US: 2,200 locked-out steelworkers lose health care

Samuel Davidson

On Tuesday, 2,200 steelworkers who have been locked out of their jobs since August 14 had their health insurance eliminated by Allegheny Technologies Inc. (ATI).

“My wife goes in for an MRI on Monday,” said a steelworker on the picket line in Brackenridge, Pennsylvania, on Sunday. “I don’t know what to expect or what will happen,” he said.

For workers to continue with their health insurance they will have to pay the full premiums, which range from $800 a month for individual coverage to as much as $1,800 a month for family coverage, an amount they cannot afford.

Steelworkers Dave and Dave picketing outside ATI’s flagship mill in Brackenridge Pennsylvania

“I had to find another job,” said Dave (pictured right), who had worked nearly eight years at ATI’s Brackenridge mill and is now locked out. “It doesn’t pay as much, and there are no paid holidays or time off, but at least I do get health insurance.

“By the end of February, the unemployment runs out and you are going to have 2,200 people without any benefits at all.

“I don’t understand why they are doing this. We were willing to work; it is the company that has locked us out.

“I don’t have kids at home. It is really hurting the guys that have a family to support and take care of. I don’t know what people are going to do. You have to have health insurance when you have kids. It is a waiting game.”

Workers who don’t continue coverage through the company’s plan will be forced to buy insurance elsewhere or face being fined under the Obama administration’s misnamed Affordable Care Act.

Picketing alongside Dave was another steelworker, also named Dave (pictured left), who has worked for ATI nearly 10 years. He said that he is able to get health insurance from his previous job, where he had been a coal miner for 20 years until the mine where he worked shut down.

“I would just like to know what we did that was so wrong to deserve this,” Dave said, speaking of the lockout.

“You have a group of guys who know how to do their jobs. We got the production out, we did quality work and we did it safely. I worked in the three departments, and on the afternoon and midnight shifts we didn’t even have any supervision and we always got the product out.

“What company wouldn’t want to have a workforce like us, instead of always having to have someone standing over your head telling you ‘do this and do that’ all the time? Unless there is a breakdown or something, a supervisor is never there in the afternoon or midnight shifts.

“Health insurance is very important for us. We work with silica and acid fumes and lots of dangerous things in there.

“They don’t want to talk to the union; they are trying to break the union. I think the big companies are behind this, they want to use us to set the example.”

ATI began locking out its workforce at 12 mills in six states on August 14, several days after putting forward its “last, best, and final offer.” ATI is demanding steep increases in out-of-pocket health care payments, which can amount to more than $10,000 a year per family, factoring in deductibles, prescription drug costs and other expenditures. In addition, ATI is calling for massive cuts to benefits for new hires, including the replacement of pensions with 401(k) plans.

The company also aims to turn its workforce into casual labor, demanding the ability to contract out 40 percent of all jobs. Proposed new scheduling rules would essentially eliminate time-and-a-half overtime pay after eight hours of work, while placing workers’ schedules at the day-to-day discretion of employers.

ATI has replaced its workers with scabs through Strom Engineering of Minnesota, which specializes in hiring scabs for companies during strikes or lockouts.

ATI is being used as a model in the entire steel industry, which is seeking to place the full burden of the drop in demand and falling prices for steel onto the backs of its workers.

For its part, the United Steelworkers (USW), who represent the locked-out workers at ATI, continue to isolate and divide the workers. Thirty thousand steelworkers at US Steel and ArcelorMittal have been ordered to continue working despite the expiration of their contract on September 1. Both US Steel and ArcelorMittal are making similar demands for massive concessions in health care and contracting out as at ATI.

Far from defending steelworkers, the USW is seeking to prove to the companies that it can be relied upon to provide a disciplined workforce and thus serve as a second level of management in restoring the steelmakers’ profits.

Parasitism and the slump in US manufacturing

Andre Damon

In the latest sign of a downturn in the global economy, US manufacturing activity last month hit its lowest level since June 2009, when the economy was still reeling from the Wall Street crash the previous September.

The Institute for Supply Management said Tuesday that its index of manufacturing activity fell to 48.6 last month, from 50.1 in October. The fifth consecutive monthly decline brought the figure below the milestone of 50 that indicates contraction.

There were sharp declines in both demand and output, with new orders falling 4 points and production declining 3.7 points.

More than seven years after the collapse of Lehman Brothers, the US economy remains in a protracted slump. It has grown at an average rate of just over 2 percent during the official economic “recovery” of 2010-2015. This is markedly less than the 3.2 percent growth rate in the 1990s and the 4.2 percent rate in the 1950s.

Despite the Obama administration’s claims that it has turned US manufacturing around, there are 4.7 million fewer US manufacturing jobs today than there were in the late 1990s, and 1.8 million fewer than in 2006. The last time there were as few US manufacturing workers as at present was in 1950, when the population was less than half its current level.

In recent months, leading financial commentators and institutions such as the International Monetary Fund have been forced to admit that there exists no prospect for a return to “normal” economic conditions in the foreseeable future.

It is clear that the monetary policy conducted by the Obama administration and the Federal Reserve in response to the 2008 financial crash, based on the provision of essentially unlimited funds to the financial elite with no strings attached, has failed to restore the real economy.

These policies were sold to the American people as a means of promoting economic recovery and “creating jobs.” In reality, they have facilitated a massive growth of financial parasitism, in which an ever-greater share of social resources is diverted away from productive economic activity into various forms of financial speculation.

This process has been fully on display this year. “Business investment across the US is fizzling out,” declared the Wall Street Journal in an article published Monday. The newspaper added, “Companies appear reluctant to step up spending on the basic building blocks of the economy, such as machines, computers and new buildings.”

As evidence, the newspaper noted that orders for nondefense capital goods excluding aircraft, a measure of business investment in productive economic activity, fell 3.8 percent in the first ten months of 2015 compared with a year earlier.

Nor is business investment expected to grow in the future. A survey by the Business Roundtable released Tuesday showed that 27 percent of US chief executives expect to cut spending on capital goods over the next six months, the largest share planning to reduce investment since the 2008-2009 crisis.

The money that corporations are refusing to spend on productive investment is being channeled back to the financial elite in the form of share buybacks, dividend hikes and increased CEO pay.

US companies increased their dividend payments by an “astonishing” 24 percent in the third quarter alone, according to Henderson Global Investors. Firms listed on the Standard & Poor’s 500 stock index have increased their share buybacks by 10 percent in the third quarter compared to a year earlier, and share buybacks are up 80 percent over the past decade.

An analysis by Bank of America found that for every job created by major US corporations over the past decade, companies spent $296,000 buying back their stock.

The growth of economic parasitism takes its most malignant form in the boom in mergers and acquisitions, which are on track to set a new record this year. These transactions, which create billions of dollars in paper wealth for the rich investors, executives and financial firms that orchestrate them, result in mass layoffs, wage cuts and speedup for employees.

