How Corrupt The U.S. Is: An Extraordinary Example

Eric Zuesse

Even if it might be the case that incarceration rates don't necessarily correlate with corruption, they do necessarily reflect the extent to which a given nation's government is (by means of its laws and its enforcement of those laws) at war against its own population; and, so, technically speaking, incarceration rates (the percentage of the population who are in prison) are  supposed to reflect the prevalence of law-breaking within a given nation. After all: by definition, people are presumed to be in prison for law-breaking, irrespective of whether the given nation's laws are just — and, if they're not  just, then this fact reflects even more strongly that the nation itself is  corrupt. So: a high incarceration-rate does strongly tend to go along with a nation's being highly corrupt, in more than merely  a technical sense — it's almost more like being the definitive measure of “corruption.” So, the correlation between incarceration rates and corruption must be assumed to be high, and any measure of corruption which fails to at least include countries' incarceration rates should be rejected. 

Out of the world's 223 countries, the U.S. has the world's second-highest incarceration rate: 698 per 100,000, just behind #1 Seychelles, with 799 per 100,000. Seychelles doesn't even have as many as 100,000 people (but only 90,024 — as many people as are in the city of Temple, Texas). By contrast, the U.S. has 322,369,319; so, the U.S. is surely the global leader in imprisonment. And, furthermore, #3, St. Kitts and Nevis, with an incarceration-rate of 607 per 100,000, has only 54,961 people (as many people as are in the city of Columbus, Indiana). The only other country that might actually be close to the U.S. in imprisoning its own people is North Korea, which could even beat out the U.S. there, but wouldn't likely beat tiny Seychelles: North Korea is estimated to have“600-800 people incarcerated per 100,000,” and a total population of “24,895,000.” 

Thus, for imprisonments, the U.S. really does have no close second: it's the unquestionable global market-leader, for prisons and prisoners.

And this brings us to the market-leader for prisons within America itself, and to the stunning corruption that stands behind it. So, here's that extraordinary example, and the story behind its corruption, which will provide a close-up view of America's general corruption, from the top (including the government itself) on down: 

In order to protect the profits of privately run prisons in the U.S. (where “Sixty-two percent of detention beds are administered by private prison corporations,” meaning that most U.S. prisoners are being ‘served' by for-profit corporations in for-profit-run prisons), the U.S. Federal Government is refusing to honor Freedom Of Information Act (FOIA) requests by the Center for Constitutional Rights (CCR), which is trying to find out why people are being imprisoned as illegal immigrants who ought not to be. Wrongly-imprisoned people are a device by which private prison-operating companies keep their prison-beds occupied and thus drawing income from the U.S. government, just like a high occupancy-rate is essential for a hotelier's profitability. But — unlike in the hotel trade — this coercive bed-occupancy produces more than mere profits; it produces also distressed families, of those individuals who are yanked and unjustifiably imprisoned, families suffering needlessly. 

It turns out that U.S. federal laws, passed mainly by the Republicans, but also with votes from corrupt Democrats, require (in H.R.3547) the U.S. government to pay for “a level of not less than 34,000 detention beds” for ‘illegal immigrants.' (You can see that requirement being cited by the Republican interrogator of an Obama Administration official, Department of Homeland Security, at 1:03:00- in this video, where the Obama official is being criticized for not locking up enough people to meet the law's requirements.) (Republicans and other conservatives love to punish people, irrespective of justice; so, they want at least those 34,000 prisoners. To be concerned about justice, as the CCR is, is to be ‘soft on crime,' as Republicans view it. Instead of justice, Republicans seek revenge; thus, for example, Republicans overwhelmingly support torture against ‘terrorist' suspects; Democrats overwhelmingly oppose it. Torture greatly reduces the trustworthiness of a suspect's statements, but it always serves as a vent for revenge, even when the suspect actually had nothing to do with terrorism; so, Republicans strongly approve of torture. Similarly, the most-conservative Muslims approve of beheading ‘infidels.' Conservatives everywhere, and in every faith, support harsh punishments; and the U.S. is a conservative country; so, sentences are long, and the conditions are harsh.)

However, the Obama Administration itself, even as it locks up, on some days, just shy of the legally mandated minimum of 34,000 accused ‘illegal immigrants' (which shortfall is here drawing the ire of that congressional Republican in the video), is also actively blocking CCR from access to the information about how the government and private corporations set rates for immigration detention beds and facilities. CCR argues that private profits are being given higher priority by the Administration than is the welfare of the public; and, thus, that the General Welfare Clause of the U.S. Constitution is being violated here. 

The Obama Administration says that it won't release the information, because to do so would “harm corporations competitively.” 

CCR claims, and the Obama Administration is opposing their claim, that "there is essentially no competitive market in government contracts that could be harmed by the release of information, that there should be nothing proprietary about the terms of a government contract, and that the public has a right to understand how Congress funds immigration detention and how that funding is influenced.”

The Obama Administration is arguing that if this same cost-information were being requested concerning any of the 38% of government-run prisons, then the FOIA request would be complied with, but that contracting-out or privatizing that function has freed the government from any such obligation.

However, CCR is concerned specifically about that profit-motive here — that the revolving door between government service and the private sector might itself be a key part of the explanation for the government's requiring that at least 34,000 people will be in prison for, or awaiting trial on charges of, ‘illegal immigration.' CCR contends that the only reason why people should be imprisoned in America is that they've actually broken laws for which the correct punishment is a prison term. But the position of the U.S. government is contrary: if the beneficiary of someone's imprisonment is a private corporation, the public shouldn't necessarily be allowed to know what's going on, nor why. And, so, that's the issue here. Does a private corporation's privacy-right exceed the public's right-to-know? The government says yes; CCR says no. CCR argues that to privatize is not to immunize: the government has the same obligations to the public, regardless of how it has chosen to carry out its obligations — either directly, or else by contracting them out (such as here). The Obama Administration argues that a private corporation is private, protected from the public's scrutiny — and that the corporation's only obligations are to the government, not  to the public; thus, no such FOIA requests will be honored. 

