Why We Shouldn’t Feel Too Optimistic If ISIS is Driven From Mosul

Patrick Cockburn

After Isis captured Mosul in June 2014, people in Baghdad waited in terror to see if its fighters would go on to storm the capital. There was very little to stop them as the Iraqi army in northern Iraq broke up and fled south. Many government ministers and MPs rushed to the airport and took refuge in Jordan. When an American military delegation arrived to review the defences of Baghdad, they were told by a senior Iraq official “to look to see which ministers had put fresh sandbags around their ministries. Those that have done so like myself will stay and fight; where you see old sandbags it means the minister doesn’t care because he is intending to run.”

Two and a half years later, it is Isis fighters who are battling street-to-street to hold onto west Mosul, their last big stronghold in Iraq, in the face of multiple assaults by a revived Iraqi army backed by US airpower. The last road out of the city to the west was cut by Iraqi government forces on 1 March and they have also captured one of the half-ruined bridges over the Tigris River that bisects Mosul, which they are planning to repair using US-supplied pontoons. Iraqi military units backed by some 50 US airstrikes a day are getting close to the complex of buildings that used to house the government headquarters in the centre of the city.

Iraqi officials and officers announce only advances and victories, reports that often turn out to be premature or untrue. But there is no doubt that the Iraqi security services are winning the struggle for Mosul, though fighting could go on for a long time amid the close-packed buildings and narrow, twisting alleyways. Already shelling and airstrikes are causing heavy casualties among families sheltering in cellars or beneath the stairs in their houses.

The battle will probably continue for a long time, but the capture of Mosul looks inevitable and will be a calamitous defeat for Isis. When its few thousand fighters seized the city and defeated a government garrison of 60,000 in 2014, it portrayed its victory as a sign that God was on its side. But the same logic works in reverse and today all Isis can offer its followers is a series of hard-fought defeats and withdrawals.

The crucial question concerns whether or not the fall of Mosul means the effective end of the caliphate declared by its leader Abu Bakr al-Baghdadi. The caliphate’s significance was that at one time it ruled territory with a population of five or six million people in Iraq and Syria, where it sought to establish a truly Islamic State. It is this dream – or nightmare – that is now being shattered. Isis may still control some territory in Iraq and more in Syria, but it has nothing like the human and material resources it enjoyed at the height of its power when it controlled territory stretching from the Iranian border almost to the Mediterranean coast.

Isis still has some strengths, including experienced and skilful commanders leading a core of fanatical fighters numbering as many as 4,000 in west Mosul alone. They have already killed 500 and wounded 3,000 of the Iraqi security service’s best soldiers in the struggle for east Mosul, which was meant to last a few weeks and instead took three months. There is a no reason the same thing should not happen in the west of the city where the warren of streets gives the defence an advantage. Foreign fighters know they cannot blend into the population and escape, so they have no choice but to fight to the death.

Other factors work in favour of Isis: it is fighting a vast array of enemies forced into an unwilling coalition against Isis because they fear and hate it just a little bit more than they hate and fear each other. As Isis weakens and becomes less of a threat, the edgy détente between different anti-Isis forces, such as the Iraqi government and the Iraqi Kurds, will begin to fray. People in Baghdad recall that the Kurds took advantage of the defeat of the Iraqi army in 2014 to grab extensive lands long disputed between themselves and the Arabs. Once freed of the menace of Isis, non-Kurdish Iraqis will want these territories back.

In Syria, there is an even more complicated three-cornered fight between the Syrian President Bashar al-Assad, the Syrian Kurds and Turkey for the areas from which Isis is retreating. Turkish troops and their local proxies have just taken al-Bab, northeast of Aleppo, from Isis after a hard fought siege, and have started attacking the town of Manbij nearby, which was taken from Isis after a long battle late last year by the Syrian Kurdish People’s Mobilisation Units (YPG) and its Arab allies. As Isis is driven out, the YPG and Turkish-backed forces are left facing each other in what might be the beginning of a new Kurdish-Turkish war waged across northern Syria.

Even those familiar with the complexities and shifting alliances of the Syrian civil war are baffled by the likely outcome as the different players in Syria position themselves to take advantage of a likely attack on Raqqa, the de facto Syrian capital of Isis. Will the US continue to use the devastating firepower of its air force to support a YPG-led ground offensive? Or could the US administration under Trump take a more pro-Turkish stance and, if it did so, would the Syrian Kurds look for an alternative military alliance with Assad and his Russian backers?

The answers to such questions will decide if we are really getting towards the end of the terrible wars in Iraq and Syria that have ravaged the region since 2003 or if we are only seeing an end to a phase in the conflict. In Iraq, the government has survived the disasters of 2014 and is about to defeat Isis in Mosul, though the Baghdad administration remains spectacularly corrupt, sectarian and dysfunctional. Assad in Syria has already won a crucial victory by capturing east Aleppo, the last big urban stronghold of the armed opposition in Syria, and is evidently intending to win back the whole country.

These successes give an exaggerated idea of the real power of the Iraqi army, which owes the reversal in the military tide to the support of foreign powers and, above all, to US airpower. The same is true of the Syrian army in its reliance on Russia and Russian airstrikes. So far, the mix of cooperation and rivalry between the US and Russia in Syria that developed under President Obama has not changed much under Donald Trump.

Yet the war is not quite over. Isis has a tradition of responding to defeats on the battlefield by carrying out terrorist attacks in the region, Europe, Turkey or other parts of the world. Some spectacular atrocities would enable it once again to dominate the news agenda and show it is not beaten.

Isis may want to test the Trump administration and see if it can provoke it into an overreaction by some act of terror, just as al-Qaeda was able to do at the time of 9/11.

Discontent and political volatility dominate Western Australian election

Mike Head

A state election in Western Australia (WA) on March 11 could become a political disaster for the federal Liberal-National government, with media polls predicting likely defeat for the ruling Liberal Party of Premier Colin Barnett.

Conditions in the former mining boom state illustrate the economic and social reversal faced by many workers across the country since the boom started to unravel in 2012. In some suburbs of Perth, the state capital, official jobless rates exceed 20 percent and many more workers have been pushed into low-paid and casualised employment.

Over the past five years, WA has gone from being the fastest growing state to the most recessionary. The economy has shrunk almost 11 percent, led by a near-40 percent drop in business investment. Once heavily-dependent on iron ore royalties, the state budget has a $3 billion annual deficit and, according to the state treasury, is heading for debt of $41 billion.