A case in point is the newly merged Kraft Heinz Co, which announced last month that it would close seven North American plants as part of its plans to slash $1.5 billion in costs. At the same time, the company said it would raise its stock dividend by 4.5 percent.

By means of stock buybacks, dividend hikes, mergers and other parasitic activities, the financial aristocracy has plundered the real economy to boost its personal wealth. The resulting destruction of decent-paying jobs, pensions and health benefits has fueled a vast upward redistribution of wealth, which only accelerated during the so-called Obama “recovery.” While the income of a typical US household fell 5 percent between 2010 and 2013 (on top of an earlier fall of 7 percent), the wealth of the Forbes 400 richest Americans doubled from 2009 to the present.

It is worth noting that the US financial markets responded enthusiastically to Tuesday’s dismal economic figures, with all three major indexes up by around 1 percent for the day. US markets are solidly in the green over the past month, despite a continuous stream of negative economic data, the Paris terror attacks, the ongoing refugee crisis, and the danger of the proxy war in Syria sparking an international military conflagration.

This reality points to certain fundamental characteristics of the present period. In a process that grows more naked by the day, the wealth of the financial elite is derived not from productive investment and the expansion of the productive forces, but the plundering of existing wealth, which goes hand in hand with the impoverishment and ever-greater exploitation of the working class.

This process is mirrored in the sphere of foreign policy in the drive by every major global power, spearheaded by the United States, to use military violence as a means of ensuring geopolitical dominance. Accustomed to making its money through parasitic and semi-criminal means, the ruling elite sees international law as a dead letter and proceeds to bomb and invade countries at will.

Economic stagnation, parasitism and war are accompanied by an enormous buildup of the repressive apparatus, to be used against any and all domestic opposition, above all, the financial elite’s historic enemy—the working class.

Slump, war and dictatorship have a common root: the capitalist system and the financial oligarchy that presides over it. The great task of the present historical period is to overthrow this system, expropriate the financial aristocracy, and reorganize society on socialist foundations.

China’s Cult called Xi Jinping

Monika Chansoria

November 2015 marks three years since Chinese President Xi Jinping (习近平) took over the reins of power by assuming office of the Party Commission in November 2012. At that point, it was hard to fathom that within a short span of three years, especially in the context of a large nation like China, Xi would be able to establish, what perhaps has been China’s most tight-fisted socio-political control since the era of Mao Zedong. Interestingly, this is not the astounding part. While leaders in democracies around the world have certain commonalities in terms of their approach and consequent connect with their masses/electorate, the case of China is different for obvious reasons.

In this reference the demeanour of Xi Jinping spreads far and wide - of smiling and laughing in public, cuddling babies, enjoying sports, shunning the state limousine motorcade and opting for a mini-bus to travel with the masses instead, self-serving a bowl of dumplings at local restaurants, and having a meagre traditional meal in a farmer’s hut in the countryside - thereby pointing towards a vital changing reality vis-à-vis the Chinese Communist Party. The CCP is finally being associated singularly with the face of its leader - Xi Jinping - who strikes a chord with the Chinese public and keeps track of public opinion, to the extent that he is often referred to nowadays as “Xi Dada” in local Chinese media.

For that matter, even the People’s Liberation Army owes open allegiance to Xi Jinping with state-run and controlled newspapers carrying full-page expressions of absolute loyalty by military commanders across regions (for more details, see, “The Power of Xi Jinping,” The Economist, 20 September 2014) as an attempt to quell any form of rift between the Party and the PLA, as has been debated frequently. Xi Jinping happens to be the youngest leader to take over command of China’s 2.3 million-strong armed forces. Owing to his political capital, his association with the PLA and having witnessed military diplomacy up close, Xi’s control over the PLA is far greater than both Hu Jintao and Jiang Zemin, who struggled to coagulate their authority during their respective tenures.

In the backdrop of the above, it appears that the winds of Chinese politics are taking a definitive, yet very gradual bend. Xi became the Chairman of China’s Central Military Commission and General Secretary of the Party in November 2012 and thereafter the President of the PRC in March 2013. While popularising his image among the Chinese masses, Xi made an astute and deliberate attempt to strengthen his grip on power, especially by placing effective checks on the power elite. The most profound manifestation of this came in the form of reducing membership of the most powerful political decision-making body of the CCP - the Politburo Standing Committee - from nine to seven members. Noteworthy is that no member, as of now, is exclusively responsible for domestic security, and it remains Xi Jinping’s fief (for more details, see, “The Power of Xi Jinping,” The Economist, 20 September 2014).

Xi Jinping has given out a clear message on who calls the shots in China, unlike his predecessor Hu Jintao. Recall that Hu had been challenged by then Politburo Standing Committee member, Zhou Yongkang (in-charge of the entire law-enforcement apparatus, from the police, secret police and judiciary). Incidentally, Zhou Yongkang is presently being tried for corruption charges and his investigation and trial grabbed international headlines primarily because Zhou is among the highest-ranking officials to have been subjected to the kind of trial that was unheard of in China ever since the Party took over in 1949. Xi Jinping is sparing no political elite when it comes to charges of corruption, and by doing so, in effect, is neutralising all potential political rivalry that could threaten his power and control, in any way. A person whom Xi Jinping would not like to forget is Bo Xilai, the Party chief in China’s south-western province of Chongqing, sentenced to life-in-prison on charges of corruption and abuse of power. Bo and Xi had many similarities in traits and background - both being Princelings with a proclivity to enchant masses. The alternative argument suggested that it was the challenge that Bo posed to Xi’s political rise, which became the key reason for his eventual downfall from public life.

The unimaginable and unprecedented crackdown on corruption is becoming the most potent tool in Xi’s hand with more than 200,000 been rounded up by party investigators, as reported by The Economist. Corrupt officials above ministerial level have apparently been identified in all 31 provincial regions of the Mainland. As the anti-graft campaign in China catches momentum, key political appointees are falling prey, and are being formally charged with taking bribes and embezzling public funds, including prominently:

Ai Baojun (Vice Mayor of Shanghai and Head of the Shanghai Free Trade Area), Lyu Xiwen (Deputy Party Chief in Beijing), Yao Gang (Vice-Chairman of the China Securities Regulatory Commission), Zhang Yujun (Assistant Chairman at the Securities Regulator), Lu Qinhua (Former Vice Mayor of Qinzhou city in south China’s Guangxi Zhuang autonomous region), and Mao Xiaobing (Former Member, Standing Committee of the CCP’s Qinghai Provincial Committee).

