The US economy shrank by 6.2% in the last three months of 2008, official figures have shown, a far sharper fall than had previously been reported.
Plunging exports and the biggest fall in consumer spending in 28 years dragged the figure down from the 3.8% estimate the government gave earlier.
The decline was much worse than analysts had expected.
In 2008 as a whole, the economy grew by 1.1%, the slowest pace since 2001. The Dow Jones was down 1.6% in early trade.
Recession warning
Consumer spending, which accounts for about two-thirds of domestic economic activity, fell by a rate of 4.3% in the final quarter - the biggest fall since the second quarter of 1980. This was a revision of the earlier figure of 3.5%.
“ It shows the weak state of the world's largest economy ”
Matt Esteve
Tempus Consulting
With rising unemployment, sliding home values, increasing numbers of repossessions and the slumping value of investments, observers say many US consumers are hanging on to whatever disposable cash they have.
Meanwhile, exports - which had until recently been supporting the economy - fell at the sharpest rate since 1970 at an annual rate of 23.6%, down from 19.7%.
Earlier this week, Federal Reserve chief Ben Bernanke warned Congress that without the right policies from the government, the US recession could last into 2010.
But he said if the Obama administration and the central bank can restore some measure of financial stability, 2010 could be a year of recovery.
President Obama recently signed a $787bn (£556m) recovery package of increased government spending and tax cuts, and unveiled a $75bn scheme to stem repossessions.
No good news
The latest GDP figures were "just awful" said Matt Esteve, a currency trader at Tempus Consulting in Washington DC. "It shows the weak state of the world's largest economy."
And Boris Schlossberg, director of currency research at GFT Forex said there was "doom all over".
He predicted that the dollar would not weaken too much against the euro because "there's no good news on the other side of the Atlantic, either".
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7915040.stm
Published: 2009/02/27 14:47:57 GMT
Friday, February 27, 2009
Thursday, February 26, 2009
US factory orders decline again
US orders for long-lasting manufactured goods fell by more than expected in January as the global economic downturn continued to bite.
New orders for durable goods fell 5.2%, official data showed, the sixth month in a row the figure has fallen.
Orders for cars, machinery, metal products and household appliances were the worst affected.
Meanwhile, updated figures for December showed a 4.6% drop in orders, worse than the 3% fall originally estimated.
Gloomy picture
January's figures were much worse than analysts had been expecting. They had forecast a 2.5% decline.
The six straight months of declines in durable goods orders highlights the severity of the continued global economic downturn. The record for a string of consecutive monthly falls had stood at four months and was set in 1992.
Consumers are rapidly reining in their spending as they face rising costs and uncertainty about their jobs, and so purchases of big-ticket items such as cars are subsequently being affected.
On Thursday, struggling US carmaker General Motors announced a $9.6bn (£6.7bn) loss in the fourth quarter, pushing its net 2008 losses to $30.9bn.
Furthermore, the collapse in the US's housing market has had a detrimental effect on demand for products from manufacturers such as furniture and carpet suppliers. Equally cautious foreign consumers mean that international demand for the US's products has also weakened.
On Friday, the government will release updated figures on how the US economy performed during the final three months of 2008.
Analysts now believe the US economy contracted at a pace of 5.4% in the last three months of 2008, significantly higher than the estimate of a 3.8% annualised drop made a month ago.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7912984.stm
Published: 2009/02/26 15:39:34 GMT
New orders for durable goods fell 5.2%, official data showed, the sixth month in a row the figure has fallen.
Orders for cars, machinery, metal products and household appliances were the worst affected.
Meanwhile, updated figures for December showed a 4.6% drop in orders, worse than the 3% fall originally estimated.
Gloomy picture
January's figures were much worse than analysts had been expecting. They had forecast a 2.5% decline.
The six straight months of declines in durable goods orders highlights the severity of the continued global economic downturn. The record for a string of consecutive monthly falls had stood at four months and was set in 1992.
Consumers are rapidly reining in their spending as they face rising costs and uncertainty about their jobs, and so purchases of big-ticket items such as cars are subsequently being affected.
On Thursday, struggling US carmaker General Motors announced a $9.6bn (£6.7bn) loss in the fourth quarter, pushing its net 2008 losses to $30.9bn.
Furthermore, the collapse in the US's housing market has had a detrimental effect on demand for products from manufacturers such as furniture and carpet suppliers. Equally cautious foreign consumers mean that international demand for the US's products has also weakened.
On Friday, the government will release updated figures on how the US economy performed during the final three months of 2008.
Analysts now believe the US economy contracted at a pace of 5.4% in the last three months of 2008, significantly higher than the estimate of a 3.8% annualised drop made a month ago.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7912984.stm
Published: 2009/02/26 15:39:34 GMT
Wednesday, February 25, 2009
From Global Finance to the Nationalization of the Banks: Eight Theses on the Economic Crisis
Leo Panitch and Sam Gindin
1. The current economic crisis has to be understood in terms of the historical dynamics and contradictions of capitalist finance in the second half of the 20th century. Even though the spheres of capitalist finance and production are obviously intertwined (in significant ways today more than ever before), the origins of today's US-based financial crisis are not rooted in a profitability crisis in the sphere of production, as was the case with the crisis of the 1970s, nor in the global trade imbalances that have emerged since. Although the growing significance of finance in the major capitalist economies was already strongly registered by the 1960s, it was the role finance played in resolving the economic crisis of the 1970s that explains the central place it came to occupy in the making of global capitalism. The inflation that was the main symptom of that crisis had a strong negative impact on those holding financial assets and destabilized the international role of the dollar. Under the guidance of the US Federal Reserve, financial markets used very high interest rates to drive up unemployment, defeat trade union militancy and restrict public welfare expenditures in the early 1980s – all of which had come to be seen as the source of the intractable profitability and inflation problems of the previous decade. Yet it was precisely the contradictory ways finance contributed to global capitalism's successes in the closing decades of the 20th century that laid the foundation for the massive capitalist crisis that now closes the first decade of the 21st century.
2. The spatial expansion and social deepening of capitalism in the last quarter century could not have occurred without innovations in finance. The development of securitized financial markets and the internationalization of American finance allowed for the hedging and spreading of the risks associated with the global integration of investment, production and trade. This provided risk insurance in a complex global economy without which capital accumulation would otherwise have been significantly restricted. At the same time, finance penetrated more and more deeply into society, integrating subordinate classes as debtors, savers, and even investors through private pensions, consumer credit and mortgages for private housing. This became especially important in facilitating the maintenance of consumer demand in a period of wage stagnation and growing inequality. In terms of directly fostering capital accumulation, finance was not only an important site of technological innovation in computerization and information systems, but also facilitated innovation more generally in high tech sectors through venture capital, especially in the US. The central role of the US dollar and Treasury bonds in the global economy as the key store of value and the basis for all other calculations of value, alongside the global institutional predominance of US financial institutions, acted as a vortex for drawing the global surplus to American financial markets and instruments. This allowed for the mobilization of cheap global credit for the US economy, and sustained its place as the major import and consumer market in the global economy. The lowering of US interest rates was important to the macroeconomic stability reflected in the fewer and milder recessions within the US in comparison with the post-war era (‘The Great Moderation,’ as economists refer to the 1983-2007 period).
3. The competitive volatility of global finance produced a series of financial crises whose containment required repeated state intervention. Global financial competition for higher yields led to institutional and market innovations that allowed greater leveraging and therefore more credit relative to the capital base. This in fact amounted to a vast increase in the effective money supply, but rather than yielding the price inflation that monetarists predicted, the defeat of labour and the increased corporate ability to fund investments with internal funds meant that increased liquidity translated into asset inflation. This asset inflation was uneven across sectors, producing financial bubbles from stock markets to real estate at various times, while the size of these bubbles was expanded by virtue of the material expansions in the real economy related to each of these areas. The bursting of these bubbles became a common feature of capitalism and the state interventions required to contain them reinforced the confidence that supported future bubbles. The alleged withdrawal of states from markets amidst the globalization of capitalism was a neoliberal ideological illusion: states in the developed capitalist countries pumped more liquidity into the banks in the face of financial crises, while they ensuring that crises in the developing countries were generally used to impose financial discipline. The neoliberal American state played the most active role as the imperial guarantor, coordinator and fire-fighter-in-chief for global capitalism.
4. Both finance's central role in the making of global capitalism and the American state's role in sustaining it produced the bubble that emerged inside the US housing sector. Rising demand for home ownership at all income levels, partly reflecting limits on public housing since the crisis of the 1970s, was encouraged by US government support for meeting housing needs through financial markets backed by mortgage tax deductions. And, reflecting the increasingly unequal income distribution that was the consequence of the defeat of labour generally and the restructuring of production and employment, a broad stratum of the working class population also sustained their consumption through taking out second mortgages on the bubble-inflated values of their homes, But all this was really only made possible by the acceleration of financial securitization and the creation of a broader market for mortgage-backed securities in particular. This developed amidst rising house prices that apparently increased the wealth and credit-worthiness of those borrowing, and gave rise to the acceptance of lower standards (including for ‘teaser’ subprime mortgage rates) by regulatory agencies, largely supported by both parties in Congress. The Federal Reserve's low interest rate policies, especially in the wake of the bursting of the dot-com bubble, reinforced by the high demand for US Treasury securities as the safest store of value in a highly volatile global financial system, intensified competitive pressures on finance everywhere to get higher yields through greater leveraging of assets and innovative securitization to stretch the boundaries of risk. The historical safety of collateralized home loans (with such a large portion having been backed by the US government) reinforced the confidence in perpetually rising home prices and made housing debt the most attractive arena for the systemic exercise of arbitrage between low-interest US Treasury bonds and high-interest mortgage-backed securities.
5. The inevitable bursting of the housing bubble had such a profound impact because of its centrality to sustaining both US consumer demand and global financial markets. The eventual bursting of the housing bubble was inevitable once, as was the case by 2005, housing prices peaked. By this time, not only had the Fed's low interest rate policy come to an end, but teaser rates on many subprimes had run out. The rise in foreclosures and the number of houses offered for resale had immediate effects on housing prices, new home construction and furniture and appliance sales. Moreover, by virtue of the loss in value of the primary asset figuring in workers' perceptions of their personal wealth, this in turn led to an overall decline in US consumer spending and import demand in a way that the bursting of stock market bubbles had not. At the same time, since the spreading of risk in subprime mortgages had been effected through their packaging into derivative securities with more highly-rated tranches of debts, the housing crisis undermined the econometric equations that valued these assets in global financial markets. Mortgage-backed securities became difficult to value and to sell, and this produced a contagion throughout financial and inter-bank markets that spread the collapse internationally. Taken together with the impact of the housing crisis on mass consumption behaviour, and thus on the US economy's ability to function as the key global consumer, illusions that other regions might be able decouple from the US in this crisis were quickly dispelled.
6. The crisis reinforced the centrality of the American state in the global capitalist economy while multiplying the difficulties entailed in managing it. The rise of the US dollar in currency markets and the enormous demand for US Treasury bonds as the crisis unfolded reflected the extent to which the world remained on the dollar standard and the American state continued to be regarded as the ultimate guarantor of value. Treasury bonds are in demand because they remain the most stable store of value in a highly volatile capitalist world: illusions that foreign states were previously doing the US a favour by buying Treasury securities may finally be dispelled by this crisis. The American state's central role in terms of global crisis management – from currency swaps to provide other states with much needed dollars to overseeing policy cooperation among central banks and finance ministries – has also been confirmed in this crisis. Yet despite its very active interventions, the American state has proved unable to contain the effects of this particular crisis. The massive drops of liquidity that it has helicoptered onto the financial system since August 2007 have not restored the banks' capacity or willingness to lend at anything like previous rates – even to each other, let alone to firms or to consumers. The whole system of securitized finance that has grown up over the past few decades – whereby the risk on mortgages, consumer credit and business loans is sliced, diced, repackaged and traded around the world – has imploded.
7. The scale of the crisis today is such that nationalization of the financial system cannot be kept off the political agenda. It is increasingly apparent, that monetary and fiscal stimulation alone are unlikely to succeed in ending the crisis since the banking system's dysfunctionality today undermines the multiplier effect, just as new regulations are supposed to make finance more cautious and prudent in their lending. Indeed, there has been an increasing realization that it may not be possible to keep off the political agenda much longer the issue of bringing large portions of the financial system into public ownership. This is advanced today along the lines of the temporary nationalizations that took place in Sweden and Japan during their financial crises in the 1990s whereby the state took on the banks' bad debts and then passed the banks back to the private sector. It is a measure of the severity of the crisis that nationalization is now being quite generally proposed even within the US although it poses a host of problems as a way of saving global capitalism. It is highly significant that the last time the nationalization of the banks was seriously raised, at least in the advanced capitalist countries, was in response to the 1970s crisis by those elements on the left who recognized that the only way to overcome the contradictions of the Keynesian welfare state in a positive manner was to take the financial system into public control. Now that bank nationalization is back on the political agenda (albeit now coming from very different sources), it is very important to contrast the type of band-aid nationalization now being canvassed with the demand for turning the whole banking system into a public utility, which would allow for the distribution of credit and capital to be undertaken in conformity with democratically established criteria. And it is necessary to point out that this would have to involve not only capital controls in relation to international finance but also controls over domestic investment, since the point of making finance into a public utility is to transform the uses to which it is now put.
8. The call for nationalization of the banks provides an opening for advancing broader strategies that begin to take up the need for systemic alternatives to capitalism. The severity of today's economic crisis once again exposes the old irrationality of the basic logic of capitalist markets. As each firm (and indeed state agency) lays off workers and tries to pay less to those kept on, this has the effect of further undercutting overall demand in the economy. At the same time, the financial crisis exposes new irrationalities, not least those contained in the widespread proposals for trading in carbon credits as a solution to the climate crisis, which involve depending on volatile derivatives markets that are inherently open to the manipulation of accounts and to credit crashes. In the context of such readily visible irrationalities, a strong case can be made that – to save jobs and the communities that depend on them in a way that converts production to ecologically-sustainable priorities during the course of this crisis – we need to break with the logics of capitalist markets rather than use state institutions to reinforce them. We need to put on the public agenda the need to change our economic and political institutions so as to allow for democratic planning to collectively decide how and where we produce what we need to sustain our lives and our relationship to our environment. However deep the crisis, however confused and demoralized are capitalist elites both inside and outside the state, and however widespread the popular outrage against them, making this case will certainly require hard and committed work by a great many activists, many of whom will see the need for building new movements and parties to this end. This is what is really needed if this crisis is not to go to waste. •
Leo Panitch is Canada Research Chair in Comparative Political Economy at York University. His most recent books are American Empire and the Political Economy of International Finance and Renewing Socialism: Transforming Democracy, Strategy and Imagination.
Sam Gindin, formerly Chief Economist and Assistant to the President of the Canadian Autoworkers Union, holds the Packer Professorship in Social Justice at York University. He is the author of The Canadian Auto Workers: The Birth and Transformation of a Union and (with Panitch) Global Capitalism and American Empire.
1. The current economic crisis has to be understood in terms of the historical dynamics and contradictions of capitalist finance in the second half of the 20th century. Even though the spheres of capitalist finance and production are obviously intertwined (in significant ways today more than ever before), the origins of today's US-based financial crisis are not rooted in a profitability crisis in the sphere of production, as was the case with the crisis of the 1970s, nor in the global trade imbalances that have emerged since. Although the growing significance of finance in the major capitalist economies was already strongly registered by the 1960s, it was the role finance played in resolving the economic crisis of the 1970s that explains the central place it came to occupy in the making of global capitalism. The inflation that was the main symptom of that crisis had a strong negative impact on those holding financial assets and destabilized the international role of the dollar. Under the guidance of the US Federal Reserve, financial markets used very high interest rates to drive up unemployment, defeat trade union militancy and restrict public welfare expenditures in the early 1980s – all of which had come to be seen as the source of the intractable profitability and inflation problems of the previous decade. Yet it was precisely the contradictory ways finance contributed to global capitalism's successes in the closing decades of the 20th century that laid the foundation for the massive capitalist crisis that now closes the first decade of the 21st century.
2. The spatial expansion and social deepening of capitalism in the last quarter century could not have occurred without innovations in finance. The development of securitized financial markets and the internationalization of American finance allowed for the hedging and spreading of the risks associated with the global integration of investment, production and trade. This provided risk insurance in a complex global economy without which capital accumulation would otherwise have been significantly restricted. At the same time, finance penetrated more and more deeply into society, integrating subordinate classes as debtors, savers, and even investors through private pensions, consumer credit and mortgages for private housing. This became especially important in facilitating the maintenance of consumer demand in a period of wage stagnation and growing inequality. In terms of directly fostering capital accumulation, finance was not only an important site of technological innovation in computerization and information systems, but also facilitated innovation more generally in high tech sectors through venture capital, especially in the US. The central role of the US dollar and Treasury bonds in the global economy as the key store of value and the basis for all other calculations of value, alongside the global institutional predominance of US financial institutions, acted as a vortex for drawing the global surplus to American financial markets and instruments. This allowed for the mobilization of cheap global credit for the US economy, and sustained its place as the major import and consumer market in the global economy. The lowering of US interest rates was important to the macroeconomic stability reflected in the fewer and milder recessions within the US in comparison with the post-war era (‘The Great Moderation,’ as economists refer to the 1983-2007 period).
3. The competitive volatility of global finance produced a series of financial crises whose containment required repeated state intervention. Global financial competition for higher yields led to institutional and market innovations that allowed greater leveraging and therefore more credit relative to the capital base. This in fact amounted to a vast increase in the effective money supply, but rather than yielding the price inflation that monetarists predicted, the defeat of labour and the increased corporate ability to fund investments with internal funds meant that increased liquidity translated into asset inflation. This asset inflation was uneven across sectors, producing financial bubbles from stock markets to real estate at various times, while the size of these bubbles was expanded by virtue of the material expansions in the real economy related to each of these areas. The bursting of these bubbles became a common feature of capitalism and the state interventions required to contain them reinforced the confidence that supported future bubbles. The alleged withdrawal of states from markets amidst the globalization of capitalism was a neoliberal ideological illusion: states in the developed capitalist countries pumped more liquidity into the banks in the face of financial crises, while they ensuring that crises in the developing countries were generally used to impose financial discipline. The neoliberal American state played the most active role as the imperial guarantor, coordinator and fire-fighter-in-chief for global capitalism.
