Womankind #12: octopus

The phantom economy of multi-nationals and banks

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by Helena Norberg-Hodge on June 8, 2017

The Greek economy has been in the news for almost a decade. Every few years another crisis arises, Greece’s creditors are bailed out, and further rounds of austerity measures are imposed on the Greek people. Meanwhile, unemployment continues to hover above 25 per cent and the social safety net remains shredded. This is an economic calamity with deep roots, but the media usually goes no further than the contrast between Greece’s ‘profligate’ Mediterranean culture and the thrifty work ethic of Northern Europe, Germany in particular. But there’s far more to the story than that.

In the late 1980s I spent three months on Crete, researching and writing on the dramatic collision between tradition and modernity in Ladakh, or ‘Little Tibet’, in the Indian state of Jammu and Kashmir. I had come to know Ladakh’s ancient, nature-based culture just as it first encountered the global economy. I watched the local economy unravel as subsidised food from thousands of miles away sold for less than food from the nearby village; I saw how media images romanticising consumerism replaced local role models for the young, eroding both individual and cultural self-esteem.

During my time in Crete, I realised that the same systemic pressures I had seen at work in Ladakh were also taking their toll on Greece. Today, after more than 40 years of studying the impact of the global economy on cultures around the world, it is clear to me that Ladakh and Greece are not exceptions, but the rule. From Europe to the United States, from Asia to South America, thriving local economies have given way to unemployment and poverty, and social cohesion has been replaced by hyper-individualism, competition and insecurity; localised economic structures and relationships have been undermined, and communities and even nation-states drained of their richness and vitality. Meanwhile, pollution of soil, water and air has increased dramatically.

All these trends have a single underlying cause: economic globalisation.

What is globalisation? At its core, it is an economic process. It’s about deregulating trade and investment – freeing up big businesses and banks to enter and dominate local markets worldwide. Its main drivers are the ‘free trade’ treaties that strip local communities and nation-states of the ability to control their own labour, resources, and markets. Thanks to such agreements, big businesses are increasingly able to bargain with governments for lower tax rates and higher subsidies by threatening to ‘offshore’ their operations. To rub salt in the wound, governments must use their depleted treasuries to support the growing ranks of the unemployed, to retrain displaced workers, to mend the unravelling social fabric, and to clean up the environmental mess left behind by deregulated, mobile corporations. To meet these obligations, governments are continually forced to go hat-in-hand to international lenders – leaving them ever deeper in debt, with interest payments consuming an increasing proportion of the national budget.

Debt is a central and unavoidable feature of globalisation. In the post-colonial era, debt was used to keep the former colonies in a state of dependency: rather than use their resources to meet local needs, every newly-independent state was encouraged to orient their economies towards international trade, which meant borrowing vast sums to build up trade-based infrastructures. Governments that focused on social programs or local trade would be unable to repay their debts, and would then face painful ‘structural adjustments’ imposed by the International Monetary Fund (IMF).

Today, austerity measures push corporate privatisation of every sector, plunging societies deeper into dependence on the exploitative global economy. As economics professor Michael Hudson at the University of Missouri asserts: “When a country can’t pay, the rules at the IMF and EU and the German bankers behind it say, don’t worry, we will simply insist that you sell off your public domain. Sell off your land, your transportation, your ports, your electric utilities.” Even the richest countries in the world are by no means immune: the US national debt has reached nearly $20 trillion.

It’s not just governments that have been pulled into this system. Thanks to a relentless bombardment of advertising and media images, entire populations have been taught to value competition and material wealth over community, and self-reliance. Media and advertising images not only make people feel inferior and insecure, they instill the belief that buying more stuff will fill the void, thus tightening the grip of consumerism.
In Ladakh, people’s sense of self was also damaged by a sudden influx of seemingly wealthy foreign tourists – a pattern observed in Greece as well. Writer Brian Davey notes that “Greek people, like many of the populations in other countries, absorbed the idea that the good life was all about self-display, leisure and consumption – an idea that they might have got partly from the stream of tourists from northern Europe to whom they catered.”

More than just a temporary bump on the path of progress, these trends are an inevitable consequence of economic policies that have shaped the modern era. Almost every country is tightly bound to the global economy through various regulatory and financial structures, including a number of trade treaties, the European Central Bank, the ‘eurozone’, the IMF, The World Bank, and the World Trade Organisation (WTO). These last three institutions were created by the Bretton Woods Agreement negotiated by the Allied powers in the waning days of World War II. The goal was to prevent another economic collapse like the Great Depression, in part by drawing every economy, including the Third World, into a single global economy. But by systematically working to expand global trade, these institutions and their descendants have benefited the largest corporations and banks, while diminishing the power of nation-states and local communities.

As their power over governments has increased, global corporations have used their clout to push for trade agreements that are even more generous to them. Most trade treaties today include investor state dispute settlement (ISDS) clauses, which allow corporations to sue governments if their laws or regulations could diminish corporate profits.