The Communiqué released following the fifth plenary session of the 18th CCP can be described as a caveat that summed up the objective of the anti-corruption campaign, “… so that officials … do not want to be corrupt, do not dare to be corrupt, and could not be corrupt even if they wanted to be.” (Xinhua Press Release, “CPC tightens anticorruption efforts as Shanghai, Beijing officials fall,” 12 November 2015.) That corruption in China is systemic and widespread is all too well-known and acknowledged, but, the fact that Beijing and Shanghai - China’s political and economic hub - too have fallen to corruption charges as the last provincial-level regions only reflects the depth of the roots of corruption, now a social pandemic in China.

Notwithstanding that Xi’s political standing and control at present pronounce him as China’s most powerful ruler since Deng Xiaoping, and possibly even since Mao Zedong, it simultaneously brings to light the nation’s turbulent political past when Chairman Mao’s reign was notoriously reminiscent of the turbulences of a dictatorship. Although Xi Jinping is attempting to add a dash of populism to his rule, the concurrent tightening of control on online social networks and brute crackdown against political dissent and activism shall blemish the very idea of being “Xi Dada” - which he would like to be remembered for.

VW workers to bear the cost of emissions scandal

Dietmar Henning

Gradually, more and more details of auto maker VW’s systematic fraud concerning emissions test results are coming to light. Behind the scenes, the VW board and the trade union representatives on the works council are working out how best to pass the resulting costs onto the workforce through job losses and wage cuts.

In September, it was revealed that VW had used software to falsify the nitrogen oxide emission results of some 11 million diesel vehicles worldwide. In early November, VW then admitted to “irregularities” in the carbon dioxide (CO2) levels in its diesel and gasoline engines. CO2 is principle greenhouse gas that contributes to climate chage. In addition to the “legal” tricks used to conceal real exhaust emission values, the reported results were simply falsified in the test procedures. A total of 800,000 vehicles are said to be affected.

Two weeks ago, VW distributed a list containing a “critical overview of CO2 values for 2016 models”. The business daily Bilanz from Springer-Verlag evaluated these, finding it covered a total of 430,000 cars delivered since the spring, and which for the most part are still at dealerships. It is noteworthy that in addition to the many models with diesel engines, more models are included with petrol engines than were previously known.

The manipulated results over the last six to seven years affected at least 130 models, meaning that blame cannot be attributed to a small group of senior executives and developers. This is large-scale fraud, requiring a high level of criminal energy and numerous accomplices in the upper echelons of VW.

It is completely implausible that the works council, which stresses at every opportunity that it closely collaborates with the company’s executive board, was not involved. It turns out that Germany’s much-vaunted “social partnership” between unions and employers is a veritable conspiracy against the workers—both car makers and car buyers.

Now the exhaust scandal is to be used to enforce the long-planned restructuring of the VW group at the expense of around 600,000 employees worldwide. VW CEO Matthias Müller announced that all VW expenditure would be under scrutiny. Last Friday, he announced that investment plans would be slashed. The company will only invest a maximum of €12 billion in the coming year. A year ago, the projection was an average of €16 billion per year through 2019.

Above all, it is the core VW brand that will be affected. The construction of a planned design centre in Wolfsburg will be postponed; the construction of a paint shop in Mexico is to be “reviewed”. Cuts are also planned in the model range. It is still unclear how much the company will have to pay out for the exhaust fraud. Estimates range from €20 billion to almost €100 billion.

In the US, VW has offered those customers affected by the exhaust scandal—some half a million—an indemnity of $1,000—half of which can only be redeemed at VW dealerships. This “good-will” action meant to placate VW’s US customers, is aimed especially at the authorities.

US environmental agencies had submitted deadlines to VW for proposed reductions in the nitrogen oxide emissions of diesel engines. VW has now admitted that the emission values have also been manipulated for both the two- and three-litre engines in VW, Audi and Porsche models. The company said that it had not disclosed a total of three computer programmes in the test procedures.

On November 16, company representatives held discussions with the Investigation Commission of the Ministry of Transport at the VW headquarters in Wolfsburg concerning possible solutions to the exhaust fraud. On Monday of this week, speaking to a thousand executives in Wolfsburg, VW CEO Müller then announced that solutions had now been confirmed for more than 90 percent of the affected vehicles in Europe. The cost of retrofitting was “technically, mechanically and financially manageable.” In cars with 1.6-litre diesel engines, no “essential interventions” in the engine were needed. In addition to a software update, only “relatively simple changes” to the air grille or the air filter cartridge were needed, Müller said.

If this is correct—and not the result of a questionable deal between the German authorities, the EU authorities and VW—then the company has placed the jobs of tens of thousands at stake for savings of just a few euros per car.

However, all the fines, tax arrears, conversion costs and even the possible repurchase of the affected vehicles hinted at by the US authorities are nothing compared to the consequences of a possible downturn in sales due to the exhaust gas scandal.

As a result, the VW group works council and the IG Metall union are working behind the scenes to deal with this eventuality. The works council chairman, Bernd Osterloh, together with the VW board have the task of calming the situation. Osterloh is spreading reassurances in the press. He told theSüddeutsche Zeitung (SZ) that VW had a diesel problem, not a sales problem, and concluded, “Jobs will only be reduced if we sell fewer cars.”

But this is just what it currently looks like. Since the beginning of the year, 4.84 million Volkswagen vehicles were delivered, a decline of 4.7 percent compared to 2014. In all 12 Group brands, the decline was 1.7 percent, down to 8.26 million cars.

According to a November 17 report by the industry association Acea, new vehicle registrations for the core VW brand in October fell by 5.3 percent compared to the same month last year. The VW brand Skoda sold 2.6 percent fewer cars, and Seat sold 11.4 percent fewer cars than the year before. Because the gap between order and delivery is often months, automotive experts expect that the exhaust scandal will be reflected even more strongly in later sales figures.

In a joint interview with Osterloh, VW brand chief Herbert Diess was more restrained. What was clear was only that there would be “losses” in employees’ special payments. He said he “believed” the “core workforce” could be kept. “We must be careful with taking on temporary workers at the present time.” VW employs about 7,000 temporary workers in Germany alone.

Osterloh confirmed this. The SZ quotes him as saying, “If sales go down, then we have less employment—that’s clear. Then we will also have to discuss how to deal with the issue of temporary work.”

Last Saturday, the FAZ also brought short-time working into the debate. “If the cars produced are only stockpiled, the spectre of short-time working will arise in Wolfsburg.”

In other words, the works council and top management are preparing massive cuts for employees. According to a report from the Reuters news agency, VW CEO Müller and works council chief Osterloh agreed on the next steps for “investment and capacity planning” on November 9. Müller emphasised that he attached great importance to the experience of the works council representatives. Osterloh said the staff stood behind the company. Since then, a series of meetings have taken place between the Management Board and employee representatives about which no information has so far been given to the workforce.

This was preceded by a letter from Osterloh to the Board, which criticised Diess, along with the board members, of sketching out the savings plan without involving him. Osterloh said in the SZ interview, “We want to be involved.”

