Workers’ Strike in Reliance Textile Industries, Naroda plant, Ahmedabad – A Report

February 8, 2012 by Leave a Comment

Highly exploitative wage structure and abysmal working conditions have led the over 5000 workers to strike work in the primary manufacturing plant of Reliance Textile Industries in Naroda, Gujarat, which is at a halt since 2nd February 2012. While the company posted its highest ever turnover of over USD 44 billion and its net profit increased to USD 3.6 billion, workers in the factory (‘dressing up India’ with ‘fabrics which make you feel like a millionaire’ its website says) which started this empire’s journey find their lives getting cheaper by the day. Spread over 120 acres and with assets of over 300 crore, this plant in Naroda Industrial Estate, located in a GIDC (Gujarat Industrial Development Corporation) near Ahmedabad is India’s ‘most modern textile complex’ (according to the World Bank) and Reliance’s first manufacturing facility set up by Dhirubhai Ambani in 1966. Producing the ‘Only Vimal’ brand and housing sophisticated machinery, it says it is ushering in ‘a new era in fabrics, include suitings, shirtings, home textiles’.

Workers’ Demand List

But the skeletons in its closet are coming tumbling out, as the most of the around 1100 permanent and 4000 contract workers assert their rights and continue their strike which started from the second shift on 2nd February. The company meanwhile responds with police deployment, intimidation, arrest of workers’ leaders and a media campaign which says that the workers have only been miffed for not being allowed to carry mobile phones inside the factory. On the first day of the strike itself, Modi’s willing police forced the striking workers away from the factory gate, and when they assembled in the shamshanghat complex, around 20 minutes away, were forced out of there too. Declaring the strike to be illegal, and arresting the leaders, police has posted itself in the factory gate.

Workers’ Demand List Contd.

According to the workers, for last 20 years (when the company’s profits increased ten-fold), the wages for the workers and karigars has more or less been the same, whereas the salary of the staff increased many times. While the permanent workers earn a paltry Rs. 5000-6000 per month, the contract workers are paid Rs.85-100 per day. No legality of payment in terms of pay slips etc. is maintained, only a voucher is signed. Overtime is paid in single rate, while strict surveillance is maintained and late entry is severely punished. For the last 20-25 years, two anti-worker unions have been there in the plant. One is ‘Majdoor Mahajan’, the union that was originally established by M. K. Gandhi after the Bombay textile strike in the 1920s and has many unions across Gujarat, and the other is ‘Mill Mazdoor Sabha’, affiliated to the Hind Mazdoor Sabha. The workers, fed up of both these Unions’ corrupt practices, say how they act as “extended office of the management”. Every three years, a settlement is brokered between these two Unions’ officials and the management, but workers are kept out of it and do not even get to know of the deal brokered. No notice is put up. Four years back, both these Unions even agreed to accept that there will be no recess hour for the workers to have tea. So the workers were henceforth forced to have tea on the way to the bathroom, and in the location of work in an unhygienic and dirty atmosphere, so that work is not disturbed and time ‘better managed’.

Workers strongly emphasise that the reason for the strike is not as the popular media reporting and management statements on it goes, that of the prohibition of mobile phone inside the factory. It is only to delegitimize their struggle, that they are sought to being portrayed as flippant, lazy, like the recent struggle in Yanam was decried as being done by anarchist ‘killer workers’, or how the Maruti Suzuki struggle was sought to be portrayed as ‘innocent young workers under the sway of outside elements’.

The demands and the inhuman working conditions from which they have arisen are clear to the workers. Even as the company site says that it ‘endeavours to create a workplace where every person can realise his or her full potential’, the workers specifically stress on the abusive language of the management staff. Though they have raised their demands again and again earlier, the workers now organized as Reliance Employees Union submitted a 16-point demand list to the management again during the strike, which include a 60% hike in wages and regularization of contract workers, besides double rate overtime, a 20% increase in bonus, increase of daily wage of contract workers to Rs. 200 per day, renewal of fixed salary system, uniform rights for wage board, tea-snacks in the canteen, no fine for 10 minute late entry, to fill accident forms according to procedure, an end to harassment of workers, and an assurance that striking workers will not be fired and no deduction of wage for the strike period is made.

Disregarding all these demands, the management apart from the disinformation campaign, has resorted to police force, arrest and intimidation on the striking workers and their leaders, and are now bringing in temporary workers from outside, paying them Rs. 400-500 per day, to show that the plant is running, though at much below its capacity. Continuing with their anti-worker stance, both the pro-management Unions were against the strike, but the majority of the workers emphasized the strong unity among striking workforce. “We have formed a new union named ‘Reliance Employees Union. The strike will go on till our demands are met”, said Hasmukh Patel, President of the new Union. The workers’ complete disillusionment and anger against Narendra Modi and his ‘vibrant Gujarat development model’, and against the Reliance management is becoming more and more evident, from their own experiences. Sagar Patil, a striking worker, said, “With 9.5 crore, the money we produced, Nita Ambani bought an IPL team. They are making jalsa with our money, but it pains them to even part a few thousands to us who produce.” No trade union, or political group or even the huge number of ‘humanist’ organizations in Gujarat have even made a single statement in favour of the workers till now, but the striking workers continue with their struggle.

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For some Gup-Shup in Faridabad (February 7)

February 4, 2012 by Leave a Comment

Faridabad Majdoor Samachar

To contribute to radical social transformations that are mushrooming all over the world, feel free about : stammering, fragmentariness, incoherence, missing steps….. Social (and natural) reality are very complex and dynamic. Leaps in interactions amongst seven billion human beings are on our agenda.

It is only in the present that we can act/prepare to act. What to do and what not to do, how to do and how not to do are coloured by the different facets/ sectionalities in the present and also carry deep imprints of the past (not only near and distant past but also different pasts of different locations/groups). So a request: Try not to be polemical; try not to attempt to clinch arguments; try to respect your own selves (by implication you will respect those around you). Primarily it is to act, it is for better actions that this gup-shup is premised on. “Cataclysmic event” language and imagery seems problematic; languages and imageries that are premised on active participations of seven billion human beings are indispensable for radical social transformations.

A technical constraint in the gup-shup is that we will be using mostly English language.

Some Statements Etcetera

* Small groupings of human beings called birth a shaap (curse) or the fall. Half of their numbers, females were described as sin personified. What was tragic for small groupings is today a tragedy for all human beings, for all living species, for the earth.

* It does not seem that something had to happen, rather possibilities and probabilities seems to be the norm. But, once a possibility gets concretized, it has a dynamic and trajectory specific to it.

* Relationship between a part and the (immediate) whole. Harmony and conflict between parts and the whole seem to be the norm. Small groupings of human beings embarked on a trajectory wherein the part attempts to control, dominate, mould the whole. Other-ing unleashed – series of “the other – others.”.

* Domestication of animals led to the domestication of human beings, slave owners and slaves.