4. Both finance's central role in the making of global capitalism and the American state's role in sustaining it produced the bubble that emerged inside the US housing sector. Rising demand for home ownership at all income levels, partly reflecting limits on public housing since the crisis of the 1970s, was encouraged by US government support for meeting housing needs through financial markets backed by mortgage tax deductions. And, reflecting the increasingly unequal income distribution that was the consequence of the defeat of labour generally and the restructuring of production and employment, a broad stratum of the working class population also sustained their consumption through taking out second mortgages on the bubble-inflated values of their homes, But all this was really only made possible by the acceleration of financial securitization and the creation of a broader market for mortgage-backed securities in particular. This developed amidst rising house prices that apparently increased the wealth and credit-worthiness of those borrowing, and gave rise to the acceptance of lower standards (including for ‘teaser’ subprime mortgage rates) by regulatory agencies, largely supported by both parties in Congress. The Federal Reserve's low interest rate policies, especially in the wake of the bursting of the dot-com bubble, reinforced by the high demand for US Treasury securities as the safest store of value in a highly volatile global financial system, intensified competitive pressures on finance everywhere to get higher yields through greater leveraging of assets and innovative securitization to stretch the boundaries of risk. The historical safety of collateralized home loans (with such a large portion having been backed by the US government) reinforced the confidence in perpetually rising home prices and made housing debt the most attractive arena for the systemic exercise of arbitrage between low-interest US Treasury bonds and high-interest mortgage-backed securities.
5. The inevitable bursting of the housing bubble had such a profound impact because of its centrality to sustaining both US consumer demand and global financial markets. The eventual bursting of the housing bubble was inevitable once, as was the case by 2005, housing prices peaked. By this time, not only had the Fed's low interest rate policy come to an end, but teaser rates on many subprimes had run out. The rise in foreclosures and the number of houses offered for resale had immediate effects on housing prices, new home construction and furniture and appliance sales. Moreover, by virtue of the loss in value of the primary asset figuring in workers' perceptions of their personal wealth, this in turn led to an overall decline in US consumer spending and import demand in a way that the bursting of stock market bubbles had not. At the same time, since the spreading of risk in subprime mortgages had been effected through their packaging into derivative securities with more highly-rated tranches of debts, the housing crisis undermined the econometric equations that valued these assets in global financial markets. Mortgage-backed securities became difficult to value and to sell, and this produced a contagion throughout financial and inter-bank markets that spread the collapse internationally. Taken together with the impact of the housing crisis on mass consumption behaviour, and thus on the US economy's ability to function as the key global consumer, illusions that other regions might be able decouple from the US in this crisis were quickly dispelled.
6. The crisis reinforced the centrality of the American state in the global capitalist economy while multiplying the difficulties entailed in managing it. The rise of the US dollar in currency markets and the enormous demand for US Treasury bonds as the crisis unfolded reflected the extent to which the world remained on the dollar standard and the American state continued to be regarded as the ultimate guarantor of value. Treasury bonds are in demand because they remain the most stable store of value in a highly volatile capitalist world: illusions that foreign states were previously doing the US a favour by buying Treasury securities may finally be dispelled by this crisis. The American state's central role in terms of global crisis management – from currency swaps to provide other states with much needed dollars to overseeing policy cooperation among central banks and finance ministries – has also been confirmed in this crisis. Yet despite its very active interventions, the American state has proved unable to contain the effects of this particular crisis. The massive drops of liquidity that it has helicoptered onto the financial system since August 2007 have not restored the banks' capacity or willingness to lend at anything like previous rates – even to each other, let alone to firms or to consumers. The whole system of securitized finance that has grown up over the past few decades – whereby the risk on mortgages, consumer credit and business loans is sliced, diced, repackaged and traded around the world – has imploded.
7. The scale of the crisis today is such that nationalization of the financial system cannot be kept off the political agenda. It is increasingly apparent, that monetary and fiscal stimulation alone are unlikely to succeed in ending the crisis since the banking system's dysfunctionality today undermines the multiplier effect, just as new regulations are supposed to make finance more cautious and prudent in their lending. Indeed, there has been an increasing realization that it may not be possible to keep off the political agenda much longer the issue of bringing large portions of the financial system into public ownership. This is advanced today along the lines of the temporary nationalizations that took place in Sweden and Japan during their financial crises in the 1990s whereby the state took on the banks' bad debts and then passed the banks back to the private sector. It is a measure of the severity of the crisis that nationalization is now being quite generally proposed even within the US although it poses a host of problems as a way of saving global capitalism. It is highly significant that the last time the nationalization of the banks was seriously raised, at least in the advanced capitalist countries, was in response to the 1970s crisis by those elements on the left who recognized that the only way to overcome the contradictions of the Keynesian welfare state in a positive manner was to take the financial system into public control. Now that bank nationalization is back on the political agenda (albeit now coming from very different sources), it is very important to contrast the type of band-aid nationalization now being canvassed with the demand for turning the whole banking system into a public utility, which would allow for the distribution of credit and capital to be undertaken in conformity with democratically established criteria. And it is necessary to point out that this would have to involve not only capital controls in relation to international finance but also controls over domestic investment, since the point of making finance into a public utility is to transform the uses to which it is now put.
8. The call for nationalization of the banks provides an opening for advancing broader strategies that begin to take up the need for systemic alternatives to capitalism. The severity of today's economic crisis once again exposes the old irrationality of the basic logic of capitalist markets. As each firm (and indeed state agency) lays off workers and tries to pay less to those kept on, this has the effect of further undercutting overall demand in the economy. At the same time, the financial crisis exposes new irrationalities, not least those contained in the widespread proposals for trading in carbon credits as a solution to the climate crisis, which involve depending on volatile derivatives markets that are inherently open to the manipulation of accounts and to credit crashes. In the context of such readily visible irrationalities, a strong case can be made that – to save jobs and the communities that depend on them in a way that converts production to ecologically-sustainable priorities during the course of this crisis – we need to break with the logics of capitalist markets rather than use state institutions to reinforce them. We need to put on the public agenda the need to change our economic and political institutions so as to allow for democratic planning to collectively decide how and where we produce what we need to sustain our lives and our relationship to our environment. However deep the crisis, however confused and demoralized are capitalist elites both inside and outside the state, and however widespread the popular outrage against them, making this case will certainly require hard and committed work by a great many activists, many of whom will see the need for building new movements and parties to this end. This is what is really needed if this crisis is not to go to waste. •
Leo Panitch is Canada Research Chair in Comparative Political Economy at York University. His most recent books are American Empire and the Political Economy of International Finance and Renewing Socialism: Transforming Democracy, Strategy and Imagination.
Sam Gindin, formerly Chief Economist and Assistant to the President of the Canadian Autoworkers Union, holds the Packer Professorship in Social Justice at York University. He is the author of The Canadian Auto Workers: The Birth and Transformation of a Union and (with Panitch) Global Capitalism and American Empire.
Notes on an Orientation to the Obama Presidency
By Linda Burnham
The election of Obama, while enthusiastically embraced by most of the left, has also occasioned some disorientation and confusion.
Some have become so used to confronting the dismal electoral choice between the lesser of two evils that they couldn’t figure out how to relate to a political figure who held out the possibility of substantive change in a positive direction.
Others are so used to all-out, full-throated opposition to every administration that they wonder whether and how to alter their stance.
Still others sat out the election, for a variety of political and organizational reasons, and were taken by surprise at how wide and deep ran the current for change.
Now there’s an active conversation on the left about what can be expected of an Obama administration and what the orientation of the left should be towards it. There are two conflicting views on this:
First, that Obama represents a substantial, principally positive political shift and that, while the left should criticize and resist policies that pull away from the interests of working people, its main orientation should be to actively engage with the political motion that’s underway.
Second, that Obama is, in essence, just another steward of capitalism, more attractive than most, but not an agent of fundamental change. He should be regarded with caution and is bound to disappoint. The basic orientation is to criticize every move the administration makes and to remain disengaged from mainstream politics.
It is possible to grant that Obama is a steward of capitalism while also maintaining that his election has opened up the potential for substantive reform in the interests of working people and that his election to office is a democratic win worthy of being fiercely defended.
Obama is clear – and we should be too – about what he was elected to do. The bottom line of his job description has become increasingly evident as the economic crisis deepens. Obama’s job is to salvage and stabilize the U.S. capitalist system and to perform whatever triage is necessary to restore the core institutions of finance and industry to profitability.
Obama’s second bottom line is also clear to him – and should also be to us: to salvage the reputation of the U.S. in the world; repair the international ties shredded by eight years of cowboy unilateralism; and adjust U.S. positioning on the world stage on the basis of a rational assessment of the strengths and weaknesses of the changed and changing centers of global political, economic and military power – rather than on the basis of a simple-minded ideological commitment to unchallenged world dominance.
Obama has been on the job for only a month but has not wasted a moment in going after his double bottom line with gusto, panache and high intelligence. In point of fact, the capitalists of the world – or at least the U.S. branch – ought to be building altars to the man and lighting candles. They have chosen an uncommonly steady hand to pull their sizzling fat from the fire.
For some on the left this is the beginning and the end of the story. Having established conclusively that Obama’s fundamental task is to govern in the interests of capital, there’s no point in adjusting one’s stance, regardless of how skillful and popular he may be. For the anti-capitalist left that is grounded in Trotskyism, anarcho-horizontalism, or various forms of third-party-as-a-point-of-principleism, the only change worthy of the name is change that hits directly at the kneecaps of capitalism and cripples it decisively. All else is trifling with minor reforms or, even worse, capitulating to the power elite. From this point of view the stance towards Obama is self-evident: criticize relentlessly, disabuse others of their presidential infatuation, and denounce anything that remotely smacks of mainstream politics. Though this may seem an extreme and marginal point of view, it has a surprising degree of currency in many quarters.
The effective-steward-of-capitalism is only one part of the Obama story. Obama did what the center would not do and what a fragmented and debilitated left could not do. He broke the death grip of the reactionary right by inspiring and mobilizing millions as agents of change. If Obama doesn’t manage to do even one more progressive thing over the course of the next four years, he has already opened up
far more promising political terrain. His campaign
· Revealed the contours, composition and potential of a broad democratic coalition, demographically grounded in the (overlapping) constituencies of African-Americans, Latinos, Asians, youth across the racial groups, LGBT voters, unionized workers, urban professionals, and women of color and single white women, and in the sectors of organized labor, peace, civil rights, civil liberties, feminism, and environmentalism. Obama did not create this broadly democratic electoral coalition single-handedly or out of whole cloth, but he did move it from latency to potency and from dispirited, amorphous and unorganized to goal oriented, enthusiastic and organized;
· Busted up the Republican’s southern strategy, the foundation of their rule for most of the last forty years, and the Democrat’s ignominious concession to this legacy of slavery;
· Wrenched the Democratic Party out of the clammy grip of Clintonian centrism. (Although he himself often leads from the center, Obama’s center is a couple of notches to the left of the Clinton administration’s triangulation strategies); and
· Rescued political dialogue from its monopolization by hate-filled, xenophobic, ultra-nationalistic ideologues.
This is not change of the anti-capitalist variety, but certainly it is change of major consequence.
If the criterion is that the only change to be supported is that which strikes a decisive blow at capital, then the gap between where we are now and the realignment it would take to strike such a blow is completely and perpetually unbridgeable.
A better set of criteria, in light of the weakness of the left and the decades of hyper-conservatism we are only now exiting, is change that: creates substantially better conditions for working people; broadens the scope of democratic rights for sectors of the population whose rights have been abrogated; limits the prerogatives of capital; constrains runaway militarism and perpetual war; takes seriously the prospect of environmental collapse; and creates better conditions for struggle. This is the potential for change that Obama’s presidency has generated. This is the democratic opening. It is potential that will only be realized and maximized if the left and progressives step up and stay engaged.
These are also the criteria to keep in mind as the Obama presidency unfolds, rather than flipping out over every appointment and policy move he makes. Far better to de-link from the 24-hour news cycle that feeds on micro-maneuvers, stop making definitive judgments based on parsing the language of every pronouncement, and keep our eyes on the broader contours of change.
Besides the sectors of the anti-capitalist left that are stranded on Dogma Beach, there are those who see the tide running high but are still watching from the safety of the shore, hesitant to get in the water. There are those who have been so long alienated from mainstream political processes and so disgusted with both political parties and all branches of government that their default response is instinctive distrust. They view Obama’s presidency through the lens of anticipatory disillusionment. Their basic orientation is to analyze the administration’s every move with the goal of concluding, “See, we told you so. Obama’s gonna burn you. You’re gonna be disappointed.” This is a mindset for jilted lovers, not political activists. Let us grant without argument that, from the vantage point of the left, there are many disappointments in store. This is easy enough to predict based not only on Obama’s own politics but also on the alignment of forces and institutions in which he is embedded. And so what? We can survive disappointment over this or that policy or concession as long as we are making headway on the broader criteria above.
There are also those who stayed on the shoreline during the campaign because they are wedded to localism as a matter of preference, principle or habit. Others were lodged in organizational forms that, for structural, political or legal reasons, could not articulate with the motion and structures of the presidential campaign. These are complicated issues, bound up as they are with questions of resources and patterns of philanthropy. But for those who missed interacting with the motion of millions against the right, against the white racial monopoly on the executive branch, and for substantive change, their absence should, at the very least, prompt a serious examination of political orientation and organizational form.
Finally, there are those who are struggling to negotiate the existential shoals of a commitment to anti-capitalist politics in a period when the system is manifestly dying but not nearly at death’s door (and there have been all too many chronicles of that death foretold); major alternative systems have only recently collapsed or capitulated; and the vision, values and program that might bind together an anti-capitalist left and win broad support are still frustratingly obscure. There’s no remedy for this dilemma except to live in the times we’re in meeting the challenges we’ve been given and making the most of every opportunity, rather than anticipating capital’s demise or pining for a past beyond recovery.
In this period, then, the left has three tasks.
Our first job is to defend the democratic opening. This is a job we share with broader progressive forces and with centrists. Obama won big and retains the favorable regard of a sizeable majority. And meanwhile the Republican Party is in glorious disarray. But in no way should we take this situation for granted. The new administration faces daunting challenges and outright crises on every front. And while the right is disoriented and weakened, it has not and will not leave the playing field. The principal players and institutions of the right are, at this very moment, plotting how to undermine the administration, challenge every initiative that moves in the direction of democracy, progress and peace, and regroup to seize control, once again, of the state apparatus.
Defense of the democratic opening means many things and ought to be the subject for discussion and strategizing on the left. But in practical terms, first and foremost, it means consolidating and extending the electoral alliance that made the opening possible. Any work that strengthens and broadens the voter engagement of the constituencies and sectors that secured Obama’s election is work that defends the democratic opening. This kind of voter education, registration and mobilization work can be done in conjunction with an extremely broad range of local campaigns and initiatives. And anything that hastens the demise of the southern strategy, builds on the wins in Florida, North Carolina, and Virginia (along with the significant southwestern shifts in New Mexico, Colorado and Nevada), and challenges structural barriers to voter participation (e.g., felony disfranchisement, voter ID laws) is critical. All this is another way of saying that the electoral arena is an essential site of struggle for left and progressive forces in a way it has not been in at least 20 years. And this work, in which we have unity of purpose with the centrists, is vital to widening the Democratic majority in the 2010 congressional races, winning a filibuster-proof Senate majority, ensuring the successful re-election of Obama in 2012, and shaping both the parameters of viable Democratic candidates in 2016 and the outcome of that election.
Our second job is to contribute to building more united, effective, combative and influential progressive popular movements. This places the highest premium on strengthening and extending our ties with broader progressive forces, both inside and outside the Democratic Party, with an eye towards building long-term relationships and alliances among individuals, organizations and sectors. Anything that thickens and enriches the relationships among left and progressive actors in labor, religious institutions, policy think tanks, grassroots organizations, academia etc. is to be supported in the interests of strengthening the capacity of the left-progressive alliance to influence policy, to encourage and shore up whatever progressive inclinations might emerge from within the administration, and to resist administration tendencies to accommodation and capitulation to center-right forces. At this early stage of Obama’s tenure it is already evident what some of the most vital left-progressive alliance building ought to focus on. In foreign policy, on war and militarism in general and on Iraq, Afghanistan, Pakistan, Israel/Palestine, Iran and non-proliferation in particular. In domestic policy, on health care and on solutions to the economic crisis that hold the financial sector accountable for reckless and predatory practices while addressing the particular vulnerabilities of working people, the poor, women, immigrants and communities of color. And, at the intersection of global and domestic policy, on oil dependency and global warming. All that enhances our capacity to constructively engage in debating and influencing policy on these issues is to the good. All that obstructs or distracts is highly problematic.
We’ve exited a period of collective psychic depression only to enter one of global economic depression. Each day, as the institutions of finance capital collapse, the corruption, greed and mismanagement of the nation’s economic system are further revealed. Broad sectors of the population have been shocked into a more skeptical and critical stance towards capitalism, and the need for some measure of structural change wins near-universal acceptance. The clash of rising expectations (encouraged by the hope and change themes of the Obama campaign) and a sinking economy will likely spark new levels and forms of popular resistance. In this political environment, alliance building will be complicated, messy and filled with political tensions and tactical differences. It is imperative nonetheless.
Our third job, and perhaps the trickiest, is to build the left. First let it be said that unless we are able to demonstrate a genuine commitment and growing capacity to take on the first two jobs, the third is a non-starter, and a prescription for political isolation. In other words, defending the democratic opening in conjunction with the center and building long-term relationships between the anti-capitalist left and broad progressive sectors in the context of the struggle over administration policy must be understood as critical tasks in their own right, not simply as arenas in which to advance an independent left line or to recruit new adherents to an anti-capitalist perspective. Realizing the progressive potential of the Obama win requires the most committed involvement with the twists and turns of politics on the most pressing issues on the administration’s agenda. This same engagement is critical to rebuilding the left, a long-term process that can be advanced significantly in the context of Obama’s presidency if, and only if, the left can skillfully manage the relationship and distinction between its own interests, dynamics and challenges and those of broader political forces. Why is this the case? On the tell no lies front, the left is more isolated and fragmented than it has been in forty years. Truly fine work is being done by leftists in every region of the country and on every social issue. But the left qua left is barely breathing. This is not the place to go into the historical (world historical and U.S. historical), ideological, theoretical and organizational reasons why this is so. But let us, at the very least, frankly acknowledge that it is so. The current political alignment provides an opportunity to break out of isolation, marginalization and the habits of self-marginalization accumulated during the neo-conservative ascendancy. It provides the opportunity to initiate and/or strengthen substantive relationships with political actors in government, in the Democratic Party, and in independent sectors, as well as within the left itself – relationships to be built upon long after the Obama presidency has come to an end. It provides the opportunity to accumulate lessons about political actors, alignments and centers of power likewise relevant well beyond this administration. And it provides the opportunity for the immersion of the leaders, members and constituencies of left formations in a highly accelerated, real world poli-sci class.
In these circumstances, among our biggest challenges is how to attend to building the capacity of the left without succumbing to the siren songs of dogma, the old addictions of premature platform erection, or the self-limiting pleasures of building parties in miniature. For the anti-capitalist left, this is a period of experimentation. There is no roadmap; there are no recipes. Those organizational forms and initiatives that enable us to synthesize experience, share lessons and develop broad orientations and approaches to seriously undertaking our first two tasks should be encouraged. Those that would entrap us in the hermetic enclosures of doctrinal belief should be avoided at all cost.
