Mass layoffs at northwest Indiana steel mills

Jeff Lusanne

Under the impact of falling oil prices and the global economic slowdown, layoffs have begun in northwest Indiana—a major center of the US steel industry. Last week, US Steel announced the idling of its tin mill in East Chicago, Indiana, laying off 369 workers. ArcelorMittal, the world’s largest steel producer, also announced the closure of a portion of its massive Indiana Harbor complex, the Long Carbon facility, which will affect 300 jobs.
The layoffs are likely only the beginning, as a combination of factors in the world economy lead to reduced demand internationally for steel. West Texas Intermediate (WTI) crude oil, a major benchmark for oil prices, has fallen from $110 per barrel in the summer of 2014 to $45 per barrel at present. The collapse of oil prices has reversed the rapid growth of American shale oil and Canadian tar sands production and led to mass layoffs, with 16,000 job losses in Texas and North Dakota alone announced in January.
Shale oil production, using the process of hydraulic fracturing, or fracking, relies on a large quantity of steel pipe to pump fluids and sand into a well and pump oil out. With the collapse of shale production, steelmakers are pulling back on so-called oil country tubular goods, which had been a large growth segment of their production.
Every week brings more announcements of layoffs at US Steel, where job losses have now surpassed 1,300. In the first week of January, it announced the idling of its plant in Lorain, Ohio, leading to 614 layoffs. Another 142 workers in Houston, Texas, also lost their jobs. More recently, US Steel announced it would significantly scale back operations at its Fairfield Tubular Operations and Fairfield Works in Fairfield, Alabama, as well as its Lone Star Tubular Operations in Lone Star, Texas. Both facilities produced pipe and tubes for the oil and gas industry, and as many as 1,918 workers will be affected by those layoffs.

US Steels East Chicago tin plant, which will be idled in mid-March, laying off 369 workers

In East Chicago, US Steel is idling its tin plant, which makes tin-plated metal largely for canned foods. US Steel also warned it would permanently close is coke-making operations at its Granite City, Illinois, works, near St. Louis, laying off 176 workers. Aside from falling oil prices and production, there is also falling demand globally for steel and a supposed glut of production. Asia, especially China, has been a major market for steel, but China’s growth rate for 2014—at 7.4 percent—is the lowest since 1989. The stagnant Eurozone economy offers no outlet for steel production. Steel and the raw materials that make it are plummeting in price; iron ore is trading at its lowest level since 2009.

ArcelorMittall’s Indiana Harbor Long Carbon plant, which will be idled beginning on March 1, affecting over 300 workers

ArcelorMittal’s Indiana Harbor Long Carbon plant makes steel bars that are primarily used in the auto industry. Formerly run by Inland Steel, the mill was originally opened in 1901, shut down temporarily in 2009, and reopened in 2010. ArcelorMittal officials claim the facility has lost money since 2011 and that it can produce its steel bars more cheaply in Germany and Canada.
The 246 unionized workers at the mill—members of the United Steelworkers of America (USWA) Local 1101—and 58 salaried employees are being affected by the closure. In December 2014, ArcelorMittal also idled the Indiana Harbor West No. 2 galvanizing line as production was transferred to a plant in Alabama. In both cases, the company has claimed workers will be transferred to other facilities in Indiana Harbor complex, which is the largest integrated steel mill in North America, employing approximately 4,850 people.
The USWA has not even made a pretense of opposing the layoffs. Instead it is engaged in a reactionary, chauvinist campaign against the “dumping” of cheaper steel by foreign countries, particularly Korea. Allied with steel company executives and Democratic Party politicians in the Alliance for American Manufacturing, the USWA is demanding protectionist measures in the name of defending “national security” against China and other countries.
The USWA, along with other unions like the United Auto Workers, used such nationalist “Buy American” campaigns in the 1970s and 1980s to prevent a struggle by workers against the corporations and the capitalist system responsible for plant closings and layoffs. These campaigns, which sought to drive a wedge between American workers and their international brothers, never saved a single job.
In any case, US Steel and ArcelorMittal are both global corporations that seek, with the assistance of the unions, to pit workers against each other in a race to lower costs.
With an increasingly dire world economic outlook for steel demand, these are likely not the last steel industry layoffs in northwest Indiana, which has several large ArcelorMittal and US Steel mills. A significant amount of total production goes to the auto industry, and any drop in auto sales will ripple back. Additionally, the new Ford F-150 pickup truck, the best-selling vehicle in America, is using a mostly aluminum body instead of steel.
Northwestern Indiana has already been devastated by the long-term loss of industrial jobs. East Chicago had a population of 29,698 in 2010, down from a population of 57,669 in 1960. The Census Bureau’s five-year (2009-2013) survey estimates a poverty rate of 35.7 percent for individuals and a median household income of $27,500 in the city on the Indiana-Illinois border. The latter figure is barely half of the national mean income.

Marktown, a neighborhood surrounded by the plant closures, already has boarded up homes and a closed restaurant

One neighborhood, Marktown, is surrounded by plant closures and is already pockmarked with boarded-up homes. On its southwest border, the US Steel tin plant will close. To the southeast, the ArcelorMittal Long Carbon plant will close. Across from that lie acres of the Indiana Harbor complex that were abandoned long ago. Indiana 912/Cline Ave, an abandoned elevated highway, is nearby, partially demolished. Some four-lane concrete roads are already empty of traffic, even during a weekday.
To the northwest of Marktown, there is the massive BP Whiting Refinery. The global energy giant is pointing to the drop in oil prices to justify freezing the wages of its non-union workforce at the refinery and demands for concessions from the USWA after the current labor agreement runs out January 31. More than 2,800 construction jobs were lost in northwest Indiana in 2014 as construction wound down from the refinery’s expansion.

New figures show continued decline in US union membership

Shannon Jones

The rate of US union membership continued its fifty-year decline in 2014, falling from 11.3 percent to just 11.1 percent of the workforce. The new numbers released by the Bureau of Labor Statistics (BLS) show that unions added just 50,000 members last year compared to an overall employment growth of over two million.
Unionization rates are now at their lowest level in the US in 100 years. According to a study by two Rutgers economists, the 1916 US unionization rate was 11.2 percent. While public sector unionization showed a tiny rise in 2014, the private sector unionization rate collapsed to just 6.6 percent.
Even more striking was the decline in unionization in Michigan, once one of the most heavily unionized US states. The overall rate fell from 16.3 percent to 14.5 percent of workers in the state, representing a drop of 11 percent. In absolute numbers union membership fell by about 48,000 out of a prior total of 633,000. In 1964, 44.5 percent of Michigan workers belonged to unions, and, as late as 2004, some 21.6 percent of the state’s workers were still unionized. The state now ranks 11th in overall unionization. In 2003 it ranked third.
The decline in Michigan reflects in part the impact of recently enacted right-to-work legislation. The law, which took effect in 2013, prohibits the payment of union dues as a condition of employment. The intent of the measure was to criminalize any form of collective resistance by the working class. This does not alter the fact, however, that the UAW and other trade unions are essentially business entities, which have prospered through their collaboration in the destruction of the jobs and living standards of workers. After decades of such betrayals, the unions were incapable of generating popular opposition to the passage of the reactionary law.
With union membership now voluntary, tens of thousands of workers have stopped paying dues, seeing no reason to subsidize organizations that are hostile to their interests. The Michigan Education Association alone lost nearly 5,000 members, its rolls falling to 110,000.
The full impact of right-to-work in Michigan has yet to be felt, since the law did not cover workplaces with existing labor contracts. The contracts for the major auto manufacturers covering tens of thousands of workers in Michigan employed by General Motors, Ford and Chrysler expire in September 2015, and the new agreements will be barred from making union membership mandatory.
This presents a serious problem for the UAW, since it has alienated and angered workers through its decades-long policy of union-management collaboration that has decimated the wages and benefits of auto workers, once among the highest-paid industrial workers in America. The cuts imposed by the UAW have had a particularly terrible impact on younger workers, who now start at just a little more than half of the standard wage.
As a consequence of its betrayals, UAW membership has plummeted; it is now down to less than 400,000 compared to 1.5 million in 1979. In anticipation of a further massive decline once workers are no longer compelled to pay dues, the UAW forced through a 25 percent dues increase at its constitutional convention last year.
However, the UAW apparatus has been largely insulated from the impact of its repeated sellouts. The union has developed new sources of income based on its suppression of the class struggle: joint training, real estate and investment funds, and the control of multibillion-dollar retiree health care trust funds set up during Obama’s 2009 restructuring of Chrysler and GM. Despite the decline in membership, the UAW had nearly a billion dollars in assets in 2013, including $661 million in marketable securities, with hundreds of union executives on its staff earning more than $100,000 per year.
The UAW is not the only union whose treasury and officers are doing well financially. The American Federation of Teachers boasted net assets of $104 million in 2014, not counting the assets of affiliated locals, which in some cases are quite substantial. AFT President Randi Weingarten alone took in $557,000 in salary and expenses. The rival National Education Association, meanwhile, had total assets $336 million, according to its 2014 report and outgoing NEA President Dennis Van Roekel pocketed some $541,000 in salary and expenses. The Service Employees International Union, meanwhile, had $258 million in total assets, paying SEIU President Mary Kay Henry $295,000 in salary and expenses. Robert Buffenbarger of the International Association of Machinists topped this, taking in $319,000.
While feathering their own nests, the unions have worked to crush all manifestations of working-class militancy. The moribund character of the unions is reflected in the collapse in strike activity, which remains at historic lows. There were just nine strikes involving 1,000 or more workers in the United States in 2014, according to BLS figures. That compares to 235 in 1979, two years before the smashing of the air traffic controllers’ strike, and 424 in 1974.
Where the unions have called strikes they have been token affairs that were quickly sold out. An example was the one-day walkout called by the UAW at the Lear seating plant in Hammond, Indiana last September. The UAW ended the walkout claiming it had abolished the two-tier wage at the facility, which makes seats for Ford. In fact, the agreement called for the creation of a “third tier” of low-paid workers, starting a just $12 per hour.
The unions are able to stagger on only because of the support of a section of the corporate-political establishment, which values their services in disciplining the working class. Indeed, one of the highest points in US union membership came during World War II, when the Roosevelt administration brought the unions directly onto government-management boards, relying on the union leadership to drive up production, impose a wage freeze and enforce a no-strike pledge.
In the recent period, the UAW has sought and received management support in its effort to “unionize” Volkswagen’s Chattanooga, Tennessee assembly plant. The UAW and VW are working to establish what amounts to a company union at the facility by setting up a works council based on the German model of “co-determination.” After workers voted against the UAW in a union representation election, VW allowed the UAW into the plant anyway. The union is permitted to use company meeting rooms, post literature and meet regularly with plant management. If the UAW can convince an auditor hired by VW that it represents more than 50 percent of workers, it could be installed without another union representation election.
In exchange for recognition the UAW has pledged to maintain the factory’s cost-advantage over facilities run by the Detroit automakers and to underbid VW workers in other countries.
These facts speak for themselves. The US unions, like their counterparts globally, are anti-working class organizations defending the interests of a privileged upper-middle class layer whose income is dependent on its defense of capitalism and its suppression of workers struggles. To defend their interests workers must break with these organizations and build democratic rank-and-file organizations based on a new perspective and program. This means a struggle for the political independence of the working class based on a socialist and internationalist perspective.