Here's what's not  in dispute about the case: the man who, in the first Obama Administration, was the head of the U.S. Department of Homeland Security's Office of Immigration and Customs Enforcement's Office of Enforcement and Removal Operations, David Venturella, is now the top sales official at GEO Group, which is "the world's leading provider of correctional detention, and residential treatment services around the globe” — and that's also the first thing GEO says about itself, on its own “Who We Are” page. And Mr. Venturella is now being cited by the Obama Administration as an ‘expert,' in order to deny CCA's FOIA request.

As a GEO official, Venturella claims in his 22 December 2015 declaration in the court-case, that, “the winning proposal in almost every Federal procurement competition is awarded to the lowest priced bidder,” and that, “The disclosure of GEO's proprietary bed-day rates and staffing plans would result in substantial competitive financial harm to GEO.” He claims that, “Even with access to their larger competitors' staffing plans, the smaller private companies do not have access to the capital needed to compete to win a large facility.” In other words: he pretends that GEO is one of “the smaller private companies.” But then he goes on to say (just in case a reader might happen to consider GEO not to be one of “the smaller private companies"): "The second stage would be acrimonious competition between the larger organizations, public and private, that will very likely lead to their withdrawal from the detention market as well, thereby leaving ICE [Immigration and Customs Enforcement] with no viable detention service providers.” Venturella assumes here that ICE cannot itself own and operate its prisons. (He doesn't say why; he merely assumes that it's the case — perhaps that everything should be privatized, and must be privatized, so ICE shouldn't run its own prisons.) And, he also is vaguely threatening there to abandon this market. He's actually suggesting that, if the government were to require this information about cost and profitability to be released to CCA, then GEO might no longer even bid on this business — regardless of how profitable it is to them. And, he says, this would leave ICE “with no viable detention service providers.” 

So: that (ridiculously and multiply false) argument is the reason why injustices to defendants in the U.S. immigration system must continue, Venturella, the salesman for GEO (his title is “Senior Vice President”), is here arguing. And, the U.S. government doesn't challenge it, but instead unquestioningly accepts it. 

Essentially, the Obama Administration is joining with GEO arguing that the profitability of private prison companies is more important than any injustices that might happen to be caused by Congress's establishment of an arbitrary fixed and stable minimum number of prisoners every day — and, since the head of the top prison-company is saying that profits would be threatened by adhering to FOIA in this particular matter, the Freedom Of Information Act request in this case must be denied.

The basic  argument, in other words, is that privatization is more important than the U.S. Constitution and its General Welfare Clause.

How close are these contractors to  the government?

Here are five of the seven members of the Board of Directors of GEO:

One is “Former Director, Federal Bureau of Prisons.”

Another is “Former Under Secretary United States Air Force.”

Another is “Executive Director, National League of Cities.”

Another is “Chairman and CEO of ElectedFace Inc.,” which “will connect people to their elected officials in every political district.”

Another is George C. Zoley, the company's Founder and CEO, who is also “America's Highest Paid ‘Corrections Officer.'” In fact: "GEO Group's revenue in 2012 exceeded $1.4 billion and CMD [Center for Media and Democracy] estimates that 86% of this money came out of the pockets of taxpayers. CMD's investigation of GEO Group unearthed how the company's cost-cutting strategies lead to a vicious cycle where lower wages and benefits for workers, high employee turnover, insufficient training, and under-staffing results in poor oversight and mistreatment of detained persons, increased violence, and riots.” (If so, then that would add to the misery that's produced by the improper imprisonments.)

“According to Nasdaq, major investors in GEO Group include: Vanguard, BlackRock, Scopia Capital (a hedge fund run by Jeremy Mindich and Matt Sirovich) Barclays Global Investors, Bank of New York Mellon, and more.^[132] George Zoley, CEO of GEO, is a major stockholder with over 500,000 shares.^[133] For more on investors, see Ray Downs, ‘Who's Getting Rich Off the Prison-Industrial Complex?' Vice, June 2013.”

Privatization is very profitable. But not for everybody. Only for the well-connected. For everybody else, it's just more poor and abused workers, and unjustly imprisoned people. But virtually all Republicans, and also the Obama Administration and other corrupt Democrats (and Obama will get his enrichment after he leaves office), think that privatization is necessary — even more necessary than is adherence to the U.S. Constitution, or than a justly ruled nation, and a prosperous public.

This type of government fits with America's extraordinarily high incarceration rate. Looking under the hood of one dysfunctional car, one finds a dysfunctional motor.

But a few U.S. officials do whatever they can to reduce the country's corruption. For example, the “Immigration Detention Bed Quota Timeline” shows that, in September 2015, U.S. Senator Bernie Sanders (who probably is the U.S. federal government's leading campaigner against corruption) “introduces the Justice is Not for Sale Act of 2015, which seeks to end the bed quota among other criminal justice and immigration detention reforms. The bill is the first effort in the U.S. Senate to eliminate the bed quota. In addition, Reps. Raúl Grijalva (D-AZ), Keith Ellison (D-MN), and Bobby Rush (D-IL) introduce the bill in the U.S. House of Representatives.” 

Those are the most progressive members of the U.S. Congress. Arrayed against them are the billions of dollars in political propaganda that cause the number of such progressives to be extremely few in the U.S. government. For that bill to pass in Congress, practically all conservatives would first have to become replaced by progressives, and by other supposed non-conservatives (called ‘liberals'), in Congress. Sanders says that it would require “a political revolution,” and he's correct on that. But that's the least likely type of “revolution” the U.S. might have. Perhaps Sanders knows this but doesn't want to shock people, who are too indoctrinated to be able to accept the uncomfortably ugly truth, that things are probably already be too far gone for that type of “revolution” to be sufficient (even if feasible).

