Unrest in Peru

Chloe Atkinson

Photograph Source: Galería del Ministerio de Defensa del Perú – CC BY 2.0

Peru unrest highlights country’s instability As Peru experiences nationwide anti-government protests following the removal of President Pedro Castillo after what appears to have been an attempted self-coup, current President Dina Boluarte said she would not step down in the face of violent protests over her predecessor’s ouster as she called on lawmakers to bring forward elections as a way to quell unrest.

Authorities in Peru also arrested six police generals on Monday as part of an investigation into corruption which authorities say Castillo was directly involved in.

It is unclear if this was a self-coup or an imposed coup. Some of the leaders of the region’s countries see Castillo as the victim of a coup rather than the perpetrator. The leaders of Mexico, Argentina, Colombia and Bolivia issued a statement declaring the ousted Castillo as “the victim of anti-democratic bullying” and calling on Peru’s government institutions “to refrain from reversing the people’s will as expressed in a free vote.”

Protesters have blocked highways, set buildings on fire and taken over airports in the wake of Castillo’s move, after he tried to shut down Congress to avoid an impeachment vote he feared losing.    Demonstrators are demanding early polls, and the release of Castillo who

Demonstrators are demanding early polls, and the release of Castillo who appears to have caused this political upheaval over his claim that he is protesting what he said is a hostile Congress which made it extremely difficult for him to govern.

Castillo, 53, was the president of Peru since July 2021. Prior to his presidency, Castillo was a school teacher from a humble background and a union leader in Peru’s rural areas. He ran for president as the candidate of the Peru Libre party and campaigned on a platform that included promises to reduce poverty, combat corruption, and promote social justice. Castillo was elected by a public deeply frustrated by conventional politics, so when he delivered his surprise address to the nation that he intended to dissolve Congress and replace it with an “exceptional emergency government” and also declared a nationwide state of emergency, which he said was aimed at “re-establishing the rule of law and democracy,” the public was not willing to accept it.

Boluarte, 60, the former vice president who assumed the presidency on December 7, has insisted that Congress approve her proposal for a constitutional amendment that would have pushed up elections, originally scheduled for 2026, to December 2023. But now, Boluarte has refused to resign despite the worsening protests that have left at least 20 people dead and more than 500 demonstrators and security forces wounded.

The crisis has only deepened the instability gripping the country, which has seen six presidents in as many years. The country has seen a series of presidents ousted and a number of ex-presidents sent to prison for crimes committed during their time in office. Castillo’s cabinet underwent constant change and in one unusual incident in 2020, the country had three presidents in the space of only five days.

Yet Peru’s problems go back a few decades, if not more. Peruvians experience deep poverty, inequality, corruption, social and political instability, and a lack of access to quality education, healthcare, and other basic services. In addition, natural disasters, such as earthquakes and floods have also caused hardship and discontent in the country as dysfunctional governments have been slow to respond to the needs of citizens. Peruvians, like people in many other countries, want change for a variety of reasons.

They feel that the current political, economic, or social systems in Peru are not meeting their needs or addressing their concerns, and therefore want to see changes in these systems. They feel that the country is facing significant challenges, such as poverty, inequality, and corruption. They also see that the country is not making progress in areas such as education, healthcare, and infrastructure, and want to see improvements and not just empty political promises. Peruvians are fed up with the status quo and the election of Castillo was an expression of their feelings that the status quo is not serving them or their country well, and that there are opportunities for improvement.

US State Department Spokesperson Ned Price announced that Secretary of State Antony J. Blinken spoke on December 16 with Boluarte. “Blinken encouraged Peru’s institutions and civil authorities to redouble their efforts to make needed reforms and safeguard democratic stability,” he said, adding that the US “looks forward” to working with Boluarte on “human rights, security, anti-corruption, and economic prosperity.”

Blinken also called for “constructive dialogue to ease political divisions and focus on reconciliation.”

Through its embassy in Lima, the United Kingdom also condemned “acts of vandalism and violence,” especially “those who take advantage of peaceful protests to sow discord and instability.” “We call to seek dialogue, reach agreements, and work together with President Boluarte and her government to follow the constitutional order, and guarantee a peaceful and democratic path,” the UK added.

These calls for order, peace, and stability are expected but they do little to help the citizens on the ground. Castillo’s self-coup should be viewed as testament to the poor political reality in Peru and the dysfunctional relationship between the executive and legislative branches. The unrest should also be viewed through the prism of the changing world order, with public protests taking place in Iran and China, and the ongoing Russian war against Ukraine.

The people of Peru may be seeing this is an opportune time to rise up and fight for their cause as opposed to sitting back and relying on the politicians. Castillo, whom the people hoped would prove to be the answer to their problems, seems not to have achieved their trust as their living conditions have not improved. The public’s discontent that brought Castillo into power will only grow further unless Peru’s leaders can find a way to improve the lives of citizens and ensure stability. Peru’s leaders must buckle down and deal with poverty, inequality, and corruption as well as problems with education, healthcare and infrastructure. Only then will Peru see a return to stability.