Whistleblower who exposed CIA nuclear sabotage operation convicted under Espionage Act

Thomas Gaist

Former Central Intelligence Agency officer Jeffrey Sterling was found guilty of violating the 1917 Espionage Act Monday for providing information to the New York Times regarding covert operations conducted by the CIA against Iran. Sterling was convicted of nine felonies including illegally possessing and transferring secret government information. He could receive up to 100 years in prison after sentencing in late April.
Sterling allegedly spoke to Risen about the CIA efforts, codenamed Operation Merlin, as part of research for Risen’s 2006 book State of War. Operation Merlin sought to sabotage Iran’s nuclear program by selling the Iranian government flawed nuclear reactor blueprints through a foreign intermediary.
Risen resisted years-long efforts by the Justice Department to force him to testify against Sterling, stating that he would accept a prison term before doing so. The Obama administration dropped its efforts to coerce Risen once prosecutors became convinced they could convict Sterling without Risen taking the stand.
CIA officers who did testify in the case were concealed behind a dark screen. The federal prosecution team never introduced evidence that Sterling even spoke directly to Risen about the Iran operations. The only correspondence between the two presented to the court related to a separate issue.
Sterling informed the Senate Intelligence Committee in 2003-04 about CIA operations against Iran, and the leak could have originated from Senate staffers, Sterling’s defense attorney argued, pointing to the prosecution’s lack of direct evidence.
The case represents yet another victory for the Obama administration’s assault on investigative journalism, including the secret wiretapping of the Associated Press to identify “leakers” and the prosecution of Chelsea (Bradley) Manning for providing information to WikiLeaks. The administration has prosecuted more cases under the Espionage Act than all previous presidential administrations combined.
The Obama administration’s surveillance and prosecution of journalists has produced a “chilling effect,” with sources in the government and corporate bureaucracies suddenly going silent, according to leading journalists. As Risen noted in an interview with the Times last August, President Obama is “the greatest enemy to press freedom in a generation.”
The Obama administration is “going to bring these cases continuously to demonstrate that type of conduct by a government employee or a government contractor is going to be prosecuted,” a prominent New York lawyer told the Washington Post, referring to Sterling’s conviction.
Attorney General Eric Holder responded by declaring that Sterling’s conviction was the “just and appropriate outcome” of the trial. Sterling’s communications with Risen “placed lives at risk” and represented “an egregious breach of the public trust,” Holder said.
In essence, Sterling has been convicted for allegedly leaking information about illegal CIA covert operations, that is, for helping expose a criminal conspiracy orchestrated at the highest levels of government.
Holder, on the other hand, has committed grave crimes against the US Constitution. While serving on behalf of President Obama, Holder has overseen the destruction of central elements of the US Constitution, including the right to due process and protection from arbitrary searches and seizures. The attorney general will be known above all for his arguments in favor of the right of the president to assassinate US citizens without any legal procedure.

Concerns over Fed tightening as deflation fears grow

Nick Beams

In the wake of the decision by the European Central Bank (ECB) to institute quantitative easing through the purchase of government bonds, questions have begun to be raised about whether the US Federal Reserve should continue with its plan to tighten monetary policy from the middle of this year by lifting interest rates. There are even suggestions that it should resume the purchase of financial assets, a program it halted in October.
With the Fed’s policy-making Federal Open Market Committee meeting this week, most economists expect no change in the US central bank’s previously stated plan to begin gradually raising rates later this year.
At a meeting held during last week’s World Economic Forum in Davos, Switzerland, former US Treasury Secretary and Obama administration economic adviser Lawrence Summers warned that a deflationary spiral could ensue if the Fed tightened its monetary policy too soon.
“Deflation and secular stagnation are the threats of our time,” Summers told a Bloomberg forum. He went on to say there was no confident basis for tightening and any threat of inflation was a long way off.
Summers warned that the world economy was headed for treacherous waters because the US economy was entering its seventh year of recovery, nearing the end of its life expectancy, after which there could be another, unexpected, recession. “Nobody over the last 50 years, not the IMF, not the US Treasury, has predicted any of the recessions a year ahead,” he said.
Responding to Summers’ remarks, International Monetary Fund Managing Director Christine Lagarde said she hoped he was wrong because the world economy was “short of any engine at the moment.”
Since the eruption of the global financial crisis in September 2008, the US Fed has pumped some $4 trillion into the financial system and kept interest rates at near-zero. Last October, it ended its program of direct asset purchases and indicated that this would be followed by a gradual lifting of official interest rates in attempt to resume a more normal monetary policy.
This agenda seemed to be proceeding in line with an accelerated growth in the American economy, but has now been called into question by the emergence of outright deflation in Europe and the worsening downturn to which the ECB’s quantitative easing decision is a response.
Summers’ concerns were echoed in remarks by the head of the Bridgewater hedge fund Ray Dalio. He warned that what he called the “central bank supercycle” of ever-lower interest rates and increased debt-creation had reached its limits. Interest rates were already so low that the transmission mechanisms of monetary policy had broken down.
Dalio recalled the situation in the early 1980s in the US when a high dollar value and high interest rates plunged the American economy into a deep recession. However, he said, there was a major difference between then and now that made the present position “ominous.”
“Back then we could lower interest rates,” he said. If we hadn’t done so, it would have been disastrous. We can’t lower interest rates now. We’re in a new era in which central banks have largely lost their power to ease.”
New York Times op-ed columnist and Princeton economics professor Paul Krugman has also voiced disagreement with US monetary policy, writing last week that he was “very worried that the Fed may be gearing up to raise rates too soon” and expressing his agreement with Summers.
Both Summers and Krugman come from what could be considered the liberal pro-Keynesian wing of the US economic policy establishment. But opposition to the present course has also emerged from what might be considered an unlikely source.
In a comment published earlier this month, John Makin of the right-wing, free market American Enterprise Institute also voiced concerns. The Fed’s message was that interest rate increases squared well with increased growth and lower unemployment, he wrote, but this was “bizarre” in conditions of falling inflation and the deflationary impulse coming from falling oil and commodity prices and a stronger dollar.
“The Fed has decided simply to assert that US deflation won’t materialize, so it will continue on its current path toward mid-year tightening. This is a dangerous course to follow, especially in view of rising global deflation pressure,” he wrote.
Makin noted that the expectation of falling prices was lowering consumption demand, as purchases were put off in the expectation that tomorrow’s prices would be lower than today’s. It was having an adverse effect on already low investment rates because if US inflation went negative, as it already has in a number of European countries, the real interest rate would rise, raising the cost of borrowing.
Bankers speaking at the Davos gathering also warned that financial markets could experience heightened volatility once the Fed started tightening. They claimed that regulators were starting to share their concerns.
Anshu Jain, the co-chief executive of Deutsche Bank, said he was “relatively comfortable” if there was a major unwinding in sovereign debt markets, as there were ways to work it out. “My main worry is if the same thing was to happen in investment grade credit, or, even worse, in the high yield or leveraged loans market,” he said.
Leading bankers are claiming that increased regulations introduced as a result of the 2008 crisis have meant that they are not able to hold large stocks of such investments and cannot provide liquidity by purchasing these assets from those who want to sell.
The Financial Times has reported that a clash erupted at two closed door meetings at Davos between Jain and other bankers on the one side, and US Treasury Secretary Jack Lew and Bank of England Governor Mark Carney on the other, over whether the “flash crash” of last October, when market conditions briefly recalled those of 2008, was caused by new regulations.
The disputes over the Fed’s tightening trajectory, the impact of deflation and the causes of market volatility point to the intractable nature of the global economic breakdown. The Fed’s agenda is far from representing some major clampdown on financial markets, but is guided by the belief that the issuing of endless supplies of money cannot continue indefinitely, and at some point monetary policy must start to return to at least a semblance of normalcy.
However, even the initial limited steps in this direction have prompted predictions that they will give rise another financial crisis.
On the other hand, there are warnings that, far from being an antidote to financial crisis, quantitative easing itself is creating the conditions for another meltdown. One of the leading proponents of this view is William White, former chief economist at the Bank for International Settlements, who warned well before the Lehman collapse in 2008 that a crisis was building up as a result of the expansion of credit.
In an interview with the British Daily Telegraph on the eve of the Davos summit, he said the major central banks were inflating asset bubbles through quantitative easing, while beggar-thy-neighbour currency devaluations—themselves one of the products of QE—were spreading.
“We are in a world that is dangerously unanchored,” he said. “We’re seeing true currency wars and everybody is doing it, and I have no idea where this is going to end.”
He said quantitative easing by the ECB was not going to help because the European economy had a greater reliance than the US on small and medium-sized companies that obtained their money from banks, not bond markets, and the banks were cutting back their lending.
White noted that corporations in emerging markets, principally in Asia and Latin America, had up to $6 trillion of debt denominated in US dollars, and this was going to create a “huge currency mismatch problem as US interest rates rise and the dollar goes back up.”
So far as the liberal commentators such as Krugman and Summers are concerned, the key problem in Europe, which is at the centre of the global deflationary spiral, is the insistence of governments, led by Germany, on austerity.
In his Davos remarks, Summers spoke of the “irresponsible decision” to launch a currency union without a fiscal union to back it up, leading to a refusal to share liabilities and a dysfunctional system.
But, contrary to Summers, the essential problem in the design of the EU is not a lack of perspicacity. Rather, it is rooted in objective conditions—the division of the continent into conflicting nation-states. While it initially provided a certain limited degree of economic unification, the monetary union is foundering on the contradictions created by this system.
Krugman takes a similar position, blaming the mounting crisis either on intellectual failings or psychological problems.
In a New York Times column published on January 22, he claimed that European austerity reflected a “wilful misdiagnosis of the situation.” Officials in Berlin and Brussels chose to ignore evidence that the excesses which led to the crisis flowed from private rather than public debt. Pursuing a narrative that blamed budget deficits, they then imposed spending cuts, rejecting evidence that such measures would further depress the economy.
Such analysis is aimed at covering over the fact that the policies of the European governments were not the result of a false analysis, but the expression of definite class interests. Nowhere has this been more clearly demonstrated than in Greece, where money obtained through cuts under the so-called bailout measures has been used to get the major private banks off the hook.
Likewise, German opposition to quantitative easing, which American financial interests have demanded be implemented, is not the result of some misplaced ideology, but reflects the position of German finance capital.
Having lost large amounts of money in the US-based sub-prime crisis, German banks, which were the first to be affected in 2007, fear that further financial “innovation” will lead to another crisis and severely impact on their position, weakening them in the struggle with their rivals in the US and elsewhere.
The mounting disputes and conflicts testify not only to the absence of any coherent economic program to resolve the breakdown, but also to the growing rivalry between the major powers that will further develop as the crisis deepens.

