Shifting Power and Realities: Africa Beyond the Niger Coup

Nilantha Ilangamuwa

Lumumba pictured in Brussels at the Round Table Conference with other members of the MNC-L delegation, 26 January 1960. Harry Pot / Anefo – CC0

Conveying the essence of slavery to those ensnared within its clutches, with the intent of liberating them from its bonds, is a formidable challenge. Many among the enslaved did not perceive it as an avenue to freedom, and the tragedies endured by those who fought for their fellow slaves’ emancipation are profoundly poignant. Within the discourse of authentic social revolutionaries who waged war against the chains of slavery, from luminaries like Frederick Douglass to the indomitable Harriet Tubman, it’s all too easy to overlook one vital aspect—the anguish suffered by the slaves themselves, a pain compounded by their own brethren.

Furthermore, when we denounce the specters of colonialism and neo-colonialism, our gaze often turns to Africa, a repository of many examples. From iconic figures such as Patrice Lumumba, Kwame Nkrumah, Thomas Sankara, Frantz Fanon, to the resonant voice of PLO Lumumba advocating for the freedom and sovereignty of the African continent in modern times, their rhetorical and substantive contributions to society stand commendable.

Yet, it’s lamentable that many of these narratives place undue emphasis on external forces as architects of societal decay, relegating discussions about local dissension, hypocrisy, betrayal, and vulnerability to the shadows. The scarcity of self-critique dims our understanding of the internal fissures that plagued these societies. Often, the individuals we venerate as heroes earned their laurels in front of foreign societies by capitalizing on the underlying societal woes of their own origins. Their approach inadvertently nourished the very societal ills they ought to have resolved, allowing these deep-rooted problems to manifest in multifaceted ways. This raises valid concerns about whether true societal transformation transpired through their advocacy. This introspective perspective extends from Mahatma Gandhi to Nelson Mandela, prompting a reassessment of their historical heroism.

From my personal vantage point, George Washington’s decision to choose democracy over monarchy, resisting Colonel Lewis Nicolas’ entreaty for a royal crown after his victorious war, showcases an exemplary path. These actions underpin the foundational tenets that Western thought has bequeathed to us. Although the regrettable erosion of these honorable truths caused by the maneuvers of corrupt regimes and politicians within Western nations is evident, the essence of Western political thought retains its value. This is the case, even as power-hungry agendas and a decline in intellectual rigor have compromised the moral principles of human civilization.

This isn’t merely corruption in the conventional sense; rather, it’s an ideological corruption that afflicts nations like the United States in contemporary times. In contrast, during the culmination of revolutionary movements across Africa, Asia, and Latin America, several political leaders who were hailed as champions neglected to share the wisdom of learning from their opponents with the downtrodden in society. This oversight deprived common citizens of the opportunity to constructively evolve and contribute to societal betterment. This, in turn, obscured the deception and corruption woven into the tapestry of these so-called liberators’ actions. Their manipulation of a fragile societal fabric, coupled with manipulation fueled by hatred against external foes, served to legitimize their actions. Tragically, these so-called liberators maintained covert liaisons with their supposed enemies via clandestine channels.

This pervasive double standard consistently failed to yield genuine social reform, leaving these societies bereft, vulnerable, and marred by fraud, corruption, and criminality. Among those who ascended to power, be it through democratic means, revolutions, or coups, few exhibited a genuine resolve to address these underlying societal afflictions. Within this context, it becomes imperative to scrutinize the ongoing social upheavals in several pivotal African countries.

Africa, a continent endowed with abundant natural resources, paradoxically languished in poverty – a stark testament to the complex realities of humanity. Nature bestowed its treasures, yet external actors, often masquerading as local saviors, siphoned away their prosperity in the name of emancipation. In the poignant words of the late revered clergyman, Desmond Tutu, ‘they came and asked us to close our eyes, placing holy books on our heads. When we finally opened our eyes, we own holy books, and they own our land.’

A succinct exploration of the ‘military coup’ in Niger, situated within the Sahel region and endowed with substantial natural wealth, particularly uranium, assumes significance as a player in Africa’s evolving political landscape. The bloodless overthrow of the President was met with public approval. A rally attended by over 30,000 individuals underscored the military leaders’ reception. Notably, Niger has experienced its fair share of military coups throughout its political history. The trajectory includes leaders who assumed power through elections and military figures who seized control. Neighboring Nigeria, Libya (during Muammar al-Qaddafi’s administration) and France have exerted significant influence over Niger’s political dynamics. Additionally, French companies hold substantial stakes.

