Forecast 2016: China’s Rectifications and ‘New Normals’

Bhim Bahadur Subba

Externally, China’s ever growing power has been felt significantly, even more than it previously was. With the Renminbi’s inclusion in the Special Drawing Rights (SDR) basket under the IMF basket of currencies, the influence of Beijing’s international image has been tremendous. In the domestic sphere, the Communist Party of China (CPC) had few things to cheer about. President Xi Jinping’s – who has become a paramount leader, after Mao Tse Tung – strengthening grip over the Party demonstrates a gradual re-emergence of cult personality and concentration of power under a single hand. In fact, China’s politics is at a crossroad, a contrast between the external and domestic landscapes.

On 28 September 2015, on the commencement anniversary of Hong Kong’s ‘umbrella’ movement’, protest leaders had a ‘mute’ march, unlike the year before. Large scale demonstrations were absent. Instead, academic seminars and prayers were held at the square. The stock-market crash led to the wiping of several trillion dollars, and also highlighted the uncertainty of Chinese economic policies in the long run. Scores of retail investors lost their highly coveted investments within a fortnight. The 6.9 per cent growth rate in 2015 also demonstrates that the state of China’s economy is not so nice.

However, the numbers of registered strikes have been annually increasing. China Labour Bulletin’s official data shows over a 56 per cent increase in 2015 in comparison to the previous year. Some reports also indicate that mass social unrests have been escalating higher than before. The worsening environmental problems, with air pollution reaching epidemic levels in some metropolises, mine collapses, and chemical blasts – as the one in Tianjin (twelve in a year) – have taken a swipe on China’s industrial safety policies.

China’s crackdown on social media and the Internet via strict censorships and surveillance, and persecution of religious minorities, civil society groups, intellectuals and lawyers, have disenchanted the country’s rising middle class. Recent trials and illegal detentions of journalists, publishers and human rights lawyers have seriously undermined China’s path to legal reforms. The recent detention of five published from Hong Kong show China’s intolerance towards anti-establishment literature.

Some high points of 2015 can be viewed in the scrapping of the hukou system i.e. compulsory household registration system, which barred migrant families from availing benefits in cities or places other than their hometowns. Social benefits may not be availed soon, but gradual initiatives complement rapid urbanisation and migration. Similarly, a new law permitting the right to bear a second child is a welcome policy for an ageing society. On the political front, corrupt Party leaders and cadres were arrested and expelled. Within the country’s People’s Liberation Army (PLA), corrupt generals and commissars faced disciplinary action and dismissal. Major reshuffling and reorganisation of the PLA took shape with the appointment of the younger lot.

With China’s rapidly ageing society and gender imbalance, the workforce is shrinking even faster. However, how far the population will actually avail of this opportunity is yet to be seen. Political and social reforms were side-lined in 2015 due to the looming economic problem. 2016 might not be very different.

No End to the Anti-graft CampaignIn 2015, 54,000 Chinese officials were investigated by prosecutors for bribery, dereliction of duty and other duty-related crimes. In fact, since its launch in 2013, the number of entities inspected so far reached 90 in 2015. The campaign against SOE, especially in the petroleum sector, led to arrests of two Petro China Co. & Sinopec Corp bosses. The petroleum sector was a fiefdom of Zhou Yongkang, a former member of the CPC Politburo Standing Committee (PBSC) who is now serving a prison sentence. The Party has been emphasising on “building a discipline system with cleaner governance.” The Central Commission for Discipline Inspection (CCDI) stress on anti-corruption crackdown is unlikely to end soon.

In 2016, the anti-graft campaign may concentrate on the financial sector, especially after the 2015 stock market crash. Inspections have begun against the speculators under the leadership of Meng Qingfeng, Vice Minister, Public Security Bureau. As Wang Qishan, an anti-corruption czar, is a former banker and many people facing the heat are in his circles, some reports indicate intensification and deepening of the anti-corruption campaign, which may not end soon. Since Xi also heads the Small Leading Group on Economy, this campaign can also be seen as a ‘tool’ of economic reforms.

Political Consolidation and Rectification MovementWith the arrests of many ‘tigers’ and ‘flies’, the anti-corruption campaign has also led to disenchantment of the party leaders. In December 2015, Xi called to the Politburo, the CPC’s top decision-making body, to stay united and loyal to the party and to follow Party leaders’ instructions. Besides, Xi also asked the leaders to supervise their family members and warn against abuse of power. This reflects his determination to strengthen and consolidate his authority via the use of a rectification movement, as Mao did in 1942.

The resurgence in persecution – including denying work visas to foreigners – of journalists, social activists, human rights lawyers, academics, and publishers, indicate the CPC’s continued zero tolerance on dissent. However, Xi’s call encourages self-introspection within the leadership that has been increasingly sensitive to criticism; and such arrests may continue in the coming days.

Simultaneously, Xi must be cautious of squeezing too much. Despite the CPC’s overwhelming power, silenced dissident views may lead to policy errors in pursuing reforms. Already, at the January plenary session of the CCDI, it was proposed that inspection teams visit the entire provincial and ministry level institutes before the 19th Party Congress in 2017. As proposed, these inspectors will assess the cadres following Party instructions, loyalty and implement the political line in the spirit of Xi’s speeches. As Wang Yukai of the Chinese Academy of Governance points out, ‘emphasis on party loyalty during inspection tours’ is to assess the ground situation for political mobility, and also to assess the cadres on corruption and disloyalty.

The Party and the PLAAs the Chairman of the Central Military Commission (CMC), both of the Party and State, Xi has ensured that the writ of the party is respected. With successfully bringing down the former Vice CMCs, Xu Caihou and Guo Boxiong, and other Military Region Commanders during 2014-15 via the anti-graft campaign, Xi has strengthened his control over the PLA more than ever. In January 2016, Xi became the second person after Mao to make what is called a ‘precept’ speech xun ci, which translates to “admonishing words”), in which he called for a complete remodelling of the PLA, and for utmost loyalty to the Party.

If successfully implemented, many commentators argue that Xi is at par with Mao, as his other three predecessors, Deng, Jiang and Hu were not so determined to challenge the conservative military.

Xi has urged the PLA to adhere to political principles and follow the Party’s leadership i.e. the Central Committee and the CMC. With a thrust on restructuring the military, technological modernisation and also job cuts, Xi has embarked on a major step towards overhauling the old soviet style military, as well as boosting the military’s morale in ‘winning battles’. Thus, ‘If the power flows from the gun,’ Xi Jinping has resolved to bring the ‘gun under the control of the party’.

New Normal’: Legitimising a Slowing Economy
In 2015, Hu Angang, a close aide of Xi Jinping, remarked that China is entering a new stage of economic development with an emphasis on rebalancing and diversifying the economy, embracing sustainable growth and evenly distributing benefits in the society. The GDP growth of 7.4 per cent in 2014, and 6.9 per cent in 2015 – lowest since the 1978 reforms – clearly portray the deceleration in China’s economy. Under the ‘new normal’ (xinchangtai), Xi has asked the Chinese people to accommodate growth that is far slower than those of the previous years.

With the 2015 crash landing of the stock market, the anti-graft crackdown against those responsible can pacify some, but many unfortunate investors may look for transparency and stringent rules.

Solutions towards fiscal stimuli and fixed asset investments have only led to a burgeoning of national debt. Without sound economic reforms, 2016 may bring more unwarranted challenges to the economy. Despite several social regulations, decreased funding and strict control of the public purse may have led to over-capacity. Thus, xinchangtai, can become a mere story for justifying the sluggish mismanagement of economy, and if handled imprudently, the coming months might be quite painful.