Japanese government exploits hostage crisis to push remilitarisation

Ben McGrath

The Japanese government has announced that it will use the current parliamentary session to push through a raft of legislation to codify its “re-interpretation” of the country’s constitution to allow for “collective self-defense.” Prime Minister Shinzo Abe is exploiting the current hostage crisis, in which Islamic State of Iraq and Syria (ISIS) has killed one Japanese citizen and continues to hold another, in a bid to overcome public opposition to remilitarisation.
The regular 150-day session of the Japanese parliament or Diet that began on Monday is the first since the ruling Liberal Democratic Party (LDP) won reelection in December. Among some 80 bills expected to be submitted are 10 to remove restrictions on the Self-Defense Forces (SDF), Japan’s military. The LDP will begin negotiations with its coalition partner Komeito in early February and plans to submit the bills for a vote following April’s local elections.
Speaking to Japan’s NHK public broadcaster on Sunday, Abe declared: “The legislation is aimed at protecting the lives and well-being of the people by structuring a seamless legal security structure. For example, if Japanese abroad come under harm’s way, as in the recent case, the Self-Defense Forces currently aren’t able to fully utilize their abilities.”
These new laws are being drawn up not to protect Japanese citizens, but to facilitate the Japanese military’s involvement in US wars of aggression, in particular its war preparations against China as part the US “pivot to Asia.” The legislation is in line with new defense guidelines that Washington and Tokyo agreed to last October.
The legislation will allow Abe to dispatch the SDF overseas without seeking the Diet’s approval. Currently, each time the militarily is sent abroad, a new law must be passed authorizing the mission, as was the case in Japan’s military support for the US invasions of Afghanistan and Iraq.
The proposed laws will ensure that Japan is more closely integrated into US war planning in Asia against China. The Pentagon regards its military bases in Japan as crucial components of its “AirSea Battle” strategy, which envisages a massive missile and air attack on Chinese mainland bases, missile sites, command centers and communications. Japan is also critical to another element of US military planning, for an economic blockade of China.
Other laws are specifically directed against China. These include allowing the prime minister to dispatch the SDF if foreign ships or people enter the waters around Japanese islands or land on the islands themselves. The disputed Senkaku/Diaoyu Islands in the East China Sea have been at the centre of sharp tensions with China since the Japanese government provocatively nationalised them in 2012 by purchasing three of the islands from their private owner.
A particularly insidious bill will allow the government to restrict the rights of Japanese citizens if Japan is attacked or threatened with an attack. The legislation will give the government broad scope to crack down on anti-war protests or opposition to remilitarization in Japan, on the pretext, for example, of a supposed threat from North Korea.
The Abe government is clearly considering measures that go beyond its proposals for “collective self-defense.” Reuters reported that at Abe’s request Japanese officials drafted a briefing paper last Friday to consider a series of questions, including whether the planned legal changes would allow Japan to launch a military attack on ISIS to secure the release of the hostages. The paper’s conclusion that there was no legal basis for such action could well be used by Abe to press for further legislative changes.
However, the briefing paper did conclude that the new legislation would permit Japan to give military support to the US-led war in Iraq and Syria. “We are proceeding with consideration of a legal framework to implement support activities necessary to support other militaries in contributing to Japan’s peace and safety and the peace and stability of the international community,” it stated, without directly referring to ISIS.
The current hostage crisis began on January 20 when ISIS released a video featuring two Japanese men, Haruna Yukawa and Kenji Goto, and demanding $200 million for their release. Yukawa was captured last August. Goto attempted to intercede for Yukawa in October but was also captured. In the video, ISIS gave a 72-hour deadline for Japan to pay the ransom or the two men would be killed.
The deadline expired Friday afternoon but it was not until late Saturday evening that a second video was released featuring Goto holding a picture of Yukawa, who had been beheaded. ISIS also changed its demand from a ransom to a prisoner exchange. The organization is seeking the release of Sajida al-Rishawi, a woman condemned to death in Jordan for her role in a 2005 terrorist attack at hotels in the Jordanian capital, Amman. ISIS issued a new threat saying Goto would be killed along with a Jordanian pilot on Wednesday if its demands were not met.
In 2013, Abe seized on a hostage crisis in Algeria, which resulted in the deaths of 10 Japanese citizens, to pass a new law watering down restrictions on the Japanese military. The law overturned a ban on Japan sending SDF vehicles, including armored vehicles, into a conflict zone.
The widespread public opposition to the government’s constitutional reinterpretation and the planned legislation finds no expression in the political establishment. The LDP’s coalition partner, Komeito, which is nominally pacifist, backed Abe’s constitutional reinterpretation last year and is looking for cosmetic changes to the new legislation. In relation to providing logistical support for US wars, spokesman Natsuo Yamaguchi said on Sunday: “As a basic rule, rear-line support should be to back the response of the international community based on a UN Security Council resolution.”
The opposition Democratic Party of Japan (DPJ) has yet to formulate a coherent stance on the government’s planned laws. Newly-installed DPJ leader Katsuya Okada tentatively pointed out that the legislation would mean Japan would be drawn into US wars. “If the United States requests more direct involvement, can the Japanese government refuse it by saying, ‘we only conduct humanitarian aid?’” However, he did not oppose the legislation, or involvement in US-led conflicts, outright.