Following the military coup, a swift arrangement was made for Victoria Nuland’s visit. She sought an audience with the former president, who is currently under house arrest in the presidential palace in Niamey. However, the new leadership declined her request. Reports indicate her $200 million offer to coup leaders, many trained by the US, vehemently rejected. She also used the threat of discontinuing aid to coerce the reinstatement of former President Mohamed Bazoum into power, a plea that went unheard. The country presently houses around 1,500 American troops, operating from Niger Air Base 201, which stands as the second-largest US base in Africa. Contrastingly, Niger has called upon France to withdraw its contingent of 1,100 soldiers. This request stands in contrast to the situation in Mali and the coup leaders have already accused France of violating their airspace. The situation may escalate further before it eventually subsides. However, from the discussions surrounding Nuland’s visit, a discernible truth emerges—an escalating global surge in radical ideology against both Victoria Nuland and the US administration.

However, weary from the ongoing conflict in Ukraine, Western nations cannot afford a new war in Niger. Niger’s formerly affable relationship, which deteriorated following the Soviet Union’s invasion of Afghanistan, has undergone a transformation during the Putin administration. Russia has increased its military and political influence in these regions, exemplified by the African conference held on July 27-28, alongside Niger’s power transition. Despite attempts to downplay the event by the West, representatives from 49 African countries attended the St. Petersburg conference, including 17 heads of state who visited Russia to discuss politics, humanitarian concerns, and economics. China’s and Russia’s achievements in African nations underline that even the US would face an unprecedented crisis if war breaks out. Regrettably, the United States not only erodes its credibility but also struggles to comprehend prevailing realities. This perspective appears to seek redemption through the augmentation of its military capacities, inevitably paving the way for unforeseen crises in the times ahead.

We stand at a transformative moment in history, akin to the approaching winter that is set to reshape the conflict in Ukraine and the political dynamics in Europe. Africa’s effort to disentangle from colonial overseers marks a new era. Power shifts resonate with nations seeking alternatives. However, power politics has not eradicated poverty and social disparities in Africa. The resurgence of military coups in West Africa reflects an underlying ailment demanding genuine scrutiny. Yet, the pivotal task is addressing political and socio-economic injustices, tied to the recurring pattern.

What truly matters is the fate of those farmers toiling to feed their children, the laborers trapped in uranium mines reaping meager rewards, the children bereft of proper education due to the absence of adequate schools, and so forth. Is their plight destined to change? Notably, the complex resistance against liberation often arose from the very slaves who sought freedom, rather than the slave owners. This poignant dilemma echoes the tragic reality faced by numerous African nations.

How Israel Occupied Itself

Juan Cole

Photograph Source: צילום: איציק אדרי – CC BY 2.5

On July 24th, the Israeli Knesset passed a measure forbidding the country’s High Court of Justice from in any way checking the power of the government, whether in making cabinet decisions or appointments, based on what’s known as the “reasonability” standard. In the Israeli context, this was an extreme act, since right-wing parliamentarians were defying massive crowds that had, for months on end, demonstrated with remarkable determination against such radical legislation. And that measure was only one part of a wide-ranging redesign of the court system unveiled by Prime Minister Benjamin Netanyahu in January, which deeply alarmed his critics.

As exemplified by prominent world historian Yuval Noah Harari, such protestors warned that limiting the functions of the highest court, in a land with a parliamentary system largely lacking other checks and balances, represented a big stride toward a future autocracy. After all, dangers abound in a nation with a one-chamber legislature, lacking the equivalent of a Senate, that elects the prime minister as the instrument of its will.

The central motivation for that legislation, however, lay not in domestic politics but in the desire of extremists in the cabinet to ensure that the courts won’t be able to interfere with their plans to vastly increase the number of Israeli squatter-settlements on Palestinian land on the West Bank and perhaps someday soon simply annex that occupied territory. Under such circumstances, members of the far-right Religious Zionist Party were recently excoriated by Tamir Pardo, a former head of Israeli intelligence, as Israel’s “Ku Klux Klan.”

Reasonability, Fraud, and Occupation

The Israeli supreme court had invoked what’s called “the reasonableness doctrine,” rooted in British common law, to strike down Netanyahu’s January appointment of Aryeh Makhlouf Deri as Minister of Health and the Interior in his ever more extreme cabinet. Deri, a Moroccan-Israeli, leads the ultra-Orthodox Shas Party, largely comprised of Mizrahim, or Jews of Middle Eastern ancestry, like himself. Deri has often been in trouble with the law. He was, in fact, given a three-year jail sentence in 1999 for fraud and bribery. In 2022, he was facing a possible conviction for tax fraud by the High Court of Justice, which could have resulted in jail time and a seven-year ban on political activity. According to the justices of that court, Deri promised to retire from politics to avoid being sentenced, a vow on which he later reneged.