ConclusionWith external highs, and domestic lows, the CPC has more daunting tasks ahead. In the politically volatile border regions, the Chinese state faces security risks from the increasing numbers of Uighur origin volunteers fighting under the Islamic State (IS) banner in Syria. Counter-terrorism expert Li Wei states, that “with the rise of ISIS and as more Chinese nationals are smuggled over the border to join it, China faces a bigger threat of terrorism.” However, sporadic attacks such as the September 2015 attack in Baicheng, Aksu Prefecture, continue. To that end, a Counter-Terrorism Law was passed in December 2015. However, the Law is extremely controversial as it provides sweeping powers that the Party is likely to use as a tool to control minorities.

China’s 13th Five Year Plan (2016-20) will be also on the anvil this year. The national planners have stressed on the role of innovation, green development and inclusive growth. Beijing aims to double its 2010 GDP and per capita income of residents of cities as well as rural areas by 2020, and a 6.5 per cent growth rate will be ideal to achieve those levels. Social insurance, population reforms and hukou registration are some important issues the Party and the government have to deal with.

At the leadership level, there has been a rising trend in concentration of power with a single individual. The leader has outgrown the Party. With Xi’s coming to power, its ‘harmonious development’ is nowhere mentioned in speeches and Party documents. Xi is not only trying to cleanse the Party, but also his political rivals, which is often not accepted by the Party. Despite commanding immense powers, Xi cannot try to undermine the role of party and state structures to legitimise his authority. For, if such a trend continues and/or intensifies, the political institutionalisation process that has insofar been the Party’s mainstay may be adversely affected. If Xi is concerned about the future of the CPC, he would do well to understand that no individual can be bigger than the Party itself.

The looting of US workers’ pensions

Andre Damon

Behind the backs of the American people, the Obama administration is carrying out one of the most significant measures of its tenure in office: the gutting of benefits for hundreds of thousands of retired workers covered by multiemployer pension funds. This attack on private-sector pension benefits coincides with an escalating assault on the pensions of public-sector workers.

On Monday in Detroit and Tuesday in Minneapolis, longtime Washington fixer Kenneth Feinberg held the final public hearings before the implementation of plans to slash the pension benefits of 270,000 retired truck drivers, package handlers and other beneficiaries of the Teamsters Central States Pension Fund by between half and 75 percent.

Pensioners will receive ballots to vote on the benefit cuts, which will be counted and totally ignored, as Feinberg, appointed by the administration to serve as the Treasury Department’s “special master” for multiemployer pension funds, rules unilaterally to proceed with the cuts.

As the Obama administration’s special master on executive compensation for banks and other firms that received taxpayer bailouts in 2008-2009, Feinberg rubber-stamped multimillion-dollar bonuses at companies such as the insurance giant American International Group (AIG), which was bailed out by the government to the tune of $185 billion.

At the Detroit meeting, hundreds of retired long-haul truckers, package handlers and delivery workers packed the hall to protest the brutal cuts. One after another—their hands trembling, many clutching canes, others in tears—workers rose to explain how their lives and those of family members would be destroyed by the proposed reductions in benefits.

The workers seemed shell-shocked. How could this be happening? Had they not worked their whole lives, spent years alone on the open road, broken their bodies, missed hundreds of family functions, strained or ruined marriages—all so they could have some security in their retirement? Were these not contractual guarantees? Did not institutions such as the government, the courts, the unions, the press exist to prevent such injustices?

History, wrote the Russian revolutionary Leon Trotsky, is cruel, not kind. Like the proverbial wicked stepmother, it teaches lessons with blows, not caresses.

In letters received over the Christmas holiday, these workers were informed, in effect, that the official political institutions had conspired to rob them of any rest in the final years of their lives. In the eyes of capitalist society, they have no rights, their lives mean nothing, and they should just hurry up and die.

The drive to dismantle pensions is part of a conspiracy to destroy all of the social gains won by workers over the course of more than a century of struggle—a conspiracy that extends beyond America to the entire world.

This is a social counterrevolution, and it has been underway for decades. It has seen the destruction of millions of US manufacturing jobs, the slashing of wages, the undermining of health benefits, the gutting of social programs, a frontal assault on public education, and the replacement of defined-benefit pensions with 401(k) plans tied to the stock market.

As a result of this ruling-class offensive, the share of US private sector workers receiving only a defined-benefit pension has fallen from almost 30 percent in 1980 to less than 3 percent today.

The social counterrevolution has been intensified since the financial crisis of 2008-2009. To pay for the bank bailouts, in which the US government handed over some $7 trillion to Wall Street, the Obama administration, with the support and collaboration of the unions, ratcheted up the attack on the living standards of the working class.

First came the 2009 restructuring of the auto industry, in which the pay was slashed for all newly hired workers and the share of “second-tier” workers, earning half the pay of older workers, was expanded from 20 to 40 percent at GM and Chrysler, even as health benefits for retirees were slashed.

In 2010, President Obama signed the Affordable Care Act, which created a mechanism for companies to offload workers from their existing health care plans into low-quality, high-cost private plans sold through exchanges. It introduced a sharp penalty, known as the “Cadillac tax,” on higher-quality health plans.

Next, in a series of deals with congressional Republicans, the White House repeatedly slashed vital social services such as food stamps and unemployment insurance and chipped away at the bedrock social programs Medicare and Social Security.

Then came the 2013-2014 Detroit bankruptcy, in which an unelected emergency manager used the bankruptcy courts, in collaboration with the Obama administration, to set a precedent for slashing constitutionally protected pension benefits of public-sector retirees. This opened up the floodgates for the dismantling of pensions in states throughout the country, including Illinois, California, Pennsylvania and New York.

In late 2014, the Obama administration worked with Congress, major corporations and trade unions to pass the Multiemployer Pension Reform Act, which opened the door to the slashing of the pensions of up to a million retirees, starting with the beneficiaries of the Teamsters Central States Pension Fund.

Every one of these initiatives was promoted by the unions, which backed Obama’s forced bankruptcy and restructuring of GM and Chrysler, served as cheerleaders for the Affordable Care Act, supported the Detroit bankruptcy “plan of adjustment,” and worked behind the scenes to ensure the passage of the law to cut multiemployer pension benefits.

In the years since the 2008 financial crash, the mask has fallen off capitalist society: the essence of social relations has increasingly appeared on the surface.

Capitalism stands exposed as a de facto dictatorship of the corporations and banks. No one should be under any illusions: with the US teetering on the brink of recession, the ruling class will redouble its efforts to shore up its own social wealth at the expense of workers.

The drive to reduce the working class to penury will not end until workers organize a counteroffensive that matches and exceeds the determination and consciousness with which the ruling class pursues its interests.

There are signs of growing militancy in the working class. Last year’s auto contract votes were marked by mass opposition to the UAW-corporate alliance. In Detroit, teachers and students have launched mass sickouts this year. In Flint, Michigan, workers have staged protests and demonstrations against the lead poisoning of the city’s water supply. The widespread support for Democratic candidate Bernie Sanders, who falsely claims to be a socialist, is a pale and distorted reflection of growing anticapitalist sentiment within the population.

The central task is to unify the mounting struggles of workers and youth and arm them with a political perspective capable of opposing the dictates of the financial aristocracy. Workers must realize that all of the official institutions, including both major political parties, the courts and the media, are instruments of the financial oligarchy and are rigged against them.

It is not a matter of appealing to the politicians or courts, but rather of independently mobilizing the immense social power of the working class, both within the United States and internationally.

None of the social rights of the working class can be defended outside of the building of a working-class socialist movement aimed at overthrowing the capitalist system and reorganizing society to meet social needs, not private profit.