India, US boost military-strategic drive against China

Keith Jones

The “Chief Guest” at India’s January 26 Republic Day parade, US President Barack Obama returns from a three-day visit to India with a series of agreements that dramatically enhance the Indo-US “global strategic partnership.”
Indian Prime Minister Narendra Modi—with whom the US had refused to have contact until early last year because of his role in instigating and facilitating the 2002 Gujarat anti-Muslim pogrom—lavished Obama with pomp and circumstance.
The US president replied in kind. In a break with Secret Service protocol, Obama appeared in an open public venue for a full two hours in order to oblige Modi’s request that he review the entire Republic Day parade. However, he did so in the comfort of the most extensive security operation ever seen. A security operation that included the mobilization of 50,000 Indian security personnel in New Delhi and its environs, a thousand snipers positioned along the parade route, a no-fly zone with air defenses co-manned by Indian and US military personnel, and, as its seventh and final “layer,” US warships in the Indian Ocean.
The smiles and embraces notwithstanding, behind all the bonhomie between Obama and Modi was cold calculation. The US is determined to make India the south Asian anchor of its “Pivot to Asia,” that is, its drive to strategically isolate, encircle and, if necessary, wage war on China.
Rattled by the near halving of India’s growth rate since 2011, the Indian bourgeoisie is desperate for US investment. And with ambitions to regional and world power status that far outreach its economic and military-strategic grasp, the Indian elite is eager to take Washington up on its cynical, self-interested offer to “help India” become a great power.
As expected, Obama and Modi announced that they had agreed on a new 10-year military cooperation agreement to replace the first ever such Indo-US agreement, which was set to expire later this year. Under the “2015 Framework for the US-India Defense Relationship,” the two countries have agreed to more intensive joint military exercises. The Pentagon, it should be noted, already stages more joint exercises with India’s military than any other. The agreement also calls for increased collaboration in maritime security.
Washington has long expressed support and promised assistance for India’s navy assuming a major role in policing the Indian Ocean, which not coincidentally is the conduit for much of the oil and other resources that fuel China’s economy.
Obama and Modi also announced that they were moving forward with four “pathfinder” projects under the India-US Defense Trade and Technology Initiative (DTTI), including coproduction of the Raven unmanned aerial vehicle (UAV) and an “intelligence, surveillance, and reconnaissance” module for the Lockheed Martin-manufactured C-130 J transport aircraft. To move forward with these and other projects, the Pentagon is establishing a DDTI “dedicated rapid reaction team.”
Developed by Ashton Carter, who is to succeed Chuck Hagel as US Defense Secretary, the DTTI offers India the possibility of coproducing and co-developing weapons systems with the Pentagon and US arms manufacturers. Its true purpose is to make India’s military increasingly dependent on the US. A further aim of this policy is to undermine the longstanding Indo-Russia military-strategic partnership. Just days before Obama’s India visit, Russian Defense Minister Sergei Shoigu visited New Delhi to try to remove hurdles in actualizing an Indo-Russian agreement to develop a fifth-generation fighter jet, as well as a plan to build 400 advanced helicopters in India per year.
Commenting on the military agreements he had reached with Obama, Modi said they take the “growing” Indo-US “defense cooperation to a new level.”
No less significant were the foreign policy positions India adopted in an Obama-Modi ”Joint Statement” and in a “U.S.-India Joint Strategic Vision for the Asia-Pacific and Indian Ocean Region.” Many of them parroted US positions chapter and verse. Thus India criticized North Korea’s nuclear and ballistic missile programs and said the onus is on Iran to prove to the “international community,” i.e. Washington, that its nuclear program is “exclusively peaceful.”
Most importantly, India, as reported by the New York Times, adopted in toto the US-proposed text on the maritime territorial disputes that the US has encouraged between its East Asian allies and China. The “Vision” statement affirms “the importance of safeguarding maritime security and ensuring freedom of navigation and over flight throughout the region, especially in the South China Sea.”
Obama and Modi also announced that they had broken the six-year “logjam” in actualizing nuclear commerce between the US and India. The details of the agreement are far from clear. But India has indicated that it will take steps to insulate US nuclear-power companies like General Electric and Westinghouse from having to pay damages in the event their faulty equipment or other malfeasance leads to a catastrophic nuclear accident. Modi’s Bharatiya Janata Party (BJP) government will set up an insurance fund to pay limited compensation to accident victims. It will also issue a “memorandum of law” to clarify (in reality reinterpret and with the express aim of circumventing parliament) India’s nuclear liability law so as to make India’s government-owned nuclear power company solely liable for compensation claims.
Obama, for his part, has apparently abandoned the US’s claim to exercise control in perpetuity of all US-supplied nuclear equipment and parts, agreeing that IAEA (International Atomic Energy Agency) oversight will suffice.
According to news reports, a decision was taken at the highest political level in both countries to prevent the nuclear issue from interfering with the desire of both governments to “qualitatively reinvigorate their strategic ties.”
While Washington and New Delhi have claimed that the 2008 Indo-US nuclear accord, which paved the way for the US to negotiate India a unique position within the world nuclear regulatory regime, only concerns civilian nuclear energy, it in fact has huge military-strategic implications. Now able to purchase nuclear fuel and technology from abroad, India can concentrate the resources of its indigenous nuclear program on weapons development.
When not currying Obama’s favor, Modi was courting the large delegation of US businessmen who accompanied him to India. Addressing meetings of the US-India Business Council and the India-US CEO Forum, Modi promised the assembled business leaders that his government is at their disposal. He promised a “welcoming environment,” a “predictable and competitive tax regime,” and a government that will work to realize their projects, “protect” their intellectual property” and expunge the “excesses of the past.”
Obama, meanwhile, chided India for not doing more to open its economy to US investors. “There are still too many barriers, hoops to jump through,” he declared.
According to the New York Times, Obama and his aides were elated by the outcome of his India trip and particularly by the extent to which Modi shared the US’s attitude toward constraining and thwarting China’s rise. Reportedly at Modi’s initiative, China dominated the first 45 minutes of the discussion when he and Obama had their first sit-down meeting. An unnamed senior administration official told the Times that Obama’s conversation with Modi about China was “really qualitatively different” than those the US president had had with Indian leaders in the past. Said the official, “I really was struck that he took a similar view to us.”
The official was particularly pleased that Modi appeared ready to revive formal quadrilateral military-security cooperation with the US’s other key Asian-Pacific allies, Japan and Australia. In 2007, the four countries established a Quadrilateral Security Dialogue but Beijing objected strongly and the following year it was abandoned.
This week’s heightening of Indo-US ties, which follows on from their collaboration in the successful US-led campaign to unseat Sri Lanka’s president because he was deemed too friendly with China, has not been lost on Beijing.
China’s President Xi Jinping issued a Republic Day message in which he repeated his recent proposal that Beijing and New Delhi take their relations to a higher level. But in the government-owned Chinese media there was a spate of commentary questioning India’s intentions toward China.
A comment published Monday in two papers with close ties to the government, the People’s Daily and Global Times, warned New Delhi not to fall into a US “zero-sum trap.” Pointing to the US’s anti-China “Pivot to Asia,” the comment noted that the US has “ulterior motives” in depicting “the ‘Chinese dragon’ and the ‘Indian elephant’ as natural rivals.” It urged New Delhi to beware it not be maneuvered into becoming a US pawn so as to ensure Sino-Indian relations not take on the character of “a life-or-death struggle.”
While Obama was being feted by Modi, Pakistan Army chief General Raheel Sharif was visiting Beijing to meet with China’s foreign minister and other senior political and military leaders. A Pakistani spokesman said that during the talks China’s leadership reiterated that Pakistan is its “irreplaceable all weather friend.” Considered by India to be its archrival, Pakistan is currently facing a military-diplomatic campaign on the part of India’s Hindu supremacist BJP government to change the “rules” of their toxic bilateral relationship in its favor. The Indian press has carried reports from Indian army commanders in Indian-held Kashmir in which they boast that the new BJP government is encouraging them to inflict “unacceptable consequences” on Pakistani forces during cross-border firing and incursions.
By moving ever more tightly into Washington’s strategic orbit, the Indian bourgeoisie is assisting and encouraging US imperialism in its reckless and ruinous offensive against China—an offensive whose logic is war and nuclear conflict. It is also creating conditions in which the reactionary Indo-Pakistani military-strategic conflict, which is rooted in the communal partition of the subcontinent, becomes ever more entangled with the US-China divide, adding an explosive new dimension to each.

US announces plan to ration health care under Medicare

Kate Randall

The Obama administration has announced a major shift in the way Medicare will pay hospitals and doctors. Health and Human Services (HHS) Secretary Sylvia Burwell announced the initiative Monday following a closed-door meeting with representatives of the insurance industry, large employers and doctors’ professional organizations.
The shift moves the health care counterrevolution embodied in the 2010 Affordable Care Act (Obamacare) into high gear. Over the next three years, payments to hospitals and doctors for a large percentage of health care provided under Medicare, the government-run health insurance program for the elderly, will be shifted from the traditional “fee-for-service” model to alternative methods in which health care providers are rewarded for cutting costs and rationing care.
The radical revamping of Medicare will slash costs borne by the government, insurance firms and hospital chains by denying Medicare patients what is presently considered to be normal access to medical procedures, drugs and hospital care. The realignment of Medicare more directly with the profit dictates of the market will become the model for the American health care system as a whole.
Burwell told the media following the meeting, “Today’s announcement is about improving the quality of care we receive when we are sick, while at the same time spending our health care dollars more wisely.” The official line about improving the quality of health care, repeated by Burwell, is a cynical lie.
Medicare provides health insurance for 50 million elderly and disabled Americans at an estimated government cost of $600 billion a year. It is the largest single buyer of health care services in the US. It has for decades been a prime target of corporate interests and politicians seeking to roll back the social reforms of the 1930s and 1960s, who have always encountered massive popular opposition.
The program, notwithstanding the limitations, distortions and cutbacks inevitable within the framework of for-profit medicine, has played a major role in reducing the poverty rate of retirees in the US and extending life expectancy. It has taken a Democratic president, overseeing a conspiracy of the corporations and the state against the people disguised as a “progressive reform,” to initiate in earnest the drive to gut Medicare. The calculated aim is to throw millions of retirees into poverty and slash medical costs by shortening their life spans.
According to the time-table announced Monday, by next year Medicare will make 30 percent of its direct payments to doctors, hospitals and other providers in accordance with “alternative payment models.” Half of Medicare’s direct payments to providers are to be made in line with such models by 2018.
These new models build on experiments begun under the ACA, particularly through the use of so-called “accountable care organizations,” or ACOs. Providers will be given a lump-sum payment for treating a patient throughout a specific episode of care, such as knee replacement surgery, instead of being reimbursed for the individual medical components of that care.
HHS has also set a goal of tying 85 percent of all payments under traditional Medicare to measures of “quality” or “value” by the end of 2016, when Obama leaves office, rising to 90 percent by the end of 2018. How will this operate in practice? Hospitals with high rates of patients readmitted within a month of being sent home will face financial penalties, while those spending less on supposedly unnecessary treatments and tests will be rewarded.
HHS is creating an agency with the Orwellian title “Health Care Payment Learning and Action Network” to enforce these changes. This panel presumably will be tasked with targeting “frivolous” procedures and screenings for elimination in the interest of restoring “value” to the health care system.
HHS Secretary Burwell is ideally suited for leading this attack on Medicare. She is a veteran of the Clinton administration and the Treasury Department. She served as an aid to Microsoft founder Bill Gates, as president of the Walmart Foundation, and as a member of the Metlife insurance company board.
Serving under Obama as budget director from 2013 to 2014, when social spending was slashed by tens of billions, she was tapped by the president to succeed HHS Secretary Kathleen Sebelius last June following the disastrous roll-out of Obamacare’s HealthCare.gov web site. Obama praised her at the time as a “proven manager,” who, as budget director, had overseen a more than $400 billion decline in the federal deficit. She was confirmed as HHS secretary with overwhelming bipartisan support.
Under Obamacare’s individual mandate, individuals and families without insurance through their employers or a government program such as Medicare or Medicaid are required to purchase coverage from private insurers on the ACA’s health care exchanges or face a tax penalty.
The Obamacare ACOs are modeled on those already in existence in the private sector. These are growing in popularity among large employers. Justine Handelman, vice president for legislative and regulatory policy at Blue Cross and Blue Shield Association, which represents insurance companies, told Bloomberg, “Medicare is aligning with what is already working in the private sector to move away from fee-for-service. The private sector is further ahead than Medicare right now.”
Burwell has stated that phasing out fee-for-service payments will be a major priority of her tenure as HHS secretary. In addition to expanding ACO’s to Medicare, administration officials said Monday they plan to increase coordination of similar programs with state governments that insure millions of their poorest residents through the Medicaid program.
Seated next to Burwell at Monday’s meeting was Karen Ignagni, chief executive officer of America’s Health Insurance Plans (AHIP), the industry’s main lobby group. “Health plans have been in the forefront of implementing payment reforms in Medicare Advantage, Medicaid Managed Care, and in the commercial marketplace,” Ignagni said in a statement. “We are excited to bring these experiences and innovations to this new collaboration.”
This glowing tribute from the CEO of AHIP is further confirmation of the thoroughly right-wing character of Obamacare, which has nothing in common with a true reform of the health care system in the interest of providing universal, quality care. From its inception some five years ago, Obamacare has been aimed at enriching the insurance industry and health industry at the expense of vitally needed health care services for the vast majority of Americans.
It has been designed from top to bottom in the closest consultation with corporate lobbyists and lawyers, with no input from working people.
The sacrifices now being demanded of Medicare recipients in the interest of “quality” and “value” will translate into the withholding of medical treatments and procedures that will undoubtedly result in suffering and untimely deaths for American seniors.
The gutting of Medicare is one prong of an assault on health care that affects the entire working class and considerable sections of the middle class. A second major area of attack under Obamacare is the dismantling of employer-provided health care for active workers and retirees, the system that for nearly 70 years secured health coverage for most US workers.
Obamacare is designed to encourage employers to ditch their health insurance programs and force their workers onto the ACA’s health care exchanges. There, workers are forced, as individuals, to deal with gigantic insurance companies that offer high-priced plans providing sub-standard benefits.
The rich and the super-rich will, of course, continue to receive the best care money can buy.
Opponents of the predominantly fee-for-service system in Medicare bemoan the fact that the $2.9 trillion-a-year US health care system does not result in a healthier population than in those countries that spend far less per capita. It goes unmentioned that the obscene profit-gouging of private insurers, drug companies and hospital groups are responsible for this state of affairs.
The only solution to the health care crisis lies in taking the profit out of medicine, putting an end to privately owned health care corporations, and guaranteeing free, high-quality health care for all through the establishment of a democratically run, publicly owned socialized health care system.