Everyone in Congress knows that this is the reality. On December 28th, Huffington Post bannered, “Why Jon Stewart Fought So Hard For 9/11 Responders: The former ‘Daily Show' host went to Capitol Hill twice to help the people who had risked their lives get access to health care. It left him disgusted.” He was shocked at how psychopathic almost all of the members of Congress are. Apparently, the closer you get to it, the worse it smells.

How European Are European Values?

Nagothu Naresh Kumar

As the refugee crisis simmers in Europe, politicians of all hues and media outlets of various persuasions debate on what comprises European values. In this discourse, the forms these values take might be hostage to debate and intense hand-wringing but not their source. There is a tacit understanding permeating all the camps involved that the values espoused/defended are decidedly Western in origin. This familiar trope of ‘European values’ has had a life of its own that has gradually matured to gain unquestionable authority.

In the prevailing discourse, the centrality of encounters and cross-fertilization of ideas in the very constitution of ‘European/Western’ values and identities is given short shrift. This discourse is a serious blight to how coffee and tea got to be the ‘native drinks’ of England and how more importantly at the ideational level notions of toleration and secularism were products of exchanges rather than emanating out of a particular geographical entity.

Material Culture and the Making of ‘Native’ Drinks

Long before the West undertook the project of ‘discovering’ new lands and treading uncharted territory through courage and risk-taking enterprises, traders traversed the Indian as well as Mediterranean seascapes establishing commercial as well as fiduciary networks complemented by a bevy of financial institutions and instruments that continue to be in use even today. These pre-established routes and mediums of exchange would prove to be the crucial blueprint for European traders to fan out across the globe from the 16th century onwards. The maritime routes that were purportedly ‘discovered’ by the trading class from Britain were tread upon by Arab, Indian and Armenian merchants for centuries. In this new vortex of networks, Britain, and its merchants were neophytes.

The reign of Elizabeth I saw an increase in the probability of an average English person meeting and conversing with a Muslim. It was also her reign that saw the establishment of a spirited relationship with the Islamic World on many fronts. The interdependencies these encounters choreographed led to Muslims petitioning the Queen seeking to fight on her behalf against the Spaniards. The material culture also saw remarkable changes, appropriations, and substitutions. Commodities that were imported from the Islamic lands such as tea, coffee and chocolate began to populate the houses and taverns of England gradually graduating to the status of ‘native drinks’. The equestrian culture of this period as well saw conspicuous changes. As hot-blooded horses from various parts were imported, it gradually signaled the emergence and evolution of equestrian culture that saw the rise of ‘thoroughbreds’ leading to the forging of a national sport.

The need for Indian textiles, which was fueled by better quality and inexpensive tags changed and influenced the English way of life. The centrality of textiles in quotidian life is evident from the debates around calico that animated many a decades from late 17th century to 18th. The belief in high profit and the manifest lucrativeness of this trade saw a quantum jump in the making of textile industries which eventually heralded the industrial revolution.

The social and cultural lives of Europeans, as well as others, thus underwent significant changes due to these interactions. Asia thus came to be a lynchpin in the making of Europe and its myriad identities. More importantly, these influences and interactions were not confined to material aspects but evident at the ideational level too which would gradually come to define and constitute “European values’.

The Forging of ‘European Values.'

For many Britons, Muslim lands were preferable to a Catholic Britain for they were tolerant. For writers of this period, Islam, and the lands it flourished in represented a vast canvas upon which the contingencies of time played out. For many, this represented an opportunity to pick and choose and write about the events in England. Many found similarities between the events that transpired in England in the 17th century and the Ottoman Empire.

Thus, Henry Stubbe’s book written in 1671 makes favorable references to Islam through the lens of tolerance. Mary Montagu’s writings in the epistolary genre, Paul Rykaut’s take on Ottoman Empire present tolerance as the important panacea for an intolerant Catholic England. The bane of intolerance haunting England, they wrote, can be remedied by notions of tolerance taken from Islam in toto.

This Islamic metaphor was widely deployed by writers, pamphleteers, and dramatists of various persuasion. George sale opined that the Prophet Mohammed had initiated ‘reformation’ nine centuries before the advent of the same in Europe in trying to argue persuasively for the successful dissemination of Islam. By the end of the 17th century with England wracked by internecine conflict especially along religious lines, John Locke came up with his essay on toleration. Having studied Arabic at Oxford under Edward Pococke, Locke opined that Protestant Britain and Europe too should develop a tolerant attitude toward people of different faiths, mutatis mutandis, as Islam as done so in the case of non-Muslims. The emergence of this Islamic metaphor was instrumental in the development of the British national and Protestant identity, a narrative that gets blotted from conventional histories, textbooks, and popular discourse.

The Canadian philosopher Charles Taylor’s magisterial work ‘A Secular Age’ published in 2007 among other things looked at the trajectory of western secularism over the centuries. Taylor, however, does not take into account the notion that western secularism’s development was deeply contingent on its colonies across the Middle East and other regions. It was in the management and control of colonies that the West came into contact with diverse belief systems. These interactions, in turn, helped forge western secularism.

Politics of Cultural Authenticity

The 19th century heralded an age of nationalism that was well supplemented by an irresistible urge to search and cement people’s origins and distinctiveness. The masking of the viscosity of past interactions stems from a desire to project identities and values as indigenously formed and untainted by any outside contact providing fodder for cultural authenticity that in turn acts as the axle in the wheel of nationalism. The pitfalls of exercises in cultural authenticity thus make it necessary to note that “European values” such as secularism, liberty, equality, etc. are forged out of interactions and encounters.

In the European context, an appreciation of ‘European values’ as products of a remarkable dialectic of ideas and material exchanges rather than singular social achievements means puncturing any essentialist conceptions about regions and embracing a topography of shared histories and future that can go a long way in tempering attitudes towards refugees in contemporary Europe. An understanding that follows from such a viewpoint does not search for or brag about stable, well-polished identities or ideas but appreciates fuzziness and fluidity of identities, as well as the forgotten amalgam of boundary-defying encounters that led to the constitution of European values.