* Deformation of communities, emergence of “I” with men as its official bearers. Man woman relations become very problematic. Today, by and large, women and children are also bearers of “I”. “Who am I?” has become a universal question.

* Certainty of death after birth becomes unbearable for any “I”. Attempts at immortality. Search for amrit (the nectar of life). Philosophies of rebirth, heavan, hell. Theories of lineage. Tragedies of Alexanders – great thinkers, great warriors, great artists, great sportspersons, great performers, great leaders…..

* From “who am I?”, we have entered a phase where there are many an “I” in each “I”. In the process of transcending “I” we seem to have come to the era of ekmev (unique) and ekmaya (together).

* Discriminations became rampant amongst human beings. It was a corollary of othering and dominating – controlling – moulding. All discriminations must be opposed. The question is: How? Discriminations are a breeding ground for all sorts of identity politics. An exemplary end-result is the constitution of the state of Israel. This is how discriminations are not to be opposed. The ways of opposing discriminations should be such that discrimination as such comes into focus.

* From domestication of animals to agriculture, from slave-owners and slaves to feudal lords and serfs increased the groupings of human beings that led tragic lives. Trade, long distance trade further increased these numbers. But during all this time large groupings of human beings lived in natural surroundings. It is only during the last two hundred years, it is only after steam and coal power was harnessed by human beings that a leap change began. Internal combustion engine, electricity, atomic energy, electronics magnified the leaps in the changes and have brought us face to face with their dire consequences.

* It was production for the market that led the onslaught. Artisans and peasants producing for the market using their own and family labour became redundant. For two hundred years now they are face to face with social death and social murder. Peasants and artisans in their Luddite incarnation in England attacked factories at night. Some of them were gunned down and hanged, many became wage-workers or shopkeepers or social outcastes, beggars etc., and many were forced out to the Americas and Australia. The mass displacements from Europe further increased the genocides in Americas and Australia. A corollary of the inability to tame-domesticate people in America – Australia was the massive increase in slave-trade in Africa, indentured labour in India, for production for the market.

* Steam and coal driven machinery had made large numbers of people in Europe superfluous. The entry of electronics in the production processes has made still more people superfluous….. Its impact on hundreds of millions of peasants, artisans, shopkeepers in Asia, Africa, South America is devastating and at an electronic pace. They have nowhere to go. There are no “empty americas”. Desperation borne of social death and social murder of peasants, artisans, shopkeepers is the cause of hundreds of thousands committing suicides and similar numbers taking up arms in various garbs. Napoleon’s army is miniscule vis-a-vis the militarization in the world today but it is still too small for the desperate hundreds of millions. So, besides state armies there are mushrooming proto-state armies. Desperations of hundreds of millions of peasants, artisans, shopkeepers is increasing the fragility of state apparatuses. Outside of western Europe, Japan and North America this is a very important social setting for attempts at radical social transformations.

* In the initial stage of production for the market using wage-labour, factories were owned by individuals. The unfolding of the process led to factories being owned by groups of individuals, by a dozen or so stock holders. The requirements for establishing and running a factory soon started demanding the pooling of resources by thousands. Share holding of thousands became the “owner” of the factories. Needs of increasing size and resources made share holding inadequate and loans emerged as the major source of funds for establishment and functioning of factories. Pension funds, insurance funds, bank deposits, financial institutions became de-facto owners of production enterprises with 80-85% of the investment coming from them and about 15% from shares. (A significant portion of shares is also held by these institutions). “Capitalist – personified capital” has given way to boards of directors, chairmen, managing directors, CEO’s as “representatives of faceless capital”. Being a state enterprise or corporate, company enterprise is not a significant difference. These changes in material production enterprises have by and large been replicated in other spheres of social life, be they be trade, education, entertainment, medical treatment. Craft-artisanal mode gave way to industrial mode and then its dynamics has followed. Factory mode is moulding all spheres of life throughout the world. (In long distance trade, the institutional form of organization, company preceded its emergence in material production.)

* The process of institutionalization has not halted with the dismantling of large factories. Instead of a car factory, we have auto hubs today. What is called a car factory is mainly an assembly plant. A vehicle manufacture today needs production facilities spread over an area with fifty kilometer radius. It requires a hundred thousand plus workforce. And the rapid changes that the institutionalization of research is bringing about makes it increasingly unviable. Today it is only in China that there are a few factories with a hundred thousand plus workers. The entry of electronics in production process started the dismantling of twenty thousand plus workers factories, the “workers fortresses” in the 1980s. With all the confrontations that it engendered, it is more or less over.

* Roots in artisanal guilds provided initial factory workers with trade/craft organizational structures to confront the new situation they found themselves in. These defensive organs of wage-workers were initially illegal. Over time they obtained legal status. They had a leverage vis-a-vis individual owners regarding wages and conditions of work. Emergence of joint stock and then share holding decreased the leverage of trade-craft unions. Their defensive and conservative roles in the changing scenario brought them on the sides of their governments in the mass slaughter during 1914 – 1919. Craft based trade unions were denounced by some radicals in 1919 and instead of trade based unions, factory based unions were attempted as alternative form of workers organisations. We have had some experiences of factory based unions during 1980 – to date. We began looking at industrial unions as workers organisations with misleaders at their helm. In our experience we found factory unions functioning almost like another department of the factory. Managing workers was the job of the unions and good functioning of the factory was seen as good for the workers of that factory. With the introduction of electronics in the production process in factories, from the beginning of 1990s large scale restructuring took place in Faridabad. What was earlier seen largely during long term agreements between managements and unions became blatant in 1990-2000 period. In factories ninety percent plus workers had been permanent. Large scale retrenchment of permanent workers took place in many factories and in most of the cases unions were openly standing with the managements. Engineered strikes and lockouts were the means in these major attacks on factory workers. From these experiences when we look back at the 1982 Bombay textile strike in which 250,000 workers were involved, it seems to us that it was an engineered strike. The composite textile mills with their spinning, weaving, processing, dyeing and printing departments have vanished from Bombay-Mumbai. What would have taken decades if it were slow attrition was done in one blow. The composite textile mills of Indore, Gwalior, Faridabad, Delhi, Hissar, Kanpur, have also vanished. And cloth production in these twenty five years has grown exponentially. In this vein it seems to us that the coal-miners strike in England in 1984-85 was another engineered strike that saw the number of coal miners come down from 100,000 to 10,000. Another example could be the longshoremen strike in the US which resulted in drastic reduction in permanent workers and matched the needs of containerization. Today when we look back, 1980 – 2000 appears ancient to us. Factories in Gaziabad, NOIDA, Delhi, Gurgaon, Faridabad are largely run by temporary workers. In direct production process five to thirty per cent workers are permanent. In the national capital region in India (and things are not different in other parts) seventy-five to ninety-five percent factory workers are temporary workers. There are factories where not even one worker in 300 is permanent – only the staff has permanent status. And amongst these 80 percent temporary workers, three-fourths are “invisible” workers. Almost 75 percent workers in factories in the NCR do not exist in company and government records, be it garments or auto or pharmaceuticals or chemicals, things are the same. Factory unions, where they exist, have only permanent workers as their members. 90 percent factory workers in the NCR do not fit in the union structure. The increasing number of temporary workers is a global phenomenon.