COVID hospitalisations up almost 30 percent in Britain

Robert Stevens

COVID cases are rising sharply, with hundreds of deaths still reported weekly. Latest Office for National Statistics (ONS) figures published this week but based on the situation nearly three weeks ago in the seven days to December 9, estimate 1.4 million people in private UK households testing positive for the virus. This is up from 1.1 million infections a week previous.

Sarah Crofts, ONS deputy director for infection survey analysis, said, “Today’s data show that Covid-19 infections have risen for the fourth consecutive week in England, with cases also continuing to rise in Scotland.

“Over half of English regions saw an increase, while it’s a mixed picture for different ages. Infections have increased among most adults under 70, while secondary school-age children experienced a decrease in infections.”

The highest level of infection was in Scotland with around one in 40 people (130,900) estimated to be testing positive, a rise from the one in 60 at the end of November. In England, 1.2 million people were estimated to have COVID, one in 45 people and up from one in 60 at the end of November.

The ZOE COVID Study app, the world’s largest ongoing study of COVID, with more up-to-date figures, reported over 3.3 million current infections in Britain on December 26. ZOE app users also recorded 265,000 new infections on the same day. The study had its funding removed by the Conservative government months ago.

A graph designed by Twitter user Dr. Joe Patak showing in the top right 3.3 million current infections in Britain on December 26,. This figure is from the ZOE COVID Study app, as opposed to the 1.1 million infections estimated by the ONS. ZOE app users also recorded over 265,000 new infections on the same day. [Photo: @JoePajak/Twitter]

COVID cases are rising more than 17 months since the pandemic was declared over by then Prime Minister Boris Johnson. Everyone was told to “learn to live with the virus” by the government, and even more grotesquely to “live well with COVID” by the Labour Party opposition.

Since that date nearly 60,000 more people have died from the disease. According to data compiled by Johns Hopkins University and available on Our World in Data, total deaths in Britain from COVID stand at 213,249. The government’s own tally of fatalities, measured as someone dying within 28 days of a positive COVID test, will soon pass 200,000 (currently 198,937).

The ONS data was released before the start of the Christmas holiday season, when millions met with their families throughout Britain and vast numbers of shoppers gathered in city centres and indoor shopping venues for the winter sales. Such gatherings are proven super-spreader events. Yet more infections will be recorded as the New Year festivities take place.

Scientists fear that a new COVID mutation circulating in the UK, the BQ1 variant of Omicron, could lead to a flood of new cases in a winter that has been mild so far. At the beginning of December, BQ1 made up around half of all cases in the UK, compared to 39 percent the previous week.

As of November 30, according to NHS England, 4,964 people were in hospital after testing positive for COVID—an 8 percent rise on the previous week. Hospitalisations have surged in the month since. According to the ONS, 8,643 people were in hospital with COVID in England alone on December 21. This was an increase of 29 percent week-on-week and the highest total since late October.

While the government and mainstream media no longer publicise any data that conflicts with the “the pandemic is over” narrative, on December 23 Twitter user Tigress @tigresseleanor reported, “#COVID19 hospital admissions continued to increase to 9.56 per 100,000 people in the week ending 18 December 2022. The number of deaths involving #COVID19 increased to 380 in the week ending 9 December 2022.”

Children continue to be infected by COVID and to die from the disease. The previous day the account tweeted, “There were 462 Covid cases reported in 0-4 year olds. 191 children 0-5 were admitted to hospital with Covid. Under reported cases or more severe in 0-5 ?”

The same day Tigress tweeted, “Sadly gov.uk/UKHSA [UK Health Security Agency] report the deaths of another 2 children with Covid.” This brought the number of UK child COVID deaths to 228 (England 205, Scotland 16, Wales 5, Northern Ireland 2).

On December 24, Tigress tweeted, “If we follow last year which we appear to be doing, Covid admissions double around 28th/29th & remain high until mid January. Last year deaths increased around the 30th to 150-200 per day, variants are different this year perhaps more severe.”

The surge in COVID cases, amid rising flu admissions, is putting enormous additional pressure on the National Health Service. Earlier this month, Sky News reported, “Hospital admissions for flu in England have overtaken admissions for COVID-19 for the first time since the coronavirus pandemic began.” Flu admissions to hospital were at the highest level for the last four winters. It cited UKHSA data showing “the rate of flu admissions was 6.8 per 100,000 people in the week to 11 December, compared to 6.6 per 100,000 for COVID-19.”

On December 20, Wrightington, Wigan and Leigh Teaching Hospitals NHS Foundation Trust declared a “critical incident” due to “immense pressure on its services”. Citing “exceptionally high levels of occupancy, growing pressure on our services and unprecedented attendances” at the A&E department of the Royal Albert Edward Infirmary in Wigan, it tweeted, “Our A&E is full. Do not attend, unless you have a life or limb-threatening emergency.”