The opposition Labor Party is committed to slashing spending to reduce the deficit and has failed to gain much ground. Bitter memories also remain of the last Labor government, from 2001 to 2008, which starved basic services of funds while using enormous mining royalties to cut taxes for the wealthy.

More fundamentally, the Labor Party at every level of Australian politics has functioned for decades as a ruthless instrument of big business, working with the unions to impose sweeping corporate restructuring and austerity measures.

Under these conditions, the WA election has become a testing ground for the aspirations of Senator Pauline Hanson’s anti-immigrant One Nation party, assisted by prominent media promotion, to exploit the social discontent and political disaffection.

Hanson is trying to emulate US President Donald Trump, posturing as “anti-elite” outsider and adopting his slogan of “drain the swamp.” Like the American billionaire, she is seeking to divert widespread anger at the political establishment into reactionary nationalist and protectionist directions by witch-hunting Muslims and scapegoating overseas workers.

Hanson will spend the next week campaigning in WA. Currently polling at between 8 and 13 percent, her party hopes to win enough seats in the upper house to hold the “balance of power”—a Liberal or Labor government would need its votes to push legislation through parliament.

In a bid to survive, and to make a pitch in Hanson’s extreme right-wing direction, the Liberal Party struck a preference vote swap deal with One Nation. The pact was not simply a WA initiative—the negotiations with One Nation involved key figures in the federal Coalition government, including Finance Minister Mathias Cormann.

There are indications, however, that the deal may have backfired, further haemorrhaging support for the Liberals. The agreement preferenced One Nation above the rural-based Nationals, who hold ministries in Barnett’s government, exacerbating rifts in the national Liberal-National Coalition. The Nationals retaliated by directing preferences in some electorates to the Greens, endangering Liberal Party seats.

Barnett also outraged working people by vehemently supporting the recent federal Fair Work Commission ruling to slash the Sunday penalty wage rates on which many workers and young people depend to live. He called on the WA Industrial Relations Commission to match the decision for state-based awards, under which about 15 percent of West Australians are employed.

According to a February 3 Newspoll, Barnett’s satisfaction ratings remained the lowest ever recorded by a state leader at only 32 percent. Yet, the Labor Party has been unable to capitalise on the hostility because of its own pro-business policies. Likewise, the support for the Greens, a pro-capitalist party appealing to well-off sections of the middle class, remained on just 9 percent support.

Cynically, Labor Party leader Mark McGowan, an ex-naval officer, is posturing as an opponent of the government’s plans to sell-off a 51 percent stake in WA’s electricity network, Western Power, a move that inevitably will eliminate thousands of jobs and push up household power prices. The Liberals hope to raise $11 billion from the privatisation to meet the debt reduction demands of the financial markets, which stripped WA of its AAA credit rating in 2013.

Labor’s stance is a fraud. Labor governments in other states have privatised electricity and other assets to satisfy the corporate elite, an offensive that was accelerated by the last federal Labor government from 2007 to 2013. Moreover, as McGowan told a gathering of business leaders last December, Labor intends to meet their budget-slashing demands by cutting public sector jobs and services.

McGowan unveiled a plan to reduce the number of senior public servants by 20 percent and introduce 20 new key performance indicators for government service delivery. He said Labor’s policies represented “a revolution in how government is conducted.”

Shadow treasurer Ben Wyatt recently said Labor had identified recurrent spending cuts worth about $200 million, and would initiate a “service priority review” to target further savings. To reduce the state debt would “take years of consistent strong budgeting that WA Labor delivered under [former premier Geoff] Gallop.”

Such cuts will deepen the assault on health, education, welfare and other social programs that began under the previous WA Labor governments, and which were then intensified by the Liberals once the mining tax revenues collapsed.

WA already has the country’s worst public school student-teacher ratio—15.7. In 2013, the Barnett government eliminated about 500 teaching jobs and more than 400 education assistant positions. Labor has promised to restore only 120 teaching jobs and 300 education assistants and is being supported by the education unions, which were instrumental in blocking opposition to the job cuts.

In public hospital emergency departments, the percentage of patients waiting four hours or less dropped from around 80 percent to 75 percent between 2011–12 and 2015–16, far below the national target of 90 percent.

Since 2012–13, the number of social housing units has declined from 42,496 to 39,969, while the level of need has soared. According to welfare agencies, almost 10,000 people are now homeless in WA, and in 2016 one charity, St Vincent de Paul, turned away 17,000 requests for assistance.

In the state’s north, mining towns have been decimated by job losses and property price collapses, forcing many residents to leave. Thousands of workers who once worked on mining projects, often on a fly-in, fly-out basis, generating super-profits for the mining conglomerates, have been thrown on the scrapheap.

Perth’s suburbs have some of the worst unemployment rates nationally: to the south Armadale 18.0 percent and Mandurah 23.8 percent, to the north: Balga-Mirrabooka 22.0 percent and Girrawheen 21.5 percent.

Hanson falsely claims to represent the interests of ordinary working people. She has professed to oppose the electricity privatisation, while calling for further cuts to government spending. One Nation has already assisted the federal Coalition government to push through welfare cutbacks.

Above all, Hanson has sought to split the working class, fomenting divisive, anti-Muslim sentiment. One Nation’s nationalist and protectionist policies also echo the efforts of the trade unions to divert workers’ discontent down anti-Chinese and anti-foreign worker channels.

Hanson denounces welfare recipients, effectively blaming unemployed youth and workers, as well as foreign workers, for the relentless destruction of jobs and conditions by Australian corporations.

No matter which party heads the next WA government, with or without One Nation’s help, the assault on the working class will intensify. As the West Australian reported last month, Barnett and McGowan “have been put on notice by WA Treasury that the state’s finances are in crisis, with debt and deficit blowing out.”

Crisis of right-wing Croatian government deepens over coalition

Markus Salzmann

After just four months in office, tensions inside the Croatian government coalition are mounting. Although the conservative Democratic Union (HDZ) and the right-wing liberal Most (Bridges) party are agreed on a right-wing programme, the government of Prime Minister Andrej Plenković is in deep crisis.

The conflict was triggered by a meeting of Plenković with the honorary president of the liberal Croatian People’s Party (HNS), Vesna Pusic. This fuelled rumours that the HDZ might quit the coalition with Most and form a government with the HNS, which currently has nine seats in the Croatian parliament.

And so the permanent crisis in this Balkan state continues. In September last year, elections were held after the government coalition—also an alliance of the HDZ and Most, under the independent pharmaceutical manager Tihomir Oreskovic—broke apart in June after just four months.