Gang warfare continues to infest Mexican politics

Don Knowland

On January 2, Gisela Mota Ocampo, the 33-year-old mayor of the city of Temixco in the central Mexican state of Morelos, was gunned down in her home, one day after being sworn into office. On January 3, police killed two suspects in the assassination and arrested three others.

Temixco, with about 100,000 people, is a suburb of Morelos’s capital city Cuernavaca, where many wealthy Mexico City residents and foreigners buy homes. The expressway between Mexico City and the Pacific Coast city of Acapulco in Guerrero state, a major drug trafficking route, cuts through Cuernavaca and Temixco.

Morelos governor Graco Ramirez and its public security commission told the media that Mota Ocampo, formerly a federal congresswoman, was killed by members of the Los Rojos (The Reds) drug gang, for refusing to ally with them.

Los Rojos is also known for kidnappings and extortion of local businesses. Los Rojos has battled the Guerreros Unidos (United Warriors) cartel for some time for control of the Morelos and parts of neighboring Guerrero state. Both groups arose out of the demise of the Beltrán-Leyva cartel, which itself arose out of a split with Joaquín “El Chapo” Guzmán Loera’s cartel, based in the northwest state of Sinaloa.

The Mexican government officially blames Guerreros Unidos for the likely killing in September 2014 near the Guerrero town of Iguala of 43 missing teaching students (normalistas) from Ayotzinapa, Guerrero.

Mayor Mota was a member of the center-“left” Party of the Democratic Revolution (PRD). Upwards of 100 mayors from the PRD and other political parties have been killed across Mexico over the past decade at the hands of organized crime.

Another PRD candidate for mayor of Temixco was kidnapped in December 2014, allegedly by Guerreros Unidos.

Temixco was also the site of another highly publicized March, 2011 killing of the the 24-year-old son of poet Javier Sicilia and six other people by members of the Pacifico Sur (Pacific South) cartel, yet another remnant of the defunct Beltrán-Leyva cartel.

As in the case of Iguala after the Ayotzinapa normalista killings, efforts to clean out corrupt local police who protected gangs led Morelos to put Temixco officers under a unified Morelos state command. That did nothing to protect Mayor Mota.

The mayor of Iguala, where the Ayotzinapa normalistas were kidnapped, José Luis Abarca Hernández, was a PRD member as well, who was in the process of decamping to Andrés Manuel López Obrador’s pseudo-left Moreno party, as part of a plan to run for governor of Guerrero. Abarca and local police under his command worked in league with Guerreros Unidos. His wife, mother-in-law and brother in-law had come out of the Beltrán-Leyva cartel.

As to the 43 missing students, the official version of Mexican President Enrique Peña Nieto and his ruling Institutional Revolutionary Party (PRI) remains that local Iguala pólice delivered the students to members of Guerreros Unidos, who then killed them, burned their corpses and tossed them into a dump in the neighboring town of Cocula.

However, during the last week of December a group of distinguished experts from the Interamerican Commission of Human Rights that studied the case reported that new evidence showed that the students were not incinerated in that location, something the parents of the students have asserted for over a year.

The Mexican government ignored that report. Peña Nieto’s strategy has been to simply attempt to wait out Mexico’s profound outrage over the killing of the normalistas and his abysmal poll ratings.

Various sectors of the PRI, and other major Mexican political parties, have been associated with drug cartels for the years. Chapo Guzmán’s Sinaloa cartel infiltrated the ranks of various Mexican government agencies, including Mexico’s Interpol. Reputable Mexican investigative journalists have also accused the PRI of favoring the Sinaloa cartel to the extent of helping it wage war against its rivals.

On Friday Guzmán was recaptured by a unit of the Mexican navy in the coastal Sinaloa city Los Mochis, a little over ten months after he escaped from the Altiplano federal prison. That was the second time Guzmán escaped from a federal high-security prison. Rolling Stone magazine published Saturday an interview with Guzmán by American actor Sean Penn, which was conducted in October. Guzmán was interested in having a film made of his life, much as was done as with the late Colombian drug lord Pablo Escobar, who recently became the subject of a Netflix and Spanish television dramatic series. Mexican actress Kate del Castillo, known for her portrayal of a narco queen in the popular Mexican soap opera Reina del Sur (Queen of the South), introduced Penn to Guzmán.

According to the Mexican Secretary of the Interior, Miguel Ángel Osorio Chong, the government located Chapo Guzmán by monitoring his contacts with his lawyers, Castillo and Penn.

This is indeed the stuff of soap operas. Belief is widespread among Mexicans that the government had a deal with Guzmán, whose net worth is reputedly upwards of $3 billon, to let him escape last year, and could have picked him up again any time.

This is not farfetched. Guzmán has been taken back to the same “high security” prison from which he escaped in February.

American business interests have increasingly warned the Mexican government that the instability and violence associated with the “drug war” in Mexico is an impediment to investment. Guzmán’s escape in 2014 did little to assuage investors.

Peña Nieto, himself proven to be immersed up to his eyeballs in corruption, may have decided it was time to pull in Guzmán once again, as efforts are accelerated in the new year to bring foreign capital into the oil and telecommunications industries.

It is true that the population of Mexico has suffered immensely from the drug violence and government corruption. At the same time, the narco drama also serves as a diversion from a class war raging in Mexico, as the Peña Nieto government imposes ever increasing attacks on the working class.

Australian stocks fall sharply on China and global fears

Mike Head

Australia’s stock exchange last week experienced its worst start to a year in recent history, and the share price falls continued for the seventh consecutive day yesterday, with mining and banking companies most seriously affected.

As of last night, the main Australian share indexes had dropped more than 7 percent in 2016, wiping off more than $100 billion in value from the S&P/ASX 200 stocks alone. This reflects, above all, Australian capitalism’s acute vulnerability to the slowing growth and signs of economic instability in China, as well as the gathering world slump, which has sent mineral and energy export prices into a downward spiral over the past year.