Netanyahu managed to keep Shas in his current coalition despite its loss of that important cabinet seat. Indeed, he still needs its support to stay in power. Over time, the Shas Party has swung far to the right on the Israeli political spectrum, while taking an ever-harder line in favor of expanding Jewish settlements in the Palestinian West Bank, which Israel seized in 1967. It is now inhabited by some three million stateless Palestinians whose land continues to be usurped. The Shas leadership has shifted to ever stronger support for Jewish settlements on the West Bank in large part because of the increasing proportion of Israeli squatters there who hail from the Haredim or Ultra-Orthodox religious tradition. They had already become about a third of all West Bank settlers by 2017.

In the Israeli system, the Ultra-Orthodox pay little in taxes, are subsidized to study the Bible, and are exempted from military service. Moreover, as a group, thanks to their tendency to have large families, they have grown to about 13% of the Israeli population. They place a substantial burden on the state, which, in recent years, has responded by giving them inexpensive housing on Palestinian land.

At the left-leaning +976 Magazine, journalist Ben Reiff recently pointed out that Minister of Justice Yariv Levin, a long-time factotum in Netanyahu’s Likud Party and a driving force behind the recent attack on the judiciary, justified his actions primarily in terms of the Palestine issue. He singled out High Court decisions that prevented the blackballing of individuals who supported the Boycott, Divestment, and Sanctions (BDS) on Israel movement for the country’s apartheid-style policies toward the Palestinians or who backed “refuseniks,” Israeli soldiers who decline to serve as part of an occupation force in the Palestinian West Bank. Levin also complained bitterly about court rulings requiring that Palestinians be treated in accord with the Geneva Conventions. One conclusion from Reiff’s reporting is that there will be ever more blackballing of critics of the occupation by the present government.

The High Court (Sometimes) Recognizes the Rights of Palestinians

Another step Netanyahu has said he would like to implement is to allow a simple majority in the Knesset to overrule any High Court rulings striking down legislation as inconsistent with the country’s basic laws on human rights, passed in the 1990s. Among the grievances of the particularly extremist Greater Israel faction in the cabinet is that court’s dependence on international law in some of its rulings against “Illegal settlements” — those established by militant vigilantes on West Bank land owned by Palestinian families for centuries.

Over the years, the High Court has, in fact, ruled in favor of numerous settlements, while drawing on aspects of Ottoman, British, and international law to do so. Ottoman law, for instance, permitted the state to assume ownership of fallow land. On that basis, the court has, in the past, allowed the Israeli state to declare swathes of the Palestinian West Bank “state land.” It mattered little that an occupying state settling its citizens on such territory gravely breached the Geneva Convention IV and the 2002 Rome Statute that acts as a charter for the International Criminal Court.

In other words, all such settlements should be illegal. Palestinians often protest, to no avail, that land designated by authorities in Tel Aviv as ownerless and fallow is, in fact, private property and has even been recently cultivated. Once it officially becomes state land, however, the court has indeed permitted Israeli citizens to build on it, which is how most Israeli settlements on the West Bank came to be. The court considers such Jewish-only housing projects “legal” under Israeli law.

Although those settlements on the West Bank are often depicted as a volunteer and private activity, the Israeli government has long provided subsidies and other incentives to people moving into such remarkably low-rent settlements and continues to do so to this day. Because so many Ultra-Orthodox men, with their limited educations (and incomes), are unemployed, they are especially open to such obvious opportunities.

Although once upon a time many illegal Israeli settlements were swiftly dismantled by the Israeli army, some survived and began lobbying the government for recognition. In 2017, the Knesset took a radical step, passing a law that allowed the Israeli state to expropriate Palestinian land at will and used that power to legalize 16 previously illegal squatter-settlements. In 2020, the High Court shocked Knesset right-wingers by striking down that very law and explicitly stating that Israeli sovereignty simply didn’t apply to West Bank Palestinians who were under occupation and must be treated in the context of international law on military occupations. The Court even cited Article 27 of the Fourth Geneva Convention, which guarantees occupied persons respect for their dignity and family rights.

“Sovereignty and Settlement”

That ruling, with its explicit denial of Israeli sovereignty over the Occupied Territories, proved a genuine shock to the political right and underlies its ongoing Knesset campaign to neuter the courts. Extremist Bezalel Smotrich, now both minister of finance and responsible for the Palestinian West Bank, was deeply angered by that High Court ruling. He insisted that the only acceptable response would be “passing the bill allowing the Knesset to override the courts immediately.” As it happens, his own home was built on private Palestinian land just outside the municipal limits of the “legal” settlement of Kedumim. The left-leaning Israeli newspaper Haaretz also reported in June 2020 that then-speaker of the Israeli parliament, Yariv Levin, lashed out, claiming the High Court had “once again today trampled, as is its unacceptable tradition, Israeli democracy and the basic human rights of many Israeli citizens.” As for Netanyahu, at the time he suggested that the problem of illegal settlements would best be resolved by a formal Israeli annexation of a large area of the Palestinian West Bank.