A critical incident was also declared at Portsmouth Hospitals University NHS Trust. Its emergency department was “full with patients that need admission,” with only “limited space to treat patients with life-threatening conditions and injuries”.

Hospital staff treating a COVID patient in the intensive care unit at the Royal Papworth Hospital in Cambridge, England [AP Photo/Neil Hall]

Due to the government’s criminal pandemic policy of infecting as many people as possible, and its abandoning of all COVID safety measures within the space of a few months in 2021, millions of people are suffering from Long COVID. According to the ONS, in December an estimated 2.2 million people (3.4 percent of the population) were afflicted with Long COVID. Over half (1.2 million people) are estimated to have had the condition for over a year.

This week, leading scientist Professor John Drury of the University of Sussex denounced the government for implementing policies that directly led to so much suffering. Drury is a member the Scientific Pandemic Insights Group on Behaviours (SPI-B)—a sub-committee of the Scientific Advisory Group for Emergencies (SAGE) which advised the government throughout the pandemic. He spoke to the inews website which reported, “After many Covid restrictions were eased in April 2021, SPI-B advised the Government to continue with ‘policies that promote Covid-19 protective behavior’”.

Prof Drury said, “Had the recommendations been implemented there would have been fewer people with Covid and therefore fewer people with long Covid…

“They’ve thrown the clinically vulnerable under a bus and made the judgement that it’s ok for two million people to have long Covid. For a significant minority of that two million, this is a highly debilitating condition that has ruined their lives.”

Nothing is being allowed to remain in place that in any way mitigates the spread of the disease or even acknowledges that it exists. From January 6, 2023, the UKHSA Epidemiology Modelling Review Group will no longer publish any more COVID modelling data, including critical updates on the virus’s R (Reproduction) number.

Australian central bank rate rises target working-class households

Mike Head

The year 2022 has already seen the sharpest reversal in working-class living conditions in Australia and globally since World War II, driven by sky-rocketing inflation and interest rates.

Internal documents from the Reserve Bank of Australia (RBA) show that this economic and cost-of-living crisis will intensify in 2023, with a deliberate policy to inflict the suffering primarily on workers and their families.

A man walks past the Reserve Bank of Australia building in Sydney, Australia on Oct. 7, 2021. [AP Photo/Mark Baker]

On December 23, just two days before Christmas, the RBA released the “restricted” documents in response to a Freedom of Information application. The timing was designed to bury the contents as much as possible during the holiday period.

The draft reports and emails, dating back to June, show that the central bank has consciously calculated that the harshest impact of its ongoing interest rate rises since May will fall on lower-income households, threatening many with mortgage defaults.

The documents are a warning of the severe financial and personal stress facing millions of people as the RBA, like other central banks internationally, engages in the fastest raising of rates for decades. Over half of home loan borrowers will suffer a 20 percent decline in their cash flows.

The material shows that the RBA expects its consecutive monthly rate rises—so far from 0.1 percent to 3.1 percent—to dramatically reduce consumer spending by the most indebted and lowest-income households. By contrast, wealthier and older people with cash savings are expected to lift their spending thanks to higher yields on savings.

These calculations are all premised on using the aggressive rate rises to also ensure that real wages continue to be cut. In the RBA’s scenarios, the official inflation rate is expected to be around 8 percent, while annual wage rises—including those for high-salary employees—will average just 5 percent.

Thus workers are being hit by a double blow—real wage cuts and sharp rate rises that have the effect of cutting disposable incomes even more.

At the same time, the documents show that the wealthiest households also obtained the greatest financial benefit of the near-zero interest rates that the bank previously implemented at the outset of the COVID-19 pandemic. Those record low rates were set in order to provide the corporate elite with cheap money, boost the already-inflated property market and stimulate consumer spending.

In sum, the RBA, together with other central banks, is intent on imposing on the working-class the overwhelming burden of the economic and cost-of-living crisis produced by the pandemic and the US-NATO proxy war against Russia in Ukraine.

Also revealed are efforts by the RBA to camouflage the regressive “distributive” effect of its interest rate hikes in its official statements and presentations, and to play down the likely suffering of working-class households, so as not to be “alarmist.”

No doubt these calculations have been shared with Treasurer Jim Chalmers, for all his feigned empathy for the “pain” facing ordinary people. The Albanese Labor government has supported the demand of RBA Governor Philip Lowe for wage increases to be kept below 3.5 percent.

Overall, the RBA’s forecasts are stark. Almost two in three home loan borrowers are expected to slash “non-essential” spending, and 30 percent will deplete their savings within 12 months.

A graph shows that more than 80 percent of borrower households will suffer a greater than 10 percent fall in “spare cash,” that is cash flow relative to income.

