Sunday, August 30, 2009

No on Lisbon - Until the people understand it


Related Furious fishermen call for 'No' in Treaty


Posted: Aug 26, 2009

Lisbon: How the elite forces organised against democracy

The elite forces have carefully prepared for the second referendum and will use a variety of 'civil society' groups to front their campaign. But at the heart of their strategy lies a deep contempt for democracy. In this extended analysis Kieran Allen, one of the editors of offers a detailed critique of the excuses used by the elite for not respecting Ireland's original vote.

Political activists rarely read sociological texts because they are sometimes written in an impenetrable style. But an exception should be made for a short,. six page text from the French sociologist, Pierre Bourdieu entitled Neoliberalism as a Conservative Revolution. It was originally delivered as a speech in 1997 - in other words, before the Wall St Crash of 2008 when the neoliberal dogma still seemed to be unassailable. The article makes a number of key points that are significant for anyone seeking to understand the twin crisis of legitimacy that is currently affecting Ireland.

Our ruling elite destroyed some of their political capital when the population gave a decisive rejection to the Lisbon Treaty on June 12th -despite, or possibly because, of their internal elite solidarity in marshalling the Yes argument. Co-incidentally, the economic model which served our rulers well during the Celtic Tiger years entered a period of crisis on both a local and global stage. Ireland's peculiar role in undercutting tax rates and the European social wage in order to serve US capital has itself been undercut by countries in Eastern Europe. And this has developed in the context of a 1930s scale crash which undermines all the dogmas about the power of 'de-regulated' market forces.

In his article Bourdieu defined neo-liberalism as primarily a conservative revolution. In the name of flexibility, it seeks a return to a more radical capitalist order that shifts power to the wealthy. It was, however, a unique form of conservatism because:

'It is not like in other times a question of evoking an idealized past by the exaltation of blood and soil - agrarian and archaic themes. This new type of conservative revolution appeals to progress, reason, and science (economics, in this event) to justify restoration and seeks in this way to dispatch progressive thought and action to an archaic past.

In a subsequent article, Bourdieu pointed out that the neoliberal discourse was often backed up by a new set of 'cultural producers'. These were the experts who emerged from the world of think tanks and academic institutions to present an aura of objective research. There were also communications advisors, who raised the discourse of neoliberalism from the everyday to the academic speak.

Through such mechanisms, the neo-liberals proposed an 'unsurpassable horizon of thought and the end of critical utopias (based on) an economic fatalism'. Some translation may be needed here to access Bourdieu's train of thought.

His point was that the discourse of neoliberalism sought to reduce political choice in the name of globalisation. A mythology was created through an endlessly repeated story line that there was only room for acquiescence with 'market forces'. While neoliberals proclaimed a world of limitless individual choice they assiduously reduced real political choice to zero. The right wing New York Times columnist Thomas Friedman summed up the message with his concept of the 'golden straightjacket.' Every country which wanted to develop, he argued, had to put on the straightjacket of 'market forces'. According to Friedman

Once your country puts it on, its political choices get reduced to Pepsi or Coke - to slight nuances of taste, slight nuances of policy, and slight alterations in design to account for local tradition, some loosening here or there, but never any deviation from the core golden rules.

These insights serve as a useful starting point for examining current strategies for overturning the will of the Irish people.


The leaders of the EU have subjected the political establishment in Ireland to considerable pressure to come up with a strategy to overturn the June 12th vote. There was hardly any disagreement in the Yes camp that this should occur. They merely pleaded on tactical grounds for more time because the consequences of a second defeat would be devastating.

In pushing for a repeat vote, the political establishment have revealed their own contempt for the limited form of democracy that we currently enjoy. Referenda are blunt instruments as they force unlikely forces to combine around a simple Yes or No position. But they are equally blunt for both sides. If the Yes side had won the vote, it is barely conceivable that the No side could call for a repeat vote.

Once the vote was counted, the elected Taoiseach and his government were formally mandated to implement the decision of the people. Yet at no stage has the current government undertaken to actively promote that democratic view. They were mandated to press for the rejection of the Lisbon Treaty and as that treaty demanded the agreement of all EU nations, they had considerable leverage. Ireland's effective veto on the treaty could have been exercised. If they had done this, the Lisbon Treaty would have died and the EU would have been forced to consider a new treaty which would have taken some account of the deep alienation that many Europeans feel about its undemocratic structures.

Instead the Irish government defined their own people's decision as a problem and conspired to undermine it. Sarkozy and Barrosso were only able to employ intimidatory tactics because the Irish elite facilitated them.

In the run up to the EU Council meeting on December 11th, a flurry of publications has emerged from the Yes which outlines their emerging strategy. The Institute of International and European Affairs, describes itself as a policy think tank whose 'corporate and foundation members' are composed of 'investment banks, government departments, and industrial conglomerates' It issued a report entitled Ireland's Future after Lisbon which warns that if the Lisbon Treaty were abandoned in accordance with the Irish vote, there would be 'serious consequences for this country in terms of its good standing and influence' A sub-committee of the Oireachtas Joint Committee on European Affairs has issued a report entitled Ireland's Future in the European Union: Challenges Issues and Options. This is turn draws on another, as yet unpublished, report from the Dublin European Institute composed mainly of academics who played a prominent role in the Yes camp.

The tone and rhetoric of the two published reports draw on a standard managerial discourse which is used by corporate groups such as developers when they face a difficulty with local residents over planning issues. As part of a now familiar process of 'stakeholder consultation', the corporation, or the consultants they employ, firstly, engage in a 'scoping exercise' by assembling the arguments of their opponents in a crude and simple manner. Once these have been re-constructed, a set of 'options' are offered for dealing with 'the problem'. The options, however, tend to be structured in such a way that opponents are left with little option but to choose the least worse - which happens to be the original choice of the corporation. As a gesture to their demoralised opponents, the corporate developers then grant some tokens which signify that the 'stakeholders' gained minimal recognition from entering the process.

We shall examine the two reports in the context of Bourdieu's insights about neoliberalism.

Progressive European versus backward sceptics :

One of the main arguments being adduced by the political establishment for explaining the No vote was a lack of understanding on the part of the Irish people. It is recognised that 73 percent support membership of the EU but it is claimed that 'Ireland lags behind other EU Member states in terms of people's knowledge of the EU' . It is further claimed that 'a citizen's level of understanding has a significant effect on policy choices that citizens make about the union'. It follows, therefore, that the Irish people need more education so that they will better 'understand' the complexities. Among the social engineering measures proposed by the progressive Yes establishment are 'incentivising the posting of Irish journalists to Brussels' and a more prominent role for 'the history of European integration since 1950s' in the Irish school curriculum. Through such measures, it is assumed that that lack of 'understanding' that led to a negative vote on Lisbon can be overcome and future disasters avoided.

