Economy – Pike & Hurricane

The Case of the Mistaken Identity

Rozarina Bakher — Sat, 10 Jul 2021 17:20:16 +0000

During a recent Clubhouse room chat, I was reminded of an incident. I happened to be listening in on a conversation on “funny immigrant stories”. Shared were anecdotes such as, “my name is Mohammed, and I get stopped at immigration all the time” or “people assume I work in IT because I am from India”. This was mine: One summer afternoon in 2019, my friend and I were sitting in a bar in Copenhagen, chatting and having a merry time. She and I are both from Malaysia, and if I can give anyone any advice, it will be this. If you see Asians sitting in a group, please take a table over. This advice is well intended, as abroad our community is tiny, and we get really excited to speak in our mother tongue. So, do us a favour by taking a seat elsewhere, and do not hush us.

We were just sitting and talking until a Caucasian woman around mid-50’s asked if she could join us. Asians are polite creatures, so we agreed. We continued talking, and she asked us some questions and shared stories of her travels in Asia. Be mindful, the conversation was happening in English. We were having a lovely time and she seemed nice enough until she suddenly said to us “You ladies, should not come here and steal our husbands!”. Then she went on about Thai massage parlours and Vietnamese-run nail salons and how there are too many of these in Scandinavia. My girlfriend and I are both fluent Danish speakers, so at this point we switched to Danish as we suspected that she was, and we were right. I jokingly said, we are not aware which one is her husband as we do not have a directory of “who-is-whose” in our Asian community WhatsApp group. My girlfriend, who is older than me, told her to get off our table and some profanity was uttered.

I shared this story in the Clubhouse audio chat room, most of whom participating were immigrants or foreigners of Asian origins. The whole room roared with laughter, but a bittersweet discussion ensued. All of us have a shared story of how we are often accused of stealing something, be it jobs from the locals and now, other people’s husbands. And if we express our discomfort of being treated derogatorily in a foreign country, we all have experienced being told off: “If you don’t like it, why don’t you go back to your country!”.

Why do people migrate?

The United Nations Population Fund (UNFPA) reported that in 2015, around 244 million people, or 3.3 per cent of the world’s population lived outside their country of origin. A more recent number from 2017, reported in The United Nations International Migration Report (UN DESA), estimated 258 million people are living in a country other than their country of birth. Both these reports stated that some of the reasons why people migrate are for the search of better economic and social opportunities.

The pursuit of better economic opportunities is cited as one common reason people migrate. Economic migration is defined as a choice to move to improve one’s standard of living by gaining a better paid job. When Poland and other Eastern European countries joined the EU in 2004, the UK received many economic migrants from this region. The Philippines have one of the world’s largest migrant workers abroad. Known as Overseas Filipino Workers (OFW), they are economic heroes of the country because of their significant contributions towards the growth of the Philippine economy. Remittances sent by OFWs accounted for 11% of the country’s total GDP in 2018. Overseas remittances from a migrant worker are important to a country’s domestic economy as it helps increase the purchasing power of the population i.e., the family members left behind. The remittances improve credit constraints on the poor, improve the allocation of capital, substitute for the lack of financial development and thus accelerate economic growth. Via these inward remittances as well, countries can maintain a stable foreign reserve.

The United Nations International Migration Report stated that when supported by appropriate policies, migration can contribute to inclusive and sustainable economic growth and development in both home and host communities. Remittances constitute a significant source of household income that improves the livelihoods of families and communities through investments in education, health, sanitation, housing and infrastructure. Countries of destination benefit significantly from migration, as migrants often fill critical labour gaps, create jobs as entrepreneurs, and pay taxes and social security contributions. Some migrants are among the most dynamic members of the host society contributing to the development of science and technology and enriching their host communities by providing cultural diversity. If economic migration has such a beneficial effect, shouldn’t host countries make an effort to increase the dignity of these groups?

Diversity and inclusion of economic migrants

According to an OECD report, in many European countries the integration of migrants means their assimilation into a pre-existing, unified social order, with a homogenous culture and set of values. Integration is perceived as a one-way process, putting the onus for change solely on migrants. In my experience, this is true for most countries, so I will not single out the European countries as being the only bad examples at making an equitable diversity and inclusive policies for economic migrants. One of which is the requirement to speak the national language to obtain employment. Many migrants such as myself have successfully learnt the local language, as this is something we see necessary for survival rather than merely an employment requirement. The trap here is when you do speak the language, you rarely become as fluent as a native. You might remain passive in a conversation, where you reply only when you are spoken to.

Of course, there are also social class differences within the economic migrants’ group. Many of my peers are what is known as ‘professionals’ and due to the mobility strategies of the companies we are working for, we are fortunate enough to experience lives as expatriates. At the same time, there are those who are in lower-skilled labour such as those employed in short-term projects, for example construction workers. As a norm, we are slightly better compensated than our local peers, but this is because often we need to budget trips home and pay for international education of our kids if the local school programs aren’t in English. In addition, rents are typically higher for those on temporary working visas. Perhaps it is because of aspects like these that it bums us out when we are accused of being a kind of pest or economic freeloaders by the natives of the host countries.

Positive reinforcements of economic migrants at national level

Back to my story on Clubhouse. What struck my girlfriend and I was that not once did the lady ask us where we came from. Not that it matters, the fact she insulted us like that was a xenophobic act itself. Often people are stereotyped and grouped together by assumed characteristics such as the colour of their skin and appearances. There is a notion that all Asian look alike, which is an annoying statement. We can be similar in appearances but vastly different in terms of the religion we practise or the language we speak. The socio-political situation of our home countries and the rights we are guaranteed differs significantly. As a Malaysian, I have significant political, economic, and social benefits that come with being a citizen of a progressive country. I can travel without a pre-approved visa to the Schengen area. Citizens of many of my neighbouring countries, such as Thailand and Vietnam, who according to prevailing stereotypes are “just like me”, lack this freedom. An absence of international immigration cooperation restricts them to travel freely, for instance to Schengen-countries.

For those groups of economic migrants who lack democratic representations at home, this migration is more than just an opportunity for better lives but also an opportunity to live their lives in freedom and safety. I salute these economic migrants as they migrate and become entrepreneurs by opening massage and nail salon centres, and in so doing creating employment and adding to the local economy through value added and service taxes for example. If any, they should be applauded, not be accused of being hoarders of the economy or husband-thieves. They should be recognized as a dignified human being for making an honest living. It is the task of the host country to create a positive representation of these economic migrants in the community at large, through positive conversations and images that will lead to change in the ways that locals view their participation and contribution to the local economy.