According to a note: “Just over half of variable-rate owner-occupier borrowers would see their spare cash flows decline by more than 20 percent over the next couple of years, including around 15 per cent of households whose spare cash flows would become negative.”

But the wealthiest 5 percent of variable-rate owner-occupier borrowers would experience an increase in their cash flows. “This group are typically high-income borrowers who spend a low share of their income on essential living expenses” and “their expected income growth would exceed that of their (loan and living) expenses.”

At the other social pole, one report identifies 6 percent of borrowers as “highly vulnerable” and likely to fully deplete their savings “buffer” within six months, even if they cut non-essential spending by 90 percent. This could lead to some being forced to sell their homes, unable to meet elevated mortgage demands.

Some 71 percent of borrowers were supposedly “not vulnerable” but only because they had mortgage prepayment buffers considered large enough to absorb the financial shock for at least two years, providing they cut non-essential spending by 10 percent.

Another graph further illustrates the unequal class content of the bank’s offensive. It shows that a household with two children on a gross income of $120,000 a year with a $600,000 debt would suffer about a 13 percent cut in disposable income, while one on $250,000 would take a smaller 8 percent reduction. No comparison was offered for households on even lower incomes.

A September 15 note records advice by Lowe to hide this distributional impact. “Phil [Lowe] raised a point that a 5‐10 percent decline as share of household income seemed to be alarmist.” So the RBA decided to present overall percentage cuts in “spare cash flows” rather than what these cuts were as a percentage of household incomes.

Another presentation says nearly a quarter of variable loan borrowers would have debt servicing ratios exceeding 30 percent of income—a measure of financial stress. Of these, 75 percent would be “in the lower half of the income distribution,” while one-third would have “less than one month buffer.”

A note states: “Lower income households tend to spend a larger proportion of their incomes on (unavoidable) essential living expenses. Lower income households may also be subject to a higher effective rate of inflation if they are less able to substitute away from purchases of goods and services with more rapidly rising prices.”

One summary concludes that if such households “have limited ability to make other adjustments to their financial situation (e.g. by increasing their hours worked) and pressure on their finances continues, they could fall into arrears on their loan obligations; some may eventually need to sell their homes or may even enter into foreclosure.”

These scenarios understate the depth of the financial stress to come because they assume no substantial rise in unemployment, despite the looming economic contraction. One note admits: “Should labour and housing market conditions deteriorate further than assumed in the Bank’s central scenario over the coming years, a larger share of households would be expected to fall into arrears on their mortgages.”

The housing and financial crisis will worsen during 2023 because about 35 percent of mortgages are on short-term fixed rates, and most are due to expire next year. Many loans were taken out at fixed rates of around 2 percent, relying on RBA statements that it would keep rates at record lows until 2024 at least.

The RBA estimates that many of these households will confront a more than 40 percent rise in mortgage repayments. But the bank’s chief concern is that there is a “lag” in this impact and the wider effect of rate rises on variable rate borrowers.

The documents show that the lion’s share of the benefit of the record low interest rates in 2020 and 2021 went to wealthiest households. In his public statements, Lowe sought to play down the impact of rate hikes by reporting that households had built up $260 billion in savings.

But a graph shows that about $220 billion of the estimated additional household savings from the March quarter of 2020 to the December quarter of 2021 went to the richest two quintiles. Of that, some $160 billion went to the top quintile. That left about $40 billion for the lowest three quintiles—a thin “buffer.”

Like their counterparts around the world, the bankers know that the rate rises will not bring down global inflation—which has not been caused by workers’ wages or spending. The rises are aimed at suppressing workers’ wages struggles by imposing an economic contraction, or even a recession.

In announcing the RBA’s latest rise earlier this month, Lowe reiterated the bank’s focus on “the importance of avoiding a prices-wages spiral.” He warned of even higher rates in 2023. In November, he had warned that if workers pressed ahead with wage demands, the central bank would lift interest rates to induce a “severe recession.”

Treasurer Chalmers defended the bank, saying the “defining” economic challenge was inflation. “That’s what the Reserve Bank was responding to today.”

Since scraping into office in May the Labor government has demanded “sacrifices” from workers, junking its election slogan of “a better future.” With its state and territory Labor counterparts, the Albanese government is spearheading the suppression of wages by imposing punishing sub-inflation wage caps on nurses, teachers and other public sector workers.

Facing deepening discontent and a resurgence of strikes, the Labor leaders are relying on the trade union bureaucrats to keep imposing sub-inflation workplace agreements to enforce the pro-business agenda laid out in the Albanese government’s first budget on October 25, which was predicated on at least two more years of real wage cuts.

US requires travelers from China test negative for COVID amid surging infections and deaths

Evan Blake

On Wednesday, the US Centers for Disease Control and Prevention (CDC) announced that, beginning on January 5, all travelers flying from China to the US will be required to show a negative COVID-19 test result from within two days of their flight departure. Similar measures have also been implemented by Italy, Japan, Malaysia, Taiwan and India.

