Poor countries suffer a hangover for a party they didn't attend
Duncan Green, Guardian
The financial boom never reached the world's poorest countries – yet now they're suffering the pain of the rich world's cuts
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... Many governments of poor countries are already cutting spending rather than risk a new debt crisis. Two-thirds of countries are cutting budget allocations in 2010 to one or more of the priority sectors of education, health, agriculture and social protection. According to their budget statements, Zambia has slashed its health spending by a third this year, while Mali, Benin, Niger and Nicaragua have taken the axe to their schools budget. Mongolia is cutting everything. All this, just at a time when they need to massively increase such spending if they are to achieve the MDGs. So there you have it, across low-income countries vital services are being taken away at a time when the poorest need them most and we didn't even know it was happening. Shocking.
(6 August 2010)
related: Hedge funds and the true cost of vulture capitalism

Stoneleigh takes on John Williams: deflation it is
Stoneleigh, the automatic earth
Ilargi: I know I've suggested before that John Williams of the highly regarded Shadowstats.com site might be better at collecting data than interpreting them (something to do with that silly hyperinflation idea) , but I figured if I asked Stoneleigh to weigh in on a recent interview with him, she might just hammer that point home better than I could at the moment.

There are quite a few voices out there who -sort of- see what's going on, but who most of them go completely astray when it comes to the interpretation of the data; to what will come after. Stoneleigh and I have never had any doubts, other then in timing, i.e. another taxpayer trillion dollars straightening the ship for another month. John Williams sees a lot of it, which makes him an interesting guy to listen to. But on the flipside, he misses out on some of the perhaps most crucial parts of the entire story. Which is a shame.

Here's Stoneleigh:

Stoneleigh: There's an interesting interview at The Energy Report with John Williams of Shadow Stats ( John Williams: Times That Try Our Souls ), which I wanted to discuss because, while there are many aspects are we would agree with, there are other glaring differences with how The Automatic Earth sees the future unfold. It is worth looking at the article in some depth in order to find the source of the disparities.

Mr Williams' prediction is hyperinflation, although, like us, he is predicting a great depression. One major distinction between TAE's view and that of many inflationists is the definition of inflation. It is clear from the interview that Mr. Williams' definition is increasing prices. Readers of TAE will know that our definition is a monetary one - an increase in the supply of money, credit and velocity thereof relative to available goods and services. We have consistently pointed out that using a price definition of inflation removes all the explanatory and predictive value from the concept. Prices changes are lagging indicators of changes in the money supply, complicated by other factors, both globally and locally. For instance, global wage arbitrage has been a major factor driving prices down in recent years, despite a tremendous credit expansion.

Prices do not tell a story by themselves. It is necessary to assess price drivers in order to understand what is unfolding. It is then necessary to adjust prices for changes in the money supply in order to see what is happening to prices in real terms, as opposed to merely nominal terms. Prices in real terms show what is happening to affordability, as it is not price by itself that matters, but price relative to how much money one has in one's pocket...
(8 August 2010)

America Goes Dark
New York Times, Paul Krugman
The lights are going out all over America — literally. Colorado Springs has made headlines with its desperate attempt to save money by turning off a third of its streetlights, but similar things are either happening or being contemplated across the nation, from Philadelphia to Fresno.

Meanwhile, a country that once amazed the world with its visionary investments in transportation, from the Erie Canal to the Interstate Highway System, is now in the process of unpaving itself: in a number of states, local governments are breaking up roads they can no longer afford to maintain, and returning them to gravel.

And a nation that once prized education — that was among the first to provide basic schooling to all its children — is now cutting back. Teachers are being laid off; programs are being canceled; in Hawaii, the school year itself is being drastically shortened. And all signs point to even more cuts ahead.

We’re told that we have no choice, that basic government functions — essential services that have been provided for generations — are no longer affordable. And it’s true that state and local governments, hit hard by the recession, are cash-strapped. But they wouldn’t be quite as cash- strapped if their politicians were willing to consider at least some tax increases.