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The Precariat – The Loss of Job Security and What To Do About It

Oliver Ösmark — Wed, 10 Feb 2021 20:00:07 +0000

Khalil Gibran’s book “The Prophet” begins with the protagonist Almustafa spotting on the horizon the ship that will take him back to the isle of his birth, and he prepares himself to leave the city of Orphalese which he has called home for 12 years. But he is struck by melancholy as his thoughts turn to the hurt he will cause the people of the city with his passing. Being a popular fellow, he is beseeched by men, women, elders, and clergy to speak to them of the truths he has learned in his time: “Now therefore, disclose us to ourselves, and tell us all that has been shown you of that which is between birth and death.” Almustafa obliges and shares his wisdom in 26 dainty morsels on the topics of love, good and evil, crime and punishment, joy and sorrow, friendship, laws, time, talking, trade, work, and so on. The word “meaning” is not used a single time in the whole book.

At this stage one might feel as though the omission of “meaning” in this context is of no significance as the narrative itself is heavily flecked with the mysticisms, superstitions, dogmas, and all the loose scales shed from the scalp of theism. After all, the ultimate meaning of religion is faith, and faith is servitude to the idea of God and all that entails; or “the gods, sprits and idols,” if you are the kind of person to diversify your spiritual portfolio. One would be forgiven for thinking so. Gibran was a Maronite flirting with Islam, Sufi mysticism, and the Bahá’í Faith. But his eclecticism also spanned into the artistic enclaves of Romanticism, and modern (at the time) symbolism and surrealism. The point here being that it is not far-fetched to claim that any artist engaging in honest dissemination of the human condition does not regard close-mindedness a virtue. “Meaning” is not God’s decree. It is a consortium of disciplines. Disciplines represented with poetic precision by Gibran in his book.

The Prophet Almustafa says of work:

“You work that you may keep pace with the earth and the soul of the earth […]

You have been told also that life is darkness, and in your weariness you echo what was said by the weary.

And I say that life is indeed darkness save when there is urge,

And all urge is blind save when there is knowledge.

And all knowledge is vain save when there is work,

And all work is empty save when there is love;

And when you work with love you bind yourself to yourself, and to one another, and to God.”

Love for one’s trade is the flower borne from the seed of urge. Yet, the realities of the day—underemployment, redundancies, glass ceilings, manufactured impediments to accessing education, etc.—leave many scrambling in for options. Any options. And even though a small—plausibly non-existent—minority of people would make the claim that their gig as a human billboard brings them closer to God, work satisfaction falls by the wayside with little or no long-term job security. Darkness abounds, and this is the precarious circumstance a growing portion of the labor force find themselves in. But before we explore this phenomenon any further, first we must address some common suppositions.

The usual suspects

Economic inequality is a prompt for social mobilization on the regular. “The 1%” have been the punching bags of the discontent and disempowered since the invention of value itself. These days that practice is perfectly understandable. In 2018, the 26 richest people in the world held as much wealth as half of the global population (3.8 billion at the time), a change from 43 people the preceding year. Yet, it is a mistake to think that inequality is rising everywhere. It is not all-pervasive, nor an inescapable symptom of globalization. Neither has the average level of inequality changed much. In countries like China, India, Indonesia, and the U.S., which together account for 45% of the world population, the Gini index—the go-to barometer of wealth inequality—saw an increase of about 4 points. Hence, while the average country saw little variation of the Gini index, the average person lived in a country that saw rising income inequality.

Unemployment numbers do not tell the whole story either. These have more or less followed a stable flat trend within the 3-7% range, alongside with a steady increase in GDP per capita, since the ILO began recording unemployment data per state. Extreme outliers like Spain and Greece in 2013—which peaked at 27% and 25% respectively—led to much civil unrest as austerity measures inflamed an already volatile situation. Youth unemployment in these countries was more than twice as high as the country average, as is often the case in most countries on average. High rates of underemployment compound this issue. Underemployed workers may be able to find work, but their income may not be sufficient for meeting basic needs. Youths are overrepresented in this category. Hence, unemployment rates alone are inadequate measures of labor market slack.

Indeed, labor underutilization affects 473 million workers worldwide, which is more than double the number of unemployed people considered separately, and 61% of workers worldwide are in informal employment. Significant inequalities in access to decent work opportunities has become an increasing trend and feature of current labor markets.

The precariat

Guy Standing is an economist and professor at the University of London who has worked extensively on economic inequality and written two book on a new social class dubbed the “precariat”; the word itself is a portmanteau of “precarious” and “proletariat”. Unlike the latter characterized as exchanging labor for livelihood yet deprived of the “means of production”—raw material, facilities, machines, capital—the precariat are only partially involved in labor and must take on extensive amounts of uncompensated “work”—e.g. updating CV’s and sending out job applications, attending job interviews, being “on call” for “gig” work—to have access to decent earnings. Emblematic of this class is a lack of job security, benefits, or union protection. The precariat also spans the income and education spectrums: from illegal migrant work to highly educated but freelance-dependent industries.

Workers of a Mexican textile plant or “maquila”. Most workers work 11 hours a day, 6 to 7 days a week, for less than the legal minimum wage. Industries in the US and elsewhere make heavy use of Mexico’s and other Central American countries’ low-cost labor.

Standing says that this phenomenon really took off after 2008 in the aftermath of the 2007–2008 financial crisis. In his book “A Precariat Charter: From Denizens to Citizens” he outlines 29 “demands” aimed at providing the precariat both economic stability and empowerment to live in comfort and participate in society—these range from rehauling unions, reforming migration policies, ending means testing. A central demand is the establishment of a universal basic income, an idea that has been courted by the international labor and economic mammoths ILO, OECD, the World Bank—especially in the wake of the Great Recession—but never consummated.

But won’t basic income dissuade people from working and bleed government of tax revenue? Cool your boots, prolepsis. Let us entertain the side of the argument where one aspires for universal access to opportunity and decent standards of living. Take the Swedish unemployment fund (arbetslöshetskassa or “a-kassa”) which, ideally, pays up to 80% of your salary—though there are many fine print provisos to resign the newly dispossessed to feeling more fleeced than golden. To retain unemployment benefits, one must be active in looking for jobs; you must be able to prove that you are active in looking for jobs (the specifics of this are ad hoc and negotiated with the Swedish Public Employment Service); and you cannot decline any job offers—even ones that offer unstable hours and temporary employment. Receiving a limited yet regular amount in benefits from the government makes far more sense than sporadic and unreliable employment. As Standing says: “In effect, the system for the precariat has a huge disincentive for people taking low-wage jobs and punishes them for doing so. That is thoroughly unfair.”

So foul a sky clears not without a storm

Universal basic income is not a new idea. The social philosopher/lawyer/humanist Thomas More wrote about it in 1516, followed by corsetmaker/journalist/revolutionary Thomas Paine in 1719. Still, what the two Thomases were suggesting has never sifted into the mainstream of real-world policy. The 2020 Democratic presidential candidate Andrew Yang proposed that every American adult receive a monthly check of $1,000 as a solution to structural unemployment caused by automation. This “Freedom Dividend” only got him 2.8% of the votes in the primaries and he subsequently dropped out of the race. Then came the pandemic, which revealed the degree to which unemployment insurance had come up short in keeping up with the labor market. The welfare systems were overwhelmed, and people were desperate. Suddenly government started experimenting with forms of basic income.