International investigations fuel Malaysian corruption scandal

John Roberts

Attempts by Malaysia’s Prime Minister Najib Razak to bury the long-running 1MDB corruption scandal have been brought undone by a series of statements and reports internationally that raise more questions. The scandal not only threatens to bring down Najib but is weakening his United Malays National Organisation (UMNO)-led government.

The allegations focus on the heavily indebted, state-owned 1Malaysia Development Berhad (1MDB) and the government’s misuse of public funds. Najib is in the spotlight over the transfer of $681 million into his personal account before the bitterly contested 2013 election. Last July in a bid to fend off criticism, the prime minister sacked his deputy, the attorney general and four other ministers.

On January 26, Attorney General Apandi Ali made a concerted attempt to finally lay the affair to rest. He told the media the $681 million was a “personal donation” from the Saudi Arabian royal family, to be put to any use, and therefore was not looted from 1MDB. The attorney general said most of the money was not spent and $620 million was returned in August 2013.

As a result, Apandi declared: “I am satisfied with the findings that the funds were not a form of graft or bribery.” He proceeded to shut down an inquiry by the Malaysian Anti-Corruption Commission (MACC) and other investigations. Apandi also said no criminal offence was committed and therefore there was no need for Malaysia to ask foreign nations to complete their investigations.

Najib issued his own statement, saying: “The matter has been comprehensively put to rest. It is time for us to unite and move on.”

The scandal is far from over, however. Since Apandi’s announcement, Najib and the government have been hit by new revelations and continuing criticism.

On February 1, Singapore announced that it had seized a large number of bank accounts as part of its ongoing investigation into the 1MDB scandal. United States authorities are continuing their inquiries into the investment fund and its dealings in New York involving Najib’s stepson Riza Aziz and associate Jho Low.

On February 4, Saudi Arabian Foreign Minister Adel al-Jubeir called into question the account provided by the Malaysian attorney general. While accepting Apandi’s claim that there was no wrongdoing, he said he did not think the $681 million came from the Saudi government or that it was a political donation. “It is a private Saudi citizen, I believe, and the funds went to an investment in Malaysia,” he said.

On the same day, French prosecutors announced an investigation into allegations that Najib, as defence minister, took bribes as part of a French company winning a $1.2 billion submarine contract. The inquiry is potentially very damaging to Najib. It will raise once again allegations that he was involved in the murder of a young Mongolian model Altantuya Shaariibuu, who was allegedly linked to a middle man in the submarine deal, Abdul Razak Baginda.

On February 5, the Swiss attorney general’s office said its investigation now had evidence indicating that $4 billion was misappropriated from Malaysian state-owned companies. While stating that Najib was not a suspect, it said some of the money had made its way into the accounts of ex-officials in Malaysia, as well as current and former officials in the United Arab Emirates. The Swiss formally asked the Malaysian attorney general to assist in their inquiries, undermining Malaysian efforts to shut down any further investigation.

Najib has clung to power, despite being directly implicated in the protracted scandal, by suppressing critics at home. He has also enjoyed the tacit support of the Obama administration, which has largely turned a blind eye to the allegations in order to secure closer military ties with the Malaysian government. When Obama visited Malaysia in 2014, he pointedly did not meet with opposition leaders or criticise Najib’s autocratic methods of rule.

Under conditions of worsening global economic crisis, however, the expanding international corruption investigations are a sign of deepening concern over the Malaysian government, particularly in financial circles, which have long been critical of UMNO’s cronyism.

A comment by the British-based Financial Times said the Malaysian attorney general’s announcement had done nothing “to dispel a growing sense that Najib Razak has been a disastrous prime minister for Malaysia.” The comment warned that the allegations swirling around Najib “are damaging Malaysia’s international reputation and deepening a public trust deficit at home.”

The Financial Times decried the government’s “lurch towards authoritarianism” and its jailing of opposition leader Anwar Ibrahim following the 2013 election, saying these events were “unsettling investors in Malaysian stocks and bonds.” Its real concerns, however, are not UMNO’s longstanding anti-democratic methods. The comment said it was necessary to end “the practice of providing patronage to a group of crony Malay business people.”

As the comment makes clear, the scandal surrounding Najib has become a useful tool to press for a wholesale restructuring of the Malaysian regime that will further open up the economy and protect the interests of “investors in Malaysian stocks and bonds.”

For all the government’s efforts to suppress criticism, the scandal will not go away within Malaysia either. During his January 26 press conference, Attorney General Apandi waved around copies of MACC reports to emphasise the extent of the investigation he was shutting down. Press photographs snapped shots of the documents, details of which were then published by the Sarawak Report.

The Sarawak Report used the documents to trace money from SRC International, a former subsidiary of 1MDB now owned by the finance ministry, which Najib controls. The newspaper tracked the funds to specific credit cards used during Najib’s holiday to Europe in 2014. Within UMNO, however, the prime minister has insisted that the money funded projects to win votes at the 2013 election.

Tens of thousands of steel, energy, retail, government jobs cut in the UK

Harvey Thompson

Thousands of jobs losses have been announced in recent weeks across the UK as part of a corporate European-wide assault on the working class, amid growing global economic turmoil.

Tata Steel announced last month that it is to slash 1,050 jobs in the UK. Around 750 of these job losses are expected in Port Talbot, Wales and another 300 jobs could be lost at steel mills at plants in Llanwern, Trostre, Hartlepool and Corby.

The Port Talbot plant, which once employed 20,000 steel workers, is a major regional employer and each job loss is expected to have an immediate knock-on effect of four job cuts in associated industries, businesses and supply chains.

There has been a haemorrhaging of jobs in steel production in the UK over the past year.

In addition, oil giant British Petroleum (BP) last month announced 600 jobs losses in the North Sea (one in five of all jobs). These are part of 4,000 posts BP plans to shed globally from its “upstream” oil exploration and drilling business. BP’s cutbacks form part of a major reduction in its global “upstream” workforce––those employed in oil exploration and production––from 24,000 to less than 20,000 by December 2017.

According to the industry body, UK Oil & Gas, an estimated 65,000 jobs had gone in the oil sector as of September 2015. The oil price is now at a 12-year low of around $30 per barrel and expected to fall farther.

The BP cuts were announced a day after oil and gas services firm Petrofac said that it would be cutting up to 160 jobs to integrate its operations into a single business. The firm said this was to ensure it remained “competitive and sustainable against a challenging industry backdrop”.

British Gas is to make 500 staff redundant, with the shutting of its loft and cavity wall insulation business. The cuts are part of 6,000 job losses announced by parent company Centrica. Some 500 of the jobs will go at sites around the UK, with 100 of them in Leeds.

Up to 300 jobs are also under threat at the Leeds headquarters of supermarket giant Asda. The retailer employs almost 3,000 staff at its head office in the city. The job cuts are on top of 1,360 middle management jobs axed in stores in 2014 as the Walmart-owned chain tries to lower costs by £1 billion.

The UK’s third largest supermarket chain is believed to have fallen behind rivals during the key Christmas trading period. Analysts expect Asda to report its sixth quarter of falling revenue and to have the worst sales performance of the so-called “big four” supermarkets.

Up to 300 jobs are threatened at London-based ready meals company Bakkavör Meals after it lost a contract to supply mashed potatoes to the UK’s top retailer Tesco. Bakkavör is one of the UK’s biggest ready meals companies and provides prepared foods from salad to pizza and stir fries to all the major supermarket chains.

Tesco is involved in a ferocious trade war with low-cost retailers Aldi and Lidl. In November, Carlsberg said it was to cut up to 100 UK staff after Tesco stopped stocking some of its beer. General Mills announced 265 jobs will go with the closure of its factory in Berwick, which makes pastry and cake mixes. General Mills began producing pastry at the site over 50 years ago.

