Moscow’s most prominent opposition figure, Alexei Navalny, has been moved from jail to a local hospital in the Russian capital after officials said the rogue politician may have been poisoned.
According to BBC, officials said Navalny – who has been detained for the second day on Monday – was in “satisfactory” condition, and that though he may have had an allergic reaction, Navalny’s doctors said they demanded “fundamentals” like the prospect of using “disproportionate” things like making. More than 1,400 people were detained while protesting Navalny’s detention.
Navalny had been sentenced to 30 days for provoking an unsanctioned protest with other lawmakers.
The EU slammed Russia over the “disproportionate” use of force against the protesters, claiming it undermined the “fundamental freedoms of expression, association and assembly.”
then again, Russia isn’t exactly known for its tolerance of political dissent.
According to the AP, access to Navalny is restricted, and Dr. Anastasiya Vasilyeva, Navalny’s physician, only managed to see him on Sunday afternoon. Doctors at the hospital initially said that Navalny was taken in after suffering a severe were region
At least 21 people, including Navalny’s supporters and journalists, “briefly detained outside the hospital Sunday evening. Still, hospital officials refused to run any additional tests on him.
Another Navalny ally, Leonid Volkov, said on Sunday that conditions at the prison were unsanitary.
Baton-wielding police on Saturday wrestled with protesters in arguably the largest unsanctioned protest in Russia in a decade.
Navalny has been the Kremlin’s most formidable foe since 2011, when Navalny led a massive wave of protests against Putin and his party. Since then, Navalny has been arrested many a times.
The hospital described Navalny’s condition as satisfactory.
via ZeroHedge News https://ift.tt/2ZgfGml Tyler Durden
Amazon will be responsible for nearly half of all e-commerce in the United States during 2019. Critics such as Sen. Elizabeth Warren (D–Mass.) allege that the company “squash[es] small businesses and innovation.” They believe government antitrust action is needed to save retail from being totally subsumed by Prime memberships and brown boxes. Yet their dystopian vision fails to account for the boutique retail renaissance simultaneously happening in cities around the world.
Stores selling a single product category, such as butcher shops or model train stores, used to be common, but this pattern of shopping disappeared as first big-box and then e-commerce retailers started offering a vast array of goods at lower prices in a single location.
There was much handwringing over the trend away from specialized retail, but as Philip Oltermann observed recently in The Guardian, a new wave of small retailers is popping up in cities such as Berlin. Oltermann visited a shop selling nothing but live ants and ant terrariums, many designed by the 30-something proprietor himself. It operates as a showroom, a place to display boutique products that are then shipped from off-site to the consumer, thus saving money on retail space and inventory overhead.
How is that store able to compete against Amazon, which sells ant farms at a lower price point? The key is that it bridges the gap between online and offline life. When you order a terrarium from a seller who is clearly obsessed with his own product, you’re buying that person’s expert knowledge in addition to his unique wares. Contrast that experience with buying an ant farm on Amazon, where the expert is replaced with an algorithm and a few hundred reviews from random strangers. Amazon may tell you which terrarium was bought by the most people and how they felt about that purchase at a moment in time, but it’s a poor substitute for true expertise.
Perhaps you think Amazon will crush specialized retail because consumers value cost and convenience over expertise. So it once seemed with Barnes & Noble and Borders, two corporate Goliaths most people thought would permanently crush independent book-selling Davids by offering lower prices and wider inventory.
Nobody in the late 1990s imagined that an internet startup would eventually topple those giants by beating them at their own game. Nor did most think Amazon’s ascent would lead to a revival of independent bookstores—but it has. According to the American Booksellers Association, the number of such shops climbed from 1,660 in 2010 to 2,470 in 2018.
The future of retail is not an Amazon monostore, although Prime may replace big-box retailers, dominate certain categories of products, and appeal to the most price-conscious of consumers. But alongside Amazon, we are already seeing a new wave of hyper-specialized stores selling goods to consumers looking for expertise and a boutique shopping experience.
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In what appears to be a first since Hong Kong was handed back to China by the UK in 1997, the Hong Kong and Macau Affairs Office, a mainland authority that oversees the two Chinese territories, held a press conference on Monday where they reiterated that the violent protests that continued through Sunday wouldn’t be tolerated by Beijing’s government, BBG reports.
The HKMAO, which answers directly to China’s cabinet, reaffirmed its support for the city’s government and police during what was a rare press briefing on Monday. After the briefing, the heads of the authority brusquely left the room, ignoring questions shouted by journalists.