The Obama presidency is a rare confluence of individuals and events. There is no way to predict how things will unfold over the next 4-8 years. But this much we can foresee: if the opportunity at hand is mangled or missed, the takeaway for the left will be deepened isolation and fragmentation. If, on the other hand, the left engages with this political opening skillfully and creatively, it will emerge as a broader, more vibrant force on the U.S. political spectrum, better able to confront whatever the post-Obama world will bring.
The election of Obama, while enthusiastically embraced by most of the left, has also occasioned some disorientation and confusion.
Some have become so used to confronting the dismal electoral choice between the lesser of two evils that they couldn’t figure out how to relate to a political figure who held out the possibility of substantive change in a positive direction.
Others are so used to all-out, full-throated opposition to every administration that they wonder whether and how to alter their stance.
Still others sat out the election, for a variety of political and organizational reasons, and were taken by surprise at how wide and deep ran the current for change.
Now there’s an active conversation on the left about what can be expected of an Obama administration and what the orientation of the left should be towards it. There are two conflicting views on this:
First, that Obama represents a substantial, principally positive political shift and that, while the left should criticize and resist policies that pull away from the interests of working people, its main orientation should be to actively engage with the political motion that’s underway.
Second, that Obama is, in essence, just another steward of capitalism, more attractive than most, but not an agent of fundamental change. He should be regarded with caution and is bound to disappoint. The basic orientation is to criticize every move the administration makes and to remain disengaged from mainstream politics.
It is possible to grant that Obama is a steward of capitalism while also maintaining that his election has opened up the potential for substantive reform in the interests of working people and that his election to office is a democratic win worthy of being fiercely defended.
Obama is clear – and we should be too – about what he was elected to do. The bottom line of his job description has become increasingly evident as the economic crisis deepens. Obama’s job is to salvage and stabilize the U.S. capitalist system and to perform whatever triage is necessary to restore the core institutions of finance and industry to profitability.
Obama’s second bottom line is also clear to him – and should also be to us: to salvage the reputation of the U.S. in the world; repair the international ties shredded by eight years of cowboy unilateralism; and adjust U.S. positioning on the world stage on the basis of a rational assessment of the strengths and weaknesses of the changed and changing centers of global political, economic and military power – rather than on the basis of a simple-minded ideological commitment to unchallenged world dominance.
Obama has been on the job for only a month but has not wasted a moment in going after his double bottom line with gusto, panache and high intelligence. In point of fact, the capitalists of the world – or at least the U.S. branch – ought to be building altars to the man and lighting candles. They have chosen an uncommonly steady hand to pull their sizzling fat from the fire.
For some on the left this is the beginning and the end of the story. Having established conclusively that Obama’s fundamental task is to govern in the interests of capital, there’s no point in adjusting one’s stance, regardless of how skillful and popular he may be. For the anti-capitalist left that is grounded in Trotskyism, anarcho-horizontalism, or various forms of third-party-as-a-point-of-principleism, the only change worthy of the name is change that hits directly at the kneecaps of capitalism and cripples it decisively. All else is trifling with minor reforms or, even worse, capitulating to the power elite. From this point of view the stance towards Obama is self-evident: criticize relentlessly, disabuse others of their presidential infatuation, and denounce anything that remotely smacks of mainstream politics. Though this may seem an extreme and marginal point of view, it has a surprising degree of currency in many quarters.
The effective-steward-of-capitalism is only one part of the Obama story. Obama did what the center would not do and what a fragmented and debilitated left could not do. He broke the death grip of the reactionary right by inspiring and mobilizing millions as agents of change. If Obama doesn’t manage to do even one more progressive thing over the course of the next four years, he has already opened up
far more promising political terrain. His campaign
· Revealed the contours, composition and potential of a broad democratic coalition, demographically grounded in the (overlapping) constituencies of African-Americans, Latinos, Asians, youth across the racial groups, LGBT voters, unionized workers, urban professionals, and women of color and single white women, and in the sectors of organized labor, peace, civil rights, civil liberties, feminism, and environmentalism. Obama did not create this broadly democratic electoral coalition single-handedly or out of whole cloth, but he did move it from latency to potency and from dispirited, amorphous and unorganized to goal oriented, enthusiastic and organized;
· Busted up the Republican’s southern strategy, the foundation of their rule for most of the last forty years, and the Democrat’s ignominious concession to this legacy of slavery;
· Wrenched the Democratic Party out of the clammy grip of Clintonian centrism. (Although he himself often leads from the center, Obama’s center is a couple of notches to the left of the Clinton administration’s triangulation strategies); and
· Rescued political dialogue from its monopolization by hate-filled, xenophobic, ultra-nationalistic ideologues.
This is not change of the anti-capitalist variety, but certainly it is change of major consequence.
If the criterion is that the only change to be supported is that which strikes a decisive blow at capital, then the gap between where we are now and the realignment it would take to strike such a blow is completely and perpetually unbridgeable.
A better set of criteria, in light of the weakness of the left and the decades of hyper-conservatism we are only now exiting, is change that: creates substantially better conditions for working people; broadens the scope of democratic rights for sectors of the population whose rights have been abrogated; limits the prerogatives of capital; constrains runaway militarism and perpetual war; takes seriously the prospect of environmental collapse; and creates better conditions for struggle. This is the potential for change that Obama’s presidency has generated. This is the democratic opening. It is potential that will only be realized and maximized if the left and progressives step up and stay engaged.
These are also the criteria to keep in mind as the Obama presidency unfolds, rather than flipping out over every appointment and policy move he makes. Far better to de-link from the 24-hour news cycle that feeds on micro-maneuvers, stop making definitive judgments based on parsing the language of every pronouncement, and keep our eyes on the broader contours of change.
Besides the sectors of the anti-capitalist left that are stranded on Dogma Beach, there are those who see the tide running high but are still watching from the safety of the shore, hesitant to get in the water. There are those who have been so long alienated from mainstream political processes and so disgusted with both political parties and all branches of government that their default response is instinctive distrust. They view Obama’s presidency through the lens of anticipatory disillusionment. Their basic orientation is to analyze the administration’s every move with the goal of concluding, “See, we told you so. Obama’s gonna burn you. You’re gonna be disappointed.” This is a mindset for jilted lovers, not political activists. Let us grant without argument that, from the vantage point of the left, there are many disappointments in store. This is easy enough to predict based not only on Obama’s own politics but also on the alignment of forces and institutions in which he is embedded. And so what? We can survive disappointment over this or that policy or concession as long as we are making headway on the broader criteria above.
There are also those who stayed on the shoreline during the campaign because they are wedded to localism as a matter of preference, principle or habit. Others were lodged in organizational forms that, for structural, political or legal reasons, could not articulate with the motion and structures of the presidential campaign. These are complicated issues, bound up as they are with questions of resources and patterns of philanthropy. But for those who missed interacting with the motion of millions against the right, against the white racial monopoly on the executive branch, and for substantive change, their absence should, at the very least, prompt a serious examination of political orientation and organizational form.
Finally, there are those who are struggling to negotiate the existential shoals of a commitment to anti-capitalist politics in a period when the system is manifestly dying but not nearly at death’s door (and there have been all too many chronicles of that death foretold); major alternative systems have only recently collapsed or capitulated; and the vision, values and program that might bind together an anti-capitalist left and win broad support are still frustratingly obscure. There’s no remedy for this dilemma except to live in the times we’re in meeting the challenges we’ve been given and making the most of every opportunity, rather than anticipating capital’s demise or pining for a past beyond recovery.
In this period, then, the left has three tasks.
Our first job is to defend the democratic opening. This is a job we share with broader progressive forces and with centrists. Obama won big and retains the favorable regard of a sizeable majority. And meanwhile the Republican Party is in glorious disarray. But in no way should we take this situation for granted. The new administration faces daunting challenges and outright crises on every front. And while the right is disoriented and weakened, it has not and will not leave the playing field. The principal players and institutions of the right are, at this very moment, plotting how to undermine the administration, challenge every initiative that moves in the direction of democracy, progress and peace, and regroup to seize control, once again, of the state apparatus.
Defense of the democratic opening means many things and ought to be the subject for discussion and strategizing on the left. But in practical terms, first and foremost, it means consolidating and extending the electoral alliance that made the opening possible. Any work that strengthens and broadens the voter engagement of the constituencies and sectors that secured Obama’s election is work that defends the democratic opening. This kind of voter education, registration and mobilization work can be done in conjunction with an extremely broad range of local campaigns and initiatives. And anything that hastens the demise of the southern strategy, builds on the wins in Florida, North Carolina, and Virginia (along with the significant southwestern shifts in New Mexico, Colorado and Nevada), and challenges structural barriers to voter participation (e.g., felony disfranchisement, voter ID laws) is critical. All this is another way of saying that the electoral arena is an essential site of struggle for left and progressive forces in a way it has not been in at least 20 years. And this work, in which we have unity of purpose with the centrists, is vital to widening the Democratic majority in the 2010 congressional races, winning a filibuster-proof Senate majority, ensuring the successful re-election of Obama in 2012, and shaping both the parameters of viable Democratic candidates in 2016 and the outcome of that election.
Our second job is to contribute to building more united, effective, combative and influential progressive popular movements. This places the highest premium on strengthening and extending our ties with broader progressive forces, both inside and outside the Democratic Party, with an eye towards building long-term relationships and alliances among individuals, organizations and sectors. Anything that thickens and enriches the relationships among left and progressive actors in labor, religious institutions, policy think tanks, grassroots organizations, academia etc. is to be supported in the interests of strengthening the capacity of the left-progressive alliance to influence policy, to encourage and shore up whatever progressive inclinations might emerge from within the administration, and to resist administration tendencies to accommodation and capitulation to center-right forces. At this early stage of Obama’s tenure it is already evident what some of the most vital left-progressive alliance building ought to focus on. In foreign policy, on war and militarism in general and on Iraq, Afghanistan, Pakistan, Israel/Palestine, Iran and non-proliferation in particular. In domestic policy, on health care and on solutions to the economic crisis that hold the financial sector accountable for reckless and predatory practices while addressing the particular vulnerabilities of working people, the poor, women, immigrants and communities of color. And, at the intersection of global and domestic policy, on oil dependency and global warming. All that enhances our capacity to constructively engage in debating and influencing policy on these issues is to the good. All that obstructs or distracts is highly problematic.
We’ve exited a period of collective psychic depression only to enter one of global economic depression. Each day, as the institutions of finance capital collapse, the corruption, greed and mismanagement of the nation’s economic system are further revealed. Broad sectors of the population have been shocked into a more skeptical and critical stance towards capitalism, and the need for some measure of structural change wins near-universal acceptance. The clash of rising expectations (encouraged by the hope and change themes of the Obama campaign) and a sinking economy will likely spark new levels and forms of popular resistance. In this political environment, alliance building will be complicated, messy and filled with political tensions and tactical differences. It is imperative nonetheless.
Our third job, and perhaps the trickiest, is to build the left. First let it be said that unless we are able to demonstrate a genuine commitment and growing capacity to take on the first two jobs, the third is a non-starter, and a prescription for political isolation. In other words, defending the democratic opening in conjunction with the center and building long-term relationships between the anti-capitalist left and broad progressive sectors in the context of the struggle over administration policy must be understood as critical tasks in their own right, not simply as arenas in which to advance an independent left line or to recruit new adherents to an anti-capitalist perspective. Realizing the progressive potential of the Obama win requires the most committed involvement with the twists and turns of politics on the most pressing issues on the administration’s agenda. This same engagement is critical to rebuilding the left, a long-term process that can be advanced significantly in the context of Obama’s presidency if, and only if, the left can skillfully manage the relationship and distinction between its own interests, dynamics and challenges and those of broader political forces. Why is this the case? On the tell no lies front, the left is more isolated and fragmented than it has been in forty years. Truly fine work is being done by leftists in every region of the country and on every social issue. But the left qua left is barely breathing. This is not the place to go into the historical (world historical and U.S. historical), ideological, theoretical and organizational reasons why this is so. But let us, at the very least, frankly acknowledge that it is so. The current political alignment provides an opportunity to break out of isolation, marginalization and the habits of self-marginalization accumulated during the neo-conservative ascendancy. It provides the opportunity to initiate and/or strengthen substantive relationships with political actors in government, in the Democratic Party, and in independent sectors, as well as within the left itself – relationships to be built upon long after the Obama presidency has come to an end. It provides the opportunity to accumulate lessons about political actors, alignments and centers of power likewise relevant well beyond this administration. And it provides the opportunity for the immersion of the leaders, members and constituencies of left formations in a highly accelerated, real world poli-sci class.
In these circumstances, among our biggest challenges is how to attend to building the capacity of the left without succumbing to the siren songs of dogma, the old addictions of premature platform erection, or the self-limiting pleasures of building parties in miniature. For the anti-capitalist left, this is a period of experimentation. There is no roadmap; there are no recipes. Those organizational forms and initiatives that enable us to synthesize experience, share lessons and develop broad orientations and approaches to seriously undertaking our first two tasks should be encouraged. Those that would entrap us in the hermetic enclosures of doctrinal belief should be avoided at all cost.
The Obama presidency is a rare confluence of individuals and events. There is no way to predict how things will unfold over the next 4-8 years. But this much we can foresee: if the opportunity at hand is mangled or missed, the takeaway for the left will be deepened isolation and fragmentation. If, on the other hand, the left engages with this political opening skillfully and creatively, it will emerge as a broader, more vibrant force on the U.S. political spectrum, better able to confront whatever the post-Obama world will bring.
Putting the U.S. Economic Crisis in Perspective
Leo Panitch
It is time to take stock. The centrality of the American economy to the capitalist world – which now literally does encompass the whole world – has spread the financial crisis that began in the U.S. housing market around the globe. And the economic recession which that financial crisis has triggered in the U.S. now threatens to spread globally as well.
Capitalism has had an incredible run – politically and culturally as well as economically – since the stagflation crisis of the 1970s. The resolution of that crisis required, as economists put it at the time, 'reducing expectations' of the kind nurtured by the trade union militancy and welfare state gains of the 1960s. This was accomplished via the defeats suffered by trade unionism and the welfare state since the 1980s at the hands of what might properly be called capitalist militancy. This was accompanied by dramatic technological change, massive industrial restructuring, labour market flexibility and the over – all discipline provided by 'competitiveness.'
It was also accompanied, of course, by massive economic inequality. But this did not mean capitalism was no longer able to integrate the bulk of the population. On the contrary, this was now achieved through the private pension funds that mobilized workers savings, on the one hand, and through the mortgage and credit markets that loaned them the money to sustain high levels of consumer spending on the other. At the centre of this were the private banking institutions which, after their collapse in the Great Depression, had been nurtured back to health in the postwar decades and then unleashed the explosion of global financial innovation that has defined our era.
The question begged by the current crisis is whether capitalism's capacity to integrate the mass of people through their incorporation in financial markets has run out of steam. That the fault line should have appeared in 'sub-prime' mortgage loans to African-Americans is hardly surprising – this has always been the Achilles heel of working class incorporation into the American capitalist dream. But an economic earthquake will actually only result if there is a devaluation of working class assets in general through a collapse of housing prices and the stock and bonds in which their retirement savings are invested.
We are by no means there yet. The role being played to prevent just this by the Federal Reserve, very much acting as the world central bank in light of the global implications of a U.S. recession, should once and for all dispel the illusion that capitalist markets thrive without state intervention. It was through the types of policies that promoted free capital movements, international property rights and labour market flexibility that the era of free trade and globalization was unleashed. And this era has been kept going as long as it has by the repeated coordinated interventions undertaken by central banks and finance ministries to contain the periodic crises to which such a volatile system of global finance inevitably gives rise.
The Fed has repeatedly poured liquidity into its financial system at the first sign of trouble. Yet the capacity of the system to go on integrating ordinary Americans through the expansion of investor and credit markets in this way may have reached its limit. This is indeed suggested by the Bush administration's sudden (non-military) Keynesian turn with its recently announced $150 billion fiscal stimulus. The announcement at the same time of massive public expenditure cutbacks by the Schwarzenegger administration in California is a reminder, however, that fiscal stimulus at the federal level may be undone at the state level.
This is especially likely to be the case with municipal government cutbacks, given their massive dependence on property taxes. The recent evidence that the financial institutions that specialize in selling risk insurance on municipal bonds are enveloped in the credit crisis further compounds the problem. This indeed brings to mind the extent to which it was municipal governments that were on the front lines of the Great Depression. The kind of fiscal stimulus that is needed to boost the economy now probably entails public infrastructure spending, but the type of state intervention that brought us financial globalization is not well suited to this, as the collapsed levies of New Orleans and the collapsed bridges of Minneapolis prove.
To see this go unmentioned in the Democratic primary debate this week may be hardly surprising given the absence of even a trade union campaign around this, but it bespeaks an impoverishment of American politics that in fact goes all the way back to the New Deal. The issue of economic democracy that had been placed on the political agenda alongside the New Deal's public infrastructure projects was set aside for the remainder of the century after the FDR's administration's self-described 'grand truce with capital' in the late 1930s.
There should be no illusion that a recession, or even a depression, will necessarily bring the issue of economic democracy back onto the U.S. political agenda. It would require a transformation of American politics to do so – and that too would have global implications.
Leo Panitch is Canada Research Chair in Comparative Political Economy at York University.
It is time to take stock. The centrality of the American economy to the capitalist world – which now literally does encompass the whole world – has spread the financial crisis that began in the U.S. housing market around the globe. And the economic recession which that financial crisis has triggered in the U.S. now threatens to spread globally as well.
Capitalism has had an incredible run – politically and culturally as well as economically – since the stagflation crisis of the 1970s. The resolution of that crisis required, as economists put it at the time, 'reducing expectations' of the kind nurtured by the trade union militancy and welfare state gains of the 1960s. This was accomplished via the defeats suffered by trade unionism and the welfare state since the 1980s at the hands of what might properly be called capitalist militancy. This was accompanied by dramatic technological change, massive industrial restructuring, labour market flexibility and the over – all discipline provided by 'competitiveness.'
It was also accompanied, of course, by massive economic inequality. But this did not mean capitalism was no longer able to integrate the bulk of the population. On the contrary, this was now achieved through the private pension funds that mobilized workers savings, on the one hand, and through the mortgage and credit markets that loaned them the money to sustain high levels of consumer spending on the other. At the centre of this were the private banking institutions which, after their collapse in the Great Depression, had been nurtured back to health in the postwar decades and then unleashed the explosion of global financial innovation that has defined our era.
The question begged by the current crisis is whether capitalism's capacity to integrate the mass of people through their incorporation in financial markets has run out of steam. That the fault line should have appeared in 'sub-prime' mortgage loans to African-Americans is hardly surprising – this has always been the Achilles heel of working class incorporation into the American capitalist dream. But an economic earthquake will actually only result if there is a devaluation of working class assets in general through a collapse of housing prices and the stock and bonds in which their retirement savings are invested.