Virgin Media is to cut 900 jobs from its UK workforce over the next two years. Tom Mockridge, the chief executive, said: “The proposed reorganisation will give us an even sharper focus on the customer, network expansion and business growth”.

Research by the GMB trade union found that than 25,000 jobs are under threat in local authorities nationwide, due to councils imposing central government spending cuts.

Councils in the North East of England are set to shed more than 1,500 jobs. Approximately 700 jobs could go at Derbyshire County Council, 400 at Plymouth City Council and the same number at Sheffield City Council.

Also in Sheffield, over 240 jobs are under threat at the Department for Business, Innovation and Skills (BIS). Staff dealing with policy and corporate services have been told their office will close by 2018. Martin Donnelly, BIS permanent secretary, said the end of operations in Sheffield would be accompanied by the creation of a combined central headquarters and policy centre in London. “The unions are being consulted and will be involved throughout the process”, he said.

Up to 15,000 local authority jobs are set to go in Scotland under cuts imposed by the Scottish National Party (SNP) government.

In January, Edinburgh council approved 2,000 job losses, over the next four years. Scotland’s second largest authority, run by a Labour-SNP coalition, is imposing £140 million in cuts in that period. About 700 staff are already slated for redundancy. Up to £85 million in cuts will go through over the next year, with museums and galleries’ opening hours slashed, and grants to local organisations cut. Parking charges in the city will rise by up to 50 percent.

Dumfries and Galloway Council could shed 400 job losses as part of spending cuts of £21.1 million. Stirling Council could also cut up to 390 jobs over the next five years and 150 in the immediate future. Loss of unsocial hours payments and changes in terms and condition of employment are also under consideration by Stirling as part of £6.6 million in cuts this year.

Around 150 jobs are to go at Iceland’s manufacturing plant for frozen food in Gorton, Manchester. Management this was “as a result of a review into its business operations”. Iceland bought the site from Loxton Food Company in 2013.

Staff at the plant, speaking anonymously to the local media, fear the workforce could be reduced by up to two-thirds if another round of redundancies goes ahead later in the year.

One of the workers told the press, “The company farmed out manufacturing of ready meals to other companies when Gorton got the contract to do the Slimming World meals. Now we don’t have enough work—that is due to a management decision. The managers say the redundancies are subject to consultation but we expect about 150 of us to go”.

Budget shoe chain Brantano went into administration last month—putting 2,000 jobs at risk. The collapse of the firm, which has 140 shops and 60 concessions, was blamed on a high street slump.

Education book publisher Pearson announced 4,000 redundancies worldwide, with most jobs going in the United States. Around 500 jobs are set to go in the UK. The shares of Pearson, who recently sold the Financial Times, rose 17.4 percent on the news of the cuts.

Barclays, under newly appointed manager Jes Staley, is initiating another wave of job cuts at its investment-banking arm, on top of the 7,000 staff sacked since 2014. Some 1,200 jobs losses have been announced, with Barclays issuing its second profit warning in three months. The job losses coincide with Barclays’ plans to pull out of Russia and close offices across a number of countries in the Asia-Pacific region.

Joint Japan World Bank Graduate (JJ/WBG) Scholarships for Developing Countries 2016/2017

Scholarship Name: Joint Japan/World Bank Graduate Scholarship Programme – JJ/WBGSP

Brief description: The Joint Japan/World Bank Graduate Scholarship Programme – JJ/WBGSP call for applications from developing country nationals and Japanese nationals for master degree programs starting this 2016-2017 academic year to open on February 10 and close March 10 2016.

Accepted Subject Areas

Eligible applicants should propose a program of study related to development at the master’s level, in fields such as economics, health, education, agriculture, environment, natural resource management, or other development‑related subject.

About Scholarship

The World Bank and the Government of Japan, through the Joint Japan/World Bank Graduate Scholarship Program, offer scholarships for Masters Degree to postgraduate students from developing countries. It is anticipated that scholars would return to their countries to apply their enhanced knowledge and skills towards helping accelerate the pace of economic and social development.

Scholarship Offered Since: Not Specified

Scholarship Type: Masters Scholarship for developing world bank member countries

Selection Criteria

Eligible applications are assessed according to three main factors: academic excellence, professional experience, and relevance of program of study. Priority is given to candidates from the public sector with a high potential to impact the development in their own countries after completion of their studies

Eligible

To apply for a JJ/WBGSP scholarship under the Regular Program, an applicant must:

• Be citizen of a World Bank member country eligible to borrow;
• Not hold dual citizenship of a developed country;
• Be under the age of 45 on the Application Deadline date;
• Hold a Bachelor (or equivalent) degree earned at least 3 years prior to application deadline;
• Have 3 years or more of recent development-related work experience after earning a Bachelor (or equivalent) degree;
• Not be a staff member (which includes consultants) or relative of a staff member of the World Bank Group;
• Be in good health;
• Be accepted unconditionally to enroll in the upcoming academic year in one of JJWBGSP preferred master programs;
• Submit a completed JJWBGSP application by the Application Deadline date

Number of Scholarships: Several

Scholarship benefits: The JJ/WBGSP scholarship provides annual awards to cover the cost of completing a master’s degree or its equivalent. The awards are given for one year and, provided that the academic program is longer than one year, may be renewed for a second consecutive year or a portion thereof, subject to satisfactory academic performance in the first year and the availability of funds.

The scholarship provides benefits for the recipient only, covering:

• economy class air travel between the home country and the host university at the start of the study program and one return journey following the end of the overall scholarship period. In addition to the ticket, scholars receive a US $500 travel allowance for each trip;
• tuition and the cost of basic medical and accident insurance usually obtained through the university;
• a monthly subsistence allowance to cover living expenses, including books.

Duration: The proposed program of study should start during the academic year 2016/2017 for a maximum duration of two years.

Eligible Countries: Developing countries eligible to borrow from the World Bank

To be taken at (country): One of the preferred university (see link below)

Application Deadline: You need to apply to the university to get accepted into the program and also apply directly to JJ/WBGSP for the scholarship. The deadline for JJ/WBGSP scholarship applications for the academic year 2016-17 is 10 March, 2015.

Offered annually? Yes

How to Apply

Applicants are strongly encouraged to use the online application form available in  English, French, or Spanish

Scholarship Webpage

Sponsors: The Government of Japan and the World Bank

Boys, Hell, and the Politics of Vagina Voting

Kathleen Wallace

There’s this candidate out there that I think might be just what men need to ensure their specific needs are met– a candidate who has the ability to configure a world that more adequately fits the needs of the man of today. I’m talking about any candidate with a penis. Oh,sure it’s usually not a good plan to vote on a single issue, but in this case, I think this single item is of utmost importance…..one that rises to greater magnitude than specific issues, or even the actions of the candidate.

This is basically the Gloria Steinem/Madeleine Albright argument for Hillary Clinton, but just substitute one genitalia for another. I’m sure you’ve heard about Steinem chastising millennial female voters who trend heavily toward Sanders. She said something like…… these girls just want in the tree-house with the boys, and will do anything to get up that rope, even bring snacks. She said later that she “misspoke” but usually a mispeak is a word that is made up, like mispeak, and a small error, not a complete opposite meaning. She meant what she said, and it’s just tragic. The millennials are saddled with debt, a culture that seems to hate their autonomy….and the grand old dame of the feminists has to throw in some insults, as well.

Gloria Steinem is something of a Charlie’s Angels feminist. She takes assignments like dressing up as a Playboy bunny to show things like “ouch, these guys are staring at my cup size!”. No shit, Gloria. It’s like an assignment from Charlie (can you tell I was a kid in the 70’s!?)…..”Jill, you’re going to have to take down this drug smuggling ring that operates out of a bank on 5^th Street. Here is your disguise.”

