Sapin-saping dahilan para kumilos at lumaban!

Disyembre na. Malungkot, walang trabaho o hanapbuhay, gutom, wala ni bubong na silungan at nagdarahop na Pasko ang muling daratal sa higit na nakakaraming mamamayang Pilipino.

Disyembre na. Maglilipat na ang taon. Si Gloria Macapagal-Arroyo ay nasa Malakanyang pa rin. Kapit-tuko sa kapangyarihan. Gustong manatili dito nang labag sa pasya ng mamamayan. Gustong manatili dito ng habambuhay. Sa kabilang banda ang mamamayan ay mistulang habambuhay na bilanggo sa pagsasamantala at pang-aapi ng iilang dayuhan at lokal na naghahari.

Sapin-sapin ang mga suliranin ng sambayanan habang nagpipista sa kurakot at korupsyon ang mga umaangkin ng kapangyarihan. Magpapasko, ang buong daigdig at ang bansa ay hinahambalos ng matinding krisis ngunit walang-lubay ang mga demolisyon sa mga kumunidad ng mga maralita. Hindi rin binabawi o sinususpinde ang pagtataas ng singil sa kuryente, tubig at pati na matrikula ng mga estudyante.

Nagtatanggalan sa trabaho sa loob at labas ng bansa. Ngunit walang hakbang ang gubyerno para lumikha ng makakabubuhay na mga trabaho at hanapbuhay. Iaalok lamang muli ng rehimen sa mga dayong bansa ang mga OFW na nawawalan ng trabaho. Patuloy na itinataboy ng rehimeng Arroyo ang mga Pilipino sa ibayong dagat upang doon makipagsapalaran sukdang magpa-alipin makapagpadala lamang ng dolyar, euro o ng yen. Sa loob ng bansa ang mga dayuhang kapitalista’y ay pangunahing inaakit sa mura at supil na lakas-paggawa ng mga Pilipino. Bawal mag-unyon! Bawal ang dumaing! Pagtatanggal sa trabaho ang banta sa bawat maggigiit ng karapatan, sa bawat ayaw magpaalipin!

Wala na ni kahit butas-butas na repormang agraryo o kahit pormal na pagkilala sa karapatan ng mga magbubukid sa lupang binubungkal.. Wala nang puwang para magkaroon ng kapirasong lupang mabubungkal ang maraming wala nito. Ngunit pinagkakalooban ng rehimeng GMA ang mga dayuhan ng 100% karapatang mag-ari ng lupa sa Pilipinas!

Patuloy na bumababa ang presyo ng langis at mga batayang pagkain. Ngunit ayaw alisin ang VAT na pinagpapasasaan ng kurakot na rehimen at pambayad sa dayuhang pautang na malaon nang nabayaran sa pawis at dugo ng mamamayan. Patuloy na mataas ang presyo ng bigas, ng mga gamot, ng pagpapa-ospital hanggang pagpapalibing.

Ngunit ayaw suportahan ang mga magbubukid. Bawat ipinagmalaking programa ng suporta sa pagsasaka ay nauwi sa katiwalian. Tulad sa kinasangkutan ng dakilang sinungaling na si Joc-joc Bolante sa pondong nilustay upang ipanalo si GMA at biguin ang yumaong FPJ noong 2004.
Mayroon diumanong batas para sa murang gamot ngunit patuloy na nagpapasasa ang mga dambuhalang dayuhang kumpanya ng gamot sa mahal na pagbenta ng kanilang gamot sa Pilipinas. Tinitipid ang badyet ng Department of Health at mga publikong ospital ngunit binubusog ang mga heneral ng AFP at PNP tulad ni De la Paz at mga barkadang Euro Generals at ng naglaho na si Gen. Garcia.

Kailangan pang ipaglaban ng mga publikong guro, mga karaniwang sundalo at empleyado ng gubyerno ang kanilang karapatan sa nakabubuhay na suweldo samantalang kinukurakot ng mga opisyales ang mga pondo.

Walang pag-aasa at maasahan pang buti sa rehimeng GMA at sa pinangangalagaan nitong naghaharing sistemang malaon nang bulok. Malaon nang natuto tayong mga Pilipino na umasa sa ating sariling pagtitiyaga at pagsusumikap na mabuhay ng kahit sa bawat araw lamang.
Ngunit laging may hangganan ang pagtitiis!

May dakila at mapait na mga aral tayo mula sa kasaysayan at sa sariling karanasan ngayon. Nagawa nating ibagsak ang diktadurang Marcos ngunit winaldas ng mga nagkanulo sa bayan ang tagumpay na iyon. Nagawa nating ibagsak ang rehimeng Estrada ngunit nalinlang tayo ng sagad na bulok na pumalit na rehimeng GMA.

Walang katulad sa nakaraan ang paghahari ng pangkating Macapagal-Arroyo. Hinigitan nito ang lahat sa katiwalian at korupsyon sa kabang yaman ng bansa at panunupil sa mga karapatan ng mamamayan. Wala ito ni kaunting malasakit sa bayan.

Walong (8) taon na tayong nagdurusa sa ilalim ng rehimeng GMA. Ngunit walang hiya at pananagutan itong nagmamaniobra ngayon para manatili nang lampas sa 2010.

Disyembre na. Magtatapos na ang taon ngunit hindi nagtatapos ang laban at pakikibaka ng sambayanan. Sobra na, tama na! Wakasan na ang bulok na gubyerno at sistema ng lipunan!

MANGAHAS MAKIBAKA! MANGAHAS MAGTAGUMPAY!
Disyembre 3, 2008

The Crisis of World Capitalism and the Imperatives of Peoples’ Movements

Introduction

We may find ourselves shortsighted if we would not make even make a cursory review of the historical background of the present crisis of global capitalism.

Two decades ago, when the neo-liberal or free market craze was in the upswing, some worthy writers of the imperialist apologists type declared “socialism is dead” and unabashedly proclaimed “the superiority of capitalism” and “capitalism forever”.

However, history is always unforgiving to charlatans and social cranks. World capitalism again and again, as in over past 100 years, is wracked by its inherent crisis. Especially at its monopoly or imperialist or finance capitalist stage, capitalism has continuously made the world ever smaller for the expansion of capital and competition among individual corporations in both banks and industries. The “boom-bust” cycle became shorter in duration until monopoly capitalism is chronically beset by its inherent crisis of falling rate of profit or the condition of over-production and over-accumulation of surplus capital that cannot be reproduced or re-invested in physical or material production.

Capital must therefore always find and create new areas for investment or expansion to escape and counter the falling rate of profit. In this era of imperialism and because every new industry is fast saturated with capital, finance or bank capitalists have continuously developed financial manipulation and speculation or the means by which surplus capital could grow outside the sphere of physical or material production. Finance speculation has created the “metaphysical” or “bubble” economy. But because its object and subject is the physical economy, the “bubble” busts every now and then, ravaging the real or physical economy.

Monopoly capitalists would always find the intervention of the imperialist state necessary, even if capital remains mainly private and thus the capital earnings. But competition is another basic character of capitalism and the imperialist state would always favor the monopoly capitalists, especially the monopoly finance or bank capitalists, specifically the biggest among them and those who have the proper connections.

Imperialist state intervention has been seen in two World Wars, which were the culmination of capitalist depression and through the regular defense and arms build-up, the US wars of aggression and military intervention and its creation of imperialist institutions in all aspects—economic, financial, political and military. World War I (1914-1918) was the culmination of the Long Depression (1880s-1900) that ushered in the stage of monopoly capitalism. The USA emerged as the chief victor in WWI and had the strongest hand in the re-partition of the world. But it was not a “winner-take all” affair for the US and its allies, Britain , the erstwhile superpower and France . The working class was able to seize power in Russia in 1917 and soon in all the nations that were once under the Tsarist Empire. The Union of Soviet Socialist Republics (USSR) or Soviet Union was established.

