency in 2014 (Financial Times 12/4/14, p. 4). Xi’s war on corruption is based on the premise that corruption undermines China’s status as a global power – it ranks with Algeria and Surinam. Secondly, Xi hopes that he can ‘reform’ the public sector in order to privatize it and he wants the sale to go to the highest bidder, not the biggest bribe giver.
His campaign attacks privileged elites, who accumulate and dispose of wealth illegally but he has never sought to diminish the class system, the hierarchy and inequalities which concentrate political power and forms the basis of corrupt bribe giving and taking.
Xi’s ‘cultural revolution’ is continuing and corruption may lessen. Ostentatious public spending is declining. But this layer of ‘new morality’ is spread thinly over a system of power that can easily revert to the ‘old system’ once the ‘revolution’ ends.
Xi’s noteworthy ‘cultural revolution’, the moralization of public administration and private capitalism, can only succeed if it is accompanied by a social transformation: ethics at the service of social justice and equality and by a democratization of the economic decision-making process. The problem is that Xi, by family, social ties and political allegiances is deeply embedded in a milieu which absolutely rejects any such ‘deepening’ of Xi’s ‘cultural revolution’.
His cultural revolution is strictly guided by a singular objective: to force ‘morality’ on the ‘captains of capital’ in order to facilitate the smooth transition to fully liberalizing China’s economy. President Xi, along with his anti-corruption campaign, is steadily loosening state control over foreign financial investments in Chinese stocks and financial sector; he is moving strongly to expand China’s overseas investments; he is accelerating the privatization of public enterprises and increasingly opening financial services to Wall Street and the City of London. He is also internationalizing the use of the yuan-the Chinese currency- in global transactions, displacing the dollar.
In other words, his cultural revolution is a bridge to a new stage of Chinese capitalist expansion; it will lessen the crude open plunder of the public treasury, but it will not lessen the exploitation of labor nor slow the increasing concentration of wealth and privilege. That will require a different kind of ‘cultural’ revolution- one led from below by workers, peasants and salaried employees. A real ‘cultural revolution’ that realizes the ethical ideals of ‘good government’ through a transformation of class relations.
Xi’s anti-corruption campaign confirms what many workers already knew – but it also unmasks the systemic decay and forges an elementary class consciousness: counter-posing honest, hardworking workers to corrupt privileged oligarchs. Xi is aware of the danger that his campaign could ignite a popular fire: That is why he has kept a tight hold on the process. He is trying to navigate the liberal capitalist transition around the shoals of existing capitalist rot without arousing mass unrest.
Mada Masr | December 21, 2014
Economic ties appear to be at the top of the agenda, as Egyptian President Abdel Fattah al-Sisi prepares for a state visit to China this week.
At a December 18 press briefing for Chinese official media, Sisi announced, “we are looking forward to developing our strategic relations with our friends in China,” reported Xinhua news agency.
“Cooperation between Egypt and China is not new, and the purpose of the visit is to confirm and develop this cooperation and discuss Chinese investment chances in Egypt,” the president reportedly added.
During the visit, which is scheduled to run from December 22 to 25, officials expect to sign 25 bilateral agreements, mostly concerning economic and investment plans, according to Egypt’s State Information Service.
The president’s visit is preceded by a delegation including the ministers of trade and industry, transport and international cooperation. The delegation set off for Beijing on December 19, and is scheduled to meet with Chinese companies interested in investing in Egypt. They are also set to discuss ways of boosting trade, investment and cooperation in industry and transport.
Trade between Egypt and China was worth around US$10 billion in 2013, a figure officials expect to exceed $11 billion in 2014. However, the balance of trade is overwhelmingly in favor of China. Egypt’s exports to China have historically made up around 10 percent of the total trade volume.
China’s investments in Egypt amount to $8.4 billion, according to The China Global Investment Tracker, a project of the US based Heritage Foundation. These investments include the North West Suez Special Economic Zone, a joint Egyptian-Chinese venture near Ain Sokhna. The project is part of a 2006 plan by China to internationalize its economy by developing 50 such zones in strategic locations around the world.