As a barometer, shares in BHP Billiton, which was the world’s largest mining corporation, yesterday slumped 4.9 percent to $15.55, its lowest level in 11 years. The company’s value has fallen 55 percent in less than eight months because of falling iron ore and coal prices.

Australian energy companies Woodside Petroleum, Santos and Origin Energy also suffered further losses of up to 5 percent as global oil prices dropped to 12-year lows, with flow-on effects for the price of liquefied natural gas.

Amid fears of the financial fallout, shares in Australia’s big four banks fell by more than 1 percent, taking their total losses over the past year to between 7 and 10 percent.

There are deep concerns on financial markets that the developments in China—declining manufacturing output, share market turmoil, rising debt levels and the official lowering of the value of the Chinese currency, the renminbi (yuan)—indicate that the situation in the world’s second largest economy is worse than the Beijing authorities have admitted.

This could spell the end of the 24-year period in which the Australian economy has avoided recession, and become increasingly dependent on growth in China. Currently China takes one-third of Australia’s total exports of goods and services (more than double the second largest market, Japan, at just over 15 percent).

The falling Chinese currency and gyrations on its share markets have led to fears that the Beijing authorities are losing their grip more broadly over the economy. Contango Asset Management chief investment officer George Boubouras told journalists: “This is effectively a lack of confidence from markets particularly in Chinese authorities’ ability to control their currency, their housing market, their domestic heavily retail-focused equity market.”

Matt Felsman, a private wealth adviser at APP Securities, referred to “a tsunami of negative psychology driven by growth concerns in the Chinese economy, crude oil prices plunging to 12-year lows reviving fears that indebted energy producers won’t be able to remain solvent, North Korea testing nuclear weapons heightening geopolitical worries, alongside Middle East tensions between Iran and Saudi Arabia.”

Australian share indexes still remain about 50 percent above the value to which they fell during the 2008-09 global financial crisis, but they have flat-lined over the past two years as the mining boom has begun to implode. Analysts are warning that the rout could now deepen. Another pointer is the fall of the Australian dollar, which dropped under 70 US cents yesterday, down to the levels seen after the 2008-09 breakdown. This is far below the highwater mark of around $1.10 set four years ago when Beijing’s huge stimulus measures initially inflated demand for mining imports.

Several commentators have pointed to the likelihood of Australia falling into recession, following commodity-exporting economies such as Canada and Brazil. Andrew Charlton, director of Alphabeta, a management consultancy, told the Australian Broadcasting Corporation’s “7.30” program last Friday: “China accounts for nearly 50 percent of all globally-traded commodity demand and that means that if you’re a commodity exporter, you are in line for a recession. Canada is in recession. Brazil is in one of the worst recessions in its modern history and you would have to think that Australia is in that same firing line.”

Already, over the past two years, capital investment—the engine of economic output under capitalism—has plummeted in Australia. While the mining sector has driven the plunge, it has spread throughout the economy. According to the Australian Bureau of Statistics (ABS), total capital expenditure for Australian companies in 2015–16 is expected to be around $120 billion, which is 21 percent lower than a year earlier. This is despite the falling Australian dollar making exports more competitive.

As 2016 began, there were signs of this decline extending to the property markets, where speculative investment, especially in housing, has largely kept the economy afloat, most notably in the highly-inflated Sydney and Melbourne markets. An ABS building approvals report showed that the number of dwellings approved fell 1.9 percent in November 2015, in trend terms, and has fallen for eight consecutive months.

Some property valuation firms, such as WBP Property, are predicting that falling house prices could be seen in Sydney and Melbourne this year, due to falling consumer confidence and tighter lending rules imposed by banks. Stagnant or falling average rental levels in capital cities, producing the lowest rate of annual rental growth for two decades according to an industry survey, are another indicator that the property bubble could burst.

Any such development would have serious implications for the banks, which rely heavily on mortgage loans for their profits, as well as their liquidity, and also remain highly dependent on borrowings on international money markets. Australia currently has the world’s second most indebted household sector, at 122 percent of gross domestic product, only surpassed by Denmark. If the Reserve Bank of Australia were to start to lift interest rates, kept at an historic low of 2 percent for the past eight months, mortgage and other debt defaults would grow quickly.

Although retail sales grew by around 4 percent in the year to November, the post-Christmas collapse of two well-known retailers, Dick Smith electronics and Laura Ashley, a women’s clothing and homewares outlet, suggests that a reversal could be underway.

Today it was reported that the ANZ bank-Roy Morgan consumer confidence index fell 1.9 percent in the week ending January 10, reversing a 0.8 percent gain in the previous week. The losses on international sharemarkets and concerns about China’s turbulence particularly affected consumers’ perception of their personal finances, with this sub-index falling 9.9 percent in just one week, the largest drop since March 2012.

The sharemarket fall also adds to the federal budget crisis faced by Prime Minister Malcolm Turnbull’s government. Today, the Australian estimated that if the slump in commodity and stock prices continued, taxation revenues would be cut by nearly another $20 billion over the next two years.

Less than a month ago, in its mid-year budget review, the government said the expected budget deficits would exceed the May 2015 budget’s forecasts by $26 billion over the next four years, taking the total deficit for that period from $82.2 billion to $108.3 billion.

The government’s prediction was based on nominal gross domestic product growth rising from 1.6 percent in 2014-15 to 2.75 percent this year and to 4.5 percent in 2016-17. Given the signs of slump spreading from mining to shares, property and retail, this forecast has been quickly discredited. Deloitte Access, a business advisory firm, currently estimates that nominal growth will reach only 1.6 percent this year and 2.85 percent in 2016-17.

