Russia and US Uranium

Tatyana Novikova

In March 2022, Senator John Barrasso (R-WY) introduced several bills calling for a ban on Russian uranium as a way to cut off funds for the war in Ukraine and also boost domestic uranium production. Although environmentalists applaud the Russian uranium ban, they are concerned that an expansion of domestic mining will have adverse effects on the environment and surrounding communities.

The United States relies heavily on imported uranium, with Russia supplying about 16 percent in 2020. The uranium business with Russia, however, includes not only imports but also enrichment services provided by the Russian state corporation Rosatom, which accounts for 23 percent of total enrichment services in the United States. It’s unclear what is included in the 16 percent mentioned above. If this is only uranium mined in Russia, it is not all the uranium sold to the United States by Russia.

In 2013, Rosatom acquired Uranium One, a Canadian uranium mining company. The story made the news and was discussed in the Senate in relation to concerns that Russia, particularly in the wake of its seizure of Crimea, had taken over American uranium deposits through a Canadian firm. Yet Russia in fact purchased Uranium One to gain access to vast deposits in Kazakhstan, a world leader in uranium mining and supplies. Whether the uranium mined in Kazakhstan and exported by Uranium One to the United States is labelled as Canadian or Kazakh, the profits nevertheless go to Russia.

So, banning the 16 percent of direct Russian imports would not cut off all uranium profits flowing to the Kremlin. But it would be a first step.

Filling the Gap

The United States has one of the world’s oldest nuclear power plant fleets. Their average age is 30–40 years, and many of them continue to function beyond the design period, posing additional safety risks (6). Decommissioning nuclear power plants that should have long been shut down due to age and risk factors will cut uranium fuel consumption by 16 percent or more.

Nuclear power plants produce energy not when the consumer requires it but when the reactor can safely generate it. Almost all nuclear power plants in the United States today operate at near-maximum capacity, or about 90 percent. As reactor power drops, so does the degree of fuel burnup. Thus, if the plant runs at a lower power, the same uranium can be used for a little longer, which also helps to save fuel.

So, eliminating the 16 percent of uranium from Russian sources can be accomplished through the closure of aging nuclear power plants and the implementation of energy efficiency measures.

Expanding Domestic Uranium Mining?

Uranium mining in the United States has dramatically declined in recent years. Thus, production in 2018 was 72 percent less than in 2016. The United States produced only one percent of global uranium production in 2018.

Despite Senator Barrasso’s claim that the United States has enough uranium, surface deposits are depleted. Deeper ores have low uranium content (below 0.1 percent) and high extraction costs. Then there are the environmental consequences of mining. In Wyoming, Senator Barrasso’s home state, leaching from uranium mines has already polluted groundwater, and mining companies are unable to restore it to its original state.

Uranium mining in the United States on federal lands is regulated by the NEPA act, which requires the preparation of an environmental impact statement as well as public and expert consultations. Mining operations on private lands may be regulated at a state level. The permitting process sometimes takes years.

Donald Trump loosened the NEPA act to encourage an increase in domestic uranium mining. In addition, the Department of Energy recommended changes to environmental legislation, particularly NEPA, to make it more favorable to uranium mining. However, this did not lead to practical benefits. The process was not significantly simplified, and domestic uranium production did not increase. For the United States to increase substantially its uranium mining to substitute for Russian imports, it would have to abolish NEPA, gut the country’s environmental policy and undermine Native American communities that live in proximity to the mines.

Uranium Provides Security?

Uranium has traditionally been used in nuclear power plants. The military also uses uranium in nuclear warheads, which must be renewed on a regular basis. However, the United States can import uranium from NATO allies like Canada. These imports can be increased in case of a military need. In the energy sector, meanwhile, the global uranium market has changed so much in recent decades that even if Russia supplies vanish, countries with a large fleet of nuclear power plants are unlikely to notice.

Because of sharply declining world prices, the leaders in uranium production, such as Kazakhstan, have reduced their uranium output. Following the Fukushima disaster, demand fell to historic depths and has only recently begun to rise. But even this modest increase in demand, following a ban on Russian uranium imports, would only result in the resumption of production and a quick replenishment of the deficit. In addition, since 2018 the IAEA has built up a global uranium reserve in Kazakhstan that can supply countries with uranium shortages.

At the moment, a more serious consideration than the supply of uranium is the vulnerability of nuclear power plants to terrorist attacks. After the Russian army shelled and then seized two Ukrainian nuclear power plants, including Europe’s largest, the entire world was busy preparing for a new Fukushima or Chernobyl. A terrorist attack or the shelling of a spent nuclear fuel storage at any of these nuclear power plants could have had tragic consequences for Western Europe. Rosatom can no longer be considered a responsible international partner because it was directly involved in the Russian military’s seizure of these nuclear power plants.

Strengthening national security necessitates terminating all energy ties with Rosatom and Russia. However, a Russian uranium ban should not be an opportunity to expand domestic uranium mining. Rather, it should be part of a transition away from costly and environmentally damaging uranium dependence and toward safer, more sustainable renewable energy, which is rapidly gaining not only market share in the United States but consumer interest as well.