Sisi is hoping to increase investment and boost exports to China during his visit, which comes ahead of a March summit for international investors in Egypt. As a sign of the state’s hopes for Chinese involvement in the summit, one potential date was nixed due to a conflict with the Chinese New Year holiday.
During his meeting with the Chinese press, Sisi mentioned the Suez Canal Development Project as a potential area for Chinese investment, as well as plans to redevelop Egypt’s road network.
Sisi’s predecessor, Mohamed Morsi, made a similar state visit to China in 2012. For his first state visit outside of the MENA region, Morsi traveled to Beijing, along with a delegation of seven ministers and 80 businessmen. Whilst he was there, China agreed to grant Egypt US$69 million in development assistance, and to facilitate access to a multi-billion dollar credit line for development projects in Africa. Private companies claimed to have secured billions of dollars worth of deals.
At the time, Morsi’s decision to visit China was viewed as an assertion of independence from the United States and other Western powers.
Despite its hostility to the regime it ousted from power, the Sisi administration appears to be continuing this policy, courting aid from foreign powers like Russia and China, as well as from the United States and its allies in the Arab Gulf.
Sisi has praised China, in particular, for separating economic aid from political issues. “China has balanced policies and does not interfere in other countries’ domestic affairs, which is one of the reasons for China’s success,” Xinhua quotes Sisi as saying.
By contrast, Western powers like the United States and the European Union are more likely to tie aid money to human rights and other political concerns. The United States has suspended hundreds of millions of dollars in aid until Egypt can meet democracy and human rights benchmarks, although earlier this month it allowed an exemption in the case of national security interests.
RT | November 9, 2014
President Vladimir Putin and Chinese leader Xi Jinping have signed a memorandum of understanding on the so-called “western” gas supplies route to China. The agreement paves the way for a contract that would make China the biggest consumer of Russian gas.
Russia’s so-called “western” or “Altay” route would supply 30 billion cubic meters (bcm) of gas a year to China.
The new supply line comes in addition to the “eastern” route, through the “Power of Siberia” pipeline, which will annually deliver 38 bcm of gas to China. Work on that pipeline route has already begun after a $400 billion deal was clinched in May.
“After we have launched supplies via the “western route,” the volume of gas deliveries to China can exceed the current volumes of export to Europe,” Gazprom CEO Aleksey Miller told reporters, commenting on the deal.
Speaking to journalists on the eve of his visit to Beijing, Putin was optimistic about prospects for the new gas deal with China.
“We have reached an understanding in principle concerning the opening of the western route,” Putin said. “We have already agreed on many technical and commercial aspects of this project, laying a good basis for reaching final arrangements.”
The “western” route deal is one of the 17 agreements signed at the Sunday meeting between Putin and Xi.
They also included a framework agreement between Gazprom and China’s CNPC on gas deliveries and a memorandum of understanding between Gazprom and another Chinese energy giant, CNOOC.
Gazprom and CNPC have also signed a preliminary agreement for China National Oil and Gas Exploration and Development to take a 10 percent stake in Russia’s Vancorneft.
Among the business issues discussed by Putin and Xi at their fifth meeting this year was the possibility of payment in Chinese yuan, including for defense deals military, Russian presidential spokesman Dmitry Peskov was cited as saying by RIA Novosti.
The BRICS Post | November 8, 2014
Chinese President Xi Jinping on Saturday announced China will contribute $40 billion to set up a Silk Road Fund to strengthen connectivity in the Asia-Pacific region.
Xi said the goal of the Fund is to “break the bottleneck in Asian connectivity by building a financing platform.”
The new Silk Road Fund will be used to provide investment and finance for infrastructure, industrial projects along the “Belt and Road”, Xi said, referring to China’s Silk Road Economic Belt and the 21st Century Maritime Silk Road initiatives.
He added that the fund will be “open” to investors from both within and outside Asia.
The Asian Development Bank has estimated that in the next decade Asian countries will need $8 trillion in infrastructure investments to maintain the current economic growth rate.
“The Silk Road boasts a 3-billion population and a market that is unparalleled both in scale and potential,” Xi said in September last year.
The Silk Road connected China and Europe from around 100 B.C.