The works council and IG Metall play a key role. They are the ones who plan out the company restructuring and the strategy to implement it. In a joint statement on October 20, they wrote, “The IG Metall and the works council will jointly develop a concept in the coming weeks. We will describe the necessary changes in our own position paper and put this forward for discussion. The involvement of management is important to us.” IG Metall and the Volkswagen Group works council would “continue to consistently follow a course in which employment and competitiveness remain equal corporate objectives”.

At the end of the year, works council head Osterloh had wanted to take over the post of VW personnel manager, with its €7 million remuneration package. In Manager Magazin in May, he called for a “leaner Group structure” and threw his hat in the ring as a successor to the current personnel manager, Horst Neumann. But that was before the crisis. Now IG Metall has decided that he should provisionally continue as works council chief in order to enforce the restructuring programme, including job losses and wage cuts, and to keep the workforce under control.

But the highly paid top job is being kept open for him. Last week, it was announced that VW CEO Müller would “temporarily” take over Neumann’s tasks. The conspiracy against the workers continues.

Sri Lankan government presents austerity budget

Saman Gunadasa

The first budget of Sri Lanka’s “unity” government, presented to parliament by Finance Minister Ravi Karunanayake last Friday, will impose a series of austerity measures on working people while granting significant concessions for local and foreign capital.

The budget is in line with the pro-business demands of the International Monetary Fund (IMF) and the “economic policy statement” delivered by Prime Minister Ranil Wickremesinghe to parliament on November 5. Those measures included the commercialisation or privatisation of state-owned enterprises, the cutting of price subsidies and greater tax burdens on workers and the poor.

To deflect popular opposition, Karunanayake tried to disguise the anti-working class character of the budget. By lowering of the Special Commodity Levy imposed by the previous government, the prices of some essential items, including potatoes, large onions, infant milk powder, sprats, dhal, chick peas, canned fish, kerosene oil and cooking gas will be somewhat reduced.

The Colombo media quickly seized on these meager concessions to declare that the government had presented a “peoples’ budget.” This claim is absurd as any examination of the measures will show.

Karunanayake began his budget speech by highlighting the need to slash public spending. “The time has come to critically analyse and evaluate the expenditure needs of the line ministries and departments to rationalise unnecessary expenditure,” he declared.

The finance minister targeted the country’s very limited welfare schemes for the poor by declaring they would be restricted to “those who actually require assistance.” The government plans to set up a network headed by village officers who will decide “who actually need to be included in social protection schemes.”

The present price subsidies for fertiliser will be replaced by fixed grants of 25,000 rupees per hectare. Farmers have already expressed concerns that the change will add to their financial problems as fertiliser prices tend to rise quite quickly.

The government proposes to abolish public sector pensions for new recruits from next year. Instead workers will have to pay into a contributory pension system. Karunanayake justified the measure, saying: “The pension bill has increased by 170 percent during the 2005–2014 period requiring appropriate actions to manage the continuous increase.” The IMF has long demanded deep inroads into the government pension fund, branding it as unaffordable.

The budget will further increase indirect taxes, which constitute 80 percent of the government’s tax income, while slashing direct taxes on big business and the rich. The burden of indirect taxes falls disproportionately on the poorest layers of society who are already struggling to make ends meet as prices continue to soar.

Liquor and tobacco will attract a 25 percent surtax. The Value Added Tax for services is to be increased from 11 to 12.5 percent, adding to the cost of water and electricity in particular. The Nation Building Tax (NBT), which is applicable on all imports, manufactures and services, including wholesale and retail trades, will be doubled from 2 to 4 percent. The Ports and Airports Development Levy (PAL) on all imports will be increased from 5 percent to 7.5 percent.

Karunanayake also signaled a major assault on the working conditions of public sector workers. “I regret to note that public sector delivery has remained below par. It must be corrected. Productivity remains a serious issue hampering overall economic growth in the country,” he said.

The finance minister proposed a series of pro-business measures, including further privatisation. He proposed the establishment of a Special Purpose Vehicle (SPV) to boost private investment in government-owned entities such as Norochcholai coal-fired power plant.

Private universities are to compete with state universities, which will inevitably be starved of funds and degraded. In a bid to blunt student protests over the establishment of private medical colleges, Karunanayake declared: “Our government also is of the view that private universities should be allowed to operate and offer courses, except in medicine.”

The finance minister “requested” the private sector increase monthly salaries by 2,500 rupees within two years. He remained silent, however, on fulfilling the remaining portion of the government’s promise to increase public sector salaries by 10,000 rupees.

The rates for corporate and personal income taxes have been “simplified” to two bands of 15 percent and 30 percent. Apart from gambling, liquor, tobacco, banking, financial services and trading, all other business sectors will be taxed at 15 percent—down from the previous general tax rate of 28 percent. At a post-budget forum on Monday, Karunanayake boasted that Sri Lanka now had the world’s best income tax rate.

The government has also removed restrictions on foreigners owning land and withdrawn the tax for foreigners on leasing land. It has also removed income tax for non-citizens on dividends and allowed any bank account to provide for foreign investment. Karunanayake also eliminated taxes on the wealthy, including a mansion tax on luxury condominiums, levies on luxury and semi-luxury cars and a tax on corporate super profits.

Not surprisingly, the Ceylon Chamber of Commerce welcomed “the 2016 Budget for its measures to boost private investment and promote inclusive economic growth.” It demanded the strict implementation of the budget’s pro-investor proposals: “While the direction of the Budget is broadly positive, it needs a focused implementation strategy with specific milestones,” its statement declared.

The budget is above all geared to meeting the IMF’s demand to reduce the budget deficit from the current 6.8 percent of GDP to 3.5 percent by 2020. The government is desperate for an IMF loan of $US4 billion to avert a grave balance of payment crisis. As noted by Karunanayake, exports have slumped from 33 percent of GDP in 2000 to 14 percent in 2014.

The finance minister opened his budget speech by boasting of the record of successive United National Party (UNP) governments in imposing the pro-market agenda. The government of President J.R. Jayawardene initiated the opening up of Sri Lanka to foreign investment in 1977. The previous Wickremesinghe government implemented its infamous “Regaining Sri Lanka” from 2001 to 2004, which Karunanayake bragged, had turned the economy from negative to positive growth.

As indicated in the first reading of the budget appropriation bill, the government has allocated an unprecedented 306 billion rupees ($2.2 billion) to the armed forces and police. In the budget speech, the finance minister said that the number of police stations would increase from 428 to 600—an indication that the government is preparing police repression against the inevitable opposition that its budget will provoke.

Ethiopia suffering worst drought in decades

Joe Williams

Ethiopia is facing its worst drought in over a decade, following a poor rainy season due to a particularly strong El Nino this year. The number of people receiving emergency food assistance has nearly doubled, from 4.55 million in August to 8.2 million in October. Schools, hospitals, and other critical facilities have been forced to close due to water and food shortages, and 350,000 children are experiencing acute malnutrition.

