Australian government budget sets stage for volatile federal election

James Cogan

The Coalition government headed by Prime Minister Malcolm Turnbull brought down its 2016–2017 financial year budget last night, laying out the campaign slogans and agenda it will take to the federal election due to be called in the next week. Polling day is almost certain to be set for Saturday, July 2.

In his speech to the federal parliament, Treasurer Scott Morrison claimed that the first Turnbull budget was an “economic plan for jobs and growth.” The government’s estimates of revenue, however, are based on fanciful predictions of growth as the global economic downturn deepens.

Morrison declared the country was making a “transition” from an “unprecedented mining investment boom”—largely based on high-priced, large volume resource exports to China—to a “new economy” driven by an “ideas’ boom.” The Treasury department predicted that economic growth in Australia would increase from 2.5 percent over the coming 12 months, to 3 percent during each of the following financial years to 2020–2021.

The absurdity of such figures was demonstrated even before Morrison rose to his feet to deliver the speech. Just hours earlier, in a virtual vote of no confidence in government policies, the Reserve Bank of Australia cut its base interest rate to a historic low of 1.75 percent. This action was taken in response to data revealing that Australia has joined numerous other countries by slumping into deflation, with a fall of 0.2 percent in the consumer price index in the first three months of the year. Further interest cuts are expected, with the RBA warning that global growth estimates had been downgraded again and highlighting the continuing slowdown in China, Australia’s largest export market and trading partner.

Even as Treasury provided Morrison with predictions of sustained growth for the next five years, it was compelled to note falls of more than 25 percent in mining investment in 2015–16 and 2016–17. Since the peak of the mining boom in 2010–2011, the price for major Australian mining exports, such as iron ore and coal, have fallen as much as two-thirds, plunging the balance of trade into large deficits. The budget paper observed: “Low inflation, low wage growth and low productivity growth being experienced in many advanced economies could become embedded in lower growth potential over time.”

The vice president of global credit rating agency Moody’s, Marie Diron, poured cold water on the government’s budget forecasts. She declared: “We estimate that the adjustment to an environment of lower commodity prices is still underway and will continue to weigh on corporate profitability and wage growth. As a result, improvements in the government’s revenues may be somewhat more muted than currently budgeted.”

The reality of Australian capitalism is that further global shocks could send it over the economic precipice, triggering a collapse in the speculative real estate bubble that has been largely responsible for what growth has taken place. The country’s major banks are highly exposed to an increase in corporate bankruptcies and household debt defaults, caused by falling property prices and rising unemployment.

The fiction that Australia will return to growth regardless of the state of the global economy enabled Morrison to announce a return to budget surpluses from massive budget deficits sometime in the early 2020s—without announcing austerity measures on the scale imposed in the US and Europe. The budget is, nevertheless, predicated upon ongoing and draconian cutbacks to the living standards and social rights of the working class, in order to finance three key measures: the ramping up of military spending, spelled out in the January Defence White Paper, the reduction of the corporate tax rate and small tax reductions for the highest income earners.

The military budget rises by 3.1 percent to $32.3 billion. This is the first increment in increases that will see $195 billion spent over the next decade on the acquisition of new warships, aircraft and submarines, as part of the US-led war preparations against China. Australia’s military deployments in Afghanistan, Syria and Iraq have been funded for the next 12 months to the tune of $686 million.

The corporate tax cuts begin for small-to-medium businesses with turnovers of less than $10 million. Their tax rate will fall from July 1 to 27.5 percent, from the current 28.5 percent. Over the following decade, the rate for all companies, large and small, will be reduced to 25 percent. At the same time, the income threshold at which individuals begin paying 37 percent tax on their income will rise from $80,000 to $87,000—an amount earned by less than 25 percent of tax payers. The main beneficiaries will be the top 3–4 percent, who pay 45 cents in the dollar on income earned over $180,000. They will also gain from the elimination of a temporary 2 percent tax increase that was introduced in 2014.

The hand-outs to business and the wealthy will lower revenue by $9.25 billion over four years. The expansion of military expenditure will cost billions more. It will be paid through the ongoing war against the working class, conducted by successive Labor and Coalition governments since the 1980s, leaving millions in financial stress or outright poverty.

Among the most brutal measures are:

* 30,000 unemployed young people aged under 25 will be pushed each year into a “voluntary” cheap labour scheme that enables private businesses to employ them as government-subsidised “interns.”

* Subsidies to aged care providers for complex health services will be cut by $1.2 billion over four years. Incentives for pathology and radiology providers to “bulk-bill,” rather than charge clients up-front for services, will be axed, saving more than $600 million.

* 90,000 disability support pensioners will be subjected to eligibility requirements, forcing at least 30,000 onto the unemployment benefit, which pays $130 less per week. All new aged pension and welfare applicants will receive 1.7 percent less than the current already below-poverty-line payments, by denying them the so-called compensation handed out in 2011 for the former Labor government’s now defunct tax on carbon emissions. The savings will be directed into financing the National Disability Insurance Scheme (NDIS), which was launched by Labor in 2012 with the primary aim of privatising disability services and driving disabled people into the workforce.

* Government departments will have to find “efficiency” savings of $1.9 billion, leading to thousands of public sector job losses, on top of more than 10,000 redundancies since 2013. Entire areas of the public sector are being prepared for privatisation as part of the NDIS and the contracting out of Medicare payment services.

* Tens of billions of dollars in funding, cut in 2014 from grants to state governments to finance public health and education, have not been reinstated. In response, the Australian Medical Association declared that the health system faced a “funding black hole.” The federal government has handed to the states the task of imposing deeper cutbacks to already vastly underfunded and increasingly dysfunctional public health and education services. While plans to de-regulate university fees have been shelved for the time being, funding to universities will be cut by 20 percent over the coming years.

* If re-elected, the Turnbull government will resubmit legislation that was blocked in the Senate in 2014 and 2015 and which, if passed, will inflict over $13 billion in welfare cuts. These will affect the poorest sections of society. The measures include changes to family tax benefit eligibility, reductions in pharmaceutical benefits, a one-month waiting period for young people to access income support, and raising from 24 to 25 the age at which individuals can qualify for the higher Newstart unemployment benefit, rather than the Youth Allowance. The Coalition will also attempt to push through an increase in the aged pension eligibility age from 67 to 70, for all citizens born after 1965.