The 4,000-mile road linked ancient Chinese, Indian, Babylonian, Arabic, Greek and Roman civilizations.
A new map unveiled by Xinhua shows the Chinese plans for the Silk Road run through Central China to the northern Xinjiang from where it travels through Central Asia entering Kazakhstan and onto Iraq, Iran, Syria and then Istanbul in Turkey from where it runs across Europe cutting across Germany, Netherlands and Italy.
The maritime Silk Road begins in China’s Fujian and ends at Venice, Italy.
In a landmark achievement, 21 Asian nations including China and India last month signed on a new infrastructure investment bank which would rival the World Bank.
One of the first projects of the new Bank is expected to be financing infrastructure projects along the “Silk Road Economic Belt” and the “Maritime Silk Road” re-establishment.
Meanwhile on Saturday in Beijing, the Chinese President stressed that efforts should be made to realize Asia’s connectivity by making Asian countries a priority.
“Asian countries are just like a cluster of bright lanterns. Only when we link them together, can we light up the night sky in our continent,” he said.
China will provide neighboring countries 20,000 training opportunities for connectivity professionals in the coming five years.
Experts say these new announcements will boost China’s global influence and enhance its soft power.
Apart from the AIIB, the BRICS new $100 billion Development Bank is also being headquartered in China.
“China has considerable experience in infrastructure planning and construction, and financing projects outside the country. As Finance Minister Lou Jiwei has said, China Development Bank’s commercial infrastructure loan is now far bigger than that of the World Bank and ADB combined. And surprisingly, this process started only 20 years ago,” write Asit Biswas and Cecilia Tortajada, China scholars at the Lee Kuan Yew School of Public Policy, Singapore.
TBP and Agencies
The BRICS Post | October 10, 2014
In yet another episode that threatens to undo efforts aimed at finding common ground to tackle hacking, the Chinese Foreign Ministry told the US to stop “fabricating stories” and “mudslinging” about alleged Chinese commercial spying. A Federal Bureau of Investigation (FBI) official has accused China of stealing secrets from US firms.
“Chinese laws forbid hacking or any other behavior harmful to cyber security, and it is an undoubted fact that the Chinese government resolutely cracks down on crimes,” China’s Foreign Ministry spokesman Hong Lei said on Thursday in Beijing at a daily news briefing.
During a TV appearance on CBS, FBI director James Comey said earlier this week that China topped the list of countries seeking to steal secrets from US firms, costing American businesses billions of dollars every year.
“I liken them a bit to a drunk burglar. They’re kicking in the front door, knocking over the vase, while they’re walking out with your television set. They’re just prolific,” Comey said.
China hit back with charges of mass surveillance of private citizens and businesses by the US.
“Again, we urge the U.S. side to drop its wrongful fabrication of stories and deliberate mudslinging toward China, as well as stop its large-scale, systematic cyber attacks on other countries,” said the Chinese spokesman.
The US side’s attempt to divert attention by accusing others will not succeed, Hong added, referring to revelations by former US National Security Agency whistle-blower Edward Snowden about US cyber-spying that included hacking into computers in China since 2009.
Sino-US ties have long been dogged by accusations of cyber espionage.
In May this year, a senior Chinese military officer labelled the United States the world’s biggest cyber-thief a week after a grand jury in Washington indicted five Chinese officers on charges of hacking into American companies to steal trade secrets.
“In terms of both military and political intelligence and trade secrets, the United States is the world’s No.1 cyber thief and its spying force should be indicted,” Sun Jianguo, deputy chief of General Staff of the Chinese People’s Liberation Army, said.
“From Wikileaks to the Snowden incident, the U.S. hypocrisy and double standards on the issue of network security have long been obvious,” the Chinese Defence Ministry said in a statement, lashing out at the US indictment.
The US is the biggest attacker of China’s cyberspace, with US servers taking control of 1.18 million Chinese host computers between March 19 and May 18, according to the China Internet information office.