The way the High Court held that Israel has no sovereignty over the West Bank deeply offended the members of the extremist Religious Zionism bloc led by Smotrich, including its coalition partner, the Jewish Power Party led by extremist Itamar Ben-Gvir (who is now Israel’s minister of national security). Under the circumstances, you undoubtedly won’t be surprised to learn that their platform for the November 2022 parliamentary election centered on “sovereignty and settlement” — that is, sovereignty over and settlement of the Palestinian West Bank. Indeed, they claimed that Palestinian agricultural and building projects in their own villages were “expansionist” and vowed to act quickly to curtail them.

Having joined Netanyahu’s ruling coalition since that election, they have now acquired substantial power to pursue the goal of halting Palestinian economic life. Smotrich even called for a Palestinian village to be wiped off the map of the West Bank. Though he later backpedaled under pressure, the lawless extremity he and a significant part of Netanyahu’s coalition today represent should be all too obvious.

Given that the High Court stands in the way of such lawlessness, despite its own frequent betrayal of Palestinian rights, the extremists are determined to gut it. Significant numbers of those who responded to the recent mass demonstrations against Netanyahu’s court decision with counterdemonstrations were bussed in from the squatter-settlements, many of them Haredim.

The Imperiled Rights of Women, LGBTQ+, and Minorities in Israel

Although the right wing’s primary motivation for eviscerating the authority of the courts had to do with the urge to take fuller control of the Occupied Palestinian Territories, the changes already implemented and still contemplated by Prime Minister Netanyahu and crew have dire implications for all too many Israeli citizens as well. As a start, more than 20% of them are persons of Palestinian heritage. Think of them as Palestinian-Israelis (on the model of “Italian-Americans”), though they are called “Arab Israelis” in Hebrew. Some 60 laws and administrative decrees have already ensured that they remain second-class citizens. In 2018, in fact, the Knesset explicitly deprived them of “sovereignty,” reserving it for Jewish Israelis alone (while stripping Arabic of its previous designation as an “official language”).

Admittedly, on occasion, the High Court has ruled in favor of equal rights for Israelis of Palestinian heritage. It did, for instance, allow government funding of their religious communities and school administration. In most other instances, however, it repeatedly rebuffed their demands for equal treatment under the law, which helps explain why they have largely been absent from the enormous demonstrations that have shaken the country every week since January. Still, Palestinian-Israeli community activists are alarmed that the Knesset’s removal of court oversight when it comes to the reasonableness of administrative appointments could prove a carte blanche for far more active discrimination against Muslim and Christian Palestinian-Israelis.

Despite a distinct lack of concern for Palestinian rights, centrist and secular Jewish Israelis are in no doubt about the serious impact the Netanyahu government’s gutting of the judiciary could have on their lives. That explains why a quarter of the country has participated in those huge, ongoing demonstrations and 58% of all Israelis want the government to stop trying to curtail the power of the courts.

Haaretz reports that women fear such power could lead the present right-wing government to put authority over alimony and child support in the hands of all-male rabbinical courts, block the government from signing onto the Istanbul Convention for the Prevention of Violence against Women, and increase gender segregation at beaches, parks, and the Wailing Wall. It might even move to reduce any commitment to their very presence on governmental bodies.

Similarly, LGBTQ+ Israelis, who had, through their activism, secured ever more rights in Israel since the repeal of the country’s “sodomy laws” in 1988, feared that their freedoms might be reversed by the most homophobic government in the country’s history. That self-described “proud homophobe” Bezalel Smotrich typically supports a law that would exempt religious people from being charged with discrimination if they decline to provide a service on the basis of their religious beliefs.

Corruption

Although the rights of women, the LGBTQ+ community, and minorities are obviously on the line, another pressing concern for those protesting the limits being imposed on judicial authority is the growth of government corruption, which could have a striking impact on the country’s future. Netanyahu is already on trial for accepting bribes (a trial he’s tried to legislate away). He also wanted to make the notoriously corrupt Aryeh Makhlouf Deri his deputy prime minister and may now proceed with that plan.