Working class struggles explode in Peru

Don Knowland & Cesar Uco

Weeks of protest in Peru expanded last week to numerous additional sectors of the Peruvian urban and rural working class countrywide, including farm workers and miners.

The unrest was ignited on March 28, when cargo carriers began a nationwide strike, blocking roads throughout the country for two weeks. Their main demand was for relief from a 37 percent fuel hike triggered by the war in Ukraine.

The strike led to a wave of protests over inflation by agricultural workers, urban bus transport workers, cab drivers and others, mostly centered in the region of the capital, Lima.

President Pedro Castillo called out the military to clear roads and impose a curfew. Tens of thousands marched in the streets of downtown Lima to protest the curfew. Castillo had to quickly lift these measures to avoid triggering further unrest.

President Pedro Castillo speaking at an April 22 ceremony marking the 25th anniversary of the Army’s storming of the Japanese Embassy in which 14 left-wing guerrillas were massacred. (Credit: ANDINA)

Last week protests exploded throughout the country over the soaring cost of fertilizer and fuel. “Peru is a powder keg about to explode,” declared the right-wing Expreso.

Thousands joined a two-day general strike in the southeastern Cuzco region. Protestors blocked roads with rocks and burning tires.

The tourist train to the famous Inca ruins of Machu Picchu—a vital economic sector in the region—stopped operations, forcing many tourists to cancel trips.

The organizers of the Cuzco stoppage, the Tupac Amaru Revolutionary Agrarian Federation of Cusco (Fartac), threatened to resume the strike on Monday, April 25.

Cuzco’s population went back on strike even earlier, on Friday, April 23, as Castillo rushed to the city, holding an impromptu cabinet meeting aimed at tamping down the unrest.

With millions of people in the impoverished southern Peruvian Andes lacking the means to feed their families, the Cuzco strike quickly spread to other cities.

In Ayacucho, a 24-hour strike occurred. Picket lines and road blockades disrupted transit in the city of Juliaca, a center of commerce linking Bolivia with Cuzco, and with Arequipa, Peru’s second largest city and industrial center.

Farmers protested in Huancayo, which was the center of violent protests two weeks ago and is home to the “left”-nationalist party, Perú Libre, that put Pedro Castillo in office.

Similarly, in the Ancash region of northern Peru, farmers blocked the Parco bridge, which connects the coast to the Callejón de Huaylas, an inter-Andean valley in north-central Peru.

General unrest also continued among Peruvian miners and in mining communities.

On April 14, community members of Fuerabamba, located in the Andean mining department of Huancavelica, invaded the site of the Chinese-owned mega mining project Las Bambas, the third largest copper producer in the country. The comuneros have long claimed that the road which crosses their lands and is used by trucks full of copper ore pollutes the air and damages crops and livestock.

In response, Las Bambas announced it will stop producing copper. President Castillo then resorted to sending the army against the protesters.

Protests from the mostly indigenous surrounding communities demanding financial compensation and a share of future profits that had shut Southern Copper Corp's Cuajone mine since late February only ended after the government declared a state of emergency last week and sent in soldiers.

According to El Comercio, “struggle committees” have been formed in 15 of Peru’s regions, indicating the class struggle and protests will increase, as, inevitably, will confrontation with the police and army.

Peruvians are at the end of their ropes amid the worst economic crisis in two decades. It follows on more than two years of pandemic which so far has taken the lives of 212,486 people, the second highest mortality rate per capita in the world.

Soaring food and fuel prices risk escalating into a full-blown hunger crisis, particularly amid a shortage of fertilizers.

Peru’s agricultural industry is facing a deficit of 180,000 metric tons of urea, a key nitrogenous fertilizer, with output of staples such as of rice, potatoes and corn set to fall as much as 40 percent unless a solution is found in the coming months, according to Eduardo Zegarra, an agrarian economist and researcher at think tank GRADE.

World fertilizer prices have surged after Russian’s invasion of Ukraine pushed up the cost of natural gas, the main input for most nitrogen fertilizer, forcing producers in Europe to cut output. Sanctions on Russia, a major low-cost shipper of every major kind of crop nutrient, are disrupting global trade. Russia accounted for 70 percent of Peru’s fertilizers last year.

Peru’s economy will continue to shrink in the coming months. According to the Peruvian Institute of Economics (IPE), private investment will fall 6 to 8 percent. And 61 percent of citizens will face difficulty making interest payments.

The government’s exemption of fuel from the ISC (Selective Consumption Tax) and the “family basket” plus other foodstuffs from the IGV (General Sales Tax), is mostly benefiting households in the two highest income quintiles, rather than the mass of workers and peasants.

With respect to the poorest Peruvian families, La República reported, 'Common pots [survival group organizations among the poorest Peruvians] struggle over rising food prices. Getting sugar, oil, vegetables and meat has become an odyssey for the leaders of these organizations.”

To make up for the loss of income, since the early months of the pandemic families have been depleting their pension fund savings to pay for house rent, schools, food, transportation and other essential goods and services. As a result, pension assets in the country have dropped by about one-third.