TBP and Agencies
By Jon Hellevig | Oriental Review | September 29, 2014
Finland – In a groundbreaking study Awara Group reveals that the real GDP growth of Western countries has been in negative territory for years. Only by massively loading up debt have they been able to hide the true picture and delay the onset of an inevitable collapse of their respective economies. The study shows that the real GDP of those countries hides hefty losses after netting the debt figures, which gives the Real-GDP-net-of-debt.
The moral of the study is that GDP growth figures as such reveal very little about the underlying dynamics of an economy if one does not simultaneously attempt to analyze what part of the growth is credited to simply artificially fueling the economy with new loans.
The study has found that the Western countries have lost the capacity to grow their economies. All they have left is a capacity to pile up debts. By massively accumulating new debt, they are able to keep up a semblance of at least sluggish growth, or of hovering around the zero growth mark.
If this massive debt would go towards investments, then there would be nothing wrong with it. But, it is not. The debt is going towards financing the losses in the national economies and essentially it all is wasted on consumption that the countries in reality cannot afford. The Western countries act like a 19th century heir to aristocratic wealth, borrowing from year to year to keep up the former lifestyle, while the estate is relentlessly dwindling. Sooner or later the prodigal heir would be forced to face reality and sell the remaining property to stave off the creditors, downgrade his dwellings, and rein in spending. Inevitably, the European countries and the USA will have to curb their excessive consumption, too, but for the time being they are putting off the final reckoning with new debt rather the way a drunkard reaches for the morning after drink to put off sobering up. In the case of the EU and the USA, we are speaking about a debt binge that has been going on for a decade.
While the situation has been generally bad for the last decade or so, it took a dramatic turn for the worse, or should we say for the catastrophic, following the onset of the global financial crisis in 2008. The shocking figures depicting the virtual crippling of the Western economies from 2009 to 2013 are illustrated in Chart 1. It depicts the development of real-GDP-growth per country in years 2005 to 2013. The chart shows that during this period Russia has been able to deliver real non-debt fueled GDP growth, whereas the Western countries are running huge deficits. The accumulated growth of the Russian economy from 2005 to 2013 was 147% while the Western countries accumulated losses from 16.5% (Germany) to 58% (USA). In the case of Russia, the real-GDP-net-of-debt figure is also corrected to adjust for the calculation error caused by an erroneous GDP deflator that Russian Statistics Agency (Rosstat) has used. We have discussed the persistent problem of Russia’s GDP growth having been underestimated due to the use of a wrong GDP deflator in the study Awara Group Research on the Effects of Putin’s Tax Reforms 2000-2012 on State Tax Revenue and GDP
Chart 2 shows the real GDP growth net-of-debt after deducting the growth of public debt from the GDP figure. Net of debt we see the scale of the Western economies, for example the Spanish economy, which amounts to the staggering figure of minus 56.3%. This while the conventional official method of crediting GDP growth with growth of debt would give only minus 6.7%.
The analysis shows that by these measures Russian economic growth, unlike that of the Western countries, has been comparatively healthy and not debt-driven. Russia has in fact a resoundingly positive ratio by these measures, where GDP growth has exceeded growth of debt by a staggering 14 times (1400%). The figure is astonishing when compared with the Western countries that have been flooded with new debt.
Chart 3 shows how much the accumulation of debt in the Western countries exceeds the official GDP growth. The USA is leading the pack with an increase in the debt load in years 2004 to 2013 of USD 9.8 trillion (in the chart in euros, EUR 7 trillion). In those years, the growth of the USA public debt exceeded the GDP growth 9 times (900%), which is illustrated by Chart 4, comparing the proportion of growth of debt to that of growth of GDP.
The comparison of growth of debt to growth of GDP reveals the UK, as the country that has amassed the most amount of new debt relative to GDP growth, having a new-debt-to-GDP-growth ratio of 9 to 1; in other words UK has taken on 900% new debt relative to the GDP growth. But the picture is grim for all the Western countries surveyed, less so for Germany, while Russia’s debt increase amounts to only a fraction of the GDP growth.
The analysis shows that by these measures Russian economic growth, unlike that of the Western countries, has been comparatively healthy and not debt-driven. Russia has in fact a resoundingly positive ratio by these measures, where GDP growth has exceeded growth of debt by a staggering 14 times (1400%). The figure is astonishing when compared with the Western countries that have been flooded with new debt.