South Africa’s politically connected elites profit amid power outages

Thabo Seseane

On Monday, ESKOM, the largest South African power utility, began implementing its second round of “managed” blackouts this year, cutting 2,000 megawatts from its grid because it could not meet demand. Tshediso Matona, ESKOM’s chief executive, has warned about the possibility of a total collapse of the power grid.
South Africa’s political elites are profiting from the crisis by awarding themselves massive contracts related to the construction of new power stations. In particular, a company directed by the wife of African National Congress (ANC) Secretary General Gwede Mantashe received a R639 billion ($55 million) contract for providing food to workers at the construction sites of the new Medupi and Kusile power plants.
The Sunday Times reported that the Kusile contract was awarded on October 1, 2013 to RoyalMnandi Duduza, part of the politically connected Bidvest group of which Nolwandle Mantashe, is a director. The five-year contract is worth R639 million, one of the largest ever sums for catering.
Another, worth R787 million, was awarded to Lephalale Site Services for catering at Medupi in Limpopo and expires this month. Then a new contract, “likely to push catering costs closer to R2 billion,” kicks in.
The Times, sister publication of the Sunday Times, reports that Nolwandle is also chief executive of Tamorah Resources, “a new company hoping to secure contracts to supply coal to ESKOM.”
In response to criticism over the impropriety of the awarding of the RoyalMnandi contract, she said, “I do not rely on political connections to do business but on capable black and white people.”
At a meeting of businessmen earlier in January, Matona was quoted as saying that “one unexpected event at any of ESKOM’s power stations could push the country to the total failure of the national electricity system” that could take weeks to resolve. ESKOM spokesman Andrew Etzinger said that Matona had been “misinterpreted” because of incorrect grammar.
Construction at Medupi and Kusile was announced after rolling blackouts began in 2005. Chancellor House Holdings, an ANC investment vehicle, owned 25 percent of the chosen boiler supplier, Hitachi Power Africa. Boiler construction and software were subcontracted after Hitachi's welding on boilers and its software failed tests.
The Public Protector probed the company’s ESKOM contract, not least because Valli Moosa, then ESKOM chairman, is a senior ANC member. The inquiry concluded that Moosa, now Anglo American Platinum chair, “failed to manage the conflict of interests,” and Hitachi could not guarantee that the ruling ANC would not benefit from the R50 million profit it stood to make through its Chancellor House stake.
Medupi is set to generate its first power this year—18 months behind schedule and at an estimated cost of R154 billion, more than twice the R69 billion originally projected.
Costs at Kusile have ballooned to R172 billion from an initially budgeted R80 billion.
The ANC called on ESKOM to “fast-track” construction at the two new power stations after the collapse of a coal silo at the utility’s Majuba facility in Mpumalanga led to rolling blackouts amid heavy rains in early December.
A year ago ESKOM was forced to ask major industrial clients including SABMiller, BHP Billiton and Glencore Xstrata to temporarily cut consumption by at least 10 percent to ease strain on the national grid. Irregular electricity supply is often cited as a reason for the spate of reviews and downgrades of public and private South African debt by international credit rating agencies.
Construction at Kusile ran behind schedule partly because of delays in the signing of a coal supply contract with Anglo American Inyosi Coal. Former ESKOM CE Brian Dames said in 2013 this was because powerful interests wanted ESKOM to sign a contract with a company that was black-controlled. As it is, Inyosi Coal is only 27 percent black-owned, by a consortium that includes Lithemba Investments and Pamodzi Investment Holdings, in which among others, former Deputy President Kgalema Motlanthe, have been involved.
Matona, the current ESKOM CE, attracted widespread ire with his remarks that the country, but not ESKOM, was “in crisis.”
At the Lethabo power plant which burns coal like most ESKOM power stations, the ash system failed. The plant effectively choked on its own waste, worsening the blackouts in December.
According to a clinic in the area, more people have shown signs of respiratory problems. Yet the Department of Environmental Services of the ANC government that appointed Matona, was not even aware of the dense cloud of toxic ash settling over the area.
In the run-up to the 2010 world soccer tournament, according to Matona, the government would not allow ESKOM to shut down plants for routine maintenance. With the 2009 general election adding pressure, ESKOM ran its existing plants at full tilt to keep the lights on at all costs, leading to more frequent breakdowns. “We are paying the price of these decisions,” Matona said. “That’s why we’re in the situation we’re in now.”
ESKOM warned as early as the first administration of former President Thabo Mbeki(1999-2004) that new investment in generating capacity was needed. Hoping to break up and privatise the utility, however, the neoliberals surrounding Mbeki ignored the advice until it was too late.
Mpumalanga, home province of Kusile, is like Limpopo, has also forked over to politically-connected businesses. Last March City Press reported that the newspaper was in possession of “copies of bank statements that show R39.8 million was paid to celebrity event planner Carol Bouwer in the space of a week.”
Bouwer’s company, which did not bid competitively for the job, was tasked by Mpumalanga Provincial Director-General Nonhlanhla Mkhize with organising memorial events following the death of former president Nelson Mandela on December 5, 2013.
This outlay took place with the full connivance of provincial Premier David Mabuza. As a result, City Press reported, “Mpumalanga’s government... shifted R70 million from six of its departments' service delivery budgets to cover employee salaries...”
The affected departments included social welfare services, public works and finance.