The IIEA report adds a further dimension to the 'backward' No versus 'progressive' Yes polarity. They claim that the NO side's arguments can be divided into a 'sovereignty' and 'identity' position. However, they claim that the 'identity position' is often 'Europhobic' seeing the European as the 'Godless Empire' which seeks to impose extreme secularism and to undermine traditional concepts of society, family and personal morality'. Against such backward reactionary thought, the progressive modernisers suffer in silence while invoking two defence measures. They argue that the statements of the official Catholic hierarchy need to be given more prominence 'so that the debate in these sensitive areas may reflect underlying attitudes of a nationalist and religiously fundamental nature'. A declaration also needs to be extracted from Brussels that assures the fundamentalists that abortion or gay marriage will not be imposed on holy Ireland. When it comes to saving Europe's free market economy and its security apparatus, morsels of comfort can be thrown to the ignorant.

There is one problem, however, with this opposition between the rational, progressive Yes voter and the backward, ignorant NO voter: it bears no relationship to the facts.

There is no evidence to show that a lack of knowledge or understanding on Europe is strongly related to a rejection of the Lisbon Treaty. In fact, there is some patchy evidence to suggest the opposite. The Eurobarometer poll which was conducted in the immediate aftermath of the vote - and hence probably the most reliable- noted that Yes voters tended to give 'one-dimensional' responses on why they voted. Their responses also related to issues that were extraneous to the actual Lisbon treaty. So by far the largest grouping gave as their reasons two very vague statements to the effect that 'It was in the best interest of Ireland' and 'Ireland gets a lot of benefit from the EU'. Specific reference to items in the treaty that went beyond 'Ireland's interest' were far fewer.

The emphasis placed on particular 'ethical reasons' to define the NO vote is also misplaced. Only 2 percent of No voters mentioned abortion, euthanasia or gay marriage as their reasons. We might actually conclude that there were more people in favour of a greater access to abortion on the No side than there were opponents because one of the key support bases of the No camp was the left and young people.

22 percent of No voters gave as their reason 'I do not know enough about the Treaty and would not want to vote for something that I am not familiar with'. But this was a perfectly rational response to a treaty that was deliberately written in an incomprehensible format in order to cover for the fact that it was substantially the same as the EU constitution rejected by the people of France and Holland. It was also a perfectly suitable response to a government that refused to provide copies of the treaty to its citizens and instead urged them to trust their leaders when dealing with complex documents.

The Cultural Producers of Assent

Faced with some difficulty from their population, the neoliberals have turned to the cultural producers from the academia to give more sophistication to their argument for assent. If the Bishops cannot be called on to herd their flock, then possibly the aura of 'objective research' might influence the population.

When Professor Brigid Laffan appeared at the Oireachtas Committee hearing she argued that while the EU may appear elitist from a national viewpoint, the complex nature of its institutional structure cannot be judged in national terms. She advanced two specific arguments.

1.'As it is not like a nation state, it will always be thinner in democratic terms than a nation state'

2. That the EU is going through a process of democratisation but, such a process takes a long time. 'We will not wake up in the morning and find that suddenly the EU is deeply democratic from top to bottom. Nation states were forged and became democratic over long periods and the EU will face the same process'.

Both these arguments can be disputed.

There is no iron law which suggests that transnational bodies need to be any less democratic than national bodies. As there are relatively few such bodies which claiming extensive sovereignty over nation states, such an hypothesis cannot be justified by empirical evidence. In historical terms, the US emerged as a trans-state body but it can hardly be argued that it was any less democratic than the British empire of the day. Moreover, if a greater form of democracy is not available in transnational bodies, then what inducement do citizens have for giving more powers to such bodies. If- and we dispute this- democracy is inevitably 'thinner' in the EU, why should citizens who want democracy voluntarily give it more power?

Nor is it by many means clear that democracy is the result of a long process of maturation. We need think only of two cases to suggest otherwise. The overthrow of the apartheid regime and the winning of majority voting in South Africa came rather sharply and suddenly. The democratic achievements of the black population were won in opposition to everything the South African state stood for in previous decades. The achievement of democracy in Spain came as a combination of growing protests and decision of the Francoist regime to seek an accommodation with its opponents. But it can hardly be argued that the tradition of Spanish monarchism or fascism slowly prepared the way for democracy.

Ironically Professor Laffan herself reveals the limits of democracy in the EU when she asserts that its very structure allows for 'centre left' or 'centre right' politics but not extremes. One of her instances of 'extreme' is a high level of government regulation of the economy. But if voters are locked out from taking such 'extreme' views, how can the institutional structure be said to be democratic?

Politics must follow economics

During the referendum campaign, the Yes side attempted to argue that a No vote would frighten away foreign investment. But yet they were forced to retreat from this position when their opponents pointed to the French case. The inflow of foreign direct investment to France shot up from $32.6bn (€20.8bn) in 2004 to $81 (€51.6bn) in 2005 when the French voted no to the EU constitution and also to $81bn (€51.6bn) in 2006. Irish opponents of the Lisbon treaty did not claim that the No vote was good for investment, merely that it had absolutely no detrimental effect.

However the neoliberal mindset cannot break from its recourse to economic fatalism. It needs to suggest that political choice must follow the economics of market forces because, as they have seen, democracy can be a rather troublesome affair. If political choice is limited to what the markets dictate, then this considerably reduces the bother.

An example of this line of reasoning re-appears in the Oireachtas Committee report on the relationship between a No vote and Ireland's economic development. The report baldly states that 'Ireland's decision not to ratify the Lisbon Treaty... could seriously damage its competitiveness in attracting foreign direct investment'

The managing director of Microsoft and other cultural producers such as Professor Francis Ruane and Professor John Fitzgerald volunteered to lend objective authority to this bald statement. With only the certainty that a professor of the ESRI could muster, John Fitzgerlad states even more baldly, ' Ireland has suffered a significant economic blow as a result of its failure to pass the Lisbon Treaty'. The golden straightjacket is therefore ready for wear. If we want economic development, we have no choice but to put it on...

The fatalism of our cultural producers is again entirely misplaced because they can produce no evidence that there is any link between a possible decline in FDI and the vote on the Lisbon Treaty. If such occurs over a longer period, it will have far more to do with structural shifts in the global economy than an Irish vote on Lisbon. Historically, Ireland has enjoyed a high share of US investment but changes in US tax policy and the more vulnerable position US corporations after the new Wall St crash may affect this. Ireland's vote has no impact on its status as a full EU member with full access to EU markets and therefore the economic options facing US companies remain precisely the same. Unless, of course, one wishes to argue that Ireland's political influence in Europe is a factor - but that can only be ascertained if there is full disclose of how exactly that influence is wielded for the benefit of US corporations.

Contrary to the economic fatalism of neo-liberals, peoples and nation do of course have political choices. The Irish vote has given its government a huge leverage to promote a more democratic Europe. Its failure to do so has nothing to do with 'economic realities' but has to do with its total immersion in the elite culture of the EU and its unwillingness to respond to the democratic wishes of its own population.


The neoliberals have found an extra new argument which they hope will carry them over the line for a Yes vote. They claim that the current global economic crisis shows the need for a more integrated Europe and that only the Lisbon Treaty paves the way for this. In fact, the current economic crisis shows the exact opposite.