We are by no means there yet. The role being played to prevent just this by the Federal Reserve, very much acting as the world central bank in light of the global implications of a U.S. recession, should once and for all dispel the illusion that capitalist markets thrive without state intervention. It was through the types of policies that promoted free capital movements, international property rights and labour market flexibility that the era of free trade and globalization was unleashed. And this era has been kept going as long as it has by the repeated coordinated interventions undertaken by central banks and finance ministries to contain the periodic crises to which such a volatile system of global finance inevitably gives rise.
The Fed has repeatedly poured liquidity into its financial system at the first sign of trouble. Yet the capacity of the system to go on integrating ordinary Americans through the expansion of investor and credit markets in this way may have reached its limit. This is indeed suggested by the Bush administration's sudden (non-military) Keynesian turn with its recently announced $150 billion fiscal stimulus. The announcement at the same time of massive public expenditure cutbacks by the Schwarzenegger administration in California is a reminder, however, that fiscal stimulus at the federal level may be undone at the state level.
This is especially likely to be the case with municipal government cutbacks, given their massive dependence on property taxes. The recent evidence that the financial institutions that specialize in selling risk insurance on municipal bonds are enveloped in the credit crisis further compounds the problem. This indeed brings to mind the extent to which it was municipal governments that were on the front lines of the Great Depression. The kind of fiscal stimulus that is needed to boost the economy now probably entails public infrastructure spending, but the type of state intervention that brought us financial globalization is not well suited to this, as the collapsed levies of New Orleans and the collapsed bridges of Minneapolis prove.
To see this go unmentioned in the Democratic primary debate this week may be hardly surprising given the absence of even a trade union campaign around this, but it bespeaks an impoverishment of American politics that in fact goes all the way back to the New Deal. The issue of economic democracy that had been placed on the political agenda alongside the New Deal's public infrastructure projects was set aside for the remainder of the century after the FDR's administration's self-described 'grand truce with capital' in the late 1930s.
There should be no illusion that a recession, or even a depression, will necessarily bring the issue of economic democracy back onto the U.S. political agenda. It would require a transformation of American politics to do so – and that too would have global implications.
Leo Panitch is Canada Research Chair in Comparative Political Economy at York University.
Depression in the east points the way for the rest of the world
Larry Elliott, Economics editor
Anybody who doubts that the global economy is facing its most serious downturn since the 1930s should take a squint at the latest trade figures from Japan. Exports in January were 46% lower in January than they were a year ago – a phenomenal drop for a country that is so heavily dependent on sales of its industrial products overseas.
Japan has got used to economic setbacks over the past two decades: it has been in and out of recession on a regular basis. But make no mistake, this drop in exports does not mean recession: it means depression.
In the circumstances, comments by analysts that the data was "not good" and "seriously bad" were somewhat otiose. The Office for National Statistics confirmed today that the UK economy shrank by 1.5% in the final three months of 2008 and is on course for an annual decline in GDP this year of between 2.5% and 3%. But in Japan, things are much, much worse. Maya Bhandar at Lombard Street Research, says that the economy is contracting at an annualised rate of 14-15% in the current quarter. Strong exports have tended to disguise the weakness of Japanese domestic consumption in recent years: now that prop has been kicked away, growth is plummeting.
Why is this happening? Quite simply, the great engine of globalisation has gone into reverse. During the long boom, the US acted as the consumer of last resort: it sucked in exports from China and Japan. As China industrialised, it needed high-grade investment goods from Germany, and as prosperity spread in the world's most populous country, there was strong demand for Japanese electronics, cars and consumer gizmos. Now that America has stopped spending, Chinese factories have closed. The knock-on effects of that are being felt in Tokyo and Hamburg.
In Japan, all the main industries are reporting decreases in exports of more than 40%. The big car companies – Toyota, Nissan and Honda – are really feeling the pinch: overseas sales by the transport equipment sector were down almost 54% on a year ago. What's more, car sales are slumping everywhere: J apanese exports to North America, Europe and the rest of Asia were all down by more than 50%.
The assumption, since the financial crisis began in the summer of 2007, has been that lessons have been learnt from the Japanese experience in the 1990s. Much comfort was taken from the fact that Ben Bernanke, the chairman of the US Federal Reserve, had produced an erudite paper on how to avoid the deflationary problems suffered by the world's second biggest economy.
As things stand, that optimism is starting to look a tad misplaced. It is not just that the generalised falls in industrial production over the past few months has been far worse than anything experienced by Japan in the 1990s; it is also that policymakers – including Bernanke – do not seem to have fully assimilated the lessons of the Japanese experience.
Japan's problem in the 1990s was not that the government failed to act: there were any number of emergency packages and bail-outs for the stricken banks. But nothing Tokyo did got to the heart of the crisis, which was that land prices continued to fall year after year, creating fresh losses for the financial system as quickly as the last batch of toxic waste was cleared up.
Something similar is happening now to Wall Street banks. With real-estate prices in freefall, the losses just continue to mount and the pressure on the banks remains acute.
guardian.co.uk © Guardian News and Media Limited 2009
Anybody who doubts that the global economy is facing its most serious downturn since the 1930s should take a squint at the latest trade figures from Japan. Exports in January were 46% lower in January than they were a year ago – a phenomenal drop for a country that is so heavily dependent on sales of its industrial products overseas.
Japan has got used to economic setbacks over the past two decades: it has been in and out of recession on a regular basis. But make no mistake, this drop in exports does not mean recession: it means depression.
In the circumstances, comments by analysts that the data was "not good" and "seriously bad" were somewhat otiose. The Office for National Statistics confirmed today that the UK economy shrank by 1.5% in the final three months of 2008 and is on course for an annual decline in GDP this year of between 2.5% and 3%. But in Japan, things are much, much worse. Maya Bhandar at Lombard Street Research, says that the economy is contracting at an annualised rate of 14-15% in the current quarter. Strong exports have tended to disguise the weakness of Japanese domestic consumption in recent years: now that prop has been kicked away, growth is plummeting.
Why is this happening? Quite simply, the great engine of globalisation has gone into reverse. During the long boom, the US acted as the consumer of last resort: it sucked in exports from China and Japan. As China industrialised, it needed high-grade investment goods from Germany, and as prosperity spread in the world's most populous country, there was strong demand for Japanese electronics, cars and consumer gizmos. Now that America has stopped spending, Chinese factories have closed. The knock-on effects of that are being felt in Tokyo and Hamburg.
In Japan, all the main industries are reporting decreases in exports of more than 40%. The big car companies – Toyota, Nissan and Honda – are really feeling the pinch: overseas sales by the transport equipment sector were down almost 54% on a year ago. What's more, car sales are slumping everywhere: J apanese exports to North America, Europe and the rest of Asia were all down by more than 50%.
The assumption, since the financial crisis began in the summer of 2007, has been that lessons have been learnt from the Japanese experience in the 1990s. Much comfort was taken from the fact that Ben Bernanke, the chairman of the US Federal Reserve, had produced an erudite paper on how to avoid the deflationary problems suffered by the world's second biggest economy.
As things stand, that optimism is starting to look a tad misplaced. It is not just that the generalised falls in industrial production over the past few months has been far worse than anything experienced by Japan in the 1990s; it is also that policymakers – including Bernanke – do not seem to have fully assimilated the lessons of the Japanese experience.
Japan's problem in the 1990s was not that the government failed to act: there were any number of emergency packages and bail-outs for the stricken banks. But nothing Tokyo did got to the heart of the crisis, which was that land prices continued to fall year after year, creating fresh losses for the financial system as quickly as the last batch of toxic waste was cleared up.
Something similar is happening now to Wall Street banks. With real-estate prices in freefall, the losses just continue to mount and the pressure on the banks remains acute.
guardian.co.uk © Guardian News and Media Limited 2009
Tuesday, February 24, 2009
Japan exports drop 45% to new low
Japan's exports plunged more than 45% in January compared to a year ago to hit the lowest figure ever recorded, official figures showed.
Japan also had a trade deficit of 952.6 bn yen ($9.9bn; £6.8bn), the lowest figure since records began in 1979.
The demand for Japanese cars in particular dropped by 69%.
Demand for electronics and other goods has also slumped as global economies and consumer spending contract, pushing Japan deeper into recession.
Serious crisis
Japanese exports to the US, which is at the centre of the slide, fell nearly 53% in January while shipments to the European Union retracted by 47%, Japan's finance ministry said.
Japan's export-led economy had previously been thought to be immune to the worst effects of the global recession, the AFP news agency reported.
The government said last week that Japan's economy was in its most serious crisis since World War II, after it contracted annualised rate of 12.7% in the last quarter of 2008.
This was its worst performance in almost 35 years, officials said.
In response the government is pushing bills through parliament to implement a stimulus plan, including a cash handout of at least 130 dollars per Japanese taxpayer, the BBC's Roland Buerk reports from Tokyo.
But any bold moves may be difficult to push through because of the unpopularity of Prime Minister Taro Aso, our correspondent says.
US President Barack Obama and Mr Aso have agreed to work together to stimulate economic demand and fight protectionism as the latter visits the US.
The US and Japanese economies are respectively the world's largest and second-largest.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/asia-pacific/7909248.stm
Published: 2009/02/25 03:32:49 GMT
Japan also had a trade deficit of 952.6 bn yen ($9.9bn; £6.8bn), the lowest figure since records began in 1979.
The demand for Japanese cars in particular dropped by 69%.
Demand for electronics and other goods has also slumped as global economies and consumer spending contract, pushing Japan deeper into recession.
Serious crisis
Japanese exports to the US, which is at the centre of the slide, fell nearly 53% in January while shipments to the European Union retracted by 47%, Japan's finance ministry said.
Japan's export-led economy had previously been thought to be immune to the worst effects of the global recession, the AFP news agency reported.
The government said last week that Japan's economy was in its most serious crisis since World War II, after it contracted annualised rate of 12.7% in the last quarter of 2008.
This was its worst performance in almost 35 years, officials said.
In response the government is pushing bills through parliament to implement a stimulus plan, including a cash handout of at least 130 dollars per Japanese taxpayer, the BBC's Roland Buerk reports from Tokyo.
But any bold moves may be difficult to push through because of the unpopularity of Prime Minister Taro Aso, our correspondent says.
US President Barack Obama and Mr Aso have agreed to work together to stimulate economic demand and fight protectionism as the latter visits the US.
The US and Japanese economies are respectively the world's largest and second-largest.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/asia-pacific/7909248.stm
Published: 2009/02/25 03:32:49 GMT
United they fall: post-communist states pull EU into the red
United they fall: post-communist states pull EU into the red
There is a new divide in Europe with eastern nations emerging as poor relations
David Gow in Brussels
The Guardian, Saturday 21 February 2009
The Berlin Wall was torn down 20 years ago this autumn, heralding the reunification of Germany and an end to the post-war division of Europe.
That historic process culminated, 15 years later, with the entry of eight post-communist states to the EU.
But, as the EU's "big four" leaders Gordon Brown, Nicolas Sarkozy, Angela Merkel and Silvio Berlusconi gather in Berlin this weekend to prepare for the April 2 G20 summit in London, a new divide in Europe is uppermost in their minds: between east and west, and between eurozone and non-eurozone.
The meeting has ostensibly been called to discuss how to resume bank lending to the real economy by resolving institutions' exposures to trillions of euros of toxic assets, and to avert rising protectionism.
But the four will devote much of their time on how to rescue central and eastern Europe and, beyond the Balkans, Russia and Ukraine.
This week, with some respite in the past two days, the euro has plunged on fears that deepening recession, rising unemployment and social unrest, currencies in free fall, stock markets in meltdown and budget deficits spiralling out of control in the region will force governments to default on their debts.
Exposed
European stocks fell to a six-year low yesterday as the flight into the dollar and US and German government bonds intensified and Russia, where unemployment rose by more than half a million last month, reported a 2.4% month-on-month contraction. In Latvia, where social and political tensions led to a riot last month, the four-party ruling coalition collapsed. The fear is that the crisis in central and eastern Europe will spill over to the west, prolonging and deepening the recession and bringing down several banks heavily exposed to it.
"Argentina on the Danube?" was the title of an Economist leading article yesterday that looked back to the Latin American currency crisis of 2001 and that of east Asia in 1997.
"Looking ahead, the emergence of a new economic and political divide within Europe has become a distinct possibility," wrote Zsolt Darvas and Jean Pisani-Ferry of Brussels thinktank Bruegel in December last year.
This week, as the OECD spoke of a record 1.5% contraction in its area in the last three months of 2008 and every indicator pointed to a worse than expected shrinkage of the EU economy, two rating agencies (Moody's and S&P) added to the darkening gloom by voicing concerns over default risks and downgrading several west European banks that have lent €1,500bn (£1,300bn) to the region.
Yesterday, in a sober but highly uncertain assessment, the World Bank said six countries - the Czech Republic, Poland, Bulgaria, Romania, Slovakia and Slovenia - would grow by between zero and 2%. The governments of several of those countries are less sanguine.
The bank, giving a more optimistic outlook than its sister body, the IMF, said Hungary would contract by 3% despite its $20bn co-ordinated bail-out. The three Baltic countries - Estonia, Latvia and Lithuania - would shrink by between 5 and 7%. Latvia, also IMF-rescued, has forecast a 12% contraction.
It was, of course, never meant to be like this. Indeed, two senior EU commissioners - JoaquÃn Almunia (economic and monetary affairs) and Olli Rehn (enlargement) - issued a voluminous report extolling the political, economic and social benefits brought for the whole EU and its now 500 million citizens by its 12 new members. (Bulgaria and Romania also joined in 2007; Cyprus and Malta in 2004). Their message was clear: enlargement to east and central Europe has brought consolidated democracy, stability and security to Europe; it has made the EU bigger, stronger, more dynamic and richer, culturally and economically.
It has made the EU the world's biggest economic bloc, accounting for 22.2% of GDP and more than 17% of trade, for 18% of imports and 17% of exports and a half of global foreign direct investment.
But, with Poland's zloty, for example, losing between a quarter and a third of its value against the euro in less than a year, is this four-year "paradise regained" turning into "the road to hell?" AlmunÃa, a Spanish socialist, was clear: No, but only if Europe avoids turning in on and tearing itself apart with intra-European protectionism.
"Divided we will achieve nothing," he told reporters.
Panic
Even with yesterday's further volatility, nay panic, on stock and forex markets, there are signs that the threat of a renewed division in Europe is enforcing a more co-ordinated, pro-active response. AlmunÃa enumerated recent examples of increased aid for the afflicted countries: a further €7bn from structural-cohesion funds; European Investment Bank loans of €11.5bn, up €3.3bn on 2008; and an EU balance of payments facility raised from €12bn to €25bn, of which €9.3bn has been given to Hungary and Latvia, two of the most vulnerable members.
Citing increased lending by individual governments, he demanded more from them and international bodies and urged private sector investors to step up to the plate.
West European banks - in Austria above all, Sweden, notably in the Baltics, Italy, the Netherlands, France, Germany and Belgium - have exacerbated the crisis through rash lending policies in central and eastern Europe. Consumers living beyond their means have, for example, taken out huge mortgages in euros or Swiss francs or dollars they are unable to service as they become jobless or their pay is slashed.
Austrian banks have lent €250bn and are sitting on €150bn of losses at least. Anything up to 70% of an individual country's GDP is out on loan. But, with more than 90% of banks in the Baltics, Czech Republic and Slovakia in foreign hands, the west European banks are being driven to recapitalise their subsidiaries - and downsizing them, too.
Daniel Gros, head of the centre for European Policy Studies (CEPS) in Brussels, thinks the pessimism is exaggerated even while admitting that the crisis is more deep-rooted and spread more widely than in East Asia eight years ago. "The Asian banks held out and lost nothing if they were patient," he said.
"They adopted tough adjustment policies and the global boom elsewhere helped too.
"Now the banks will lose a bit."
The central player, as ever in Europe, is Germany and Peer Steinbrück, the finance minister, and his boss, Merkel, have indicated a U-turn before Sunday's big four meeting: it is now willing to ignore the "no bail-out" clause in the Maastricht treaty and lend to eurozone countries in severe difficulties. Gros and others think this will spill over in its effects to non-euro countries such as Poland which are clamouring to join, and are held at bay so far by the European Central Bank as they are years off meeting the tight criteria for entry.
"Outright default of any EU country is not on the cards," Gros told the Guardian. "And, anyway, these countries are economic midgets."
The ECB itself has proved resistant, like Germany, to seeing collective eurobonds issued or to accepting temporary currency swaps. But the 16-strong zone's central bank already agreed late last year to repurchase agreements for both Hungary and Poland. Gros says emergency lending packages from the ECB and IMF should be on the cards: Bruegel says the ECB should accept non-euro denominated government bonds as eligible securities.
One outcome is certain. The four-year "stag party" for central and east Europeans is over. The EC calculates that income per head among them rose from 40% of the EU-15 in 1999 to 52% in 2008 but this was aided by unfunded consumption and spurred by unchecked credit growth and excessive pay increases resulting in overheating and huge external imbalances.
The EU, like the IMF and ECB, is now insisting that government spending be slashed and wages cut as the price for rescue. Gros says: "If you have a 15% current account deficit like Estonia and want to get back to balance you have to cut consumption by a corresponding 15% of GDP and they're already doing it." If it's tough in the west, it's going to be a nightmare in the east.
guardian.co.uk © Guardian News and Media Limited 2009
There is a new divide in Europe with eastern nations emerging as poor relations
David Gow in Brussels
The Guardian, Saturday 21 February 2009
The Berlin Wall was torn down 20 years ago this autumn, heralding the reunification of Germany and an end to the post-war division of Europe.
That historic process culminated, 15 years later, with the entry of eight post-communist states to the EU.
But, as the EU's "big four" leaders Gordon Brown, Nicolas Sarkozy, Angela Merkel and Silvio Berlusconi gather in Berlin this weekend to prepare for the April 2 G20 summit in London, a new divide in Europe is uppermost in their minds: between east and west, and between eurozone and non-eurozone.
The meeting has ostensibly been called to discuss how to resume bank lending to the real economy by resolving institutions' exposures to trillions of euros of toxic assets, and to avert rising protectionism.
But the four will devote much of their time on how to rescue central and eastern Europe and, beyond the Balkans, Russia and Ukraine.
This week, with some respite in the past two days, the euro has plunged on fears that deepening recession, rising unemployment and social unrest, currencies in free fall, stock markets in meltdown and budget deficits spiralling out of control in the region will force governments to default on their debts.