Libertarians, austerity buffs, and Ayn Rand fans have long touted that welfare programs are much too expensive to fund and complicated to manage, but this was not the case. For example, Canada’s response program covered not only those who lost their jobs, or suffered reduced hours, but also those unable to work due to quarantine and childcare. The gig-workers and self-employed qualified. It was easy to apply for and payments were received within days. But the programs employed around the world were not true systems for basic income. They were expedient and temporary. Real universal basic income is a permanent program with consistent payments.

A guaranteed minimum income does not stop people from working and makes for a healthier and less unequal society. In Finland and the Netherlands, evidence found that basic income helped people who had been chronically unemployed for years. In both scenarios, recipients were more likely to find full-time jobs than control groups stuck with the traditional approach of mandated job searches, job-readiness programs, and regular contact case workers. Rather than having to settle for temporary gigs, people had more time to look for better jobs without bureaucratic trials and tribulations in the way. Studies in Canada and Malawi showed similar positive effects.

Taken at face value, the costs for universal basic income are colossal. The price tag for Yang’s “Freedom Dividend” was estimated at $2.8 trillion. Yet, this initiative would significantly reduce poverty and inequality and according to a study by the Roosevelt institute the economy would “grow by approximately $2.5 trillion and create 4.6 million new jobs” generating around $800–900 billion in new revenue from economic growth and activity. Such a strategy coupled with more progressive tax systems more than make up for the expenses. Costs are minimized by returns in taxes, targeted to low-income recipients, and is likely lower than what governments spend on pensions.

However, thinking about universal basic income only in monetary terms is an error of judgement. Universal basic income is an investment in society, not a cost. It is not an expenditure, but the means of which communities that value health, education, and security are made manifest. The returns come in terms of higher standards of living as well as from taking the pressure of other social programs treating symptoms of poverty, like poor health.

For long, implementing universal basic income has been considered unconventional, even outright inconceivable. But, as the pandemic has revealed the glaring holes in the safety net, it is a humane alternative to the classical model. It allows for purpose to be rediscovered. To “keep pace with the earth and the soul of the earth” and a decent life disposed of darkness. And yes, even encourage love for one’s work. Let the solid surfaces deal with the billboards.

Related articles:

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Photo credits:

Job Satisfaction, by It’s No Game on flickr, CC BY 2.0

Maquiladora, Free for commercial use, DMCA

Home is Where the Fun Is. The Irony, by Andreea Popa on Unsplash

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Life under the corporate sovereign: human automata and modern serfdom

Filip Zahariev — Sun, 17 May 2020 13:28:45 +0000

Consider the basic rights we in the Western world take for granted – the twin pillars of freedom and democracy, which define Western culture. Or so it seems. Strange, then, that when we think of the single most influential institution in our capitalist society, neither of these pillars are to be found. I write, of course, of the modern-day corporation: a fundamentally illiberal institution.

In this article, I’ll look first and foremost at American corporations, as American capitalism is at its most evolved – a signpost for days to come in Europe and beyond. The COVID-19 crisis, further, allows for the underlining of the social injustices of this system.

Corporation as the engine of Capitalism

The corporation stands at the nucleus of modern society. The vast amount of people work for big business, either directly or indirectly, and their livelihoods are dependent on their continued employment. The labour the workers produce is much more valuable than their wages – what Economics professor Richard D. Wolff defines as surplus in his 2012 book, Democracy at Work. This surplus is under complete control by the capitalists, who Wolff defines as the employers of the labourers and the owners of the means of production. This surplus, then, is used to enrich capitalists and cement their place in society. This is a well-established process, to the point that to even question the capitalist market system comes with a degree of social and political stigmatization – especially in the United States. It wasn’t that long ago that the very term “socialist” could sink political careers in the US, a trend changed only recently by Bernie Sanders.

But the owners of capital – those who count themselves among the major shareholders and members of the boards of directors of corporations – have enough influence to make any talk of true equality seem a fever dream. In what reads as an Onion headline, a 2010 Supreme Court ruling held that corporations have the same right as individuals to influence elections. This, despite the skewered amount of influence corporate lobbyists have over policy in the USA and beyond – a fact owed to the tens of millions spent by corporations to this end. Take Exxon, for example, its reach is described as the kind that allows its executives “easy access to every president”. Its confident CEO is “a peer of the White House’s rotating occupants” who can usually count on the administration to see things as he does. In fact, the president is often more pliable than the CEO, who often goes his own way, “aligned…with America, but…not always in sync; he was more akin to the president of France, or the chancellor of Germany…. His was a private empire.” Almost as if depthless pockets open all avenues to power.

Life holds no candle to profit

Corporations have the absolute authority to cut any number of their workers if holding onto them threatens the bottom line of corporate profitability. Take the recent announcement that Disney stopped paying 100,000 of its employees starting the week of April 20, 2020. The devastating societal effects this decision will have on each and every one of these employees is little different than the proliferation of globalizing forces in the 1970s and onwards which saw American corporations leave behind millions of middle-class Americans for the far cheaper workforce of Asia. It was this that brought about the rise of the economically vulnerable “precariat” class – 45,000 members of which kill themselves yearly, as summarized by Helen Epstein.

If you seek more persuasive evidence, all you need do is take a glance at the unemployment numbers in the United States – twenty million (and counting) for the period of March 12–April 12. Those numbers have not shrunk since – in fact, they’ve grown. While Europe is a far cry from exemplary in tackling the coronavirus crisis, the unemployment rate hasn’t skyrocketed. This is owed to the protections workers unions have negotiated with governments over long decades via collective bargaining. Perhaps the new depression triggered by COVID-19 is just the right time to introduce collectivization in a wider context.

A better way?

Professor Wolff argues in Democracy at Work that there is an alternative to the way corporations are currently run – Workers Self-Directed Enterprises (WSDE). At its essence, the WSDE offers “placing the workers in the position of their own collective board of directors, rather than having directors be non-workers selected by major shareholders… It is the tasks of direction – the decision making now assigned usually and primarily to corporate boards of directors and only secondarily to the major shareholders who choose them – that must be transferred to the workers collectively.”

Wolff’s chief example is the Mondragón Corporation in Spain, which has been in operation for over 50 years. Over this time, the corporation has grown to be one of the most successful businesses in Spain, and “now includes eighty-five thousand members in its constituent worker cooperative enterprises.”

The WSDE methods are neither new, nor revolutionary. A 1997 New York Review of Books article, Reinventing the Corporation, examines six novels dealing with the introduction of “collaborative methods” within corporations. Discussed are the problems a traditionally structured corporation meets in transitioning towards such starkly different methodology as well as, the benefits and issues during the transition period:

“Employees, as we shall see from a variety of studies, tend to be happier, more productive, and better paid under collaborative or participatory work arrangements. These arrangements, however, are often difficult to carry out. Not only must the work force be reeducated, but managers must be persuaded to accept diminished authority.”