The HDZ emerged as the winner in the subsequent elections. With 61 parliamentary deputies, it is just ahead of the Social Democrats (SDP), with 54. In third place is Most, with 13 deputies. With the votes of some independent deputies and representatives of the smaller parties, the HDZ and Most have secured a fragile government majority.

Ever since, the HDZ, which is based on right-wing nationalists, sections of the military and the Church, has been in constant conflict with Most. Most represents better-off middle class layers and sections of big business, which are demanding aggressive reforms to satisfy the interests of the corporate elite. Many observers assume that the government could collapse following the regional elections in May.

The background of the crisis is the complete alienation of the political parties from the population. The government programme on which the HDZ and Most have agreed is a declaration of war on the working class.

Most has insisted on the establishment of an “exclusive economic zone” (EEZ) with neighbouring countries, which is supposed to transform the region into a paradise for cheap labour and low taxes. To this end, the government is planning a tax reform that will massively benefit corporations. These would be largely exempt from regulations in the areas of environmental protection and workers’ rights.

The coalition partners have also agreed a restructuring of public finances. The budget deficit is to be reduced with the aim of obtaining a much better credit rating. The two parties also consider a reform of the education system necessary, meaning the abolition of free education.

These social attacks are accompanied by a massive militarization of Croatia. Conscription, which was abolished in 2008, is to be gradually reintroduced. This would comprise several weeks of compulsory basic training. The aim is to “make the armed forces popular among young people,” Plenković said of the plan to introduce conscription in 2019. The armed forces, which currently consist of about 21,000 men, are to be made more attractive for the generations “which can no longer remember the times of the Great Patriotic War.”

Plenković stands in the tradition of the right-wing nationalists, who, with US and German support, ensured the breakup of Yugoslavia in a series of fratricidal wars. Civil rights groups are warning of the “militarisation” of society.

In January, it was announced that Croatia wants to replace its arsenal, comprising mainly Soviet-era materiel, with new NATO equipment. Defence Minister Damir Krsticevic said there were also plans for the purchase of fighter jets, which was confirmed by President Kolinda Grabar-Kitarovic in December. The acquisition is to be made by the end of 2017.

In recent months, verbal confrontations with Serbia have also increased. It is significant that four months after taking office, Plenković has still not visited the neighbouring country. Croatia vehemently rejects the inclusion of Serbia in the European Union.

Journalist Norbert Mappes-Niediek remarked recently on broadcaster Deutsche Welle: “Europe is a powder keg. But the Balkans is the fuse. The conflicts are the most dangerous. They cannot be isolated. And precisely in the present situation, in which the world has become so unstable and there is no longer any predominant power, it is much easier for the conflicting parties in the Balkans to seek allies among the greater powers. This is a situation like 1914. This, most of all, should give grounds for fear.”

In this climate, right-wing and openly fascist groups are gaining impetus. Recently, several hundred neo-fascists from the A-HSP demonstrated in the Croatian capital Zagreb. Dressed in black, the participants shouted slogans from the fascist Ustashe movement. They waved a flag of the neo-Nazi German National Party (NPD) and welcomed the election of Donald Trump in the US. Attacks on refugees, members of the Serb minority in Croatia and homosexuals are becoming increasingly more frequent.

The ruling HDZ has close links with these ultra-right forces. This became clear recently, when veterans of the 1990s civil war erected a plaque near the former Jasenovac concentration camp. This was the site where the Ustasha regime, which collaborated with Nazi Germany, murdered tens of thousands of Serbs, Croats, Jews and Roma between 1941 and 1945.

The plaque commemorated the fallen fascists with the Ustasha salute “Za Dom Spremni!” (At the ready for the homeland!), which corresponds to the German “Heil Hitler.” When this resulted in fierce criticism, Plenković said the plaque had nothing to do with the world war. They were honouring the dead of the war of independence.

Canadian military preparing for new role in Syria, extension of Ukraine mission

Roger Jordan

Canada’s Liberal government is set to unveil the extension and possible expansion of two of its foreign military deployments. Announcements are expected in coming days on extending the Canadian Armed Forces’ mission in Ukraine, where 200 soldiers are training Ukrainian Army units to fight pro-Russian separatists in the country’s east, and on continuing Canada’s role in the Mideast war and possibly expanding it into Syria.

The latter move would be made in conjunction with an anticipated decision by US President Donald Trump to drastically increase the US military presence in Syria and Iraq.

According to the National Post ’s Matthew Fisher, a veteran correspondent with close connections to the upper echelons of the military and Defence Department, the Canadian military is discussing various options for a mission to Syria. Canada was previously involved directly in the Syria war with CF-18 fighter jets, but these were withdrawn last spring by Trudeau, at the same time as his government extended and expanded Canada’s military intervention in the Middle East.

Eight hundred Canadian troops are currently involved in the war in Iraq and Syria, including a contingent of some 200 Special Forces troops who have provided training and frontline direction to the Kurdish Peshmerga. Some of the Canadian Special Forces are active on the Iraq-Syria border alongside Kurdish forces, attempting to block ISIS fighters from leaving Mosul. Canadian reconnaissance and refueling aircraft also still operate in the region in support of the US-led coalition’s air war.

Fisher suggested in his February 27 piece that one potential option could see Canada being asked to contribute “boots on the ground” to defend so-called “safe zones” in Syria. Trump has indicated his support for such an option, which would necessitate the deployment of a substantial number of soldiers to the country and amount to a dramatic escalation of the US war for regime change against the Assad government in Damascus.

It would place Canadian troops on an increasingly fractious front line as a growing number of regional and major powers compete for influence. The potential for this conflict to spiral into a much wider war was underscored earlier this week when Washington accused Russia of bombing one of its Syrian proxies, with US embedded troops only two miles away.

Since coming to power in 2015, Prime Minister Justin Trudeau has made clear that his main foreign policy goal is to deepen military-strategic and economic ties with the United States, so as to shore up North America’s global dominance and enable Ottawa to intervene more aggressively around the world to uphold Canadian imperialist interests.

When Trudeau met Trump in their first face-to-face meeting at the White House last month, he renewed Canada’s pledge to enhance military and security cooperation with Washington and signaled Ottawa will support Trump’s efforts to create a more aggressive North American trade bloc, whether through a renegotiated NAFTA or a new pact. The joint statement issued by the two leaders at the conclusion of their February 13 meeting proclaimed the Canada-US partnership to be an “indispensable alliance in the defense of North America and other parts of the world, through NATO and other multilateral efforts.”