“But why do I have to dress up like a bikini model to take down the smugglers?” “It’s not for you to ask, Jill. A man talking from a box says so.” So basically, that’s Gloria Steinem. She could have gone for something a little less cheesy, like a hard hitting, insightful look into poverty, especially from the female angle like Barbara Ehrenreich did in “Nickel and Dimed”, but that isn’t as fun as dressing up as in a shady bunny suit. You might actually have to wash some dishes and do decidedly non-dress-up, grindingly hard work. Fuck you Gloria Steinem and fuck your damn bunny suit (which I just know you probably dress up on Wednesday nights in and prance around your house). You are a sicko, at least close your curtains. And quit insulting these young women.

And Madeleine (We Think the Price is Worth It™ ) Albright said something about women who don’t support Hillary Clinton going to hell or something very crazy like that. I’m not a hell believer, but if I were of such an inclination, I’m thinking the monster who said the death of 500,000 Iraqi children was “worth it” might have the most “special” place. I would think she’d have a corner booth, even.

The comments have been termed “tone deaf” but I consider them a bit more than that. Their sexism is every bit as virulent and the most misogynist MRA  noodlebrain in that it hurts more coming from these women who should be looking out for their “sisters”. They are only looking out for the protection of the authoritarian patriarchy. They wouldn’t care if it was an authoritarian matriarchy, or even one led by zebroids—it’s all about the power. (I just learned that word, zebroid, sorry—had to use it, I’m not really saying an authoritarian zebroidocracy is in the works….but if you know of this possibility, let me know. I want to hear about it!). They have no interest in unraveling a system composed of strands of inequality for all sorts of situations and individuals. If they have power, they are good with it.

The most common item that leads to a woefully low station in these United States is a lack of money. It all feeds into that, and the deranged circle is certainly fed with racism and sexism. It’s all connected. Comments like the ones from Steinem and Albright expose that it’s about so much more than simply supporting someone with a damn vagina. It’s such an insult to the men who have worked hard to champion rights for women as well. Why would you want to be so nasty to those on your side? To indicate a stellar candidate in terms of women’s equality still falls short if he has no vagina?

The young women are looking at their situation (huge student debt, erosion of good jobs, lack of universal health care) and they are utilizing their equal and talented brains to come to the conclusion that a neoliberal lackey is not the best fit for them, regardless of sex……that’s what feminism should be about. A judgment of others (men and women) for their actions, not the presence of a vagina.

Forecast 2016: Jammu and Kashmir Politics and Security

Ashok Bhan

The sudden passing away of Mufti Mohammad Sayeed has created a serious political uncertainty in Jammu and Kashmir (J&K). Governor’s rule had to be re-imposed within a little over 10 months of coming into existence of a Jammu and Kashmir Peoples Democratic Party (PDP)-Bharatiya Janata Party (BJP) coalition government. For a meaningful forecast of the politico-security situation, the fallout of this sad event has to be assessed in the backdrop of the existing security situation; renewed attempts of terrorists to infiltrate into J&K; reports of increased radicalisation and fresh recruitments in local militant cadres; and the logjam in any forward movement in the Indo-Pak engagement.

The fractured electoral verdict of 2014 threw a formidable challenge in government formation in the state. The PDP received a resounding mandate from Kashmir valley, and voters in Jammu overwhelmingly supported the BJP. It took over two months for the now late Mufti Mohammad Sayeed to take the “courageous but unpopular decision” to lead a coalition government of the PDP and the BJP, which he himself described as coming together of “north and south poles.” Mufti had the vision for the coalition to deliver. He hoped to begin with a developmental agenda, addressing the aspirations of different regions as dictated by the mandate, and then slowly move towards his party’s political and economic agenda. He had the stature and political acumen to try and create, in due course, a consensus around addressing “core” issues to meet the aspirations of the PDP’s support base, including the alienated section in Kashmir valley. Once having entered into an alliance, Mufti demonstrated his wisdom and capacity to “swallow” avoidable diversions of political nature raked by the coalition partner which disallowed smooth running of the government.

Mehbooba Mufti as the party president is deeply conscious of stresses and strains that her late father had to pass through in running the coalition of diametrically opposite political ideologies. There is debate within the party on the desirability of continuing the coalition. It is argued that if a leader of Mufti’s stature was distracted from pursuing the “Agenda of Alliance,” it will be impossible for his successor to make any meaningful progress. This, they think, will further erode the support base of the party in the Valley. The supporters of continuity, who are currently in a majority, feel that Mufti’s risk-taking experiment for peace and stability needs to be given more time in order to assess whether it can achieve the desired results and that it must not be abandoned half way simply because he is no more on the scene. This puts Mehbooba in a dilemma. On one hand she inherits the political legacy of her late father and on the other, she faces the risk of failure to deliver on the aspirations of the party supporters and losing their confidence. It may not be easy for an out-of-power PDP to prevent poachers from changing the arithmetic of the verdict. Despite the serious political crisis following Shri Amarnath Land row in 2008 and wide spread violence in the Valley in 2010, voters have shown faith in democratic institutions via the record turnouts in 2008 and 2014 J&K assembly elections. If Mehbooba’s fears are not appropriately allayed, the state may go through a period of political uncertainty, and such an eventuality will seriously erode the faith.

Four credible assembly elections since 1996, supplemented by the periodic Lok Sabha and Panchayat polls, had considerably narrowed the democratic deficit in the strife-torn J&K. Successive elected governments of varying complexions, in close coordination with the central government, have pursued a largely peace-and-development-oriented agenda since then. The ceasefire agreement with Pakistan in 2003, which held ground till late 2008, gave much respite to people in the border areas. Cross-Line of Control (LoC) travel, and later, trade, did attract the attention of alienated sections as useful Confidence Building Measured (CBMs).

Unfortunately, other attempts to address the political dimension of the problem, including the three Round Table Conferences at the initiative of the then Prime Minister in 2006 and 2007; reports of five Working Groups; and the report of interlocutors, have yielded no results.

It will continue to remain a question mark as to whether the people’s faith in democratic institutions can be taken to another level by initiating a dialogue between internal stake holders to address the political dimension of the problem.

The Pathankot terror incident underscores the vulnerability of targets in J&K where Pakistan and its Inter-Services Intelligence (ISI) have much more over-ground and underground support base. There is a sizeable residual militancy, and infiltration of terrorists continue. In 143 incidents of violence in 2015 in the state, 37 civilians, 39 security personnel and 108 terrorists were killed. There are reports of over 200 militants operating in the Valley. 222 incidents of firing from across the border were reported in 2015, in which 16 civilians and nine SFs were killed. 36 terrorists infiltrated into the state during 2015. Fresh recruitments into jihadi tanzeems and reports of increased radicalisation of educated youth do not augur well for the peace process. Any sign of instability will not only have its political fallout but will also have serious security implications. It will give impetus to the separatists’ agenda of ridiculing democratic institutions.

India has taken a bold stand in renewing the dialogue with Pakistan. The Pathankot terror strike has temporarily stalled the restarting of the “comprehensive dialogue,” with New Delhi seeking action on the perpetrators of the attack before proceeding on the foreign secretary level talks. However, engaging Islamabad is no guarantee against the use of their soil for terror attacks in J&K and elsewhere. Pakistan Army and the ISI will not miss any opportunity to exploit the leverage it enjoys with over-ground and underground support in J&K, particularly in the event of political instability. Pakistan Army is strongly opposed to promoting friendly relations with India if it is at the cost of J&K. The recent terror attacks in Jammu, and the neighbouring Punjab – at Rajbagh, Samba, Dinanagar, and Pathankot – reveal a pattern in the sneaking of terrorists from across the international border and targeting security force camps and police stations to cause maximum casualties. These have come in quick succession after the first such attack on the Hiranagar police station in Kathua, J&K, and an army camp in Samba, J&K. None of these could have been possible without active support of the Pakistan Army. The re-emergence of suicide attacks in some of these incidents is a grim reminder of the post-Kargil situation in the late 1999-2001 period, when a spate of such incidents led to a serious sense of insecurity.