It is a difficult shift, no doubt, but the novels discussed in the article make more than one compelling case for it. To even scratch the surface of such a challenging topic as this has been no easy task. Professor Wolff’s argument is not clear-cut – collaborative enterprises such as Mondragón suffer from their own share of problems. But to ignore the cracks in a system that fails time and again is to ignore the fundamental instability of the society we live in. It is to turn a blind eye to the necessity for change and a different way forward.

by Filip R. Zahariev

Photo Credits

on the wall, Dennis AB, CC BY-SA 2.0

MEPs back joint Parliament-Commission register of lobbyists, European Parliament, CC BY-NC-ND 2.0

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Gendered power relations: the toll of austerity

Merle Emrich — Mon, 06 Jan 2020 19:24:00 +0000

Angela Merkel is not only one of Germany’s longest serving chancellors – next to Konrad Adenauer and Helmut Kohl – but also the country’s first female chancellor and arguably the world’s most powerful woman. And yet, one could say that she is far from being a symbol of female empowerment. Rather than challenging patriarchal structures, she fits into them while power positions and influence remain difficult if not impossible to reach for most other women, and the austerity policies continued or introduced by Merkel’s government are, to a great extent, placed on the shoulders of women, thus counteracting progress in the field of gender equality.

European austerity

The European Women’s Lobby (EWL) warned in a 2012 report that European austerity policies are an infringement on women’s rights and gender equality since they lead to a perpetuation of existing and a creation of new inequalities . In 2017, the then shadow equalities minister Sarah Champion (Labour) presented number showing that, since 2010, 86% of the burden of austerity policies had been placed on women’s shoulders. And while Theresa May claimed the Conservative party to be a stronger advocate for gender equality having produced the country’s only two female prime ministers, Mary-Ann Stephenson (co-director of the Women’s Budget Group) pointed out: “The chancellor’s [Philip Hammond] decision to continue with the decisions of his predecessor to cut social security for these low income families, at the same time as cutting taxes, is effectively a transfer from the purses of poorer women into the wallets of richer men.”

In Germany, austerity measures that prevailed in Europe after the 2008 financial crisis had already been implemented as of 2002. The neo-liberal reforms of the Agenda 2010, introduced by the Social Democrat/ Green party government preceding Merkel’s successive Christian Democrat-led governments that continued these austerity policies, increased the German economy’s resilience and competitiveness allowing Germany to recover quickly from the 2008 crisis. Yet, Oxfam highlights that at this policy approach shifted “the balance of power between capital and labour considerably in favour of capital.” It is a shift that comes at a high social cost, particularly for women and especially for those belonging to minority or marginalised groups.

Economy and human rights

Be it employment, the care and health system or general women’s rights, women are particularly affected by austerity measures. Not only are men’s jobs usually prioritised over women’s employment, but cuts in public sector job lead to women being more affected than men as women constituted by far more than half of public sector employees. Women are thus increasingly pushed into precarious employment situations with very low wages and little or no social security or protection of workers’ rights.

At the same time, women are forced to fill the gaps created by the state in the care and health system by cuts to public spending. As state funded care work decreases, especially in an aging society, care is reprivatized, and traditional gender roles are reinforced. Once occupied with unpaid care work, these women have less time for paid employment, free time activities and political engagement. On top, women’s voices are further marginalised by destroying gender equality institutions in stride with austerity measures that pose a struggle to organisations ranging from advocacy groups to service providers such as organisations supporting survivors of violence.

Yet, while austerity policies are a stumbling block in the way of the advancement of women’s rights and gender equality, as well as creating general economic imbalances within the Eurozone, among others the German government under Merkel’s lead holds on to their aim of a balanced budget. The social consequences of this goal will continue to be a burden that is dumped on women, especially single mothers, young women, women with disabilities, older women, migrant and refugee women, LGBTQI+ women, women belonging to ethnic, religious and linguistic minorities, women in rural areas and those who live in poverty or extreme poverty.

“Discriminatory economic policies cannot be justified on the basis of the need to achieve macro-economic target and without regard to the human rights of women and gender equality”, Juan Pablo Boholavsky, and independent expert on foreign debt and human rights, argued in a report to the UN General Assembly. In a 2018 report, the OHCHR recommends a series of measures to improve gender equality. Among others the report called on governments to recognise unpaid care and domestic work as valuable work, invest in public services such as care services to redistribute care and domestic work “not just from women to men but from individuals to families to state-funded provisions”, and to strengthen women’s working rights and social security through targeted policies.

To be continued…

While the number of female leaders is growing, austerity policies – particularly when implemented by one of these female leaders such as German chancellor Merkel – highlight feminist, journalist and author Susan Faludi’s statement: “You can’t change the world for women by simply inserting female faces at the top of an unchanged system of social and economic power.” This is not to say, that no progress is being made – in Germany where reforms were undertaken introducing i.e. paid parental leave for fathers as well as mothers, or elsewhere. However, the gender pay gap, female under-representation in positions in politics as well as in business and austerity policies standing in the way of gender equality continue to be a considerable social issue.

by Merle Emrich

Photo Credits

Hands Fingers, Karl-Heinz Gutmann

Austerity isn’t working, wandererwandering, CC BY 2.0

Stew and Sympathy, Neil Moralee, CC BY-NC-ND 2.0

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Moving money out of the public eye: tax evasion in the EU

Isa Tiilikainen and Jasmin-Leyla Virta — Sun, 29 Sep 2019 13:49:02 +0000

Tax fraud and tax evasion within the European Union (EU) form a big problem that concerns all EU citizens. For instance, in 2017 the EU lost 137 billion euros in value-added-tax revenues, but taking also other types of tax frauds into account, the estimates of lost revenues due to tax evasion and avoidance go all the way up to 1 trillion euros.

Tax avoidance and evasion can be carried out in different ways, such as aggressive tax planning by taking advantage of loopholes in legislation or by transferring money to tax havens. Tax havens are often associated with remote and foreign states but, despite the close economic integration of the EU, can also be found within the Union.

Today, tax avoidance is a recognized problem in the EU, so how is it still possible?

Free movement of capital facilitating tax avoidance

The free movement of capital is one of the EU’s four freedoms and the basis of the European Single Market meaning that all restrictions and limits on the movement of capital – for example, on buying and selling shares and assets, as well as foreign investments between member states being prohibited. This freedom, related to banking secrecy, has created an opening for tax frauds – or at least made the monitoring of tax compliance trickier.

The EU has been working on harmonizing taxation and legislation in the member states, but still there are big differences regarding state provided tax reliefs and tax transparency. This has offered more room for systematic tax planning, tax avoidance and, eventually, tax evasion. As the taxation differs from one member state to another and the tax rates can be notably lower, tax payers, investors and companies might consider directing their income and profits through a different member state that is not their country of residence. Due to this, a total of seven EU member states, Belgium, Cyprus, Hungary, Ireland, Luxembourg, Malta and the Netherlands, are considered tax havens.