A Netanyahu government unconstrained by the courts could engage in favoritism in contracts, licenses, and legislation of all sorts. The fear of such things has led 28% percent of Israelis, including a surprising number of young married professionals, to admit that they are at least considering leaving the country. Many claim they fear that “the government is going to take their money.” Although 600,000 to a million Israelis are typically out of the country at any time, studying or working elsewhere, they usually do come home sooner or later. Now, however, relocation agencies report that such returns are plummeting. There has also been a 20% drop in immigration to Israel this year and that shortfall would undoubtedly be even more serious were it not for the Russian Jews fleeing their ever more unstable, war-embroiled country. Reuters reports that investors in the usually vibrant Israeli high-tech sector that accounts for about 14% of the country’s $500 billion gross domestic product are now keeping about 80% of their new start-ups abroad. Many tech companies have also moved both their bank accounts and some of their assets out of the country.

Meanwhile, the protests — with hundreds of thousands of people in the streets every Saturday evening — continue, with demonstrators experiencing increasing police brutality. Masked cops are arbitrarily beating them up and aiming water cannons at their heads, sometimes using “skunk water” — a putrid chemical that sticks to your clothing and skin — to disperse them.

Once upon a time, such tactics were honed to a kind of grim perfection to repress Palestinians on the West Bank. Now, the Israeli opposition is discovering that such brutalization of indigenous West Bank villagers has boomeranged and the government has begun to deal with them as it once did with stateless Palestinian demonstrators. Consider this the new Israeli reality: the 56-year-long brutal occupation of the Palestinian Territories has come home to roost and Israel is now occupying itself.

Italy abandoning all COVID mitigation measures

Allison Smith

Even as the Italian state reports 15,617 new COVID cases over the 30-day period ended August 2, including 76 deaths and 415 infections among healthcare workers, the ultra-right government headed by Giorgia Meloni of the fascist Fratelli d’Italia is dropping mandatory isolation for COVID positive patients, thus virtually ending all COVID mitigations by early next month.

Since early 2022, the Italian government, first under the banker Mario Draghi and now under the fascist Meloni, has been systematically dropping COVID mitigations, first by drastically reducing the isolation period for positive patients, then by letting the requirement for masks in public spaces, including healthcare facilities and public transport, expire, and dropping mandatory vaccinations for workers, including healthcare employees. The only remaining measure, smart working from home for workers classified as medically fragile, is due to expire on 31 December this year. 

Effectively admitting that government policy has no connection to science, Italy’s undersecretary for health, Andrea Costa told RAI Italian state radio, 'The government's goal has always been to create the conditions for co-existence with the Covid-19 virus.' In other words, the government is adopting a forever-COVID policy. 

More than 26 million COVID cases have been officially reported in Italy since January 2020; however, this is a drastic undercount since the government abandoned its comprehensive testing and tracking infrastructure in early 2022, and the real toll of the ongoing pandemic is not known, leaving the population flying blind and vulnerable to death and chronic disease. 

A scene from the initial COVID outbreak in Italy in 2020 [AP Photo]

Since declaring an end to the pandemic in March 2022, the government has sought to downplay the risks of contracting the virus; however, principled scientists continue to raise the alarm, especially regarding the effects of repeated infections and Long COVID.

As an indication of the prevalence of Long COVID, a recent Italian scientific study among children infected with COVID, published in the Italian Journal of Pediatrics, found that among the study cohort, 24.3 percent of children who recovered from SARS-CoV-2 infection without need of hospitalization suffered Long COVID, a debilitating condition that can last for weeks, months, or years and involves a wide range of organs, including the heart, lungs, brain, blood vessels, and gastrointestinal tract.

The Italian study estimates that the probability of children developing Long COVID-19 increases with the severity of previous SARS-CoV-2 infection, with the study’s pediatric cohort showing the prevalence of Long COVID increasing from 11.5 percent in asymptomatic children to 46.5 percent in children with symptomatic infection, to 58 percent in hospitalized children.

The study also shows that being symptomatic during the SARS-CoV-2 infection increased six-fold the risk of children having at least one symptom of Long COVID-19, particularly respiratory, neurological, and psychological symptoms, with the study concluding, “the putative explanations for these Long COVID-19 symptoms include viral protein persistence in epithelial reservoirs, persistence of low-level inflammation, mitochondrial dysfunction, and virus-induced dysautonomia…”

Alarmingly, the study also confirmed that “hospitalized children showed high prevalence of cardiac involvement (approximately 22 percent) and above all psychological symptoms (approximately 37 percent): anxiety, fear in social relationships, depression, insomnia, and concentration difficulties,” and that “gender and pre-existing diseases do not affect the occurrence of Long COVID-19; also, children without comorbidities can have a severe course for Long COVD-19 symptoms.”

The study is an indictment of the Italian government as the authors highlight the fact that, “for many months after the breakout of the pandemic, parents’ worries about their children’s symptoms were minimized, often labelled as ‘psychological issues.’” The study demonstrates that Long COVID-19 is a reality in pediatric age and can strike patients with mild or no acute symptoms and can potentially cause lifelong health problems.