The UN Office for Coordination of Humanitarian Affairs says the level of need has already exceeded that produced by the 2011 drought in the Horn of Africa that caused 200,000 deaths in neighboring Somalia, and is comparing the situation to the droughts of the 1980s, which devastated the country and made Ethiopia synonymous with hunger in the minds of many around the world. It expects the number of Ethiopians requiring food assistance to rise to 15 million in 2016.

The official response of the government has been to deny the severity of the crisis. Speaking to Reuters, Finance Minister Abdulaziz Mohammed said, “Regarding the impact on economic growth, the drought-affected areas are peripheral and pastoral communities in the southern and eastern parts of the country … normally, those parts of the country contribute not more than 5 percent to our GDP. On the other hand, we expect harvest to be more this year.” He added that no funds will be diverted from other budget items to bring the crisis under control.

This is fully in line with the economic mismanagement and corruption that have characterized the US-backed Ethiopian Peoples’ Revolutionary Democratic Front (EPRDF) government since it seized power in 1991. Far from being revolutionary or democratic, it is considered one of the most corrupt capitalist governments in the world, with Transparency International ranking it 111th out of 177. Nearly 40 percent of the population lives on less than $1.25 a day, and the UN ranks Ethiopia 174th out of 187 countries for human development.

Despite chronic food shortages, agricultural products constitute nearly 80 percent of the country’s exports. Coffee is the largest export product, followed by meat, livestock, pulses (beans, legumes, etc.) and grains. Much of Ethiopia’s arable land is used to grow non-food products, such as flowers and palm oil, almost all of which is for export. About 80 percent of the workforce is in agriculture. Ethiopia has the highest livestock population in Africa, at 150 million animals, but its cattle are of the zebu sub-species, which produces low yields of milk and meat.

Aside from political and economic mismanagement, there are natural reasons for Ethiopia’s frequent food shortages. Significant amounts of fertile land are difficult for farmers to develop because they are swarming with deadly insects, including malaria-carrying mosquitos. The mountainous landscape makes irrigation difficult, so farmers rely solely on rain to water their crops, which comes only during the rainy season lasting from July to September. In years like 2015, when there were only three days of rain during the season, crops are doomed to failure. If the rains are substantial, on the other hand, Ethiopia’s mountainous terrain ensures that the topsoil, dry and crusty from not absorbing any rain for most of the year, will wash into the Nile, where it flows into Egypt and produces bumper crops for farmers there.

The 2011 drought led to a societal breakdown in Somalia, where already existing tensions between Islamist forces and the Mogadishu government erupted into outright warfare. Ultimately, US-backed African Union forces, led by Kenya, were sent in to stabilize the country. Today, Ethiopian troops play a leading role in propping up Somalia’s puppet government, highlighting the challenges posed to US hegemony in the region by the current crisis.

During a visit to Addis Ababa this summer, Obama hailed the regime of Hailemariam Desalegn as an “outstanding partner” in the war on terror. He referred to it as “democratically elected” just two months after a blatantly rigged election in which the EPRDF won all 546 seats in Parliament. One can expect that Obama will continue to support the EPRDF’s repressive policies as long as the regime ensures, in his words, that the US doesn’t “need to send our own Marines in to do the fighting. The Ethiopians are tough fighters.”

Underlying Obama’s visit were fears that the government, and its “tough fighters,” are being courted by China, which has surpassed the US and become Africa’s top trade partner. Chinese trade with Africa has grown rapidly since 2009, while US trade has declined by nearly half, from $125 billion to $70 billion. In Ethiopia, this economic activity comes in the form of badly needed infrastructure investments. Ethiopia’s lack of reliable roads and bridges is often cited as a major barrier to economic development, and China’s willingness to construct them may undermine the ability of the US to maintain the allegiance of the country’s elites.

The capital city’s brand new subway system, as well as the African Union headquarters located there, were financed entirely by China. The US is also concerned that its “pivot to Asia” will be threatened by plans to build the LAPSSET rail and transportation corridor, which will link Kenya, Uganda, Burundi, Ethiopia, Rwanda, and South Sudan and allow the easy export of goods and raw materials back to China.

The US and its allies have attempted to compete with China by investing in electricity production. The government recently signed a $1.55 billion contract with a subsidiary of the Blackstone Group to build an oil and gas pipeline to Djibouti, and now that company is considering investing in wind and hydro power.

In 2013, US-Icelandic firm Reykjavic Geothermal agreed to invest $4 billion in geothermal energy production. USAID has coordinated many such transactions through its Power Africa program, which “works with African governments and private sector partners to remove barriers that impede sustainable energy development in sub-Saharan Africa and unlock the substantial wind, solar, hydropower, natural gas, biomass, and geothermal resources on the continent.” Power Africa has nearly a hundred “private partners” in its effort to “unlock” Africa’s resources, including General Electric, Goldman Sachs, and the Shell Foundation.

As these efforts have failed to tip Ethiopia’s trade balance away from China and toward the West, the US will surely exploit the crisis produced by the drought to increase its military presence in the region.

Saudi monarchy to behead more than fifty in political mass execution

Thomas Gaist

The Saudi monarchy planned to behead more than 50 alleged “Al Qaeda terrorists” on Friday. At least three of the prisoners scheduled for execution were “convicted” as children, according to Amnesty International. Many of the prisoners say that they were forced to confess while being tortured.

The execution of dozens of the Shi’a minority has clearly been ordered as a political move. “The Saudi Arabian authorities are using the guise of counter-terrorism to settle political scores,” Amnesty Middle East director James Lynch noted.

The Saudi regime faces a growing internal crisis that has become especially acute in recent months, after a stampede in September killed more than 2,000 during the annual Hajj pilgrimage in Mina, Mecca. Popular outrage over the incident was further inflamed by revelations that the stampede was triggered by the militarized entourage escorting the crown prince to the ceremony.

The stampede coincided with the emergence of a letter by an unnamed member of the royal family calling for a palace coup against King Salman bin Abdulaziz Al Saud and his clique of supporters.

The internal crisis is intensified by growing regional and geopolitical pressures, including the regional struggle of the Sunni-dominated Saudi government against the Shi’a regime in Iran. Iranian support for Shia elements, including the Houthi rebels that seized power in Yemen early this year, is a cause of major concern for Riyadh, which has responded with a ferocious air and ground war against Yemen.

Behind the sensational headlines produced by this year’s surge in beheadings by the regime, Riyadh has been waging a months-long war against Yemen, pummeling one of the poorest countries in the world with advanced missiles and bombs supplied by the US, with barely a mention in the American media.

US logistics and intelligence personnel have organized the Saudi bombardment, which has killed at least 2,600 civilians and has devastated large areas of the country since beginning in March. At least 300 of those killed in the Saudi strikes were victims of flagrantly illegal operations targeting civilian areas, according to a new Human Rights Watch report. In 10 separate strikes examined by HRW, no military targets were found nearby. Neither Washington nor Riyadh has investigated a single incident of mass killing of civilians arising from the Yemen war, according to HRW.