The impact of inflation is only expected to worsen. In the last 12 months it was 7.45 percent. To curb inflation, the Bank of Peru has increased the reference interest rate by 50 basis points (0.5 percent), in turn increasing borrowing costs. This measure will particularly affect micro and small enterprises (mypes), which are the main generators of jobs in a country, where labor informality stands at 76 percent.

The popular response to corruption scandals, the marked incapacity of Pedro Castillo’s bourgeois government to meet the crisis and his recent consorting with far right-wing elements is expressed in the most recent polls. According to pollster Ipsos, the approval rating of Castillo has fallen to 19 percent, and that of Congress President Maria del Carmen Alva, of the center-right party Acción Popular, to 15 percent; 63 percent said Castillo should resign. The main bourgeoisie newspaper, El Comercio, trumpeted 'Massive rejection of Pedro Castillo.'

But the popular slogan has been “out with all of them,” reflecting a rejection of the entire bourgeois governmental setup.

There are in fact widespread calls for Castillo to resign. According to the Financial Times, many others “want him to fulfill his campaign promises to elect a constituent assembly to draw up a new constitution, to nationalize the gas industry and to implement agrarian reform,” a platform the Peruvian right last year called communism.

Desperate in the face of mass disapproval, at the cabinet meeting on Friday in Cuzco Castillo said he would send a bill to Congress to place a referendum on the regional elections ballot in October to draft a new constitution. Castillo knows full well that Congress will not agree, and that the measure is just a stunt to quell popular disquiet. Talk at the meeting by Mining Minister Carlos Palacios about lowering contract prices at Peru’s giant Camisea natural gas fields similarly was nothing but blather.

The reality is that the entire Peruvian capitalist class confronts a crisis of rule. It is incapable of providing any significant reforms.

The pseudo-left, including publications like Jacobin and Counterpunch, last year had posited Castillo, the candidate of a “Marxist” party, as the shining knight of a left revival. But after nine months in office, he has done nothing to challenge the interests of the national bourgeoisie and international capital. The disaster was so obvious that by year’s end they stopped bothering to even write about him anymore.

Other so-called “left” groups in Peru are so decrepit and politically bankrupt that they provide only a dead end for the Peruvian masses. Calls for an April 7 mobilization by the Stalinist Communist Party-controlled General Confederation of Workers (CGTP) and the Maoist Single Union of Education Workers of Peru (SUTEP) went unnoticed.

Likewise, the collectives and organizations leading various workers' struggles—such as Fartac in Cuzco—are only seeking an accommodation with the government. Several have a record of working with transnational companies and lining their own pockets.

UK Chancellor Sunak demands billions more be clawed back in student loan repayments

Ioan Petrescu

UK chancellor Rishi Sunak’s spring statement contained sweeping attacks on working-class university graduates.

The annual earnings threshold after which student loans must begin to be repaid will be lowered from £27,295to £25,000. Loans will now be written off only after 40 years rather than 30. The move to link interest on the loan to the RPI rate of inflation, rather than RPI + 3 percent, is in effect a giveaway to the highest-earning graduates.

The changes will hit working-class youth the hardest, with the Institute for Fiscal Studies (IFS) estimating that those with lower and middle earnings will have to pay around an extra £30,000 over the duration of the loan.

Up to 300 students in a lecture room at Cardiff University this year (WSWS Media) [Photo: WSWS]

Previously the repayment threshold increased in line with average earnings. Now the government has frozen the threshold at £25,000 for the next five years, meaning—under conditions where inflation is set to reach record levels—that graduates will have to spend more and more of their income on paying back their loans.

The threshold is due to start increasing again from 2027-2028 school year, but it will be indexed to RPI, rather than average earnings, meaning that future graduates will pay back a larger share of their student loans if they do manage to make gains in their salaries.

Currently only 25 percent of graduates fully repay their loans. The combination of the lengthened repayment period and the lowered threshold will increase this figure to 70 percent, according to the IFS. By their calculations, Sunak’s changes will save £6 billion in 2023 and £2.3 billion each year after that.

While capping the maximum interest rate at RPI, rather than RPI + 3 percent, reduces the amount to be paid, this has a very small impact for most graduates—dwarfed by the other changes. The ones who will benefit are the highest-earning graduates, only minimally impacted by lowering the income threshold and increasing the repayment term. According to the IFS, graduates at the top of the earnings scale stand to pay back as much as £20,000 less with the new reform.

Students who have enrolled at universities since 2012 (the last time the loan system was reformed) get the worst of both worlds. They are affected by the changes in repayment thresholds starting from 2023, but they will not see the benefit from the lower interest rates. The IFS estimates middle-earning graduates in this cohort will pay £20,000 more over the course of their loans as a result. Given the current rates of inflation, interest on tuition loans for students in this group is set to soar to 12 percent next September.

Martin Lewis, who heads financial advice website Money Saving Expert, said Sunak’s “plans will see most university leavers pay far more for their degrees over their lifetime than they do now. It effectively completes the transformation of student ‘loans’, for most, into a working-life-long graduate tax. 

“The decision to extend repayments to 40 years, combined with the other measures, will leave most who start university straight after school still repaying it into their 60s.”