Office spokesman Yang Guang said Beijing remained committed to “one country, two systems,” the separation of powers that has led to joint governance of Hong Kong since 1997. Yang added that the violence and unrest that have rocked Hong Kong over the past eight weeks “has gone far beyond the scope of peaceful march and demonstration, undermined Hong Kong’s prosperity and stability, and touched on the bottom line of the principle of ‘one country, two systems’,” Yang said.
“No civilized society under the rule of law would ever allow acts of violence to take place.”
According to the SCMP, Yang said the CPC has three ‘hopes’ for Hong Kong: That segments of the population start opposing violence, that various sectors firmly protect the rule of law, and that society can “get out of political conflict as soon as possible.”
What started as a protest movement to kill the hated Hong Kong extradition bill, which would have given the city-state’s government the power to extradite anybody to the mainland to face punishment for alleged crimes. Opponents saw the bill, which was being fast-tracked by the authority, would have allowed Beijing to arrest dissidents traveling through Hong Kong. Earlier this month, City Executive Carrie Lam tabled the withdrawal bill, but refused to take the additional step that would have taken it off the legislative agenda. With the possibility that Lam could back track as soon as protests calmed down, more Hong Kongers took to the streets to demand that Lam, who was selected by Beijing to lead Hong Kong’s government, resign, and that she take the additional steps to kill the legislation for the current cycle.
But the HKMAO reiterated that the protests have devolved into “evil and criminal acts” committed by “radical elements.”
“We call on the general public of Hong Kong to be aware of the grave nature of the current situation and to jointly condemn the evil and criminal acts committed by the radical elements and prevent them from causing trouble to Hong Kong,” Yang said.
Meanwhile, the HKMAO representatives acknowledged that Hong Kong must do a better job to “solve the grievances” of the young, and “push for economic development and solve grievances of youngsters on quality of life and career prospects.”
Hong Kong markets responded well to the press conference, with stocks paring declines after the briefing. MSCI was off 1.7% in recent trade, after falling as much as 2.2% earlier.
“This morning there was concern among investors that the central government could express a tougher stance,” said Steven Leung, executive director at Uob Kay Hian. But now that the HKMAO has struck a more moderate tone that could be described as “tough but firm,” some of those worries have dissipated.
Still, the threat that Beijing could mobilize the garrison of People’s Liberation Army troops stationed in Hong Kong continued to hang over markets.
via ZeroHedge News https://ift.tt/2MhF8nM Tyler Durden
Amazon will be responsible for nearly half of all e-commerce in the United States during 2019. Critics such as Sen. Elizabeth Warren (D–Mass.) allege that the company “squash[es] small businesses and innovation.” They believe government antitrust action is needed to save retail from being totally subsumed by Prime memberships and brown boxes. Yet their dystopian vision fails to account for the boutique retail renaissance simultaneously happening in cities around the world.
Stores selling a single product category, such as butcher shops or model train stores, used to be common, but this pattern of shopping disappeared as first big-box and then e-commerce retailers started offering a vast array of goods at lower prices in a single location.
There was much handwringing over the trend away from specialized retail, but as Philip Oltermann observed recently in The Guardian, a new wave of small retailers is popping up in cities such as Berlin. Oltermann visited a shop selling nothing but live ants and ant terrariums, many designed by the 30-something proprietor himself. It operates as a showroom, a place to display boutique products that are then shipped from off-site to the consumer, thus saving money on retail space and inventory overhead.
How is that store able to compete against Amazon, which sells ant farms at a lower price point? The key is that it bridges the gap between online and offline life. When you order a terrarium from a seller who is clearly obsessed with his own product, you’re buying that person’s expert knowledge in addition to his unique wares. Contrast that experience with buying an ant farm on Amazon, where the expert is replaced with an algorithm and a few hundred reviews from random strangers. Amazon may tell you which terrarium was bought by the most people and how they felt about that purchase at a moment in time, but it’s a poor substitute for true expertise.
Perhaps you think Amazon will crush specialized retail because consumers value cost and convenience over expertise. So it once seemed with Barnes & Noble and Borders, two corporate Goliaths most people thought would permanently crush independent book-selling Davids by offering lower prices and wider inventory.
Nobody in the late 1990s imagined that an internet startup would eventually topple those giants by beating them at their own game. Nor did most think Amazon’s ascent would lead to a revival of independent bookstores—but it has. According to the American Booksellers Association, the number of such shops climbed from 1,660 in 2010 to 2,470 in 2018.