The Saudi fear of Iranian-backed Shi’a forces applies within the boundaries of the kingdom itself. It is no coincidence that all of the victims of Friday’s executions were drawn from a town called Awamiyya, located in Saudi’s Eastern Province, a Shi’a-dominated area which is facing increasing repression by the regime.

So frequently highlighted by the US government and media, the number of beheadings carried out by Islamist extremist militias pales in comparison to those of Washington’s closest ally in the Middle East. The Saudi state has executed more than 150 people so far this year, surpassing the kingdom’s previous record for beheadings in a single year, set in 1995. The regime regularly files death penalty cases based on charges such as “sorcery,” adultery, apostasy and homosexuality.

While the Saudi regime may justify its actions by reference to forms of law rooted in the social relations of ancient slave and feudal societies, the underlying causes of its atrocities are firmly modern, being rooted in the structure of capitalist society and the imperialist world order that arises on its foundations. The crimes of the Saudi monarchy ultimately flow from the domination of the region by Washington and the cultural and economic stagnation enforced by capitalist property and the nation-state system.

More cuts to come as UK economy heads towards deeper crisis

Robert Stevens

Every speech made by UK Prime Minister David Cameron and Chancellor George Osborne now begins with the statement that, after years of austerity, the UK economy is the picture of health and the fastest growing among the Group of 7 (G7).

New data shows instead that the UK economy is fragile and teetering on the edge of a major crisis. Ahead of next week’s Autumn Statement and Spending Review, the government’s public sector net borrowing (PSNB), excluding public sector debt, rose by £1.1 billion to £7.1 billion. PSNB is the gap between what the government spends and takes in. The figure was significantly larger than £6 billion forecast by the majority of economists in a Reuters poll.

Total borrowing between April and October 2015 stood at £54.3 billion. While this was a decrease of £6.6 billion compared with the same period in 2014-2015, Osborne had forecast that borrowing would fall by £18.9 billion over the financial year. Based on October’s figures, PSNB could be £11 billion higher than the Office for Budget Responsibility’s July forecast.

This level of borrowing is the highest in six years. The last time borrowing figures were higher was in October 2009 when the economy was officially in recession. Howard Archer , chief UK and European economist at IHS Global Insight , said, “George Osborne now has an almighty task to meet his fiscal targets for 2015/16.”

A number of factors are at work in the latest figures. October is considered an important month for PSNB, as quarterly corporation tax payments are made during it. But last month tax receipts from companies and general income tax were both down. Compared with a year earlier, total tax receipts were down 1.8 percent.

Some of the world’s largest corporations continue to pay virtually nothing in corporation tax. Last year Facebook doubled its UK sales to £105 million, while reporting losses of £28.5 million. This allowed it to pay just £4,327 in UK corporation tax. This is less than a worker on the UK official average wage of £26,500. On that salary, a worker would expect to pay £5,393 in income tax and national insurance contributions.

This year Amazon paid just £11.9 million in tax on UK sales of £5.3 billion.

Tax avoidance by the super-rich is now an art form. Latest figures show that a massive £34 billion in tax went uncollected last year. Corporations will continue to pay less and less in tax. The corporation tax rate now stands at 20 percent and will be reduced to 18 percent by April 2020.

A major factor in the increase of PSNB is the prolonged squeeze on wage growth. According to official figures, real wages stagnated by around 8 percent following the 2008 financial crisis and only very recently has any growth been recorded. Household real incomes grew by a miniscule 0.2 percent in the first quarter of the year. However, millions of workers remain in low-paid jobs. In 2014, nearly one in four jobs outside of London paid less than the living wage and nearly 20 percent in the capital paid less. Last year the living wage, the rate of pay to give a supposed “adequate” standard of living, stood at just £8.80 an hour in London and £7.65 elsewhere.

Latest figures also show that net government debt, excluding public sector banks, has increased to £1.5 trillion, up by £70.4 billion from October of last year. This is equivalent to 80.5 percent of GDP and compares with the 69 percent of GDP in 2010/11 when Osborne became chancellor under the Conservative-Liberal Democrat coalition.

These figures are a refutation of all the claims that the UK economy would recover from the financial crisis based on years of austerity and “belt-tightening.”

Despite this, the latest PSNB and overall debt figures will be used by the government, and their echo chambers in the media, as a justification to demand even deeper cuts to “finish the job.”

Samuel Tombs, chief UK economist at the Pantheon Macroeconomics consultancy, said the “terrible borrowing figures provide a grim backdrop” to the Autumn Statement. He added, “October’s poor borrowing numbers extinguish any lingering hope that the chancellor will be able to soften his austerity plans materially in next week’s autumn statement.”

A source from the Treasury spoke in similar tones: “We’ve learned there’s no shortcut to fixing the public finances … that’s why in the Spending Review next week we’ll continue the hard work of identifying savings and making reforms necessary to build a resilient economy.”

The further planned public spending cuts are staggering. Prior to the Autumn Statement, 11 government departments have agreed an average cut in real terms funding of 24 percent over the next four years, on top of cuts of more than £60 billion already carried out. Welfare spending, which has been slashed by more than £21 billion since 2010, faces a further £12 billion reduction by 2018/19. A further £4.4 billion in cuts is required this year, with welfare spending set to be targeted to compensate for the governments’failure to pass cuts in workers’ tax credits in the House of Lords.

This does not satisfy the ruling elite, as they force the working class to pay the entire cost of the bailout of the banks and super-rich they undertook after the 2008 financial crisis. In a comment on the PSNB crisis, Financial TimesEconomics Editor Chris Giles warned that one of the main challenges ahead was for Osborne to “pencil in credible cuts to government departments.”

Giles was dismissive of the huge cuts already announced, stating that Osborne “has settled with many small ministries, but is yet to agree the budgets of large government departments, such as the Home Office. The defeat in the House of Lords on tax credits shows that even if he can agree tight budgets, the task of delivery is far from complete.”

Giles added, “After the settlements so far, Torsten Bell, director of the Resolution Foundation, said business, local government, justice, home affairs and non-school education, ‘either will received an average cut of around 30 percent, or the overall pace of cuts will be watered down’.”

Howard Archer, economist at the IHS Global Insight, said the borrowing figures were “difficult news” and pointed to underlying structural weaknesses in the British economy in relation to the stagnant world economy. “With the economy seeing GDP growth slow in the third quarter, there is the risk that tax receipts could undershoot going forward. The chancellor will obviously be hoping that the economy can kick on and is not hampered by global growth being held back by a marked slowdown in China and emerging markets.”

Archer added, “He [Osborne] will also be hoping that the economy is not handicapped significantly by heightened uncertainty in the run-up to the referendum on UK membership of the European Union.”