Trudeau and Trump also committed to expanding NORAD (the North American Aerospace Defense Command), which was created during the early stages of the Cold War and continues to be largely aimed at Russia, including in the Arctic.

Over the past week, Canadian Armed Forces troops and Royal Canadian Mounted Police (RCMP) special forces have been carrying out “sovereignty exercises” in the Arctic, aimed at asserting Canada’s territorial claims in the Far North. Operation Nunalivut began February 23 and runs until March 10. Around 200 armed forces personnel are involved in the exercises, which have included underwater dives by demolition and reconnaissance experts.

A recent article published by the McDonald Laurier Institute under the provocative title “Why is Russia getting ready for war in the Arctic?” urged Canada to step up its activity in the Far North and make preparations for a potential clash with Moscow.

Canada has been in the forefront of NATO’s anti-Russia offensive in Eastern Europe and the Baltic. News reports say that the government will formally announce an extension of the Ukraine training mission next week. Trudeau’s Liberals have maintained the virulently anti-Russian stance adopted by the Harper Conservatives, continuing Canada’s role as one of Ukraine’s most important international allies. The Trudeau government has also committed to lead a NATO battalion in Latvia, one of four NATO “forward deployed” battalions in the Baltic States and Poland designed to menace and encircle Russia. This will involve 450 Canadian troops being stationed in Latvia indefinitely.

In a further indication of the Liberals’ determination to stick to a firmly anti-Russian line, Trudeau appointed Chrystia Freeland as foreign minister in January. Freeland is on a Kremlin blacklist that prevents her from traveling to Russia because of her outspoken support for the ultra-nationalist regime that came to power in Kiev as a result of the February 2014, US-orchestrated, fascist-led coup against the country’s elected, pro-Russian President, Victor Yanukovych.

Speaking to the Globe and Mail, an anonymous senior government official left no doubt about the deployment’s extension. “Canada understands that Ukraine, and everybody who is a stakeholder and supporter, really wants mission renewal,” the official said.

Ruling circles in Canada have seized on pronouncements by Trump and other top US officials demanding that NATO member-states hike their military spending to the equivalent of at least 2 percent of GDP to intensify pressure on the Liberals to increase military spending. An ongoing Defence Policy Review is considering a wide range of options for the military, including Canada’s participation in the US anti-ballistic missile defence shield.

On Friday, the National Post reported that its sources had revealed that a recommendation Canada join the defence shield was sent to cabinet this week. Contrary to its name, the shield is aimed at developing the capacity to wage a “winnable” nuclear war.

After attending a NATO defence ministers’ meeting in Brussels last month, Defence Minister Harjit Sajjan sent the strongest signal yet that major spending increases will be implemented at the conclusion of the policy review. “We knew that spending by the previous government was low and the defence policy review allowed us to do a thorough analysis of what was required,” he stated. “Yes, this will require defence investments.”

The Liberal parliamentary secretary for defence, John McKay, indicated that the hike in defence spending could come as early as the 2017-18 budget, which is to be tabled in the next few weeks. At present there is a built-in $600 million annual increase in Canada’s military spending.

Because of their determination to forge close ties with the Trump administration, Trudeau and his Liberals have delayed implementing a planned deployment of 600 soldiers to Africa as part of a UN-managed “peace operation.” In truth, such a mission would be anything but peaceful or altruistic. As is openly admitted by the military, it would involve Canadian forces in an Afghan-style counterinsurgency war. And it would be aimed at securing Ottawa greater geopolitical influence and at protecting Canadian imperialism’s substantial economic and business interests on the African continent.

However, the Trump administration’s lack of enthusiasm for UN operations, coupled with the prospect of increased demands from Washington for greater military commitments from Canada elsewhere, have resulted in the Liberals postponing the deployment. The most likely candidates for such an intervention are Mali and the Democratic Republic of Congo—countries where Canadian mining companies have extensive investments.

EU’s post-Brexit plans foresee growing conflict

Alex Lantier

The March 1 White Paper on Europe issued by European Commission President Jean-Claude Juncker was billed as the most significant global policy response by the executive of the European Union (EU) to Britain's unprecedented vote to leave the EU last year.

The Brexit vote last June was the first in a series of political blows dealt to the EU. Italian voters turned down a pro-EU constitutional referendum last autumn, and voters are going to the polls this spring in Dutch and French elections dominated by the rise of far-right, anti-EU parties exploiting deep popular anger at the EU's austerity policies. Should France's neo-fascist National Front (FN) take power on its anti-euro and anti-EU program, the prospect of a collapse of the EU and of its central Franco-German axis is very real.

Above all, the election of Donald Trump as US president, and his denunciation of the EU as a tool of Germany to strangle other European countries, showed that the main historic driver of attempts to unify European capitalism—US imperialism—is divided over the EU. During the election campaign, as the Obama administration and the EU stoked conflicts with Russia over Syria and Ukraine, Trump explicitly raised the possible use of nuclear weapons in Europe.

Juncker's document shows that the leaders of the EU executive, which is especially close to Berlin, have nothing to propose to address the ongoing social collapse and drive to war. While it tries to put the best possible face on the situation, it paints a devastating, deeply pessimistic picture of the EU. The five scenarios that it forecasts, in broad and vague lines, each foresee escalating divisions and political disunity inside the EU's existing borders, and advocates trying to paper them over with calls for rearmament.

“For generations, Europe was always the future,” the document begins, having noted in its foreword that on March 25, EU leaders will meet in Rome to commemorate the 60th anniversary of the 1957 Treaty of Rome that launched attempts to integrate capitalist Europe. Today, however, the EU is unmistakably the past: as the White Paper admits, its population faces a prospect of war and relentless social decline.

The document warns of vast foreign dangers, including both “wars and terrorism in the Middle East and Africa” and the ongoing “build-up of troops on our eastern borders.” It does not add that the leading EU powers participated from within the NATO alliance in creating these dangers—through a decades-long campaign of wars for regime change in Iraq, Libya, Syria, and beyond, and since the 2014 NATO-backed putsch against a pro-Russian government in Ukraine, after which they launched a vast military build-up on Russia's borders.

In line with multi-billion-euro military spending increases by Germany, France, and beyond, as well as the recent return to the military draft in Sweden, it bluntly calls for massive rearmament and war preparations. It writes, “Europe cannot be naïve and has to take care of its own security. Being a 'soft power' is no longer powerful enough when force can prevail over rules.”