In an attempt to deflect populist accusations by the opposition Labor Party and the Greens, to the effect that its budget favoured the rich and the major corporations, the Turnbull government introduced changes to various concessions that have enabled the wealthiest individuals to avoid tax by directing income into their superannuation (private retirement) funds. It also announced a crackdown on multi-national tax evasion, modelled on the “Google tax” introduced by the Cameron government in the UK.

As the details and implications of the budget measures filter out, however, a groundswell of condemnation is already developing over the raft of attacks on the working class and poor.

The upshot is that the first-term Coalition government, which was already facing likely defeat, will enter an election campaign reviled by millions of ordinary people while, at the same time, facing criticism from the most rapacious layers of the financial and corporate elites for failing to impose savage austerity cuts. The editorial of the Australian Financial Review today declared, “this is not the budget that Australia could have had or should have had,” and lambasted Turnbull and Morrison for taking major spending cuts “off the table until after the election.”

The stage has been set for an election campaign marked by tremendous tension and volatility, above all due to the ongoing crisis and breakdown of the two party-dominated parliamentary system, which has provided Australian capitalism with relative stability for well over a century.

Poverty grows, health declines among UK children

Margot Miller

“Fairness for Children,” a report by UNICEF, reveals the income disparities that exist in the 41 richest countries and the devastating impact of inequality.

Its “report card 13” reports on how far the bottom 10 percent of children have fallen below their peers in the middle of the distribution, and ranks the 41 countries in its remit accordingly.

The report makes a comparative measure of “bottom-end inequality,” in income, educational achievement and health and happiness, to see how far children in the bottom percentile have been allowed to slip behind their peers since the financial crash of 2008. Bottom-end income inequality increased between 2008 and 2013 in half of the richest countries, worsening the health, educational outcomes and life chances of children.

Children in the UK fare particularly badly. In terms of inequality in education, UK children rank 25th out of 37 countries. This is measured by how children score in the international Programme for International Student Assessment (PISA) tests in reading, maths and science at age 15. Only 12 other countries in the study do worse by their poorest children in terms of educational achievement. The UK ranks after Poland, Romania and Slovenia. Eleven percent of UK children perform below PISA proficiency level 2.

The research underlines the abject failure of the relentless exam and target-led reforms implemented by successive UK governments.

This inequality gap in educational achievement is highlighted by UK government statistics from the Evaluation Office Agency. In areas in the north of England, such as Stockport, Trafford and Warrington, just 1 in 20 schools deemed outstanding by the government watchdog Ofsted serve lower-income areas. Nor can poorer families afford to move to the catchment areas where the more “desirable” (based on exam results) schools are.

In any case, as report card 13 reveals, educational achievement, even if measured by the narrow prism of tests, correlates with income inequality and deprivation. Finland, which has one of the lowest gaps in income inequality, also has one of the lowest proportions of 15-year-olds falling below the Pisa level 2 proficiency level.

In terms of overall health between the bottom 10 percent and the average, the UK ranks most unequal in terms of the consumption of fresh fruit and vegetables and has one of the largest gaps in the amount of physical activity children take. The latter is no doubt a consequence of the selling off by governments of school playing fields to developers, combined with the squeezing out of sports from the school curriculum in favour of the “three Rs” (reading, writing and arithmetic).

UNICEF deputy executive director for the UK Lily Caprani observed that “more of our children are at risk of becoming overweight and obese.” Though all key stage 1 children (up to seven years old) are now entitled to a free school lunch, meals are provided by private companies whose priorities are not healthy eating but profit making.

Nor does this growing epidemic of obesity in children conflict with more and more children turning up at school hungry or being underweight. Malnutrition may present itself in the form of obesity, as the poor can only afford cheaper processed foods, laden with fats and sugar and depleted of essential vitamins.

A report undertaken on behalf of the All Party Parliamentary Group on Hunger revealed that one in five children in some UK primary schools start their first and final years underweight, a “shock increase” of 15 percent “in an age of rampart child obesity.”

Data collected for the House of Commons Library for 2011 pointed to half a million under-fives who were anaemic, the highest level in 20 years. The number of pregnant mothers with anaemia is on the rise, while an increasing number of people admitted to hospital in an emergency are found to be suffering from malnutrition.

In terms of income inequality between children living in the poorest households and the average, the UK does not rank as low as some other countries, coming seventh out of 41. A government spokesman boasted that “there are now three hundred thousand fewer children in poverty” in the UK.

Closer inspection reveals a less rosy picture. Child poverty is measured as the percentage of children in households with incomes below 50 percent of the national median income. However, median income has fallen because of the decline in wages of those in the middle. This means that though the gap between the lowest and median income is smaller, this does not indicate that the poor are any less poor in real terms.

Without what the report calls “social transfers” (welfare benefits and progressive taxes) the UK would rank among the bottom of the countries in the study. And it is these that are under ferocious attack by the Conservative government. Cuts to working and non-working benefits since 2013 and the introduction of Universal Credit are projected to increase child poverty by 50 percent by 2020, according to the Institute for Fiscal Studies.

Alison Garnham, chief executive of the Child Poverty Action Group, reiterates the point that removing the UK social security system benefits will expose children to the worse ravages of poverty “by the end of the parliament.”

In relation to the introduction of Universal Credit, which combines six benefits into one, Labour’s shadow welfare and pensions secretary, Owen Smith, said this will leave “a working single mother £3,000 a year worse off,” and “over two million working families will lose an average of £1,600 per year, driving up child poverty.”

Notwithstanding these comments, Labour is as committed to austerity as the Tories. Shadow Chancellor John McDonnell has pledged that Labour would operate under a “fiscal credibility rule” and “commit to always eliminating the deficit on current spending in five years.”

The government is attempting to remove tax credits from the working poor. Iain Duncan Smith, the former secretary of state for work and pensions, who was also the architect of the hated “Bedroom Tax,” announced that the Tories would move to repeal the 2010 Child Poverty Act. Cuts to tax credits were incompatible with the targets outlined in the act to eradicate child poverty by 2020.