World War II (1939-1945) was the culmination of the Great Depression (1930s) that was signaled by the New York Stock Market crash of 1929. WWII catapulted the US into the position as the single imperialist superpower to have worldwide hegemony. But this position had reached its peak or its limits especially after Japan and Germany recovered and re-industrialized throughout the long years of the US Cold War with the USSR and the long US war in Vietnam . But China is now seen by the US as the greatest threat to its supremacy. On the other hand China , which arose at the time the US economy was already on the decline, is also seen now as the potential savior of the capitalist world.

The Features of the Present Crisis of World Capitalism

The present crisis is comparable to the Great Depression of 1930. It would suffice if our historical backdrop to the present crisis starts from the GD period or at least the post-WWII period. The limitations of the paper however would not permit it.

Whatever its complexities, let us just state the context and major features of the present crisis of world capitalism and its effects on third world economies like the Philippines.

1. The strategic decline of the US as an imperialist superpower is the broad context the present crisis of world capitalism.
2. The continuing crisis of over-production and over-accumulation of surplus capital, in other words, the under-consumption of both goods and capital, is the particular context of the present crisis.
3. The present crisis manifests or features itself as crisis in the financial and banking systems. Its particular feature is credit and debt crisis.
4. The gravest feature is the growing joblessness and wage cuts all across industries and services, especially banks and financial services, throughout the capitalist world.
5. The constricting labor-export market is limiting opportunities for third world countries like the Philippines.
6. The growing trend towards re-concentration of capitals back to their home or nation bases would deplete foreign investment and debt dependent economies like the Philippines .
7. The bail-out or “nationalization” of banks and other financial institutions shows the limits of the neo-liberal or free market paradigm but does not prove the resurgence of Keynesian economics.
8. Socialism is posing itself as the real alternative to capitalism.

We would proceed to describe the context and features of the global crisis.

1. The strategic decline of the US as superpower is principally determined by its internal weaknesses and contradictions in maintaining its economic and military might and of the US dollar and financial regime over global trading and financial system. On the other hand the US exercise of its world hegemony is challenged starting from the 1970s by its re-industrialized former enemies in WWII, Japan and Germany and lately by the fast rising economic and also military power, China which is in close alliance with Russia and India, which are both big economies and nuclear capable. But Germany before is not the Germany now at the lead of European Union (EU) whose Euro is the currency most strongly competing the US dollar. But other than the big capitalist powers that rival each other and the US, challenge is also posed by sovereign nation-states which are binding together to protect and defend their economies principally against the US. The UNASUR nations of South America led by Venezuela are the latest.

Briefly, the decline of the US begun after the collapse of the Bretton Woods system in 1971 and the US dollar while remaining the currency for global exchange was devalued and begun to be floated. Soon the currencies of Germany (DM) and Japan (Yen) were being accepted by some countries beside the dollar. After the oil producing countries formed the OPEC (1968) and asserted their sovereignty over their resources and used oil as weapon to counter US threat of trade embargo, the global oil cartel, not the OPEC, raised the price of oil by almost 400% in 1974.

The leap in profits from oil and the increased cost of fuel especially for industries exploded into a crisis called stagflation (recession with high inflation) in 1979-1981. This crisis manifested first in the US and spread to Europe and but limitedly affected Japan . Hundreds of thousands of workers were thrown out of jobs due to closure of many plants and the general reduction in production. Much of the industrial areas, especially in Michigan, were reduced to “rust belts”.

The stagflation ushered in the new capitalist paradigm—the neo-liberal or free market economics. Packaged as globalization, its main objective is the removal of all restrictions, tariff and non-tariff barriers, state intervention in the economy, workers’ right to unionize, labor standards, etc. for the free global movement of capital especially, finance capital.

In the 1980s, the US incurred growing annual trade deficit with Japan despite the US- enforced re-valuation of the Yen in 1985 (Plaza Accord). From a net creditor, the US fell to a net-debtor by 1985. Meanwhile the efforts towards the building of the German led European Union (EU), which begun from the European Common Market in the early 1960s, gained much headway. China embarked on its modernization program starting in 1981.

Despite the thawed Cold War, the US embarked on the costly National Defense Program cinematically dubbed as “Star-Wars Strategy” and the so called Reaganomics which was mainly an attack against workers’ wages and the right to strike.

In 1987, another New York Stock Market plunge dragged the whole financial world. A great factor was the 1986 debt-payment crisis. Many countries that availed of structural adjustment loans (SAL) extended by the IMF-WB defaulted in debt-payments. But the Philippines was an exception, the “people power” installed Cory Aquino regime made its infamous declaration, “we will honor our debts”. The US came to the rescue not of the deeply indebted countries but of the banks that have financed the IMF-WB SALs. The US scheme was the Brady Plan which was none other than the restructuring of debts.

The 1990s was ushered in by the Japan and Saudi- Arabia financed first US war against Iraq , the “desert storm” of 1991. The pretext was Saddam’s threat to invade Kuwait . It was in fact an assertion of Iraq ’s sovereignty over its oil which was being pumped-out across the border in Kuwait . On the other hand, the US objective was to secure the oil for its giant oil corporations. Under the Clinton government (1992-2000) the US tried to “retool” its industries that have lagged behind Japan ’s and Germany ’s. But the military and defense spending was always greater. It was the height of neo-liberal globalization, industrial capital was always in search of low-wage areas. The banks preferred more the lucrative finance speculation business, especially on the newly created financial product called derivatives.

The other great part of finance capital went, as loans and investments, to the so called “new tiger economies” and “newly industrialized countries” in Asia . Finance capital did not find the economies of tumultuous Russia and other former USSR countries and of Eastern Europe as ready for the free movement of capital. But most of the capital that flowed in and out of the Asian “tigers” and NICs were in real estate speculation, land and asset securitization and as standby loans for the liberalization of the financial and banking systems of the countries concerned. The Philippines 2000 Plan or the NIChood ambition of the Ramos regime was nothing industrial but the total liberalization of the Philippine economy, starting and ending with the liberalization of the banking and financial systems and massive land-use conversions (LUC) in 1993-1994, as condition for new IMF-WB loans. With then Sen. Gloria Macapagal-Arroyo as lead proponent, the Philippine senate ratified the GATT-WTO in December 1994. Thus the Philippines became member of the now derelict WTO.

Then the Asian Financial Crisis erupted in 1997-1998. The contagion spread to over half of the world including the US and of course, Japan. It was caused by glut in speculations. All Asian currencies were devalued several times thereby increasing the cost of countries’ debts and of course the private loans extended by banks to corporations and individuals. On the other hand, the banks were crippled by mass of non-performing assets (loan collaterals, mostly land) and non-performing loans. Again the US through the IMF-WB rushed a rescue or bail-out package valued at close to $200 billion extended as loans to countries to enable them to pay their debts to mostly private US investment banks. Japan was in deep financial doldrums and economic recession. The biggest Japanese banks were saddled with $800 billion of firstly, inter-bank and secondly, industrial corporate loans.

As consequence of the Asian Financial Crisis, losses in transactions in the US financial market from 1998-2000 were estimated at $7 trillion. Meanwhile American household and individual debts (mostly on home mortgages and car loans) were mounting.[1] Before the US recession that technically begun in March 2001, the average debt of American families and individuals was $8,000 totaling at close to $10T. This and the real threat of foreclosures and reality of increasing joblessness set the common American attitude to save and reduce consumption. The reduction on consumption was threatening the US financial and economic might because 2/3 of US GDP is generated by consumption of the American people.