This drive to war goes hand-in-hand with escalating fears of a new global economic break-down rooted in a collapse of free trade. Noting “doubts over the future of international trade and multilateralism,” the document foresees that “standing up for free and progressive trade and shaping globalisation so that it benefits all will be a growing crisis.”

One of the main causes of the growing discrediting of international capitalism and trade, the White Paper admits, is the social collapse left behind by the aftershocks of the 2008 economic crash. “Addressing the legacy of the crisis, from long-term unemployment to high levels of public and private debt in many parts of Europe, remains an urgent priority. The challenge is particularly acute for the younger generation,” it states. “For the first time since the Second World War, there is a real risk that the generation of today's young adults ends up less well-off than their parents.”

The White Paper forecasts a constant relative decline of Europe's demographic and economic weight: its share of world population is expected to pass from 25 percent in 1900 to 4 percent in 2060, and its share of the global economy from 26 percent in 2004 to under 20 percent by 2030.

The White Paper outlines five vaguely defined strategies for how the remaining 27 EU member states could try to remain together: “carrying on”, “nothing but the single market”, “those who want more do more”, “doing less more efficiently” and “doing much more together”.

The fact that “carrying on” with the agreements signed before and just after Brexit is only one of five options—and one that would not prevent the EU's unity from being “tested in the event of major disputes,” the White Paper asserts—underscores the enormous fragility of the EU. The White Paper foresees the distinct possibility that the EU might collapse into just a “single market” free-trade zone.

The press and political commentators pointed out that the appeal to continue uniting only those “who want more” would lead to the formation of a “core” EU and the de facto relegation to second class status or outright of countries who do not “want more” of the EU.

Hungarian Economy Minister Mihaly Varga explicitly denounced this possibility, warning that “strong actors” could try to sideline others, producing “social unrest” in states left behind. “There's a real threat that [those] who favour a two-speed Europe will say that those who're in the euro area are in, and those who are out of the euro are out,” he declared.

At the same time, there are increasing indications that key euro zone member states could decide to abandon the euro currency. Besides the possibility of a FN presidential victory in France, the Dutch parliament has commissioned a report evaluating the pros and cons of the euro for the Netherlands, and Italian bank Mediobanca published a report in January claiming that Italian public debt servicing would not be harmed by Italy's exit from the euro.

Amid the crisis of European capitalism, institutions built over decades, ostensibly to avert a new war between the European powers like the two world wars of the last century, are collapsing. The great contradictions of capitalism that the great Marxists explained would provoke international revolutionary struggles a century ago, at the time of World War I and the 1917 revolution—above all, between global economy and the nation state system—have returned.

Reacting to the White Paper, the press pointed to deep divisions and electoral crises in Europe, concluding that they kept Juncker from proposing anything more definite or ambitious for the EU.

With the White Paper, Le Monde wrote, Juncker is hoping to “take back control of a ship that has been navigating heavy waters for several months. The federalist is constrained and forced to become a realist.”

Mujtaba Rahman of the Eurasia Group risk consultancy said, “Juncker’s proposals aren’t going to be particularly ambitious. Germany and France disagree about what to do with the Eurozone, and states in Central and Eastern Europe want more powers to return from Brussels following Brexit. That sets clear limits on what Juncker’s plan can achieve.”

The Financial Times of London cited a report by Italian consulting firm MacroGeo, titled “Europe in the Brexit and Trump Era: Disintegration and Regrouping.”

The report, the FT wrote, “asserts that the EU in its present form is most likely going to decompose, even if pro-integrationists such as Emmanuel Macron, the French independent centrist, and Martin Schulz, the German Social Democrat, win this year’s elections. 'By the 2021-22 electoral cycle, the EU might be entering the last five years of its ‘real’ existence,' the report says.”

Sweden brings back the draft

Johannes Stern

On Thursday, the government of Sweden announced plans to reintroduce the draft. The Scandinavian country with a population of 10 million, which has not been directly involved in a military conflict for over two centuries, is girding up for war against Russia.

Swedish officials were unambiguous that recruits should be prepared to fight Russia. “The Russian illegal annexation of Crimea [in 2014], the conflict in Ukraine, and the increased military activity in our neighborhood are some of the reasons” for the re-introduction of conscription for the first time since 2010, a spokesperson for the country’s Ministry of Defence told the BBC.

Under the plan, all citizens born between 1999 and 2000 will be conscripted next year. Of the 100,000 Swedes that fall in this category, 13,000 will be ordered to receive a physical examination, and 4,000 young men and women will then have to begin an eleven-month military service on July 1.

Workers and youth across Europe should regard this announcement, which is supported by all parties in Sweden, including the Swedish Left Party, as a warning. After two devastating world wars in the 20th century, even the ruling class in supposedly peace-loving Sweden is again recruiting the cannon fodder for a new great war.

The government wants to “introduce a method of recruitment, which is more stable, and extends our military capabilities because the security situation has changed,” explained Swedish Defence Minister Peter Hultqvist. “We had difficulties staffing our fighting units on a voluntary basis and we have to fix that somehow.”

At the end of 2016, Sweden's civil protection authority (MSB) invited all municipalities to prepare “in case of war.” Emergency shelters were to be prepared, and emergency evacuation procedures were to be drawn up. A few days later, Prime Minister Stefan Löfven announced a new security strategy and an increase in the defence budget. The military is to be “strengthened, after going in the other direction for many years.”

Similar developments are taking place in all the major imperialist countries. In Germany, the defence budget is being raised, the army enlarged and the reintroduction of conscription is under discussion. President Donald Trump recently justified a ten percent increase in the US defence budget with the words: “We have to start winning wars again.”

In Europe, the massive rearmament is directed primarily against Russia, and is increasingly bound up with direct preparations for war. NATO is currently deploying combat troops and tanks to Eastern Europe and establishing so-called Battle Groups in Lithuania (led by Germany), Estonia (United Kingdom), Latvia (Canada) and Poland (USA).

Earlier this year, German tanks bearing the Iron Cross, the insignia retained by the modern German army despite its notorious use by the Nazis, rolled into Lithuania, just a few hundred kilometres from the Russian border.

Leading NATO generals are calling for a “grand strategy” against Russia. In an interview with the Financial Times on Thursday, British General Sir Adrian Bradshaw, who is also deputy NATO commander in Europe, said that Russia remained a threat so long as Vladimir Putin holds power. It could have “catastrophic” consequences if the West was not unified in its response to a “competitor” who has “all the levers of power in its hands.”