Duncan Smith spearheaded an attempt by the government to redefine the poverty level, to factor in family breakdown, debt and drug addiction, for example, and shift away from the present definition of families existing at 60 percent of the median income. The purpose is to stigmatise the poor and shift the blame for poverty away from the capitalist class and its governmental representatives.

These attacks follow unprecedented cuts, carried out by successive Labour and Conservative governments since 2008, with local authorities enforcing a reduction of spending on children and young people by £2 billion, or 71 percent.

The UNICEF report card ends with appeals to governments to alleviate child poverty by creating more employment opportunities, through progressive taxation and effective service provision. But the eradication of child poverty, along with the other scourges of austerity and war, will only end when the working class puts an end to capitalism.

May Day 2016 and the future of socialism

Joseph Kishore

On Sunday, May 1, the International Committee of the Fourth International’s third annual International May Day Online Rally attracted broad participation from workers and youth throughout the world. It was the only international event that presented to the working class a genuinely Marxist and socialist perspective in response to the spreading wave of imperialist violence that threatens the very future of humanity.

The rally was an expression of a significant growth in the political influence of the ICFI. The meeting was accessed by nearly 2,500 people, an increase of more than 40 percent over 2015. The number of countries where there were listeners increased from about 80 to 98. The size of the audience was also reflected in the large number of comments, nearly 750, submitted by listeners.

The response confirms other signs indicative of the growing political influence of the World Socialist Web Site. In February and March, according to Compete.com, the total number of individual users who accessed the site was close to a quarter million, significantly higher than the previous year.

Underlying this growth are significant objective factors. First, the past year was characterized by an enormous intensification of geopolitical conflict and a growing concern among workers and youth internationally over the danger of war. The “war on terror,” which is approaching its 15th anniversary, is developing into a global battle between major powers, centered on the increasingly provocative efforts by the US to economically and militarily encircle Russia and China. The possibility of nuclear war is once again being openly discussed by government officials and geopolitical strategists.

Second, the lasting impact of the 2008 economic crisis and the subsequent restructuring of class relations is finding expression in a growth of social militancy that is acquiring a political dimension. In the United States, the center of world imperialism, the past year has been dominated politically by an election campaign that has seen a collapse in the authority of the old political parties and their traditional representatives. As David North, chairman of the WSWS International Editorial Board, noted in his opening report to the rally:

There are many signs of a growing anti-capitalist political radicalization of the working class and youth throughout the world. Perhaps the most significant is the fact that millions of American workers, in the recent series of primary elections, cast their vote for a candidate who had identified himself as a socialist. Of course, the “socialism” of Bernie Sanders is little more than warmed over liberalism. But Sanders attracted support not because of his political opportunism, but because he was perceived by workers to be advancing, to use his own words, a “political revolution” against social inequality.

Class struggle is emerging as a dominant factor in the political situation in every country. Over the past year, hundreds of thousands of workers and youth in France participated in protests against right-wing labor reforms and an anti-democratic “state of emergency” imposed by the Socialist Party government. Autoworkers in China and India have launched strikes against attacks on wages and working conditions. Throughout Europe, there is deep opposition to relentless austerity dictated by the banks.

Another element in the growth of the influence of the International Committee is the increasingly clear differentiation between genuine Marxism and the politics of organizations that claim to be “left,” but in fact represent the interests of more privileged sections of the middle class. In Greece, Syriza rose to power in January of last year and rapidly repudiated all of its election promises. By the end of 2015, the “Coalition of the Radical Left” was implementing EU-backed austerity while serving as a front-line police force in the brutal attack on refugees throughout the continent. Based on the analysis of the WSWS, a section of workers and youth are beginning to draw conclusions from this experience.

There is still a vast gulf between the level of political consciousness and the dangers that confront the working class. The rally had an audience in the thousands, not yet in the hundreds of thousands or the millions. However, bigger numbers will come. The growing readership of the WSWS and the response to the May Day rally anticipate a much broader turn of workers throughout the world to genuine socialist politics.

Here, the question of political leadership is decisive. A socialist revolution develops out of the interaction between the objective movement of the working class and the intervention of the revolutionary party.

The most remarkable feature of the May Day rally was the unified and politically coherent perspective advanced by all of the speakers. Leaders of the ICFI from the US, UK, Germany, Sri Lanka and Australia delivered speeches (to be published on the WSWS over the next week) on some of the most important political issues confronting the international working class, including the consequences of a quarter century of virtually ceaseless war; the impact of the Obama administration’s “pivot to Asia” on India, Australia and the entire Pacific region; the growth of German militarism, the crisis in Europe and the imperialist campaign against Russia; the Brexit campaign in the UK; the refugee crisis in Europe, the Middle East and North Africa; the consequences of US-China tensions for Latin America, and the political crisis in the United States.

The fight to unify the working class of all countries and build a political leadership for the emerging struggles against war, social inequality and the assault on democratic rights was a dominant theme in all the speeches. As Wije Dias, general secretary of the Socialist Equality Party in Sri Lanka, argued in his remarks, “The crucial question is to arm the incipient rebellion of workers around the world with a program and perspective that articulates their objective interests as a global class and protagonist of a new social order, free of want and war.”

The ICFI proceeds with an immense degree of revolutionary optimism. The capitalist crisis produces not only war, it produces as well the conditions for socialist revolution. As David North put it in analyzing the political situation in the United States, “The basic narrative of American political exceptionalism—that the working class will never turn to socialism in the United States—has been refuted in practice. A new chapter in the history of the American class struggle is beginning. Socialism, suppressed for so long in the United States, is entering a period of explosive growth.”

This has the most far-reaching international implications. The growing support for socialism will develop not as a national, but as a global process.

One historical period is coming to an end and a new period is beginning. The quarter century of political confusion and disorientation created by Stalinism and the dissolution of the Soviet Union, along with the right-wing shift of “left” politics, is giving way to a period of political radicalization and struggle.

The May Day rally was a significant event in the history of the ICFI and the fight to build an international movement of the working class and youth against imperialist war and the capitalist system. We record in the May Day rally this important milestone, while also recognizing the immense challenges ahead.

Is the US Economy Heading for Recession?