Sunak has taken the next step in the long-prepared marketisation of higher education—transforming higher education even more into a privilege reserved for the rich—beginning with Tony Blair’s introduction and initial tripling of tuition fees and David Cameron’s second tripling of the cost of university education to £9,000 a year. This was done under a system which initially left the government picking up the tab for billions of pounds of unpaid loans. The Financial Times reports, “The government has estimated that 54 per cent of student loans will never be paid back, with the current value of unpaid debt at £161bn.”

But the ruling elite never had any intention of covering this cost and have since been working to shift the burden more fully onto students.

A spur has been given by the government’s drive to claw back the hundreds of billions spent by the government during the first two years of the pandemic, most of it as bailouts for big business. Sunak offered a measly one-off 5p per liter fuel duty reduction and a 1 percent reduction in the basic rate of income tax from 2024 as the only sops in his brutal spring statement. The money for funding these tax cuts comes almost exclusively from increasing the burden on poorer graduates with the new student loan reform.

The student loan announcements are also an effective cut to higher education, with yearly fees capped at £9,250 and no additional government money made available. The fully realized marketised system is intended to simultaneously cut down student numbers and the range of higher education provision on offer.

Since most university funding comes from student tuition fees, and with inflation surging and predicted to rise further, the cap will put many institutions in a precarious financial position, resulting in the ditching of “unprofitable” courses and more cuts to staff pay and conditions. The Financial Times cited Universities UK who “calculated that by the end of the 2024 academic year, inflation would reduce the value of the annual tuition fee to £6,600 based on 2012 prices, when the fees cap trebled to £9,000.”

According to the Organisation for Economic Cooperation and Development’s (OECD), the UK already has the lowest share of public funding in tertiary education among member countries at 25 percent, compared with an OECD average of around two-thirds. As the government proceeds with its plans, working-class youth will be forced out of a reduced number of courses and spaces, if they can afford to even consider going to university at all.

The education unions have no fundamental opposition to any of the measures outlined by Sunak.

National Union of Students (NUS) president Larissa Kennedy said the spring statement was a “disgrace” as “Students are paying hundreds of pounds extra in energy bills, relying on foodbanks thanks to soaring inflation, and being forced to choose between heating and eating.” But this bluster belies the NUS’s record.

No calls were made for a fightback against the government, or the slightest opposition raised against the entire student loans system—long accepted by the NUS and the education unions. These organisations offered only token resistance to Labour’s introduction and tripling of tuition fees. They demobilised major protests against their further trebling to £9,000 a year and the slashing of grantslike the Education Maintenance Allowance. Today they make no calls in support of the right to universal free higher education.

This is the case even as the attacks on students are intensifying, and those from working-class backgrounds are steadily deprived of access to higher education, and at a time when university staff are fighting against an unprecedented reduction of their pensions and evisceration of their pay, terms and conditions. The NUS and University and College Union (UCU) have organised no systematic campaign against the marketisation of higher education which underlies the attacks faced by higher education students and workers alike.

The disintegration of the German Left Party—the price of right-wing politics

Peter Schwarz

On Wednesday, Susanne Hennig-Wellsow relinquished the leadership of the German Die Linke (Left Party) with immediate effect. It had only been 14 months since she and her co-leader, Janine Wissler, had been elected to head the party. Wissler is now to lead the party alone until a new leadership is elected in June.

Janine Wissler and Susanne Hennig-Wellsow during their election to party leaders in February 2021 (Image: Martin Heinlein/Die Linke/CC BY 2.0)

Hennig-Wellsow’s resignation is just the latest chapter in a rapid disintegration of the Left Party. In last September’s federal election, it lost nearly half its previous share of the vote and missed the 5 percent hurdle required for parliamentary representation. Only because it won three direct mandates is a Left Party faction returning to the Bundestag at all. Presently, the party polls at 4 percent nationwide.

At the end of March, the Left Party plummeted from 12.8 to 2.6 percent in the Saarland state election. Oskar Lafontaine, who had co-founded the party in 2007 and ultimately led the state parliamentary group in Saarland, had quit the party shortly before.

As is always the case with internally rotten parties, the political issues underlying their decline are not openly discussed. Instead, the tensions and wing wars that inevitably accompany decay are fought out over sideshows—scandals, affairs and personal accusations.

Hennig-Wellsow’s resignation is no exception in this respect. She begins her resignation statement with a lengthy lament about the party’s crisis, without once getting specific, followed up with volleys of poisoned arrows upon her rivals.

“We could not deliver on the promise to be part of a forward change in policy due to our own weakness,” she states. “We have delivered too little of what we promised. Any real new beginning has failed to materialize. An apology is due, an apology to our voters whose hopes and expectations we have disappointed.”

And further: “A programmatic, strategic and cultural renewal of the Left is necessary, as we have known for years. I have done all within my power to contribute to it. But we have not yet come as far along this path as I believe we should have. We have betrayed trusts ...”

Hennig-Wellsow cites three reasons for her resignation: Her private life situation, the political difficulties of recent months—“the renewal needs new faces to be credible”—and the “handling of sexism in our own ranks.”