Even that modelling is predicated on economic assumptions, drawn from the past two decades, that are now highly questionable. Moreover, the corporate elite is placing mounting pressure on the Turnbull government to slash government spending, especially on social services and welfare—a demand that will not only seek to drive down the conditions of the working class but exacerbate the recessionary forces already at work.

China’s deep economic malaise

Peter Symonds

The upheavals in global share markets since the beginning of the year have focussed attention on China amid fears that the slump in its stock markets and the falling renminbi (yuan) are symptoms of a far deeper economic malaise. The slowdown of the Chinese economy, which is exposing massive overcapacity in industry and the property market, and high levels of debt, is threatening to trigger an upsurge in the class struggle.

The official growth rate for 2015 has been put at 6.9 percent, with the target for the coming year of 6.5 percent—down from 10.6 percent in 2010 and the lowest level in a quarter century. However, numbers of analysts have cast doubt over the government figures. As reported last week in the Financial Times for instance, a poll by Consensus Economics of members of its China panel forecast growth of just 4.8 percent in 2016.

So questionable are the statistics that economic pundits turn to other indices, such as the so-called Keqiang index, reportedly created by Premier Li Keqiang, to provide a more accurate gauge of the state of the economy. The three elements of the Keqiang index—rail freight, electricity production and bank lending—are all in decline. The business magazine Caixin reported last week that rail cargo slumped in 2015 by 10.5 percent—the largest annual decline on record.

The downturn in China is the product of global recessionary trends. The restoration of capitalism and transformation of the country into the world’s premier cheap labour platform over the past three decades led to a colossal economic expansion. The Beijing regime responded to the 2008 global financial crisis, which hit exports and destroyed 20 million jobs, with a huge stimulus package and a flood of cheap credit that ensured continued high levels of growth. Investment did not take place in productive capacity, however, but in large infrastructure projects and above all, fuelled a speculative frenzy in property, then in the share markets.

This strategy, which was premised on a quick recovery from the global crisis and a return to high levels of global growth, has unravelled. Exports have continued to decline, revealing enormous overcapacities, particularly in basic industries. The property market is glutted and prices are stagnant. The Chinese share markets, which reached dizzy heights in the first half of 2015, have collapsed and are now another source of instability.

The Chinese government is seeking to “transition” the economy from one based on manufactured exports to a service economy built on domestic consumption. But the new “model” is fraught with contradictions, not least of which is the fact that boosting domestic consumption requires higher incomes for working people, thus further undermining China’s competitiveness as a low-wage export hub. Moreover, the regime is confronting mounting international pressure to accelerate pro-market reforms, including the closure or restructuring of large numbers of state-owned enterprises (SOEs)—a step that will lead to rising unemployment and falling domestic consumption.

For all the hype about China’s transition, the country’s function in the world economy remains that of a cheap labour platform. All the statistics for manufacturing are bleak. According to a business sentiment index released by Caixin last month, factory employment in China has fallen for 25 months. The official manufacturing purchasing managers’ index (PMI) for December was up slightly at 49.7 compared to November but still below the figure of 50 indicating growth. Caixin ’s own PMI for December was just 48.2, down from 48.6 in November—the 10th straight month below 50.

Premier Li told a seminar in Beijing in November that the government was determined to cut back on overcapacity in traditional industries as well as the large number of so-called zombie enterprises, pointing to steel and coal in particular. Up until now, however, little action has been taken out of fear at all levels of government of rising social unrest.

The New York Times last month focussed on the fate of the Longmay Group, the biggest coal company in northeastern China, which announced plans last September to slash 100,000 jobs, or 40 percent of its workforce, at 42 mines in four cities. However, the company, an SOE owned by the Heilongjiang provincial government, delayed the job cuts. Several hundred older workers were laid off but provincial authorities provided a short-term $600 million bailout to overcome the company’s immediate debt problems.

Deng Shun, an analyst at ICIS C1 Energy, told the New York Times: “They are quite worried about social unrest, so they delay. These layoffs should have happened two years ago.” The provincial government’s fears were well grounded, however, as protests had already erupted before any mass layoffs. In April, thousands marched in the city of Hegang to protest over delayed wages. The organisers were arrested and jailed. In October, the company management only averted another protest by locking workers in the mines on the day of a scheduled rally.

Mine workers are well aware that the prospect being held out of jobs in an expanding services sector is illusory. Heilongjiang is one of China’s most economically depressed provinces, already mired in recession. Economic output fell by 2.2 percent in the first three quarters of last year compared with the same period the previous year.

The resentment and bitterness in the working class was voiced by former mineworker now taxi driver, Mr Cui, who told the New York Times: “In the 90s, everyone was poor. Now the rich are too rich, and the poor are too poor. Because of the layoffs, everyone is worried. No one has a way to live outside the mines. With the New Year holidays coming, there will be chaos in Hegang.”

It is not just miners, nor workers in basic industry, who face large job losses. Writing in the South China Morning Post last month, analyst Andy Xie explained: “China may have overinvested up to 40 trillion yuan ($US6.1 trillion) since 2009. Its physical manifestation is in empty buildings and industrial overcapacity.”

After citing estimates that the steel industry has an overcapacity of 200 to 400 million tonnes—more than the total production of any other country—Xie continued: “The dire situation is common among all commodities industries. New industries like smartphone manufacturing already have a large overcapacity. Even power plants are hugely underutilised.”

The China Iron and Steel Association has reported that in the first 11 months of 2015, large- and medium-sized steel mills suffered losses of 53.1 billion yuan ($8.18 billion). Wuhan Iron & Steel, a major SOE, announced last month that it plans to eliminate 6,000 jobs within three months, while its parent company could cut 11,000 jobs and slash salaries by 20 percent in 2016.

Restructuring is already underway in other industries. China’s two largest shipping groups merged last month and its two largest train makers, CNR and CSR, came together earlier in the year.