Jack Rasmus

This past week the U.S. government announced the country’s economy rose in the January-March 2016 at a mere 0.5 percent annual growth rate. Since the U.S., unlike other countries, estimates its GDP based on annual rates, that means for the first quarter 2016 the U.S. economy grew by barely 0.1 percent over the previous quarter in late 2015.

Growth this slow indicates the US economy may have “slipped into ‘stall speed’, that is, growth so weak that the economy loses enough momentum and slides into recession”, according to economists at JPMorgan Chase.

Has the U.S. economy therefore come to a halt the past three months? If so, what are the consequences for a global economy already progressively slowing?  What will an apparently stagnating US economy mean for Japan, already experiencing its fifth recession since 2008? For Europe, stuck in a long term chronic stagnation? And for emerging market economies, struggling with collapsing commodity prices and currencies, rising unemployment, and long term capital flight trends? Once heralded as the only bright spot in the global economy, the US economy now appears to have joined the slowing global trend.

Some Interesting Trends

Last quarter’s 0.5 percent U.S. GDP may indicate the nation’s economy is even weaker than it appears. The economy of the United States’ recent 0.5 percent growth rate is the latest in a steady declining U.S. GDP growth trend over the past year. In the previous fourth quarter 2015, the US economy grew 1.4 percent, which was down from the preceding quarter’s growth of 2 percent and before that 3.9 percent.  So the U.S. economy appears to be slowing rapidly over the past year.

Over an even longer period of more than eight years, since the previous peak growth in late 2007, the U.S. economy has grown by a cumulative total of only 10.1 percent.  That’s a paltry annual growth of only 1.2 percent a year on average for the past 8+ years.

But even those figures are overestimated. In 2013, the U.S. redefined the way it estimated GDP, adding categories like R&D expenses and other intangibles that artificially boosted U.S. GDP estimates simply by redefining it.  That “economic growth by redefinition” raised GDP by around 0.3 percent annually, and in dollar terms by roughly US$500 billion annually.  So the real U.S. GDP may be actually growing by less than 1 percent on average per year since 2007; and during the most recent quarter, January-March 2016, the economy may not have grown at all, but may have stagnated, collapse, and come to a halt.

Behind the Wizard’s Curtain

The media and press like to define recessions as two consecutive quarters of negative GDP growth. Actually, U.S. economists tasked with declaring when a recession has begun or has ended don’t rely totally on GDP estimates, which are notoriously inaccurate and have become increasingly so, given U.S. and other governments’ penchant for changing how they define GDP.

Redefining GDP to boost the appearance of growth is not just a problem in the US in recent years.  For example, there are few independent research sources that think China is growing at its officially announced 6.8 percent GDP rate. To note but a couple, both Capital Economics and Lombard Street research estimate that China’s GDP is growing at only around 4-4.5 percent based on close examination of other indicators like electricity usage, power generation, local transport volumes, and so forth.   In recent years India officially nearly doubled its GDP overnight by redefining it. So did Nigeria.  India bank researchers, whom this writer has talked to, say they have a rule of thumb: take the official government GDP rate and half it and that’s probably close to India’s actual GDP. In Europe, a number of economies, including Britain, which have been desperate to raise their GDP in recent years, now include drug smuggling and prostitution services in their estimates of GDP. How they come up with such estimates and the pricing of such services is, of course, interesting.

Not satisfied with the media-press definition of a recession as two consecutive quarters of negative GDP, US economists at the National Bureau of Economic Research, who are tasked with declaring the beginning and end of a recession, look at various economic indicators — like industrial production, retail sales, exports-import trends, and other sources. A recession may occur in just one quarter; or may require more than two.

Looking at these other indicators for this past January-March 2016 period, the US economy appears even more likely headed for a recession and sooner rather than later.

US industrial production (manufacturing, mining and utilities) declined at an annual rate of -2.2 percent this past quarter, after having declined -3.3 percent the preceding quarter. Industrial production has fallen six of the last seven months. US industrial capacity is now at its lowest point since 2010.

Business investment is another trouble spot. Investment in business structures fell by -10.7 percent and investment in new equipment by -8.6 percent, the latter the biggest drop since the 2007-09 recession.  Business inventories rose barely, by the smallest amount in two years, continuing a slowing trend of the past nine months.

And what about consumption, which constitutes about two thirds of the total US economy? US consumer spending has been growing at an average monthly rate of only 0.1 percent. Retail sales, the largest element of consumer spending, has fallen every month on average during the quarter.  After having sustained retail sales in previous years, auto sales, a large component of retail sales, declined for the second consecutive quarter during the January-March period.  The outlook for U.S. consumer spending recovery is also not too bright.  A recent Gallup poll reported that 60 percent of those interviewed indicated the U.S. economy was “getting worse.”  Reflecting the poor demand for consumer goods, U.S. consumer prices now hover on the brink of deflation, falling at an average monthly rate of -0.1 percent for the quarter.

Exports are declining, residential housing construction recently plummeted. In other words, not many of the economic indicators that comprise GDP show a promising picture. GDP should probably be even lower than the recently reported 0.5 percent annual and 0.1 percent quarter to quarter growth rates.  The U.S. economy has obviously “stalled.” But it’s not the first time. In fact, it’s the fifth time it has since the official end of the last recession in June 2009.

What’s a Relapse?

The performance of the US economy this past January-March, a trend that appears is continuing into April, represents what this writer has called an ‘economic relapse’. A relapse is a collapse of economic growth for a single quarter, to near zero or even negative growth.

The U.S. economy has experienced now five such single quarter relapses since the 2007-09 recession was officially declared over.  The economy collapsed to 0.1 percent in early 2011, to 0.2 percent in late 2012, declined again by -2.2 percent in 2014 and collapsed to 0.2 percent in 2015.

Relapses are the consequence of “epic” recessions such as occurred in 2007-09, which are typically characterized by short, shallow recoveries that slip repeatedly into periodic bouts of renewed stagnation.  They are the result of near total reliance on central bank monetary policies that are designed to boost stock, bond and other financial markets — and thus the incomes of rich investors — but which fail to generate a sustained real economic recovery.  Fiscal policies designed to stimulate consumption and good paying jobs are rejected. That almost perfectly describes U.S. economic policy the past eight years.