Also on Thursday, German Defence Minister Ursula von der Leyen of the Christian Democratic Union (CDU) and Foreign Minister Sigmar Gabriel of the Social Democratic Party (SPD) promised the Baltic states that Germany would honour its commitment to the NATO alliance.

At the Ämari Airbase in Estonia, von der Leyen said it was “important ... that Estonia and our friends in the alliance in recent years, were able to rely firmly on Germany and its commitments and that they will also rely firmly on Germany and its promises in the future.” And in Lithuania's Rukla, speaking in front of the first German combat troops to be stationed in Eastern Europe since Hitler's war of extermination against the Soviet Union, Gabriel said, “The security of Estonia, Latvia and Lithuania is synonymous with German security.”

The statements by Gabriel and von der Leyen underscore how far the imperialist powers are prepared to go. Article 5 of the NATO Treaty stipulates that “an armed attack against one or more” parties “shall be considered an attack against them all” and that “if such an armed attack occurs, each of them ... will assist the Party or Parties so attacked ... including the use of armed force.”

To put it plainly: If one of the ultra-nationalist and fanatically anti-Russian governments in the Baltic states provokes a border conflict with Russia, then Berlin and NATO are committed to go to war against the second largest nuclear power in the world.

Last month, the World Socialist Web Site asked, How many people would die in such a conflict? Almost certainly many millions, if not billions. According to a report by the International Physicians for the Prevention of Nuclear War, even a “limited” nuclear war would lead to more than a billion deaths, mainly due to severe climate disruption. According to the US National Academy of Sciences, a “full nuclear war” would directly cause up to four billion deaths.

In the years following the dissolution of the Soviet Union and the supposed “triumph" of capitalism, such scenarios were dismissed as scaremongering from a time long past. But now, as on the eve of the First and Second World War, the ruling class is concluding that a new great war is likely or even inevitable, and say so openly.

In an editorial in the German newspaper Die Welt, headlined “The world faces its defining moment,” the German historian and political advisor Michael Stürmer warns of a “no longer unthinkable event that the brakes fail, control is lost” and “world order is nothing more than a pipe dream.” “For half a century, war with Russia—accidental or deliberate—has never been as close as at present.”

The danger Stürmer evokes of a “destructive moment” can only be prevented by the construction of a new anti-war movement. A year ago, in a statement entitled Socialism and the Fight against War, the International Committee of the Fourth International outlined the political basis for the building of such a movement:

* The struggle against war must be based on the working class, the great revolutionary force in society, uniting behind it all progressive elements in the population.

* The new anti-war movement must be anti-capitalist and socialist, since there can be no serious struggle against war except in the fight to end the dictatorship of finance capital and the economic system that is the fundamental cause of militarism and war.

* The new anti-war movement must therefore, of necessity, be completely and unequivocally independent of, and hostile to, all political parties and organizations of the capitalist class.

* The new anti-war movement must, above all, be international, mobilizing the vast power of the working class in a unified global struggle against imperialism.

The building of a new socialist and internationalist movement of the working class is the most urgent political task.

New Zealand’s Maori parties sign election pact

John Braddock

New Zealand’s two Maori nationalist parties, Mana and the Maori Party, recently signed a co-operation agreement to prepare for the 2017 general election. The party leaders signalled their intention to “work together” to try to win all seven Maori electorate seats reserved for registered Maori voters. The Labour Party currently holds six of the seats, while Te Ururoa Flavell, the Maori Party co-leader, holds the seventh.

Under the deal, Mana will contest only the northernmost Te Tai Tokerau seat and will not be opposed by the Maori Party. Mana leader Hone Harawira lost Te Tai Tokerau in 2014, narrowly beaten by Labour’s Kelvin Davis, while the Maori Party’s candidate drew more than 2,500 votes. In return for boosting Harawira’s chances of retaking his former seat, Mana agreed to give the Maori Party an uncontested run against Labour in the remaining six electorates.

The arrangement sees Harawira align himself with the very party he quit in 2011. At the time, he denounced the Maori Party for its role as a coalition partner in the ruling National Party-led government, declaring it had “betrayed the people who put it in power.” Posturing as “pro-poor,” Harawira founded Mana to exploit the growing alienation of workers and youth as the social situation, including in his own electorate, sharply deteriorated.

Before the 2014 election, Mana merged with multi-millionaire Kim Dotcom’s pro-business Internet Party to form Internet-Mana. The cynical manoeuvre, a bid by Harawira to gain access to Dotcom’s wealth and media profile, backfired. Internet-Mana secured just 1.4 percent of the vote.

As part of the National government, the Maori Party has helped impose cuts to health and education, destroy thousands of public sector jobs, privatise electricity and increase the regressive Goods and Services Tax. Increasingly unpopular among ordinary Maori, its parliamentary numbers fell from five in 2008, to just two after the last election.

The electoral alliance brings together two capitalist parties, both moving rapidly to the right under the impact of deepening social inequality and class tensions. A sharp increase in homelessness and child poverty is impacting severely on Maori layers of the working class.

Talks between the two parties began last July when newly-elected Maori Party President Tukoroirangi Morgan approached Harawira to put their “differences” behind them. Both parties have ambitions for a more direct role in government, whether National or Labour wins the next election. Both are prepared to impose the next stage of the austerity agenda demanded by big business.

The realignment is bound up with the needs of the ruling class for new formations to derail the growing opposition of workers and youth to the political establishment. The Labour Party, widely recognised as just as pro-business as National, has seen its support fall to record lows in the last two elections. Mana and the Maori Party are both based on the promotion of Maori nationalism which serves to divide the working class and block a unified class struggle against the ongoing attacks on jobs and living standards. Maori make up 15 percent of the population and constitute some of the most impoverished and oppressed social layers.

Harawira has emphasised ousting the sitting Labour Party MPs, advocating “a conscious and powerful [Maori] voice in parliament.” Last September, the Maori king Tuheitia, the traditional figurehead of the central North Island Tainui tribe, endorsed the move, saying the Maori electoral seats should return to “Maori control.”

Mana and the Maori Party do not stand for the interests of Maori workers and youth. Rather they represent the privileged stratum of Maori entrepreneurs, tribal bureaucrats, lawyers and academics created over the past 30 years through multi-million dollar Treaty of Waitangi settlements, ostensibly as recompense for the historic crimes of colonialism.

According to the government ministry Te Puni Kokiri, the Maori asset base totalled $NZ42.5 billion in 2013. This comprised $12.5 billion for Maori trusts, incorporations and other tribal entities; $23.4 billion for Maori employers, including major companies, and $6.6 billion for Maori self-employed.