Standard and Poor’s downgrades Russia’s credit rating to junk

Clara Weiss

Credit rating agency Standard and Poor’s downgraded Russia’s sovereign debt rating to BB+, or junk status, on Monday. Russia’s debt has not been ranked below investment grade in over a decade.
The downgrade is part of a campaign by the United States, Germany, and their allies to step up economic pressure on Russia in order to force geopolitical concessions from the Putin regime or bring about its collapse. Due to western sanctions, and the fall in the oil price to below $50 per barrel, the Russian economy has moved deeper into recession over recent weeks.
Standard and Poor’s justified its decision by pointing to falling oil prices and the drop in the value of the ruble. In a desperate attempt to strengthen the ruble, the Russian central bank increased interest rates to 17 percent in December. Analysts now expect the Russian economy to contract this year by as much as five percent.
The S&P decision further weakened the ruble. The exchange rate with the dollar rose shortly afterwards from 66.5 to 69.2 rubles. The euro rose from 74.9 to 77.9 rubles. The decline in the rating will produce a further drop in foreign investment in Russia. The ruble already fell by 17.5 percent against the dollar in the first two weeks of the year. The main reason for this was the fall of the price of oil below $50 per barrel. Oil is the most important export for Russia and makes up a large proportion of state income.
According to finance minister Anton Siluanov, the lower oil price will mean that approximately 20 percent of anticipated state finances for this year, i.e. $45 billion, will not materialize, because the state budget had been calculated with an oil price of $100 per barrel.
In response to the economic collapse, the Russian government presented an emergency program on Tuesday that contains spending cuts, above all in social spending.
Leading Russian politicians, including finance minister Siluanov, are now warning of a much deeper crisis than 2008-09. At that time, Russian industrial production fell by 19 percent and GDP fell by 7.5 percent.
Capital outflow reached a new record of $151 billion last year, much higher than during the 2008-09 financial crisis. In comparison to the previous year, the outflow of capital was two-and-a-half times higher. Much of this was withdrawn by oligarchs who wanted to store their wealth safely abroad in the face of the sanctions.
German Gref, head of Russia’s largest bank, Sperbank, warned of a huge crisis in the banking sector. According to calculations from Interfax, around 15 percent of Russian banks will go bankrupt during this year and the next. Such a rate of bankruptcy has not been seen since the 1990s, when the Russian economy sank into chaos after the restoration of capitalism and was ravaged by a financial crisis.
Less than six months after the commencing of the trade war with Russia by the United States and European Union, the sanctions and the collapse of the ruble has resulted in a significant deterioration in the living standards of broad sections of the population.
According to figures from the newspaper gazeta.ru, prices for the most commonly used foodstuffs rose sharply: cabbage by 25 percent, potatoes and sugar by 10 percent, carrots by 13 percent and onions by 14 percent. Bread rose by two percent. According to government statistics, the price for milk products will rise by a further 10-15 percent in the first quarter.
The extent of the deepening of social tensions due to the economic crisis is shown by the example of the industrial region Sverdlovsk in the Urals. The prices of foodstuffs there have risen by 25 percent compared to the prices in January 2014.
Parliamentary deputy Ilya Gaffner from the governing United Russia party cynically told regional television this month that the price rises were really “not that bad.” “We are all Russians and have survived cold and hunger. If there is allegedly not enough money, the people should think about their health and eat a bit less.”
He went on to say, “New Year eating is over, and people have filled their stomachs. Now it is time to think about sporting activities.” A woman in a grocery store subsequently declared, “I have a disabled son and he always asks for sugar. I can’t give it to him, because there is simply no money.”
Gaffner’s arrogant remarks have produced a storm of criticism on the internet. Almost a million people watched the YouTube video containing his statements. In response to his advice to eat less, one commenter retorted that less should be stolen. Gaffner, who is himself responsible for local agricultural policy and owns at least three apartments, is alleged to be jointly responsible for the bankruptcy of several companies and agricultural sites.
With his arrogance and insolence, Gaffner speaks on behalf of a criminal oligarchy that is demanding that the working class, which has been ruthlessly exploited since the dissolution of the Soviet Union, “make sacrifices.”
Finance minister Siluanov, himself one of Russia’s richest men, also declared that in the face of the crisis “Russians” would just have to “eat less, use less electricity.”
The economic crisis and the massive impoverishment of the Russian population are the results of the policies of the western imperialist powers aimed at forcing the Kremlin to make concessions over Ukraine, push forward with social attacks on the Russian working class and, if necessary, bring about the collapse of the Putin regime.
The United States and the EU have raised the possibility of strengthening the sanctions. Responding to the escalation of violence in the Ukrainian civil war, US President Obama threatened to cut Russia off from the SWIFT agreement. The entire Russian market would thereby be isolated from the world financial system. The SWIFT (Society of Worldwide Interbank Financial Telecommunications) system includes over 10,500 banks in more than 200 countries.
Iran was the last country to be removed from SWIFT in 2012, which significantly reduced foreign trade with the country. The head of Russia’s second largest bank VTB, Andrei Kostin, stated that the removal of Russia from SWIFT would signify the ending of all ties between Russia and the United States.
EU ministers were in discussions this week whether further sanctions should be imposed and if Russia should be removed from SWIFT. Removing Russia from the SWIFT system, which is controlled by the United States, has been discussed for months as a potential last resort to bring the Putin regime into line.
However, the bourgeoisie in the EU and the US are divided over their policy towards Russia. France and Italy, and important sections of the German bourgeoisie, have warned against a further escalation of sanctions. One consideration is that Putin, who is desperately seeking a deal with Washington and Berlin, could continue to be of use to imperialism.
As the political scientist Dr. Klaus Segbers from Berlin’s Free University, who advises the government, stated at the start of December in front of a student audience, “We know exactly how we can force concessions from this regime.” It was necessary merely to cancel SWIFT, resulting in the cutting off of the entire population from financing so as to produce a regime change. “The problem is, we don’t know what will emerge after that.”

J&K: Nailing the Lies

Shujaat Bukhari

 

When 46-year-old Liaqat Shah of frontier district Kupwara in Jammu and Kashmir was arrested on March 23, 2013 at the Indo-Nepal border as a “suspected” Hizbul Mujahideen (HM) terrorist, it created a furor in Kashmir. From a commoner to the then Chief Minister Omar Abdullah, the arrest was seen as a concocted story since Liaqat was returning home from the other side of Kashmir along with his family under the rehabilitation policy. The policy, announced by the government, is for the youth who had crossed over to Pakistani side of Kashmir in early 1990s who now want to return home and live a dignified life.

Amidst resistance from the Jammu and Kashmir Police that was in loop in case of his return and pressure mounted by Omar Abdullah, the case was handed over to National Investing Agency (NIA) since people’s faith in Delhi Police has shattered over a period of time. Though Liaqat was granted bail, the investigations were taken up by NIA that finally exonerated Liaqat and recommended punishment for the policemen who had framed him as HM militant who was sent to guide a fidayeen attack in Delhi.

The NIA probe has surely raised the hope for those who have been jailed and condemned, unheard by Delhi Police’s special cell in past over two decades. It has helped to restore faith and credibility in the institution of justice. But Liaqat’s case was a unique case in which the state government took extraordinary interest in seeing that the probe is done by an elite agency such as NIA. It was perhaps about the credibility of the state itself that had unveiled the much ambitious policy for rehabilitation of youth under which more that 300 people crossed back to Kashmir through the Indo-Nepal route that is not designated as per the policy. It was an unwritten agreement between the state and Central government and facilitated duly by the government in Pakistan, that would have come under flak from extremists for draining out the strength for a “cause that needed to be seen as indigenous”. But restlessness among these youth who had been away from their families for long time was increasing and it was difficult for any government to stop them.

However, in the backdrop of Liaqat’s acquittal, the larger issue that merits a debate is how scores of innocent Kashmiris have fallen prey to machinations of certain agencies particularly Delhi Police, which has been framing the young people in false and fabricated cases. When a Kashmiri is arrested or booked in such a case outside the state, it becomes extremely difficult for him and his family to get a defence.

In a hostile environment that works under the smokescreen of so-called national interest it defeats the very logic of civil liberties. Even the lawyers are not prepared to take up the cases fearing reprisals from the agencies that are responsible for these false and concocted cases which finally fail the test of the law. We have seen in the past how a respected journalist Iftikhar Gilani was framed despite being known to the media corps of Delhi as a genuine scribe.

There are ample evidences that suggest how lives of many Kashmiri youth were ruined by the cops who went scot free. To cite a few examples : Only in October 2014, Delhi High Court acquitted Farooq Ahmad an engineer from South Kashmir after 18 years. He had been falsely implicated in Lajpat Nagar blasts of 1996.  Mushtaq Ahmad Kaloo of New Colony, Sopore, accused of conspiring to bomb New Delhi Railway Station in 2006 was acquitted of all charges by Delhi High Court in May 2013. In November 2012, Delhi High Court acquitted Mohmmad Ali Bhat and Mirza Nasir Hussain of Srinagar of all charges leveled against them in Lajpat Nagar blast case of 1996. In April 2014, a Lucknow court acquitted Gulzar Ahmad Wani of North Kashmir along with two others in a bomb blast case of 2000.

In a detailed investigative report in 2012, titled “Framed, Damned and Acquitted”, Jamia (Milia Islamia) Teachers’ Solidarity Association nailed the “lies” in 16 high profile cases and concluded that all those arrested were framed by various security agencies. Most of those framed were Kashmiris. Calling it as “proverbial tip of iceberg” the JTSA maintained that its investigation was purely based on court judgments. “We document here 16 cases in which those accused of being operatives of various terrorist organizations (Al Badr, HUJI, Lashkar-e-Toiba), arrested in main by the Special Cell of Delhi Police, were acquitted by the courts, not simply for want of evidence, but because the evidence was tampered with, and the police story was found to be unreliable and incredulous” reads the preface of 171-page report. In its demand note JTSA had asked the government to take corrective steps to arrest this growing trend.

Among other things it sought public apology from the government and the investigating agency to those who had suffered wrongful arrests, prosecution and incarceration and scrapping/disbanding of the Special Cell of Delhi Police.

Cases like that of Liaqat is an eye-opener in respect of both sides of the story. While it unravels the impunity with which the innocent youth have been framed in fabricated cases and in the manner the mechanism going without any notice so far, it also generates hope that even the sections of the system could work in bringing the justice. It is pertinent to mention that in the case of fake encounter at Pathribal in March 2000, when five Kashmiri youth were branded as foreign terrorists and burnt to death by Army in the aftermath of killing of 35 Sikhs in Chattisinghpora, the Central Bureau of Investigation (CBI) had charged five Army officers with murder. It is a different issue that they got relief from Supreme Court when the CBI’s plea for trying them in civil court was rejected.

Even as it is difficult for these acquitted young men to compensate for the lost glory of their lives, but NIA’s investigation has a potential to set a benchmark for justice in such cases. The circle can only be complete when the fabricators are punished under the law, which they tried to misuse apparently to get rewards and punishments. According to Liaqat’s statement at least 1500 families were discouraged to return after his case. This is how the systems fail when accountability is given a damn by those who think they are above law and have protection in the “national interest”.