Politicians Wearing Rose-Colored Glasses

Despite the facts, U.S. government politicians and Federal Reserve bank officials continue to run around declaring that the U.S. economy is performing well. They like to cite the 200,000 jobs allegedly created in recent months. But a closer examination shows the jobs being created are part time, temp, contract, low paid, no benefit service jobs. Jobs that generate no overall wage increase for the economy and no real income gains for working people.

Young workers 30 years old or less are especially hard hit by this “‘well performing US economy.” A recent study by the Center for American Progress, for example, showed that 30 year old workers earn today the same pay, adjusted for inflation, that 30 year olds earned back in 1984.

Despite all that, President Obama continues to tour the country complaining that he doesn’t get enough credit for bringing the US back from the worst recession since the 1930s depression.  He should tell that to the millions of millennial young workers, with low paid crappy service jobs, with no medical insurance, having to live at home with relatives because they can’t afford to rent an apartment, loaded with debt and with no prospects for meaningful change on the horizon.  No wonder they’re rallying around Bernie Sanders, who continues to capture 85 percent of their votes in the presidential primaries.  Obama (and Hillary) will have a hard time convincing them “all is well” — and an even harder time getting them to vote Democrat in the coming election in November.

The Calm Before the Coming Global Storm

Pepe Escobar

Major turbulence seems to be the name of the game in 2016. Yet the current turbulence may be interpreted as the calm before the next, devastating geopolitical/financial storm. Let’s review the current state of play via the dilemmas afflicting the House of Saud, the EU and BRICS members Russia, Brazil and China.

Oil and the House of Saud

Not many people are familiar with the Baltic Dry Index. Yet the Index is key to track commodity demand. Two months ago, it was trading to all-time lows. Since then, it has increased over 130%. Precious metals prices have all moved higher in virtually all currencies. Why is this important? Because it tells us that faith in fiat currencies – the US dollar especially – is sharply declining.

The Baltic Index rise portends a rise in oil demand in Asia – especially China. Falling supply and rising demand for oil will likely drive up the price of the barrel of oil in the second half of 2016.

That does not mean that the House of Saud will win back the trust of both the US and Russia. Deep sources keep confirming that as far as Washington and Moscow are concerned, the House of Saud is expendable. Both are really energy independent (should the US want to be). Powerful Washington factions blatantly accuse Riyadh of “terror” – well, it’s way more complicated – while Moscow regards the House of Saud as following US orders to destroy Russia in an oil price war.

Ailing – on the way to dementia – King Salman and young Warrior Prince Mohammed would be finished if those famous 28 pages about 9/11 were released and the Saudi connection is incontrovertible. What next? Regime change. A CIA coup. A “trusted” Saudi military CIA asset elevated to power.

What’s left for the House of Saud is to play for time. High up in Riyadh the feeling is that relations with Washington won’t improve while Obama is president; the next president – whether Hillary or The Donald – will be a much better deal. So Plan A for now is to keep posing as essential to Washington in the “war on terra”; that means King Salman falling back on Mohammed bin Nayef, the Crown Prince, way more adept at it than the Warrior Prince, the conductor of the disastrous war on Yemen.

In parallel, Turkey’s Sultan Erdogan keeps advancing his play to take over oil in Iraqi Kurdistan, eventually diverting the whole supply to make Turkey energy independent – and thus a regional superpower. Moreover, in Pipelineistan terms, Erdogan absolutely also needs the Qatar gas pipeline through Saudi Arabia and Syria to gain energy independence from Russia. That also happens to be a major US goal. And that also portends perennial trouble for the Syria peace process.

Erdogan already has the German superpower at his feet in the shape of a groveling, begging Chancellor Merkel. Were Turkey on its way to become an energy power, Merkel would prostrate herself on that Ankara palace golden ground non-stop. The CIA intimates as much, when it analyzes how Turkey will keep “expanding its influence” in Iraq through the militias they support, at the expense of Iraq’s security and political unity.

Andrew Bacevich’s America’s War for the Greater Middle East examines how Washington ruled that “military preponderance” across the Middle East should be the strategic objective in a war against the USSR – that was when Dr. Zbig “Grand Chessboard” Brzezinski reigned as geopolitical supremo. This was always supposed to be an endless war – now encompassing the “Greater Middle East” the neocons are so fond of.

Russia, Brazil and Hybrid War

Russia’s largest commodity exchange is actively courting international oil traders to join its emerging futures market. The goals are crystal clear; to disconnect the price-setting mechanism from the Brent oil benchmark and, crucially, to move away from the petrodollar. That also happens to be a key condition imposed by Beijing to the House of Saud for continuing to buy their oil.

It’s easy to forget that it was only 20 years ago that Moscow wanted to join the West as Christians, and was treated like trash. Russia was perceived in the Beltway to be weak under Yeltsin, who let in looters who ate up Russia as locusts, collapsing Russia’s GDP by 40% as they drew out natural resources, absconding with at least a trillion US dollars.

Now Exceptionalistan keeps updating every trick in the book to destroy or at least undermine Russia with Maidan in Ukraine, an oil price war, attacks on the ruble, Syrian pipelines. Hybrid, unconventional warfare rules – and these will only get nastier. The BRICS as a whole are under siege. The Brazilian http://www.globalresearch.ca/the-constitutional-coup-color-revolutiontwo-step-regime-change-in-brazil/5521883 color revolution, set up as a soft regime change process, is just the first stage in a new, sophisticated Hybrid War strategy bound to be studied in academia for decades.

As oil demand soars and supply contracts, Hybrid War practitioners across the spectrum will have to create a recession to keep the chaos going. A possible scenario is to let the embattled Italian banking system go down; that’s the next frontier in the EU.

Walking Dead Europe, meanwhile, subcontracted and/or externalized a policy of refugee repression, thus unleashing the largest mass deportation since WWII, complete with camps financed by EU taxpayers and managed by the Great Democrat Erdogan. The missing link is now in the open; everything is proceeding under control of  NATO-linked think tanks.

As appalling as it may be, this is hardly new. It was already inbuilt in agreements that the EU imposes on African nations, “upgrading” their status to border Cerberuses. That’s the key mission of the Frontex agency, which is progressively delocalizing the external borders of the EU – to the east and to the south – to better repel migrants. Not a dot connected to NATO’s neo-imperial wars of choice, of course.