Exposed
European stocks fell to a six-year low yesterday as the flight into the dollar and US and German government bonds intensified and Russia, where unemployment rose by more than half a million last month, reported a 2.4% month-on-month contraction. In Latvia, where social and political tensions led to a riot last month, the four-party ruling coalition collapsed. The fear is that the crisis in central and eastern Europe will spill over to the west, prolonging and deepening the recession and bringing down several banks heavily exposed to it.
"Argentina on the Danube?" was the title of an Economist leading article yesterday that looked back to the Latin American currency crisis of 2001 and that of east Asia in 1997.
"Looking ahead, the emergence of a new economic and political divide within Europe has become a distinct possibility," wrote Zsolt Darvas and Jean Pisani-Ferry of Brussels thinktank Bruegel in December last year.
This week, as the OECD spoke of a record 1.5% contraction in its area in the last three months of 2008 and every indicator pointed to a worse than expected shrinkage of the EU economy, two rating agencies (Moody's and S&P) added to the darkening gloom by voicing concerns over default risks and downgrading several west European banks that have lent €1,500bn (£1,300bn) to the region.
Yesterday, in a sober but highly uncertain assessment, the World Bank said six countries - the Czech Republic, Poland, Bulgaria, Romania, Slovakia and Slovenia - would grow by between zero and 2%. The governments of several of those countries are less sanguine.
The bank, giving a more optimistic outlook than its sister body, the IMF, said Hungary would contract by 3% despite its $20bn co-ordinated bail-out. The three Baltic countries - Estonia, Latvia and Lithuania - would shrink by between 5 and 7%. Latvia, also IMF-rescued, has forecast a 12% contraction.
It was, of course, never meant to be like this. Indeed, two senior EU commissioners - JoaquÃn Almunia (economic and monetary affairs) and Olli Rehn (enlargement) - issued a voluminous report extolling the political, economic and social benefits brought for the whole EU and its now 500 million citizens by its 12 new members. (Bulgaria and Romania also joined in 2007; Cyprus and Malta in 2004). Their message was clear: enlargement to east and central Europe has brought consolidated democracy, stability and security to Europe; it has made the EU bigger, stronger, more dynamic and richer, culturally and economically.
It has made the EU the world's biggest economic bloc, accounting for 22.2% of GDP and more than 17% of trade, for 18% of imports and 17% of exports and a half of global foreign direct investment.
But, with Poland's zloty, for example, losing between a quarter and a third of its value against the euro in less than a year, is this four-year "paradise regained" turning into "the road to hell?" AlmunÃa, a Spanish socialist, was clear: No, but only if Europe avoids turning in on and tearing itself apart with intra-European protectionism.
"Divided we will achieve nothing," he told reporters.
Panic
Even with yesterday's further volatility, nay panic, on stock and forex markets, there are signs that the threat of a renewed division in Europe is enforcing a more co-ordinated, pro-active response. AlmunÃa enumerated recent examples of increased aid for the afflicted countries: a further €7bn from structural-cohesion funds; European Investment Bank loans of €11.5bn, up €3.3bn on 2008; and an EU balance of payments facility raised from €12bn to €25bn, of which €9.3bn has been given to Hungary and Latvia, two of the most vulnerable members.
Citing increased lending by individual governments, he demanded more from them and international bodies and urged private sector investors to step up to the plate.
West European banks - in Austria above all, Sweden, notably in the Baltics, Italy, the Netherlands, France, Germany and Belgium - have exacerbated the crisis through rash lending policies in central and eastern Europe. Consumers living beyond their means have, for example, taken out huge mortgages in euros or Swiss francs or dollars they are unable to service as they become jobless or their pay is slashed.
Austrian banks have lent €250bn and are sitting on €150bn of losses at least. Anything up to 70% of an individual country's GDP is out on loan. But, with more than 90% of banks in the Baltics, Czech Republic and Slovakia in foreign hands, the west European banks are being driven to recapitalise their subsidiaries - and downsizing them, too.
Daniel Gros, head of the centre for European Policy Studies (CEPS) in Brussels, thinks the pessimism is exaggerated even while admitting that the crisis is more deep-rooted and spread more widely than in East Asia eight years ago. "The Asian banks held out and lost nothing if they were patient," he said.
"They adopted tough adjustment policies and the global boom elsewhere helped too.
"Now the banks will lose a bit."
The central player, as ever in Europe, is Germany and Peer Steinbrück, the finance minister, and his boss, Merkel, have indicated a U-turn before Sunday's big four meeting: it is now willing to ignore the "no bail-out" clause in the Maastricht treaty and lend to eurozone countries in severe difficulties. Gros and others think this will spill over in its effects to non-euro countries such as Poland which are clamouring to join, and are held at bay so far by the European Central Bank as they are years off meeting the tight criteria for entry.
"Outright default of any EU country is not on the cards," Gros told the Guardian. "And, anyway, these countries are economic midgets."
The ECB itself has proved resistant, like Germany, to seeing collective eurobonds issued or to accepting temporary currency swaps. But the 16-strong zone's central bank already agreed late last year to repurchase agreements for both Hungary and Poland. Gros says emergency lending packages from the ECB and IMF should be on the cards: Bruegel says the ECB should accept non-euro denominated government bonds as eligible securities.
One outcome is certain. The four-year "stag party" for central and east Europeans is over. The EC calculates that income per head among them rose from 40% of the EU-15 in 1999 to 52% in 2008 but this was aided by unfunded consumption and spurred by unchecked credit growth and excessive pay increases resulting in overheating and huge external imbalances.
The EU, like the IMF and ECB, is now insisting that government spending be slashed and wages cut as the price for rescue. Gros says: "If you have a 15% current account deficit like Estonia and want to get back to balance you have to cut consumption by a corresponding 15% of GDP and they're already doing it." If it's tough in the west, it's going to be a nightmare in the east.
guardian.co.uk © Guardian News and Media Limited 2009
GOP rising start Jindal's speech a coming-out party
GOP rising star Jindal's speech a 'coming-out party'
By Samira Simone
CNN
WASHINGTON (CNN) -- Thrust into the spotlight as a Republican rising star, Louisiana Gov. Bobby Jindal has been depicted as an up-and-comer capable of helping reshape the party and jockeying for the 2012 GOP presidential nomination.
And now, Jindal's party is putting him on a national platform, awarding the once little-known congressman the political plum of delivering the Republican's televised response to President Barack Obama's address to Congress Tuesday night.
"The speech is very important. This is his coming-out party," said G. Pearson Cross, head of the University of Louisiana's political science department, who has observed Jindal's political rise. "His speech will put a face on the name."
And put a fresh face on the Republican Party.
The GOP, still reeling from election beatings in 2006 and 2008, is looking to revamp itself by rebuilding from the states up and reaching out to young voters. At 37, the popular Louisiana governor embodies that mission, experts say.
"The job is very important in framing the Republican message really for the rest of the year," said Nick Ayers, executive director of the Republican Governors Association, referring to the response speech Tuesday. "Gov. Jindal provides the outside-the-beltway, not D.C., perspective. And he's one of the smartest policy minds in the country. He's not perceived as a overtly political person."
Being tapped for this prime-time speech, a job normally for congressional leaders, has helped to elevate Jindal's standing in the party dominated by old pros, including Senate Minority Leader Mitch McConnell and House Minority Leader John Boehner, as well as personalities, such as Alaska Gov. Sarah Palin and California Gov. Arnold Schwarzenegger.
"It's time for another generation to come into play," said GOP strategist Ed Rollins, a CNN contributor. "A lot of Republicans came of age under Reagan, which was 25 years ago ... and we just haven't built on that with young people."
Rollins, a veteran of the Reagan White House, called Jindal, a first-generation American born to Punjabi parents, a "young dynamic governor" with "appeal to younger voters."
The governor is a "textbook Republican" who is "scary smart," Cross added.
And, having an accomplished minority figure represent your party's message doesn't hurt, he said.
"The Republican Party very strongly wants to have a new look," he said. "They're saying, 'We're not just a party of old white guys' and he's part of that appeal."
Born Piyush Jindal in Louisiana's capital, Baton Rouge, he called winning his first election in 2004 to the U.S. House of Representatives "the ultimate embodiment of the American dream." He was only 33.
By age 28, the former Rhodes Scholar had already served in three high-profile jobs, including head of Louisiana's Department of Health and Hospitals and president of the University of Louisiana system.
Aside from his rapidly paced career moves, his ethnic background and the making of his American identity have been points of interest. Jindal, while his legal name remains Piyush, publicly goes by "Bobby" -- a nickname he reportedly picked up from the youngest "Brady Bunch" character as a preschooler. A Hindu by birth, he converted to Catholicism after his grandfather's death.
"Coming from a family of recent immigrants reflects the opportunities in this country, and that's a principle the Republican Party represents," said David Winston, a Republican pollster and strategist.
Jindal, in a statement, said he is looking forward to hearing Obama's address and that he's honored to be delivering the Republican response immediately following the president's speech.
"Here in Louisiana, we have first-hand experience with reforming government and cutting taxes to stimulate our economy in uncertain times. This is a terrific opportunity to talk about our great state to the nation."
But Democrats say the problem is the message, not the messenger.
"It doesn't matter if it's Gov. Jindal or Gov. Palin or Mitch McConnell," said Democratic strategist Chris Kofinis. "At the end of the day, the policies they support are not the policies the American people support."
Obama is expected to focus on the economic crisis and the $787 billion stimulus bill among other issues during his first congressional address, and Jindal will likely rebut with a push for fiscal responsibility, Kofinis said.
"He'll probably flash back to the past, talking about fiscal responsibility and ignoring the fact that over the last eight years the Republicans have been the poster child for fiscal irresponsibility," he said.
The governor has been a vocal conservative critic of the stimulus package, highlighting what he considers waste at a White House meeting with governors on Monday. Jindal spoke to a large group of reporters after the session Monday, noting items such as $1 billion in added spending for the national census and $50 million in federal spending for the arts. iReport.com: What do you want to hear from Obama and Jindal?
It's "not apparent to me why they had to be in the stimulus package," said Jindal, while adding that his fellow Republican governors nevertheless wanted to give Obama "every opportunity" to succeed in sparking an economic recovery.
Jindal has announced plans to reject $100 million of stimulus funding for his state, saying it would require Louisiana to change its unemployment laws. Several other governors have expressed similar concerns.
Jindal made history in 2007 when, at 36, he was elected the nation's first Indian-American governor and the youngest in office. And he drew major national attention last year when he was widely thought by pundits to be on then-Republican presidential John McCain's short list for vice president.
"All the elements of who he is make him an attractive figure, particularly with the difficulty Republicans had with attracting the youth vote," Winston said. "Having a younger member of the party is something to be desired."
Palin got the job, though Jindal did not slip into obscurity with many analysts still looking to him as a potential presidential candidate. And although Jindal has said he's focused on his job as governor, his presidential ambitions are "one of the worst kept secrets in Louisiana," Kofinis said.
Jindal was expected to headline the Republican National Convention in August, but canceled to oversee his state's response to Hurricane Gustav. iReport.com: How are you coping with the economy?
His state still recovering from Hurricane Katrina, Jindal ordered a mandatory evacuation and called up some 3,000 National Guardsmen to coordinate the exodus.
Jindal's actions were in stark contrast to former Louisiana Gov. Kathleen Blanco's shaky and largely criticized reaction to Katrina. The little-known Jindal, who narrowly lost the 2003 gubernatorial election to Blanco, won the post outright in the 2007 primary with 54 percent of the vote.
Republicans in Washington took notice. Boehner, R-Ohio, and McConnell, R-Kentucky, support the idea of Jindal serving as the official GOP spokesman Tuesday night.
"Gov. Jindal embodies what I have long said: The Republican Party must not be simply the party of opposition, but the party of better solutions," Boehner said when he announced that Jindal was slated to give the response.
A recent CNN/Opinion Research Corporation survey indicates that Mike Huckabee and Sarah Palin top the list of potential 2012 Republican presidential hopefuls, attracting about one-third of Republicans and independents who lean toward the GOP, from among those surveyed. The survey is an early measure of possible support, not a horse-race snapshot.
Jindal, falling behind former Massachusetts Gov. Mitt Romney, former House Speaker Newt Gingrich and former New York Mayor Rudy Giuliani, grabbed the backing of 19 percent. Florida Gov. Charlie Crist drew 7 percent.
Analysts say Jindal lacked name recognition. Tuesday night's speech will raise his profile.
As for 2012, Winston said it's too early to know who the front-runners will be, but expect to see more of Jindal.
"We'll see more of him, but along with other folks," said Winston, pointing out Giuliani, Palin and Republican National Committee Chairman Michael Steele. "Without a clear central person, i.e. George Bush, there are a lot of people who step forward to determine which direction the party will go."
By Samira Simone
CNN
WASHINGTON (CNN) -- Thrust into the spotlight as a Republican rising star, Louisiana Gov. Bobby Jindal has been depicted as an up-and-comer capable of helping reshape the party and jockeying for the 2012 GOP presidential nomination.
And now, Jindal's party is putting him on a national platform, awarding the once little-known congressman the political plum of delivering the Republican's televised response to President Barack Obama's address to Congress Tuesday night.
"The speech is very important. This is his coming-out party," said G. Pearson Cross, head of the University of Louisiana's political science department, who has observed Jindal's political rise. "His speech will put a face on the name."
And put a fresh face on the Republican Party.
The GOP, still reeling from election beatings in 2006 and 2008, is looking to revamp itself by rebuilding from the states up and reaching out to young voters. At 37, the popular Louisiana governor embodies that mission, experts say.
"The job is very important in framing the Republican message really for the rest of the year," said Nick Ayers, executive director of the Republican Governors Association, referring to the response speech Tuesday. "Gov. Jindal provides the outside-the-beltway, not D.C., perspective. And he's one of the smartest policy minds in the country. He's not perceived as a overtly political person."
Being tapped for this prime-time speech, a job normally for congressional leaders, has helped to elevate Jindal's standing in the party dominated by old pros, including Senate Minority Leader Mitch McConnell and House Minority Leader John Boehner, as well as personalities, such as Alaska Gov. Sarah Palin and California Gov. Arnold Schwarzenegger.
"It's time for another generation to come into play," said GOP strategist Ed Rollins, a CNN contributor. "A lot of Republicans came of age under Reagan, which was 25 years ago ... and we just haven't built on that with young people."
Rollins, a veteran of the Reagan White House, called Jindal, a first-generation American born to Punjabi parents, a "young dynamic governor" with "appeal to younger voters."
The governor is a "textbook Republican" who is "scary smart," Cross added.
And, having an accomplished minority figure represent your party's message doesn't hurt, he said.
"The Republican Party very strongly wants to have a new look," he said. "They're saying, 'We're not just a party of old white guys' and he's part of that appeal."
Born Piyush Jindal in Louisiana's capital, Baton Rouge, he called winning his first election in 2004 to the U.S. House of Representatives "the ultimate embodiment of the American dream." He was only 33.
By age 28, the former Rhodes Scholar had already served in three high-profile jobs, including head of Louisiana's Department of Health and Hospitals and president of the University of Louisiana system.
Aside from his rapidly paced career moves, his ethnic background and the making of his American identity have been points of interest. Jindal, while his legal name remains Piyush, publicly goes by "Bobby" -- a nickname he reportedly picked up from the youngest "Brady Bunch" character as a preschooler. A Hindu by birth, he converted to Catholicism after his grandfather's death.
"Coming from a family of recent immigrants reflects the opportunities in this country, and that's a principle the Republican Party represents," said David Winston, a Republican pollster and strategist.
Jindal, in a statement, said he is looking forward to hearing Obama's address and that he's honored to be delivering the Republican response immediately following the president's speech.
"Here in Louisiana, we have first-hand experience with reforming government and cutting taxes to stimulate our economy in uncertain times. This is a terrific opportunity to talk about our great state to the nation."
But Democrats say the problem is the message, not the messenger.
"It doesn't matter if it's Gov. Jindal or Gov. Palin or Mitch McConnell," said Democratic strategist Chris Kofinis. "At the end of the day, the policies they support are not the policies the American people support."
Obama is expected to focus on the economic crisis and the $787 billion stimulus bill among other issues during his first congressional address, and Jindal will likely rebut with a push for fiscal responsibility, Kofinis said.
"He'll probably flash back to the past, talking about fiscal responsibility and ignoring the fact that over the last eight years the Republicans have been the poster child for fiscal irresponsibility," he said.
The governor has been a vocal conservative critic of the stimulus package, highlighting what he considers waste at a White House meeting with governors on Monday. Jindal spoke to a large group of reporters after the session Monday, noting items such as $1 billion in added spending for the national census and $50 million in federal spending for the arts. iReport.com: What do you want to hear from Obama and Jindal?
It's "not apparent to me why they had to be in the stimulus package," said Jindal, while adding that his fellow Republican governors nevertheless wanted to give Obama "every opportunity" to succeed in sparking an economic recovery.
Jindal has announced plans to reject $100 million of stimulus funding for his state, saying it would require Louisiana to change its unemployment laws. Several other governors have expressed similar concerns.
Jindal made history in 2007 when, at 36, he was elected the nation's first Indian-American governor and the youngest in office. And he drew major national attention last year when he was widely thought by pundits to be on then-Republican presidential John McCain's short list for vice president.
"All the elements of who he is make him an attractive figure, particularly with the difficulty Republicans had with attracting the youth vote," Winston said. "Having a younger member of the party is something to be desired."
Palin got the job, though Jindal did not slip into obscurity with many analysts still looking to him as a potential presidential candidate. And although Jindal has said he's focused on his job as governor, his presidential ambitions are "one of the worst kept secrets in Louisiana," Kofinis said.
Jindal was expected to headline the Republican National Convention in August, but canceled to oversee his state's response to Hurricane Gustav. iReport.com: How are you coping with the economy?
His state still recovering from Hurricane Katrina, Jindal ordered a mandatory evacuation and called up some 3,000 National Guardsmen to coordinate the exodus.
Jindal's actions were in stark contrast to former Louisiana Gov. Kathleen Blanco's shaky and largely criticized reaction to Katrina. The little-known Jindal, who narrowly lost the 2003 gubernatorial election to Blanco, won the post outright in the 2007 primary with 54 percent of the vote.
Republicans in Washington took notice. Boehner, R-Ohio, and McConnell, R-Kentucky, support the idea of Jindal serving as the official GOP spokesman Tuesday night.
"Gov. Jindal embodies what I have long said: The Republican Party must not be simply the party of opposition, but the party of better solutions," Boehner said when he announced that Jindal was slated to give the response.
A recent CNN/Opinion Research Corporation survey indicates that Mike Huckabee and Sarah Palin top the list of potential 2012 Republican presidential hopefuls, attracting about one-third of Republicans and independents who lean toward the GOP, from among those surveyed. The survey is an early measure of possible support, not a horse-race snapshot.
Jindal, falling behind former Massachusetts Gov. Mitt Romney, former House Speaker Newt Gingrich and former New York Mayor Rudy Giuliani, grabbed the backing of 19 percent. Florida Gov. Charlie Crist drew 7 percent.