And the federal government, which can sell inflation-protected long-term bonds at an interest rate of only 1.04 percent, isn’t cash-strapped at all. It could and should be offering aid to local governments, to protect the future of our infrastructure and our children...
(8 August 2010)

Co-operatives offer template for David Cameron's big society
Larry Elliot, The Guardian
As a self-confessed football nut, it's a fair bet Gordon Brown would be able to tell you that 10 of the 11 players who began the World Cup final for Spain were on the books of just two clubs – Barcelona and Real Madrid. His successor, David Cameron, is less consumed by passion for the "beautiful game" but still ought to take an interest in La Liga's deadly rivals. Why? Because both Barca and Real Madrid are co-operatives and offer a template for the prime minister if he is serious about fleshing out his idea of a big society.

Rather than being the plaything of an oligarch or an oil sheikh, Spain's big two are ultimately controlled by their members, and they jealously guard the right to appoint the club president. Spain is not the only country to organise its domestic football differently. The German Bundesliga is run along co-operative lines, with members owning at least 50% plus one of the shares in order to prevent them being taken over by private investors. The Bundesliga lacks the Premiership's ability to spend big money attracting the world's best players, but the fans pay a lot less to watch a more competitive league. The national side seems to be doing OK as well.

...It's worth noting at this point that the co-operative model is no panacea: clubs owned by their members can still lose money. Barca's annual turnover is €400m (£330m), but last month it announced that it needed to raise a €150m loan to ensure its superstar players got paid. The newly elected president, Sandro Rosell, noted when he took over: "We found a club in debt, with liquidity problems." Three years into the financial crisis, football is perhaps the last bubble to pop. Spain's economy went down the pan a long time ago, and that has affected Barca, co-op or not.

Even so, the idea of fans running their own football clubs is just the sort of thing David Cameron would like to see. The Conservative party manifesto at the general election pledged to "reform the football governance arrangements so co-operative ownership models can be established by supporters, as part of a wider package of reform of football finance and governance". The idea is that a big pool of members would allow clubs to raise more finance from equity rather than taking on debt, thus putting them on a more sustainable footing.

...Against this backdrop, it was perhaps unsurprising that all three parties went into the election campaign supporting the idea of co-ops and mutuals, which represent a small but growing part of the UK economy. The turnover of the co-operative economy was £33.5bn in 2009, about 2% of GDP and up by 16% on the previous year. Given that 2009 saw the economy as a whole shrink by 4.9% – the biggest one-year decline in almost 90 years – this was some achievement...
(2 August 2010)

And now for some good news
Johann Hari, The Independent
At first, this isn't going to sound like a good news story, never mind one of the most inspiring stories in the world today. But trust me: it is. Yan Li spent his life tweaking tiny bolts, on a production line, for the gadgets that make our lives zing and bling. He might have pushed a crucial component of the laptop I am writing this article on, or the mobile phone that will interrupt your reading of it. He was a typical 27-year-old worker at the gigantic Foxconn factory in Shenzen, Southern China, which manufactures i-Pads and Playstations and mobile-phone batteries.

Li was known to the company by his ID number: F3839667. He stood at a whirring line all day, every day, making the same tiny mechanical motion with his wrist, for 20p an hour. According to his family, sometimes his shifts lasted for 24 hours; sometimes they stretched to 35. If he had tried to form a free trade union to change these practices, he would have been imprisoned for 12 years. On the night of 27 May, after yet another marathon-shift, Li dropped dead.

Deaths from overwork are so common in Chinese factories that they have a word for it: guolaosi. China Daily estimates that 600,000 people are killed this way every year, mostly making goods for us. Li had never experienced any health problems, his family says, until he started this work schedule; Foxconn say he died of asthma and his death had nothing to do with them. The night Li died, yet another Foxconn worker committed suicide – the tenth this year.

For two decades now, you and I have shopped until Chinese workers dropped. Business has bragged about the joys of the China Price. They have been less keen for us to see the Human Price. KYE Systems Corp run a typical factory in Donguan in southern mainland China, and one of their biggest clients is Microsoft – so in 2009 the US National Labour Committee sent Chinese investigators undercover there. On the first day a teenage worker whispered to them: "We are like prisoners here."