The Wall Street Crash of 2008 was triggered by de-regulated financial markets which enabled bankers to transfer billions of toxic loans across the global economy. It had also deeper roots in a problem of 'excess savings' which corporations experienced. Faced with uniform pressure to reduce the share of national economies allocated to wages, corporations were faced with shrinking demand and experienced over-accumulation. Instead of investing in industry and services, they chose to use a growing proportion of their capital for speculative purpose. The neo-liberal dogmas greatly facilitated them in this.

The EU has embraced these same dogmas with some gusto and therefore its political structures must also be seen as contributing to the economic crisis. The Irish Commissioner Charlie McCreevy, for example, opposed the imposition of regulations on hedge funds. An expert group which was appointed to examine the issue was composed almost entirely of bankers and docile economists. Not surprisingly, it reported that

It is suggested that additional regulation, which does not and arguably cannot accommodate the need for unrestricted investment freedom or the international organisation of business models, is likely to fail... In particular, regulation of investment strategies is the very antithesis of the hedge fund business and would be misguided.

The German Finance Minister Peter Steinbruck initially attempted to claim that the crisis merely affected the Anglo-American version of capitalism, he soon found that the European version of neoliberalism was also a causal factor.

The Lisbon Treaty represents the codification of a series of neo-liberal measures that have shaped European politics in recent years. When read in the light of the current crisis, they provide significant insights into why the whole treaty needs to be scrapped and replaced by one which develops a social Europe.

The Lisbon Treaty builds on past treaties which include the following items

  • an article which states that ' all restrictions on the movement of capital between Member States and between Members states and third countries shall be prohibited'.
  • An Article which states that the internal market 'includes a system ensuring that competition is not distorted'
  • A general principle that any aid granted by a member state which distorts competition by favouring certain goods is incompatible with the internal market
  • Powers to fine countries who are in breach of the Growth and Stability pact which restricts borrowing in a recession.
  • Complete independence for the European Central Bank which enables it to be more answerable to the needs of bankers than the wider European population.

These neo-liberal measures have already hindered efforts to reduce the social suffering caused by the economic crisis. The ECB was slower, for example, than the US Federal Reserve in cutting interest rates because it's focus was fighting inflation - which appeared to be rising earlier in the year- rather than stimulating job creation. Attempts to give state support to any one grouping which might distort the market is questioned by the EU Commission because it has been legally charged with doing precisely this. (The argument raised by Professor John Fitzgerald that Ireland was forced to give an additional bail out to foreign banks - as if the bail-out to Irish banks was not enough- because of the No vote is absurd. In fact, it was caused by the very EU treaties he has consistently supported!). Attempts to reflate an economy come up against the Growth and Stability Pact as Ireland will find in the coming years.

There is a need for a European wide response to the current crisis - but it is one that the Irish neo-liberal supporters of the Yes vote deeply abhor. The banking system which has helped cause the crisis should be taken into public ownership across Europe and its credit lines socialised so that they facilitate long term investment in services and manufacturing rather than in speculation. There is a need for a massive public works programme across Europe which is linked to serious measures to tackle climate change. These might include a major expansion of the public transport system across the continent so that air flight and car travel night be reduced. They might also include a programme of house insulation to give work to unemployed building workers. But these would imply a political structure that promotes a co-ordinated programme of public spending rather than the tokenistic re-packing of existing measures which the EU is currently proposing. EU wide regulation should be invoked to break the power of hedge funds through tough regulations on the movement of finance.

But even the slightest move towards any of these mild measures would come up against the limits of the Lisbon treaty. It is time that EU policy makers realised that the neo-liberal era is dead and that the Irish vote gives them an opportunity to draw up a new constitution for Europe that does not imprison us in the straightjacket of Thatcherism.

Reprinted from

Old Cigarette Commercials

It's not difficult to see how corporate marketing created the ideal consumer market in the USA. These old tobacco commercials may seem silly to people today; but, in their day they were highly compelling, resulting in an explosion of smoking behaviour. Massaging the masses is what its all about.

Winston on the Flintstones (1960)

The sobering context for all this is presented in a remarkable documentary, Century of the Self, not to be missed. One of the segments which impressed me the most, details how the tobacco industry aligned itself with the Women's Liberation Movement to double their profits. Warning: this might disturb some viewers (especially, women).

Virginia Slims

We didn't always think the Marlboro Man was someone to model ourselves after. Hope you enjoy these below and I trust you will have moments of revelation as to the ugly face behind the mask of marketing. For 'rational' creatures, humans certainly seem to be well managed by 'irrational' persuasion.


Philip Morris - I Love Lucy (1964)



Friday, August 28, 2009

Get the vaccine or go to jail

The swine flu vaccine scenario just gets uglier and uglier. For those who thought they could never go to jail for refusing the government vaccine, please enjoy this video. Yep, it's legal now.

For those of you who have your doubts about taking the vaccine, please enjoy this little slice of testimony of what happened with the 1976 swine flu vaccination.

And finally if you think all the concerns about the vaccine are a load of crap, why not volunteer your child for a test vaccine in Cinncinnati?

Will Medicare and Social Security be paid?

While the eyse of the US populace is on the health care debate, things are happening behind the scenes with the currency. These changes may drastically reduce social security and Medicare benefits which the baby boomers are blindly relying upon in their old age.

And for those of you who prefer the less pessimistic option generally.

Care to bet your old age pension on this information?

Tuesday, August 25, 2009

Consumer Art Photos - or what's left over

I often get tired of facts and figures, sorting through commentary for value; pictures have a way of making concepts and conditions real in a way the written word cannot.

Consumerism has been a driving motor of economy for a hundred years. We now see the natural result of placing this engine at the center of our civilisation. Chris Jordan has taken a magnificent set of photos using items of daily consumption to tell a story of great beauty with a message not easily understood in language.

I reprint one series here; Chris's website has many more worth viewing if this one suits you. Hope you will enjoy them.

Depicts 28,000 42-gallon barrels, the amount of oil consumed in the United States every two minutes (equal to the flow of a medium-sized river).

Sunday, August 23, 2009

Martial Law? Not here? Think again.

So many people think that history cannot be repeated. No chance of martial law in the US? I hope this is right but afraid it is wrong. When mainstream media begins to accustom citizens to the possibility of martial law, an alarm bell should ring. Even more disturbing, the internment camps being constructed for a decade are now being staffed by public recruitment of 'interment camp specialists'. Read this job advert:

Related posts:
  1. FEMA Camps Trains Truck Busses and Coffins + Swine Flu And Martial Law
  2. The Coming World War III, NWO Mafia Martial Law Ready & Waiting David Icke

Mainstream media acknowledges marajuana prevents cancer

Some of my work on this blog is just to bring articles to the attention of people who may be interested, but haven't the time to search the news. I have blogged previously on the proven effects of marajuana to prevent and reduce cancer. Here we go again - this time from REUTERS.

Reuters: Pot Kills Cancer But Don’t Even Think About Using It!