Pakistan Army, by these incidents, has demonstrated its capability to take the proxy war to areas that are considered free from terrorist support bases. Such attacks are likely to continue irrespective of the public stand that the Pakistan government takes to keep alive the current dialogue initiative at a time when, according to former Indian Foreign Secretary Kanwal Sibal, “Pakistan’s conduct and affiliation with terrorism has come under greater scrutiny and strictures internationally.”  While we must engage with Islamabad, any bonhomie must not lead to complacence in our security apparatus. The answer lies in preparedness to thwart such attacks, an effective counter-infiltration strategy, and an urgent review of the coordinated intelligence-based operations to tackle residual militancy in J&K.

The central government has a decisive role to play in the predicted future course of events in J&K, not merely because it is led by the BJP, the most likely alliance partner of the PDP, but more importantly because of the bigger picture that the government can see, of the fallout of political instability on the security situation in the border states; and the fate of the much touted agenda for peace and development.

The country has paid a heavy price in terms of valuable lives (as many as 5,548 security personnel and 17,027 civilians till the end of 2015 ) and resources to bring the security situation to “manageable levels” as witnessed particularly during the past five years (with less than 200 incidents of violence per year). The government owes it to the people of the country to ensure that the situation does not slide backwards.

The peace process has to be taken forward. The residual militancy has to be tackled. The renewed dialogue with Pakistan is welcome, but we must upgrade our security infrastructure to prevent infiltration and terror strikes in J&K and elsewhere. The capacity of separatists to exploit incidents, particularly in a politically unstable environment, must not be lost sight of. Regional aspirations and harmony; settlement of Kashmiri migrants; radicalisation of educated youth; and engagement with the separatists are some issues that need urgent attention. These can be best addressed by an elected government with active support from the Centre.

Therefore, in the interest of peace and development, the Central Government (the BJP may have its own political compulsions) needs to allay Mehbooba Mufti’s fears in a demonstrative manner. Both sides would be well advised to focus on peace and development and refrain from raking up controversial political issues. The government is well aware that Mehbooba is the undisputed leader of the PDP, enjoying mass support base in the Valley. The PDP in turn is deeply conscious that fulfilling the developmental agenda without the support of the Centre is a distant dream. Indian Prime Minister Narendra Modi, his politically mature Home Minister Rajnath Singh and the knowledgeable National Security Adviser Ajit Doval will have to take a call as well as the initiative in this regard, rising above party politics. J&K must not be made to suffer in wait for the PDP to spell out its expectations from the coalition partner. Both sides will have to sit across the table and draw lines for engagement rather than converse via the media.

Will the Central Government walk an extra mile for the sake of peace and stability in J&K? In the absence of Mufti Mohammad Sayeed, the onus of hassle-free transfer of power and ensuring smooth running of the coalition in this sensitive state shifts to the statesmanship of Prime Minister Modi. There lies the key to the developments in J&K in the year that we have just entered.

Forecast 2016: West Asia

Ranjit Gupta

Insofar as existing flashpoints are concerned, West Asia continued to present a bleak picture in 2015. The major change in 2015 from the end of 2014 was that the Islamic State (IS) lost ground in terms of the total territory it controls, and more importantly, it lost control of several important towns mainly in the Sunni inhabited areas of Iraq as well as considerable territory and small towns to the Kurds, in both Iraq and Syria. The IS has suffered heavy casualties and considerable damage to its military and revenue generating assets. Russia also joined the battle against them. Retaliatory consequences were ‘spectacular’ attacks in Turkey and Paris, and the downing of the Russian plane over Sinai.

All these trends will continue in 2016. More frequent and more destructive attacks against Western targets can be expected, leading to the Western war against the IS to be further galvanised and become more hard-hitting. Though the IS as an idea and ideology will take decades and generations to defeat, its persona as a proto state is likely to suffer considerable further damage in 2016.

SyriaIn Syria, President Bashar al-Assad was clearly in a better position at the end of 2015 than at the end of 2014; and this trend too will also continue in 2016, primarily because of Russia’s continuing, and indeed expanding, military support for Assad, and the expanding Iranian military support for him. This support is playing an extremely significant role in weakening the jihadist opposition groups. The current peace processes are going nowhere – no negotiation process has any chance of success if preconditions are placed before the negotiations begin; and non-state actors are holding up the process by imposing all kinds of preconditions.

In any case, participation of the two most potent opponents – the IS and Jabhat al-Nusra – is not envisaged at all; and therefore, participation should be restricted only to states – after all they are the patrons of the different rebels groups in Syria. The objective of the negotiations has to change from determining alternatives to Assad to stopping all wars in Syria, as no negotiating process is going to make any headway unless it is in sync with ground realities. These issues require focused attention in 2016.

Yemen2015 witnessed the entirely unexpected aerial assault by Saudi Arabia on Yemen. With global and even regional attention likely to be concentrated on the war in Syria and against the IS, the war in Yemen is likely to become completely marginalised in terms of international attention; and therefore, any significant subsiding of the Saudi-led coalition’s war against the Saleh-Houthi alliance is unlikely.

However, it is also highly unlikely that Saudi Arabia will succeed in reinstating the Abd-Rabbu Mansour Hadi government in Sana’a. Even if it does, the war will not fade away, mainly because there is no possibility whatsoever of his continuing to remain in power without continuous military support from Riyadh, as Hadi does not have any political, military or tribal support bases in the country. This is an unwinnable war and the sooner all concerned parties realise this the better it will be for them and the region.

Saudi ArabiaHowever, there were two very significant path breaking developments in 2015, one of which was a great surprise and could not have been predicted and the other, was expected. The first was the appointment of Prince Mohammed bin Salman, the youngest son of King Salman, as Deputy Crown Prince and Defence Minister, with considerable additional responsibilities that have concentrated unprecedented enormous power in the hands of a young, completely new-to-government royal, which no Prince has previously enjoyed.

Since his duties also encompass being the gatekeeper to the King, even the Crown Prince has access to the King only if Prince Salman agrees. No foreign ministry, no intelligence agency, no West Asia expert or observer of the Saudi scene had anticipated this or his first significant move – the launch of an expanding war against Yemen. This highlights the perils of attempting to make forecasts. Nobody can predict whether Prince Salman’s authority can or will be diluted or get even further enhanced; but either way, there will be important consequences – either the lessening of Saudi assertiveness or increasing it. The former will improve prospects for calming regional tensions and the latter could escalate them to highly dangerous levels insofar unseen.

IranThe second extremely significant development in 2015 was the successful conclusion of the nuclear deal between the P 5+1 and Iran, presaging the lifting of the bulk of the sanctions. Only a few weeks have elapsed and therefore, to expect immediate positive fallout is completely unrealistic; however, markedly unfortunately, there seem to be absolutely no indications at all on the horizon, of any, even potential, improvement in ground realities. However, all countries who have stakes in the region know that even today, Iran’s Comprehensive National Power is much more than that of all of West Asia’s Sunni countries combined, and will only continue to increase year by year; and it is the natural regional giant.

Confrontational policies by some regional countries will not change this reality. This deal provides Western powers in particular the first real opportunity to try and reorient Iran in more positive directions and this chance must not be lost. If this is not done meaningfully in 2016, then, in 2017, new and potentially more serious complications could arise in the region.