* Given the changes in the ownership patterns of factories, given the breakup of a product in hundreds of factories, given the composition of factory workforce today, given the existence of industrial areas with thousands of factories, and given the linkages among factories across the globe, co-ordination among workers needs to expand across factories and industrial areas and span the world. New types of activities and new kinds of organisational practices are needed.

* A pointer is the recent occupations of Maruti-Suzuki car factory in Industrial Model Town, Manesar. Inaugurated in February 2007, all the workers in the factory are in their twenties. There are 950 permanent workers, 500 trainees, 200 apprentices, 1200 workers hired through contractors for work in direct production process and around 1500 workers hired through contractors for various auxiliary functions. The pace of work was such that a car was being assembled in 45 seconds. Some permanent workers attempted to organise against the existing union in the company. Strong-arm tactics of the management gave rise to a wildcat occupation of the factory on June 4, 2011. The company and the government were taken aback. The occupation continued for 13 days. During the occupation many bonds developed between the permanent workers, trainees, apprentices and workers hired through contractors. The company was forced to take a step backwards and revoke termination of 11 workers for production to restart. After the occupation there was a dramatic change in the atmosphere in the factory. The company was forced to plan and prepare to re-establish its control on the shop floor. On August 28, a Sunday and a weekly day off, 400 policemen came at night to the factory. Company staff had arrived earlier. With steel sheets, the factory was secured in military fashion. On 29th morning when workers arrived for their 7:00 AM shift, there were notices announcing dismissals, suspensions, and entry premised on signing of good conduct bonds. All the workers stayed out of the factory. This is the chess game well rehearsed by managements to soften workers and re-establish control. The company had gone to distant industrial training institutes and hired hundreds of young boys. Workers from the company’s main factory in Gurgaon were also taken to Manesar. Arrangements for their stay inside the factory were made. Already 400 policemen were staying in the factory and large number of guards were hired from Group 4 security company. Staff was made to work in 12 hour shifts with the new workers. Musclemen from surrounding areas were paid to bully workers. Attempts were made to instigate workers to violence. Central trade unions tried to take leadership of the workers. Workers’ representatives were called for negotiations and arrested…… The workers refused to be instigated. All kinds of supporters came to the factory gates where the 3000 workers did 12 hour, back to back sit-togethers. Many kinds of discussions took place. Bonding between different categories acquired new dimensions. The workers’ refusal to be instigated led the well-rehearsed chess game to a dead end. The company was forced to side-step and sign a new agreement. The permanent workers, trainees and apprentices entered the factory on October 3, but the 1200 workers hired through contractors were not taken back. The company’s attempt to divide the workers received a serious thrashing when, on the afternoon of October 7, workers of A and B shift, who were inside, occupied the factory. This time it was not just the occupation of Maruti-Suzuki factory, simultaneously 11 other factories in Industrial Model Town, Manesar, were occupied by workers. “Take back the 1200 workers hired through contractors and revoke the suspension of 44 permanent workers” echoed and re-echoed all around. Again the company and government were taken aback. Despite the presence of 400 policemen and hundreds of other guards, Maruti-Suzuki factory was occupied by workers. The simultaneous occupation of 11 other factories opened up new possibilities with thousands of factories all around. Pressure was applied and occupation of seven factories was called off, but it continued in Suzuki Powertrain, Suzuki Casting, Suzuki Motorcycle factories, besides Maruti-Suzuki. It was only on October 14, after the deployment of additional 4000 policemen, that workers vacated Maruti-Suzuki factory and Suzuki Powertrain was vacated by the 2000 workers when they were surrounded by a police force of 4000 inside the factory. For details, see July 2011 to January 2012 issues of Faridabad Majdoor Samachar (and also the forthcoming February issue).

* The company and the government have not been able to understand the activities of Maruti-Suzuki workers (and other factory workers). Ripples were widespread and the dangers were very visible to the government. A third agreement was forced by the government, with it also becoming a signatory. The 1200 workers hired through contractors were taken back. Not having understood anything of what happened, the company gave significant amount of money to 30 workers it considered troublemakers, for their resignation. (And later propagated the deal as bought-sold.) Production recommenced in the 4 factories on October 22. Afraid of any and everything, the company has been giving concessions to workers. Now instead of 45 seconds, the scheduled time for making a car is one minute.

* Important questions dealing with life, time, relations, representation, articulation, factory life under scrutiny that the occupation of October 7-14 brought to the fore, in the words of a Maruti-Suzuki factory worker, are: “The time in Maruti-Suzuki factory during October 7-14 was extremely good. There was no tension of work. There was no tension of coming to the factory and going back.There was no tension of catching the bus.There was no tension of cooking.There was no tension that food has to be eaten only at 7 o’clock or only at 9 o’clock.There was no tension as to what day or date was that day. Lots of personal conversations took place. We had never come so close to one another as we came in these seven days.” From October 7-14 there were 1600 workers inside the Maruti-Suzuki factory, and 1200 outside the factory. When the bought-sold issue of 30 workers made the rounds, a Maruti-Suzuki worker said, “Earlier we used to pass on the issues to the president, general secretary, department co-ordinator – they will tell. But now every worker himself answers. On every issue, everyone gives his opinion. The atmosphere has changed.”

* Increase in accumulated labour, exponential increase in accumulated labour has sidelined personified forms and brought the social relation in its faceless form to the fore with presidents, prime ministers, chairmen, managing directors, CEO’s as its representatives. In this scenario, person has become increasingly insignificant. Whether a person is or she/he is not has become almost the same. But at the same time, in contentions between accumulated labour (dead labour) and living labour, each person has become increasingly important. Active participation of 90 percent plus of those directly concerned has become indispensable. Representation and delegation have become redundant / counter-productive.Lagta hai ki ekmev aur ekmaya ka yug dastak de raha hai. (It seems that the era of unique and together is knocking at the door.) Radical transformations are demanding the active participation of seven billion people, both as each a unique being and all together.

Faridabad Majdoor Samachar is a monthly publication in Hindi language and at present 10,000 copies are distributed each month by and large amongst factory workers in Okhla (Delhi), Udyog Vihar (Gurgaon), Industrial Model Town Manesar and Faridabad. Some rough translations in English are available at . Texts in Hindi are also on the internet via Gurgaon Workers News. In English we have published : 1. An Abridged Version of Rosa Luxemberg’s “The Accumulation of Capital”; 2. A Ballad Against Work; 3. Reflections on Marx’s Critique of Political Economy; 4. Self-Activity of Wage-Workers: Towards A Critique of Representation & Delegation; 5. Questions for Alternatives.