Over the past month, the Chinese Communist Party (CCP) has rapidly lifted the Zero-COVID policy which had kept the country’s per capita death rate by far the lowest among major countries. In a matter of weeks, hundreds of millions of Chinese people have been infected with COVID-19, hospitals have been overrun with patients and are implementing triage care, and morgues have had to suspend burial services.

A medical worker collects sample swab sample from residents in a lockdown area in the Jingan district of western Shanghai, China, Monday, April 4, 2022. [AP Photo/Chen Si]

In effect, the CCP is condensing into the span of a few months the years-long and ongoing process of mass infections and deaths that have taken place in nearly every other country. They have adopted the “herd immunity” strategy pioneered in the US, Brazil, India and other countries which are now hypocritically imposing a test requirement on travelers from China, which will do nothing to stop the deepening global catastrophe.

In a brief thread commenting on the one-sided character of the CDC’s measure, American epidemiologist Dr. Eric Feigl-Ding noted, “Ironically—US has surges nationwide, and same for Europe too. So why focus the airport inbound testing for just China?” He added, “I’m not against [airport testing] per se—but thinking that only China flight arrivals need to be tested while arrivals from other countries don’t—doesn’t make any sense given the worldwide spread of COVID.”

Boston University School of Public Health Professor Dr. Jon Levy similarly commented, “So we are requiring a negative COVID test to fly from China to the US, because China now lacks mitigation policies or adequate surveillance, but not for any other country or domestically? Not arguing for the latter, but this is illogical, hypocritical, and stigmatizing.”

A CDC press release on the new measure states that their goal is “to slow the spread of COVID-19 in the United States during the surge in COVID-19 cases in [China].” It denounces China’s “reduced testing and case reporting” and “lack of adequate and transparent epidemiological and viral genomic sequence data,” which “are critical to monitor the case surge effectively and decrease the chance for entry of a novel variant of concern.”

What hypocrisy and cynicism!

Over the past year, the Biden administration has overseen the dismantling of virtually all COVID-19 testing, data tracking and reporting. Regarding testing and genomic sequencing, the US is arguably the worst in the world relative to economic output and technological capacity.

At present, the US is in the midst of likely the third-largest wave of infections since the beginning of the pandemic, according to wastewater data. This reality is completely at odds with official infection figures, due to the closure of free PCR testing facilities across the US this year and the switch to unreported at-home antigen testing.

The CDC is doing nothing to stop the deepening surge in the US, which has been driven in large part by holiday travel from Thanksgiving to the present. In the past month, tens of millions of Americans have flown back-and-forth across the country and internationally without testing, masking, or any anti-COVID mitigation measures whatsoever.

Regarding genomic sequencing, throughout the pandemic the US has sequenced relatively low levels of positive PCR tests, and done so very slowly.

In Wednesday’s press release, the CDC also announced that airports in Seattle and Los Angeles will join their Traveler-based Genomic Surveillance program (TGS), bringing the total number of airports involved to a dismal seven and the “number of weekly flights covered to approximately 500 from at least 30 countries.” In other words, an infinitesimal fraction of international travelers to the US are tested for COVID-19 and positive results sequenced.

Furthermore, just two months ago the CDC was caught deliberately covering up the spread of new variants.

For nearly a month, from September 24 to October 14, 2022, the CDC violated their own rules and withheld data showing that the Omicron BQ.1 and BQ.1.1 subvariants were becoming dominant across the US. This was among the most significant cover-ups by the CDC since the start of the pandemic, but was only seriously reported on by the World Socialist Web Site. It took place just weeks after US President Joe Biden falsely claimed that “the pandemic is over.”

In recent weeks, the Omicron XBB subvariant, which caused a surge of infections and reinfections in Singapore and other countries this fall, has become dominant in the Northeast region and will likely become dominant across the US in the coming weeks. Numerous scientists have raised the alarm about this subvariant, while the CDC, the White House and the bourgeois media have done nothing to warn the public about this danger.

The measures against China are entirely political and in no way meant to ensure the public health of the American, Chinese or world populations. Underscoring this fact, travelers are allowed to use results from a self-administered rapid antigen test, which are known to be more likely to return false negative results. Anyone that tests negative two days before departure is liable to catch COVID-19 and become infectious in the subsequent period. As is the case for every other country, there will be no mandatory testing or quarantining upon arrival for travelers who very well could be infectious.

Furthermore, these measures are not being imposed on any other country, despite the fact that COVID-19 is now spreading unchecked throughout the world.

The CDC press release cynically concludes, “The approach laid out, when layered with existing CDC recommendations such as masking during travel, self-monitoring for symptoms, and testing for three days after arrival from international travel, will help make travel safer, healthier, and more responsible by reducing spread on planes, in airports, and at destinations.”

But throughout the past year, the CDC and other public health agencies globally have scrapped previous COVID-19 testing requirements, as well as mask mandates, for national and international travel.