The Bush government resorted to tax cuts that favored most the richest American families. However the tax cuts reduced the US government’s revenues and increased its budget deficit. This plus the increasing cost of the prolonging US wars in Iraq and Afghanistan and the annual trade deficits first with China and second with Japan are translating to $500B-700B annual deficit in US BoP. To finance this, the US Federal Reserve resorts to massive foreign and public borrowings, which are being shouldered by the American people. On the other hand the banks resorted to debt refinancing by artificially raising the values of mortgaged homes and lots. But this did not perk up the average consumption of Americans. Instead the banks made a killing in the business of securitization of mortgages or the now famous speculation on sub-prime loans represented by the very heavy but greatly unregulated inter-bank trading on collateralized debt obligations (CDOs). The unaccountable sub-prime bubble finally exploded in 2007 to what is now the deepened crisis of world finance capitalism.

2. The real measure of the crisis is in the increasing joblessness and home foreclosures in the centers of capitalism and throughout the world. What is further distressing is the trillions in dollars of bail-out packages being put up by the predator and parasitic states of US, EU and practically all countries, whose economies have been integrated under the global financial empire, to rescue precisely the rulers of this empire, the biggest banks. But where would these predators get the funds? The fact that what are being “nationalized” are the bad loans and debts of banks, it means the bail-out funds would be drawn out from the people.

3. Socialist revolutions are not near possibility but the present crisis of world capitalism which is further exploding into immeasurable proportions is a very favorable situation to counter-pose socialism against capitalism. In the imperialist stage has exposed the moribund, decadent, parasitic and, let us add, predatory characters of capitalism.

4. Tactically for countries like the Philippines , the trajectory of peoples’ movements is to de-link from the global financial empire. Debt repudiation is a very justified and reasonable call and demand now. The debt payments should be shifted to provide immediate relief for the people and job creation within the framework of genuine national industrialization and the nationalization of assets acquired by banks and therefore the nationalization of banks and the streamlining of the banking and financial systems.

On Federalism and Charter Change: A "Way to Peace" or GMA Term Extension?

Once more the GMA regime confirms an insidious plot to stay in power beyond 2010.While the nation, mired in severe economic crisis, is astir over the controversial Memorandum of Agreement on Ancestral Domain (MoA-AD) between the GRP and MILF, Gloria Macapagal-Arroyo made an anticipated pronouncement: “We advocate federalism as a way to ensure long-lasting peace in Mindanao”.


Malacañang’s henchmen lost no time in renewing its bid for charter change this time riding on the Senate Joint Resolution No. 10 calling for a shift to federal system and the need to legitimize the MoA-AD it signed with the MILF. Meanwhile foreign powers like USA, which has more than a casual interest in Mindanao, have manifested impatience over “democratic process”. It is not important to the US whether it is GMA or somebody else who would oversee the “process” so long as every remaining legal and constitutional obstacle to their interests is finally removed.


The US has taken and is provided the advantage to ensure and secure its own interests by stationing its troops and by actively influencing the outcome of the Mindanao “peace process” in utter disregard and trampling over of the Filipino, including the Bangsamoro, people’s sovereignty.


There is therefore now a meeting of interests in the move to change the Philippine charter. The GMA reactionary regime is bent and earnest in taking this opportunity to keep hold of power.


The federal shift for “peace”.


The federal way “to ensure peace” is Malacañang’s rhetoric; the real thing is further conflict. The character of ruling class politics here and US intervention overshadow the restructuring to the federal system.


In truth, federalism is not the main issue; the question is the interests that would benefit from this system given the prevailing conditions in the Philippines. System-shift via charter-change under the despicable GMA regime, whose desire to stay in power is obvious, already grabs away from federalism its merits.


Moreover, the reality that Philippines politics is based on patronage politics exercised by local dynasties will prove federalism disastrous to the Filipino people in general and advantageous to local ruling classes in particular. Furthermore, the benefits of this system for local political lords could fuel further conflict among and within political clans and in the process dragging the people into their fray.


Under the present unitary system the contest for power among members of the ruling class is most intense at the local levels. Given increased powers in a federal system their contests would be more severe, bloodier and at greater financial and social cost. Already, new and old political dynasties registered strong resurgence in 2004 and stronger in 2007. Even the latest ARMM results, do not deviate from this trend, entrenching further traditional politicos especially those with close ties to the Palace. The character of the GMA regime-- rewarding or buying the support of local political clans that include the worst types—warlords, despotic landlords and land-grabbers, real estate and finance speculators, smugglers and gambling lords--; the most corrupt, vicious and subservient but self-serving of military and police generals; and an equally corrupt and corruptible cabinet and national bureaucracy heralds the kind of federalism the Philippines could ever have.


If the Bangsamoro Juridical Entity (BJE) is model or blueprint for the Philippine federal system, we could expect the re-division of the Philippines into 11 or so federal states alone would entail a protracted battle among local elites for their economic, especially landed, interests and control.


Advocacy for federalism in the Philippines has gained much support especially in Mindanao. But however its merits, the federal system could never ensure peace or progress in Mindanao or the whole Philippines. As exemplified by the BJE, the Philippine Federal system would have a weak central government and strong federal governments.


Federal states could exercise independent economic programs and policies and pursue economic relations with other countries it is likely that in pursuance of exploiting natural resources the federal states could allow foreign ownership of lands whether solely or in partnership with the federal state or a local private entity.


Corresponding with the reality of patronage politics and local rule of political dynasties, the tradition of weak party system in the Philippines is another drawback for federalism.


Thwart the latest plot to extend GMA’s hold to power .



Malacañang’s seemingly benevolent line of federalism as road to peace in Mindanao is but a smoke-screen for GMA rule extension. Peace in Mindanao has been compromised not by Supreme Court’s TRO of the August 5 signing of the MoA between GRP-MILF. Peace in Mindanao has long been compromised and further compromised when the GMA regime opened the island to US military forces from 2002. US military presence and operations in Mindanao through the so-called Joint Special Operations Task Force Philippines (JSOTFP) has veritably made the island, starting from the Sulu Archipelago, a US war zone.


The “anti-terrorist” cover has since then revealed the more ostensible design of establishing US military facilities not only to secure the enlarging American, Australian, Canadian, Japanese, Malaysian and other foreign economic interests in agri-business, mining and oil and natural gas exploration and exploitation but also to ensure for the US the strategic location of the islands relative to the South China Sea, South Indian Ocean and the strategic sea lanes of Lombok and Makassar Straits in Indonesia and the Sibutu Strait in the Sulu Sea and the Palawan Passage.


How could the Filipinos, including the Bangsamoro people ever realize the right to self-determination with the nation being a US neo-colony and the government exercising dependence and subservience to foreign interests?


The Filipino people have to assert and fight for sovereignty, by defeating the renewed attempt change the charter in order to extend the GMA rule and further open the nation and all its parts to US imperialist and other foreign capitalist plunder.


It is through this struggle that they can determine and chart their future, including the system and structures for their exercise of their unified will.

BANGSAMORO JURIDICAL ENTITY (BJE): A US-CRAFTED TERRITORY

(Note: This statement appeared in the Sunstar Cebu Speak Out dated August 15, 2008, its edited version)

The interventionist manuever of US government is again at work during these last few years in Mindanao. Using the United States Institute for Peace (USIP), the American government guided the final outcome of the memorandum of agreement (MOA) between the GRP and the MILF to serve its tactical and strategic objectives in the country as well as in the Southeast Asian region. Such guidance is ensured through the USIP Philippine Facilitation Project, 2003-2007. It is of no surprise that the signing of MOA is scheduled this year.