Faridabad Majdoor Samachar
Majdoor Library
Autopin Jhuggi
N.I.T. Faridabad – 121001
India
Ph. – 0129-6567014

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Discussion And Reading Team of Socialists, Bhubaneswar (Second meeting) – A report

January 17, 2012 by 1 Comment

Discussion and Reading Team of Socialists (DARTS)

On Commodity Fetishism

The second meeting of DARTS was held on 30-12-2011 from 5:00p.m to 7:00p.m. at XIMB, Bhubaneswar. Prof. Raju Das of York University began his talk with a Power Point Presentation on Marx’s theory of ‘fetishism of commodities.’ Fetishism of the commodity, according to Marx, means that ‘the relationships between producers, within which the social characteristics of their labourers are manifested, take on the form of a social relation between the products of [their] labour’. In his talk he explained this idea with a simple example using export-oriented shrimp production in Orissa. The conditions of the shrimp producers, as that of numerous other workers, in Orissa (as elsewhere), are simply bad. The work they perform in producing the shrimp as a global commodity not only fails to fetch them enough money for their daily maintenance. The production process oriented towards producing the maximum amount of exchange value (profit) for the shrimp producers/traders is inscribed on their labouring bodies: chemicals used in the process affect the (women) workers’ fingers so badly that they cannot even eat with their hands. When the shrimps are in the market, every buyer, including the buyer in advanced countries, wants to get the maximum counts of shrimps for every rupee/dollar she has in her pocket. Doing this is in her own material interest. The buyer (who is also a producer of other commodities, be it a service or a physical commodity) does not care about the conditions under which shrimp workers work. And the buyer does not care because her own conditions of work and wage-level, like those of the shrimp-worker, are beyond her own control. So, it is as if shrimps and other commodities start talking in the market. The actual people who produce those commodities are not directly and socially interacting. It is immaterial whether or not people know the conditions of shrimp producers because given their own position they have to command a maximum amount of the commodity (e.g. shrimp) they want for every unit of the commodity they own (or its money form). There exists, in the words of Marx, ‘the social relation between commodities’ and ‘material relation between men.’ In Prof. Das’s words: “commodities rule over us instead of ourselves ruling over articles of use to us.” Relations between commodities replace – or at least, become much more important than – relations between people, i.e. people-as-producers of things-for-use.

Then Prof. Das explained the aspects of Ideology using I.I.Rubin (author of Essays on Marx’s Theory of Value), Terry Eagleton (author of Ideology) and Slavoj Zizek (author of Sublime Object of Ideology). Marx’s ideas of fetishism are connected not only to his ideas about alienation (partly in the sense that fetishism – the rule of commodities over us — happens because of the absence of democratic social regulation over production) but also ideology: the objective reality is such that we think that things for use necessarily have a money-tag and have to be bought and sold (for a profit) and we behave accordingly. The reality – and not (just) our discursive inability to comprehend it – is such that it makes us think that our needs can only be satisfied through commodity exchanges. Commodity fetishism is not our failure of intelligence. It is an intelligent failure. The commodity form hides the real social relations from us. It acts as a veil. And, in the words of Marx: ‘The veil is not removed …. until [the production process] becomes production by associated [producers], and stands under their conscious and planned control’ (Marx). The question is what is to be done to make this happen. Marx, of course, ends Capital Vol 1 with his most definitive answer to the question. Marx’s discussion of the commodity (dealt with in the inaugural meeting of DARTS) and of fetishism clearly shows that if we want to understand the capital and the society it dominates we must understand Marx (and his Capital).

There was an audience from several disciplines – students and teachers of Technology, Literature, Economics, Business Studies, etc. A number of political and civil rights’ activists were also present. Interesting questions were raised and discussed in the meeting. The questions included: ‘What is the distinction between objective and intrinsic in the context of value?’; ‘In a particular village, where people know each other and produce agricultural products and consume them, how is the theory of ‘fetishism of commodities’ relevant?’. What is the distinction between concrete labour and abstract labour, and why is such a distinction important? One perceptive member of the audience and a senior scholar explicitly linked the idea of fetishism to alienation, building on early Marx’s writings.’

There was an active participation as each participant found Marx relevant in her/his field of work and/or area of interest. All the questions posed could not be addressed properly due to the lack of time, which meant that there was a great need for several rounds of discussion on such concepts as the commodity and fetishism.The discussion had to be limited to commodity fetishism; there was no time for a discussion of the other form of fetishism in Marx’s work: capital fetishism.

The DARTS provisional organizing committee has decided to meet on the 29-01-12. The topic to be discussed was proposed to be ‘Labour-power as commodity.’ The time and venue will be conveyed by e-mail.

We collectively hope that we will continue to discuss important ideas of Marx both from the standpoint of their theoretical value and from the standpoint of their ability to shed light on contemporary issues facing the humanity. We also hope that there will be reading teams such as ours in many other cities and towns of Orissa and India.

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The Global Town Teach-In (April 25, 2012)

January 17, 2012 by Leave a Comment

The Global Town Teach-In:
Building a New Economy and New Wealth through Democracy Networks,
Green Jobs and Planning and an Alternative Financial System
Time and Day: April 25, 2012, 12 Noon Eastern Standard
Webpage: www.globalteachin.com

Goals

The Global Teach-In is designed to address the general problems associated with the Triple Crisis and the need to address alternative security policies. The “triple crisis” can be defined by: economics (inequality, deindustrialization, mass unemployment, or the privatization and “de-democratization” of public goods), the environment (pollution, increased greenhouse gas emissions, and depletion of species) and reliance on unsustainable energy supplies (diminished stocks of cheap oil, use of oil in hard to get or insecure areas, and substitution of land used to grow food to supply alternative fuels). The need for alternative security policies involves the need to transcend costly “hard power” and traditional military strategies in an era in which growing debt, ecological threats, the opportunity costs of military spending and the rise of asymmetric warfare reveal the limits to the traditional national security model.

Policies and Alternative Institutions

The Global Teach-In will discuss policy and institutional solutions at the global, national and local levels. First, we will discuss how a Green New Deal would expand jobs, investments and research in alternative energy and mass transportation. These will provide a means for reducing carbon emissions, creating new sources of wealth and increasing living standards. Second, we will examine how Green planning can lead to the creation of metropolitan regions where residential and labor markets are more proximate, where housing is sustainable and affordable, where products are designed to be durable and recyclable, and where designs generally reflect user interests and needs. Third, we will examine a variety of ways in which alternative economic institutions have been developed that serve to promote locally anchored and sustainable communities (in terms of ecological impacts and the durability of employment). These ways include institutions and policies such as: cooperatives, community and socially minded banks, sustainable utilities, buy local and green procurement policies, electoral measures mandating clean energy, campaigns to patronize alternative economic institutions, green civilian conversion of defense and petroleum-dependent firms, and more equitable taxation and alternative budgetary policies.