Analysts say Jindal lacked name recognition. Tuesday night's speech will raise his profile.
As for 2012, Winston said it's too early to know who the front-runners will be, but expect to see more of Jindal.
"We'll see more of him, but along with other folks," said Winston, pointing out Giuliani, Palin and Republican National Committee Chairman Michael Steele. "Without a clear central person, i.e. George Bush, there are a lot of people who step forward to determine which direction the party will go."
European indutrial output slumps
European industrial output slumps
European industrial orders fell sharply in December, official EU figures have shown, as factories reported a steep drop in demand for their goods.
New industrial orders in eurozone nations slumped by 5.2% from November and plummeted 22.3% compared with a year earlier, according to Eurostat.
The fifth consecutive monthly drop was partly driven by fewer orders for machinery and electronic equipment.
It came as German corporate confidence fell to its lowest since 1990.
The Ifo economic research institute said its German business climate index, based on a monthly poll of about 7,000 firms, fell to 82.6 in February from 83.0 in January, on deepening gloom about the state of the global economy.
"Hopes that the battered economy might be about to turn around took another backlash today," said Carsten Brzeski, an economist at ING Financial Markets, adding that the European Central Bank (ECB) would be forced to respond to the latest decline in sentiment.
EU nations are looking for co-ordinated action to tackle the economic crisis, and the weak German corporate sentiment could raise pressure on the European Central Bank to make further interest rate cuts to support eurozone economies.
However, the efforts to work in unity have met with allegations of protectionism, while governments have had differences over economic stimulus packages.
All major industry sectors reported drops in demand, Eurostat said.
The figures relate to the 15 nations which used the euro in December. Slovakia became the bloc's 16th member in January.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7907540.stm
Published: 2009/02/24 11:29:25 GMT
European industrial orders fell sharply in December, official EU figures have shown, as factories reported a steep drop in demand for their goods.
New industrial orders in eurozone nations slumped by 5.2% from November and plummeted 22.3% compared with a year earlier, according to Eurostat.
The fifth consecutive monthly drop was partly driven by fewer orders for machinery and electronic equipment.
It came as German corporate confidence fell to its lowest since 1990.
The Ifo economic research institute said its German business climate index, based on a monthly poll of about 7,000 firms, fell to 82.6 in February from 83.0 in January, on deepening gloom about the state of the global economy.
"Hopes that the battered economy might be about to turn around took another backlash today," said Carsten Brzeski, an economist at ING Financial Markets, adding that the European Central Bank (ECB) would be forced to respond to the latest decline in sentiment.
EU nations are looking for co-ordinated action to tackle the economic crisis, and the weak German corporate sentiment could raise pressure on the European Central Bank to make further interest rate cuts to support eurozone economies.
However, the efforts to work in unity have met with allegations of protectionism, while governments have had differences over economic stimulus packages.
All major industry sectors reported drops in demand, Eurostat said.
The figures relate to the 15 nations which used the euro in December. Slovakia became the bloc's 16th member in January.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7907540.stm
Published: 2009/02/24 11:29:25 GMT
Asian stocks rattled by US falls
Asian stocks rattled by US falls
Asian stocks fell sharply on Tuesday amid renewed fears over the health of the global financial sector and after US stocks hit a near 12-year low.
Japan's Nikkei index closed down 1.46%, the Hong Kong index closed down 2.9% and the Shanghai index fell 4.3%.
South Korean Kospi share index dropped 3.2%, while indexes in Singapore and Taiwan shed more than 1%.
In Japan the finance minister said the government may consider a call to buy shares to support the stock market.
The proposal came after Japanese shares fell to near 26-year lows on Tuesday.
Share worries
Finance Minister Kaoru Yosano said he told officials to look into ways to support the stock market, including setting up a government body to buy shares.
“ Investors are just selling out in disgust across the board ”
Lorraine Tan, Standard & Poor's
BBC economics correspondent Andrew Walker said a similar scheme was tried in the 1990s, and was "not very successful".
"In the case of Japan share prices are especially important to banks who are large shareholders," our correspondent said.
"They have not invested heavily in the problem assets that have undermined western banks, but a further heavy fall in share prices could do them serious damage."
US woes
Most Asian indexes had risen on Monday on hopes the US government was to increase its stake in Citigroup.
However, no formal move was made. US regulators said they were considering boosting government ownership in financial institutions, but without going all the way and nationalising them.
On Monday in the US, the Dow Jones Industrial Average closed down 250.9 points, or 3.4%, at 7,114.8, its lowest level since October 1997.
The tech-heavy Nasdaq index closed down 3.7%, while the Standard & Poor's 500 index fell 3.5% to 743.33, its lowest finish since 11 April, 1997.
No end in sight?
"Investors are just selling out in disgust across the board - disgust with the market, disgust with the financial problems," said Lorraine Tan, director of equities research at Standard & Poor's in Singapore.
"The government seems to keep throwing in money, but there doesn't seem to be any end to the declines or solutions to the problems," she said.
The Shanghai benchmark index fell as China's central bank said the country's economic downturn could worsen.
Meanwhile the index of Asia-Pacific stocks outside Japan, the MSCI, also fell, by 2.3%. And Australia's stock market was also down, by 0.6%. The Indian Sensex was down slightly, by 0.24%.
Among Asian financial shares, Nomura Holdings, Japan's biggest broker, lost 9.3% after announcing plans to raise $3.3bn.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7907117.stm
Published: 2009/02/24 12:53:50 GMT
Asian stocks fell sharply on Tuesday amid renewed fears over the health of the global financial sector and after US stocks hit a near 12-year low.
Japan's Nikkei index closed down 1.46%, the Hong Kong index closed down 2.9% and the Shanghai index fell 4.3%.
South Korean Kospi share index dropped 3.2%, while indexes in Singapore and Taiwan shed more than 1%.
In Japan the finance minister said the government may consider a call to buy shares to support the stock market.
The proposal came after Japanese shares fell to near 26-year lows on Tuesday.
Share worries
Finance Minister Kaoru Yosano said he told officials to look into ways to support the stock market, including setting up a government body to buy shares.
“ Investors are just selling out in disgust across the board ”
Lorraine Tan, Standard & Poor's
BBC economics correspondent Andrew Walker said a similar scheme was tried in the 1990s, and was "not very successful".
"In the case of Japan share prices are especially important to banks who are large shareholders," our correspondent said.
"They have not invested heavily in the problem assets that have undermined western banks, but a further heavy fall in share prices could do them serious damage."
US woes
Most Asian indexes had risen on Monday on hopes the US government was to increase its stake in Citigroup.
However, no formal move was made. US regulators said they were considering boosting government ownership in financial institutions, but without going all the way and nationalising them.
On Monday in the US, the Dow Jones Industrial Average closed down 250.9 points, or 3.4%, at 7,114.8, its lowest level since October 1997.
The tech-heavy Nasdaq index closed down 3.7%, while the Standard & Poor's 500 index fell 3.5% to 743.33, its lowest finish since 11 April, 1997.
No end in sight?
"Investors are just selling out in disgust across the board - disgust with the market, disgust with the financial problems," said Lorraine Tan, director of equities research at Standard & Poor's in Singapore.
"The government seems to keep throwing in money, but there doesn't seem to be any end to the declines or solutions to the problems," she said.
The Shanghai benchmark index fell as China's central bank said the country's economic downturn could worsen.
Meanwhile the index of Asia-Pacific stocks outside Japan, the MSCI, also fell, by 2.3%. And Australia's stock market was also down, by 0.6%. The Indian Sensex was down slightly, by 0.24%.
Among Asian financial shares, Nomura Holdings, Japan's biggest broker, lost 9.3% after announcing plans to raise $3.3bn.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7907117.stm
Published: 2009/02/24 12:53:50 GMT
Sunday, February 22, 2009
EU heads back financial clampdown (new consolidation proposals)
EU heads back financial clampdown
European leaders in Berlin have agreed on the need to regulate all financial markets including hedge funds.
Leaders of Europe's major economies said a global solution was needed to the current financial crisis.
German Chancellor Angela Merkel highlighted that leaders faced an "extraordinary international crisis".
But leaders including UK Prime Minister Gordon Brown warned against reverting to protectionism in such a difficult economic climate.
The Berlin gathering is a precursor to the next meeting of the G20 group of major developed and developing countries in London on 2 April, which aims to rewrite the rules of the global financial system.
'Supervision'
"There is a need for a global new deal so that the world economy can recover" said Mr Brown to ensure an economy that is based on the "soundest principles".
Leaders said there was a need for international institutions, including the International Monetary Fund, to play a greater role not just to help countries in financial trouble but to prevent countries from getting into such difficulties.
Mr Brown said leaders had agreed that that the IMF needed access to at least $500bn (£348bn).
“ We all agreed that we can no longer tolerate the reward package system for traders and bankers ”
French President Nicolas Sarkozy
The comments in Berlin come amid ongoing volatility in world financial markets and uncertainty over the future of some of the world's key banks.
Ms Merkel said: "We are making a commitment that all financial markets, products, and participants - including hedge funds and rating agencies - are of course subject to supervision and regulation."
Details on such a plan need to be worked out before the meeting in London, she added.
Hedge funds, which typically attract wealthy private investors, have been criticised for their lack of transparency and oversight.
Bonuses
As well as greater supervision of all financial markets and instruments, leaders underlined the need to reassess the issue of pay at finance firms.
French President Nicolas Sarkozy added: "We all agreed that we can no longer tolerate the reward package system for traders and bankers."
There has been much criticism of bankers' bonuses, which have been high despite their bank's poor performance.
Leaders also said they wanted to crack down on tax havens.
Ms Merkel said: "As far as unco-operative players, tax havens or areas where non-transparent business is carried out are concerned, we need to develop sanction mechanisms. These must be made very concrete," she said
She added that a list would be drawn up "clearly showing which the unco-operative jurisdictions are."
Different opinions
French, Italian, Spanish, Dutch, UK and German leaders are hoping to take a common approach at the London summit .
But analysts say reaching agreement among EU powers will not be easy.
The current Czech presidency of the EU, as well as and the European Commission, have voiced concern at attempts by France, Italy and Spain to shelter their car industries from the effects of the downturn.
“ Capitalism must be given new moral foundations ”
Nicolas Sarkozy
French President
The BBC's Rob Cameron in Berlin says Czech Prime Minister Mirek Topolanek - who is also in Berlin - will have a private meeting with French President Nicholas Sarkozy, following a very public row between the two countries.
Mr Sarkozy has suggested that in order to secure government aid, French carmakers should move production out of their East European factories and back to France.
Such disagreements are threatening to prevent Europe speaking with one voice, our correspondent adds.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/europe/7904300.stm
Published: 2009/02/22 16:26:43 GMT
European leaders in Berlin have agreed on the need to regulate all financial markets including hedge funds.
Leaders of Europe's major economies said a global solution was needed to the current financial crisis.
German Chancellor Angela Merkel highlighted that leaders faced an "extraordinary international crisis".
But leaders including UK Prime Minister Gordon Brown warned against reverting to protectionism in such a difficult economic climate.
The Berlin gathering is a precursor to the next meeting of the G20 group of major developed and developing countries in London on 2 April, which aims to rewrite the rules of the global financial system.
'Supervision'
"There is a need for a global new deal so that the world economy can recover" said Mr Brown to ensure an economy that is based on the "soundest principles".
Leaders said there was a need for international institutions, including the International Monetary Fund, to play a greater role not just to help countries in financial trouble but to prevent countries from getting into such difficulties.
Mr Brown said leaders had agreed that that the IMF needed access to at least $500bn (£348bn).
“ We all agreed that we can no longer tolerate the reward package system for traders and bankers ”
French President Nicolas Sarkozy
The comments in Berlin come amid ongoing volatility in world financial markets and uncertainty over the future of some of the world's key banks.
Ms Merkel said: "We are making a commitment that all financial markets, products, and participants - including hedge funds and rating agencies - are of course subject to supervision and regulation."
Details on such a plan need to be worked out before the meeting in London, she added.
Hedge funds, which typically attract wealthy private investors, have been criticised for their lack of transparency and oversight.
Bonuses
As well as greater supervision of all financial markets and instruments, leaders underlined the need to reassess the issue of pay at finance firms.
French President Nicolas Sarkozy added: "We all agreed that we can no longer tolerate the reward package system for traders and bankers."
There has been much criticism of bankers' bonuses, which have been high despite their bank's poor performance.
Leaders also said they wanted to crack down on tax havens.
Ms Merkel said: "As far as unco-operative players, tax havens or areas where non-transparent business is carried out are concerned, we need to develop sanction mechanisms. These must be made very concrete," she said
She added that a list would be drawn up "clearly showing which the unco-operative jurisdictions are."
Different opinions
French, Italian, Spanish, Dutch, UK and German leaders are hoping to take a common approach at the London summit .
But analysts say reaching agreement among EU powers will not be easy.
The current Czech presidency of the EU, as well as and the European Commission, have voiced concern at attempts by France, Italy and Spain to shelter their car industries from the effects of the downturn.
“ Capitalism must be given new moral foundations ”
Nicolas Sarkozy
French President
The BBC's Rob Cameron in Berlin says Czech Prime Minister Mirek Topolanek - who is also in Berlin - will have a private meeting with French President Nicholas Sarkozy, following a very public row between the two countries.
Mr Sarkozy has suggested that in order to secure government aid, French carmakers should move production out of their East European factories and back to France.
Such disagreements are threatening to prevent Europe speaking with one voice, our correspondent adds.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/europe/7904300.stm
Published: 2009/02/22 16:26:43 GMT
Saturday, February 21, 2009
Obama wants to halve budget deficit
Official: Obama wants to halve budget deficit
By LIZ SIDOTI, Associated Press Writer
2 hrs 55 mins ago
WASHINGTON – Barack Obama wants to cut the federal deficit in half by the end of his first term, mostly by scaling back Iraq war spending, raising taxes on the wealthiest and streamlining government, an administration official said Saturday as the president worked to finalize his first budget request.
Obama's proposal for the 2010 fiscal year that begins Oct. 1 projects that the estimated $1.3 trillion deficit he has inherited from former President George W. Bush will be halved to $533 billion by 2013. That's a difference of 9.2 percent of the overall economy now vs. 3 percent in four years.
"We can't generate sustained growth without getting our deficits under control," Obama said in his weekly radio and Internet address that seemed to preview his intentions. He said his budget will be "sober in its assessments, honest in its accounting, and lays out in detail my strategy for investing in what we need, cutting what we don't, and restoring fiscal discipline."
He's expected to outline some broad themes of his budget request Monday at a White House summit on fiscal policy and touch on it during his first speech to Congress on Tuesday evening. He is slated to officially send at least a summary of it to Congress on Thursday, barely a week after his $787 billion economic stimulus plan becoming law.
Obama's budget also is expected to take steps toward his campaign promises of establishing universal health care and lessening the country's reliance on foreign oil.
The official, who spoke on the condition of anonymity because the president has not yet released his budget, said Obama hopes to achieve his deficit-reduction goal by generating savings as he follows through on three core campaign promises over the next four years.
He has pledged to wind down the Iraq war by withdrawing most combat troops within 16 months of taking office. He also has said he would let the temporary Bush tax cuts expire in 2011 for people making more than $250,000 a year, effectively raising taxes on those people. And, he has vowed to scale back spending and improve government efficiency by eliminating programs that don't work.
The budget projections suggest that Obama hasn't backed off of any of those priorities, despite relatively little movement on them and at least one misstep in his first month in office as he concentrated on lobbying for the economic stimulus plan and rescuing the housing, auto and financial sectors.
Pentagon officials still are trying to determine exactly how to scale back the U.S. troop commitment in Iraq. The president's sweeping economic plan didn't include any of the tax increases Obama, as a candidate, had said he would impose on wealthy taxpayers. And, Nancy Killefer, his selection for a newly created position charged with eliminating inefficient government programs, withdrew amid personal tax issues.
Cutting the deficit by half in a mere four years is a lofty goal at any time, let alone in such dire economic circumstances. The question is whether Obama can do it while also turning around a recession now well into its second year.
Obama has pledged to make deficit-reduction a priority both as a candidate and a president. But he also has said economic recovery must come first.
In his first month in office, he has overseen enormous amounts of spending aimed at stabilizing the economy, reversing the recession and heading off even more turmoil.
Last week, he signed into law the $787 billion stimulus measure that is meant to create jobs but certainly will add to the nation's skyrocketing national debt. He also is implementing the $700 billion financial sector rescue passed on Bush's watch; about $75 billion of it is being used toward Obama's plan to help homeowners facing foreclosure. At the same time, the administration is weighing requests by General Motors Corp. and Chrysler LLC for an additional $21.6 billion. The ailing automakers already have received a combined $17.4 billion in federal loans.
Yet, even as he's spending a ton of taxpayer money, Obama also is pressing the need for getting "exploding deficits" under control.
The nonpartisan Congressional Budget Office says that this year's budget deficit will be at least a record $1.2 trillion — about two times that of the year before. That total includes financial bailouts and rescue plans Congress approved since last Oct. 1, the start of the government's budget year, but not Obama's hefty stimulus package that's now law.
Some private economists are forecasting that the budget deficit for the current year will hit $1.6 trillion. And, the Treasury Department has said that the recession and massive costs for the $700 billion financial bailout have pushed the federal deficit to an all-time high for the first four months of the budget year.
Obama's budget director, Peter Orszag, told lawmakers recently that even after the economy recovers, annual deficits could reach $750 billion or so and steadily exceed $1 trillion by the end of the next decade. And, Obama himself has said, without decisive action, "trillion-dollar deficits will be a reality for years to come."
By LIZ SIDOTI, Associated Press Writer
2 hrs 55 mins ago
WASHINGTON – Barack Obama wants to cut the federal deficit in half by the end of his first term, mostly by scaling back Iraq war spending, raising taxes on the wealthiest and streamlining government, an administration official said Saturday as the president worked to finalize his first budget request.
Obama's proposal for the 2010 fiscal year that begins Oct. 1 projects that the estimated $1.3 trillion deficit he has inherited from former President George W. Bush will be halved to $533 billion by 2013. That's a difference of 9.2 percent of the overall economy now vs. 3 percent in four years.
"We can't generate sustained growth without getting our deficits under control," Obama said in his weekly radio and Internet address that seemed to preview his intentions. He said his budget will be "sober in its assessments, honest in its accounting, and lays out in detail my strategy for investing in what we need, cutting what we don't, and restoring fiscal discipline."
He's expected to outline some broad themes of his budget request Monday at a White House summit on fiscal policy and touch on it during his first speech to Congress on Tuesday evening. He is slated to officially send at least a summary of it to Congress on Thursday, barely a week after his $787 billion economic stimulus plan becoming law.
Obama's budget also is expected to take steps toward his campaign promises of establishing universal health care and lessening the country's reliance on foreign oil.