Concurring, John Longworth, director-general of the British Chambers of Commerce, warned that the scale of the UK’s public sector borrowing deficit made the UK “hugely vulnerable” to unexpected external shocks and “it should be setting off alarm bells”.

Far from the UK economy “motoring forward” (Osborne), on any number of indices, it is in a perilous state. For 2014, the current account deficit stood at 5.9 percent of GDP—the highest since records began in 1948. This month, the Office for National Statistics found that the UK had suffered the slowest recovery in levels of output since the 1920s. The economy is only now reaching the size it had been before the recession in the second quarter of 2013.

Financial parasitism and the destruction of democracy

Andre Damon

On Monday, US drug maker Pfizer Inc. announced its plans to buy rival Allergan Plc in the third-largest corporate merger in history.

The new company, which would keep the Pfizer name, would be the world’s largest drug maker. As a result of the deal, known as an “inversion” because the smaller Ireland-based Allergan would buy the larger US-based Pfizer, the new company would pay a tax rate of 17–18 percent, compared to the 25.5 percent Pfizer paid last year.

The merger brings the total valuation of global mergers and acquisitions announced so far this year to $4.2 trillion. Mergers activity in 2015 is set to surpass that of any other previous year, including the $4.38 trillion record set in 2007, just before the outbreak of the global financial crisis.

In announcing the merger with Allergan, Pfizer CEO Ian Read said that the deal would “create a leading global pharmaceutical company with the strength to research, discover and deliver more medicines and therapies to more people around the world.”

Reality is the exact opposite. Financial documents released as part of the merger make clear that the resulting company plans to carry out a massive cost-cutting campaign. The company expects to implement some $2 billion in cost savings, including $660,000 in research and development funding, with the remainder of the cuts likely to come from layoffs and other consolidations.

The fundamental purpose of the wave of mergers is to find new ways to funnel money into the pockets of financial investors who are demanding ever greater returns. It is one expression of the financial parasitism that pervades the global economy.

Earlier this month, Birinyi Associates reported that US companies spent $516.72 billion buying back their own shares in the first three quarters of this year, the highest level since 2007. That figure is equivalent to the gross domestic product of Argentina, a country with 45 million people.

Apple, the world’s largest company, has spent $30.22 billion on share buybacks so far this year. During the same period, the company spent only about $6 billion on research and development, and less than $12 billion paying its workers. This includes US retail employees, whose base pay is $13 per hour, and assembly workers in China making only $1.50 per hour.

Apple is far from the exception. The Wall Street Journal reported earlier this year that the largest US corporations have in recent years spent more money buying back their own shares than hiring people or building factories. The effect of the share buy-backs is to boost corporate stock prices, in the process inflating the pay of top executives, whose compensation has been increasingly tied to stock “performance.”

An unpublished Bank of America research note cited by Bloomberg noted, “For every job created in the US this decade, companies spent $296,000 buying back their stocks.”

After years of near-record profits, US corporations are sitting on a cash hoard of some $1.4 trillion. But far from using these funds to expand productive investment, global corporations are spending it on share buy-backs, mergers and acquisitions and executive pay raises.

The effect of this process is to further constrict real economic output. US manufacturing grew at the slowest pace in two years last month according to figures released Monday, while the latest monthly jobs report, praised by commentators as “stellar” and “off the charts,” showed that the US added exactly zero jobs in the manufacturing sector in October.

The orgy of financial speculation on Wall Street and in corporate boardrooms is one side of the vast upward redistribution of wealth in the aftermath of the 2008 financial crisis, which has been facilitated by the infusion of cash into the global financial system by the US Federal Reserve and other global central banks. Since the collapse of Lehman Brothers in 2008, the world’s central banks have undertaken some $12.4 trillion in asset purchases, and have cut interest rates on 606 separate occasions, according to the Bank of America research note cited above.

The vast accumulation of wealth by the financial elite is predicated on the continuous reduction of the share of social resources going to the working class. Workers’ incomes have stagnated for decades throughout North America and Europe, and in many countries they are significantly lower than they were before the financial crisis. In the United States, for instance, the income of a typical household fell by 12 percent between 2007 and 2013, according to the Federal Reserve’s survey of consumer finances.

As a result of these processes, the top one percent of the population has accumulated 95 percent of all income gains since 2009, while the wealth of the 400 richest individuals in the US has more than doubled. The growth of social inequality has likewise fueled a growth of opposition to the capitalist system and the domination of the financial elite over all aspects of society.

This does much to explain the hysterical response by the ruling classes of Europe and North America to the November 13 terror attacks in Paris, which were seized upon in France and Brussels to implement sweeping and far-reaching attacks on basic constitutional rights, allowing the police to arrest and seize the possessions of anyone, and to ban assemblies and demonstrations. In the United States, the Paris attacks have been used to renew calls for the criminalization of encrypted communications.

It is worth noting that, despite the supposedly earth-shattering and paradigm-changing attacks in Paris, which have led some of the world’s oldest “democracies” to abandon principles that they claim to have upheld for nearly two centuries, the global markets seem unfazed. In the 10 days since the Paris terror attacks, stock prices have risen in almost every country. The French CAC is up by 1.69 percent, the US Nasdaq is up by 3.5 percent and the German DAX is up by 3.59 percent.

“Finance capital strives for domination, not freedom,” noted the Russian revolutionary Lenin, quoting the socialist economist Rudolf Hilferding. As in the periods before the First and Second World Wars, the ruling classes increasingly see an open turn to police-state forms of rule as the surest means to ensure the protection and expansion of their wealth.

The Mormon Handbook of the Gay Dead

Christopher Brauchli

“The nearer to the church, the further from God.”

— John Heywood, Be merry friends (1580)

Here is a question that since November 3, 2015, is being asked by (a) children under 18 years of age who want to be baptized as Mormons but are living with parents in a same-gender relationship and (b) Mormons who are in same-gender relationships and fear excommunication because of the rule change:  is it necessary to address the issue now or can it be addressed after death? The reason for the recent interest in this comes about because of changes to LDS Handbook 1 Document 2 that were promulgated November 3, 2015.

The Handbook adds a paragraph 16.13 that says a “natural or adopted child of a parent living in a same-gender relationship, whether the couple is married or cohabiting, may not receive a name and a blessing.”  (A name is bestowed through baptism.)  The prohibition may be removed when the child attains “legal age,” commits to live the teachings and doctrine of the Church, disavows the practice of same-gender cohabitation and marriage and doesn’t live with a parent who “has lived or currently lives in a same-gender cohabitation relationship or marriage.”