Constituencies

The Global Teach-In has been supported by academic, professional, media, labor, peace and environmental organizations and individuals associated with these. We aim to promote a broad coalition among such groups and political leaders, entrepreneurs, trade unions and interest citizens to foster a dialogue about the need for a new, comprehensive global agenda that can be initiated through a series of related local actions. We will showcase “best practices” and barriers to extending alternative models.

Format and Ambitions

The Global Teach-In will promote local study and action circles prior to the broadcast to facilitate an agenda for questions to guide discussions.

The Event

The April 25th, 2012 broadcast will be followed by discussions within localities about how to address the agenda proposed by the teach-in. The Global Teach-In will promote links and synergies between diverse constituencies and projects to help each locality achieve its objectives. For example, money moved into community banks can fund cooperatives and green technology projects. Alternative utilities and energy can help power new mass transit systems. Electoral measures to mandate alternative or clean energy can build green markets.

The Global Teach-In will take place in multiple locations through face to face meetings linked to an electronic broadcast in the U.S. and Europe including: Ann Arbor, Belfast (UK), Boston, Los Angeles, Madison, New York, San Francisco, Stockholm (Sweden), Washington, D.C. We are also interested organizing other locations and we welcome your suggestions and ideas. Interested parties should contact us at: globalteachin@gmail.com. Thank you for your interest!

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Migrant Workers Rally in Gurgaon, Haryana (Jan 8, 2012)

January 9, 2012 by Leave a Comment

• Support the struggling workers’ demands for minimum monthly wages of Rs.11000 in the area of Gurgaon.
• Stop the practice of imposing overtime on single day wages.
• Stop the use of contractors.
• Change conditions inside the factory like the use of harsh words, unequal wages for women, an ever increasing target, delays in payment, misuse of ISIPF money, employment without contracts, ill-treatment of women, imposition of overtime.

These are the demands that the Gurgaon Pravasi Mazdoor Union have taken up at the rally organized on 8th January at Udyog Vihar in Gurgaon. The union hopes to change working conditions in the factory and organize workers of the industrial belt of Gurgaon to fight for a minimum daily wage of Rs. 425 (Rs.11000 per month) as the first step towards a larger struggle against the factory owning class and the state. Workers from all walks of life will be part of the union so that these demands and the struggle to achieve them shall spread to the various sectors of the industrial belt.

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ANC Centenary: A Display of Elite Power

January 9, 2012 by Leave a Comment

Ayanda Kota
Chairperson, Unemployed People’s Movement
Grahamstown,

The centenary celebrations of the African National Congress (ANC) are being used to persuade the people that a movement that has betrayed the people is our government, a government that obeys the people, instead of a government of the elites, for the elites and by the elites. It is a hugely expensive spectacular designed to drug us against our own oppression and disempowerment.

In his Communist Manifesto Karl Marx wrote that “Each step in the development of the bourgeoisie was accompanied by a corresponding political advance of that class…The executive of the modern state is but a committee for managing the affairs of the bourgeoisie”. Here Marx is referring to the ability of the bourgeois to translate economic power into state power, thus reducing our governments to mere managers acting in the interests of capital and not the people. This has happened to governments around the world. But here our politicians are not mere managers. They are, like in Russia or India, a predatory elite with their own class interests and they support capital and repress the people as long as they can get their own share.

Since 1994 there hasn’t been a reorganisation of the economy. The commanding heights of the economy continue to reside in the hands of a tiny elite, most of which is white. Unemployment is sky rocketing. Most young people have never worked. Anyone can see that there is an excessive amount of poverty in South Africa. There are shacks everywhere. In fact poverty reigns supreme in our country. Every year Jacob Zuma promises to create new jobs and every year unemployment grows.

If things were getting better, even if they were getting better slowly, people might be willing to be patient. But things are getting worse every year. Poverty and inequality are getting worse. The government is increasingly criminalising poverty instead of treating it as a political problem. When people try to organise they are always presented as a third force being used to undermine democracy and bring back racism. But it is the ANC that has failed to develop any plans to democratise the economy. It is the ANC that has failed to develop any plans to democratise the media. It is the ANC that disciplines the people for the bourgeoisie. – a role that they are very comfortable to play! It is the ANC that follows the line of the World Bank and the International Monetary Fund. It is our local leaders who taking the leap from their old bosses, stealing from us, treating is with contempt, acting like the former colonial government and oppressing us.

During the struggle our leaders embodied the aspirations of the people. But once they took state power they didn’t need us any more. We were sent home. We are only called out to vote or attend rallies. But all the time our people are evicted from farms, paving way for animals as farms are turned into game reserves under the pretext of tourism. Our people are evicted from cities. Our people are denied decent education. The party has become a mixture of what Marx would call an instrument of power in the hands of bourgeoisie and what Fanon would call a means of private advancement.

Biko wrote that:

“This is one country where it would be possible to create a capitalist black society, if whites were intelligent, if the nationalists were intelligent. And that capitalist black society, black middle class, would be very effective … South Africa could succeed in putting across to the world a pretty convincing, integrated picture, with still 70 % of the population being underdogs.”

We, as the unemployed, belong to the 70% that Biko was talking about. We were happy to see the end of apartheid and we will always fight racism where ever we see it. But we are not free. There has only been freedom for the 30%. How can a person be free with no work, no house and no hope for their life?

R100 million is being spent on the celebration – spent to entertain elites, through playing golf and drinking the most expensive whiskey. Golf players are even receiving massages from young women sponsored by SAB. This is not a people’s celebration. We are absent! How some of us wish that all that money could have been used to build houses, create employment, build sport facilities or schools for kids who continue to learn under trees! Biko was right. As the world celebrates with the ANC today they put across a pretty convincing picture of freedom while everywhere people are broken by the burdens of poverty.

In his Wretched of the Earth, in the chapter called “The Pitfalls of the National Consciousness”, Frantz Fanon wrote:

“The leader pacifies the people. For years on end after independence has been won, we see him, incapable of urging on the people to a concrete task, unable really to open the future to them or of flinging them into the path of national reconstruction, that is to say, of their own reconstruction; we see him reassessing the history of independence and recalling the sacred unity of the struggle for liberation. The leader, because he refuses to break up the national bourgeoisie, asks the people to fall back into the past and to become drunk on the remembrance of the epoch which led up to independence. The leader, seen objectively, brings the people to a halt and persists in either expelling them from history or preventing them from taking root in it. During the struggle for liberation the leader awakened the people and promised them a forward march, heroic and unmitigated. Today, he uses every means to put them to sleep, and three or four times a year asks them to remember the colonial period and to look back on the long way they have come since then.”