An overview of the future

So many puzzle pieces - so little time to put them all together. If you are like me, you may find reading long tedious articles, one after another, to get an understanding of where WE are going quite a chore, necessary but laborious. Since I am dyslexic, this is an act of sheer will on my part.

Once in awhile, I find a video that makes the job of interpreting the exponentially voluminous reading material much simpler. Such is the quality of the video below. Although the speaker is not as dramatically endowed as some, the information which he discusses consolidates months of reading. And is invaluable to anyone who wishes to understand global dynamics.

I highly recommend this 1 1/2 hour video for anyone who has not the luxury of time to comb the net daily for clues as to the direction of where global government is leading. I hope you enjoy it - but I doubt you will. The prognosis is not at all optimistic for masses. The question is are we brave enough to face the reality.

Related reading:

Global War and Dying Democracy: The Revolution of the Elites
Global Power and Global Government: Part 5

This is a 5 part series looking at the trends in globalisation. Very long but extremely worthwhile.

Global Trading Showing No Sign of Recovery

Wednesday, August 19, 2009

Chinese banks owned by the people

Western people might learn a trick or two from China. That is, when all the propaganda is put aside.


by Ellen Brown
To the extent that China's stimulus plan is working better than in the U.S. and the U.K., this seems to be because the government is using the banks for public ends, rather than allowing the banks to use the government for private ends.
"The banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. They frankly own the place."

-- U.S. Senator Dick Durbin, Democratic Party Whip, April 30, 2009
While the U.S. spends trillions of dollars to bail out its banking system, leaving its economy to languish, China is being called a "miracle economy" that has decoupled from the rest of the world. As the rest of the world sinks into the worst recession since the 1930s, China has maintained a phenomenal 8% annual growth rate. Those are the reports, but commentators are dubious. They ask how that growth is possible, when other countries relying heavily on exports have suffered major downturns and remain in the doldrums. Economist Richard Wolff skeptically observes:

"We now have a situation in the world where we have a global capitalist crisis. Everywhere, consumption is down. Everywhere, people are buying fewer goods, including goods from China. How is it possible that in that society, so dependent on the world economy, they could now have an explosive growth? Their stock market is now 100 percent higher than at its low -- nothing remotely like that hardly anywhere in the world, certainly not in the United States or Europe. How is that possible? In order to believe what the Chinese are saying, you would have to agree that in a matter of months, at most a year, no more, they have been able to transform their economy from an export-based powerhouse to a domestically focused industrial engine. Nowhere in the world has that ever taken less than decades."

How can China's stimulus plan be working so well, when ours is barely working at all? The answer may be simple: China has not let its banking system run roughshod over its productive economy. Chinese banks work for the people rather than the reverse. So says Samah El-Shahat, a presenter for Al Jazeera English who has a doctorate in economics from the University of London. In an August 10 article titled "China Puts People Before Banks," she writes:

"China is the one leading economy where the divide "" the disconnect between its financial sector and the world normal Chinese people and their businesses inhabit "" doesn't exist. Both worlds are booming again and this is due to the way the government handled its banks. China hasn't allowed its banking sector to become so powerful, so influential, and so big that it can call the shots or highjack the bailout. In simple terms, the government preferred to answer to its people and put their interests first before that of any vested interest or group. And that is why Chinese banks are lending to the people and their businesses in record numbers."

What Wolff calls a "global capitalist crisis" is actually a credit crisis; and in China, unlike in the U.S., credit has been flowing freely, not just to the financial sector but to industry and local government. State-owned banks have massively increased lending, with local governments and state enterprises borrowing on a huge scale. The People's Bank of China estimates that total loans for the first half of 2009 were $1.08 trillion, 50% more than the amount of loans Chinese banks issued in all of 2008. The U.S. Federal Reserve has also engaged in record levels of lending, but its loans have gone chiefly to bail out the financial sector itself, leaving Main Street high and dry. Writes El-Shahat:

"In the UK and US, the financial sector is booming, while the world of normal people seems to be going from bad to worse, unemployment is high, businesses are folding and house foreclosures are still taking place. Wall Street and Main Street might as well be existing on different planets. And this is in large part because banks are still not lending money to the people. In the UK and US, banks have captured all the money from the taxpayers and the cheap money from quantitative easing from central banks. They are using it to shore up, and clean up their balance sheets rather than lend it to the people. The money has been hijacked by the banks, and our governments are doing absolutely nothing about that. In fact, they have been complicit in allowing this to happen."

Cracks in the Chinese Wall?

The Chinese economy is not perfect. The push to make profits, particularly from foreign investment capital, has encouraged speculative ventures, with a great deal of money going into high-rise apartments and other real estate developments that most people cannot afford. Chinese workers are now complaining of too much capitalism, since they are having to pay for housing, health care and higher education formerly picked up by the State. And while efforts are being made to make more loans available to medium-sized and small businesses, state-owned businesses and large corporations are still getting most of the loans. This is because the banks have been told to tighten their lending standards, and these larger entities are safer credit risks.

Wolff thinks China's "miracle" is a bubble that is about to burst, with catastrophic consequences. Historically, however, when bubbles have collapsed suddenly it has been because they were punctured by speculators. When the Japanese stock market bubble burst in 1990, and when other Asian countries followed in 1998, it was because foreign speculators were able to attack their currencies with exotic derivatives. The victims tried to defend by buying up their own national currencies with their foreign currency reserves, but the reserves were soon exhausted. Today, China has accumulated so much in the way of dollar reserves that it would be very difficult for speculators to do the same thing to the Chinese stock market. A gradual stock market decline due to natural market forces is something an economy can take in stride.

Economic Role Reversal?

For the time being, at least, China's stimulus plan is clearly working better than those of the U.S. and the U.K.; and a chief reason it is working better is that the government has a grip on its banking sector. The government can operate the banks' credit mechanisms in a way that serves public enterprise and trade, because it actually owns the banks, or most of them. Ironically, that feature of China's economy may have allowed it to get closer to the original American capitalist ideal than the United States itself. China is often referred to as communist, but it has never really been communist as defined in the textbooks, and it is far less so now than formerly. Communist Party leader Deng Xiaoping, who opened China to foreign investment after 1978, famously said that it doesn't matter what color the cat is, so long as it catches mice. Whatever the Chinese economy is called, today it provides a framework that effectively encourages entrepreneurs.

Jim Rogers is an expatriate American investor and financial commentator based in Singapore. He wrote in a 2004 article titled "The Rise of Red Capitalism":

"Some of the best capitalists in the world live and work in Communist China. . . . No matter how long China's leaders persist in calling themselves Communists, they seem quite intent on creating the world's dominant capitalist economy."