Diesel spill in West Virginia leaves 12,000 without water

Clement Daly

About 12,000 people in southeastern West Virginia were left without drinking water after a diesel spill over the weekend. Trucks have been dispatched to provide bulk water to residents of an affected area spanning over 20 miles, from the communities of Renick to Ronceverte, including Frankford, Fairlea, and the City of Lewisburg.
A tanker truck hauling about 7,500 gallons of diesel fuel overturned late Friday night on Route 92, north of Lewisburg in Greenbrier County, West Virginia. Nearly 4,000 gallons of fuel were dumped into the soil and Anthony Creek, a tributary of the Greenbrier River, which serves as a water source for Lewisburg and surrounding areas.
Officials from the U.S. Environmental Protection Agency, the National Guard, the West Virginia Bureau of Public Health and other state and local agencies were at the scene of the accident. Cleanup operations, however, have been slowed due to inclement weather and poor road conditions.
Lewisburg officials closed the city’s water intake early Saturday morning, prior to the spill’s arrival, to prevent the contamination of the distribution system. Customers of the Lewisburg Municipal Water System were warned that the system was operating on reserves and asked to restrict water usage to critical functions. The systems and its reserves ran dry around 3 pm on Sunday.
Schools, restaurants, hotels, and other businesses were ordered closed by the health department unless they provided alternate water plans. The Greenbrier Valley Medical Center cancelled elective surgeries and procedures and has enacted water conservation measures.
The water department turned on the water intakes late Monday after the health department certified tests showing diesel at non-detectable levels. However, the distribution system, with its 135 miles of water mains, has been run dry and it is expected to take up to three days before it is re-pressurized. Residents are under a boil-water advisory for three days after water is restored.
So far no fish kills have been reported, but officials worry about the environmental impact of the spill. Anthony Creek is a popular stream for trout fishing and flows through the Monongahela National Forest before entering the Greenbrier.
Chemical spills and leaks are endemic throughout the US, threatening the health and safety of the population and the quality of the environment. Last week, 40,000 gallons of crude oil were released into the Yellowstone River in Montana from a leaking pipeline forcing some 6,000 residents to rely on bottled water for five days.
In West Virginia, thousands of chemical leaks into the state’s water are reported every year, according to the West Virginia Department of Environmental Protection (DEP). However, as the Charleston Gazette has noted, “DEP inspectors check into each report the agency gets, but the DEP doesn’t keep track of inspector findings in a way that would let anyone know how big each reported spill turned out to be—or what caused it, or whether there was any enforcement action taken, or if precautions were implemented to prevent a recurrence.”
Friday’s accident is the second fuel leak into the Greenbrier in the past year. Last July, a tanker truck carrying 7,800 gallons of diesel overturned and caught fire on a bridge in Bartow, dumping fuel directly into the river.
Just over a year ago, a chemical leak on the Elk River in the state’s capital, Charleston, poisoned the water supply for 300,000 residents after it reached the regional treatment and distribution plant intake. A state of emergency was declared in nine counties, and a ban of tap water usage remained in effect for more than a week in some areas. Hundreds of residents were treated for nausea, skin burns and eye irritation from contact with the spilled coal-cleaning agent MCHM.
Last month federal prosecutors charged the now-bankrupt Freedom Industries, the company responsible for the 2014 leak, and several of its leading executives, with violations of the Clean Water Act.
“Freedom and its officers and agents, including responsible corporate officers, failed to exercise reasonable care in its duty to operate the Etowah Facility in a safe and environmentally-sound manner, in that it failed to comply with applicable law, regulations, and guidelines; failed to follow its own internal operating procedures; and failed to conform to common industry standards for safety and environmental compliance,” the indictment claimed.
Rarely, if ever, are chemical spills and leaks simply accidents. They take place within a definite social context and are the product of neglected and often inadequate infrastructure coupled with reckless operation in the pursuit of profit.

WikiLeaks considers legal action over Google’s compliance with US search orders

Evan Blake

On Monday, lawyers for WikiLeaks announced at a press conference that they may pursue legal action against Google and the US government following revelations that the Internet company complied with Justice Department demands that it hand over communications and documents of WikiLeaks journalists.
More than two and a half years after complying with the surveillance orders, Google sent notifications to three victims of these unconstitutional searches—WikiLeaks investigations editor Sarah Harrison, organization spokesman Kristinn Hrafnsson and senior editor Joseph Farrell. The company informed WikiLeaks that that it had complied fully with “search and seizure” orders to turn over digital data, including all sent, received, draft and deleted emails, IP addresses, photographs, calendars and other personal information.
The government investigation ostensibly relates to claims of espionage, conspiracy to commit espionage, the theft or conversion of property belonging to the United States government, violation of the Computer Fraud and Abuse Act, and conspiracy, which combine to carry up to 45 years in prison. The ongoing investigation into WikiLeaks was first launched in 2010 by the Obama administration, which has so far led to the 35-year sentence for Chelsea (Bradley) Manning.
At the press conference, Hrafnsson stated, “I believe this is an attack on me as a journalist. I think this is an attack on journalism. I think this is a very serious issue that should concern all of you in here, and everybody who is working on, especially, sensitive security stories, as we have been doing as a media organization.”
Baltasar Garzon, the Legal Director for Julian Assange’s legal team, told reporters at the event, “We believe the way the documents were taken is illegal.”
On Sunday, prior to the press conference, Michael Ratner, the lead lawyer of the counsel for WikiLeaks and president emeritus at the Center for Constitutional Rights, penned a letter to Eric Schmidt, the executive chairman of Google, stating, “We are astonished and disturbed that Google waited over two and a half years to notify its subscribers that a search warrant was issued for their records.”
Google claims that they withheld this information from the three journalists due to a court-imposed gag order. A Google spokesperson told the Guardian, “Our policy is to tell people about government requests for their data, except in limited cases, like when we are gagged by a court order, which sadly happens quite frequently.”
In his letter, Ratner reminds Schmidt of a conversation he had with Julian Assange on April 19, 2011, in which Schmidt allegedly agreed to recommend that Google’s general counsel contest such a gag order were it to arise.
The letter requests that Google provide the counsel for WikiLeaks with “a list of all materials Google disclosed or provided to law enforcement in response to these search warrants,” as well as all other information relevant to the case, whether or not Google challenged the case prior to relinquishing their clients’ data, and whether Google attempted to remove the gag order at any point since they received their orders on March 22, 2012.
At the Monday press conference, Harrison noted that the government was not “going after specific things they thought could help them. What they were actually doing was blanketly going after a journalist’s personal and private email account, in the hopes that this fishing expedition would get them something to use to attack the organization and our editor-in-chief Julian Assange.”
The case, Harrison said, pointed to the “breakdown of legal processes within the US government, when it comes to dealing with WikiLeaks.”
Harrison assisted Edward Snowden for four months, shortly after his initial revelations on NSA spying in 2013, helping him leave Hong Kong. She is one of Assange’s closest collaborators, highlighting the inherent value of her personal email correspondence. Through her and her colleagues’ email accounts and other personal information, the Justice Department is seeking to manufacture a case against Assange.
Assange currently faces trumped up accusations of sexual assault in Sweden, along with the threat of extradition to the US. He has been forced to take refuge in the Ecuadorian embassy in London for over two and a half years, under round-the-clock guard by British police ready to arrest him if he steps out of the embassy.
In various media accounts, Google has postured as a crusader for democratic rights. A Google attorney, Albert Gidari, told the Washington Post that ever since a parallel 2010 order for the data of WikiLeaks’ volunteer and security researcher Jacob Appelbaum, “Google litigated up and down through the courts trying to get the orders modified so that notice could be given.”
In reality, the company serves as an integral component of, and is heavily invested in, the military-intelligence apparatus. In their 2014 “transparency report,” Google admitted to complying with 66 percent of the 32,000 data requests they received from governments worldwide during the first six months of 2014 alone, including 84 percent of those submitted by the US government, by far the largest requester.
In his book When Google Met WikiLeaks, published in September 2014, Assange detailed the company’s ties to Washington and its wide-ranging influence on geopolitics.
In a statement published by WikiLeaks, the organization noted that “The US government is claiming universal jurisdiction to apply the Espionage Act, general Conspiracy statute and the Computer Fraud and Abuse Act to journalists and publishers—a horrifying precedent for press freedoms around the world. Once an offence is alleged in relation to a journalist or their source, the whole media organisation, by the nature of its work flow, can be targeted as alleged ‘conspiracy.’”

Will the Genie Want to Go Back?

 D Suba Chandran

Ever since the horrible attack on school children in Peshawar, there have been a series of measures within Pakistan in responding to militancy. A National Plan has been prepared; military courts have been constitutionally set up to deal with the militants; groups have been banned, and recently the government has also decided to freeze the funds of the Jamaat-ud-Dawa (JuD). There is a general perception within Pakistan, that today, the nation does not differentiate between the “good” and “bad” Taliban, leading to a new paradigm involving the State, society and militants.

What is this new paradigm? While many at the civil society level are keen to put the militant genie back into the bottle, does everyone within the Establishment share the same enthusiasm? Is there a section within the political and military Establishments that sees militants in terms of good and bad?

Two more important questions on this issue relate to the capacity of the State to deal with the militants and the willingness of the jihadi groups to be rolled back. Can the State really put the genie back into the bottle? Is the genie willing to get back?

The new paradigm that the civil society is talking about in Pakistan today relates to their own resolve to fight the militants, and that of the State to combat and neutralize them. Three issues are important while discussing this new paradigm in Pakistan. Is the civil society in Pakistan against the violence perpetrated by the militant groups, or against them and their ideology in principle? Is the State’s effort aimed at completely neutralizing the jihadi groups and their ideology, or only focused on bringing them under their own control, as it existed pre-9/11? Finally, is the State capable of creating an environment - social and economic - that would be competitive and not provide any substantial space for the jihadi groups and their ideologies to influence civil society?

Is the civil society only against violence, or against the jihadis and their ideologies?
This is an important question that will have a crucial impact on the future of not only Pakistan, but also the entire region. Pressure from civil society has been one of the most crucial components in the State’s proactive response against the militant groups. How far will the civil society go in pushing the case? Will it call for the complete annihilation of these groups, their infrastructure and their ideologies? Or, will it fall short?

The Peshawar attack undoubtedly has been an important event. The society has been shaken and is angry. Rightly so. But will the same sense of anger prevail against all forms of violence perpetrated by a small fraction in the name of religion? What has been the response of the civil society to the assassination of Salman Taseer, attacks on Imambaras, Shias, Ahmadiyas, etc? Unfortunately, the same sense of anger or condemnations does not exist. And even if it exists, it does not have the same intensity that has forced the government to take proactive measures after the Peshawar attack.