The USIP is created and funded by the US Congress. It has made its presence felt in practically all areas immersed in local wars, ethnic wars, and regional conflicts. It ensures that through their sponsored conflict resolution mode, US strategic interests in these areas are safeguarded. Mindanao is no different.

The entry of US in the peace talks was facilitated by the direct plea for help of the MILF late Chairman Hashim Salamat to Pres. Bush in January, 2003. Washington’s commitment was hinged on the MILF’s renouncement on terrorism and the late Chairman made this policy public in June, 2003. The conspiratorial yet the most decisive role of US is being held a secret since then. Yet at some time, MILF’s Kabalu has said, “at the moment the US is playing a clever role; they are involved, but only via the USIP”.

The US has already established its military presence in the island through the Joint Special Operations Task Force Philippines (JOSTFP). This command has been rotating its forces every six months and is composed of marine, air force, navy, army, and special forces personnel.
After the nationalist lawmakers in 1991voted to end the US’ long military presence in the country, the US has been looking a for a possible new hosting arrangement t for their military installations in the country.

The MILF has hinted on several occasions that it has been approached by undisclosed US authorities about the possibility of establishing US military bases in the MILF controlled territory as part of the final peace deal. The MILF’s spokesperson has confirmed this. According to him, “this is negotiable, it is possible”. He added, “if the American interest is really in pushing this peace process, then we can talk about military bases.”

Expectedly, the GRP-MILF draft pact on the Bangsamoro homeland provided the latter with the broadest concessions. One of this is the agreement of both parties “to invite a multinational third party to observe and monitor the actual implementation of the comprehensive compact…..”. The establishment of the military installations within the BJE would serve a de facto peacekeeping role between the two sides. The possibility of a US sponsored UN peace keeping force with the latter’s headquarters in the former’s future military installations is a not a far fetch reality. Such facility is pivotal to their whole military strategy in this part of the globe. Gen. Abat, the former senior envoy to Beijing, contends that “establishing a US military base in Mindanao would make strategic sense for Washington on several fronts, including possible future naval interventions in the South China Sea, defending Taiwan from a preemptive Chinese attack and providing a launch pad for anti-terrorist operations in Indonesia, Afghanistan and Iraq.”

US knows that the greatest obstacle to the full realization of the Bangsamoro Juridical Entity remains to be the nation’s constitution and laws. Yet what is happening now is a classis case of putting the cart before the horse. Without any iota of decency, the GRP panel stooges and a bully clothed as presidential peace adviser proceeded with the MOA without laying first the constitutional basis for it. Obviously, the US as their masters, has no respect on the laws of its neocolony as long as its actions can ensure its strategic interests.

Yesterday, the Philippine Daily Inquirer carried on its front page, “US envoy brightens dark mood in Malaysia.” After all, it was only a “purely temporary impasse”. With the Philippine Supreme Court issuing a temporary restraining order on the scheduled signing, US Ambassador Kenney commented, “it is the rule of law. So, I don’t think this as embarrassment.” After crafting a GRP-MILF draft pact as a route towards installing their military bases in Mindanao, she said, “respecting the democratic process is never a cause for embarrassment.” A doubletalk that she only can deliver best.

Kilusan Para sa Pambansang Demokrasya (KPD) – Cebu
August 14, 2008

Dark Clouds

“DARK CLOUDS”

Looking at the view of Cebu at a distance in Mactan Island coastal areas fronting the port area at daytime seemingly delights the mind as if development is at its reach at the Metropolitan. The infrastructures are as high as the grandeur skyscrapers already in Makati with the outlining South Reclamation Project to the on-going North Reclamation development of more business establishments. Delightful sight definitely, until it rained. The rain came so sudden that the site vanished and only dark clouds can be seen. The delight vanished too. Imagining, it relates a very familiar feeling nowadays.

Many have felt that the presence of these giant buildings and spectacular lights and colorful lifestyles determines our boost. Getting along and being amused by these till our pockets run dry. On one hand, one’s mind can’t help but wonder, do the majority of the Filipino people amidst this gaining capital-based growth are doing the same? Or the contrary?

At this time, no sign of relief is up for grabs. News and the realities have brought a scare already on the unending increase of the prices of basic commodities: fuel reaching not lower than Php70/liter until the end of the month, Php8 minimum fare increasing on less than a month basis, rice as our staple food is skyrocketing at Php35-49/kilo, tuition fees are not lowering either at 7-11% increase this school year yet only a feet-dragging Php17 increase on the wage.

FOOD, JOBS, SECURITY, JUSTICE AND FREEDOM have become a non-issue. Capital Investment has become the drive. What has become of some? More so, what has become of our Government? Indeed, history teaches us that how the Republic of the Philippines was first formed, organized and essentially was, remained until now, at the allegiance to the “democracy” propagated by the USA.

Comparatively, dark clouds indeed, vanishing whatever beautiful sights we see daily.

Perhaps this rain that has become a storm heads us to reflect unto things. The reflection we often times can’t and don’t have the luxury because of the rat-race we are into, the rat-race of survival. But do we have to race? Living is not all of surviving or merely existing, it is caring, it is involving.

Come to think and act on it, after all that is what keeps us human unless we refuse to be one. Stand against the storm: Get informed, Search for the truth and break free from the shackles of uncertainties and rage against the dying of the light.

“Rage against the Dying of the Light”: A Walk for a Cause Campaign for the Concern for Food, Jobs, Security, Justice and Freedom
For interested and for more information and discussions, please contact/check on the following for your queries and request for schedules:
Tel. No.: 253-9682
Mobile Phone Number: 09283792617/
Email Add: kpd_cebu@hotmail.com
Blogspot: http://kpd-cebu.blogspot.com

The International Economic Situation

The World is Headed to a Crisis

Far Greater than the Great Depression

A combination of financial crisis, fuel crisis and food crisis is afflicting the world.

Monopoly capitalism or imperialism with its basic character of being moribund, decadent and parasitic engendered this crisis. Its fundamental contradiction is socialized production by workers and other laboring masses in the international scale and private appropriation by a few global monopoly capitalists of all the fruits or values created by this socialized labor. Financial and price speculations and manipulations done by the same monopoly capitalists, more particularly by monopoly finance capitalists of the oligarchic type as exemplified by giant banks and other financial and securities trading entities further intensified this contradiction.

Economically and socially costly wars and huge military spending being waged and done by the US, its allies and by its rivals for and in behalf of giant, monopolistic oil corporations, arms and other war industries, construction companies, pharmaceutical and food corporations, etc made this fundamental contradiction most intense.

Untold sufferings and miseries, deaths, hunger, diseases, homelessness and generalized impoverishment plague people everywhere, especially in the third world countries. The working class and people of the US and other capitalist countries are not spared from these plagues and deprivations created by boundless greed for profit by monopoly capitalists.

Finance capital, principally held by the financial oligarchy, having gained dominance in the era of imperialism became more dominant in the present period of neo-liberal imperialist globalization. Capitalism has long ago developed means by which money or wealth can beget money or wealth without the intervention of the real value creating process of production. In the present era when finance capital is dominant, financial transactions and speculations outside the sphere of production have become a normal, legal and regular means to profit.