The Handbook has also been amended to describe what sorts of serious transgressions MAY result in the convening of a disciplinary council that can, among other things, excommunicate a church member.   Serious transgressions include “attempted murder, forcible rape, sexual abuse . . . homosexual relations (especially sexual cohabitation), deliberate abandonment of family responsibilities  . . . .”  The new rule goes on to say that a disciplinary council is MANDATORY in cases of “apostasy” and “apostasy” includes being in a “same-gender marriage.” (It will probably surprise some same sex couples to learn that their misconduct is on the same level as forcible rape and other enumerated offenses.)  The good news for those who wonder whether these new rules will affect them permanently is, they needn’t worry. Here’s why.

In 1994 the world learned that the Mormons posthumously baptized, among others, 380,000 victims of the holocaust together with Adolph Hitler, the man responsible for the 380,000 being eligible for posthumous baptisms.  The baptisms occurred in a ceremony known as the “Baptism of the Dead.”  During that ceremony people who are not dead, known as “proxies”, stand in for people who are dead.  The proxies give the dead folk the opportunity to become what might be called “late blooming Mormons” although that is my description and not the church’s.  They are baptized posthumously and as a result, if they are already in heaven when the ceremony is concluded, they can presumably check out the accommodations and decide if the Mormon digs are better than the digs they were in before being made members of the Church of Jesus Christ of the Latter Day Saints. Among the folks who have been beneficiaries of this practice, in addition to Adolph Hitler, are Anne Frank, Sigmund Freud and David Ben-Gurion, together with hundreds of thousands of non-Jews.

It is obvious that those acting as proxies for the dead in hundreds of thousands of posthumous baptisms, have no way of determining whether or not the dead people being baptized were openly and gaily married or were children of gay parents who refused to disavow their parents’ life styles.  These people will certainly be baptized posthumously along with thousands of others and will enjoy the same heavenly benefits as those who were baptized while alive. For readers who do not take comfort in that thought, however, there is another reason they should not be completely despondent.  It is found in the history of the Church of Jesus Christ of the Latter Day Saints.

For the first 148 years of the church’s existence, black males were banned from the priesthood because they were black.  That all changed in 1978.  It was then that a letter was sent to all Mormons from the president of the Church in which he stated that “we [the first Presidency and the Quorum of the Twelve Apostles] have pleaded long and earnestly in behalf of these, our faithful brethren, spending many hours in the Upper Room of the Temple supplicating the Lord for divine guidance. He has heard our prayers, and by revelation has confirmed that the long-promised day has come when every faithful, worthy man in the Church [irrespective of race or color] may receive the priesthood. . . .”

Although it is too soon to hope that God will decide it’s OK for gay people to marry or enjoy same sex relationships since he just told the First Presidency and the Quorum of the Twelve Apostles that it was not, I have confidence that He will, upon sober reflection, realize that He made a mistake when talking to the First Presidency and the Quorum since it makes Him look really silly.  It was He, after all, who made gay people gay.  He would not have done so had He not wanted them to enjoy life’s pleasures as fully as heterosexuals can.

Nonetheless, until God realizes He made a mistake and lets the higher ups in the church know, deciding to not worry about the present but to await the benefits bestowed by posthumous baptism seems to be the best bet for gay Mormons and children of gay Mormon parents. Either that or join a church that believes in both God and tolerance.

Strangling the Palestinian Economy

Nur Arafeh

The European Union this week issued its long-awaited guidelines to label settlement products produced in the illegal settlements Israel has built in the territory it occupied in 1967. Even before the guidelines were issued, the Israeli government blasted the move, claiming it undermined peace and discriminated against Israel.

It even claimed labelling would hurt Palestinian workers in Israeli settlements. This claim deliberately creates confusion and diverts international attention from the colossal damage Israel’s occupation and colonization of Palestine does to the Palestinian economy.

True, some Palestinians work in Israeli settlements. But how many? And why do they work in settlements? To answer these questions, it is useful to begin with a quick look at the impact of Israel’s occupation on the Palestinian economy.

Israel has exploited the Palestinian economy — directly and through its illegal settlement enterprise — since its occupation began. It has confiscated Palestinian land and property for settlement construction and agriculture; seized water resources (the more than 600,000 settlers now use six times as much water as the 2.6 million West Bank Palestinians); taken over tourist sites; and exploited Palestinian quarries, mines, the Dead Sea, and other non-renewable natural resources.

In addition, the settlements are supported by an infrastructure of roads, checkpoints, and the Separation Wall, leading to the creation of isolated Bantustans. According to a World Bank study, 68% of the so-called Area C − which represents 60% of the West Bank and which is richly endowed with natural resources — has been reserved for Israeli settlements, while less than 1% has been allowed for Palestinian use.

This physical fragmentation, coupled with Israeli restrictions on movement and access, has led to the emergence of different economies in the occupied territory, greatly harming the prospects for economic development. Overall, it is estimated that the total cost of the occupation was almost 85% of the total estimated Palestinian GDP (around $7 billion) in 2010 alone. The illegal settlement enterprise has thus severely strangled the Palestinian economy. It is no surprise that the economy now suffers from structural weaknesses and a debilitated productive base that is unable to generate enough employment and investment. It is also no surprise that the Palestinians have become dependent on foreign aid, including from taxpayers in the EU and its member countries.

It is this harsh economic reality that drives some Palestinians — estimated at 3.5% of the total West Bank labour force in 2013 — to work in Israeli settlements, where they are subject to difficult, sometimes dangerous working conditions. Most do not have health insurance to protect them from work-related accidents and it is estimated that 93% do not have labour unions to represent them: they are subject to arbitrary dismissal and withholding of their permits if they demand their rights or try to unionize.

It is sometimes argued that Palestinian workers in settlements receive higher wages than in the Palestinian labour market; however, it is worth noting that they are paid on average less than half the Israeli minimum wage. For example, in Beqa’ot, an Israeli settlement in the Jordan Valley, Palestinians are paid 35% of the legal minimum wage. (The packing-houses of Mehadrin, the largest Israeli exporter of fruits and vegetables to the EU, are located in this settlement.) More than 80% of Palestinian workers would leave their jobs in the settlements if they could find an alternative in the Palestinian labour market.

While Israel spins that EU labelling will hurt a few thousand Palestinian workers, in reality millions of Palestinians have been dispossessed of their economic resources. And Israel’s occupation hurts Palestinians far more than EU labelling of settlement products could. What Palestinians need is an end to occupation, not more jobs in illegal settlements. Only then can they strengthen their economy’s productive base, generate employment, ensure self-reliance and self-sufficiency — and stop being dependent on EU aid.

The EU has recognized the illegality of Israel’s colonial enterprise, which is a breach of the Hague Regulations of 1907, the Fourth Geneva Convention of 1949, and the right of Palestinians to self-determination. But, as Israel’s largest trading partner, the EU’s guidelines on labelling do not fully meet its moral and legal obligations. Third states are obliged not to provide any assistance to maintain an illegal situation. The EU should ban all settlement products and end its dealings with all parts of the Israeli economy that engage in Israel’s illegal settlement enterprise.