The new CDC policy follows a meeting last week between US Secretary of State Antony Blinken and Chinese Foreign Minister Wang Yi, in which Blinken decried China for a lack of “transparency” regarding COVID-19. American imperialism is increasingly utilizing the COVID crisis which it has fomented in China to escalate the threat of war.

For over two years, US imperialism and its media mouthpieces have continuously demanded that China scrap Zero-COVID. After Apple, Nike and other major corporations threatened to move production from China elsewhere, the Chinese Communist Party (CCP) relented and lifted all public health measures, including mass testing, contact tracing, lockdowns, the safe isolation and quarantining of infected and exposed people, travel restrictions, and more.

The scrapping of Zero-COVID in China is reactionary and must be counterpoised with a comprehensive public health program fought for by the Chinese and international working class. But the measures implemented by the US and other countries against China will do nothing to stop the spread of the pandemic and will only be used to escalate military aggression against the country. China will be vilified for any new variants detected, and all the lies told about the “Wuhan lab leak” will be repackaged and disseminated once again.

New VW CEO restructures company with support of the trade unions, costing thousands of jobs

Dietmar Gaisenkersting

In the almost four months since Porsche CEO Oliver Blume also took over as CEO of Volkswagen, he has implemented two strategic changes.

First, he has reorganized software development in the 10-brand VW group with its 670,000 employees worldwide. This will have far-reaching consequences for workers in research and development, especially at Audi. Secondly, he has secured the full support of the trade union-dominated works councils, above all that of Daniela Cavallo, chairwoman of the General Works Council, who also chairs the works council at the main VW plant in Wolfsburg.

Reorganization of software development

A week before Christmas, Blume presented plans for a comprehensive strategic restructuring of the company. Accordingly, from 2023 onwards the VW brand will be responsible for production and procurement in the overall group, Audi will then be responsible for sales and quality management, and Porsche will head the important development and design departments. This is a huge demotion for Audi, which until now has been responsible for development as the technology leader. It will result in massive job cuts in the development departments in Ingolstadt.

Audi’s ambitious goal of putting the first highly automated car (under the name “Artemis”) on the road before the end of this decade has been completely abandoned by Blume. VW’s withdrawal from US-based start-up Argo AI is also related. VW bought into this firm along with Ford in 2019 to develop fully automated driving. Now, Argo AI is being wound up, and almost 300 developers who worked in Munich do not know what awaits them in the coming year.

The temporary withdrawal from the development of highly and fully automated driving is a consequence of the concentration of all resources on the company’s own software development efforts. Software is considered the largest value-adding component in the cars of the future. VW set up its own subsidiary, Cariad (for Car, I am digital), for this purpose two years ago. But so far it has not been able to develop an in-house operating system. Blume’s predecessor, Hebert Diess, had to leave not least because of this. VW workers complained that under his leadership, software had taken a back seat to the development of new models. Now it is to be the other way around, with software being developed first and then vehicle models defining it.

Ex-Volkswagen CEO Herbert Diess (left) and his successor Oliver Blume. [Photo by Alexandr Migl / Matti Blume via wikimedia / CC BY-NC-SA 4.0]

Accordingly, the Trinity electric model, which was supposed to roll off the production line with this software as early as 2026 in a new factory sprouting from the ground near the Wolfsburg main plant, has also been postponed for the time being. It is to be released—if at all—at the end of the decade at the earliest, when the company’s own software can be used. Only a few people in Wolfsburg still believe the new factory will be built, and a decision is to be made early next year.

As long as the new proprietary software is not available, VW will have to make do with further development of existing software. To do this, VW will also have to cooperate more with established software companies such as Microsoft and Google.

Cariad announced at Christmas that it would hire up to 1,700 software and hardware developers and engineers, 300 of them in Seattle alone, in the US. Nevertheless, the approximately 5,000 Cariad employees worldwide, many of whom work in Ingolstadt—at the headquarters of the previous development manager, Audi—are wondering whether their VW subsidiary will still exist in one or two years.

Close cooperation with union works council representatives

Diess also had to go because he frequently announced attacks without involving the IG Metall union works council representatives. For example, the works council had taken exception to the fact that scenarios commissioned by Diess about the loss of 30,000 jobs had been made public and had alarmed the workforce.

Blume is currently being praised by the union works council representatives because he involves them closely in his planning. Blume had made a good start at the top of the corporation and enjoyed the “fullest support” of the works council with his team, says Cavallo, adding that they worked together “on a basis of trust and as equals.”

Blume needs the union works council members, especially at the Wolfsburg headquarters. The plant has been underutilized for some time. Parts shortages, especially in semiconductors, have caused production to pause frequently throughout the year. Night shifts were permanently cancelled in the spring, followed by repeated short-time working. Throughout January, VW will have production workers on short-time working, which began in the week before Christmas. These were the consequences of the “current worldwide coronavirus pandemic and the effects of the war in Ukraine.”