I am not opposed to the centenary celebration of the ANC. But if the ANC was a progressive movement they would have organised a celebration in a way that includes the people and supports us to build our power. They could have, for instance, asked people to meet all over the country, discuss how far we have come and far we still have to go, and draw up demands for a new freedom charter for the new era. But this celebration is just a spectacle that we are supposed to watch on TV. It is exactly what Fanon talks about. It is designed to keep us drunk on the memory of the past struggle, so that we must stop struggling and remain in the caves.

In a recent protest in Bloemfontein, police were there in numbers to flush the demonstrators. This has happened in many other demonstrations. The message is very clear: “Go back to your caves!” It is backed up state violence. As Fanon says a party that can’t marry national consciousness with social consciousness will disintegrated; nothing will be left but the shell of a party, the name, the emblem and the motto. He says that:

“The living party, which ought to make possible the free exchange of ideas which have been elaborated according to the real needs of the mass of the people, has been transformed into a trade union of individual interests.”

This is exactly what the party has become. Institution such as parliament and local municipalities have been severely compromised because of individual interests. Corruption is rampant. The Protection of Information Bill (Secrecy Bill), is another illustration of how the selfish interests of individuals ave taken over the party.

A true liberation movement would never have killed Andries Tatane, attacked and jailed activists of social movements. It would never send people to lull – it would encourage people to continue organising and mobilising against injustices and oppression. A progressive leader would know that he or she cannot substitute themselves for the will of the people. A progressive party would never help the government in holding the people down through fascist attacks on the media by the likes of Nceba Faku, Blade Nzimande and Julius Malema to mention but a few. A democratic party would never engage in attacks on protests as we saw most recently with the ANC and ANCYL fascism against the Democratic Left Front in Durban during COP17 Conference.

In the Congo, in Nigeria and across the Arab world people are deserting celebrations of the flag and political leaders as if they really do represent the nation. Some are turning to a politics of religious or ethnic chauvinism. Others are turning to the politics of mass democratic rebellion or a democracy that is truly owned by the people. This is a free exchange of ideas backed up with popular force. We are also seeing this in Europe and North America. Latin America has been in rebellion for many years. Across South Africa more and more people are deserting the party that spends so much money to keep them drunk on the memory of the past struggle, their own struggle, the same struggle that the ruling party has privatised and betrayed. There are occupations, road blockades and protests and the message is loud and clear: Sekwanele! Genoeg! Enough!

The only way to truly honour the struggles of the past is to stand up for what is right now. The struggle continues and will continue until we are all free.

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To be consequent as an Internationalist New Year 2012

January 2, 2012 by Leave a Comment

Ron Ridenour

Expanded speech written for “Message from the Grass Roots” conference held December 10, 2011 at Carpenters Union—TIB—in Valby, Denmark. Herein are many wars and liberation struggles from Afghanistan and Iraq, Pakistan, Palestine, over to Haiti and Honduras, to Sri Lanka-Tamils, to the pro-liberation and anti-capitalist movements in the Arabic world, in Chile, at OWS and spreading throughout the US and into some of Europe, sparking Russians.

“To be internationalist is to pay our debt to humanity”
Says Fidel Castro and this can be read on many billboards in Cuba.

What is internationalism?—cooperation among people and nations, states my dictionary. The book of definitions maintains that internationalism is a principle of communism and socialism. It is the belief of ideological leaders such as Lenin, Fidel and Che.

Che wrote in his essay, “Socialism and Man”, that proletarian internationalism isn’t just a duty but a necessity. If revolutionary leaders forget this, Che wrote, the revolution will lose its inspiration and imperialism will benefit.

Che was also known for having severely criticized Soviet Union leadership for having lost its internationalism with the world’s proletariat and the Third World. Following up on Che’s critique, I find it important to criticize communist and socialist parties, and governments led by these parties, which let down people who are oppressed by or invaded by national or foreign powers.

Internationalism in action

1. Internationalists must support resistance fighters against invasions. Therefore, one must chastise political parties and groups that give political or moral support to those who call themselves the Iraq Communist Party as it is part of the Quisling government the USA terrorist state set in. ICP leaders live side by side the invaders in the Green Zone. That there are organizations in the United States, UK, Denmark and elsewhere, which call themselves communist or socialist parties and that cooperate with the world’s greatest terrorist state is incomprehensible, shameful, immoral and anti-internationalist.

2. The same applies to people who still support the Zionist state of Israel, which commits genocide against the Palestinian people. Millions of decent people have gotten together to support Palestinians in many ways, including Ships to Gaza. In Denmark, four groups of people have challenged the state’s terrorist laws by donating solidarity aid to the secular leftist PFLP which is part of the Palestinian resistance. Rebellion (Denmark), Fighters and Lovers, Horserød-Stuthoff Association (veterans of WWII resistance fighters imprisoned in Horserød and Stuthoff prisons), and TIB’s club (local carpenters near Copenhagen) have aided both PFLP and FARC, Colombian armed liberation movement.

3. Internationalist can not cooperate with US-NATO aggressive wars, which always have the goal of controlling that country’s economy and politics for capitalist profits. It is shameful that many experienced socialists and communists, as well as naïve progressive people, have backed up West’s big capitalist plans to take over Libya, and thus have bombed Libya back to the stone age. Denmark was one of only six countries that dropped tens of thousands of bombs on Libya, destroying much of it infrastructure, school, hospitals…In fact, Denmark dropped more bombs on Libya than it has on any other country in its history, Afghanistan included. And the pilots were cowards as there was no resistance by Libya’s air force, already decimated.

This conflict has little to do with the Arab Spring movement. It is a conflict between internal war lords, with ordinary people involved who wished to increase democracy but who were misled by US-NATO whose forces seek to control Libya’s oil and avoid a gold-based currency that Gaddafi was promoting amongst all African countries. Now, US-NATO has placed a lackey government in Tripoli just as they did in Afghanistan and Iraq.

4. Internationalists must also criticize comrade governments, such as Cuba and ALBA governments in Latin America, when they make big mistakes regarding internationalism. We can’t be true comrades-solidarity activists by keeping our mouths shut when this occurs. Such is the case with their support of the brutal government of Sri Lanka, which practices genocide against the minority Tamil population. Ever since independence from Great Britain, in 1947, the majority Sinhalese governments and chauvinist Buddhist monk system has discriminated against Tamils. They have constantly been treated as second class citizens, their language and religions relegated to secondary status without national recognition. Even pogroms have been employed with the brutal murder of many thousand on various occasions. And since May 2009, following the end of 26-year civil war, ethnic cleansing in the traditional Tamil homeland in the north and eastern areas is the rule of the day.

Cuba and ALBA have spoken only positively of their historic ties with the Non-Aligned Movement (NAM), to which Sri Lanka is a member, but so are 130 other nations. One cannot, in the name of protecting each nation’s sovereignty, avoid critique when one or more of these nations oppresses or conducts pogroms and genocide against part of the population. Nor can we accept as an excuse the immoral geo-political game that nearly all governments of whatever color play.