The official, who spoke on the condition of anonymity because the president has not yet released his budget, said Obama hopes to achieve his deficit-reduction goal by generating savings as he follows through on three core campaign promises over the next four years.
He has pledged to wind down the Iraq war by withdrawing most combat troops within 16 months of taking office. He also has said he would let the temporary Bush tax cuts expire in 2011 for people making more than $250,000 a year, effectively raising taxes on those people. And, he has vowed to scale back spending and improve government efficiency by eliminating programs that don't work.
The budget projections suggest that Obama hasn't backed off of any of those priorities, despite relatively little movement on them and at least one misstep in his first month in office as he concentrated on lobbying for the economic stimulus plan and rescuing the housing, auto and financial sectors.
Pentagon officials still are trying to determine exactly how to scale back the U.S. troop commitment in Iraq. The president's sweeping economic plan didn't include any of the tax increases Obama, as a candidate, had said he would impose on wealthy taxpayers. And, Nancy Killefer, his selection for a newly created position charged with eliminating inefficient government programs, withdrew amid personal tax issues.
Cutting the deficit by half in a mere four years is a lofty goal at any time, let alone in such dire economic circumstances. The question is whether Obama can do it while also turning around a recession now well into its second year.
Obama has pledged to make deficit-reduction a priority both as a candidate and a president. But he also has said economic recovery must come first.
In his first month in office, he has overseen enormous amounts of spending aimed at stabilizing the economy, reversing the recession and heading off even more turmoil.
Last week, he signed into law the $787 billion stimulus measure that is meant to create jobs but certainly will add to the nation's skyrocketing national debt. He also is implementing the $700 billion financial sector rescue passed on Bush's watch; about $75 billion of it is being used toward Obama's plan to help homeowners facing foreclosure. At the same time, the administration is weighing requests by General Motors Corp. and Chrysler LLC for an additional $21.6 billion. The ailing automakers already have received a combined $17.4 billion in federal loans.
Yet, even as he's spending a ton of taxpayer money, Obama also is pressing the need for getting "exploding deficits" under control.
The nonpartisan Congressional Budget Office says that this year's budget deficit will be at least a record $1.2 trillion — about two times that of the year before. That total includes financial bailouts and rescue plans Congress approved since last Oct. 1, the start of the government's budget year, but not Obama's hefty stimulus package that's now law.
Some private economists are forecasting that the budget deficit for the current year will hit $1.6 trillion. And, the Treasury Department has said that the recession and massive costs for the $700 billion financial bailout have pushed the federal deficit to an all-time high for the first four months of the budget year.
Obama's budget director, Peter Orszag, told lawmakers recently that even after the economy recovers, annual deficits could reach $750 billion or so and steadily exceed $1 trillion by the end of the next decade. And, Obama himself has said, without decisive action, "trillion-dollar deficits will be a reality for years to come."
Huge protest over Irish economy
Huge protest over Irish economy
About 100,000 people have taken part in protests in Dublin city centre to vent their anger at the Irish government's handling of the country's recession.
They oppose plans to impose a pension levy on 350,000 public sector workers.
Trade union organisers of the march said workers did not cause the economic crisis but were having to pay for it.
In a statement, the Irish government said it recognised that the measures it was taking were "difficult and in some cases painful".
The pension levy was "reasonable", the government said.
It reflected "the reality that we are not in a position to continue to meet the public service pay bill in the circumstances of declining revenue", it added.
Reports say the plan could cost the 350,000 public sector workers between 1,500 euros and 2,800 euros (£2,500) a year.
High unemployment
There were conflicting estimates of the numbers of people at the march, which began on the north side of Dublin in the middle of the afternoon.
Police said 100,000 people were on the streets, while organisers said they expected 200,000 to protest in total.
The Irish Congress of Trade Unions (Ictu), which organised the march, said it was campaigning for "a fairer and better way" of dealing with the economic crisis.
"Our priority is about ensuring that people are looked after, the interests of people are looked after, not the interests of big business or the wealthy," Sally-Anne Kinahan, Ictu's secretary general, told the BBC.
“ I've a mortgage to pay, I've children to put through school, and now I'm being told I have to take cutback, after cutback, after cutback ”
Irish protester
One protester said he was "sick and tired of the way this government conducts itself and what it's doing to this country".
"I've worked all my life, I've never broke the law, never walked out on strike. Instead I've went to work and done my job," he said.
"I've a mortgage to pay, I've children to put through school, and now I'm being told I have to take cutback, after cutback, after cutback."
Ireland, which was once one of Europe's fastest-growing economies, has fallen into recession faster than many other members of the European Union.
The country officially fell into recession in September 2008, and unemployment has risen sharply in the following months.
The numbers of people claiming unemployment benefit in the Irish Republic rose to 326,000 in January, the highest monthly level since records began in 1967.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/europe/7903518.stm
Published: 2009/02/21 21:32:10 GMT
About 100,000 people have taken part in protests in Dublin city centre to vent their anger at the Irish government's handling of the country's recession.
They oppose plans to impose a pension levy on 350,000 public sector workers.
Trade union organisers of the march said workers did not cause the economic crisis but were having to pay for it.
In a statement, the Irish government said it recognised that the measures it was taking were "difficult and in some cases painful".
The pension levy was "reasonable", the government said.
It reflected "the reality that we are not in a position to continue to meet the public service pay bill in the circumstances of declining revenue", it added.
Reports say the plan could cost the 350,000 public sector workers between 1,500 euros and 2,800 euros (£2,500) a year.
High unemployment
There were conflicting estimates of the numbers of people at the march, which began on the north side of Dublin in the middle of the afternoon.
Police said 100,000 people were on the streets, while organisers said they expected 200,000 to protest in total.
The Irish Congress of Trade Unions (Ictu), which organised the march, said it was campaigning for "a fairer and better way" of dealing with the economic crisis.
"Our priority is about ensuring that people are looked after, the interests of people are looked after, not the interests of big business or the wealthy," Sally-Anne Kinahan, Ictu's secretary general, told the BBC.
“ I've a mortgage to pay, I've children to put through school, and now I'm being told I have to take cutback, after cutback, after cutback ”
Irish protester
One protester said he was "sick and tired of the way this government conducts itself and what it's doing to this country".
"I've worked all my life, I've never broke the law, never walked out on strike. Instead I've went to work and done my job," he said.
"I've a mortgage to pay, I've children to put through school, and now I'm being told I have to take cutback, after cutback, after cutback."
Ireland, which was once one of Europe's fastest-growing economies, has fallen into recession faster than many other members of the European Union.
The country officially fell into recession in September 2008, and unemployment has risen sharply in the following months.
The numbers of people claiming unemployment benefit in the Irish Republic rose to 326,000 in January, the highest monthly level since records began in 1967.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/europe/7903518.stm
Published: 2009/02/21 21:32:10 GMT
CBC Member says opposition to stimulus is slap in the face
SC Rep: Opposition to stimulus is slap in face
By PAGE IVEY, Associated Press Writer
Thu Feb 19, 11:26 pm ET
COLUMBIA, S.C. – The highest-ranking black congressman said Thursday that opposition to the federal stimulus package by southern GOP governors is "a slap in the face of African-Americans."
U.S. Rep. James Clyburn, D-S.C., said he was insulted when the governors of Texas, Louisiana, Mississippi and his home state, which have large black populations, said they might not accept some of the money from the $787 billion stimulus package.
Texas Gov. Rick Perry said Wednesday he would accept the money, and none of the others has rejected it outright. The Republican governors of Idaho and Alaska also said they had reservations about whether the money would come with too many strings attached, but Clyburn said he was particularly taken aback by southern governors who said they might decline it.
"These four governors represent states that are in the proverbial black belt," Clyburn said.
A spokesman for South Carolina Gov. Mark Sanford accused Clyburn of playing the race card.
"Spending money at the federal level that we do not have represents a future tax increase on all South Carolinians, regardless of their color," Sanford spokesman Joel Sawyer said in an e-mail statement. "And in the process of doing so, he's ripping off everyone he claims to represent."
Speaking earlier Thursday on CBS' "The Early Show," Sanford said being against the stimulus plan doesn't preclude taking the money. He said he opposed President Barack Obama's economic plan because it's "a bad idea," but would look over it and decide whether some parts would work for South Carolina.
A message seeking comment was left with a spokesman for Mississippi Gov. Haley Barbour. Kyle Plotkin, press secretary for Louisiana Gov. Bobby Jindal, who is the son of Indian immigrants, called Clyburn's comments absurd.
"Each state agency is reviewing the bill to determine what strings are attached to any funds coming to Louisiana," Plotkin said. "The governor has an obligation to look out for the interests of Louisiana's taxpayers and that is exactly what he will do."
Clyburn spokeswoman Hope Derrick later said Clyburn didn't mean he thought those governors were racially motivated in their opposition, but that rejecting stimulus money would hurt black residents.
Clyburn began his remarks to reporters Thursday by talking about the Juneteenth celebration, which marks when slaves in Texas finally learned they had been freed by the Emancipation Proclamation more than a year after it happened.
"Knowing my history and knowing Texas history, all of this, it was a slap in the face of African-Americans," Clyburn said.
___
Associated Press Writer Melinda Deslatte in Baton Rouge, La., contributed to this report.
By PAGE IVEY, Associated Press Writer
Thu Feb 19, 11:26 pm ET
COLUMBIA, S.C. – The highest-ranking black congressman said Thursday that opposition to the federal stimulus package by southern GOP governors is "a slap in the face of African-Americans."
U.S. Rep. James Clyburn, D-S.C., said he was insulted when the governors of Texas, Louisiana, Mississippi and his home state, which have large black populations, said they might not accept some of the money from the $787 billion stimulus package.
Texas Gov. Rick Perry said Wednesday he would accept the money, and none of the others has rejected it outright. The Republican governors of Idaho and Alaska also said they had reservations about whether the money would come with too many strings attached, but Clyburn said he was particularly taken aback by southern governors who said they might decline it.
"These four governors represent states that are in the proverbial black belt," Clyburn said.
A spokesman for South Carolina Gov. Mark Sanford accused Clyburn of playing the race card.
"Spending money at the federal level that we do not have represents a future tax increase on all South Carolinians, regardless of their color," Sanford spokesman Joel Sawyer said in an e-mail statement. "And in the process of doing so, he's ripping off everyone he claims to represent."
Speaking earlier Thursday on CBS' "The Early Show," Sanford said being against the stimulus plan doesn't preclude taking the money. He said he opposed President Barack Obama's economic plan because it's "a bad idea," but would look over it and decide whether some parts would work for South Carolina.
A message seeking comment was left with a spokesman for Mississippi Gov. Haley Barbour. Kyle Plotkin, press secretary for Louisiana Gov. Bobby Jindal, who is the son of Indian immigrants, called Clyburn's comments absurd.
"Each state agency is reviewing the bill to determine what strings are attached to any funds coming to Louisiana," Plotkin said. "The governor has an obligation to look out for the interests of Louisiana's taxpayers and that is exactly what he will do."
Clyburn spokeswoman Hope Derrick later said Clyburn didn't mean he thought those governors were racially motivated in their opposition, but that rejecting stimulus money would hurt black residents.
Clyburn began his remarks to reporters Thursday by talking about the Juneteenth celebration, which marks when slaves in Texas finally learned they had been freed by the Emancipation Proclamation more than a year after it happened.
"Knowing my history and knowing Texas history, all of this, it was a slap in the face of African-Americans," Clyburn said.
___
Associated Press Writer Melinda Deslatte in Baton Rouge, La., contributed to this report.
Deadlines, partisanship won't keep mayors from federal dollars
Deadlines, partisanship won't keep mayors from federal dollars
By Suzanne Malveaux
CNN White House Correspondent
WASHINGTON (CNN) -- Several dozen mayors from across the country emerged from their meeting with President Barack Obama on Friday with one message -- they are determined to get their money.
The mayors met with Obama to discuss the implementation of city-related funding from the $787 billion stimulus package.
"This plan does more to lay a new foundation for our cities' growth and opportunity than anything Washington has done in generations," Obama told them at a White House reception.
The economic stimulus package sets aside billions of dollars for highway construction, transit improvements, school modernization and community development block grants, among other things.
San Francisco Mayor Gavin Newsom noted, however, that getting those dollars is a competitive process.
"I think those cities that have stepped back and have not organized to date are in real peril of missing out on the competitive dollars," he said.
"We need to be front and center, because you've got short timelines here and the timelines are not only to get the dollars distributed, but more importantly to make sure they're spent within 18 months, as we're prescribing most of these dollars to be spent."
Getting this kind of money is an unbelievable opportunity, Newsom said.
"As a mayor, I'll never experience this again, and perhaps as a citizen of this country -- and as the next ex-mayor of San Francisco, I don't think I'll ever experience it either, so we don't want to screw it up."
Democratic Mayor Ray Nagin of New Orleans vowed that he would get his share of the stimulus, even if his state's Republican governor, Bobby Jindal, tries to block it. Jindal has threatened to refuse the billions of dollars in stimulus money Louisiana is qualified for because he believes the economic stimulus package is a waste of money.
Nagin suggested politics motivated Jindal's hard-line stand.
"He thinks he's been tapped as the up-and-coming Republican. He'll potentially run for it (the presidency) the next time it goes around. So he has a certain vernacular and a certain way he needs to talk right now," he said.
"I don't think it's going to impede us, because Rep. [James] Clyburn basically said if a governor does not want this money, the legislator can vote to accept the money. I told the governor personally, any dollar he does not want, we will take them gladly."
Clyburn, a South Carolina Democrat, spoke out after Jindal indicated he might not take the money.
Republican Mayor Patrick McCrory of Charlotte, North Carolina, acknowledged he is one of the Republicans who are not fans of the $787 billion plan, but he's still pursuing his city's share.
"I thought too much emphasis was on non-infrastructure projects. My hope was if we're going to do a stimulus it would be on long-term infrastructure projects, like during the Eisenhower administration, which would have impact for generations to come, since they'll be paying for it," he said. "But since the bill's been passed now I've got to work with the bill and try to implement it the best way I can in my city and as other mayors will do in their cities."
McCrory rejected the suggestion that he should refuse the money to be consistent with his party's stand. Only three Republican senators voted for the stimulus package.
"It's our money that's being spent. I mean, I'm sending my tax dollars -- my income tax dollars along with my constituents' tax dollars -- to Washington, and if I don't spend it these other mayors will spend it, and that wouldn't be fair to my constituents," he said. "So I do not think it's a sign of hypocrisy or a contradiction. We do this every year with bills that are passed or not passed. During the last 14 years I've been mayor, there have been many bills that have been passed which I disagree with, but once it's passed, you've got to make it work, and that's what I hope to do in Charlotte."
McCrory believes Republican governors who are threatening to block funds to their states are making a big mistake.
"I would disagree with them, unless some of the money, you've got to be careful with, because it could be tied to long-term operating money, which could put you in a bind only two or three years from now. That I understand, but just overall rejecting the infrastructure money would be a mistake for their own taxpayers because those taxpayers are paying for it whether they get it or not," he said.
Newsom said that despite the rush for the funds, the Obama administration has set a reasonable timetable.
"I think it is, under the circumstances, but it focuses peoples' attention, and in politics our attention sometimes wanders. And so this is an opportunity in the next two or three months to get very serious because it can play a huge role in dramatically changing the direction of a lot of American cities."
Newsom said the federal dollars will be especially helpful to his high tech area. "We're seeding a modernization strategy: on Wi-Fi, on ubiquitous broadband access, on modernizing integrated traffic management systems, on smart grids, on transmission lines, on focusing on electric vehicles and greening of our workforce."
Newsom said the biggest challenge in getting money right away is "making sure that the grant applications are consistent, collaborative and coordinated and that they meet the criteria that have been set out.
"That was the advantage of this meeting, because we were able not only to meet with the president and vice president, but the secretaries and the Cabinet-level officials that are really drawing down on the specific, prescriptive nature of some of these applications, and that was, for me, a great opportunity to take notes, read between the lines in terms of what they're looking for, again, particularly on the competitive dollars."
All AboutEconomic Stimulus • Barack Obama • Ray Nagin • Gavin Newsom • Bobby Jindal
Find this article at:
http://www.cnn.com/2009/POLITICS/02/20/obama.mayors.reaction/index.html
By Suzanne Malveaux
CNN White House Correspondent
WASHINGTON (CNN) -- Several dozen mayors from across the country emerged from their meeting with President Barack Obama on Friday with one message -- they are determined to get their money.
The mayors met with Obama to discuss the implementation of city-related funding from the $787 billion stimulus package.
"This plan does more to lay a new foundation for our cities' growth and opportunity than anything Washington has done in generations," Obama told them at a White House reception.
The economic stimulus package sets aside billions of dollars for highway construction, transit improvements, school modernization and community development block grants, among other things.
San Francisco Mayor Gavin Newsom noted, however, that getting those dollars is a competitive process.
"I think those cities that have stepped back and have not organized to date are in real peril of missing out on the competitive dollars," he said.
"We need to be front and center, because you've got short timelines here and the timelines are not only to get the dollars distributed, but more importantly to make sure they're spent within 18 months, as we're prescribing most of these dollars to be spent."
Getting this kind of money is an unbelievable opportunity, Newsom said.
"As a mayor, I'll never experience this again, and perhaps as a citizen of this country -- and as the next ex-mayor of San Francisco, I don't think I'll ever experience it either, so we don't want to screw it up."
Democratic Mayor Ray Nagin of New Orleans vowed that he would get his share of the stimulus, even if his state's Republican governor, Bobby Jindal, tries to block it. Jindal has threatened to refuse the billions of dollars in stimulus money Louisiana is qualified for because he believes the economic stimulus package is a waste of money.
Nagin suggested politics motivated Jindal's hard-line stand.
"He thinks he's been tapped as the up-and-coming Republican. He'll potentially run for it (the presidency) the next time it goes around. So he has a certain vernacular and a certain way he needs to talk right now," he said.
"I don't think it's going to impede us, because Rep. [James] Clyburn basically said if a governor does not want this money, the legislator can vote to accept the money. I told the governor personally, any dollar he does not want, we will take them gladly."
Clyburn, a South Carolina Democrat, spoke out after Jindal indicated he might not take the money.
Republican Mayor Patrick McCrory of Charlotte, North Carolina, acknowledged he is one of the Republicans who are not fans of the $787 billion plan, but he's still pursuing his city's share.
"I thought too much emphasis was on non-infrastructure projects. My hope was if we're going to do a stimulus it would be on long-term infrastructure projects, like during the Eisenhower administration, which would have impact for generations to come, since they'll be paying for it," he said. "But since the bill's been passed now I've got to work with the bill and try to implement it the best way I can in my city and as other mayors will do in their cities."
McCrory rejected the suggestion that he should refuse the money to be consistent with his party's stand. Only three Republican senators voted for the stimulus package.