This year, fewer than 400,000 cars will be produced in Wolfsburg--the world’s largest car factory. This is the worst result in VW history and there is no significant improvement in sight. According to Volkswagen CFO Arno Antlitz, inflation and the worsening economic situation will hurt demand for new cars.

Cavallo is therefore insisting on producing new models in Wolfsburg. The €2 billion that the new Trinity plant was supposed to cost could flow into the main plant. The corporation has since announced plans to invest around €460 million there by 2025. The plant was already being prepared for production of the ID.3, which has so far been built in Zwickau, he said. The small car would be the first electric model for Wolfsburg. At a works meeting, VW brand boss Thomas Schäfer announced another larger electric model, an SUV.

Works council head Cavallo has expressed her pleasure, saying Wolfsburg remained the powerhouse of the brand and the group. She anticipated two electric car models and the Trinity: “In this way, we are creating job security.”

Works councils at other VW subsidiaries see it differently, however. There are already signs of bickering among the company’s works councils at different plants, especially between VW Wolfsburg and Audi in Ingolstadt and Neckarsulm, since it is not just development engineers who are at risk there. Hildegard Wortmann, who is responsible for sales on Audi’s management board, recently recalled what she had predicted in 2020, when she said, “There’s a 50 percent chance that Audi will still be around in 10 years.” She would repeat this thesis today, she said two months ago in a podcast by business weekly Wirtschafts-Woche.

Incoming orders for VW’s Western Europe division were down 15 percent, she said. If Audi did not change, “we’re simply out of the game,” she said.

Last week, Audi announced plans to cut annual factory costs in half by 2033. The company’s main plant in Ingolstadt, which employs 40,000, is serving as a blueprint, according to Gerd Walker, board member responsible for production.

At the last works meeting, long-time Audi works council chairman Peter Mosch supported the restructuring. He said there were clear agreements between the board and the general works council. In an interview with the Augsburger Allgemeine newspaper on December 16, he, too, raved about the new VW boss. “Mr. Blume also calls me on his own accord.” Blume makes sure that “we as employee representatives are in on the action.”

IG Metall works council member Mosch is calling for full capacity utilization at the Audi plants until at least 2030, and only then could there be talk of “one or the other project being manufactured at another location in the VW Group.” According to Mosch, “Our motto is therefore: Audi First!”

He recalled that he had agreed to eliminate 9,000 jobs in return for which he expected “around 2,000 to be created in new areas such as electrification and digitization.” Mosch announced, “But we as the Audi Works Council want to get a bigger piece of the new pie.”

Just as Mosch is now calling for “Audi First,” others will follow suit. By playing off the workforces of the individual brands and locations against each other, the union works council representatives are implementing the attacks that Audi manager Wortmann described as a “fundamental need for change.” Job cuts, wage reductions, increases in work pressure, all this is being prepared.

Enrichment of the shareholders

While the union works council representatives are calculating how to implement these attacks with Blume, the shareholders are securing their profits. The Porsche IPO in September raised around €20 billion for VW. A quarter of Porsche preferential shares have been sold on the stock market; the financial holding company of the Porsche and Piëch families has acquired another 25 percent.

At a special general meeting on December 16, shareholders decided that half of this nearly €20 billion would be distributed to themselves as a special dividend. Since VW’s largest owner by far is the financial holding company of the Porsche and Piëch families, the two will thus receive €3 billion. As the second largest shareholder, the state of Lower Saxony will receive more than €1 billion, and the third largest owner, the Sheikdom of Qatar, will also receive more than €1 billion in special dividends.

2022: A year of deepening economic and financial crisis

Nick Beams

The year 2022 has seen a sea change in the global economy and financial system, setting in motion tendencies that will continue and deepen in 2023.

The most significant shift in the economic and financial landscape has been the development of global inflation to the highest level in four decades and the response of central banks, led by the US Federal Reserve.

A person stands near an electronic stock board showing Japan's Nikkei 225 index at a securities firm Monday, Dec. 19, 2022, in Tokyo. [AP Photo/Eugene Hoshiko]

In the name of “fighting inflation,” they have undertaken the sharpest rise in interest rates since those of Fed chief Paul Volcker in the early 1980s, part of a war against the working class spearheaded by the Reagan administration in the US and the Thatcher government in the UK.

This shift has not been initiated to bring down inflation—central bankers understand their policies will do nothing to reduce prices—but is aimed at suppressing the wages struggles of the working class by imposing an economic contraction, or even a recession.

There are many forecasts of recession next year, both in the major economies and globally, as the impact of interest rates rises takes hold.

The Centre for Economics and Business Research in London said it was “likely” that the world economy would face recession next year. It expected that central banks would continue with their tightening regime “despite the economic costs” and there was a “poorer growth outlook for a number of years to come.”