The above figures are adjusted taking into account public debt (general government debt), but the situation is even worse when we consider the effect of private debt on the GDP. New debt of corporations and households have at least doubled private debt of most of the Western countries since year 1996 (Chart 5).
Reviewing these figures, it becomes evident that in reality Western economies have not grown in the past decade, rather the countries have massively inflated their debt load. With these levels of debt reached this cannot continue for long. There is a real risk that the bluff will be called sooner rather than later dropping the Western economies to GDP levels that they can carry without debt leverage. But in that situation they will not be able to serve the accumulated debts leading to catastrophe scenarios.
We have not included Japan and China in the analysis due to the difficulties attributed to finding consistent data for all the input variables. For those countries we have come across problems of fractured data that do not capture all the relevant years; inconsistent data across the samples we looked at; and uncertainties about conversion of the input data into euros. (We are sure that major research houses could overcome such problems, having greater and more sophisticated resources than ours). This exclusion of Japan and China is regrettable as Japan is the country worst affected by the problem of debt-fueled GDP growth, having a public debt to GDP ratio of well above 200%, and would therefore have been very instructive for our purposes.
Japan has been essentially living on debt since the early 1990’s. However, some of the more irrational Western analysts want to take Japan as a prime example to follow, arguing that since Japan has been able to pile up debt for some 25 years now, all the Western countries would be able to do it as well for the foreseeable future. In this they fail to grasp that Japan earlier had the luxury of being the sole country living on such exorbitant levels of debt. Japan has enjoyed great support from the Western countries to be able to continue that practice, not least for political reasons. Another important consideration against the idea that Western countries could continue to accumulate debt is that they have, since the early 1990’s, rapidly lost their economic hegemony in terms of share of world trade and global GDP. I have written about this in a recent article entitled Why the West is Destined to Decline.
The West is fast shrinking in economic significance relative to the rest of the world. This is demonstrated by comparing the GDP of the Western powers as represented by the G7 countries (USA, Japan, Germany, France, UK, Italy and Canada) with the GDP of emerging powers. As recently as 1990, the combined GDP of the G7 was overwhelming in relation to that of today’s 7 emerging powers: China, India, Russia, Brazil, Indonesia, Mexico and South Korea (not necessarily constituting one political block). In 1990, the G7 countries had a combined GDP of USD 14.4 trillion and the emerging 7 had a GDP of USD 2.3, but by 2013 the tables had been turned, as the G7 had USD 32 trillion and the emerging 7 had USD 35 trillion. (Chart 6).
With the challenge of the ever increasing share of world economy belonging to the emerging countries, it becomes clear that the Western countries will not be able to profit sufficiently from world trade to service their debt loads.
For the time being the Western countries benefit from the privilege of having currencies that the rest of the world still largely trusts as reserve currencies. In essence, the USD and the euro enjoy a kind of monopoly status. This is what allows Western countries to gain access to cheap debt and fuel their economies with central bank financing (quantitative easing or “printing of money”). But the risk is that, with the deteriorating debt situation and diminishing share of the global economy, they will forfeit this privilege, perhaps even in the near future. What would follow from this is sharply more expensive financing and inflation, with hyperinflation as the eventual outcome. In this scenario – which I consider inevitable over the next 5 to 10 years – the economies of Western countries would essentially collapse.
The problem is that there is no way of averting this scenario, because the Western powers have lost their competitive advantages as economic powers. Eventually, their economies must shrink to match their resource and population bases. (I have written about this in the article referred to above). But it seems that the ruling Western elites have no intention of facing up to these realities. They will try to keep up a semblance of prosperity with ever new debt, as long as they can. The political parties of the West have been essentially converted into voting machines with one singular concern – that of winning the next elections. To do that they will continue to engage in what amounts to bribing of the electorate – creating new debt that fuels the national economy.
But there is no way to turn back this historical tide. Just as the aristocrat of the old regime eventually squandered his legacy, so will the Western powers. This inevitability of the process is what makes it really scary, because I am afraid that the Western elite might be tempted to bail itself out from this doomsday scenario with a war of epic proportions. We are now truly approaching the Armageddon between the West, with its desperate economic circumstances, and the emerging world powers.