These financial transactions and speculations create a bubble economy above and far greater than the material or physical economy. These meta-physical economic activities

modeled by such case as the transactions on sub-prime housing mortgages or debts can inflate or deflate prices or cost of debts or mortgages thereby also inflating or deflating the prices or costs of the physical or material assets that secure or collateralize the debts or mortgages.

1. Generalized crisis of world capitalism

The present crisis is principally financial. It broke out in late 2007 with the bursting of the subprime home mortgage bubble in the US. The crisis is characterized by: credit crunch or capital tightness; continuing devaluation of the US dollar; under-capacity production; reduction in work force; and soaring prices of fuel and food. The features have similarities with stagflation but economists see a long or protracted slowdown or recession. Others say the capitalist world is in the brink of depression.

Before proceeding let us have a short discussion about the collapse of the US mortgage market or the sub-prime bubble bust that triggered the present financial crisis.

Steadily the US financial system is exposed. It has lax credit practices for subprime borrowings. It has lax practices for subprime borrowings. Housing loans or mortgages were extended to low- income groups at variable interest rates, thus the so called “NiNa” loans (for “no income, no assets”)and the laxity if not the absence of sound and professional assessment or investigation of credit-worthiness of borrowers. In other words, subprime credit is high-risk investment. Sub-prime is the business of lending to debtors even to those who have records of having defaulted in payment.

Hard-selling promoters through such advertisements as “zero down payments and 100% financing” attracted homebuyers, especially the first timers. Unsuspecting homebuyers and loan subscribers tended to ignore the risk of possible interest rate hikes and a jump in their monthly payments.

The condition of recession, especially from 2000-2001, when consumption level of people in America was in a continuous slump favored this situation. Many have lost their jobs and among the employed. Many have compromised their wages just to keep jobs. Everyone needs additional income and mortgaging properties is one of the means to additional income.

The banks also have to do business with their idle capital assets and the industries and manufacturers must resume operations or increase their output or capacity. The subprime, estimated at $6.5 trillion in mortgage-backed securities (MBS) and/or collateralized debt obligations (CDOs) is all bubble created by series of buying and selling of MBS or CDO papers. But this bubble kept construction and real estate alive and therefore, manufacturing, industry and commerce, including retail and wholesale trade also.

For almost 5 years, the housing bubble, as the US Federal Reserves admits, kept the US economy, particularly the consumption of Americans close to non-crisis level. Then came the time when the price of sub-prime transactions were way beyond the values of assets (houses and lots) or collaterals that secure the loans or mortgages. The bubble burst, and with it, the prices of ABS (asset backed securities, like the MBS and CDO plunge and so did the resale prices of the mortgaged houses and lots.

Several analysts, including Wall Street economists and US Federal Reserves chair Bernanke, take the March 14, 2008 rescue by the US Federal Reserves and acquisition by JP Morgan Chase, at the greatly discounted price, of Bear Stearns (the 5^th largest investment bank in the US and one of the biggest global financial corporations) as signal for the bigger crisis.

The terrain of the crisis before the rescue of Bear Stearns was a mire of sub-prime housing mortgages or what have been repackaged into new “financial products” called MBS and CDOs that sold like hotcakes before and until 2006. Other than American, several European and Asian banks and financial institutions bought these financial products.

Beginning in late 2006, the U.S. subprime mortgage industry entered what many observers have begun to refer to as a meltdown. A steep rise in the rate of subprime mortgage defaults and foreclosures has caused more than 100 subprime mortgage lenders to fail or file for bankruptcy, most prominently New Century Financial Corporation, previously the nation's second biggest subprime lender. The failure of these companies has caused prices in the $6.5 trillion mortgage backed securities market to collapse, threatening broader impacts on the U.S. housing market and economy as a whole. (http://en.wikipedia.org/wiki/Sub-prime_mortgage/)

The crisis could be likened to a virus epidemic whereby the degree of susceptibility of banks and other financial institutions that have direct or indirect exposures in the sub-prime market can not be immediately ascertained. But what is clear is almost every bank has incurred losses.

Thus when the crisis hit the subprime mortgage market, those who bought into the market suddenly found their investments near-valueless - or impossible to accurately value. Being unable to accurately assess the value of an asset leads to uncertainty, which is never healthy in an investment climate.

With market paranoia setting in, banks reined in their lending to each other and to business, leading to rising interest rates and difficulty in maintaining credit lines. XXX ordinary, and healthy businesses across the world with no direct connection whatsoever to US subprime suddenly started facing difficulties or even folding up due to the banks' unwillingness to budge on credit lines. (http://en.wikipedia.org/wiki/Sub-prime_mortgage/)

“Since the crisis broke out nine months ago, the true picture of the financial debacle is still subject to much speculations. According to the London Economist, more than $5 trillion has disappeared from the value of public companies (publicly listed) by early 2008; its best estimates of prospective banking losses is around $1.1 trillion”. (Gert A. Gust, Boom and Bust: Understanding the global financial crisis, Philippines Free Press, April 26, 2008).

Many banks, mortgage lenders, real estate investment trusts (REIT), and hedge funds suffered significant losses as a result of mortgage payment defaults or mortgage asset devaluation. As of May 21, 2008 financial institutions had recognized subprime-related losses and write-downs exceeding $379 billion.[1]

Profits at the 8,533 U.S. banks insured by the FDIC declined from $35.2 billion to $646 million (89 percent) during the fourth quarter of 2007 versus the prior year, due to soaring loan defaults and provisions for loan losses.[2]

· Write-down league table

Published: May 13 2008 18:04 | Last updated: May 14 2008 07:33

The following table lists the asset write-downs and credit losses since the beginning of 2007 at some of the world’s biggest banks.

Sub-prime losses by bank
	Company	Total write-downs and credit losses since Jan 2007 ($bn)
1	Citigroup	40.9
2	UBS	19.2
3	Merrill Lynch	31.7
4	AIG (Insurance)	30
5	HSBC	12.4
6	Royal Bank of Scotland	15.3
7	Bank of America	14.8
8	Morgan Stanley	12.6
9	Deutsche Bank	7.6
10	Credit Suisse	6.3
11	JPMorgan Chase	9.8*
12	IKB Deutsche	8.9
13	Crédit Agricole	8.4
14	Washington Mutual	8.3
15	Other European banks	7.9
16	Wachovia	7
17	Société Générale	3.9
18	Mizuho financial	5.5
19	Other Asian banks	5.4
20	Barclays	4.5
21	Canadian Imperial	4.1
22	Bayerische Landesbank	3.6
23	Fortis	3.4
	Source: Bloomberg and FT Research
	* Excluding the expected $9bn charge JPMorgan Chase will take to clean up Bear Stearns’ balance sheet and pay for redundancies and litigation arising from its takeover of the bank (read story)

Copyright, The Financial Times Limited 2008

The move by the US Federal Reserves and by JP Morgan Chase, while particularly benefiting JP Morgan and Bear Stearns, was to save the whole financial system that is teetering. And, it was not only Bear Stearns that the US Federal Reserves rescued. Last March the Fed announced a $200 billion loan package in US Treasury bonds for Wall Street investment banks. The Fed accepts as collateral, mortgage-backed securities or collateralized debt obligations, which had no buyers in the financial market since the sub-prime bubble bust. These moves gave back some measure of confidence for the financial market to somehow recover from continuous fall.

But the Federal Reserves’ moves did little, if not, nothing to avert the financial crisis. The Federal Reserves has admitted that the market has not really returned to normal and that the crisis precipitated by the sub-prime market collapse would be protracted.