The second and third reasons are directed at internal party rivals, especially at co-chair Janine Wissler. The influential weekly Der Spiegel published a long article last Friday about allegations of sexual assault in the Hessian state party, where Wissler played a leading role for years. In it, Wissler’s then-life-partner is accused of sexual assault and Wissler herself of covering it up.

Although a party statement affirmed to Wissler that she had behaved in a politically correct manner, the accusations of sexism have since been further amplified—especially within the Left Party-associated Solid youth organization—in an internal party #MeToo campaign. Only an independent investigation can show what to make of all this. In any case, the sexism accusations are not the cause, but only a means in the internal party mud fight.

The real cause of the Left Party’s crisis and decline is its right-wing politics. The worsening of the social crisis as a result of the pandemic and inflation, as well as the war in Ukraine, have made it impossible to hide its right-wing policies under left-wing phrases. Whoever voted for the Left Party under the wrong impression that it was a left-wing alternative is turning away.

The claim that the Left Party and its predecessor, the PDS, are left-wing, anti-capitalist or socialist has always been a fraud. Emerging from the Stalinist state party of East Germany, the PDS initially served as a wailing wall for all those who had been short-changed in German reunification, which the PDS itself had supported. But the more it was needed to quell social tensions in the East, the more openly it professed its support for social cuts and a police state.

In 2007, renegade Social Democrats and union bureaucrats from the West, who feared that the Social Democratic Party (SPD) could no longer keep the class struggle under control because of its mass-impoverishing Agenda 2010, united with the PDS to form the Left Party. Several pseudo-leftist groups who had previously led a meagre existence in the pocket of the SPD and trade unions also joined the new party, which provided them with lucrative political careers. Among them was Janine Wissler, who had been a member of the group Marx21, close to the International Socialist Tendency, and its predecessors for two decades.

In the federal states where it assumed government responsibility, the Left Party cut social spending as savagely as any other party, deported refugees and outfitted the police. In the state of Thuringia, the party has held the prime ministership for the last seven years.

With the Ukraine war, the Left Party is letting the last fig leaf fall: its nominal renunciation of militarism and NATO, which was never more than platonic lip service without practical consequences.

Gregor Gysi, a founding member and long-time leader of the PDS and the Left Party, tried to win support for the German federal government’s €100 billion rearmament program as early as February. Gysi accused left-wing deputies who opposed it: “You are only interested in saving every aspect of your old ideology. NATO is evil, the US is evil, the federal government is evil, and that’s the end of it for you.”

Hennig-Wellsow immediately backed Gysi. In a written contribution, she called for “self-criticism.” The Russian attack on Ukraine showed “how great one’s own illusions were” that had led to “devastating misjudgements.” One cannot “cling to ‘truths’ that have been crushed by tanks and missiles.”

Even if it is not easy to “reconcile the desire for peace and the will to defend,” Hennig-Wellsow said, the party must ratchet up its “own notion of ‘defensive potentials.’” The call for the “dissolution of NATO and its replacement by a collective security system with the participation of Russia,” which is still in the party’s current program, must also be questioned, she said.

Hennig-Wellsow, the daughter of an East German policeman taken on by the West German police after reunification, was State Prime Minister Bodo Ramelow’s right hand as the Thuringia state party parliamentary group leader before moving to Berlin last year. She is one of those Left Party representatives particularly eager to prove their “ability to govern,” i.e., their unqualified loyalty to the capitalist order.

Now she has resigned, irked, but her war path has become official policy of the Left Party, fitting seamlessly into the war propaganda of NATO, which is flooding Ukraine with weapons, waging a proxy war against Russia and risking a nuclear World War III.

On March 6, in a recent general debate in the Bundestag, Left parliamentary group leader Dietmar Bartsch explicitly backed the German government, which is supplying Ukraine with arms on a large scale, and called for unity among the “West,” i.e., NATO.

“I want to state this clearly: the responsibility for the war and the crimes lies with Russia, not with anyone in Germany,” he declared, calling on all other parties to stand united: “Those who try to instrumentalize the war in Ukraine for party political reasons are not contributing to ending the war, but are playing into the cards of Russian propaganda of a divided West.”

To the extent Bartsch criticized the German government, the criticism came from the right. “Why is Germany failing to enforce sanctions against Russian oligarchs?” he asked. Belgium, France and Italy, he said, had managed to freeze much higher sums.

In a video published by Die Welt, Bartsch advocated a halt to energy imports from Russia, something even the ruling government has so far rejected for fear of devastating economic consequences. It is an “insane situation,” he said. “We are financing this war. We are transferring hundreds of millions every day into Putin’s war chest.”

There is no serious opposition to this war policy within the Left Party. Janine Wissler loyally supports the course of Gysi, Bartsch and Hennig-Wellsow.

Left Party politician Sahra Wagenknecht and her followers, who most clearly distance themselves from NATO, do so from a German-nationalist standpoint rather than a principled stand against German militarism. They believe that German imperialism could better advance its national interests by breaking away from US dominance.