In recent years, this action has been closely observed through the Luxembourg Leaks – a major investigation revealing that over 300 foreign companies avoided taxes by channelling the taxation through Luxembourg where companies pay significantly lower corporate taxes than in other European states as the state’s legislation makes offers of substantial tax relief and deduction deals in privacy.

Several multinational companies, such as Disney, Pepsi and IKEA, profited financially by centralizing their income stream on European market through Luxembourg where they had to pay less than 1% taxes of their profits whereas taxation in other EU countries could have cost them billions of euros more, as the average corporate income tax rate in the EU countries is currently around 21,3%. Similar taxation deals are found for example in Ireland with Apple and in the Netherlands with Nike, as revealed by an investigation of the so-called Paradise Papers.

Zero-sum game?

Free movement of capital and tax planning within legal framework can create healthy competition and maximize profits for all actors, the EU, the member states, the companies, as well as individuals. However, at worst, harmful tax competition can unbalance the equality between the member states.

According to Spanish Member of the Parliament, Miguel Urban, the problem with tax evasion is the lack of fiscal unity in Europe which leads to fiscal competition and dumping aimed at attracting companies and capital. One can even argue that free movement of capital facilitates tax evasion. Miguel Urban states: “We are returning to a feudal system, where the feudal lords don’t pay any tax. This aristocratic class and modern feudalism is called Bono, Messi, Christiano Ronaldo as well as Nike, Apple and Amazon. It’s a class that positions itself not only above the middle class but also above small and medium-sized businesses. It’s a new nobility that believes to be above the law.’’

States’ right to choose their form of taxation is an argument often referred to by the tax-avoiding nations. For example, many Luxembourgers have publicly expressed this opinion, as a spokesman for the Luxembourg Finance Ministry says: “Each country should be free to fix taxes according to its national priorities”. Many lobby organisations promote this view as well, as Nicolas Mackel from Luxembourg’s financial lobby puts it: “Competition is healthy. And it is legitimate. To align the rules would certainly increase taxation. And that is not necessarily the most appropriate thing”.

These opposing views have created some contradictory outcomes mainly associated with the President of the European Commission, Jean-Claude Juncker. Previously Juncker has been the Finance Minister of Luxembourg, meaning that he has been one of the main actors preparing the tax relief deals with multinational companies, but as the President of the Commission he has been forced to fight against these deals and tax evasion.

However, with regards to the internal market system of the EU, it is evident that when one country offers tailored tax deals to multinational corporations, it steals the revenue from all the other countries. When multinationals dodge taxes, the gap has to be somehow compensated for and this often means increasing taxes on small and medium-sized enterprises, lower- and middle-income households and cutting back on public services.

The EU loses around 20% of its corporate tax revenue to tax havens. The woeful part about tax evasion is its clear connection to inequality between citizens all over Europe. Had the correct amount of corporate taxes been paid accordingly, there would be no need for any budgetary cuts.

Time to act

Recently the EU has taken measures to combat tax evasion as one of the focus points of its agenda.

One of the most effective and recent actions of the EU in the fight against tax evasion is the Anti Tax Avoidance Package based on the recommendations of The Organisation for Economic Cooperation and Development (OECD). The package was introduced in 2016 and aims at achieving fairer and more coherent corporate taxation by increasing transparency and helping the member states to act united against tax frauds. As a part of this package the Anti Tax Avoidance Directive, creating a minimum level of protection against tax avoidance, was applied on 1 January 2019. The directive includes rulings against profit shifting to low-tax countries, to prevent double non-taxation and to discourage artificial debt arrangements.

Even though these measurements are now applied, the fight against tax evasion is still in its early stages. Like with many other major issues within the EU there seems to be more talking than taking action. One reason for this is the fact that taxation is still very highly associated with member states sovereignty. As a consequence, policies and rulings related to taxes are handled in the Council of the European Union with unanimity which means that one single member state can obstruct the proposed changes and legislation if it collides with their own national interest.

Issues with a cross-border dimension, like aggressive tax-planning and evasion, are hard to tackle with only domestic policies. The EU’s internal market structure between 28 member states can both be the accelerator of the problem, as well as the key to a possible resolution.

Written by Isa Tiilikainen & Jasmin Virta

Photo Credits

Bad Weather, Frédéric Schneider, CC BY-NC-ND 2.0

Commission President Jean-Claude Juncker debated the last EU summit, Pietro Naj-Oleari (European Parliament), CC BY-NC-ND 2.0

Members making statement during vote on motion of censure against the Commission, Pietro Naj-Oleari (European Parliament), CC BY-NC-ND 2.0

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France and the Sorrows of Organic Agriculture

Merle Emrich — Fri, 12 Apr 2019 13:27:15 +0000

We live in a time, in which climate change and environmental protection are one of the most important challenges that need to be overcome. Organic farming can be a factor that contributes positively to this aim. However, interests of private companies and counterproductive government policies increase the difficulty of making this possibility reality – the situation in France being only one example.

Vittel without Water

In Vittel, France – where more than two million bottles of water a produced daily – about thirty farmers have signed a contract with Nestlé’s subsidiary company Agrivair. These farmers are allowed to use the land agreed upon in the contract for free, provided they comply with a number of regulations that are supposed to keep the groundwater clean. So far, so good. Yet, this deal is part of a development that sees Nestlé privatising more and more water sources in the region making it impossible for anyone but the company to use them. Not only is there a plan to cut off the whole population of Vittel from local water sources and instead pump water through a pipeline from a region fifteen kilometres away into the homes of the people, but it also makes life difficult for the farmers that have signed Nestlé’s contract.

During summer, water supplies are already low, especially with groundwater levels sinking due to Nestlé’s presence in the region. Since the company has – legally – closed wells to prevent nitrate from polluting the water, the farmers are forced to drive around for up to five hours a day to organise water for their animals. And that even though Nestlé has built a new well and thus, there would be enough water for the company as well as the farmers that help keeping the groundwater clean. One of these farmers is Benoît Gille who combines growing apples with keeping a breed of sheep that does not eat bark. That way the sheep naturally maintain and fertilise the meadow which the apple trees grow on. It could be success story of organic farming if it wasn’t for the water issue.

Guns before Butter

Vittel, however, is not the only place in France where farmers – especially organic farmers – are facing troubles. Despite a growing awareness of and interest in organic agriculture, the French government decided to discontinue state support for organic farmers (2018). Macron has broken with France’s traditional stance on EU agricultural subsidies by accepting a reduction of these funds. The plan combines a reform of the Common Agricultural Policy (CAP) with increased spending in other sectors, especially defense which illustrates what POLITICO calls a policy of ‘guns before butter’. And despite assurances that there will not be a CAP reduction, most experts on farm policy predict a general fall in farm funding.