Another essential feature of the global economy is the creation of money by banks. Through the issuance of loans, banks are effectively creating money, or ‘phantom wealth’, out of thin air. Since this money must be repaid with interest, it is one of the reasons that economic growth is such an imperative: only an expanding economy allows more money to be repaid than was borrowed. During the last few decades of financial deregulation, banking reserve requirements were lowered to such an extent that about 97 per cent of the money circulating in the economy today – the digital pulses that correspond to billions and trillions of dollars – is backed by nothing but debt. Private banks have, in effect, been given a license to print money. Rather than being used to meet the real needs of society, most of this expanding supply of money is being created for no other purpose than to obtain the highest and quickest returns possible. Much of the money is used for purely speculative purposes – to make still more money.

Financial deregulation has contributed to a dramatic increase in volatility and instability. Massive speculative bets on exchange rates can cause national currency values to crash overnight – enriching a handful of investors but causing real hardship for the majority. Meanwhile, the system of ever-expanding interest-bearing debt creates a structural imperative for corporations to cut jobs, lower wages, drive home consumer addictions, and exploit natural resources ever more intensively, accelerating worldwide crises of unemployment, psychological insecurities, and ecological destruction.

In the end, the economic problem in Greece is the product of a global system that puts the needs of corporations and banks ahead of people and the planet. The internal logic of this system favours no nation, only the footloose corporations and banks that dominate the global economy.

Since globalisation is at the root of so many problems faced today, it makes sense to shift direction towards economic localisation. Localisation is a two-step process: on the one hand we need to resist the corporate juggernaut and the policies that propel it; on the other we need to work from the grass roots to renew our local economies and our communities.

Both of those steps are being taken by a growing worldwide localisation movement. At its core, it is about shortening the distances between producers and consumers. It’s about prioritising the needs of people over the demands of corporations when negotiating trade treaties and setting laws. It’s about re-regulating businesses so they become rooted in place and accountable to the people and nations they serve, rather than the other way around. It’s about shifting taxes and subsidies to support the growth of human-scale, place-based and sustainable enterprises instead of continuing to prop up the unwieldy, fossil-fuel driven system.

While governments still remain committed to continued globalisation through deregulatory trade treaties, the tide has begun to turn. With environmentalists, farmers, labour unions, and human rights activists linking hands across the world, political leaders were no longer able to ignore the widespread and vocal opposition to the Trans-Pacific Partnership (TPP) – a ‘free trade’ deal that is now unlikely to be ratified. A similar trade agreement, the Transatlantic Trade and Investment Partnership (TTIP), likewise is meeting widespread opposition.

People are actively resisting the global economy in other ways. For example, in exchange for debt relief the Greek government was forced to ‘streamline’ regulations that slowed approval for resource development projects, including a gold mine on the Halkidiki Peninsula. If allowed to operate, the mine will release 20,000 tons of arsenic, among other toxic chemicals, into an environment that is home to thousands of olive oil, feta cheese, and honey makers, whose livelihoods depend on healthy soil and clean water. Local residents have been fighting the project for more than a decade, and show no signs of giving up.

Meanwhile, people-centred initiatives created at the grass roots are mitigating some of the worst effects of globalisation, while revitalising vibrant human-scale economies and cultures. Unsurprisingly, initiatives are spreading rapidly in Greece. As Helena Smith of The Guardian writes, “Public buildings – from abandoned municipal offices to theatres, market places and cafes – have been squatted and taken over. An unofficial support network has evolved with self-managed health clinics, collective kitchens, neighbourhood assemblies, community groups and language schools mushrooming … At last count there were over 400.” Giorgos Kaminis, the progressive mayor of Athens, has even created a municipal post – Vice Mayor for Civil Society and Municipality Decentralisation – to help foster these kinds of community initiatives.

This kind of renewal is occurring across the entire country. As one Greek writer, living on the Peloponnese Peninsula, put it: “My neighbours in rural Greece carry on with their lives as they have for centuries. Invisible to most economists, they subsist in ways that cannot be measured easily by typical economic yardsticks. Nonetheless, their economy is real, will help them survive the current crisis, and in fact offers a lesson in resilience for all of us.”
These and many other efforts represent economic localisation in action. The benefits go beyond the financial: it provides the foundation for rebuilding strong communities, creating ample and meaningful jobs, and living more sustainably on the earth. It takes us out of the endless cycle of boom and bust, which further impoverishes ordinary people at each turn.

While we have yet to see localisation enacted at the national policy level anywhere in the world, at the regional and local level we are seeing tremendous change. People are creative and resourceful, as shown in the multitude of initiatives that have sprung up in Greece. They inspire us to see a new way forward that fundamentally moves outside of the paradigm imposed by financial markets.

Now is the time to build up awareness of the inherently flawed structures of the global economy, and of the much needed shift towards strong, local economies. It is time to support such movements with policy change, so that it is no longer possible for large, mobile corporations and banks to keep governments under their thumb.

We need to insist that our governments put at the forefront the needs of the real economy – people and the natural world – not the phantom economy of multinational corporations and banks. We need to foster small-scale on a large-scale, because in both our shared crises and in our potential to create a different future, we are all Greece.

From Womankind ‘Greece” – available from newsstands, bookstores, airports, or order online here (delivery from Australia).

Image from BLANZ Roadshow 09

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