As debts mount, IMF calls for Australian budget “repair”

Nick Beams

The Australian election campaign has demonstrated the unity between the Morrison Liberal government and the opposition Labor party on all major issues. It is clearly illustrated in their agreement to cover over the depth of the global economic crisis and its impact on the policies of whatever government comes to power after May 21.

International Monetary Fund Managing Director Kristalina Georgieva speaks during an interview outside of the International Monetary Fund (IMF) building during the World Bank/IMF Spring Meetings in Washington, Thursday, April 21, 2022. [AP Photo/Jose Luis Magana]

Global commodity markets are in turmoil, inflation is running rampant, rising central bank interest rates are threatening to produce financial instability and a recession, and the debt of governments around the world is at record levels. But all of this is being ignored in the official campaign as both parties seek to promote the fiction that Australian capitalism can ride out the storms.

Above all they seek to cover over the implications of the massive increase in government debt because of COVID spending, much of it in billions of dollars to major corporations, and how it will be brought down. However, the issue of repayment is not being ignored by global financial authorities.

Last week at its semi-annual meeting in Washington, the International Monetary Fund (IMF) made it clear that, as the budgets of governments go deeper into the red, the task of “fiscal repair”—the cutting of government spending on vital social services and facilities—had to be undertaken.

Since the start of the pandemic Australia has recorded its three largest budget deficits in history. According to the IMF, of the 34 developed nations that it tracks, Australia will have the eighth largest structural deficit in the next financial year coming in at 3.6 percent of GDP. It also had one of the largest increases in gross debt in the developed world.

When the Liberal-National Coalition came to power in 2013, Australia’s gross debt was 30.5 percent of GDP. By next year it is predicted to double to more than 62.5 percent. At present the debt level is $899 billion but is expected to go beyond $1 trillion in the immediate future.

The debt has been incurred in a period of ultra-low interest rates. But this environment is now rapidly changing as central banks, including the Reserve Bank of Australia, move to lift their rates in response to rapidly accelerating inflation.

The pace of the change is indicated in the Pre-Election Economic Fiscal Outlook (PEFO), produced by the Treasury and Finance Department. The PEFO report estimated that government debt could end up $12 billion higher than forecast in the budget brought down just three weeks ago because of rising interest rates.

At last week’s IMF meeting, the head of its fiscal affairs department, Vitor Gaspar, said there were increasing risks for countries that had increased their debt levels during the pandemic. Countries such as Australia had to start “normalising” their fiscal policy.

“Treasuries in advanced economies must heed rising inflation. For the past two decades, they have benefited from declining debt service costs, stemming from trends both in nominal interest rates and neutral real interest rates.”

But in a situation of “high and volatile inflation, the attractiveness of sovereign bonds is undermined, making it harder to sustain elevated levels of debt.”

According to estimates by the Australian Financial Review (AFR), “whoever wins the federal election … will face 15 years of deficits and the need to find savings of $40 billion a year in the next few years.”

Commenting on the fiscal situation last month, Chris Richardson of Deloitte Access Economics said: “Making decisions to save more than $40 billion a year wouldn’t be a walk in the park. And neither side of politics will talk about this challenge—certainly not this side of the election and probably not afterwards either.”

The issue, however, is being discussed in financial circles. In a recent policy paper, the Centre for Independent Studies insisted that the high debt had to be reduced.

“Fiscal policy will be grappling with the debt burden for many years to come,” it said, “and the first task is to close the structural deficit that has opened up.” This necessity had to “concentrate the minds of our economic policy makers” in future years.

The reduction in the deficit will not come about through increased taxes on corporations and higher income earners.

Campaigning in the Northern Territory over the weekend, Prime Minister Scott Morrison announced his Lower Tax Guarantee saying the government would deliver “$100 billion in tax relief over the next four years.” Morrison claimed the tax break would benefit workers with mortgage repayments. But the measures, to which the Labor Party has agreed, are targeted almost exclusively at higher income earners.

This means that so-called “budget repair” will be aimed at spending cuts on vital health, education and other social services as military spending is boosted still further as part of the governments war preparations being directed against China.

The cuts have already been initiated in the recent federal budget in which a short-term “cash splash,” consisting of minor tax adjustments plus a temporary reduction in fuel excise, was used to mask significant real cuts in health spending.

The Labor Party, having signed off on the government’s cuts for higher income earners, has pledged that it will not make any tax changes beyond the implementation of the multinational tax agreement decided on by the Organisation for Economic Co-operation and Development.

Election campaigns in Australia, above all when dealing with economic issues, are always conducted as if the state of the global economy was merely a backdrop from which the “resilient” Australian economy was insulated.

This trend is even more evident in the current campaign amid warnings that the global financial outlook is being rapidly transformed.

In its Global Financial Stability Report issued last week, the IMF said the sharp rise in commodity prices, together with more prolonged supply chain disruptions, had led to a significant rise in inflation expectations.

“Financial stability risks have risen along several dimensions and the resilience of the global financial system may be tested,” it said.

It warned that interest rates may rise above what has been priced in by markets and for many countries they may rise “well above their neutral level.” That is, central banks may lift them to a rate that induces a recession.