We shall also criticize Bolivia, Uruguay, Brazil and other Latin American progressive governments for helping the US and France in their ouster of the only decent and only democratically elected people’s president in Haiti’s history, Jean-Bertrand Aristide. These Latin American governments actually assist the US’s 2004 coup d´état against Aristide by placing occupying troops in the small country, seeking to dampen the people’s anger. These progressive governments should, instead, back up the people’s desire to bring their president back to state power, just as they sought to do for President Zelaya in Honduras where national capitalists and generals kicked him out of office, with background support once again by the United States government.

5. On the personal and organizational plain, internationalism operates when workers of a major firm ask people to boycott a product because of the mistreatment of the workers by the firm. This is the case with Coca-Cola who workers in Colombia asked us to stop buying the “drink of the death squad” (David Rovic’s song), because it hires mercenaries to murder workers who seek to organize a union and struggle for collective bargaining. Workers in other countries, such as Guatemala, and farmers in India have asked the same.

It is with joy that I can state that here where we gather (carpenters’ hall in Valby, Denmark), this union is one of the few local unions and political or grass roots groups in Denmark that has boycotted Coca-Cola. This is something any and all individuals can do. It is just a soda drink. So drink something else. Boycotting Coca-Cola is just like boycotting all products from Israel and Sri Lanka. It is a simple act of solidarity, of internationalism.

Charlotte and I have just returned from a six week trip in India where two of my books (“Tamil Nation in Sri Lanka” and “Sounds of Venezuela”) were published by New Century Book House, Tamil Nadu. The Tamil book concerns the history and contemporary life of the Tamil people in that island-nation, and the need to act in solidarity with them. The Venezuela short book concerns this people’s efforts to create a better world for themselves and solidarity with all peoples. When people asked us where we are from we often replied that we are “internationalists”. Interestingly, many Indians understood our meaning and were pleased to think in terms of being brothers and sisters in the world.

This concept, and feeling, of brotherly love, of internationalism has taken off in a bigger way, in 2011, than in many decades. It started in Tunisia, and has expanded to the indignados in Spain, to the anti-capitalists in Wall Street and in hundreds of cities throughout the US and the West.

We have much to criticize and yet much to be glad for as 2012 opens. We must remember and appreciate those who set us off on this new anti-capitalist/anti-imperialist, non-violent and democratic revolution—from the martyr in Tunisia (street vendor Mohammed Bouazizi) and his Iraqi spiritual brother a bit earlier, shoe-thrower Muntazar al-Zaidi, to Occupy Wall Street protestors to Bradley Manning and Julian Assange and co-workers at Wikileaks, who helped spark it all by blowing the whistle on the war criminals. These modern-day Paris Commune resisters without arms—OWS and Occupy the World—are growing and they are presenting a vision and with it a program-in-discussion that must be studied and supported.

Internationalism is an endless struggle, an endless challenge. It does not end even when one or more of our political parties take over the governing reigns. We activists from the streets must always keep our wary eyes pinned on the leaders, regardless of their names, just as our clear eyes cast light upon humanity’s future.

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4th Anuradha Ghandy Memorial Lecture (Jan 20, Mumbai)

January 2, 2012 by Leave a Comment


Anuradha Ghandy Memorial Committee

4th Anuradha Ghandy Memorial Lecture
by Arundhati Roy

“CAPITALISM: A GHOST STORY”

on January 20, 2012
at
St Xavier’s College Hall, Dhobi Talao, Mumbai
at 6.00 pm

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Bhubaneswar: Discussion And Reading Team of Socialists (DARTS) – December 30

December 28, 2011 by Leave a Comment

The second meet of ‘Discussion And Reading Team of Socialists'(DARTS) is to be held on the 30-12-2011 at Xavier Institute of Management (XIMB), Bhubaneswar Room No. 229 from 5p.m to 7p.m. In the first meet Prof. Raju Das from York University, Toronto delivered a short talk on the relevance of Marx’s Capital and on Marx’s Labour Theory of Value followed by discussion among the participants. Marx’s Capital is an essential read for activists and intellectuals alike. The analysis of the commodity in the first chapter ‘Commodities’ is, as Marx claims, the point from where he begins his analysis/critique of capitalism (see Marx’s Introduction to first edition of Capital). It requires more effort understanding this chapter than the rest of Capital. Prof. Das, in the second meet of DARTS will deliver a small talk on the last section of this chapter ‘the fetishism of commodities and the secret thereof’ after revisiting the initial section of the chapter. We request you to be present for discussion.

P.S: In the third meet the discussion team is supposed to meet after reading Chapter I (or a part of it — this shall be decided in the second meet). The date, time and venue will be let known via e-mail.

Please send your suggestions to darts.bhubaneswar@gmail.com

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Direct and Indirect Costs of the US Financial Crisis

December 28, 2011 by Leave a Comment

Deepankar Basu

The global financial crisis that started with the bursting of the housing bubble in the U.S. in 2007 imposed both direct and indirect costs on the working and middle class populations. The direct costs are those associated with the bail-out of financial institutions, which will ultimately be borne by the taxpayers; the indirect costs are those associated with the ensuing economic crisis and the deep and prolonged recession that came in its wake, which, again, will be mostly borne by the working class population. While both costs lead to increasing deficits, and over time accumulating debt, of the federal government, they are of vastly unequal magnitudes. The direct cost (i.e., the costs associated with bailing out the financial institutions immediately after the crisis) is much smaller than the indirect cost (i.e., the cost, in terms of rising unemployment and government deficit if one considers the latter a cost, arising due to the recession); the contribution of the bail-out funds to the build-up of sovereign debt, in the US (and Europe), is minuscule compared to the contribution of the indirect cost (the widening gap between tax receipts and government outlays caused by the recession).

Many people on the left, by emphasizing the cost of bailing out financial institutions (and its contribution to sovereign debt build-up), target the wrong, and smaller, costs. There are two senses in which targeting the bail out funds is incorrect. First, the magnitude of those costs are small compared to the indirect costs. Second, if the direct costs had not been incurred, i.e., if the system continued to be organized around capitalist lines and the financial system had not been bailed out, the ensuing recession would have been deeper and hence the indirect costs, ultimately borne by the working and middle class people, even higher.

It is important to be clear that the workings of the financial sector under capitalism imposes enormous costs on the working and middle class people not only because it needs to be bailed out when the system hits the fan, as happened in 2008. The financial sector imposes much larger costs by the sheer magnitude of the externality of its actions on the working class, by the structural refusal to internalize the costs of its speculative activities, by increasing the financial fragility of the system when the bubble is inflating and ushering in the deep and prolonged recession that inevitably arrives when the bubble bursts. The direct cost of bailing out the financial system when the crisis breaks out is small compared to the indirect cost that comes from the externality of its casino-like activities. In fact, if the financial system had not been bailed out, the indirect costs would have been even higher because the recession would have almost certainly turned into a depression (of the magnitude that the world witnessed during the 1930s).