In fact, the attack on school children in Peshawar in December 2014 would not have happened if such resolve existed during the last two decades, when the militant groups were on a rampage against the minority communities in Pakistan. Their ideology would not have found support had the civil society rejected the case against Ahmadiyas and the blasphemy legislations that became a tool in the hands of a select few against the minority communities.

The civil society will find it difficult to succeed in Pakistan if its fight is narrowly focused. Those who are using suicide bombs against the Sufi shrines and school children did not start abruptly. They started decades ago, supported by a section within the civil society, social organisations, political groups and parties, and finally the intelligence and military. The media, even today, perhaps unintentionally (with a section perhaps otherwise) provide the much-needed space for those who support and believe in radical ideologies.

The civil society will also not be able to succeed if it is buoyed by so much anti-West, anti-Indian and multiple other “anti” sentiments. The jihadi groups and their patrons abuse this inherent sentiment to suit their purpose. While some of these sentiments are fed by different groups within the State and vested interests to perpetuate their monopoly, the rest of them have been blown out of proportion by regular ill-informed debates at various levels. Not only in Pakistan, but in the entire South Asian region, there have been such ill-informed debates, at times carefully planted and nurtured by a select few. This vitiates the entire atmosphere and provides the space for hate and anger.

The shift in paradigm will come only when the civil society distances itself from the militant groups and their ideologies. Simply condemning violence alone will not be sufficient. A crucial first step has been taken; now the civil society has to walk the talk in Pakistan.

Is the Establishment aiming at neutralizing the jihadis and their ideology, or does it simply want to bring them under its control?
The State has taken certain crucial measures during the last two months in Pakistan, the most important being the creation of military courts to deal with terrorists, banning certain militant groups and freezing the accounts of some others.

While the State seems to be serious in neutralizing those who have been attacking it, one is not sure whether the intensity and response is the same when it comes to the Afghan Taliban, Haqqani Network and the Lashkar-e-Toiba. Though statements have been made that the distinction between good and bad Taliban now ceases to exist, actions during the last two months have created more confusion than clarity.

The State looks serious in fighting the TTP. The renewed measure as a part of its military offensive in the tribal regions and the neutralization of scores of Taliban militants belonging to the TTP clearly indicates the above.

But why is the State lukewarm in extending the same approach towards the Haqqani network and the Jamaat-ud-Dawa (JuD)? While the TTP is being hounded in the FATA, the State has only frozen the JuD’s bank accounts; Hafiz Saeed is still being provided with State security. From analysts writing for the media in Pakistan to its Supreme Court, many are confused about the State’s approach towards the JuD and Haqqani network.

So, what is the new paradigm as far as the State is concerned in fighting militancy? Is it only fighting those who have turned against it and gone rogue?

Such an approach will backfire. The Establishment seems to be fighting only the symptoms of anti-State activities, and not the reasons that have provided the space for the jihadi groups to find root in Pakistan in the first place. The real problem in this context is the long term perception of India and Afghanistan by the Establishment and the use of proxies. Unless the Establishment changes this basic perception, the larger paradigm that provides a crucial space for jihadi groups is unlikely to change.

Besides the willingness, a larger question is related to the capacity of the State in Pakistan if it decides to fight back. Unlike other States, for example Afghanistan, the capacity of the State in Pakistan has not been questioned. At least, until now. If it leaves the genie to further strengthen and gather a critical mass both inside and outside Pakistan, the question of capacity may also come into to the equation.

Militant Groups in Pakistan: Is the Genie willing to go back?
Perhaps, this is the most important question when people talk about a paradigm shift in Pakistan vis-à-visthe militant groups. True, there may have been external reasons for their emergence a few decades ago. The State may have played a role in creating and nurturing them earlier, to be its proxies to fight the former’s battle both within and outside Pakistan.
Now, there is a realization amongst a section that the above strategy has started backfiring, and there is a roll back. Will the proxies remain committed to their patrons in the changed atmosphere? Or during the process have they developed their own objectives and are fighting their own battles? Certainly the Taliban has turned back and is not willing to go down. How about the JuD and Haqqani network?

The larger problem for Pakistan will not emanate from the Master’s changed heart to put the Genie back in bottle. Rather, it will come from whether the Genie wants to go back. The situation will become worse for the rest of the region if the Genie finds the bottle small, and wants a bigger space!

US stock sell-off in response to Fed policy statement on interest rates

Barry Grey

All three major US stock indexes fell sharply Wednesday in response to the policy statement issued mid-afternoon by the Federal Reserve’s interest rate-setting Federal Open Market Committee (FOMC).
The markets had recorded modest gains prior to the release of the FOMC statement, but declined steeply after it became clear that the central bank had failed to signal a possible delay in its plans to begin raising its benchmark federal funds rate as early as June.
The Dow Jones Industrial Average dropped by 195 points, or 1.13 percent, ending the day below 17,200. The Standard & Poor’s 500 Index fell 27 points, or 1.35 percent, and the Nasdaq declined by 43 points, or 0.93 percent.
These declines followed a broad sell-off the day before, sparked by poor earnings reports and negative forecasts from a number of major companies across many economic sectors, as well as a dismal report on durable goods orders in December. Over the two days, the Dow lost 486 points.
With the soaring US dollar, slumping global demand and plummeting oil prices beginning to seriously impact the sales and profits of major US firms, the Fed has come under increasing pressure from Wall Street to delay any rate hike until the final months of this year or some time in 2016.
So far this week, Microsoft, Caterpillar, Procter & Gamble, DuPont, United Technologies, Pfizer and a number of other large firms have reported major declines in fourth-quarter earnings and/or sharply reduced forecasts for 2015, attributing the negative results at least in part to the impact of the steady rise in the US currency on their exports and overseas operations.
On Tuesday, Microsoft’s stock fell 9 percent, wiping out nearly $35 billion in the company’s market value. Caterpillar stock declined 7 percent.
“The rising dollar will not be good for US manufacturing or the US economy,” Doug Oberhelman, chief executive of Caterpillar, told analysts on Tuesday.
The consumer goods giant Procter & Gamble said it had been hit by the “most significant fiscal year currency impact” in its 178-year history.
The Fed’s plan, announced over a year ago, to begin raising rates from the near-zero level that has prevailed since shortly after the September 2008 financial crash, has been complicated by deflationary tendencies in Japan, Europe and the US itself, and a general slowdown in the world economy. The response of central banks and governments has been to devalue their currencies in an attempt to export the slump to the US.
Last week, the European Central Bank launched a “quantitative easing” plan to purchase 1.1 trillion euros worth of bonds by 2016, diluting the value of the euro against the dollar and other major currencies. On Tuesday, Singapore became the ninth country this month to take action to push down the value of its currency. The others, besides the euro zone, include Denmark, Turkey, India and Canada.
Since June 30, the US dollar has risen 17.7 percent against a basket of international currencies. It has increased by 9 percent over the last three months alone.
Plummeting oil and other commodity prices (oil is down by 57 percent since June), a symptom of stagnating and even negative growth from China and Japan to Europe and much of Latin America, have contributed to extremely low inflation in the US. This is despite headline figures on employment and the gross domestic product that point to relatively solid growth in the US economy.
An index of prices Americans pay for goods and services rose just 0.8 percent during the 12 months ending in December. This is the slowest pace during a period of economic growth in half a century. And on Tuesday, the Commerce Department reported that US durable goods orders fell by 3.4 percent in December, the fourth consecutive monthly decline. The department also reported that US firms broadly cut capital spending in the final three months of 2014.
Under these conditions, the Fed’s announced intention to begin raising rates as early as June, while central banks in the rest of the world are lowering rates or printing huge amounts of currency, tends to push the dollar even higher and heighten deflationary tendencies within the US. Already a number of American firms whose exports are being impacted by the rising dollar are preparing to cut costs and shed jobs. On Wednesday, reports emerged that IBM was preparing a massive layoff.
The Fed pioneered the policies of near-zero interest rates and “quantitative easing” to pump virtually free cash into the banking system and rescue the financial elite. Now, it is trying to wean the US banks and hedge funds off of the narcotic of endless central bank subsidies and restore a more normal interest rate regimen. But it is confronting increasing resistance from Wall Street and major US corporations.
In its statement Wednesday, the Fed hailed the “solid pace” of US economic growth and what it called “strong job gains and a lower unemployment rate.” It did not mention that most of the new jobs are low-paying and many are part-time or temporary. Nor did it note that much of the fall in the official jobless rate is the result of the exit of millions of long-term unemployed workers from the labor market.
The FOMC made clear that the Fed would not raise interest rates at either of its two meetings prior to June—one in March and one in April. It reiterated previous assurances that its timetable for raising rates would depend on economic conditions, that it was not wedded to a definite date, and that it would increase rates only gradually and keep them abnormally low for “some time.”
However, it called the low inflation rate and falling oil prices “transitory” phenomena and said inflation in the US would begin to climb in the mid-term toward the Fed’s target rate of 2.0 percent. Wall Street investors and speculators had been hoping for language suggesting that the deflationary trends might cause the bank to hold off on raising US rates.
At last week’s World Economic Forum in Davos, Switzerland, the divisions within the American and international bourgeoisie over Fed policy emerged in the open. Former US treasury secretary and Obama administration economic adviser Lawrence Summers warned that an early initiation of monetary tightening by the Fed could trigger a full-scale recession, if not depression, in the US and beyond.
“Deflation and secular stagnation [i.e., indefinite recession] are the threats of our time,” Summers, one of the architects of bank deregulation in the US, told a Bloomberg forum.
William White, former chief economist at the Bank for International Settlements, gave vent to his fears over the state of the world economy in an interview with the Daily Telegraph on the eve of the Davos gathering. “We are in a world that is dangerously unanchored,” he said. “We’re seeing true currency wars and everybody is doing it, and I have no idea where this is going to end.”
This week’s developments show that Fed policy is becoming increasingly entangled in the international net of intractable crisis and economic nationalism fueled by its own parasitic efforts to bail out the American ruling class.