So far, the Australian economy has benefited from rising commodity prices but that could rapidly change. AFR commentator Karen Maley warned in a column last week that the worsening economic outlook in China, resulting from the latest COVID outbreaks, coupled with the slump in the property market, would have their impact.

At present, the strong Chinese demand for steel and iron ore, which is providing a boost to the Australian budget, reflected the fact that many cash-strapped property developers were rushing to complete construction projects so they could sell apartments to use the cash to pay down debt.

“The problem is that when these part-finished residential projects are finally completed, Chinese demand for commodities is likely to suffer a brutal decline,” she concluded.

Sri Lankan finance minister declares austerity will get worse before it gets better

Saman Gunadasa

Addressing the Colombo media from Washington last Friday, Sri Lankan Finance Minister Ali Sabry signaled that harsh austerity measures were being dictated in talks with the International Monetary Fund (IMF). Sabry is leading the negotiating team seeking emergency loans and debt restructuring to help deal with immense economic crisis confronting the country.

Ali Sabry (Photo: Facebook)

Sabry said: “Although it is going to be painful couple of years, I think the IMF opportunity is a moment for us to seize irrespective of all differences.” The government and the political establishment as a whole will accept the IMF’s terms, but the “pain” will inevitably be imposed on the vast majority of the population—working people and rural toilers.

The finance minister tried to put the best possible face on the situation, declaring: “I am confident that Sri Lanka can overcome this economic crisis.” He then added: “Of course, it is going to be worse before it gets better.” Given the global economic turmoil, workers can have no confidence that the social disaster they confront will get better in two years.

Sabry said: “For emergency financing, the Government is considering options from various countries such as India, China and Japan in addition to the World Bank and the Asian Development Bank (ADB).” The World Bank is supposed to provide $US300-600 million “bridging finance” immediately, while ADB has indicated it will provide $21 million to import medicines.

Sri Lanka is not able to raise commercial funds as rating agencies including Moody’s, Fitch and S&P have downgraded the country’s credit rating to junk status. The Sri Lankan rupee has depreciated by almost 70 percent, to 340 rupees to the US dollar, in less than two months. The country has already declared a temporary default on its foreign loans.

Sri Lanka’s worsening economic crisis is an acute expression of the global economic downturn that has been exacerbated by the two years of the COVID-19 pandemic and now the US-NATO proxy war against Russia in Ukraine along with the associated crippling economic embargo against Moscow.

Sabry’s comments come as the island is engulfed in mass protests demanding the resignation of President Gotabhaya Rajapakse, Prime Minister Mahinda Rajapakse and the government over the economic and social crisis. At the main protest site, Galle Face Green in central Colombo, thousands have been protesting day and night since April 9.

Working people must wait in long lines for hours just to buy the basics, which are not always available or affordable. Prices are soaring. The price of cooking gas cylinders and everyday items doubled over the past week, putting them out of reach of many. At least six people have died queuing for essentials.

The protests have further escalated as a result of the widespread anger over the police shooting at protesters against fuel price hikes in the provincial town of Rambukkana on April 18. A worker Chaminda Lakshan was killed and two dozen others were injured.

The escalating protest movement has deepened the political crisis of the Rajapakse government, which has effectively lost its parliamentary majority with the desertion of more than 40 of its MPs. The police killing of Chaminda Lakshan is an ominous sign that it is prepared to resort to police state measures to try to crush opposition to the IMF austerity agenda.

IMF Sri Lanka Mission chief Masahiro Nozaki told Reuters: “The country needs to take steps to restore debt sustainability prior to any IMF lending, including the emergency Rapid Financing Instrument (RFI).”

The IMF’s insistence on “debt sustainability” as the precondition for any fund release is to ensure that the country’s international creditors—half of them commercial investment houses—are paid while the full burden of the crisis is imposed on working people.

The finance minister is to appoint financial and legal experts to speak to the creditors within the next 15 days. One such expert, Lee Buchheit, specializing in imposing hardship in South American countries, has already briefed the Sri Lankan delegation. In Belize for instance—a country which declared bankruptcy in 2020—public sector wages were slashed and a broad-based general sales tax was imposed.

Sabry has already foreshadowed fiscal, institutional and tax reforms. The measures include raising income and value-added taxes; increasing fuel prices and electricity prices; instituting a market-determined flexible exchange rate; cutting the fiscal deficit, i.e., slashing social spending; and “restructuring” the state sector through privatization, corporatization and contracting-out, which will drastically destroy jobs and working conditions.

In an interview with Bloomberg, Sabry said Sri Lanka’s present tax revenue had to be increased from 8.6 percent to 13–14 percent of the gross domestic product (GDP). This can only be done by widening and increasing direct taxes on working people in addition to increases in indirect taxes on food and other essentials.

The working class, youth and rural toilers will not passively accept new harsh austerity measures dictated by the IMF. Hundreds of thousands, if not millions, have protested against the already intolerable conditions they face and demanded the resignation of the government.

However, matters cannot be left in the hands of the Colombo political establishment—the government or the opposition parties that all agree that the burden of the economic crisis must be imposed on working people.

Twitter accepts $44 billion acquisition offer from Elon Musk

Kevin Reed

Twitter announced on Monday that it had agreed to be purchased by the billionaire and richest individual in the world Elon Musk, turning the microblogging and social media platform with 217 million active daily users into a privately held company.