Jon Hellevig is a business consultant and economic and political observer. He is the co-editor and co-author of Putin’s New Russia and several books on philosophy and political and social sciences.
Press TV – September 27, 2014
The coalition of developing countries at the United Nations has categorically condemned unilateral sanctions against Iran over its civilian nuclear energy program.
In a resolution issued on the sidelines of the 69th annual session of the UN General Assembly in New York on Friday, foreign ministers of the Group of 77 plus China for the first time explicitly rejected as unacceptable the imposition of unilateral economic sanctions against Iran.
Such sanctions would have adverse consequences on the development of the Iranian nation, the resolution said, calling for the immediate removal of the bans.
The illegal US-engineered sanctions on Iran have been imposed based on the accusation that Tehran is pursuing non-civilian objectives in its nuclear energy program.
Iran rejects the allegation, arguing that as a committed signatory to the Non-Proliferation Treaty (NPT) and a member of the International Atomic Energy Agency (IAEA), it has the right to use nuclear technology for peaceful purposes.
The 133-member Group of 77 plus China strongly rejected any unilateral punitive moves such as sanctions against developing countries and called for the removal of all such measures.
The foreign ministers of the member states noted that such measures would not only undermine the UN charter-based international law, but also would leave a negative impact on the freedom of trade and investment.
They further called on the international community to take an effective collective action to stop unilateral economic sanctions against developing states.
The Group of 77 was founded on June 15, 1964, by the “Joint Declaration of the Seventy-Seven Developing Countries” issued at the conclusion of the United Nations Conference on Trade and Development (UNCTAD) in Geneva.
The Group of 77 holds a one-year and rotating presidency among Africa, Asia and Latin America. Bolivia holds the chairmanship for 2014.
RT | September 23, 2014
China will never support any sanctions against Russia and will never join them, Valentina Matviyenko, speaker of the Russian parliament’s upper house said, citing Chinese President Xi Jinping, with whom she met on Tuesday.
Both Russia and China believe the sanctions are illegal, ineffective and counterproductive, according to Matviyenko. They are nothing but an attempt “to exert pressure on sovereign states to change their position and to weaken them and suppress their development,” she stressed.
Matviyenko thanked Beijing for its public position towards Western sanctions imposed on Russia over the Ukrainian conflict. China has offered an “absolutely objective” assessment of what is now going on in Ukraine. Moreover, no sanctions will affect the long-term strategic partnership between Moscow and Beijing, which reflects the interests of both peoples, she noted.
Cooperation of Russia and China remains a serious factor in international politics, Matviyenko said, adding that the two states have no disputable issues. Their positions are either close or coincide on major problems, including how to settle international and regional conflicts or deal with new challenges and threats.
The BRICS Post | September 18, 2014
Russia plans to sign a 30-year gas supply contract with China via the western route, Russian energy giant Gazprom’s CEO Alexei Miller told President Vladimir Putin on Wednesday. The route to supply gas to China via western Siberia may be implemented faster than the eastern route, through which Moscow has agreed to ship the fuel to its Asian neighbor in May.
“Gazprom plans to sign a contract to supply China with 30 billion cubic meters of natural gas via western route over thirty years,” Miller said.
The China-Russia West Route natural gas pipeline project connects gas deposits in Western Siberia and the northwestern part of China via Russia’s Altai region, securing the world’s top energy user a major source of cleaner fuel.
The potential of this route is “enormous”, the Gazprom CEO told the Russian President.
“It is even greater than in Eastern Siberia and, without a doubt, we can increase the volume of gas supplies very quickly via the western route, depending on the growth in demand in the Chinese market,” said Miller.
Gazprom is to sign the 30-year contract with China National Petroleum Corporation (CNPC) in November. The deal will directly link Russia’s huge gas fields to Asia’s booming market for the first time.
Miller also said Gazprom might consider more than doubling the volume of supply.