In a 2022 interview with la Repubblica, Professor of Medical Hygiene Walter Ricciardi said that research shows more than four million Italians of all ages are suffering from Long COVID, sometimes for more than one year after infection, with pulmonary, heart and kidney problems being the most frequent and serious complications reported. 

Long COVID continues to be a major global concern among principled scientists who characterize the response of governments to the pandemic as a mass disabling event. 

As in other nations that have dismantled COVID monitoring and mitigation, scientists in Italy are using wastewater testing to keep the public informed of the state of the pandemic and to track new and evolving variants. 

Samples taken in October 2022 detected the highly transmissible Omicron strains BQ.1 and BQ.1.1 before they were reported in clinical cases as well as other subvariants that have not yet been sequenced. The study authors urge the Italian state to optimize sequencing strategies in wastewater and integrate environmental with clinical surveillance to help the early discovery of less abundant SARS-CoV-2 lineages and complement public health surveillance. With the government policy of forever COVID, this will not happen, and the pandemic will continue to kill and maim indiscriminately. 

The newest variant, Eris, is spreading like wildfire in the Basilicata region of Italy and the Italian media, in sheer indifference to public health, is spreading misinformation that “it is as harmless as the flu,” even as COVID is proven to mutate and spread more than twice as fast as the flu and kill at a much higher rate.

Moody’s announces significant downturn in ratings of mid-sized banks

Nick Beams

When the Fitch rating agency downgraded the US credit rating earlier this month from AAA to AA+, the response in the financial markets and the business media was a collective “so what” shrug of the shoulders.

US President Joe Biden speaks about the economy at Arcosa Wind Towers, Wednesday, Aug. 9, 2023, in Belen, New Mexico. [AP Photo/Ross D. Franklin]

The Biden administration, however, more conscious of the possible impact on the global position of the US dollar, hit out. Its reaction, articulated by US Treasury secretary Janet Yellen, was along the lines of “how dare they do that” when the US economy and its financial system are so strong.

In its decision Moody’s downgraded the ratings for 10 medium-sized banks, named six banks for a possible review, including some larger ones, and changed the outlook on 11 others from stable to negative.

The banks whose ratings were downgraded comprised middle-sized banks hit by the rise in interest rates by the Fed which has led to a cut in the market value of their financial assets and commercial and real estate loans.

The Moody’s statement pointed to the existence of unrealised losses on the banks’ books—the issue which led to the downfall of Silicon Valley Bank, First Republic and Signature in March, three of the four largest bank failure in US history.

Uninsured depositors in the banks, including companies and very wealthy individuals, were bailed by the combined actions of the Federal Reserve, the Federal Deposit Insurance Corporation, and the US Treasury on the basis that the failures posed the danger of “systemic” risk. But these actions raised the question of whether there was now an implicit guarantee that the US government and its agencies would act in the same way whenever there was a failure.

Pointing to the ongoing fallout from the Fed interest rate hikes, the Moody’s statement noted that most regional banks had comparatively low capital compared to larger banks.

“In the current high-rate environment, this leaves some banks with sizable unrealized losses that are not reflected in their regulatory capital ratios vulnerable to a loss of investor confidence. Further, we expect a US recession in early 2024 will worsen banks’ asset quality and increase the potential for capital erosion.”

In research carried out by a team of academic economists, it has been estimated that the full extent of unrealised losses resulting from the fall in the value of Treasury bonds they piled into during the era of virtually free money under the Fed’s quantitative easing program could be as high as $2 trillion.

The Moody’s action led to a fall in the stocks of a number of regional banks.

According to a report in the Wall Street Journal (WSJ), “The reaction suggests the sector remains vulnerable to the problems that stirred a panic this spring after the failures of several midsize lenders: devalued bonds, jittery investors, deposit withdrawals and higher costs.”

Jill Cetina, Moody’s associate managing director and one of the authors of the report, told the WSJ: “There has been more funding pressure, more deposit pressure in the US banking system than we have seen in a long time.”

The report said the hiking of interest rates by the Fed—supposedly to combat inflation but in reality directed to suppressing the wage demands of the working class by slowing growth and even creating a recession—“continues to have a material impact on the US banking system’s funding and its economic capital.”

The effects are moving from the smaller and medium-sized banks up the ladder. Larger banks, including Bank of New York Mellon, Northern Trust, State Street and US Bancorp, were among those which were under review.

So far, the main issue has been the losses, both unrealised and real, on the financial assets held by banks. But a potentially much bigger financial storm is building up in the commercial and real estate (CRE) sector.

There has been what was described Robert Gottliebsen, the business commentator for the Australian, as a “staggering fall in the value of office blocks in leading American cities, including New York, San Francisco, Los Angeles, Chicago and Atlanta.”