US and West Asia2016 is the last year of US President Barack Obama’s presidency; and his policy towards West Asia has been very strongly criticised domestically and by the Sunni countries who are long-standing US allies in the region.

However, it is to be hoped that he will not be deterred – he has crafted a statesmanlike legacy by overturning the decades-long US propensity for military interventions in the region. President Obama’s approach is the right way forward, since the reality is that Washington’s interventions in West Asia have perhaps been the single major contributor for constant regional turmoil. Obama’s visionary approach has led to re-engagements with Myanmar, Cuba, and most significantly, with Iran. Therefore, Obama’s continuing to make negative public comments about the Iranian role in the region is disappointing – whoever Obama’s successor may be, he/she will have a considerably less charitable view of Iran and its policies. 

The potential positive fallout of the path breaking nuclear deal must be realised while Obama is still at still at the helm. Otherwise, there is real danger of the US policy vis-à-vis Iran being reversed, and this will be disastrous for the region. This is a challenge that Obama must take up in 2016.

OverviewIn 2016, the pendulum is likely to sway one way more than the other in the three hotspots – Syria, Yemen and in relation to the IS – but it is unlikely that ground realities would change sufficiently for final solutions in any of these three cases.

The single most important geopolitical factor in West Asia today is the spreading virus of sectarian hatred between the Shias and Sunnis because of the cynical misuse of religion in a very bitter competition between Iran and Saudi Arabia for regional influence and primacy. This rivalry is the single major cause of the situation in Syria being what it is; Saudi Arabia’s invasion of Yemen; a contributory factor in the rise of the IS; and also of the growing disaffection of Shia minorities in the Gulf Cooperation Council (GCC) countries. With the somewhat unnecessary and avoidable execution of prominent Shiite cleric Nimr al-Nimr by Saudi Arabia, the situation reached the worst it could. Iran’s top leadership’s public apologies for the retaliatory attack on the Saudi Arabian embassy in Tehran was a very positive gesture.

In an interview to The Economist on January 08 2016, Saudi Defence Minister and Deputy Crown Prince Mohammed bin Salman said, “War would not be allowed to happen. It is something that we do not foresee at all, and whoever is pushing towards that is somebody who is not in their right mind. For sure we will not allow any such thing.” This is particularly reassuring, since he is the architect of Saudi Arabia’s new and particularly assertive posture.

The most important task that could and should be attempted in 2016 is that major global powers, particularly the P5, individually and collectively, should concertedly use whatever influence they have with both these countries to tone down the vitriolic rhetoric being exchanged between them on a daily basis, and try to re-establish credible back channels between the two. They have existed in the past, but seem to have broken down; and no task is more urgent than restoring these. A workable via media between Tehran and Riyadh can only be brought about by the two countries themselves and cannot be imposed upon them by any third country. It is fervently hoped that in 2016 there will be movement in this direction.

Italy hit by banking crisis

Marianne Arens

Sharp turbulence on the Milan stock exchange in January focused attention on Italy’s deep economic and financial crisis. At the same time, the conflict between the Italian government and the European Union (EU) Commission has intensified. Prime Minister Matteo Renzi (Democratic Party–PD) has responded with new, stepped-up attacks on the working class.

Stock markets across the world experienced a sharp downturn at the beginning of 2016, with the stock exchange in Milan affected particularly severely. Although all European economies suffered as a result of the slowdown of growth in China and the decline of oil prices, “apart from Athens, the Milan stock exchange was … by far the worst affected,” as the SwissNeue Zürcher Zeitung wrote on January 21.

In mid-January, the stocks of many major banks and corporations fell steeply. The worst losses were to the stocks of Fiat, UniCredit bank, Monte dei Paschi di Siena bank, and Cariger bank.

The value of Monte dei Paschi di Siena (MPS) bank, the oldest bank in the world (founded 1472), fell temporarily by half, and its share price dropped to just 50 cents. The bank had to be removed from trading. On January 24, the government decided to protect the bank from bankruptcy with a guarantee from the Economics and Finance ministry.

The MPS is one of six Italian banks that reportedly hold large quantities of toxic assets. With net wealth of €10 billion, the value of bad loans allegedly totals €24 billion. As the European Central Bank confirmed in a data analysis at the end of last year, there are more than €200 billion worth of toxic assets on the books of Italian banks.

The figures reflect the weakness of the Italian economy after five years of recession. Seventeen percent of loans held by Italian banks today are, according to EU figures, in danger of turning bad. By contrast, according to figures from the Royal Bank of Scotland, in Germany the figure is 2 percent and in France 7 percent.

The following comparison brings out the state of crisis in the Italian economy: while six years ago small and medium-sized businesses had the possibility of paying back 90 percent of their loans, today it is only 72 percent.

Already in November 2015, four smaller banks fell into crisis: Banca Popolare dell’Etruria in Arezzo, Banca Marche in Ancona and two local savings banks in Chieti and Ferrara. The Italian government did not step in to support the crisis-ridden institutions with state loans, because the EU has since banned state help for failed banks.

New EU competition regulations prevent the kind of state assistance financed by taxpayers’ money that was carried out in almost every country after the 2008 financial crisis. In place of the “bailouts,” a so-called bail-in has been established, which means that bank customers must support the bank with their assets.

The New EU regulations, which were allegedly intended to prevent taxpayers’ money being used to finance failed banks, have been exposed as a new claim on the funds of small savers and pensioners. In the case of the four failed banks, 12,500 savers lost their funds.

The bankers have used a provision of the new regulations, according to which not only savers with deposits of over €100,000 could be made liable for a bank in crisis, but also holders of sub-prime bonds. Such junk bonds were evidently sold in large quantities to unsuspecting small savers.

At the end of 2015, as the banking crisis became acute, many of these savers lost everything. Dramatic stories resulted: a 68-year-old pensioner hung himself in Civitavecchia, when he, a former employee of the state energy firm ENEL, realised his savings at the Banca Popolare dell’Etruria had vanished. This case and similar incidents affecting hundreds of savers, mainly pensioners, provoked a wave of protests.

Finally the government—with a view to upcoming municipal elections—established a “solidarity fund” of €100 million for those small savers affected, although this came nowhere near covering all the losses. But this measure by the finance minister intensified the conflict with the EU.

For months, a bitter dispute has played out between the government of Matteo Renzi and the EU. Under the leadership of Germany, the EU has pressured weaker countries like Greece, Spain and Italy to implement a brutal austerity programme.

In the case of the steel firm Ilva, the EU Commission accused Renzi of using too much state aid and thus breaking EU competition law. On the issue of an Italian “bad bank,” which Italy has wanted to establish for some time to allow the banks to dump their bad assets, the EU responded only when the stock market crisis was in full swing.

On January 26, EU competition commissioner Margrethe Westagar finally permitted the Italian government to create a “bad bank.” The agreement signed by Finance Minister Pier Carlo Padoan in Brussels was coupled with such stringent conditions that it proved unable to calm the alarm on the stock market. Bloomberg cited a representative of the investors as saying, “The agreement can help the banks to get rid of part of their dubious outstanding debts, but it will not solve the problem, especially for the weakest finance houses, which without doubt require fresh capital.”

On February 2, the Italian Central Bank issued a record 30-year bond worth €9 billion. This was “the largest issuing Italy had ever done, and the most important over a 30-year period ever undertaken by a European sovereign,” explained Frédéric Gabizon from HSBC. But just two days later, on February 4, the Milan stock exchange fell sharply once again.

Italy’s state debt rose to 132.2 percent of GDP in 2015, well above €2 trillion. Only Greece has a higher level of state debt.