“We plan to sign a contract for a volume of 30 billion cubic metres for 30 years, though the talks have also looked at other figures for new contracts concluded for the western route. We are looking at the possibilities for supplying 60 billion cubic metres or up to 100 billion cubic metres of gas to China,” Miller told Putin in Moscow.
China and Russia signed a $400-billion gas supply deal in May this year, opening up a new market for Moscow as it risks losing European customers over the Ukraine crisis.
The Russian part of the joint venture pipeline, officially dubbed “Power of Siberia”, will be built by Gazprom with a total investment of $55 billion.
Construction of the China- Russia East Route natural gas pipeline started this month in this eastern Siberian city of Yakutsk.
TBP and Agencies
The BRICS Post | September 11, 2014
Chinese President Xi Jinping and his Russian counterpart, Vladimir Putin, met in Dushanbe, capital of Tajikistan, on Thursday ahead of the 14th summit of the Shanghai Cooperation Organization (SCO).
The two allies discussed “pressing issues of bilateral cooperation, particularly in energy, aircraft engineering and infrastructure”, said a Kremlin statement.
It is the fourth meeting in 2014 between the two leaders.
Chinese President Xi Jinping said during Thursday’s meet that the leadership of the two nations will “jointly face external challenges”.
“I am ready to maintain further contacts with you to strengthen mutual support and expand openness between our countries, so that we could always draw from each other’s support, jointly face external challenges and achieve our grand development and revival goals,” said Xi.
Earlier last week, China put its weight solidly behind Russian President Vladimir Putin’s seven-point peace plan for Ukraine, even as the EU prepared another wave of sanctions targeting Russia’s banking and energy sectors.
The Russian President on Thursday lauded the milestone deal signed earlier this year in May, the $400-billion gas supply deal between the two countries, securing the world’s top energy user a major source of cleaner fuel.
“This was done with the direct support of the President of China. Now we have practically begun its implementation, which, I am certain, will proceed in the same business-like manner and will be efficiently carried through by both parties – Russia and the People’s Republic of China,” said Putin on Thursday in Dushanbe.
The deal opened up a new market for Moscow as it risks losing European customers over the Ukraine crisis.
Putin’s “personal friendship” with the Chinese President is a political triumph for the Russian President even as Western leaders step up attempts to isolate Putin internationally over Russia’s alleged support to pro-Moscow rebels in eastern Ukraine.
“We are making headway in other traditional areas of cooperation as well, including nuclear power, aircraft engineering, infrastructure and so forth,” Putin said on Thursday.
Xi said Beijing and Moscow have overseen new progress in the joint development of long-haul jumbo jets and heavy helicopters, as well as other major joint projects.
“Early this month you personally took part in the ceremony to launch the construction of the Power of Siberia gas pipeline, which shows how seriously you take the expansion of Chinese-Russian energy cooperation,” Xi told Putin.
“We have set up an intergovernmental Chinese-Russian commission on investment cooperation. We are actively considering cooperation in the construction of high-speed railways. We have launched cooperation in satellite navigation systems, which you personally have given great attention to,” he added.
Xi and Putin had also held talks in July in Brazil during the 6th BRICS Summit.
Xi has held talks or met with Putin for nine times since he assumed the office of China’s President in March 2013, testifying to stronger and more assertive Sino-Russian relations.
In a major highlight of an investment meet on Tuesday, Moscow and Beijing have entered into a pact to boost use of the rouble and yuan for trade transactions.
During its maiden meeting in the Great Hall of the People in Beijing, the Russia-China Investment Cooperation Commission discussed 32 bilateral investment projects on Tuesday, Russia’s Deputy Prime Minister Igor Shuvalov said.
Both Xi and Putin will now attend the 14th summit of the SCO slated for Thursday and Friday in the Tajik capital.
TBP
or go to
Aletho News Archives – Video-Images
By Lisa Pease | Consortium News | September 16, 2013
More than a half century ago, just after midnight on Sept. 18, 1961, the plane carrying UN Secretary-General Dag Hammarskjöld and 15 others went down in a plane crash over Northern Rhodesia (now Zambia). All 16 died, but the facts of the crash were provocatively mysterious. … continue
Aletho News If Americans Knew No Tricks Zone
Aletho News 