No wonder Noam Chomsky has noted that support for formal democracy in the West is dwindling, because they are not real democracies. All major decisions affecting the EU are taken by unelected eurocrats in Brussels. In a groundbreaking book published in Spain, Mercado-Estado-Carcel en la Democracia Neoliberal Espanola (Anthropos), Daniel Jimenez, doctor in Juridical Sociology at the University of Zaragoza, details how the new institutional local order is about de-democratization, denationalization and dependency; NATO, IMF, World Bank, the Paris club, BCE, the European Commission, the Fed, they are part of a global web of institutions, private but self-described as public or public but managed by private interests (such as the Fed). Michael Hudson, among others, has detailed how the EU never developed sustained mechanisms of transfer of capital from the wealthier economies towards poorer members.

I’m a mess without my China fix

Sophisticated Hybrid War-derived techniques may have been deployed full blast against Russia and Brazil. But against China, everything fizzles.

Exceptionalistan’s spin is that China is not as economically secure as it seems. So global public opinion is bombarded by the usual litany of “convulsions in its financial markets”, “investor risk aversion”, “volatility”, or an inevitable crash.

Nonsense. The leadership in Beijing has its strategic imperatives fully delineated in the latest Five-Year-Plan. It will pump whatever amount of credit into the system whenever it takes. It won’t depreciate the yuan – no matter how loud Washington/New York complain. A yuan devaluation would sink an array of Chinese firms loaded up on US dollar debt. Moreover, Beijing is tweaking its system, a carefully calibrated transition from an export-driven model to one geared toward consumption by the internal market. A strong yuan preserves the purchasing power of tens of millions of members of the New Chinese Middle Class – all of them upwardly mobile, and all of them asset owners.

According to the US Treasury, only about $1.2 trillion in liquid securities is in Chinese hands. And that will keep diminishing, fast – as China keeps buying gold. And to top it off, China has already turned its economy around. That brings us back to that dramatic increase in the Baltic Index. Oil prices are rising. And China is buying the whole lot.

Beijing is advancing on all fronts; spreading influence/commercial deals all across Eurasia, which the New Silk Roads will shape into a mass emporium; modernizing its military; buying strategic foreign assets; building up global trust in the yuan as a stable reserve currency; allowing Chinese elites to diversify their enormous wealth by buying foreign assets, from vineyards in Bordeaux to the odd football giant, such as AC Milan.

No wonder the astonishing spread of Chinese economic power has left assorted Exceptionalists – from neocons to neoliberalcons – totally deranged. Washington has absolutely nothing to offer to nations across Asia, Africa and Latin America – to the whole Global South for that matter. They have all seen how Beijing is not in the market demanding Mob-style compound interest on sovereign debt; “support” for neo-imperial moves by NATO or the UN; one more extra-territorial hub for the US Empire of Bases; or total domination of their central banks.

On the other hand, they have seen what Washington does offer; endless war; the progressive smashing of the nation state; democracy blasted to smithereens; and technocratic governance by the 0.00001%.

Yet all this is just the calm before the storm. The Empire is already striking back. There’s serious blood on the tracks ahead.

Washington Brings Regime Change To Venezuela

Paul Craig Roberts

According to President Obama, the world’s only superpower, the unipower, the exceptional country is threatened by small Venezuela in South America !

In an executive order last year, renewed this year, President Obama declared Venezuela to be an “unusual and extraordrinary threat to the national security and foreign policy of the United States” and declared a “national emergency” to counter the “Venezuelan threat”
( http://latino.foxnews.com/latino/politics/2016/03/03/obama-extends-order-declaring-venezuela-national-security-threat/ ).

This manufactured “extraordinary threat” serves as the Obama regime’s excuse for overthrowing President Maduro in Venezuela. It is a Washington tradition to overthrow elected Latin American governments that try to represent the interest of the people, and not the interest of US corporations and banks.

I wrote about Washington’s attack on Latin American reformers on April 11 (http://www.paulcraigroberts.org/2016/04/11/washington-continues-to-destroy-latin-american-reformers-paul-craig-roberts/) and on April 22
(http://www.paulcraigroberts.org/2016/04/22/washington-launches-its-attack-against-brics-paul-craig-roberts/).

Decades ago US Marine General Smedley Butler confessed that he was “a gangster for capitalism,” imposing the will of New York Banks and the United Fruit Company on Latin American countries by force of arms.

In his book, Confessions of an Economic Hit Man, John Perkins reports the 1981 assassinations of Panama President Omar Torrijos and Ecuador President Jaime Roldos, both of whom got in the way of US corporate interests.

After being duly demonized by the US media, in 2009 Honduras President Manuel Zelaya, who thought that Honduras should be for Hondurans and not for the United Fruit Company, was overthrown in a military coup greenlighted by President Obama and Secretary of State Hillary Clinton. The president chosen by the people was replaced with Roberto Micheletti, a tool of US corporations, chosen by Washington.

Washington has been conducting economic warfare against Venezuela in order to undermine
President Maduro’s public support. The media is controlled by the elite and blames Maduro for the economic problems caused by Washington.

Washington has succeeded in having its agents among the elite regain control of Venezuela’s National Assembly. A recall attempt is underway against Maduro. It is possible that confused Venezuelans will cut their own throats by returning to power the elite that has traditionally oppressed them.

Washington tried to destabilize Iran with the Washington-funded “Green Revolution,” but it
did not work. Both Russia and China open themselves to destabilization by hosting Washington-funded Non-Governmental Organizations (NGOs), participating in Western economic institutions, and permitting foreign investment.

Washington has had success in entangling Russia and China in Western economic institutions and economic ways of thinking that put the two countries’ independence at risk.

Considering the control freak character of Washington, Russian President Putin should be on his guard against assassination. In the neoconservative drive for US world hegemony, no means are impermissible.

Deflation spreads to Australia

Mike Head

The annual federal budget to be delivered by the Australian government tonight will seek to paper over the deteriorating economic situation, globally and in Australia, until after the extraordinary “double dissolution” of both houses of parliament, set to be called for July 2.