Meanwhile, the U.S. has sunk into what Rogers calls "socialism for the rich." When ordinary U.S. businesses go bankrupt, they are left to deal with the asphalt jungle on their own; but when banks considered "too big to fail" go bankrupt, we the taxpayers pay the losses while the banks' owners keep the profits and are allowed to continue speculating with them. The bailout of Wall Street with taxpayer money represents a radical departure from capitalist principles, one that has changed the face of the American economy. The capitalism we were taught in school involved Mom and Pop stores, single-family farms, and small entrepreneurs competing on a level playing field. The government's role was to set the rules and make sure everyone played fair. But that is not the sort of capitalism we have today. The Mom and Pop stores have been squeezed out by giant chain stores and mega-industries; the small private farms have been bought up by multinational agribusinesses; and Wall Street banks have gotten so powerful that Congressmen are complaining that the banks now own Congress. Giant banks and corporations have rewritten the rules for their own ends. Healthy competition has been replaced by a form of predator capitalism in which small fish are systematically swallowed up by sharks. The result has been an ever-widening gap between rich and poor that represents the greatest transfer of wealth in history.

The Best of Both Worlds

The Chinese solution to a failed banking system would be to nationalize the banks themselves, not just their bad debts. If the U.S. were to adopt that approach, we the people would actually get something of value for our investment "" a stable and accountable banking system that belongs to the people. If the word "nationalize" sounds un-American, think "publicly-owned and operated for the benefit of the public," like public libraries, public parks, and public courts. We need to get our dollars out of Wall Street and back on Main Street, and we can do that only by and we can do that only by breaking up our out-of-control private banking monopoly and returning control over money and credit to the people themselves. If the Chinese can have the best of both worlds, so can we.

Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and "the money trust.

Tuesday, August 18, 2009

It ain't over til it's over: and it ain't over.

For more than a year, many critics following the dollar have been warning of an eventual meltdown of the currency. Mostly, these predictions have been ignored and labelled as doomsday conspiratorial mumbo jumbo.

Most people in the US are still yapping about health care and Obama's birth certificate while the rest of the world tries to cope with austere fiscal constraints and unemployment. Yet there is a bigger picture which dampens the hope of all for a near recovery, more than most people want to be aware of.

I have posted numerous articles on this blog following the impending decline of the dollar as world reserve currency.

In the article below, this fear is expressed from a highly credible source. I would say the time is right to batten down the hatches for a currency storm that will rock the world.

‘The World Is in Trouble’:
Deutsche Bank Chief Economist

12 Aug 2009


The global economy still faces turmoil as governments try to figure out how to move out of fiscal rescue packages, which could lead to another two downturns, Deutsche Bank Chief Economist Norbert Walter said Thursday.

In addition, nervousness on the part of major dollar holders could pressure the greenback and lead to a very worrying 2010, Walter said.

Norbert said recently in research notes “the world is in trouble.”

“I believe that the rescue packages brought on have been so costly for so many governments that the exit from this fiscal policy will be very painful, very painful indeed,” he said. “Some of us are already talking about a W-shaped recovery. I’d probably talk about a triple-U-shaped recovery because there are so many stumbling blocks here to get out of this.”

“There are a few countries that have not dismissed people, they had a dramatic drop in their sales but they kept on people because they believed the recession would be very shallow,” Walter said. “They now have to fire people. That will increase unemployment and they therefore, of course, may be endangering retail sales in some countries.”

If Australia hikes rates in September or October, markets “will certainly shiver” and cause zig-zagging at the bottom of the recession, Walter said.

And while the White House struggles with issues like health care and puts a fiscal policy exit strategy on the back burner, there are big concerns of about the direction of the U.S. dollar.

“I’m deeply worried about the worries of those investors who have invested a lot, really a lot into the dollar” like the Chinese, Japanese, Arabs and Russians, he said.

“If they have second thoughts about the quality of this currency then the dollar is bound to weaken” which means higher long-term interest rates for a country where government debt is approaching 100 percent of gross domestic product, he said.

If that happens, “2010 could be a worrisome year for all of us,” he said.


Ultimate Crisis Is Still Coming: Marc Faber

Roubini: Risk of Double-Dip Recession Not Quite Past Yet

Jobless spike compounds foreclosure crisis

More articles here.

Monday, August 17, 2009

US pipeline games with China

I am appalled at the mentality of Americans and the English when they are asked a question about why their countries are sending troups to Afghanistan. It seems that few have even a vague notion of why this expensive military invasion persists. Even more appalling is the Western media reports that purport to explain what is happening in China's Xinjiang province. I refer here to the recent regional disturbance between the Uygurs and Han people in Xinjiang.

Western media would have one believe this civil unrest is the result of Chinese communist dictators squelching the rights of outlying indigenous peoples. Of course, one expects nothing less of Western media journalism which supports the farcical notion of democracy of the West spread to the lucky countries of Asia and the Mideast.

Yet the real story of the conflicts in this outlying area of China may be quite different than the mainstream media insinuates. As with many other sensationalist propaganda from the West, the essential detail of energy pipeline politics is omitted from the front page analysis.

Below, F. William Engdahl, one of my favorite economists, has a more rational explanation for the civil unrest in Xinjiang that details the energy pipeline concerns of the U.S. in constraining the unstoppable Sino/Soviet alliance of providing energy to Europe and Asia. Indeed, all conflicts now about 'democracy' can be re-interpreted as 'oiligarchic' concerns.

Is Washington Playing a Deeper Game with China?

by F. William Engdahl
author of Full Spectrum Dominance: Totalitarian Democracy in the New World Order
July 13, 2009

July 12 —After the tragic events of July 5 in Xinjiang Uyghur Autonomous Region in China, it would be useful to look more closely into the actual role of the US Government’s ”independent“ NGO, the National Endowment for Democracy (NED). All indications are that the US Government, once more acting through its “private” Non-Governmental Organization, the NED, is massively intervening into the internal politics of China.

The reasons for Washington’s intervention into Xinjiang affairs seems to have little to do with concerns over alleged human rights abuses by Beijing authorities against Uyghur people. It seems rather to have very much to do with the strategic geopolitical location of Xinjiang on the Eurasian landmass and its strategic importance for China’s future economic and energy cooperation with Russia, Kazakhastan and other Central Asia states of the Shanghai Cooperation Organization.

The major organization internationally calling for protests in front of Chinese embassies around the world is the Washington, D.C.-based World Uyghur Congress (WUC).

The WUC manages to finance a staff, a very fancy website in English, and has a very close relation to the US Congress-funded NED. According to published reports by the NED itself, the World Uyghur Congress receives $215,000.00 annually from the National Endowment for Democracy for “human rights research and advocacy projects.” The president of the WUC is an exile Uyghur who describes herself as a “laundress turned millionaire,” Rebiya Kadeer, who also serves as president of the Washington D.C.-based Uyghur American Association, another Uyghur human rights organization which receives significant funding from the US Government via the National Endowment for Democracy.

The NED was intimately involved in financial support to various organizations behind the Lhasa ”Crimson Revolution“ in March 2008, as well as the Saffron Revolution in Burma/Myanmar and virtually every regime change destabilization in eastern Europe over the past years from Serbia to Georgia to Ukraine to Kyrgystan to Teheran in the aftermath of the recent elections.

Allen Weinstein, who helped draft the legislation establishing NED, was quite candid when he said in a published interview in 1991: "A lot of what we do today was done covertly 25 years ago by the CIA."