The future of retail is not an Amazon monostore, although Prime may replace big-box retailers, dominate certain categories of products, and appeal to the most price-conscious of consumers. But alongside Amazon, we are already seeing a new wave of hyper-specialized stores selling goods to consumers looking for expertise and a boutique shopping experience.
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As oil revenue for Venezuela continues to stagnate, the Maduro regime is more reliant than ever on illegal gold exploited from lawless jungles in the south of the country, according to a recent report and leading experts on the topic.
The coveted mineral is being exported through an elaborate global network from the crisis-stricken nation to Europe, the Middle East, and the United States, where its origin is unidentifiable, an investigative project created by five media outlets across five countries has revealed.
The report, “Venezuela, the Smugglers’ Paradise,” details how the gold is carried from mines in Venezuela run by armed gangs in the country’s mineral-rich “mining arc” in the south, under the watch of the Venezuelan National Guard, smuggled across the porous Venezuelan-Colombian border by desperate migrants fleeing the country, then shipped to the United States and Switzerland under false papers. It’s then sold to some of the countries’ biggest refineries, and could end up in the products of the world’s largest companies, such as Apple or IBM.
The United States is working on sanctions to combat the trade as the billions generated from the illegal gold empire have now become so valuable to corrupt Venezuelan elites that regime leader Nicolás Maduro may not be able to survive without it, Douglas Farah, president of IBI Consultants who also researches the topic, told The Epoch Times.
Concealing the Origin
Maduro legalized the exploitation, previously outlawed, of the country’s Orinoco region in 2016 to make up for dwindling oil revenue. The move has succeeded in generating new funds for the regime as officials tax those who participate in the illicit business, but so has violence, as different armed groups war for control of increasingly valuable mines and trafficking routes.
The gold is ostensibly sold by small groups to the state, but in reality, most is smuggled out on foot, or in boats, cars, and small planes to fetch better value abroad.
After making its way through guerrilla and military checkpoints, the gold reaches the Colombian border, where it is concealed by desperate migrants or allowed passage by bought-up officials. It is then purchased by one of hundreds of gold vendors at the bustling border hub of Cúcuta, Colombia, sent on to the country’s major cities where false papers are created, labeling the gold Colombian, then sold in Miami—and from there, to some of the largest refineries in the United States.
A second key route involves the Dutch Caribbean islands of Aruba and Curacao, 19 and 43 miles away from Venezuela, respectively.
The report’s interviews with customs and government officials, gold traffickers, and ex-Venezuelan government officials highlighted the pivotal role of the islands, whose lax controls allow the origin of the gold to be wiped before being sent to global markets.
Arriving directly via small planes from Venezuela, the gold bars pass through the islands “in transit” and are shipped by private, or in some cases commercial, aircraft to Europe, the Middle East, and the United States.
Government sources concede that at least 90 percent of the gold passing through the islands in recent years is Venezuelan, according to the report, which says 160 tonnes (176 tons) of Venezuelan gold have passed through the islands since 2014.
“The amounts of gold that have been transported through the Dutch Caribbean are staggering and definitely were higher than what we expected,” said Bram Ebus, one of the journalists who led the investigation.
Maduro’s Lifeline?
The trade has ballooned to such a degree that it’s now critical to the survival of Nicolás Maduro, Farah says.
Under Maduro, the country’s economy has tanked, and many basic goods have become widely unavailable or unaffordable due to rampant hyperinflation; at least four million people have fled, according to the U.N. Refugee Agency.
“Our work shows that gold is now more important than the drug trade for the survival for the Maduro regime,” Farah said.
“The laundering of illicit products and the ability to move illegally mined gold to the world market are fundamental to Maduro’s survival. Without the resources to pay the military leadership and maintain a privileged business class, the regime would fall.”
A vast labor pool of hundreds of thousands of illegal miners to extract the goods, and a wide, lucrative market in which the product is untraceable, has made the product more valuable to Maduro than cocaine.
The United States is working on sanctions to combat the illegal trade, but blocking official routes could push the practice further underground, benefiting the armed gangs who profit from it, such as Colombia’s ELN guerrillas who are expanding rapidly into the country.
“With a product that is illegally mined but not illegal to sell on the world market, finding ways to cut off the flow is very difficult,” Farah said.