Bear Stearns, reportedly holds $2.5 trillion worth of trading contracts with several trading and securities firms in the world. This is about 1/6 of the total GDP of US and around 1/20 of the total world GDP. This explains why it was rescued by the US Federal Reserves and was taken-over by JP Morgan.[3]

Before the rescue of Bear Sterns was the collapse, in September 2007, of Northern Rock[4] a mortgage bank in England and about 100 mortgage-financing institutions in the US. Northern Rock sought and received liquidity support from Bank of England on September 14, 2007. On February 22, 2008 it was nationalized by (Bank of )England when 2 interested parties failed to bid the take-over of the bank.

The US Federal Reserve’s rescue of Bear Stearns and the nationalization of Northern Rock by the Bank of England, although isolated, nevertheless are indications of the so-called “Keynesian” measures or “cure” being resorted to by imperialist states. These exemplify the undercurrent neo-Keynesian stream to the mainstream neo-liberal economics.

Among the features of this crisis are the companies going bankrupt or incurring heavy losses and the simultaneous buy-outs and acquisitions and mergers as banks and other financial institutions “correct or clean their books”.

Other than the acquisition by JP Morgan Chase of Bear Stearns are the following mergers and acquisitions and write-downs and their implications and effects on employment.

· Prominent in the US last year was the filing for bankruptcy by the New Century Financial Corp, the erstwhile 2^nd biggest sub-prime lender in the US. In January 2007, New Century had 7,200 full time employees. When it filed for bankruptcy in April 2007, New Century was terminating 3,200 of its employees.

· As early as September 14, 2007, the Bank of America (BofA) got the approval from the Federal Reserves to acquire ABN Amro North America, La Salle Bank Corp. and La Salle Corporate Finance from ABN Amro for $21 B. On January 11, 2008 BofA acquired Countrywide Financing for $4 billion. Countrywide Financing was mortgage service provider for 9 million mortgages worth $1.4 trillion as of Dec. 31, 2007. Due to write-downs and rising credit costs BofA declared that its earnings for the first quarter of ’08 was down by 80% to $1.2B.

· UBS of Switzerland is writing down $19B of its investments in American sub-prime and other mortgages as part of the expected 12 billion Swiss Franks projected loss for the first quarter. Last May 6 UBS announced it would cut 5,500 jobs by middle of 2009. These jobs include those hired in 2008

· HSBC of England bought E-Trade, an Indian on line brokering firm for $235 million.

· ING of Netherlands made direct bids to buy InterHyp, a German direct mortgage broker for 64 Euros per share or an equity value of 416 million Euros ($645 million).

· Banking and finance including securities have shed a total of 48,000 jobs in the last ten months. On April 1 financial research firm Celent LLC issued a report suggesting that some 200,000 of the US commercial banking industry’s 2 million jobs could be lost over the next 12 to 18 months.[5]

· Citigroup the biggest bank in the world in terms of assets, reported $5.1 billion loss in the first quarter and $16 billion in write downs, announced 9,000 job cuts and a total of 13,000 redundancies since the beginning of the credit crunch.

· American International Group (AIG) one of the world’s biggest insurance companies, announced a $7.8 billion loss in the 1^st quarter. Though it has not announced any retrenchment yet, it is already being anticipated.

· Merryll Lynch announced a loss of $1.96 billion and plans to lay-off a total of 4,000 employees within 2008.

· JP Morgan’s take over of Bear Sterns would mean reducing the 14,000 work force of the latter. JP Morgan has earlier said that it would retain only 6,000 of the 14,000 workers. As of late JP Morgan is “looking for jobs” for 5,000 Bear Stearns’ employees.

· Other large US banking firms, such as Washington Mutual (a $1.14 billion loss and 3,000 layoffs), Wachovia ($393 million loss and hundreds of layoffs) and Wells Fargo (11% decline in profits), have also reported grim first quarter earnings.

· Outside banking and finance, other US based industrial and commercial corporations that announced reduction in jobs are: AT&T (5,000 jobs), Volvo Trucks (1,100), Asahi Glass (900 in the US and Canada), Harley-Davison (730), Lehman Brothers (600), Siemens Energy and Automation (477), AMD (420), Valley Health System (396), Newark Morning Ledger (367), Skybus Airlines (365), Greenville Hospital in Jersey City, New Jersey (356), Aramark Sports and Entertainments (303), Baja Marine Corp (283), Dutch Housing (250) and Summit Production Systems (200), among other firms.

· General Motors announced it will close four factories in the US, Canada and Mexico by 2010, eliminating more than 8,000 jobs. The action is the latest move in the downsizing of the former American industrial icon, which has cut its hourly US workforce by 53,000—or more than half—over the last four years. In the last week of May, GM announced that 19,000 of its workforce have accepted early retirements and buy-outs. This is part of GM’s restructuring of its workforce, that is, GM is steadily eliminating its hourly workers.

· Home Depot announced it was halting plans to open about 50 new US stores and closing 15 existing stores over the next seven weeks. As many as 1,300 employees could lose their jobs.

· Sun Microsystems posted a net loss of $34 million for its third quarter and announced plans to cut up to 2,500 jobs. .

· Health care giant Johnson & Johnson announced Wednesday it was eliminating 400 sales jobs in the US by the year’s end.

Other US-wide data:

· The official unemployment rate in the US has reached 5.5% in May after net loss of 49,000 jobs. This is the biggest monthly jump since 1986. This is up from 5% in April and 5.1% in March. (California has 6.2% unemployment rate in March.) The official jobless count was 7.8 million in March, by May it has risen to 8.5 million. This does not include those who have stopped looking for jobs but nevertheless are still unemployed. So far this year, the US government said, job losses have totaled 324,000.

· The reduction of jobs in the month of April 2008:

- Manufacturing—46,000 jobs

- Construction--- 61,000 jobs

- Retail----------- 26,800 jobs

New jobs in April were in:

- Health care------ 37,000

- Restaurant and Hotel----- 18,000

- Professional/business services--- 39,000

A total of 350,000 jobs have been displaced from construction industries in the US from March 2007 to March 2008. The housing slump is the main reason for this situation which affects directly the employment situation in all other lines of industry, manufacturing and in trading and commercial businesses.

US Housing Crisis

The economic devastation that the sub-prime bubble bust brought to the American people is the housing crisis manifested in the continuing decline in housing prices; defaults in payment of home mortgage loans; and, hundreds of thousands of home foreclosures every year since 2006.

Home ownership is the common American dream. Others say it is “that cornerstone of American dream”. Americans have invested more in homes than in stocks on the common belief that values or prices of homes and lots never go down. Now that dream is vanished for many and is running away from millions of Americans who are now property-less but deeply in debt.

The Mortgage Bankers Association’s (MBA) report for the first quarter of 2008 manifest the monstrosity of the US housing problem.

· Home foreclosure forecast for 2008 is more than 1 million foreclosures. For the approximately 516,000 foreclosure proceedings started in the first quarter, sub-prime ARM (adjustable-rate mortgages) account for 195,000 foreclosure cases and prime ARM, 117,000 cases. The states of Arizona, California, Florida and Nevada account for 89% of total home foreclosures.

· Almost 1 (0.99%) of every 100 mortgages is in foreclosure process. This is more than the 0.83% rate in the last quarter of 2007.

· Mortgage delinquency (30 days late) has risen from 5.82% in the last quarter of 2007 to 6.35% in the first quarter of 2008.

· Delinquency rate among credit-worthy borrowers has also increased from 3.24% in last quarter of 2007 to 3.71% in Q1 of 2008. More than this delinquency trend is the number of credit-worthy borrowers who are falling into home foreclosures. The percentage of credit-worthy borrowers who have fallen to foreclosure has increased from 0.41% in Q4 of 2007 to 0.54% in Q1 of 2008.