The commercial arm of the South Island’s Ngai Tahu tribe nearly tripled its assets in the past decade, from $561 million in 2006 to $1.5 billion this year. The second wealthiest tribe, Ngati Whatua, saw its asset portfolio, which includes major Auckland properties Quay Park and Vector Arena, rise by 22 percent in 2015, to $888.6 million. The Maori elites have accumulated this expanding wealth through the exploitation of workers of all origins.

Harawira used the resignation of National’s John Key as prime minister last December to demagogically distance himself from the government and its supporters among the well-off Maori. “The only Maori who will mourn John Key’s passing are those who clipped the ticket during his reign, those who reaped the benefits of Treaty settlements and corporate success, but did nothing to lift their own people from the mire of welfare despondency, drug-fuelled violence and suicide,” he declared.

Mana’s alignment with the Maori Party, a partner in the National government, underscores the duplicity of such statements. For all its pro-poor posturing, Mana has campaigned for increased funding for Maori businesses and the tribal elite, while supporting attacks on the working class and demands for jobs for “New Zealanders first.” Mana has joined Labour, the anti-immigrant NZ First Party and the Greens in seeking to whip up anti-Chinese xenophobia and scapegoat Chinese people for the country’s housing crisis and unemployment.

Both parties promote the reactionary nostrums of Maori identity politics. Harawira told Mana News that Mana and the Maori Party are committed to “the notion of Mana Maori Motuhake”—Maori self-determination—although “moving down that path right now is a bridge too far.” Maori, once among the most militant sections of the working class, have been encouraged to turn toward tribal identification and demands for racially-established “indigenous” rights under capitalism.

The pseudo-left groups—the International Socialist Organisation, Fightback and Socialist Aotearoa—all falsely promoted Mana as a progressive alternative for the working class. They affiliated with Mana and supported the alliance with the Internet Party, campaigning for Internet-Mana at the 2014 elections, as a vehicle for integrating themselves into the political establishment. None has made any comment on the Mana-Maori Party electoral alliance.

US Congress members visit Sri Lanka to boost US interests

Saman Gunadasa

A group of US Congress members—four Democrats and four Republicans led by House Judiciary Committee chairman Bob Goodlatte—called on President Maithripala Sirisena last Friday. It was the second group of Congress members to visit Sri Lanka during February, underscoring the intensifying geo-strategic tensions generated by the US military buildup in South Asia.

Indian and Chinese diplomats also arrived in Colombo during the past two weeks, seeking to strengthen their influence in Sri Lanka.

The first US delegation came on February 20 for a two-day visit under a so-called democracy partnership agreement with the Sri Lankan parliament. They met with members of parliament, as well as Sirisena and Prime Minister Ranil Wickremesinghe.

The second delegation concentrated more on sensitive political issues. The US embassy in Colombo said the delegation came to “discuss strategic issues affecting vital sea lanes in the Indo-Pacific, learn about Sri Lanka’s progress in forging lasting reconciliation and a non-recurrence of conflict” and “to learn more about economic reforms” that could increase bilateral trade and investment between the two countries.

President Donald Trump’s administration has indicated it will continue to concentrate on South Asia as it prepares for confrontation with China. US Defence Secretary James “Mad Dog” Mattis reportedly told his Indian counterpart, Manohar Parrikar, early last month that the US intended to build up its strategic partnership and defence cooperation with India, further developing ties forged as part of the Obama administration’s “pivot to Asia” directed against China.

The Obama administration orchestrated a regime-change operation in Colombo via the 2015 presidential election, installing Sirisena to replace Mahinda Rajapakse. The main objective of this intervention was to undermine Sri Lanka’s ties with Beijing under Rajapakse’s government.

Delegation leader Goodlatte said the US was pleased with the steps taken by “the consensual government to strengthen democracy, individual freedom, and reconciliation.”

This “consensual government” is the coalition between Wickremesinghe’s right-wing United National Party (UNP) and a section of the Sri Lanka Freedom Party (SLFP) led by Sirisena. This coalition was formed not to “strengthen democracy” but to stabilise the government, which has changed foreign policy in favour of the US and its ally India, and to suppress the explosive social opposition among workers and poor to the austerity offensive begun under Rajapakse.

In his discussions, Sirisena reiterated his government’s readiness to serve the needs of American imperialism. According to a government statement, Sirisena said: “Sri Lanka has an important responsibility regarding regional security in addition to national security as the country is situated at an important strategic location in the international maritime route… [H]ence Sri Lanka takes all these into careful consideration while entering into international investment agreements.”

Sirisena appeared to be addressing US concerns over Sri Lanka’s investment agreements with China.

Sirisena halted all investment projects funded by China as soon as he took office. However, his cash-strapped government has since been compelled to seek Chinese investments and loans, and is planning to sell the controlling shares in the Hambantota Magampura Port to a Chinese company.

The port was built by Chinese companies, largely funded by a Chinese loan, during the Rajapakse government. The US and India branded it as part of China’s “String of Pearls” strategy to allegedly dominate the Indian Ocean and beyond. In response, Sirisena and Wickremesinghe have declared that no Chinese military presence will be allowed in Hambantota.

While thanking the US for resuming training of Sri Lankan armed force members, which was stopped under Rajapakse, Sirisena asked for “additional training slots” for naval officers.

His government is deepening military ties with the US. In November, the USS Somerset, a naval amphibious landing ship, anchored in Trincomalee port for joint naval exercises involving 300 US marines. Last September, the Sri Lankan navy established its first ever Marine Forces with the help of the US Marine Corps.

The US delegation reportedly asked Tamil National Alliance (TNA) leaders “what they felt about China’s and India’s interest in Sri Lankan political affairs.” The Island reported that TNA head and parliamentary opposition leader, R. Sambandan, replied that China did not interfere in the country’s internal affairs, whereas India continued to demonstrate interest in constitutional reforms.

The TNA, which represents the Tamil capitalist elite, fully backed Washington’s 2015 regime-change operation and supports the current government.

Indian Foreign Secretary Subrahmanyam Jaishankar arrived in Sri Lanka on February 18 to meet with Sirisena, Wickremesinghe, several other ministers and TNA leaders.

Indian think tanks and the media reported that Jaishankar was sent to discuss some concerns of Indian Prime Minister Narendra Modi’s government. Savita Pandey, a professor of South Asian Studies at Jawaharlal University, told the press: “Although India has a favorable government in Sri Lanka, China’s efforts to expand its presence in the island nation is a cause of concern for New Delhi.”