These findings are more pessimistic than the International Monetary Fund predictions in October that more than a third of the world economy would contract in 2023.

The development of recession, coupled with the higher interest rate regime, will have a significant effect on financial markets.

As Financial Times columnist John Plender noted in a recent comment entitled “Central bank horror story”: “A move into recession in 2023 could expose financial fragilities arising from the long period of ultra-low interest rates in which investors searched for yield regardless of risk.”

The low interest rate regime, intensified in March 2020 to prevent a meltdown of the financial system at the start of the pandemic, led to a new round of speculation which sent share markets to record highs.

With the shift in the policy of central banks this financial house of cards is becoming increasingly unstable.

The turn by the Fed and other central banks does not indicate any shift in their class orientation by the guardians of finance capital. Rather, it is based on the assessment that the most destabilising factor of all is the global upsurge of the working class in support of wage demands to counter rising inflation which must be suppressed at all costs.

The year has ended with a small downturn in goods inflation and a slight easing of the rate of interest rate hikes—the Fed reduced the increase in its base rate to 0.5 percentage points from the previous four consecutive rises of 0.75 percentage points at its last meeting. However, the major central banks have made it clear the rises must continue and have increasingly pointed to the “tightness” of labour markets as the reason for doing so.

The Fed has said it has “more work to do,” the European Central Bank has spoken of “more ground to cover” and the Bank of England, confronting struggles by millions of workers in support of pay demands, has insisted it must take “forceful” action.

Even before the interest rate rises have had their full impact, the effect on financial markets has already been felt. This was most notable in the September-October crisis in the UK financial system which followed the budget of the short-lived government of Liz Truss.

Her government’s decision to give massive tax handouts to the corporations and wealthy by increasing debt sparked a market meltdown which threatened the financing of the entire pensions system, estimated to amount to £1.5 trillion.

The turmoil in markets was not an expression of opposition to more wealth being showered on the super-rich but because the measures were not funded by major spending cuts and the increase in debt was not viable in the new financial conditions produced by interest rate rises.

The financial gyrations on Wall Street, while not yet as violent as those which erupted in the UK, are no less significant. The major index, the S&P 500, has fallen by almost 20 percent over the year, even as traders continue to speculate on the assumption that the Fed will have to begin cutting rates some time in 2023.

Notwithstanding these expectations, at least in some quarters, the direction is clear. One of the chief beneficiaries of ultra-cheap monetary policy, the Tesla car company of Elon Musk, has suffered a spectacular fall.

At the start of the year, the market value of the company was $1.2 trillion. In trading just before the Christmas break, its market capitalisation was below $400 billion, after its stock price fell $85 billion in a week, or 18 percent.

The rapid changes in financial conditions have led to calls for the Fed to pull back on the interest rate hikes lest they hit the entire financial system.

Writing in the FT, Bill Gross, once the world’s foremost bond market trader, called for a halt noting the “dangerous levels of debt” reported by the Bank for International Settlements earlier this month, but which are not reported on or tracked.

“Off-balance sheet dollar debt,” the BIS warned, “may remain out of sight and out of mind, but only until the next time dollar funding liquidity is squeezed.”

According to Gross, the BIS calculated that this “hidden ‘shadow bank’ debt may be as high as $65 trillion more than two and half times the size of the entire Treasury market and most of it owed to the banks.”

He noted that the lowest global interest rates in history had led to “massive misallocations of capital,” much of it “hidden in private equity” that ultimately had to be repriced “sharply lower.”

The collapse of the crypto bubble, expressed in the $32 billion demise of the FTX exchange owned by Sam Bankman-Fried, now facing multiple criminal charges, is not some kind of exception.

The rise and rise of crypto was fueled by the provision of virtually free money which lifted all areas of the financial system, but has now come to an end.

The year is concluding with another significant shift—the decision by the Bank of Japan to ease its so-called yield curve control. The measure involved buying up virtually all new government debt, which kept interest rates at near zero.

While the BoJ has yet to officially abandon the policy, there is no doubt as to its implications. Higher Japanese rates will mean the return of money previously invested internationally.

In an article entitled “Why Japan’s bombshell risks another global credit crunch,” the financial columnist of the UK-based Telegraph, Ambrose Evans-Pritchard, noted that with $3.6 trillion of net assets overseas Japan is the world’s top creditor.

“When the flows reverse and the Japanese repatriate their money—as they did in late 2007 and 2008—it can lead very quickly to a systemic credit crunch and a financial chain reaction.”

He cited the remarks of one financial analyst who pointed out that ultra-monetary policy had been holding down rates in the rest of the world but “the tectonic plates are shifting.”

It is impossible to predict the exact course of events, but the general trend of developments is clear.

The onset of global recession, the growing prospect of another major financial crisis and the unbridled determination of governments and central banks to make the working class pay for the deepening crisis of the profit system is going to drive forward the development of the class struggle in the coming year.