Macron is already facing a severe image problem due to accusations of him being ‘president of the rich’ and not of the ordinary people. His take on reforming the agricultural sector is more than unlikely to change this for the better and could offer a chance to more right-leaning politicians to win some extra points in the coming European elections. And that is beside severely harming the organic agricultural sector.

What Organic Agriculture is and what it should be

With 58% of the French people being convinced that organic farming is beneficial for environmental protection both the number of consumers and organic farmers is growing. Yet, organic agriculture only accounts for a small percentage (7.3%) of all farmed land. It is a sector that, despite gathering strength, still needs support – not to increase consumption but for technical development. The abolition of CAP funds for sustainable agriculture thus present a serious challenge to organic farming as has already become evident in the cases of the UK and the Netherlands.

In the case of the UK the land used for organic farming has been diminished by 29% within five years (2010-2015) once subsidies for the sector had been cut. With environmental protection being more urgent than ever, it is counterproductive to weaken the organic farming industry, especially when there is the necessary consumer demand that helps the sector grow until it is stable enough to function on its own. From rising food prices due to increased production costs to increased water pollution due to nitrate in fertilisers that are used in conventional farming, the reduction of support for organic agriculture has a number of negative impacts on environmental as well as social justice. Thus, as French MEP Eric Andrieu (S&D) states: ‘Organic agriculture should be the primary beneficiary of future CAP reform, but we are still far from such agricultural revolution.’

by Merle Emrich

Photo Credits

Fauno in the fields, Damanhur Spiritual EcoCommunity, CC BY-ND 2.0

Shropshire Sheep, Amanda Slater, CC BY-SA 2.0

Agriculture, StateofIsrael, CC BY 2.0

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Les Gilets Jaunes: A Discovery of Revolution

Merle Emrich — Tue, 26 Feb 2019 20:16:18 +0000

Since the beginning of the gilets jaunes (‘yellow vests’) movement, a response to Macron’s planned fuel tax hike as environmental measure, it has become clear that the protests are not directed against green policies. The increasingly expensive fuel prices were merely the drop that made the barrel of social injustices overfull. In the wake of this revolt against neo-liberal policies references to the French Revolution of 1789 peak through in the discourse of newspapers and on the streets. But who – or rather why – are the gilets jaunes, and what do they have in common with 230-year old revolutionaries?

Do You Hear the People Sing?

Mass protests and revolts can be confusing, especially when they are led by a diverse, leaderless movement such as the gilets jaunes, leaving many underlying structures undiscovered until, with time, they surface. What first had been perceived as opposition to rising fuel prices, soon revealed much larger magma chambers of anger at social injustices, disillusionment with party politics, and dissatisfaction with France’s ‘arrogant’ ‘president of the rich’.

The existence of the people’s frustration and its eventual eruption should not have come as a surprise, however. The prelude to the gilets jaunes already began in 1983, when Mitterand’s government imposed austerity policies leaving the people worried about the state of their social protections. Since then the French welfare system has been increasingly dismantled by the following governments in which the Macron administration is merely the latest one.

‘The first social law is therefore the one that guarantees all members of society the means of existence’ – Maximilien de Robespierre

All the same, Macron having been elected by many as the lesser of two evils and his failure to emphasise with the regular people have not contributed to defusing concerns. During his election campaign, Macron portrayed himself as a politician different to the established career politicians of previous governments. Once elected, he – not very surprisingly – turned out to be just one more privileged mainstream politician by instantaneously amending the wealth tax (ISF) and continuing on the path of neo-liberal policies.

His unfortunate history of condescending statements towards working class people such as ‘You don’t scare me with your T-shirt. The best way of paying for a suit is to work’, or that it were easy to find a job if only one tried since ‘[e]verywhere I go people say to me that they are looking for staff’ have not helped in the least to create an image of Macron as the people’s man. In fact, especially in rural areas there is a lack of employment opportunities and Macron’s austerity project includes the cutting of 100 000 more jobs in the public sector. The people feel overlooked and ignored by Paris, and it is not only the poor who struggle with high prices of i.e. fuel but also the middle class.

We no longer want this system of exploitation.

We no longer want people having to sleep on the streets.

We can no longer count our money, be in debt by the tenth of the month.

And we are millions who are in this situation.

(Gilets Jaunes leaflet)

The Figure of he King and Rhetoric of Revolution

The gilets jaunes movement, sparked by an attempted environmental policy directed at those who already have troubles making ends meet instead of the actors mainly responsible for pollution, the big industries, is a heterogeneous mass. While uniting people with different backgrounds and expectations without a clearly defined leadership, and in part being targeted by right-wing groups seeking to use it as platform for their ideology, the protests have some clear general objectives. Their demands range from higher wages and social security payments over better (free) public services and a fairer tax system including the reintroduction of the ISF to more direct democracy and the resignation of Macron.

If you go to the city centre of any French city on a Saturday you will encounter a crowd of people with drums and flags, many of them wearing their high-visibility vests. And if you stop listening to the chants of ‘ Macron! Démission!’ (Macron! Resignation!) you might every now and then pick up a reference to the French Revolution. And indeed, since the beginning of the protest comparisons to the revolution of 1789 have multiplied. The yellow vests that the movement owes its name to involuntarily reminds of the sans-culottes: the ‘culottes’ (pantaloons) were a symbol of aristocracy in 18th century society, thus, the sans-culotte represented the anti-elitist movement of that time much like the gilets jaunes with their high-visibility vests which can be seen not only as a sign of distress (used e.g. in the event of a car accident), but also as a symbol of the working class, are the French anti-elitist movement of today.

And even though the socio-economic circumstances of today and 230 years ago are not the same, the themes are. Both the French Revolution and the current wave protests can be linked to an anger over high living costs (indirect taxes on i.e. salt then causing the price of bread to sore, Macron’s fuel tax now) and favouritism towards the wealthiest 1%, as well as dissatisfaction with a king/ president who is out of touch with the regular people. Or as a gilet jaune put it: ‘This is the beginning of the revolution. We are not in 1789, we’re not going to cut off heads but we want that Macron resigns […] In 1789, the aristocracy was about 1% of the population. That is the same percentage that the ISF applies to.’

Funnily enough, Macron is reported to have said that ‘in French politics what is absent is the figure of the king which I think basically the French people did not want dead.’ He could not have been more wrong. After all, the French Revolution, although France relapsed into authoritarianism with Napoleon, endowed the people with sovereignty. Sovereignty in so far as that they could hold their representatives accountable to guarding social justice and the equality of the people. Moreover, the constitution of 1793 degreed that a law if opposed by at least 10% in half of France would not be adopted. These principles and achievements of the French Revolution – social justice, equality, accountability and more direct democracy – are the objectives of the gilets jaunes. And more pragmatically, according to sociologist and president of the Fondation maison des sciences de l’homme (FMSH), Michel Wievorka, the comparison with the revolution provides the protesters with a legitimating rhetoric that every French(wo)man can related to, and that thus unites an otherwise diverse movement.

by Merle Emrich

Photos Credits

Related articles:

Les Gilets Jaunes: The Uncovering of Violence

Photo Essay: A Nation Sees Yellow

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Beer vs. Water

Nikhil Gupta — Sun, 02 Dec 2018 19:09:33 +0000

Literally dying of thirst? Drink a Corona!