FIGURE 1: Time series plot of changes in the index of house prices in major US cities


(Source: http://www.project.org/info.php?recordID=445)

Let us study the US economy and try to understand the difference between the direct and indirect costs of the financial crisis of 2008-09. Recall that the the housing bubble in the US started deflating from around late 2006 (Figure 1). The securitization process that had built itself on the shaky foundations of the housing bubble started unraveling within a year, and the financial crisis broke out in real earnest in 2008. The financial system went into panic, credit markets froze (as banks stopped lending to each other and to nonfinancial firms) and this sent shock-waves through the US government and the Federal Reserve circles. Monetary policy had already kicked in at least an year ago, with the Fed slashing short term interest rates and making liquidity available to the financial system (see Figure 2). But this was clearly not enough.

FIGURE 2: Short term interest rates in the US


(Source: http://research.stlouisfed.org/fred2/graph/?id=FEDFUNDS)

To unfreeze credit markets and deal with the growing panic, the US Treasury department adopted the Troubled Assets Relief Program (TARP) in early October 2008. The conceptualization of the TARP went through two rounds. In the first round, the US Treasury argued that the TARP should buy out the toxic assets (i.e., assets that drew its value from the housing market like mortgage backed securities, the collateraized debt obligations, etc., and were now more or less worthless) from financial institutions to restore confidence in the financial markets and prevent widespread bankruptcies. Very soon it became clear that this strategy would not work because it was impossible to ascertain the “true” value of the toxic assets. In other words, it was not clear at what price the assets should be bought for by the US Treasury. Hence, this strategy was abandoned and in the second round of iteration, TARP was conceptualized as a recapitalization program. This entailed lending money (or other liquid assets like Treasury bills) to financial institutions but in return taking ownership shares of those institutions.

The bail out of the financial institutions that we now talk about is precisely TARP as a method to recapitalize financial institutions, in particular banks, credit market institutions, the automobile industry and the insurance giant AIG, by injecting fresh capital into their balance sheets in lieu of ownership shares. How much money was involved? Initially, TARP was thought to involve $700 billion. But, the Dodd-Frank Wall Street Reform and Consumer Protection Act reduced the maximum authorization for the TARP from $700 billion to $475 billion. The TARP ended on October 3, 2010 and had by then disbursed only a total of $411 billion. Of this, 77%, i.e., $318 billion, has already been recovered through repayments, dividends, interest and other income earnings of the US Treasury.

In fact, the part of TARP funds that was lent to banks has already been recovered with a profit: a total of $245 billion was invested in banks, and it has been recovered with a profit of about $20 billion. It is estimated that the overall cost of TARP, after all recoveries are taken into account, will amount to $70 billion, only about a tenth of the original amount of $700 billion. Hence, it is clear that the overall contribution of the TARP (the bailing-out of the financial system) to the deficit (and outstanding debt) of the US government is not large. The direct cost of the financial crisis, in terms of the funds required to bail out the financial system during the peak of the crisis, is not very large when compared to the indirect cost, to which we now turn.

FIGURE 3: Civilian Unemployment Rate in the US


(Source: Federal Reserve Bank of St Louis, http://research.stlouisfed.org/fred2/)

The indirect cost arose because of the magnification of the effects of a downturn into a deep and prolonged recession, the magnification being caused by the fragility of the financial system. Unemployment rates went through the roof and continues to be at historically high levels despite the official end of the recession in the second quarter of 2009; the labour force participation rates have fallen due to discouraged unemployed workers dropping out of the labour force; the median duration of unemployment has increased to extremely high levels; the share of long term unemployed workers has grown to postwar highs (see Figure 3 and 4 for some details).

FIGURE 4: Civilian Participation Rate in the US


(Source: Federal Reserve Bank of St Louis, http://research.stlouisfed.org/fred2/)

While it might be difficult to accurately quantify these losses, it seems clear that they are far higher than the $70 loss that the taxpayer will be saddled with due to the bail out of the financial sector. For instance, some studies suggest that about 7 million workers have been displaced from long-term employment during the Great Recession, only a subset of all workers who have been adversely hit by job losses. These 7 million workers will experience an income loss of about $774 billion over the next 25 years.

In a similar vein, the contribution of the direct investment from TARP to the growth of the fiscal deficit is small compared to the contribution due to the recession. Figure 5 plots the net outlays (i.e., net of interest payments of its debt) of the federal government, the receipts of the federal government and the difference between the two for the period 2006-2011. It can be seen from Figure 5 that the major jump in the deficit occurred between 2007 and 2009, a period during which it increased by about $1252 billion. This increase was the result of an increase in net outlays (i.e., expenditure) by about $788 billion and a fall in receipts of around $463 billion. Even assuming that the total $411 billion disbursed by the US Treasury for the TARP had occurred during that period (which it clearly did not), it is only about a third of the increase of the federal deficit during that period. Thus, close to (or more than) two-thirds of the increase in the federal government deficit was the result of non-bail out costs.

FIGURE 5: Deficit of the US Federal Government


(Source: Federal Reserve Bank of St Louis, http://research.stlouisfed.org/fred2/)

Looking at the plots of the outlays and receipts of the US federal government in Figure 5, we clearly see that the two series have diverged significantly since the start of the Great Recession. Even though net outlays (i.e., expenditures) have flattened out since 2010, receipts (i.e., tax revenues) have not picked up in any major way. Thus, the gap between the two continues to be big, in excess of $1000 billion every year. This huge gap is what lies behind the deficit and mounting debt of the US government, not the $70 billion that will be the net cost of the TARP. It is more or less certain that a similar account would be accurate for Europe also, i.e., the largest portion of the debt of Eurozone governments would be the result of indirect costs and not the direct cost of bailing out the financial sector during the crisis of 2008.

Conclusion

To conclude, let me summarize the argument. It is important to distinguish between the direct costs (i.e., bail out of the financial sector through the TARP) and indirect costs (rise in unemployment and the growth of the government debt due to the deep and prolonged recession) of the financial crisis and focus on the second rather than the first. This is because the second is much larger in magnitude than the first. In fact, it is not even clear that the first can be considered a cost because without bailing out the financial sector via recapitalization (or temporary and partial nationalization), the recession would certainly have been deeper, increasing the burden on the working people. In addition, concentrating on the second cost allows us to focus on the systemic aspect of the costs that the financial sector, in its speculative avatar, imposes on the working and middle class population of a country. This forces us to conceptualize an alternative that is likewise systemic in nature and goes beyond arguing against bail out of financial sector firms.

Deepankar Basu is an Assistant Professor in the Department of Economics, University of Massachusetts.

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