So you might be thinking – was it a cruel joke to bill this as a good news story? Not at all. An epic rebellion has now begun in China against this abuse – and it is beginning to succeed. Across 126,000 Chinese factories, workers have refused to live like this any more. Wildcat unions have sprung up, organised by text message, demanding higher wages, a humane work environment, and the right to organise freely. Millions of young workers across the country are blockading their factories and chanting, "There are no human rights here!" and, "We want freedom!" The suicides were a rebellion of despair; this is a rebellion of hope...
(6 August 2010)

France's New Rural Ghettos
GATIEN ELIE, ALLAN POPELARD and PAUL VANNIER, Counterpunch
How can we explain the demographic revival in the French countryside over the past 20 years? This migration was initially confined to the urban periphery, but has now reached rural margins. Three out of four rural cantons showed positive net migration during the 1990s. While some interpret it as a sign of a “rural renaissance” that reverses decades of desertification – “the end of farmers” and “the end of native soils” – the socio-spatial dynamics are much more complex, and rather less idyllic.

Resettling rural areas is not the monopoly of the middle and upper classes, or young executives who look to the countryside for a more pleasant way of life and acquire a detached house for their families. An urban exodus has helped change the sociology of the countryside; 60 per cent of country-dwellers are now workers or employees. In the past, the rural exodus, accelerated by the industrial revolution, created the urban proletariat by driving smallholders and artisans out of the countryside. Today the urban proletariat – particularly the poorest households – have been relegated from towns because of the rise in house prices. In France, the poverty threshold is set at 50 per cent or 60 per cent of the median standard of living. In 2007, this was $948 a month for a single person at 50 per cent of the median standard of living, and $1,137 a month at 60 per cent; between 4.2 and 8 million people.

The institutionalization of France’s national urban policy (politique de la ville) in the 1970s masked this change by addressing all social issues as urban issues. Now, in 90 out of France’s 95 départements, relative poverty is higher in the countryside than in towns. While this is linked to a crisis in agriculture, it is also the result of the arrival of poor neo-rurals.

It takes 45 minutes to drive from Montpellier to Ganges, a small town of 4,000 just within the Hérault département. The road first passes between Euromédecine and Agropolis, the hi-tech parks that symbolise the dynamism of Montpellier, the “town that makes its dreams come true”. Then it goes straight across the wine-growing plains of the Coteaux du Languedoc and then more sinuously around the foothills of the Cévennes. The district of Ganges, far from Montpellier’s jobs and services, nevertheless attracts new inhabitants: almost a thousand have settled here since 1992.

Bernard and Christine (not their real names), young retirees originally from the outskirts of Montpellier, arrived in 2008. He used to work for Nicollin, the urban cleaning company. She used to clean in secondary schools. Their income dropped abruptly in retirement. Heavily in debt, they could no longer cope with their rising expenditures. The rest, they said, “was coincidence: a house in the country, not expensive, bearable local taxes, a maximum of 50 kilometers from Montpellier”. The necessity to move became a virtue.

...But when summer is over “you quickly realize your misfortune,” Sylvie said. In the autumn, Cévenol rainstorms hammer the Mediterranean foothills of the Massif Central and “winter is pretty long”. A social worker said: “Every year there’s a spike of activity in September. People who moved into campsites thinking they could live there year round suddenly discover the bad weather and the rigours of winter.”

The first frosts also surprise new tenants of the town’s apartments. In Ganges, as in most of the French countryside, over half of all accommodation was built before 1949. Much is decrepit, with holes in the roofs, badly insulated windows, and archaic electric circuits. “Every month I’ve got to pay rent for an apartment that looks like a squat,” Sylvie said. In winter, damp oozes from the walls, and high ceilings make apartments difficult to heat. When the fuel tank is empty and electricity bills can no longer be paid, domestic space is reorganised around the oil heater...
(6 Aug 2010)