Commercial property, in which many smaller and not-so-small banks are involved, has been hit from two directions. The value of commercial loans has fallen because of the Fed’s interest rate hikes.

At the same time the demand for office space is declining because of the development of working from home, which began during the COVID-19 pandemic and continues under conditions of a tight labour market, in which office staff are able to insist on the avoidance of sometimes long commutes.

Speaking to the Financial Times on the fall in bank stocks following the Moody’s report, the president of Camelotta Advisors said: “The banks tend to be a canary in the coal mine for the economy. Part of the concern is downtowns in America seem to be ghost towns, and we haven’t seen any real financial repercussions yet, but I think the banks are potentially looking at some real estate losses.”

The Moody’s report said that asset risk was rising for small and midsize banks with large CRE exposure and while asset quality metrics “remain solid” they have begun to deteriorate.

Elaborating further it said: “To date, stress on US banks has been reflected almost exclusively in funding and interest rate risk related to monetary policy tightening, but a worsening in asset quality will likely come.”

Pointing to what it said was a leading indicator, the Senior Loan Officer Opinion Survey, it noted the already tightening credit conditions indicated a deceleration of lending to corporations starting early next year that could be as deep as in the 2000–2001 recession.

Under conditions of recession, which, at this stage, it has predicted will be “mild,” and rising unemployment, it noted that history suggested that “recessions associated with banking strains are both deeper and more protracted, and sharper downturn is possible if bank lending standards continued to tighten.”

The focus so far has been on the problems of smaller banks but that does not gainsay their importance because, as the report indicated, they are “important providers of credit to small businesses that employ about half of the US workforce.”

Moody’s warnings about bank losses were underscored the following day when it was reported that US banks lost a total of $19 billion on loan losses in the second quarter, the highest level in more than three years.

The growing stress on working-class families and the poor was reflected in the losses on credit card debt which came in at $10.7 billion.

There was also a significant jump in CRE loans on premises not occupied by the owner which came in at $1.17 billion—the highest level in more than a decade.

At every stage in the growing financial turmoil, they carry out bailouts, the message from the heads of the financial establishment—Fed chair Jerome Powell and Yellen—is that the US banking system is “sound and resilient.” Facts and figures are starting to paint a different picture.

Chinese exports slump amid global downturn and US trade war

Peter Symonds

Chinese exports declined precipitously in July by 14.5 percent year-on-year, according to the latest official data released this week. The fall, the steepest since the onset of the COVID-19 pandemic in early 2020, is just one of the economic indices confirming a slump in the world’s second largest economy and largest exporter, as global inflation, high interest rates and slowing economies impact on trade.

A man wearing a protective mask walks in front of an electronic display board in the lobby of the Shanghai Stock Exchange building, China, Friday, Feb. 14, 2020. [AP Photo]

The July figure is not an aberration. Chinese exports have declined year-on-year in each of the past three months, dropping by 12.4 percent. Imports have also been falling by 12.4 percent in July and 6.8 percent in June, reflecting both a decline in consumer spending and contracting demand among manufacturers for inputs.

Official inflation figures released yesterday showed that, unlike much of the rest of the world, prices overall are falling in China. The consumer price index fell by 0.3 percent year-on-year in July, on top of no change in June. The producer price index—a measure of the price of goods at the factory gate—dropped even further by 4.4 per cent in July.

Falling prices are a further sign that the anticipated rebound of consumer spending following the government’s lifting of virtually all COVID-19 restrictions at the beginning of the year has failed to occur. China has been on the brink of deflation, an indicator of economic stagnation, throughout the year. The average consumer price increase in the first seven months was just 0.5 percent—well below the government’s official target of 3 percent.

The economic slowdown is also reflected in data on manufacturing activity—as indicated by the purchasing managers’ index—which has declined for four months in a row to July, according to official statistics. The index for July was 49.3, marginally up from 49 in June, but still well below the figure of 50 that separates manufacturing contraction from expansion.

The Chinese Communist Party (CCP) regime has set a modest economic growth target of 5 percent. Except for a sharp economic decline in 2020, it would be lowest since 1990. Even the target of 5 percent is now in question. Growth for the second quarter this year was 6.3 percent when compared to the same period last year when major manufacturing centres such as Shanghai were under COVID-19 lockdown. However, when compared to the first quarter this year—a more accurate measure—growth was just 0.8 percent.

Chinese President Xi Jinping and the CCP leadership are clearly concerned over the state of the economy, not least for what it portends for social unrest. At its meeting last month, the CCP Politburo admitted that the economy had made “tortuous progress” since the lifting of COVID-19 restrictions. It promised to “concretely optimise private firms’ development environment”—winding back the limited restrictions placed on property developers and other private corporations.