Now I know that’s tempting, but unfortunately science says it’ll dehydrate you further. This peculiar trade off is relevant in places like North Mexico and East Africa where it is common for people to wake up one morning and find that there isn’t fresh water to drink.

Ahogado el niño, tapando el pozo.

That’s a Mexican saying which literally translates into “trying to close the well after the child has already drowned” – trying to prevent something which in reality is “too little too late.” In Mexicali and Zaragoza, even the wells are drying up.

Through the magic of the NAFTA agreement, Constellation brands i.e. the third largest beer manufacturer in the United States (owns Corona, Modelo Especial, and Negra Modelo brands) can set up production plants in Mexico at low costs, and export beer across the border without paying tariffs. In 2015, they decided to expand their plants by spending over $2 billion in Zaragoza, Coahuila. In 2016, they focused on setting up a multi million dollar plant in Mexicali.

The problem is that Constellation Brands is exploiting water from the wells of these cities by drilling up to 500 metres deep into the ground. Needless to say, the dry Mexican climate only adds to the misery. In the case of Mexicali, its prime source of water supply comes from the Colorado river. However, being one of the most exploited rivers in North America, only 7% of the river’s flow reaches Mexico. Scientists estimate that the river’s flow will decrease by 5-20% within the next 40 years due to climate change.

Let’s do some basic math then. It takes a little over 3 litres of water to produce 1 liter of beer. In arid places that walk on fine margins, this is a big deal. According to estimates, Constellation Brands could own up to 75% of Mexicali’s water supply. And it isn’t even a case where a company privatizes water with the objective of providing water. Natural water is being dug up in order to make beer – resulting in higher profits for the company on one hand, and locals without water on the other. This caused a massive uproar among people in Mexicali that has largely been ignored by the government. The Mexicali Resiste started a Boycott Modelo campaign that resulted in confrontations between protesters and the police. The bigger picture remains unchanged.

Frustrations can be seen at a political level as well. In an interview with the Guardian, Mayor Leoncio Martínez Sánchez of the municipality of Zaragoza said that “there’s barely a drop of water when you open the tap”

Echoes

This dynamic is paralleled in other parts of the world. For instance, Nile Breweries , based around the source of the Nile river, is owned by the world’s second largest beer producer SABMiller. Similarly in Kenya, East African Breweries (EABL) is located on the banks of Ruaraka river. Surprise, surprise- EABL is owned by Diageo, the world’s biggest liquor producer.

Thus, we notice a trend. The existence of these breweries negatively impacts the water security of countries with a dry climate and a lack of structure that ensures access to safe drinking water. Lobbying efforts of major corporations have added fuel to the fire. For instance, companies in favour of privatization of water such as Nestlé and AB InBev (the world’s largest beer producer) have been partners of the World Water Week in the past. This conflict of interest is quite demoralizing as the voices of common people that are most affected by these activities are never heard.

What can we do about this? The short answer is spread awareness. Granted, alcohol is a strong enough motivator to look away, but stories of those affected need to be echoed worldwide in order to facilitate change.

What’s the way out?

It’s clear that this world can’t live without beer. Perhaps it could be possible to come up with smarter solutions instead. Perhaps the solution is not only the responsibility of the people, but also that of corporations.

In Sweden, the brewery Nya Carnegiebryggeriet, Carlsberg, and the Swedish Environmental (IVL) just launched a new pilsner called PU:REST that is brewed with recycled wastewater. It may not be the sexiest idea, but it is certainly one of the future. While this concept is still new and available only in Sweden, it serves as a stellar example of corporate social responsibility and other breweries should follow suit.

Let’s not sacrifice the basic needs of others for a cold pint.

by Nikhil Gupta

Photo Credits:

The moment a water balloon bursts with two funny water balloons, Public Domain Photography, CC BY-SA 2.0

Its my birthday! Party Woo, Sam Ilic, CC BC-NC 2-0

Child sit on cracked earth, ittipon

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Going around in circles: Headed towards yet another financial crisis

Merle Emrich — Thu, 15 Nov 2018 15:09:39 +0000

Ten years ago, Lehman brothers collapsed. The shock waves of the financial crisis of 2008 could be felt throughout North America and Europe. One consequence was that trade finance trickled away and between 2008 and 2009 global trade and the stock market value decreased with a velocity not even observed during the Great Depression of the 1930s. To prevent another crisis of the same scale as the 2008 financial crash, provisions, i.e. mechanisms to monitor banks, were taken. The question, however, is: Are they sufficient?

What Awaits

Generally, the global economy was back on the path of recovery in 2012. Due to international cooperation, it is argued, international trade and foreign direct investment was improving. But while it may seem as if our economy is almost out of the metaphorical woods, with unemployment rates below the level of 2008 and the US economy being fairly strong, the next crisis is already looming on the horizon. And the structures we have in place might be far from helpful to prevent it or even soften the blow, not helped by an incomplete implementation of reforms decided upon after the Great Recession.

Inflation has, with nearly three percent, reached the highest level of the last six years, corporate debt is rising and with it the interest on that debt. In fact, global debt has reached a level three times higher than the global GDP and the Federal Reserve has already raised interest rates eight times since 2015. China is targeted by the US government’s trade war, as the dollar gets stronger it becomes increasingly difficult for emerging markets to repay their dollar debts (if there even is any chance of repayment at all). Pakistan requested a bail-out from the IMF, Turkey and Argentina are plunging head first into financial troubles, in 2018 the stock markets have recorded a decline due to US monetary policy and Brexit has left the UK vulnerable to a financial crisis. The list goes on.

And as if that was not enough, there are now ten banks that own more than fifty percent of the top hundred commercial banks’ assets. And the bigger the bank, the harder it falls when it falls. These ten biggest banks are so called ‘too-big-to-fail banks’. Their fall would send shudders through the economic world exceeding the seismographic scale, surpassing the extent of the Great Recession. And who will be left to clean up the rubble we have already seen in the aftermath of the 2008 crisis?

Economy and Populism

Unfortunately, financial troubles for banks, states, corporations and citizens are not the only consequence of the 2008 economic crisis. Not only has the crisis been linked to rise of suicide rates among the affected population, but to an increase of nationalist populism. In 2015 the Center for Economic Studies & Ifo Institute (CESifo) published a study showing that financial crises usually play into the hands of far-right parties, based on data of 100 financial crises and roughly 800 national elections in 20 democratic states since 1870.