The NED is supposedly a private, non-government, non-profit foundation, but it receives a yearly appropriation for its international work from the US Congress. The NED money is channelled through four “core foundations”. These are the National Democratic Institute for International Affairs, linked to Obama’s Democratic Party; the International Republican Institute tied to the Republican Party; the American Center for International Labor Solidarity linked to the AFL-CIO US labor federation as well as the US State Department; and the Center for International Private Enterprise linked to the US Chamber of Commerce.

The salient question is what has the NED been actively doing that might have encouraged the unrest in Xinjiang Uyghur Autonomous Region, and what is the Obama Administration policy in terms of supporting or denouncing such NED-financed intervention into sovereign politics of states which Washington deems a target for pressure? The answers must be found soon, but one major step to help clarify Washington policy under the new Obama Administration would be for a full disclosure by the NED, the US State Department and NGO’s linked to the US Government, of their involvement, if at all, in encouraging Uyghur separatism or unrest. Is it mere coincidence that the Uyghur riots take place only days following the historic meeting of the Shanghai Cooperation Organization?

Uyghur exile organizations, China and Geopolitics

On May 18 this year, the US-government’s in-house “private” NGO, the NED, according to the official WUC website, hosted a seminal human rights conference entitled East Turkestan: 60 Years under Communist Chinese Rule, along with a curious NGO with the name, the Unrepresented Nations and Peoples Organisation (UNPO).

The Honorary President and founder of the UNPO is one Erkin Alptekin, an exile Uyghur who founded UNPO while working for the US Information Agency’s official propaganda organization, Radio Free Europe/Radio Liberty as Director of their Uygur Division and Assistant Director of the Nationalities Services.

Alptekin also founded the World Uyghur Congress at the same time, in 1991, while he was with the US Information Agency. The official mission of the USIA when Alptekin founded the World Uyghur Congress in 1991 was “to understand, inform, and influence foreign publics in promotion of the [USA] national interest…” Alptekin was the first president of WUC, and, according to the official WUC website, is a “close friend of the Dalai Lama.”

Closer examination reveals that UNPO in turn to be an American geopolitical strategist’s dream organization. It was formed, as noted, in 1991 as the Soviet Union was collapsing and most of the land area of Eurasia was in political and economic chaos. Since 2002 its Director General has been Archduke Karl von Habsburg of Austria who lists his (unrecognized by Austria or Hungary) title as “Prince Imperial of Austria and Royal Prince of Hungary.”

Among the UNPO principles is the right to ‘self-determination’ for the 57 diverse population groups who, by some opaque process not made public, have been admitted as official UNPO members with their own distinct flags, with a total population of some 150 million peoples and headquarters in the Hague, Netherlands.

UNPO members range from Kosovo which “joined” when it was fully part of then Yugoslavia in 1991. It includes the “Aboriginals of Australia” who were listed as founding members along with Kosovo. It includes the Buffalo River Dene Nation indians of northern Canada.

The select UNPO members also include Tibet which is listed as a founding member. It also includes other explosive geopolitical areas as the Crimean Tartars, the Greek Minority in Romania, the Chechen Republic of Ichkeria (in Russia), the Democratic Movement of Burma, and the gulf enclave adjacent to Angola and the Democratic Republic of the Congo, and which just happens to hold rights to some of the world’s largest offshore oil fields leased to Condi Rice’s old firm, Chevron Oil. Further geopolitical hotspots which have been granted elite recognition by the UNPO membership include the large section of northern Iran which designates itself as Southern Azerbaijan, as well as something that calls itself Iranian Kurdistan.

In April 2008 according to the website of the UNPO, the US Congress’ NED sponsored a “leadership training” seminar for the World Uyghur Congress (WUC) together with the Unrepresented Nations and Peoples Organization. Over 50 Uyghurs from around the world together with prominent academics, government representatives and members of the civil society gathered in Berlin Germany to discuss “Self-Determination under International Law.” What they discussed privately is not known. Rebiya Kadeer gave the keynote address.

The suspicious timing of the Xinjiang riots

The current outbreak of riots and unrest in Urumqi, the capital of Xinjiang in the northwest part of China, exploded on July 5 local time.

According to the website of the World Uyghur Congress, the “trigger” for the riots was an alleged violent attack on June 26 in China’s southern Guangdong Province at a toy factory where the WUC alleges that Han Chinese workers attacked and beat to death two Uyghur workers for allegedly raping or sexually molesting two Han Chinese women workers in the factory. On July 1, the Munich arm of the WUC issued a worldwide call for protest demonstrations against Chinese embassies and consulates for the alleged Guangdong attack, despite the fact they admitted the details of the incident were unsubstantiated and filled with allegations and dubious reports.

According to a press release they issued, it was that June 26 alleged attack that gave the WUC the grounds to issue their worldwide call to action.

On July 5, a Sunday in Xinjiang but still the USA Independence Day, July 4, in Washington, the WUC in Washington claimed that Han Chinese armed soldiers seized any Uyghur they found on the streets and according to official Chinese news reports, widespread riots and burning of cars along the streets of Urumqi broke out resulting over the following three days in over 140 deaths.

China’s official Xinhua News Agency said that protesters from the Uighur Muslim ethnic minority group began attacking ethnic Han pedestrians, burning vehicles and attacking buses with batons and rocks. "They took to the street...carrying knives, wooden batons, bricks and stones," they cited an eyewitness as saying. The French AFP news agency quoted Alim Seytoff, general secretary of the Uighur American Association in Washington, that according to his information, police had begun shooting "indiscriminately" at protesting crowds.

Two different versions of the same events: The Chinese government and pictures of the riots indicate it was Uyghur riot and attacks on Han Chinese residents that resulted in deaths and destruction. French official reports put the blame on Chinese police “shooting indiscriminately.” Significantly, the French AFP report relies on the NED-funded Uyghur American Association of Rebiya Kadeer for its information. The reader should judge if the AFP account might be motivated by a US geopolitical agenda, a deeper game from the Obama Administration towards China’s economic future.

Is it merely coincidence that the riots in Xinjiang by Uyghur organizations broke out only days after the meeting took place in Yakaterinburg, Russia of the member nations of the Shanghai Cooperation Organization, as well as Iran as official observer guest, represented by President Ahmadinejad?

Over the past few years, in the face of what is seen as an increasingly hostile and incalculable United States foreign policy, the major nations of Eurasia—China, Russia, Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan have increasingly sought ways of direct and more effective cooperation in economic as well as security areas. In addition, formal Observer status within SCO has been given to Iran, Pakistan, India and Mongolia. The SCO defense ministers are in regular and growing consultation on mutual defense needs, as NATO and the US military command continue provocatively to expand across the region wherever it can.

The Strategic Importance of Xinjiang for Eurasian Energy Infrastructure

There is another reason for the nations of the SCO, a vital national security element, to having peace and stability in China’s Xinjiang region. Some of China’s most important oil and gas pipeline routes pass directly through Xinjiang province. Energy relations between Kazkhstan and China are of enormous strategic importance for both countries, and allow China to become less dependent on oil supply sources that can be cut off by possible US interdiction should relations deteriorate to such a point.