Far greater job losses are being mooted amid a debate in Chinese ruling circles about the necessity of eliminating “invisible unemployment”—workers who are kept on the books of companies even though there is little for them to do. The government faces mounting levels of debt, much of it accumulated by local governments to fund infrastructure projects and keep “zombie companies” like Longmay afloat. The country’s debt to gross domestic product ratio has risen by nearly 50 percent over the past four years.

In its annual forecast, the Chinese Academy of Social Sciences urged the government to make the “invisible unemployment” more visible in 2016 by allowing more SOEs to go under. Wei Yao, a strategist at Société Générale, published a note in November saying 1.7 million workers would go in an initial round of sackings to address “China’s most pressing economic issues: capital misallocation, looming growth of non-performing assets and deteriorating productivity.” In other words, as is the case around the world, Chinese workers are to bear the burden of the crisis through the destruction of jobs and conditions.

The protests by Longmay workers in Heilongjiang Province last year are just one indication of sharpening class tensions. The latest figures from the Hong Kong-based China Labour Bulletin show that the number of strikes and protests more than doubled last year to 2,774 incidents, compared to 1,379 for 2014, with a marked increase in December. Most of strikes were over the non-payment of wages, which can often be months in arrears, a practice common in the construction industry but now spreading to manufacturing, mining and services.

The figures, which are by no means complete, give a glimpse of the seething discontent in the working class that the regime constantly seeks to suppress through state-run trade unions and police-state methods. The constant fear in the Chinese Communist Party leadership is that the vastly expanded working class—estimated to number 400 million—will break out of this straitjacket and destabilise the regime’s tenuous grip on power.

Hundreds of Neo-Nazis riot in Leipzig, Germany

Christoph Dreier

On Monday hundreds of organised right-wing extremists attacked a leftist meeting place, a Turkish restaurant, and homes in the city of Leipzig. The fascist terror took place as members of the far-right Pegida movement held a demonstration in the city.

The riot in Leipzig took place a day after four groups of foreigners were attacked Sunday in Cologne, the police said.

This wave of far-right violence is taking place amid a wave of racist hysteria spread by politicians and the media following alleged sexual attacks by immigrants in Cologne on New Years’ Eve.

What took place Monday evening in the Leipzig suburb of Connewitz, where many students and leftists live, can only be described as an organised pogrom. At least 250 neo-Nazis travelled by car to the district from all over the state of Saxony. According to investigators they had parked their cars in various locations and then gathered together in the city suburb.

Eyewitnesses cited by the Leipziger Volkszeitung (LVZ) spoke of a horde of neo-Nazis “goose-stepping” through the district and then commencing their rampage of violence at the corner of Wolfgang-Heinze Street. “They were carrying large stones, which they had apparently brought along. If was if they had a definite leader who had to give a signal,” witness Steffen told the LVZ.

Another eyewitness said that the mob was armed with baseball bats and axes. They broke numerous windows, stormed into a Turkish restaurant and threw tables and benches through the windows into the street.

Police said dozens of windowpanes were shattered in Connewitz, fireworks ignited, and cars set on fire. The destruction was evidently planned. The windows of a local football club with leftist supporters, “Roter Stern Leipzig” and several nearby bars were shattered. Police arrested 211 participants, and a number of individuals have pressed charges for assault.

A number of violent attacks by Nazis on leftists took place in Leipzig in the 1990s, but according to the historian Sascha Lange in the LVZ the latest riots have to be considered historically. “We have to assume it was the biggest attack by right-wing extremists on shops and houses in Leipzig since the November Pogrom of1938.” Lange is an expert on resistance groups in the Third Reich.

Although the activity by the neo-Nazis had been announced in advance in social networks as “Storm on Leipzig” and was evidently a highly coordinated and organized action, the police only intervened after the damage had been done. When the police came, the neo-Nazis surrendered without resistance, although the police were initially outnumbered.

Links between the extreme right and the state apparatus are particularly pronounced in Saxony. The State Office for Political Education played a role during the past year in building up the right wing extremist and xenophobes of the Pegida movement. Several leading neo-Nazis in Saxony were, and remain on the payroll of the secret services. On Monday it was announced that the fascist NPD party has its own informants in the Leipzig police. The party published internal police documents on leftist activists, including their names and addresses.

Based on the background to the riots in Connewitz it cannot be ruled out that they were carried out with the knowledge of the security forces or were even initiated by them.

At the same time the neo-Nazis were responding to the racist campaign promoted by German political parties and the media following the New Year’s incidents at Cologne Central Station. The far right feel they have wind in their sails following nearly two weeks of officially sanctioned xenophobia.

This was clear on the Legida demonstration, which took place simultaneously with the riots. The right-wing extremists of Legida—an offshoot of Pegida—celebrated the movement’s first anniversary on Monday evening. Pegida sent some of its supporters from Dresden, and others came from Chemnitz to attend the demonstration in Leipzig. There were a total of about 3,000 participants.

Referring to the events on New Year’s Eve, Pegida leader Tatjana Festerling spoke of a “widespread terrorist attack on blonde, white, German women” by “Afro-Arab Sex-terrorists.” Blame rested, she said, with German politicians who had left the German population defenceless by allowing immigrants to enter the country.

The witch hunting of foreigners and refugees is directly linked to the campaign carried out in in recent days by the media. Germany’s most widely read newspaper, the Süddeutsche Zeitung, published a cartoon featuring a black hand grasping at the midsection of a white woman. The magazine Focus featured a picture of a naked white woman on the cover with black handprints all over her body. Die Zeit ran the headline: “The Nightmare—Arab men who grope German women.”

This campaign has deliberately fomented a pogrom-like climate, which has encouraged the right-wing extremists. The population is to be terrorized and intimidated in order to permit the ruling elite to enforce its policy of war and social attacks, for which it lacks any democratic mandate.

To this same end, the right-wing extremist movement Pegida has been consistently promoted by official and media circles. The fascist demagogues at the head of this movements have been given prime time spots on TV talk shows, received premises from the State Office for Political Education and received invitations to participate in discussions from politicians from all of the leading political parties.