New Delhi is also worried that the Sri Lankan government postponed the finalisation of an Economic and Technical Cooperation Agreement with India in the face of an anti-Indian communal campaign by Sinhala extremist groups.

On February 23, Chinese International Department Minister Song Tao led a delegation to meet Sirisena and Wickremesinghe. He also met former President Rajapakse. Tao discussed several issues, including a proposed investment zone near the Hambantota port. Beijing is perturbed by the continuing postponement of an agreement on the port project and industrial zone.

Intensifying the geopolitical tensions, the US is aggressively working to develop its military buildup. A Sri Lanka Navy statement said top-level discussions took place when Brigadier General Brian W. Cavanaugh, the Deputy Commander of US Marine Corps Forces, Pacific, met with Sri Lankan Navy Vice Admiral Ravindra Wijegunaratne in Colombo on Tuesday.

According to the statement, “extensive discussions” took place on matters of bilateral importance as well as “future operational and training aspects of the recently established Marine Battalion of the Sri Lanka Navy.” It added that discussions were held “on issues pertinent to future naval affairs and means of strengthening defense partnerships between the two countries.”

The visits by US Congress delegations and Pacific Command officers further draw Sri Lanka into the maelstrom of mounting global tensions and war dangers.

Australian growth up but wages fall

Nick Beams

Australia has avoided a technical recession—defined as two consecutive quarters of negative growth. National accounts figures issued on Wednesday for the December quarter showed that gross domestic product (GDP) rose by 1.1 percent, following a 0.5 percent contraction in the previous three months.

Media headlines declared that economic growth was “back on track” and even that the economy had “roared” back to life.

However, yesterday the Organisation for Economic Co-operation and Development (OECD) issued a report on the Australian economy, warning it was vulnerable to a recession if the housing price bubble collapsed, impacting on consumer spending and hitting the major banks.

There were three main reasons for the increase in GDP, each pointing to the fragility of the recovery. The biggest factor was increased household consumption spending. It contributed 0.5 percentage points, almost half the increase for the quarter. This was despite household incomes contracting by 0.5 percent.

The consumer spending rise was financed by a rundown of savings. Households put just 5.2 percent of their income into savings, the lowest level since before the global financial crisis of 2008–09.

A number of commentators attributed the apparent strength in consumer spending to the “wealth effect” produced by escalating house prices, which rose by 18.4 percent in Sydney over the past year, with an average rise for the six state capitals of almost 12 percent.

Rising export prices, particularly for iron ore and coal, also provided a boost to the GDP numbers. The terms of trade index, which measures the ratio of export to import prices, rose by 9.2 percent in the December quarter and is now 15 percent higher than in December 2015. This is largely due to an uptick in demand from China, which may not last.

Finally, the growth figure was also helped by an increase in non-mining investment, which showed its first increase for three years. But questions remain over its sustainability.

Capital Economics chief economist Paul Dales told the Guardian that, despite the December result, “economic growth will probably still disappoint” this year. “In the second half of last year the economy grew by just 0.6 percent and we know that the collapse in mining investment has further to go,” he said. Dales noted that the boost to national income from higher commodity prices will mostly boost profits rather than activity.

In other words, the increase in export prices will not lead to further mining investment, simply greater output from already completed projects.

Moreover, with record low wage growth, the household spending increase cannot be sustained for an extended period.

The national accounts figures were eagerly seized upon by the somewhat beleaguered Turnbull government. Treasurer Scott Morrison claimed that Australia was “top of the pack” of major economies. He said the result “confirms the change that is taking place in our economy as we move from the largest investment boom in our history to broader-based growth.”

In fact, other data reveal that economic growth is becoming more narrowly confined. According to SGS Economics and Planning, the two major cites of Sydney and Melbourne were responsible for two-thirds of Australia’s economic growth in 2015–16. This compares to their share of 34 percent in the first decade of the 2000s. Many regional areas are experiencing stagnation or economic contraction, which is contributing to the growth of support for right-wing populist parties such as Pauline Hanson’s One Nation.

The Australian Financial Review, which is waging a campaign against what it calls Australia’s “dysfunctional political culture” and its failure to deliver sweeping pro-business measures, weighed in with an editorial yesterday warning of the fragile nature of the economic upturn.

While the “surprise rebound” in coal and iron ore prices would boost profits, a “sustained return to the sort of income growth Australians enjoyed over the last couple of decades is nowhere in sight.”

The editorial emphasised the need for a “growth and productivity agenda”—the code phrase in financial circles for sweeping attacks on social services, government spending and working conditions.

Large deficits, “leave the economy much more vulnerable to any negative shock, such as another financial crisis, a China downturn or a disorderly puncturing of the reinflated Sydney and Melbourne housing bubble.”

The record low interest rate of 1.5 percent set by the Reserve Bank of Australia was yet to “cajole a pick-up in business investment” but was “injecting more speculative financial risk into the economy that could come back to bite the over-leveraged housing sector and the big banks.”

The editorial’s warnings were underscored by the OECD report. In its first major review of the Australian economy since 2014, it said the housing market may not “ease gently” but could develop into a “rout on prices and demand with significant macroeconomic implications.”

A significant fall in house prices would produce a fall in household consumption and a rise in mortgage defaults that would impact on the rest of the economy. The OECD noted that households now account for about half of Australia’s total debt, compared with around one-third in the mid-1990s. Australia is near the top of OECD rankings for household debt.

The OECD also said Australia, along with other developed economies, “now faces the risk of low growth and lacklustre private sector investment due to pessimistic expectations and weakening global trade.”

The government insists it has a plan to ensure economic growth in the form of a cut in company tax rates from 30 percent to 25 percent, costing $50 billion, over the next 10 years.

This scenario was called into question by a report published this week by the Grattan Institute entitled “Stagnation Nation?” It said while a reduced tax rate would attract more foreign investment it would also “reduce national income for years.”

Most of the short-term benefits would go to foreign investors. The report also cast doubt on whether tax cuts for small businesses would bring major benefits as they were “unlikely to lead to a substantial increase in investment.” Mining investment was experiencing its biggest ever fall and non-mining investment was down to its lowest point in 50 years, with at least a third of the decline due to slow economic growth.

The report called for a “perspective, not panic” but warned there were only “tough choices.” The main demand outlined by the OECD was an increase in the Goods and Services Tax (GST) from 10 to 15 percent. In other words, like all other corporate think tanks, the Grattan Institute is insisting that workers and their families must pay for the mounting problems gripping the Australian economy.