The Economist issue of May 29, 2008 said that “America’s housing prices today are falling faster than during the Great Depression.” Quoting S&P/Case-Shiller national house-price index, published this week, showed a slump of 14.1% in the year (2007) to the first quartern of 2008, the worst since the index began 20 years ago.

The magnitude of the housing crisis is also measured in terms of the total outstanding credit home financing institutions have extended or, in the reverse side, the outstanding financial obligations of the American debtors or borrowers. The standing of the US government-sponsored enterprises, Fannie Mae[6] and Freddie Mac[7], the twin pillars of the US housing finance market can represent the financial aspect of the housing crisis.

By the end of March 2008, Fannie and Freddie had total credit outstanding of $5.3 trillion ($1.6 trillion in debt and $3.7 trillion in credit obligations) – a total that is equivalent to the entire publicly held debt of the US. With the continued decline in housing prices and the increasing delinquency in payment of housing loans and also the increasing foreclosures, experts see these pillars, more likely, to crack. The two are just too big and too central to the US financial System. In case either or both get into trouble, the US government would intervene to save the whole American financial system.

But the social cost of the sub-prime generated financial crisis is so great and irreparable. The number of homeless, particularly those living in cars and mobile homes, has increased significantly. But it is not finished here. They have to grapple with soaring prices of fuel and food.

Total consumer or consumption debt of Americans has risen to $2.6 trillion. This includes debts incurred in using credit card to purchase and fixed-payment loans like student and car loans. Consumption debt does not include housing mortgage and loans.

Due to decline in prices of homes and stocks, including shares in mutual funds, and the increases in the price of fuel and food, the net worth of Americans has declined by $1.7 trillion.

The immediate impact is in the lifestyle of Americans, most particularly the average American middle class family.

Only a few years ago, Americans who considered themselves middle class were scrimping to pay for their kids' college education. Now, many of them are struggling to cover far more basic needs like gas and groceries. (Tam Luhby, Making a good living, but still feeling strapped CNNMoney.com, May 29, 2008)

2. Global effects and manifestations of the crisis

The sub-prime bursting in the US sent shock waves throughout the world, through the financial market. Asian markets particularly reacted proportionally to the collapse of Wall Street investment bank Bear Sterns. The reaction of the big Asian economies was particularly strong. Share values in three large Asian economies—China, Japan and India—have fallen by about 30 percent, 20 percent and 30 percent respectively. These falls outpace the decline in US shares, with the S&P 500 Index falling 13 percent since January 1.

Japan is particularly affected by the appreciation (revaluation) of the Yen in relation to the devaluing dollar. In March, the currency slid past the 100 yen to the dollar, for the first time in 12 years and slumped to Ұ96 before recovering. Some commentators predict that the exchange rate could hit 80 yen in the next year. Sony, for example, has admitted that it loses $62 million in operating profits for every 1 yen rise against the dollar. Mizuho Financial Group’s sub-prime losses reached $6.14 billion. Mizuho Securities is the worst affected by the credit crisis of Japanese banks and is planning to cut by about 300 (or 15%) as part of measures to help the brokerage firm back to profit.

The economy of Japan is perceived to be in recession even before the subprime busting in the US. The fact that corporate capital spending took a deep fall in the last quarter of 2007 reinforced this.

China and, to some extent, India are seen as possible guarantees against recession in the US. The demand of their industrialization program for mineral and other raw materials and capital goods could replace the weakened demand in US. Since the end of the Asian financial crisis of 1997-98, China has been perceived as the motor for the regional growth in Asia.

But China, India and even Japan also depend on the US market. Some present speculations that China and, to certain extent, India would not be affected by the US recession and could pull the world out of recession cannot hold water. (These speculations are referring back to the case of Japan during the stagflation of 1979-1981. In those times Japan was able to keep the unemployment rate at 4% while US and Europe had double-digit unemployment rates.)

China’s currency, the RMB, is appreciating in relation to the dollar. China holds also the biggest dollar reserves (more than $1.1T) outside of the US. Further devaluation of the dollar certainly hurts China’s economy and also Japan’s, India’s, South Korea’s and of other countries with huge dollar reserves.

The recent devastating earthquake in Sichuan province could further constrict the capacity of China to somehow cushion the effects of the US recession on the world. The economic consequences of the earthquake can be gleaned and measured on the number of fatalities and casualties, about 3 million houses destroyed, damaged and destroyed infrastructures, industrial plants and disruptions in agricultural production. Sichuan contributes 3.9% to total GDP and 2.5% of the total manufacturing output of China. The province holds 40% of China’s natural gas deposits and 22% of its natural gas production. The disruptions wrought by the earthquake would ultimately affect China’s energy supply.

A Financial Times’ report on May 16, 2008 said, Europe, particularly the 15 countries comprising the Euro zone (where the Euro is the currency), has remained relatively stable in terms of growth rates in the first quarter with Germany registering the highest rate at 1.5% and is considered as the EU’s engine of growth. France also registered a surprising 0.6% growth rate. Despite huge losses its major banks incurred and the constricting financial conditions, the European Central Bank (ECB) keeps the interest rate at 4%.

This rosy picture however is contradicted by the worsened working and living conditions of workers and the people in general and by certain factors that, in due time, would contain if not reverse this growth in Germany and the euro zone. The ECB has warned of the risk of higher inflation rate in the future. Economists forecast that financial conditions, which have increased borrowing costs; the strong euro; and declining demand in the United States would eventually hurt German and European growth.

This growth, especially of Germany, is at the great expense of the working class. Germany has kept labor cost contained, streamlined production in important manufacturing sector and kept a slow but steady growth in employment. In this way Germany was able to keep domestic demand steady. But the containment of labor cost in concrete terms means the lowering of wages and the steady decline in consumption by workers of Germany.

Despite strong and massive workers’ and students’ protests, the Sarkozy government of France is bent on increasing workers’ contributions for full pension from 40 years to 41 years thereby effecting sharp fall in retirees’ income; implementing budget cuts on education and therefore effecting job cuts among public school teachers and is privatizing port facilities. These moves being taken by the French government is increasing the ranks of unemployed and decreasing the take home wages and salaries of workers and employees in France. This means that the disposable income of the employed have been greatly reduced or at the most gone.

In the rest of the euro zone countries, Ireland and Spain registered near zero growth in the first quarter reflecting falling housing prices. Italy is likely to slide into recession.

A May 21, 2008 news item in The Financial Times report that, for the first time since 2005 the Bank of England’s (central bank) economic growth forecast is significantly lower than that by the Treasury of England. The Bank’s forecast show that England’s economic growth would slip from 3.3% in 2007 to 1.5% in 2009. This is a correction of its last year forecast of 2.8% growth in 2009. For 2010, election year, the bank estimates lower than 2.4% growth rate. On the other hand, the Treasury expects growth of 2.25%-2.75% in 2009 and 2.5%-3% in 2010.

The whole report indicates that the economy of England is heading for what the Bank described as, the “most protracted slowdown since the 1990s”. Presently, the housing market registered some weakening as indicated by lower mortgage lending figures from the Council of Mortgage Lenders. CML expects (housing) prices “to fall 7% this year and transactions to be 35 per cent lower than in 2007”.

The prognosis for the capitalist world is not optimistic. At the least it is a protracted recession but the prices of fuel, food, medicines and medical care, etc are rising; at the worst, the capitalist world led by the US is in the brink of depression. The whole world is dragged into this crisis.