The transaction will remove Twitter from the stock market and make it the private property of Musk, who has a personal wealth of $257 billion and uses the platform for statements that alternate between narcissism, right-wing populism and buffoonery.

In a cynical and self-serving tweet on Monday afternoon, Musk posted, “I hope that even my worst critics remain on Twitter, because that is what free speech means.”

In a company press release, Twitter stated that it has “entered into a definitive agreement to be acquired by an entity wholly owned by Elon Musk, for $54.20 per share in cash in a transaction valued at approximately $44 billion.”

The statement explains that the current stockholders will receive $54.20 “for each share of Twitter common stock they own” and that this price “represents a 38 percent premium” above Twitter’s closing stock price on April 1, 2022, the last trading day before Musk had become the company’s largest shareholder.

Twitter board chairman Bret Taylor said in the press release that the deal with Musk was approved unanimously by the board after a “thoughtful and comprehensive process to assess Elon’s proposal,” and that it was “the best path forward for Twitter’s stockholders.”

Musk is quoted in the Twitter release repeating statements he has made over the past few weeks about the importance of free speech for the functioning of democracy and that Twitter is “the digital town square where matters vital to the future of humanity are debated.” He said he wants to improve Twitter by enhancing it with new features and “making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans.”

Tesla CEO Elon Musk (Wikipedia photo)

The transaction will close before the end of 2022, subject to the approval of shareholders and pending government regulatory approvals. The financing for the deal is made up of the $21 billion provided by Musk from the sale of other stocks he owns, primarily Tesla, and $25.5 billion in borrowed funds, referred to in the Twitter release as “fully committed debt and margin loan financing.”

Subsequent news reports that analyzed the Securities and Exchange Commission filings said that Morgan Stanley and a group of banks and other financial institutions provided $13 billion in debt financing and another $12.5 billion in loans Musk borrowed against his Tesla stock. 

The Verge reported that, during an all-hands call on Monday, Twitter CEO Parag Agrawal told staff he had no answers as to what would happen after the deal is complete. In response to questions about layoffs, Agrawal said there were no plans to cut jobs “at this time.” He also said he would remain CEO until the closing with Musk.

When he was asked if Musk would restore the account of Donald Trump, which was terminated in the days immediately following the January 6 insurrection in Washington, DC, Agrawal said, “Once the deal closes we don’t know which direction the platform will go.” Donald Trump claimed on Monday he would not return to Twitter even if he was invited back. 

Aside from Musk’s plan to become the private owner of Twitter, there is considerable financial incentive for the current shareholders and board to sell the company to him. Twitter has lost money in nine of the last eleven years. User growth at Twitter has plateaued and advertising revenue, its primary source of income, has been inconsistent.

Like the rest of the stock market, after a sudden drop to $23.95 at the beginning of the coronavirus pandemic, Twitter’s Wall Street value climbed steadily throughout 2020 once the US government began pumping trillions of dollars into the financial system.

However, while the rest of the market kept on climbing, Twitter reached a highpoint of $77.06 in February 2021 and then dropped to $33.00 a year later. It was at this point that Musk began his stock purchasing spree and ultimately spent nearly $3 billion to achieve a 9.1 percent ownership share in Twitter. At market close on Monday, Twitter shares were trading at $51.70, not far below Musk’s offering price.

Twitter was founded in 2006 and quickly became one of the most popular of the social media platforms that heralded a significant transformation of online technologies spawned by the Internet and the World Wide Web. The mass adoption of social media—including platforms like YouTube, Facebook, Instagram, WhatsApp, TikTok and others—by billions of people internationally was driven by the convergence of mobile wireless broadband and smartphones equipped with photo and video cameras and apps.

The Twitter platform distinguished itself from the other social media technologies by enabling users to report on, comment and share the content of others in real time anywhere in the world based on short text messages with embedded images, video and links to websites and other online content. Twitter has been used effectively by individuals and political parties, public relations professionals and other organizations to communicate information and news instantaneously to those who are following them as well as the general Twitter user base using a novel categorization method known as the hashtag (#).

The corporate media is generally ecstatic about the Musk acquisition. The Wall Street Journal said, if it goes through, the deal “would mark one of the biggest acquisitions in tech history and will likely have global repercussions for years to come, including possibly shaping how billions of people use social media.”

Aside from concerns about the possibility that Musk’s ownership of Twitter will have a positive impact for Republicans and a negative impact for Democrats—based on the bogus assertion that online censorship is being used exclusively against right-wing political voices—there is not the slightest hint of fundamental criticism in any of the commentary. That a platform being used by several hundred million people worldwide is now owned and run by a single individual is in fact a completely reactionary and retrograde development.

Meanwhile, Musk’s self-description as a “free speech absolutist” means that, under his decision-making authority, he would have permitted Donald Trump to utilize the platform for the purpose of carrying through his coup attempt aimed at overturning the results of the 2020 presidential election during the January 6, 2021 fascist assault on the US Capitol, as part of an antidemocratic conspiracy that continues to this day.