Kazak President Nursultan Nazarbayev paid a State visit in April 2009 to Beijing. The talks concerned deepening economic cooperation, above all in the energy area, where Kazkhastan holds huge reserves of oil and likely as well of natural gas. After the talks in Beijing, Chinese media carried articles with such titles as “"Kazakhstani oil to fill in the Great Chinese pipe."

The Atasu-Alashankou pipeline to be completed in 2009 will provide transportation of transit gas to China via Xinjiang. As well Chinese energy companies are involved in construction of a Zhanazholskiy gas processing plant, Pavlodar electrolyze plant and Moynakskaya hydro electric station in Kazakhstan.

According to the US Government’s Energy Information Administration, Kazakhstan’s Kashagan field is the largest oil field outside the Middle East and the fifth largest in the world in terms of reserves, located off the northern shore of the Caspian Sea, near the city of Atyrau. China has built a 613-mile-long pipeline from Atasu, in northwestern Kazakhstan, to Alashankou at the border of China's Xinjiang region which is exporting Caspian oil to China. PetroChina’s ChinaOil is the exclusive buyer of the crude oil on the Chinese side. The pipeline is a joint venture of CNPC and Kaztransoil of Kazkhstan. Some 85,000 bbl/d of Kazakh crude oil flowed through the pipeline during 2007. China’s CNPC is also involved in other major energy projects with Kazkhstan. They all traverse China’s Xinjiang region.

In 2007 CNPC signed an agreement to invest more than $2 billion to construct a natural gas pipeline from Turkmenistan through Uzbekistan and Kazakhstan to China. That pipeline would start at Gedaim on the border of Turkmenistan and Uzbekistan and extend 1,100 miles through Uzbekistan and Kazakhstan to Khorgos in China's Xinjiang region. Turkmenistan and China have signed a 30-year supply agreement for the gas that would fill the pipeline. CNPC has set up two entities to oversee the Turkmen upstream project and the development of a second pipeline that will cross China from the Xinjiang region to southeast China at a cost of some $7 billion.

As well, Russia and China are discussing major natural gas pipelines from eastern Siberia through Xinjiang into China. Eastern Siberia contains around 135 Trillion cubic feet of proven plus probable natural gas reserves. The Kovykta natural gas field could give China with natural gas in the next decade via a proposed pipeline.

During the current global economic crisis, Kazakhstan received a major credit from China of $10 billion, half of which is for oil and gas sector. The oil pipeline Atasu-Alashankou and the gas pipeline China-Central Asia, are an instrument of strategic 'linkage' of central Asian countries to the economy China. That Eurasian cohesion from Russia to China across Central Asian countries is the geopolitical cohesion Washington most fears. While they would never say so, growing instability in Xinjiang would be an ideal way for Washington to weaken that growing cohesion of the Shanghai Cooperation Organization nations.

Copyright © 2009 F. William Engdahl

Sunday, August 16, 2009

Why China will rule: trading instead of invading

Figuring out why China is the new superpower is not rocket science. You get more flies with honey than with vinegar. Harmony is preferable to perpetual warfare.

China seeks to add to its development and power through a win-win strategy; it identifies the advantages of those countries it does business with, makes promises it keeps and strives for a harmonious relationship. Compare this to the US and Great Britain's strategy of bombs, bullets, invasion, proxy wars and lies to maintain their hegemonic goals alienating the entire world.

Another reason why China will rule the world is its policy of keeping multinational corporations on a short lease with the government maintaining 51% of any corporation operating in China. This short circuits the type of fascist corporate strategy that turns governments into big business puppets, as in the US and UK.

More reasons why China will emerge as top dog in world development:
1) It has the economic resources to provide loans to developing countries without the strangulation of regulations the World Bank and IMF imposes on its clients.

2) It strives for a multipolar world governance to the benefit of all countries and,

3) It has within its power to change the reserve currency, along with its allies in BRIC and SCO, from the dollar to a more acceptable unit for all nations.

Those who delude themselves that those dirty Chinese are the bad guys probably need to pull their heads out of the propaganda sandbox, and at the very least, look in a mirror.

China puts people before banks

China is one economy where there is no disconnect
between the financial and normal world [GETTY]

Samah El-Shahat, Al Jazeera's resident economist, writes a regular column analysing key elements that have contributed to the global financial downturn and its impact across the world.

China hasn't allowed its banking sector to become so powerful

The one question that isn't going away this global recession, is whether China can save the world.

But before we go running to Beijing, hat in hand, demanding assistance or else, there are some home truths that need to be considered first.

China is a developing country, with a per capita income of $4,000, which is much closer to those of African economies than to the US per capita income at $39,000, and $33,000 in Europe.

China has 130 million people who still live in absolute poverty, and even electricity hasn't made it every household yet.

So why should China be asked to save anyone but itself right now?

In fact, as Michael Pettis, a professor at Peking University's Guanghua School of Management says, China's consumption was about the equivalent of France's last year, but no one is calling on Paris to save the world.

The crisis, though, has exposed and clearly magnified the fault lines in China's emerging economy of 1.3 billion people.

The Asian giant needs to nurture its own domestic demand, so that when the export market goes sick, like it has in this Great Recession, it doesn't drag China down with it.

But making her people spend more than they save is harder said than done. After all, less than a generation ago the Chinese were so poor that hunger was the accepted norm in their daily lives.

Tiger has risen

Speak to Chinese officials in their late 40s onward and they will tell you that thinking about food was a major preoccupation as they were growing up - it was so scarce and many had to collect food coupons.

Yes, this Asian tiger has risen despite a recent past of malnutrition. So getting the Chinese to move away from the "survivors'" mentality of savers to one of spenders will not be easy.

Economists believe it takes a whole generation before people can change their ways and habits. But such a change can be overwhelmingly helped by the establishment of social welfare and safety nets such as health care provision, and other forms of social security.

This might encourage the Chinese to loosen their purse strings.

So why do we assume China can save the global economy?

Is this not a warped sense of economic prioritising to ask a developing country with pressing economic and social problems of its own to come in and sacrifice herself for the rest of the world?

Lending the US

This could have something to do with China's $2tn in denominated securities, and bonds it has acquired from the US. It is after all the US's biggest lender.

Yet, take that two trillion-dollar sum and divide it by 1.3 billion - the Chinese population - and I assure you not much would be left for your average Chinese citizen.

However, I feel this basic misunderstanding of China and her position in the world, has to do with our negative bias toward that country - we are much tougher and harder when it comes to the way we report our economic stories on China.

We are not telling enough stories of how we can in fact learn from China, particularly in the way its keeps the power of its banks in check.

Something we have been unable to do.

China is the one leading economy where the divide - the disconnect between its financial sector and the world normal Chinese people and their businesses inhabit - doesn't exist.

Both worlds are booming again and this is due to the way the government handled its banks.

China hasn't allowed its banking sector to become so powerful, so influential, and so big that it can call the shots or highjack the bailout.