Under pressure from the EU, the Renzi government therefore intensified the severe austerity measures it has been imposing for two years, announcing wide-ranging cuts in the public sector. A new law, which is supposedly to launch a struggle against the “Fannulloni,” the slackers in the public sector, makes it easier for the state to implement layoffs that have already been planned.

The attacks already carried out on pensioners and workers have resulted in a massive polarisation and increased social tensions. The major increase in the retirement age left millions of seniors in poverty. Although the liberalisation of the labour market has slightly reduced unemployment figures, two of every three newly created jobs are temporary and precarious, short-term contracts or low-paying positions.

The official unemployment rate is 11.5 percent, and youth unemployment is 38 percent. But in reality, unemployment is much higher, since more than 36 percent of all working-age Italians are absent from the statistics. They are considered “inactive” because they could not prove they had actively looked and applied for work in the last month. This means that for those aged 15 to 24, a much higher percentage is without work or training.

The bare numbers conceal a development with explosive social consequences. Conflicts are taking place daily between the police and homeless people over occupied houses, and with youth and workers determined to fight for their jobs and futures. One example is the workers at Ilva, who briefly occupied Genoa town hall in early January. Conditions in Italy differ little from those in Greece.

A new stage in the global economic breakdown

Nick Beams

China’s foreign currency reserves dropped by almost $100 billion last month, following a decline of $108 billion in December, adding to fears the country is experiencing capital flight and that financial authorities are losing their battle to prevent a rapid fall in the renminbi (also known as the yuan). The announcement had global significance because, together with the ongoing rout on international share markets, it indicates that the economic breakdown that began in 2008 has entered a new and explosive stage.

The outflow of $99.5 billion, following the biggest ever monthly fall in December, takes the country’s reserves to a more than three-year low of $3.23 trillion. At first sight this figure gives the appearance that China has sufficient reserves still in hand. However, according to calculations by the International Monetary Fund, China needs reserves of around $2.75 trillion to maintain operational flexibility in managing its currency and financial system. In other words, China has a buffer of just $500 billion before it encounters difficulties, and if money keeps flooding out at the present rate, that buffer will be rapidly exhausted.

The global significance of the mounting Chinese financial problems emerges when the present situation is examined within the framework of the economic history of the past quarter century. The liquidation of the Soviet Union at the end of 1991 was accompanied by a wave of bourgeois triumphalism and celebrations of the “free market” around the world, which was joined by the Chinese regime.

Having already initiated the restoration of capitalism and organised the bloody repression of the working class in the Tiananmen massacre of June 1989, the regime moved, from the beginning of 1992, to integrate China more directly into the capitalist world market and make it the cheap labour platform for global capital.

In the ensuing years, this set up a so-called “virtuous” economic circle. For global corporations, the opening up of China and its cheap labour force—pay scales were at one point one thirtieth the levels in the US—provided a significant boost to profits as well as benefits for US financial markets.

In a bid to first establish and then maintain its position as the world’s premier cheap labour platform, the Chinese regime recycled the dollars it received from exports to the US and other Western markets back into the US financial system through its purchases of US Treasury bonds. This prevented the value of the renminbi from rising.

This, in turn, enabled the US Federal Reserve to maintain interest rates at historically low levels throughout the latter part of the 1990s and into the first years of the new century, in what was referred to as the “great moderation.”

Low interest rates fuelled the speculation in financial assets, land, housing, stocks, etc. that increasingly became the dominant mode of profit accumulation in the US. The financial boom and the increase in home values also helped sustain consumption spending in the US, even as real wage levels declined, providing the markets for the manufactured goods produced in China and generating further trade surpluses, which were then recycled into US Treasury bonds, keeping interest rates low.

This house of cards collapsed when the crisis in sub-prime mortgage schemes set off the US and global financial meltdown of 2008.

The crisis spelt the end of the China export boom. In response to the loss of more than 20 million jobs in 2008–2009, the regime initiated a fiscal stimulus package worth half a trillion dollars and financial authorities engaged in a massive expansion of credit, leading to an infrastructure and property investment boom based on borrowed funds.

This, in turn, boosted the prices of oil and other industrial commodities in what became known as a “commodities supercycle.” As emerging markets benefited from the increased demand for their commodity exports, finance houses, looking for higher yields, poured in money to finance debt-based projects.

At the same time, the Fed, along with other central banks, ensured the continued inflow of ultra-cheap money by setting interest rates at historic lows and increasing the supply of cash through purchases of government bonds and other financial assets under their respective “quantitative easing” programs.

These measures, however, did not return the global economy to the conditions that prevailed prior to 2008. What “recovery” did take place was at best anaemic, with investment—the crucial driver of real growth in the capitalist economy—remaining at historically low levels, as corporations piled up cash to use in speculative activities such as mergers and acquisitions and share buybacks.

The significance of the massive expansion of Chinese credit is indicated not simply by China’s rising share of the global economy, but also by the fact that the “commodities supercycle” it generated meant that China-dependent emerging markets contributed about 40 percent of global growth after 2008.

But far from overcoming the crisis, all the measures undertaken since 2008 have only created the conditions for another financial and economic meltdown.

Last week, an analysis published in the New York Times pointed to a massive stagnant pool of non-performing loans—bad debts—which is posing an increasing threat to the entire banking system. In China, it is estimated that “troubled credit” could exceed $5 trillion, equivalent to half the country’s annual economic output.

According to financial analyst Charlene Chu, cited in the article, China’s financial sector will have loans and other financial assets worth $30 trillion at the end of the year, compared to $9 trillion seven years ago. “The world has never seen credit growth of this magnitude over such a short time,” she said. “We believe it has directly or indirectly impacted nearly every asset price in the world, which is why the market is so jittery about the idea that credit problems in China could unravel.”

The phenomenon of non-performing loans is not confined to China. It is estimated that bad loans in Europe amount to about $1 trillion, and the IMF has calculated that emerging markets have over-borrowed by about $3 trillion.

If we take the last quarter century as a whole, the picture that emerges is very different from the triumph of the “free market” proclaimed with the liquidation of the Soviet Union. The first phase of growth was the result of the boost to profits provided by the exploitation of cheap labour in China and elsewhere. After this ended in financial disaster, the severely shaken world economy was propped up only by the trillions of dollars pumped into the financial system by the major central banks and the massive expansion of credit in China.

Now this process has come to an end, giving rise to deepening recessionary trends and the emergence of a new financial crisis, the consequences of which threaten to be even more far-reaching than 2008.

The deepening crisis in China and its global ramifications expose one stark fact: there is no economy or group of economies that can provide a basis for global economic expansion. The US, regarded until recently as a “bright spot,” is heading for recession—manufacturing has probably already arrived there—as indicated by the plunge in yields on 10-year Treasury bonds. Yesterday, they finished at just over 1.7 percent, as investors rush for a “safe haven.”

The European economy continues to stagnate, with predictions that unemployment will remain at double-digit levels indefinitely and concerns grow over the level of bad loans in the banking system. The Japanese central bank is undertaking further quantitative easing measures and has moved to negative interest rates because of the failure of “Abenomics” to provide any boost to the Japanese economy.

So intense are the recessionary pressures that more than one quarter of the world now operates under negative interest rates, a historically unprecedented situation.

Having no economic solution to the mounting crisis, the response of the ruling classes around the world will be three-fold:

• An intensification of the assault on the working class, through job- and wage-cuts and attacks on social conditions.
  
• The development of ever-more authoritarian forms of rule and attacks on democratic rights to crush the social and class struggles now emerging.
  
• An accelerated war drive, as each of the capitalist “great powers” seeks to unload the crisis onto its rivals, if necessary by military means.

The international working class must develop its own strategy, worked out to the end, based on the struggle for an international socialist program aimed at the conquest of political power and the overturn of the capitalist profit system.