This week’s riots in Leipzig are a direct consequence of the legitimization of racism, militarism, and extreme nationalist politics by the political establishment and media.

Obama’s final State of the Union: Lies, evasions and threats

Patrick Martin

The final State of the Union speech delivered Tuesday night by President Barack Obama was a demonstration of the incapacity of the American political system to deal honestly or seriously with a single social question.

Obama evaded the real issues that affect tens of millions of working people in America every day of their lives. He painted a ludicrous picture of economic recovery and social progress that insulted the intelligence of his television audience—and went unchallenged by the millionaire politicians assembled in the chamber of the House of Representatives.

Summing up what he called “the progress of these past seven years,” Obama gave first place to “how we recovered from the worst economic crisis in generations.” The so-called “recovery” has been a bonanza for corporate profits, stock prices, and the wealth and income of the super-rich. For the working people who are the vast majority of the population, it has been a disaster.

By most social indices, the American people are worse off in January 2016 than when Obama took office seven years ago. The real wages of working people have fallen, social services have deteriorated, pension benefits have been gutted, and cities such as Detroit and San Bernardino have been forced into bankruptcy.

According to a report by the National Association of Counties issued on the eve of the State of the Union address, of the 3,069 counties in the United States, 93 percent are worse off than before the 2008 financial crash according to at least one of four economic indicators: total employment, the unemployment rate, the size of the economy and home values.

In 27 states, not a single county has recovered fully from the 2008 crash and the deep economic slump that followed. These include such major states as Florida, Georgia, Illinois, Massachusetts, Missouri, New Jersey, New York and Pennsylvania.

Obama, however, painted a picture of nearly unblemished economic advance, declaring, “The United States of America, right now, has the strongest, most durable economy in the world.” He boasted, “We’re in the middle of the longest streak of private-sector job creation in history. More than 14 million new jobs; the strongest two years of job growth since the ‘90s; an unemployment rate cut in half.”

The president did not acknowledge that the post-2008 “recovery” is the weakest on record, that the vast majority of the new jobs created have been low-wage and many of them part-time, or that the drop in the unemployment rate is primarily due to the withdrawal of millions of people from the work force because they lost all hope of getting a decent-paying job.

He went on, tellingly, to cite the auto industry as a symbol of success, declaring that it “just had its best year ever.” This perfectly expresses the utter blindness, not just of Obama, but of the entire political establishment. The “best year ever” was for General Motors, Ford and Fiat-Chrysler, which enjoyed record profits, not for the auto workers who produced those profits.

Real wages for auto workers have dropped sharply since the Obama White House forced through a 50 percent cut in wages for all new hires as part of the bankruptcy reorganization of the industry in 2009. Mass discontent among auto workers was expressed at the end of 2015 in the rejection of contracts at Fiat-Chrysler and Nexteer, a major supplier, and in widespread demands for strike action, smothered by Obama’s stooges in the United Auto Workers union.

“Anyone claiming that America’s economy is in decline is peddling fiction,” Obama concluded. The social position of the American working class has, in fact, suffered a dramatic decline, through the combined efforts of the corporate bosses, the unions and the two capitalist parties, the Democrats and Republicans.

The president conceded that economic inequality has grown in the United States, but he described it as the outcome of long-term trends such as globalization and automation, as though the policies of his administration—bailouts for Wall Street, budget cuts and wage cuts for workers—had nothing to do with it.

In the seven years since the financial crash, brought on, as he admitted, by “recklessness on Wall Street,” not a single banker or speculator has been prosecuted or jailed. On the contrary, the billionaires have greatly increased their wealth, gobbling up 95 percent of all new income since Obama entered the White House.

Obama listed a few other policy “successes,” claiming that “we reformed our health care system, and reinvented our energy sector… we delivered more care and benefits to our troops and veterans.” He was referring, however, to a series of social disasters: the reactionary attack on health benefits for workers and their families known as Obamacare; the devastation of Appalachia and other energy-producing regions; and the abuse of ex-soldiers, wounded in body and mind, by the Veterans Administration.

Obama sought to defend the foreign policy record of his administration from criticism, mainly from the Republican right, where demands are being raised for military escalation in the Middle East and stepped-up attacks on democratic rights at home in the name of fighting “terrorism.”

While he claimed to reject an American role as the world’s policeman, he nonetheless boasted, “The United States of America is the most powerful nation on Earth. Period. It’s not even close. We spend more on our military than the next eight nations combined.”

He continued, “Our troops are the finest fighting force in the history of the world,” winning the bipartisan standing ovation that always accompanies any mention of American soldiers engaged in combat overseas.

Obama indulged in the glorification of killing that has become an essential part of the degraded spectacle that passes for political discourse in America. Describing the US war against the Islamic State in Iraq and Syria, he claimed, “With nearly 10,000 air strikes, we are taking out their leadership, their oil, their training camps, and their weapons.”

He called on Congress to pass an Authorization for the Use of Military Force against ISIS, but vowed to wage war with or without legislative approval. The leaders of ISIS, he proclaimed, “will learn the same lessons as terrorists before them. If you doubt America’s commitment—or mine—to see that justice is done, ask Osama bin Laden. Ask the leader of al Qaeda in Yemen, who was taken out last year…”

Then he declared, in language that will be noted by nations all over the world, that when it comes to waging war against potential adversaries, “our reach has no limit.”

Obama concluded his speech with an appeal to his Republican opponents to work with his administration and pull back from the extreme anti-immigrant and anti-Muslim rhetoric that has characterized the contest for the Republican presidential nomination.

In a clear reference to Donald Trump, he argued that “we need to reject any politics that targets people because of race or religion. This is not a matter of political correctness, but understanding what makes us strong.”

Obama was making an argument, not so much that racism and bigotry are intrinsically wrong, but that they make it more difficult for American imperialism to maintain its dominant world role. “When a politician insults Muslims,” he said, “it makes it harder to achieve our goals.”