3. Food crisis, fuel crisis and the general worsening of socio-economic conditions

The financial crisis and the logical tendency of capital to find new areas for growth or for profit-making is an immediate and permanent reason for the rising fuel, metal (including valuable metal) and food prices. Of all physical or material commodities, fuel, metals and food are the most urgent requirements for both industrial and human consumption.

When the sub-prime home mortgages finally burst, speculative capital shifted massively to fuel, metal and food price speculations.

The continuous rise in fuel and metal prices increases the cost of food production. Fertilizer and pesticides are oil-based and farm machines run on petroleum fuel. Increases in prices of tin and aluminum also contribute to rising cost of processed food.

In the past year, per bushel wheat prices have risen by 64 %; corn is up 68% ; soybeans 76%. Rice prices have risen by 134 %. With corn and soybean prices going up so too are the prices of animal feeds and therefore the prices of livestock, poultry and dairy products. With wheat and corn prices going up so too is the price of flour and food starch and therefore the price of bread and all flour based products.

A few giant corporations monopolize nationally and globally the businesses of producing crop seeds, livestock and poultry breeding, fertilizer, pesticide and pharmaceuticals for both human and animal medication; and, the processing of human food and livestock and poultry feeds, storage, transport and trading. All these industries consume fuel and power in the whole process from production to distribution.

Because of these, in the first quarter of this year monopoly corporations in the business of agricultural production and agricultural product processing, storage, transport and trading and other related businesses saw huge increases in profits.

Archer-Daniels-Midland (ADM), the largest grain processor in the US, posted a 42% increase in profit from last year to $517 million in the first quarter. Cargill, the second biggest grain processor, profited $1.03 billion, an 86% increase from last year. Bunge, the third largest, reported $289 million profit, a staggering 1,964% increase from last year.

Farm machine maker Deere & Co. reported a 55% increase in quarterly earnings over the year, to $369 million. Monsanto, a biotechnology company with a virtual monopoly on crop seed and herbicide production, reported $1.13 billion in profits for the latest quarter, more than doubling profits of the preceding quarter. Other corporations with significant agricultural operations, including Syngenta AG, DuPont and Dow Chemical, have also posted huge profits.

ADM executives attributed record earnings throughout all of the company’s operations to an enormous increase in speculative activity in commodities markets.

While fuel, metal and food price speculation is the immediate reason for food price spikes, other underlying conditions cause the food supply and price crisis. No less than the UN and WB food programs have enumerated the other reasons for the crisis. The increase in yield in the 1970s attributed to “green revolution” was not sustained for long. By year 2000 yield showed a decreasing pattern.

The fact of climate change is clear and present however, capitalism-made conditions exacerbate the effects of climate change to global agricultural production.

Climate change is not the only seemingly unstoppable force assailing developing countries in their search for food security. Scientific advances in agriculture have brought great benefits, notably in the “green revolution” originating in the 1970s. However, unlike the green revolution which was largely driven by state funding, today’s biotechnology puts seed management and patents in the hands of a small number of very large international companies such as Monsanto, Dow Chemical and Syngenta.(UNDP, Food Security Guide)

A logical consequence of this private monopoly control of biotechnology is the rapid decline in the number of food crop varieties as only seed varieties favored by these companies are mass-marketed. The paper cited above says, “Industrial crops are now limited to about 150 varieties, rendering superfluous the inherited local wisdom acquired over generations. The implications of the loss of biodiversity in both seeds and local ecosystems for resistance to diseases or climate change are uncertain.”

Another result of this control of biotechnology is the controversy and problems surrounding and emanating from the widespread introduction of genetically modified crops developed and patented by biotechnology companies. And under Intellectual Property Rights (IPR) that these companies wield, local farmers lose control over their own produce. “There are doubts as to whether developing countries have the capacity to establish regulatory frameworks to manage inevitable conflicts of interests between the local stakeholders (farmers, consumers, and governments) and global shareholders.” (Food Security Guide)

The same giant oil companies that monopolize the production and distribution of fossil-based fuels encourage the rushto ethanol and bio-fuel crop production as additive to petroleum fuel. This has resulted so far to massive conversion of farmlands for food production into ethanol and bio-fuel crop production. Other than this is conversion of food crop such as corn, for human and animal food into ethanol/bio-fuel use.

In the US, the Bush government has directed that corn would principally be used for ethanol production. This resulted in an effect-causing in an increase in prices of corn and corn-based animal feeds. In China, a shortage of pork has prompted the government to block approval of new ethanol plants which are indirectly forcing up prices of animal feed. The Philippines is offering more than a million hectares to Chinese corporations for the planting of bio-fuel crop such as jatropha and for hybrid rice and sorghum production for China. In Brazil, the denuded areas along the Amazon are being planted to sugar cane for ethanol production.

A study the International Food Policy Research Institute in Washington suggests that bio-fuel production accounts for a quarter to a third of the recent increase in global commodity prices. The Food and Agriculture Organization of the United Nations predicted late last year that bio-fuel production, assuming that current mandates continue, would increase food costs by 10 to 15 percent.

Food security is being compromised where priority is for export crop and bio-fuel crop production. Imagine this; the number of vehicles in the world is 800 million. This is almost the same as the 850 million undernourished people in developing countries. One tank of ethanol for a Sports Utility Vehicle consumes corn that could feed a man for a year.

Food Security is the condition in which everyone has access to sufficient and affordable food. Ten million hunger-related deaths every year, half of them children, testify to our failure to achieve global food security. Over 850 million people remain trapped in the spiral of hardship that hunger imposes, a figure which continues to rise even amidst the riches of the 21st century. As developing countries grapple with the complexities of biotechnology and the alarming impact of climate change, it is extraordinary that the major powers should choose this moment to trigger a craze for bio-fuels, adding pressure on world food prices. (Food Security Guide)

Food Security Guide asserts that world food production yield still outpace population growth rate. But where there is conflict such as in Africa and, of course, Iraq and other Middle East countries, food production is greatly disrupted. Absence of food in the market is not the cause of hunger prevalence but their inaccessibility to many whose income is way below the prices foodstuffs.

The Food Security Guide failed to mention however that the same giant biotechnology firms and grain processing and meat processing firms also control the global grain and food trade. They are among those that dominate the speculative activities in commodities markets where future prices of grains, sugar, flour, edible oil, etc. are set. The future prices set the present prices of food. This is where much of their profits are made more than in food production process where cost of production is kept low principally by depressing wages of farm and factory workers.

Fuel crisis

The price of crude oil has soared to more than $138 per barrel or $11 increase in just 1 day. The immediate causes or factors to oil price spikes are the intensity of speculations in the oil bourses, the continuing devaluation of the US dollar and the increasing tension between Iran and Israel.

Crude oil price is projected to reach $150 per barrel by July 4 when the usually busiest travel holiday in the US combines with strong demands in Asia, particularly by China and India.

The continued spike in oil price and devaluation of the dollar are creating a chain reaction of price increases of almost everything and including the cost of finding and producing oil itself. #####

Kilusan para sa Pambansang Demokrasya

(Movement for National Democracy)- Philippines

June 9, 2008

---

[1] http://en.wikipedia.org/wiki/2007_Subprime_mortgage_financial_crisis

[2] ibid.

[3] Nick Beams, Shades of 1929: Global implications of US banking collapse Part 1, April 16, 2008, wsws.org

[4] Northern Rock was nationalized or was taken over by the government. It is indebted to the Bank of England.

[5] David Walsh, As losses mount, US banks cut thousands of jobs, April 19, 2008, wsws.org

[6] Federal National Mortgage Association

[7] Federal Home Loan Mortgage Corporation