"It's our money that's being spent. I mean, I'm sending my tax dollars -- my income tax dollars along with my constituents' tax dollars -- to Washington, and if I don't spend it these other mayors will spend it, and that wouldn't be fair to my constituents," he said. "So I do not think it's a sign of hypocrisy or a contradiction. We do this every year with bills that are passed or not passed. During the last 14 years I've been mayor, there have been many bills that have been passed which I disagree with, but once it's passed, you've got to make it work, and that's what I hope to do in Charlotte."
McCrory believes Republican governors who are threatening to block funds to their states are making a big mistake.
"I would disagree with them, unless some of the money, you've got to be careful with, because it could be tied to long-term operating money, which could put you in a bind only two or three years from now. That I understand, but just overall rejecting the infrastructure money would be a mistake for their own taxpayers because those taxpayers are paying for it whether they get it or not," he said.
Newsom said that despite the rush for the funds, the Obama administration has set a reasonable timetable.
"I think it is, under the circumstances, but it focuses peoples' attention, and in politics our attention sometimes wanders. And so this is an opportunity in the next two or three months to get very serious because it can play a huge role in dramatically changing the direction of a lot of American cities."
Newsom said the federal dollars will be especially helpful to his high tech area. "We're seeding a modernization strategy: on Wi-Fi, on ubiquitous broadband access, on modernizing integrated traffic management systems, on smart grids, on transmission lines, on focusing on electric vehicles and greening of our workforce."
Newsom said the biggest challenge in getting money right away is "making sure that the grant applications are consistent, collaborative and coordinated and that they meet the criteria that have been set out.
"That was the advantage of this meeting, because we were able not only to meet with the president and vice president, but the secretaries and the Cabinet-level officials that are really drawing down on the specific, prescriptive nature of some of these applications, and that was, for me, a great opportunity to take notes, read between the lines in terms of what they're looking for, again, particularly on the competitive dollars."
All AboutEconomic Stimulus • Barack Obama • Ray Nagin • Gavin Newsom • Bobby Jindal
Find this article at:
http://www.cnn.com/2009/POLITICS/02/20/obama.mayors.reaction/index.html
Obama administration keeps Bush view on Afghanistan detainees (political prisoners)
Obama administration keeps Bush view on Afghanistan detainees
By Terry Frieden
CNN
WASHINGTON (CNN) -- The Obama administration told a federal court late Friday it will maintain the Bush administration's position that battlefield detainees held without charges by the United States in Afghanistan are not entitled to constitutional rights to challenge their detention.
"Having considered the matter, the government adheres to its previously articulated position," said a Justice Department document filed in federal court in Washington.
In a controversial 5-4 vote, the Supreme Court last year ruled that detainees held at the U.S. naval base at Guantanamo Bay had a right under the constitution to challenge their continued detention. However, the court did not say whether it applied to prisoners in other locations abroad, including Afghanistan.
Five prisoners held at Bagram Air Base, backed by human rights groups, have gone to court to claim the same rights as the men detained in Guantanamo Bay.
The new administration, which was given a month by a federal judge to declare whether the government wants to change its position, has now indicated it will continue to argue that it is against its security interests to release enemy combatants in a war zone.
Barbara Olshansky, lead counsel for three of the detainee petitioners, said that the administration's decision was "deeply disappointing."
"We are trying to remain hopeful that the message being conveyed is that the new administration is still working on its position regarding the applicability of the laws of war -- the Geneva Conventions -- and international human rights treaties that apply to everyone in detention there," she said.
The air base at Bagram, located north of the city of Kabul, houses between 600 and 650 detainees. Most were picked up for suspected ties to terrorism.
All AboutGuantanamo Bay • U.S. Supreme Court • Bagram Airbase
Find this article at:
http://www.cnn.com/2009/WORLD/asiapcf/02/20/afghan.detainees/index.html
By Terry Frieden
CNN
WASHINGTON (CNN) -- The Obama administration told a federal court late Friday it will maintain the Bush administration's position that battlefield detainees held without charges by the United States in Afghanistan are not entitled to constitutional rights to challenge their detention.
"Having considered the matter, the government adheres to its previously articulated position," said a Justice Department document filed in federal court in Washington.
In a controversial 5-4 vote, the Supreme Court last year ruled that detainees held at the U.S. naval base at Guantanamo Bay had a right under the constitution to challenge their continued detention. However, the court did not say whether it applied to prisoners in other locations abroad, including Afghanistan.
Five prisoners held at Bagram Air Base, backed by human rights groups, have gone to court to claim the same rights as the men detained in Guantanamo Bay.
The new administration, which was given a month by a federal judge to declare whether the government wants to change its position, has now indicated it will continue to argue that it is against its security interests to release enemy combatants in a war zone.
Barbara Olshansky, lead counsel for three of the detainee petitioners, said that the administration's decision was "deeply disappointing."
"We are trying to remain hopeful that the message being conveyed is that the new administration is still working on its position regarding the applicability of the laws of war -- the Geneva Conventions -- and international human rights treaties that apply to everyone in detention there," she said.
The air base at Bagram, located north of the city of Kabul, houses between 600 and 650 detainees. Most were picked up for suspected ties to terrorism.
All AboutGuantanamo Bay • U.S. Supreme Court • Bagram Airbase
Find this article at:
http://www.cnn.com/2009/WORLD/asiapcf/02/20/afghan.detainees/index.html
Friday, February 20, 2009
Warning for the west as crisis spills into the streets
Warning for the West as crisis spills onto streets
The slump that has swept through developed nations like the UK, the eurozone and the United States is hitting the world's emerging economies with a speed and ferocity that has shocked even the most pessimistic analysts.
Until recently, many investors and economists thought such countries could provide a bulwark against the collapse in growth elsewhere. Instead, the latest data suggests that emerging economies as a group actually contracted late last year, and will likely shrink further in 2009.
The pace of the turnaround has caught policymakers and investors off guard. In a matter of months, key gauges of growth in trade and industrial production in a number of countries went from acceptable to alarming - even domestic demand is suffering.
Asia's economies have posted the starkest drops in economic activity, but the slide is evident from Latin America to Eastern Europe.
Economists are particularly concerned about conditions in the Baltic countries, Eastern Europe and Russia, which still has a formidable nuclear arsenal. In all three areas of the former Soviet empire, deteriorating economic conditions, marked by steep falls in the value of national currencies and gross domestic product, has led to weeks of civil unrest.
Analysts are worried that problems in Eastern Europe and Russia could have a negative impact upon western currencies and banks, which are big lenders and investors in the area.
They point to a sharp fall in the euro last Tuesday. The value of the 17-nation currency plunged after reports that Russian banks were seeking to reschedule as much as $400bn of foreign debts.
Russian banks had $198bn in outstanding foreign debt as of October 1 and non-financial institutions had $300bn, according to the latest data available from the central bank in Moscow.
Reports of rescheduling plans were denied by Moscow but this failed to help the single currency recoup all its losses.
Analysts said the episode illustrated just how vulnerable the euro remains to the problems of Central and Eastern Europe. The Russian rouble and the Hungarian forint have also weakened against the dollar.
In an ominous development, Russian companies, the biggest emerging-market borrowers during the last three years, have been shut out of the international bond market after yields jumped sixfold since August amid plunging energy prices and a weakening rouble.
The credit squeeze will force companies to rely on government bailouts to refinance their debt or face default, according to MDM Bank, VTB Group and Commerzbank.
In a move to restore confidence in the Russian economy, President Dmitry Medvedev last week pledged more than $200bn in emergency funds to support banks and companies as the 60% drop in oil prices since August and the rouble's 35% tumble against the dollar push the world's biggest energy supplier into its worst economic crisis since the government defaulted on $40bn of domestic debt in 1998.
Street clashes have broken out in Moscow and other cities and the government is clearly worried about further outbreaks of violence.
Fitch recently downgraded Russia's sovereign rating, citing a wave of corporate refinancings and the government's macroeconomic policy. Standard & Poor's made similar moves late last year and many observers expect Moody's to do the same soon.
Downgrades make it more expensive for companies and the government to obtain new debt.
The situation is little better in the Baltic states of Latvia, Lithuania and Estonia, where governments have had to cut spending on key programmes.
Some experts are concerned that economic difficulties in the Baltic states will spill over into Sweden, Denmark and Norway.
There are also worries about larger economies such as Slovakia, Bulgaria, Romania and Ukraine. If they weaken further, it will put banks in Germany and Austria in even deeper trouble. Austrian banks have run up huge debts in neighbouring countries.
Last month saw the biggest demonstrations in Latvia and Lithuania for nearly 20 years. In Vilnius, the capital of Lithuania, a mass protest against austerity measures ended up in a riot as protesters hurled eggs, rocks and snowballs at the police.
In Latvia's capital Riga, people dug up cobblestones from the street, smashed storefronts and trashed police cars. The protests followed the government's decision to push through massive cuts in social security payments.
Angry demonstrations have broken out elsewhere in Eastern Europe. The centre of the Bulgarian capital Sofia was brought to a standstill by protesters who surrounded the country's parliament building.
In Romania, thousands of workers walked out of factories and marched against government plans for more privatisation and budget cuts.
Tension is rising in Hungary, where unemployment has jumped to above 8%, according to analysts in Budapest. Last year, the government was forced to turn to the International Monetary Fund to avert a debt default, and the economy is forecast to contract as much as 3% this year.
Meanwhile, some of the strongest emerging economies outside of Europe are also in trouble. Taiwan said last week that exports in January plunged a record 44% from the same month last year, pushing them down to a level unseen since 2005.
Last week, Brazil posted industrial production numbers for December that showed a historic tumble of 12.4% from the previous month, shocking the country and forcing its president to calm nerves.
In South Korea, the December fall in industrial output over a year earlier was the largest since the country began keeping records. The South Korean won has shed nearly 10% of its value against the dollar.
Malaysia announced last week that its factory output fell at its steepest pace in 15 years in December from a year ago, reinforcing expectations the government will step up spending to fend off a recession.
It was the fourth straight month of decline in output in the South-east Asian country, which is grappling with collapsing demand for electronic goods, the biggest export revenue earner for the country.
"The magnitude of the deterioration (in emerging economies) is nothing short of dramatic," said Amer Bisat, an analyst at US investment firm Traxis Partners. "We're continually catching up with the data, and with continuing downward revisions, at a pace which to my mind is unprecedented."
Bleak economic figures have prevented some stock markets in developing countries from making gains this year. Benchmark indices in Brazil and China are up about 10% this year, but India's is down slightly and Russia's has fallen sharply. The Russian equity market is one of the worst-performing bourses in the world.
Analysts said a number of emerging markets are grappling with a series of blows such as declining trade, shrinking capital flows and slumping commodity prices. Domestic demand also is going into reverse.
JP Morgan forecasts that at least 11 emerging economies - among them South Korea, Taiwan, Russia, Turkey, and Mexico - will shrink in 2009, with another four posting no growth.
Brazil is the latest example of the swift reversal of fortune in emerging markets. Just last month, the country's finance minister predicted "good economic results" and gross domestic product growth of 4% in 2009 for South America's largest economy. But forecasts by private economists are in freefall, and many now predict no growth or very little this year.
JP Morgan economists predict that China, the giant of the emerging world, will grow 7.2% this year, a major deceleration compared to 2008 and 2007. Chinese imports and exports are falling at their worst rates in a decade, a sign not only of weak global demand, but of a retrenchment by Chinese companies and consumers.
The Chinese government has responded with an aggressive stimulus package and interest-rate cuts. A gauge of manufacturing posted a slight rebound for January, but is still signaling a contraction in activity.
In South Korea, the economy began spinning backwards late last year. Surging exports from its ports stalled and then fell more than 30% in January over a year earlier, a reversal that has outpaced declines the country experienced during the Asian financial crisis of 1997-98.
In 2009, Taiwan, Indonesia, and the Philippines are expected to see a fall in exports that will outstrip what they experienced during the Asian financial crisis of 1998, according to Credit Suisse.
During that debacle, emerging nations were able to recover relatively quickly by relying on export markets like the United States to keep buying their goods - something they may not be able to count on this time around.
12:46am Monday 16th February 2009
By DOUGLAS HAMILTON
The slump that has swept through developed nations like the UK, the eurozone and the United States is hitting the world's emerging economies with a speed and ferocity that has shocked even the most pessimistic analysts.
Until recently, many investors and economists thought such countries could provide a bulwark against the collapse in growth elsewhere. Instead, the latest data suggests that emerging economies as a group actually contracted late last year, and will likely shrink further in 2009.
The pace of the turnaround has caught policymakers and investors off guard. In a matter of months, key gauges of growth in trade and industrial production in a number of countries went from acceptable to alarming - even domestic demand is suffering.
Asia's economies have posted the starkest drops in economic activity, but the slide is evident from Latin America to Eastern Europe.
Economists are particularly concerned about conditions in the Baltic countries, Eastern Europe and Russia, which still has a formidable nuclear arsenal. In all three areas of the former Soviet empire, deteriorating economic conditions, marked by steep falls in the value of national currencies and gross domestic product, has led to weeks of civil unrest.
Analysts are worried that problems in Eastern Europe and Russia could have a negative impact upon western currencies and banks, which are big lenders and investors in the area.
They point to a sharp fall in the euro last Tuesday. The value of the 17-nation currency plunged after reports that Russian banks were seeking to reschedule as much as $400bn of foreign debts.
Russian banks had $198bn in outstanding foreign debt as of October 1 and non-financial institutions had $300bn, according to the latest data available from the central bank in Moscow.
Reports of rescheduling plans were denied by Moscow but this failed to help the single currency recoup all its losses.
Analysts said the episode illustrated just how vulnerable the euro remains to the problems of Central and Eastern Europe. The Russian rouble and the Hungarian forint have also weakened against the dollar.
In an ominous development, Russian companies, the biggest emerging-market borrowers during the last three years, have been shut out of the international bond market after yields jumped sixfold since August amid plunging energy prices and a weakening rouble.
The credit squeeze will force companies to rely on government bailouts to refinance their debt or face default, according to MDM Bank, VTB Group and Commerzbank.
In a move to restore confidence in the Russian economy, President Dmitry Medvedev last week pledged more than $200bn in emergency funds to support banks and companies as the 60% drop in oil prices since August and the rouble's 35% tumble against the dollar push the world's biggest energy supplier into its worst economic crisis since the government defaulted on $40bn of domestic debt in 1998.
Street clashes have broken out in Moscow and other cities and the government is clearly worried about further outbreaks of violence.
Fitch recently downgraded Russia's sovereign rating, citing a wave of corporate refinancings and the government's macroeconomic policy. Standard & Poor's made similar moves late last year and many observers expect Moody's to do the same soon.
Downgrades make it more expensive for companies and the government to obtain new debt.
The situation is little better in the Baltic states of Latvia, Lithuania and Estonia, where governments have had to cut spending on key programmes.
Some experts are concerned that economic difficulties in the Baltic states will spill over into Sweden, Denmark and Norway.
There are also worries about larger economies such as Slovakia, Bulgaria, Romania and Ukraine. If they weaken further, it will put banks in Germany and Austria in even deeper trouble. Austrian banks have run up huge debts in neighbouring countries.
Last month saw the biggest demonstrations in Latvia and Lithuania for nearly 20 years. In Vilnius, the capital of Lithuania, a mass protest against austerity measures ended up in a riot as protesters hurled eggs, rocks and snowballs at the police.
In Latvia's capital Riga, people dug up cobblestones from the street, smashed storefronts and trashed police cars. The protests followed the government's decision to push through massive cuts in social security payments.
Angry demonstrations have broken out elsewhere in Eastern Europe. The centre of the Bulgarian capital Sofia was brought to a standstill by protesters who surrounded the country's parliament building.
In Romania, thousands of workers walked out of factories and marched against government plans for more privatisation and budget cuts.
Tension is rising in Hungary, where unemployment has jumped to above 8%, according to analysts in Budapest. Last year, the government was forced to turn to the International Monetary Fund to avert a debt default, and the economy is forecast to contract as much as 3% this year.
Meanwhile, some of the strongest emerging economies outside of Europe are also in trouble. Taiwan said last week that exports in January plunged a record 44% from the same month last year, pushing them down to a level unseen since 2005.
Last week, Brazil posted industrial production numbers for December that showed a historic tumble of 12.4% from the previous month, shocking the country and forcing its president to calm nerves.
In South Korea, the December fall in industrial output over a year earlier was the largest since the country began keeping records. The South Korean won has shed nearly 10% of its value against the dollar.
Malaysia announced last week that its factory output fell at its steepest pace in 15 years in December from a year ago, reinforcing expectations the government will step up spending to fend off a recession.
It was the fourth straight month of decline in output in the South-east Asian country, which is grappling with collapsing demand for electronic goods, the biggest export revenue earner for the country.
"The magnitude of the deterioration (in emerging economies) is nothing short of dramatic," said Amer Bisat, an analyst at US investment firm Traxis Partners. "We're continually catching up with the data, and with continuing downward revisions, at a pace which to my mind is unprecedented."
Bleak economic figures have prevented some stock markets in developing countries from making gains this year. Benchmark indices in Brazil and China are up about 10% this year, but India's is down slightly and Russia's has fallen sharply. The Russian equity market is one of the worst-performing bourses in the world.
Analysts said a number of emerging markets are grappling with a series of blows such as declining trade, shrinking capital flows and slumping commodity prices. Domestic demand also is going into reverse.
JP Morgan forecasts that at least 11 emerging economies - among them South Korea, Taiwan, Russia, Turkey, and Mexico - will shrink in 2009, with another four posting no growth.
Brazil is the latest example of the swift reversal of fortune in emerging markets. Just last month, the country's finance minister predicted "good economic results" and gross domestic product growth of 4% in 2009 for South America's largest economy. But forecasts by private economists are in freefall, and many now predict no growth or very little this year.
JP Morgan economists predict that China, the giant of the emerging world, will grow 7.2% this year, a major deceleration compared to 2008 and 2007. Chinese imports and exports are falling at their worst rates in a decade, a sign not only of weak global demand, but of a retrenchment by Chinese companies and consumers.
The Chinese government has responded with an aggressive stimulus package and interest-rate cuts. A gauge of manufacturing posted a slight rebound for January, but is still signaling a contraction in activity.
In South Korea, the economy began spinning backwards late last year. Surging exports from its ports stalled and then fell more than 30% in January over a year earlier, a reversal that has outpaced declines the country experienced during the Asian financial crisis of 1997-98.
In 2009, Taiwan, Indonesia, and the Philippines are expected to see a fall in exports that will outstrip what they experienced during the Asian financial crisis of 1998, according to Credit Suisse.
During that debacle, emerging nations were able to recover relatively quickly by relying on export markets like the United States to keep buying their goods - something they may not be able to count on this time around.
12:46am Monday 16th February 2009
By DOUGLAS HAMILTON