Pain and gain in a ‘European Winter’

[ABDUL JABBAR KATIAR]

BY Irfan Husain
DAWN, 12-11-2011

AS the Arab Spring continues to destabilise governments and topple dictators, its counterpart is gathering strength in the West in the form of a `European Winter`. It has already claimed the scalps of leaders in Portugal, Ireland, Greece and Italy.

The revolt in Europe is not against dictators, but politicians trying to impose tough austerity measures to placate market forces that have driven the cost of borrowing to unsustainable highs. Their large budgetary deficits had made them the subjects of withering European Union strictures and harsh conditions for financial support.

While these political changes are the result of a democratic process, the fact is that market forces and EU officials are not elected. Yet such is their power that hapless leaders like George Papandreou of Greece and Silvio Berlusconi have been spat out like a couple of bitter seeds.

To his credit, Papandreou tried to refer the continuing austerity measures dictated by the EU to the electorate in a referendum. After all, he reasoned, since the vast majority of the Greek people would be feeling the pain, it was only right to elicit their views.

But this move infuriated the EU and roiled the markets with the result that the Greek PM not only had to cancel the referendum, but also step down. So much for democracy in the country where it was born.

These changes have a more populist counterpart in the Occupy movement now sweeping much of the capitalist world. While the protesters in Wall Street in New York and St Paul`s Cathedral in London have different agendas, they are expressing a rising rage against a status quo seen as being stacked against the vast majority of workers and middle-class professionals. Above all, young people feel increasingly marginalised.

At the heart of this anger is the perception that a tiny minority is grabbing a disproportionate share of the economic cake. Recently, for example, a study revealed that in the UK, directors and chief executives had, on average, given themselves an increase of nearly 50 per cent in emoluments over the previous year. Ordinary workers, on the other hand, saw their packages go up by an average of just 2.5 per cent at a time inflation was hitting five per cent.

All this needs to be seen against a backdrop of recession and unemployment. Millions have lost their jobs and their homes. For them, the sight of corporate fat cats feeding well at the trough is infuriating. And politicians, while imposing job cuts and harsh austerity measures, continue to defend the right of the rich to get richer even when all economic indicators are pointing at worse to come.

In an article in the Guardian on Nov 8, George Monbiot gives some startling figures to illustrate how the rich get richer while the poor get poorer:

“Between 1947 and 1979, productivity in the US rose by 119 per cent, while the income of the bottom fifth of the population rose by 122 per cent. But from 1979 to 2009, productivity rose by 80 per cent, while the income of the bottom fifth fell by four per cent. In roughly the same period, the income of the top one per cent rose by 270 per cent.

“In the UK, the money earned by the poorest tenth fell by 12 per cent between 1999 and 2009, while the money made the richest tenth rose by 37 per cent….”

We have always lived with income inequality, but its extent has seldom been as marked as now. In developed economies, a small group of predatory corporate types have seized the commanding heights of the capitalist system, and used their control to enrich themselves. Politicians, dazzled by this wealth and often dependent on contributions from this class to fund increasingly expensive election campaigns, have been bribed and bullied into dismantling regulations that once kept capitalists in check. Here is Monbiot again:

“Many of those who are rich today got there because they were able to capture certain jobs. This capture owes less to talent and intelligence than to a combination of the ruthless exploitation of others and accidents of birth, as such jobs are taken disproportionately by people born in certain places and into certain classes.”

Over the years, I have known many rich people in Pakistan, and almost always left a meeting with one of them wondering how on earth they had made so much money. The truth is that our seths have either inherited wealth, or have used their contacts to get ahead. In a corrupt system, it is the crooks who thrive.

One reason Pakistani businessmen have been unable to expand and go global is their inability to delegate authority to professionals. Trusting only members of their immediate families, they have employed incompetent sons and nephews to fill senior positions. These young scions of the rich, secure in the knowledge that they won`t be fired, have been mostly incapable of justifying the faith their fathers and uncles placed in them.

Our seths have also used Pakistan`s high tariff barriers to prosper. One reason many of them are unhappy about the proposal to grant India MFN status is that they are afraid of the competition from across the border. Fattened on subsidies, cheap raw materials and protection from imports, they have fleeced the Pakistani consumer mercilessly. All this while, they have evaded taxes whenever they could.

Ultimately, what is driving the anti-capitalism protests is the sheer injustice of an exploitative system that offers so little to ordinary people while showering obscene rewards on a tiny minority. Economic theory assures us that some of this wealth would trickle down, but as the above figures show, this is not true. The rich guard their wealth zealously.

Despite the approaching meltdown of the system in the wake of the eurozone crisis, socialism is still too discredited to present a serious challenge. The inefficiency of state capitalism and nationalised industries is before us, so these can hardly be seriously considered as an alternative.

However, better regulated financial institutions would insulate the system from the worst excesses of runaway capitalism fuelled by pure greed. For instance, Canada, Australia, China and India weathered the recent crisis largely because their banks were not exposed to the kind of toxic assets their counterparts in the US, the UK, France, Switzerland and Germany were.

Despite the well-funded lobbying efforts by western banks to avoid tougher regulations, perhaps our salvation lies in making executives more accountable. And to defuse the anger on the streets, governments should impose limits on salaries and bonuses.

The writer is the author of Fatal Faultlines: Pakistan, Islam and the West .

irfan.husain@gmail.com