“It isn’t like dealing with a substance like cocaine that is universally defined as illegal.”
via ZeroHedge News https://ift.tt/2GyX4Xp Tyler Durden
A spokesman for Chicago’s Office of Emergency Management and Communications says the agency will discipline and retrain a 911 operator who hung up on a road rage victim. The victim says a man in a van cut her off and yelled slurs at her. When she drove off, she says the man followed, so she called 911. The operator told the frightened woman to stop yelling at her. The woman hung up on the operator because she thought the operator wasn’t helping. She called back and got the same operator. She asked for someone else, but the operator said “Bye” and hung up on her.
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As US diplomatic officials around the globe are no doubt lecturing ‘official enemies’ over human rights, and enforcing crippling sanctions from Caracas to Damascus to Tehran to Moscow, they might pause for a moment and look closer to home, as days ago the United Nations slammed key American allies Saudi Arabia and Israel for killing an appalling high number of children.
Not unrelated, as we’ve noted before, the two countries have also grown closer in their relationship over the past years in common cause against Iran and related to Syria regime change policy.
First the Saudis, which found themselves for the first time under unprecedented international scrutiny following the December 2018 Jamal Khashoggi killing in Istanbul. Reuters reported Friday:
A Saudi Arabia-led military coalition fighting in Yemen killed or injured 729 children during 2018, accounting for nearly half the total child casualties, United Nations Secretary-General Antonio Guterres said in a report to the Security Council on Friday that blacklisted the coalition for a third year.
Yemenis dig graves for children after their school bus was hit during an airstrike in 2018. Image source: AFP
It should be noted that this is a very conservative estimate among the some 100,000 total number of people believed killed as a result of the four-year long Saudi coalition bombing campaign over Yemen, as a recent report in The Guardian tallied.
And of the Israelis, Reuters related the following concerning the UN censure:
Guterres also reported that the highest number of Palestinian children had been killed or injured last year since 2014, mainly by Israeli forces, though no parties were blacklisted in the annex to the annual Children in Armed Conflict report, seen by Reuters.
The UN report indicated 56 Palestinian children killed by Israeli forces in 2018, which is the highest since the 2014 war in Gaza.
Perhaps more astounding though, UN Secretary General Antonio Guterres told the Security Council in his report that Israeli troops injured nearly 2,700 children “in the context of demonstrations, clashes and search and arrest operations.”
The UN chief urged Israel “to immediately put in place preventive and protective measures to end the excessive use of force” and “all Palestinian actors to refrain from encouraging children’s participation in violence.”
Reuters file photo: Israeli police detain a Palestinian youth following clashes after Friday prayers in East Jerusalem.
The Israelis did not immediately comment on the the UN report, while the Saudi Ambassador to the UN Abdallah Al-Mouallimi called the numbers “exaggerated” while also saying that “every child’s life is precious.”
Meanwhile, none of these horrifying figures will result in censure from Washington regarding its close Middle East allies. Weapons and oil will continue to flow. Joint missile tests and defense pacts will continue. Business as usual.
via ZeroHedge News https://ift.tt/2GA5MnY Tyler Durden
A spokesman for Chicago’s Office of Emergency Management and Communications says the agency will discipline and retrain a 911 operator who hung up on a road rage victim. The victim says a man in a van cut her off and yelled slurs at her. When she drove off, she says the man followed, so she called 911. The operator told the frightened woman to stop yelling at her. The woman hung up on the operator because she thought the operator wasn’t helping. She called back and got the same operator. She asked for someone else, but the operator said “Bye” and hung up on her.
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Boris Johnson laid down the ground rules for discussion with the EU. The EU says it won’t accept them.
On Thursday Boris Johnson threw down the gauntlet with a call for the total abolition of the backstop. He also said the Government was “turbocharging” preparations for a no-deal break on Oct 31 if the EU refused to engage.
At a stroke, Mr Johnson appeared to sweep away the camp, nominally led by the Attorney-General Geoffrey Cox, that still believed that with a tweak – perhaps a time-limit or a unilateral exit-mechanism – the backstop could be rendered acceptable.
Not only did he announce the Irish backstop must be abolished, but he went further, turning the tables to set conditions for any future talks with the European Union.
EU diplomats and officials in Brussels have been clear that this will not happen, even if that puts the UK and EU on a collision course towards ‘no deal’ over the apparently intractable problem of the Irish border.
It is a wearingly familiar argument. Mr Johnson contends that the entire UK should be able to leave the EU customs union and single market while preserving a status quo border in Ireland.
The question now, is who will blink first as pressure builds towards an impending ‘no deal’ in the autumn?