Indeed, we can observe the surge of right-wing populism in the aftermath of the 2008 financial crisis. Since 2014, India has a nationalist government and recently Poland had to face repeated criticism by the European Union concerning their right-wing policies. Austria is governed by a coalition of the conservative party ÖVP and the right-wing populist FPÖ and only by a hair’s breadth elected Green Party politician Van der Bellen as president instead of right-wing candidate Hofer. Trump is the President of the United States, the right-wing populist Sweden Democrats (SD) have made it into parliament with almost 18% in the 2018 general elections. And while in German cities such as, perhaps most heard about, Chemnitz, the counter-protests are considerably bigger than the Nazi protests; the fact that these protests happened speaks for itself.

Tell Me Why

But why do financial crises lead to a surge of right-wing populism? One explanation might be that crises do not appear out of nowhere. Usually people made of flesh and blood can be found to have made mistakes or miscalculations leading to the crisis. In the case of the most recent financial crisis, that would be the political and economic elites. This opens the door for right-wing populists using a people versus elites rhetoric based on portraying identification with the disillusioned voter and a simple, familiarity-creating language, and promising stability, and law and order.

One might assume that elite-skeptic left-wing parties would gain votes as well. Yet they do not. In contrast to left-wing parties, right-wing politicians are more willing to use foreigners and minorities as their scapegoat, providing seemingly easy answers, and making use of and feeding people’s fears. The availability and skill to use television and social media to spread their ideology and creating polarisation plays into the hands of populist parties.

While voting patterns usually swing back to their pre-crisis status quo after about five years, that was not the case after 2008. The financial crash of 2008 was not only a great shock with effects exceeding their average duration, but it was merely one stumbling block in a ten years long series. And as if that was not enough, populists were able to utilise terrorist attacks and refugee flows to drive their wedge into society.

What Happens After the Next Crisis

As populist parties gain votes, government majorities decrease making it harder to make decisions and effective policies in parliament, and also making it more challenging to deal well with a possible future financial crisis. The consequences of the 2008 crisis could have been much worse, had it not been for international cooperation. The increase of right-wing populism, however, is likely to lead us on the path of protectionism, complicating international cooperation. And another financial crisis itself would be likely to trigger an even higher increase of far-right populism.

In an interview with the Economist philosopher Slavoj Žižek goes even further. He claims that “populism is simply a new way to imagine capitalism without its (…) socially disruptive effects” and explains modern populism as a reaction to experts’ expertise not working. As an example he gives the 2008 financial crisis that appeared to catch even experts off guard. This loss of trust in not only political elites but so-called experts has lead to the return of the “traditional authoritarian master”.

by Merle Emrich

Photo Credits

That was supposed to be going up, wasn’t it?, Rafael Matsunaga, CC BY 2.0

Occupy Wall Street -45, Esther Lee, CC BY 2.0

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Keeping the Enemy Closer

Nikhil Gupta — Thu, 15 Nov 2018 15:09:21 +0000

You’re in the middle of your Godfather marathon when suddenly, your attention is diverted to your shadow. You find yourself getting sucked into a portal that takes you into the anti-world. It’s a lot like the world we live in – except the economy is the black market, a normal job involves stealing, murder and violence; and actors that form the foundation of the system are institutions of organized crime. Such a world has existed in parallel to our conventional political system for centuries!

I’ve always thought that the relationship between the two worlds is like a Star Wars franchise, where there is a clearly defined good and evil. In reality, though, their relationship mirrors more of a Dark Knight dynamic. In other words, the trend today suggests that the lines between conventional politics and organized crime are blurred.

I don’t like violence, Tom, I’m a businessman

While there isn’t a set definition for the term, organized crime is essentially a network of enterprises set up for the purpose of engaging in activities such as drugs, prostitution, loan sharking etc. They may be illegal, but have continued to have a large public demand only since the birth of any form of political order. Especially today, with the emergence of sophisticated technological advancements, these syndicates are challenging conventional concepts such as rule of law, power and order.

And its not as if states haven’t identified the issue. Indeed, recent research from the United Nations University shows that wherever there is armed conflict, there are usually links to organized crime. Why, then, does this continue to exist? The short answer is that it’s trickier than you think.

It should be clear that organized crime poses as a threat to peace and security globally. The problem, though, is that organized crime networks are intertwined with the global economy. The fact that some of the world’s top criminal organizations currently generate more revenue than select nation states is astounding!

Fortune’s list of the top five organized crime groups estimates the “Solntsevskaya Bratva” (Russian mafia) creating a revenue of $8.5 billion and “Yamaguchi Gumi” (aka the Yakuza from Japan) a revenue of $6.6 billion in a year. This massive revenue is then laundered into legal businesses that pay taxes which – in the larger scheme of things – contribute to the country’s economy.

Like it or not, sometimes organised crime groups tend to complement states by getting their hands dirty for activities that “white knight” governments can’t acceptably do. That extends to trafficking drugs and arms, assassinations, extortion, money laundering, and strategic offshore investment — including in foreign politicians. Consequently, there is oftentimes a tendency for organized crime groups and governments to scratch each other’s backs.

Rise of the Mafia State?

The elephant in the room needs to be addressed. The current president of the most powerful country in the world is under investigation for collusion with the Russian mob during the election campaign. Journalist Craig Unger, in his House of Trump, House of Putin goes in detail to illustrate that Trump’s ties with Russian organized crime isn’t new and has a 30 year history. This is a watershed case to highlight that the relationship between the Russian government and its mob is symbiotic.

But this game has had many players. For instance, the release of previously confidential U.S. government materials on the assassination of President John F. Kennedy seem to confirm that the CIA worked with the American mafia to try to assassinate Fidel Castro. It’s sort of like a priest hiring a consulting firm to engage in blasphemy on his behalf.

It’s a no-brainer, then, that the sins of organised crime can’t be put to justice overnight. But what does the crystal ball say?

Leave the gun, take the Cannoli

The UN University predicts that collusion between political and criminal actors will only increase in the future, playing an even bigger role in national and global governance over the next three decades.

This is unsurprising, for the betting man would double down after seeing trends such as the migration crisis today, where government policies leave loopholes for the illegal transport of refugees. Additionally, economic and political vulnerability has always been good for business which can exploited more efficiently today in a world of globalization. However, a growth in anti-state activities would lead to the growth of the state executive. The car wash scandal- possibly the biggest corruption scandal in history shows that at some point, complex networks can be dissolved.

This compels me to disagree with the romanticized notion that the mafia and the state would be interchangeable concepts in the future. Institutions of organized crime are agents of the anti-state, i.e. the potential of their power is determined by the state as a point of reference. Thus, even with the imminent growth of organized crime in the future, there’s always going to be an equilibrium between the conventional world and the anti-world.

By Nikhil Gupta

Photo Credits:

Crime Hmm, Tobyas Reaper– CC BY 2.0

Putin is coming, Yuri Akopov– CC BY NC-2.0

Gun, hands back, weapon, Skitterphoto

Agent Dangerous, Open Clipart-Vectors

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