Regardless of whether Prime Minister Malcolm Turnbull’s Liberal-National Coalition or the opposition Labor Party forms the next government, it will soon bring forward deep cuts to social spending and other austerity measures to impose the full burden of the slump on the working class.

A clear indicator of the recessionary forces overtaking the Australian economy was last week’s official cost-of-living statistics, showing the emergence of deflation for the first time since the 2008-09 global financial crisis.

Falling clothing, food and gasoline prices pushed the consumer price index down 0.2 percent in the first three months of 2016, taking the annual inflation rate to just 1.3 percent, its weakest result in 17 years.

Deflation, which has already been experienced for some time in Japan and Europe, is a warning sign of recession. It reflects weakening demand, associated with declining investment and real wages. It can also lead to a further downward spiral if companies and consumers delay spending, expecting falling prices.

Some economic commentators downplayed the deflation figures, attributing them primarily to lower global oil and commodity prices. But those lower prices are themselves the product of the global slump that is hitting Australia, together with other commodity-export dependent countries like Canada and Brazil.

Even the so-called “core” annual inflation rate, which removes volatile items such as fuel, dropped to just 1.55 percent, well below the Reserve Bank of Australia’s (RBA’s) target range of 2 to 3 percent and corporate economists’ projections for 2 percent. This result—which came despite healthcare and secondary education costs both rising by more than 4 percent—signals domestic deflationary tendencies.

The marked slowdown in China, Australia’s largest export market, which is bound up with the stagnation in Europe and North America, is continuing to feed into the unravelling of the two-decade mining boom. Except for a speculative housing bubble in Australia’s two main finance centres, Sydney and Melbourne, the economy would already be contracting.

The most recent official producer price figures, released last Friday, showed that domestic final demand (excluding exports) fell by 0.2 percent in the March quarter with an annual growth in overall demand of just 0.8 percent—a level usually associated with recessions.

Significantly, deflation has emerged despite the RBA maintaining official interest rates for nearly a year at a record low 2 percent in an unsuccessful bid to stimulate borrowing and spending. Today, the central bank cut its rate to 1.75 percent.

Market economist Warren Hogan warned: “There is clear evidence that global economic fragilities are putting deflationary pressures into the economy … Even if the RBA cuts rates substantially over the next 18 months, these latest figures highlight that Australia is unlikely to escape the global realities of weak nominal economic growth and low investment returns. This of course, has important implications for the Budget and fiscal policy.”

Half-year profit results released yesterday and today by two of Australia’s four big banks provided further signs of the impact of mining-related collapses and rising bad debts.

ANZ bank’s cash profit for the second half of 2015 fell 24 per cent to $2.8 billion, with the largest reversals occurring in Asian and domestic business lending. Institutional business—which covers companies and other large institutions—posted a 41 percent plunge in profits to $632 million.

According to the bank, margins are under pressure from intense competition, costs associated with regulation and technology, lower trade volumes and reduced credit quality. ANZ said total provisions for bad and doubtful debts were $918 million.

Mark Whelan, an ANZ executive wrote on BlueNotes, the company’s news site: “It is a very disappointing result, that is the only way to look at it. But these are probably the toughest conditions I have seen in the institutional market in 25 years in banking—it is almost like the perfect storm.”

Westpac unveiled a six-month profit of $3.9 billion, up a bare 3 percent and well down on financial market expectations, largely due to significant corporate bankruptcies.

Earnings in Westpac’s institutional business dropped 21 percent to $517 million, with a $252 million jump in provisions for bad loans, believed to include failed steelmaker Arrium, bankrupt miner Peabody Energy, law firm Slater & Gordon and transport company McAleese.

Any bursting of the over-heated housing market—where the major four banks draw their most lucrative profits—could quickly expose them to great difficulties. Despite being touted as among the strongest banks in the world, they are extremely vulnerable to an international funding freeze, as they were in 2008 before being propped up by a government guarantee of their borrowings.

The major banks, which between them employed the equivalent of more than 170,000 people full-time during 2015, have begun cutting their workforces. ANZ said its number of full-time equivalent staff fell by about 1,200 in the second half of 2015, to 48,896.

According to official jobless statistics, the seasonally adjusted unemployment rate for March dropped 0.1 percentage points to 5.7 percent. But that headline figure masked a further growth in part-time employment at the expense of full-time jobs. Part-time jobs grew by 34,900, while full-time employment declined by 9,000.

Working hours actually fell. Seasonally adjusted monthly hours worked in all jobs decreased 17.5 million hours (1.1 percent) to 1,632.3 million hours.

Unemployment data produced by the Australian Bureau of Statistics seriously underestimate the actual jobless toll. An alternative survey by Roy Morgan Research showed the unemployment rate rose from 10.0 percent to 11.0 percent in March. Another 7.8 percent of the workforce was under-employed, that is, seeking more work. A total of more than 2.4 million workers were unemployed or under-employed.

During April, another 2,000 job cuts were announced by five companies alone—Royal Dutch Shell, telecommunications provider Optus, Perth-based Engineering group RCR Tomlinson, West Australian state-owned corporation Western Power and retail chain Target.

For electoral reasons, tonight’s federal budget will avoid savage spending reductions. Nevertheless, it will assume that the next government can push through parliament 25 outstanding bills containing cuts worth $13 billion over four years. These were not passed by the Senate from the 2014 and 2015 budgets, because of the public hostility toward the measures.

These include Family Tax Benefit cutbacks of $6.3 billion, maternity leave cuts of $1.3 billion and Pharmaceutical Benefits Scheme reductions of $1.2 billion. Other provisions include reductions in unemployment entitlements and Medicare payments and lifting the retirement pension age to 70.

Once the election is over, even more sweeping cuts will be brought forward to meet the demands of the corporate elite for slashing social programs and cutting business taxes to boost profits. Today’s Australian editorial set the tone, declaring: “With the dramatic double-dissolution timetable bearing down on him, Mr Morrison [the Treasurer] can be forgiven for being wary of unpopular measures, but he must not abandon meaningful reform.”

Forty thousand public sector workers strike against Costa Rican government

Andrea Lobo

An estimated 40,000 Costa Rican state workers and students staged a two-day strike on April 26 and 27 to oppose policies of the government of President Luis Guillermo Solís Solis, which is attacking workers’ incomes, public education, health care, and the right to water.