In simple terms, the government preferred to answer to its people and put their interests first before that of any vested interest or group.

And that is why Chinese banks are lending to the people and their businesses in record numbers. Why don't we hear more about that in the media?

Different planets

In the UK and US, the financial sector is booming, while the world of normal people seems to be going from bad to worse, unemployment is high, businesses are folding and house foreclosures are still taking place.

Wall Street and Main Street might as well be existing on different planets.

And this is in large part because banks are still not lending money to the people.

In the UK and US, banks have captured all the money from the taxpayers and the cheap money from quantitative easing from central banks.

They are using it to shore up, and clean up their balance sheets rather than lend it to the people.

The money has been hijacked by the banks, and our governments are doing absolutely nothing about that. In fact, they have been complicit in allowing this to happen.

I asked Costas Lapavitas from the School of Oriental and African Studies (SOAS) whether governments had put the interests of banks before the interests of their wider populations.

"Yes I think you can say that. I think governments will probably come out and say that we helped rescue the banks, and we prevented generalised collapse. And to a certain extent that is true of course," he said.

"However there were so many ways in which banks could have been rescued and this particular way has been done in such a way that the banks have no incentive to change the ways they operate ... It is as if the banks have written the policies that the state adopted."

Interests of shareholders

The US and British governments have allowed banks to solve their own crises in the interests of their own mangers, and shareholders – they are after all private business.

Governments should have made it conditional for banks to lend to us, before they are given access to so much of our money and the Federal Reserve's cheap credit.

So the Western hemisphere is suffering the consequences of government failure, while the Asian Giant is celebrating government getting it right.

Funny, how our seemingly democratic governments have been taken over by vested interests.

So, lay off China. It is the one country that is putting the interests of its people above that of the banks.

And in these pressing times I say Hallelujah to that.

Chavez's 'historic' China strategy

At a land base in Venezuela, Chavez and Morales
cheer the satellite's successful launch [EPA]

By Dima Khatib in Caracas

As the rocket carrying the Simon Bolivar Venesat-1 satellite lifted into space from south-western China, Hugo Chavez, the Venezuelan president, could not help but show his excitement.

Watching the launch live from Bolivar State, in south-eastern Venezuela, with Evo Morales, the Bolivian president, Chavez described the October 2008 launch of the country's first satellite "of strategic and historical importance for Venezuela and China".

The satellite is now used by Venezuela to meet some of its telecommunication needs and is one of the main achievements of Caracas' strategic partnership with Beijing.

Venezuela's interest in such a partnership provided China an excellent opportunity as it searched for a reliable partner that could guarantee energy, particularly oil, supplies in the long run.

Their relationship now stretches from the depths of space to Venezuelan soil.

Developing oil fields

In central Venezuela's Faja del Orinoco, believed to be the world's largest oil reserve, China is helping Caracas explore an area that is believed to hold about 40 billion barrels of crude oil, twice the volume of oil reserves in the US.

As Venezuela seeks to diversify and expand the reach of its energy exports in the world instead of largely depending on US markets, it has started exporting oil for the first time in recent years to far-away China.

It currently exports to China almost 400,000 barrels a day and hopes to reach 1mn barrels by 2010. It is also planning to build refineries in China.

In the meantime, China is also helping Venezuela develop its telecommunications and hi-tech infrastructure.

In the Paraguana Peninsula in western Venezuela, China has helped Venezuela manufacture its first mobile phone and computer.

"Best" mobile phone

Chavez wants to use Venezuela's oil to break what he believes is US hegemony [EPA]
Baptised the Vergatario, or in colloquial Spanish "the very best", the new mobile phone is assembled in a joint Chinese and Venezuelan company called VTELCA.

Chinese engineers have contributed the technology and parts while Venezuela provides the manual labour, infrastructure and financing.

The Vergatario costs a mere $14, the cheapest by far in the market, and is intended to cater to low-income Venezuelans.

The phone was released for the first time on Mother's Day in May earlier this year. Within hours all units were sold out and many Venezuelans are waiting for the next batch to come out.

Technological sovereignty

VTELCA is one of 209 new socialist companies that have been established to help Venezuela reach what Chavez has termed 'national technological sovereignty'.

Most of its 170 workers were hired through local "communal councils" in the area's towns and villages. Comprised of housewives and labourers, the workforce was trained by the Chinese who now only supervise the work in the factory.

In one such factory, which began operating in December 2006, Chinese engineers are helping Venezuelans develop the first homemade computer.

Venezuelans hope Chinese technology and know-how will be transferred to them in the future so they can design their own computers and locally manufacture the parts in future socialist companies.

Joint investments

In 2007, China and Venezuela established a joint investment fund in which China initially pledged to inject $4bn over a period of three years. Venezuela provided $2bn into the fund.

The idea behind the fund is that the Chinese contribution would be a down payment for future oil supplies, while Venezuela would use the money in development projects.

The two would agree on a fixed oil price in a way that protects both from constant fluctuations in the energy market.

Less than two years later, China had already provided its share. In early 2009, at the height of the current global financial crisis, Chavez managed to convince Beijing to add an extra $4bn to the fund; Caracas also injected a further $2bn raising the total value to $12bn.

This is one of the Chavez government's many alternatives to conventional financing by the IMF and World Bank. These funds are designed to finance development projects without the burden of high interest rates and without dictating economic policies by the lender.

It is also a mechanism to break the circle of speculation in the energy market which Chavez believes is based on "capitalist principles" and he calls as "unfair and greedy".

The fund has been used to finance many projects in Venezuela so far. In one project in the state of Monagas in eastern Venezuela, the fund is financing a pilot project to increase chicken production in the country using Argentinian know-how.

It has also been used to finance a nationwide railway network that is being built in a partnership with other countries.

Ideology and strategy

When Chavez came to power 10 years ago, trade with China had peaked under $200mn but since then it has jumped to nearly $10bn.

It is no surprise then that Chinese officials say that Venezuela has now become the biggest recipient of its investments in Latin America.

While the Chinese community has existed here for decades, the presence of Chinese companies is increasing and being felt in several sectors of the economy: housing, agriculture, industry. The relationship serves China's commercial interests.

But for Venezuela, it serves ideological and strategic purposes.

Since becoming president, Chavez has travelled to China six times, making him its most frequent visitor among Latin American leaders.

He says the growing ties with Beijing are part of his stated aim to build a new multi-polar model of international relations "to break" US hegemony.

He has also embarked on a programme of cultural and scientific exchange with China.

By having Venezuelans study and benefit from Chinese technological expertise, Chavez is hoping to create a strategic partnership which merges China's socio-economic experiment with Latin American socialism.


All blogs are really just small snapshots of a person's mind, heart and soul as they evolve together through life....

Small bits of the thread of life we weave together into the fabric of ourselves, in the hope we will make sense of our existence, individual and collective.

On this page, is the cloak I have fashioned from my fabric to warm myself in a universe which often makes little sense.

Inside my cloak, it is warm enough to face the blistering cold winds of the insane world in which I find myself.

If you find some a bit of 'the good stuff' here, it has been my pleasure.