The decline in Chinese exports and economic slowdown is not just the result of low global growth and faltering global trade but of the US economic warfare aimed at undermining the Chinese economy and in particular crippling its hi-tech industries. US President Biden has not only maintained the punitive tariffs imposed on China by his predecessor Trump, but greatly expanded the scope of bans on Chinese hi-tech corporations and the sale of advanced computer chips and chip-making equipment to China in the name of “national security.”

Biden ramped up the assault on Chinese hi-tech industries yesterday by signing measures into law to ban American corporations and venture capitalists from investing in Chinese companies involved in cutting edge technologies, including developing semiconductors, quantum computers and some artificial intelligence applications.

Far from being narrowly targeted, as Washington claims, the bans are sweeping in scope and are designed to cripple China’s ability to develop and compete in commercial as well as military hi-tech applications. As was the case with previous bans, the US is exerting pressure on its allies in Europe and Asia to follow suit.

US imperialism regards China as the chief threat to its global hegemony and will stop at nothing, including war, to bring Beijing to its knees. The very fact that Washington’s expanding economic war is being waged in the name of “national security” makes clear that the US is rapidly preparing for a military conflict with China—even as it escalates war against Russia.

Washington’s economic bans and deliberate heightening of tensions with China has already impacted on the Chinese economy. Not only have Chinese exports been affected but there has been a marked slowdown in foreign investment in China—even before the latest measures are implemented. Net foreign direct investment in the Chinese mainland in the June quarter plummeted to its lowest level in more than two decades—down 87 percent year-on year to just $4.9 billion.

Amid the growing uncertainty created by US economic warfare, global corporations are increasingly diversifying their manufacturing bases in what is known as “China plus one”—in other words, retaining some factories in China, particularly for the huge Chinese market, while moving substantial manufacturing elsewhere. While no doubt many factors are involved, Chinese exports to the US plunged by 23 percent year-on-year in July, while exports into the US from Mexico, Canada, Vietnam and other countries have been sharply rising.

China’s economic slowdown is undoubtedly generating sharp social and political tensions. The CCP’s turn to capitalist restoration from 1978 rested ideologically on the claim that the market would lift the living standards of the population as a whole. In the heyday of Chinese economic expansion, the CCP apparatus considered 8 percent economic growth was the benchmark for high employment and social stability.

Now, the target for economic growth is 5 percent and unemployment is rising. The official urban jobless rate for July was 5.4 percent but that figure does not include the huge numbers of internal migrants from rural areas—around 280 million workers—who flock to the cities as a source of cheap labour in manufacturing and construction. Migrant workers are treated as second-class citizens, who have no right to essential services in the cities where they work and are the first to be dismissed.

Urban youth unemployment is far higher, hitting a record 21.3 percent for 16-24 year olds in June according to official statistics. Many young people, however, particularly the millions of new university graduates, are simply dropping out of the job market, or “lying flat,” despite government exhortations to accept any menial, low-paid job. Peking University economist Zhang Dandan estimated that the real youth unemployment rate in March could have reached 46.5 percent. And that is not including the situation in rural areas.

The alienation of young people is being further fueled by the enormous social gulf between rich and poor generated by the processes of capitalist restoration. While the number of dollar billionaires in China has at times been exceeded only by the figure in the United States, large sections of the population struggle to survive on very low incomes. In 2020, Chinese Premier Li Keqiang blurted out that 600 million people live on less than 1,000 yuan ($US143) a month, or less than $5 a day.

President Xi, who is acutely aware of the explosive social tensions that are building up, has made “common prosperity” a key slogan in his third term of office, putting pressure on the corporate oligarchy to contribute to society, while boasting that absolute poverty has been ended in China. While China’s extraordinary economic expansion has lifted the living standards of large sections of the population, glaring social inequality remains and the plight of the poor is worsening as the economy slumps. The response of the bureaucratic CCP apparatus has been to demand that the media puts a positive spin on bad economic news, and to censor videos and stories of terrible poverty appearing on social media.

The economic slump and social tensions building up in China are just one expression of the deepening crisis of global capitalism internationally, including in the United States. Moreover, in a world economy that has been deeply integrated by the processes of globalised production over the past four decades, the trade war measures being taken by the US to exacerbate the breakdown of the Chinese economy will in one way or another rebound.

Chinese stimulus measures following the 2008–09 global financial crisis played a crucial role in the recovery of the world economy as did Chinese exports during the initial period of the COVID-19 pandemic. Now as the global economy slows amid growing financial instability, China, weighed down by huge debts itself and facing a punitive US trade war, is no longer in a position to play the same role.