Thousands marched in San José last Tuesday

The central government estimated that 50 percent of all public health and 70 percent of public education workers participated in the strike. The unions said the strike affected 80 percent of the health services and 95 percent of the country’s educational institutions.

Union officials had threatened to extend the strike indefinitely, but sent the workers back to work once the ministers of health and labor agreed to meet last Thursday for negotiations. On Thursday, the different unions were split over their demands and the talks came to a halt. Meetings continued on Friday.

The public sector union association BUSSCO and the teachers’ union ANDE convoked the strikes primarily to oppose plans to reduce public workers’ incomes, including the single salary or Public Employment Law, which is directed at drastically reducing workers’ wages.

On the eve of the walkout, President Solís stated that there was “no justification” for the strikes since “not a single point in their demands is not already present, or could be incorporated, into current negotiations.”

Workers who participated in a mass demonstration Tuesday, however, expressed their concerns and anger over the government’s counter-reforms and voiced their willingness to fight back against the government and the business elite.

“The single salary [proposal], more than anything else, is what worries us. It would take away approximately 40 to 50 percent of our net income,” said Gabriel, a math high-school teacher.

He added, “I have two small children who depend on me. If this law gets through, I would have to quit and do something else. I don’t know what.”

School teachers and principals

Asked whether he perceived any results from previous strikes, Gabriel answered: “Other times we haven’t felt any, but we hope this time will be different. … We want a permanent strike until the government gets rid of these proposed bills!”

The strikers were also protesting against public hospital “death lists,” with an estimated 500,000 patients waiting for surgery and thousands more waiting for examinations.

The government is seeking to dismantle and privatize the public health sector, a process demonstrated by the state’s poor clinical infrastructure, expired drugs, salary bonuses to high functionaries, a massive debt built on poor investments, the shortage of medical specialists and the absence of efforts to reduce waiting lists.

Under International Monetary Fund (IMF) orders, the government is threatening to revoke collective bargaining agreements and slash retirement benefits, while raising the minimum age. Among other reactionary measures, it intends to limit unemployment benefits to eight years, reduce medical and family leaves, slash yearly raises from 5.5 percent to 2.54 percent and add tougher performance evaluations to approve them.

The unions also oppose the new tax bill, which would turn the current 13 percent sales tax into a 15 percent regressive value-added tax, covering a wider scope of services.

Public health workers were under direct orders from their unions not to speak to interviewers and to direct all questions to union leaders. However, a nurse, who decided not to give her name, said that she has three sons and “would not be able to afford taking care of them if the reforms pass.”

Miguel, “Water is not a commodity, No to privatization”

Miguel, a “retiree from ANEP, another one of the traitor unions in this country,” as he put it, also hoped that, “if the government doesn’t heed it, this demonstration today will be extended indefinitely.”

With the support of the pseudo-left Frente Amplio, the unions betrayed the workers by decentralizing the protest, calling the strike a “rehearsal,” and falsely promising bigger actions in the future. The unions, along with Frente Amplio and the ruling PAC party, did exactly the same thing in 2005 and 2006 with the anti-CAFTA protests, including calling them “rehearsals.”

These demoralizing tactics by the unions and the pseudo-left parties have become essential tools for the political and business elite to continue imposing austerity measures and privatizations.

Miguel said that he was mainly protesting against a recent water law. In 2009, he was part of the efforts to collect 150,000 signatures to propose a law declaring water a human right. “But the parliament manipulated the bill so much that it became an commodity,” he concluded, “it got privatized.”

In another significant betrayal, Frente Amplio and Patria Justa supported the approval of the Labor Process Reform, which limits public sector strikes and gives private sector employers the final decision on whether a planned strike “fulfills the requirements” to make it legal.

Perhaps more importantly, it “prohibits a union in a specific trade supporting or demonstrating in favor of other sectors that are not of their concern.”

Franklin, a sociologist and member of the Workers Association of the Labor Ministry, said: “Our focus today is on tax evasion and pay cuts against public employees. It’s on our backs that the government is placing the tax deficit, knowing that tax evasion is 8.2 percent of GDP.” In comparison, Costa Rica spends 7 percent of its GDP on education each year.

He criticized the government for attacking workers’ rights to negotiate and protest in order to cut salaries and employment and concluded, “the solution is to make the rich pay like rich, and the poor pay like poor.”

Income inequality within the government is comparable and in some cases greater than that in the private sector. The Ministry of Planning calculated that the highest state salary is 55 times the lowest. For an average employee, 15 annuities amount to $1,440 in yearly wages, compared to $24,400 for a state manager, about 17 times greater.

Oxfam reported in 2015 that there are about 100 Costa Ricans who individually own more than $30 million in assets and collectively own as much as four times what is spent on education yearly.

When asked whether there are any parties that represent working class interests, Franklin answered. “We might have some sympathies and compatibility with Frente Amplio, but we don’t coincide in other things. We believe that, with these proposed bills, our ally will be Frente Amplio.”

A school principal and member of ANDE, protesting with a group of colleagues. spoke to the WSWS. She is particularly concerned about the changes in the education system, but said that, “We have a long list of measures that we could take to exert pressure on the government. For instance, we could simply stop taking yearly census data, for which they pay us as unskilled cheap labor.”

The dual education reform plans to institutionalize the existing gap in school completion rates and education quality that exists between technical and academic high schools. It plans to oblige students in technical schools to virtually become free labor for companies in order to get certified.

The structural schooling disparity, which would get consolidated with dual education, leaves an entire sector of the population with little or no opportunity to complete or advance their education. Within low-education households, only 15 percent of those between the ages of 18 to 24 continue to study, compared to 79 percent of those in households with an average of post-secondary education.

The school principal added, “We can’t be afraid, just like previous generations, we are defending our rights.”

The government is also planning to collect the retirement savings of all 1.4 million public workers in order to more easily invest them within the government and in speculative markets. It will gradually make the workers themselves pay more for the fund’s sustainability by imposing regressive taxes and reducing pension benefits.

According to Oxfam, partial and complete social security privatizations in Latin America have led to more unequal coverage. In Costa Rica, there already is a 44 percent gap in access to health care and 28 percent gap in pension enrollment between the top and poorest quintiles.