Diplomats and officials were clear on Thursday that Mr Johnson’s statement, taken together with his decision to purge the Cabinet of all forces of compromise, could only be explained by a desire to create the conditions for an election.
The only question in European minds is whether that election comes as a result of Parliament blocking ‘no deal’ – and Mr Johnson being forced to request an extension to Article 50 – or after a ‘no deal’ has already happened.
Perhaps No One Blinks
Without a doubt, Johnson laid the groundwork for an early election.
But the notion Johnson will seek and extension other than for a week or so tie up loose ends in preparation of no deal seems silly. Also silly is the notion parliament will block no deal.
Parliament has no such power other than to force an election. And it’s now likely too late to force an election in time to kill Brexit.
Besides, with Labour splintered, it’s likely Johnson will achieve a strong working majority in the next election.
Meanwhile, as long as both sides believe the other side will blink, neither will.
It may take a crippling recession in the EU before it comes to its senses.
Germany, EU exporters in general, will get crushed in the event of no deal.
via ZeroHedge News https://ift.tt/2ZkwGHU Tyler Durden
We’ll start with the 10 per-capita poorest-countries in the whole of Europe. In rank order:
Moldova – US$2560
Ukraine – US$3560
Kosovo – US$3990
Albania – US$4450
Bosnia and Herzegovina – US$4769
Republic of Macedonia – US$5150
Serbia – US$5820
Montenegro – US$7320
Bulgaria – US$7620
Romania – US$9420
Average per capita income in Europe as a whole is US$37,317 (2018 figures).
What is noticeable is that most of these states are situated in either the Balkans or South-Eastern Europe. But that is not the end of the story.
Portugal, the poorest country in western Europe with GDP standing at US$238billion, is just pipped by the Czech Republic (now Czechia which is actually in the centre of Europe) as the star performer of the East whose national income stands at US$ 240,105 million.
Thus, in terms of per capita income the Czech Republic is the sole representative of the ex-Soviet states in Europe. This geopolitical and economic cleavage could hardly be starker. These two Euro-zones replicate the division of North and South between the US/Canada and central and Latin America.
Much of the attention to European development – or the lack of it – has been preoccupied with the gap between the West and South of Europe. This present schism is attributable to tried, tested, and failed economic strategies promulgated by the various institutions of globalization: the IMF, WB, WTO and so forth.
The single currency, the euro, became legal tender on 1 January 1999 and was adopted by most of the countries in the Euro area. But this proved to be the undoing of the political economy of the South.
When different sovereign states are responsible for their own economic policies and are able to print and issue their own currencies on world markets, any distortions and maladjustments which occur in trade balances is alleviated by changes in exchange rate values – in short, devaluation. This will hopefully restore such imbalances and return to a trade equilibrium.
However, this policy is, now, no longer available to the Southern European states since they no longer have their own currencies and, in addition, are under the tutelage the European Central Bank (ECB). The Southern periphery are now are using the same currency as the Northern European bloc, the euro, and required by the ECB to take on a one-size fits all monetary policy.
Devaluations are therefore ruled out.
Given the higher productivity levels and lower costs of Germany, Holland, Sweden, France and so forth, the Southern peripheral states have begun to run chronic balance of payments deficits. The only avenue left open to them is what is termed ‘internal devaluation’ – i.e., austerity.
This results in low growth, high unemployment, high migration, depopulation, cuts in public spending and the rest of the IMF’s Structural Adjustment Policies – policies which have failed just about everywhere. So much for the southern periphery.
Focus on Eastern Europe sheds light on a different set of problems. Most Eastern European countries, Bulgaria, Croatia, Czech Republic, Hungary, and Poland kept their own currencies; apart that is from basket cases like Latvia whose government, unlike the people, went where angels feared to tread – into the Eurozone and the euro.
(N.B. Some Western European countries, e.g., the UK, Denmark, Switzerland and Norway did – wisely – keep their own currencies.)
Excluding Russia, of course, these Eastern European states – termed ‘transitional economies’ – have become stalled in economic stagnation which so far has been difficult if not impossible to overcome. These obstacles have been specific to the Eastern periphery.
The European Union now consists of 28 states. No fewer than 10 of these are former states of the Eastern Bloc, and this proportion is set to grow with the impending accession with some minor Balkan nations. Although Georgia and Ukraine are in line for membership of the EU, they are also expected to join NATO as has become customary for aspirant EU states.
Whether they obtain either is a matter of conjecture, however, as this would be almost certain to cross Russia’s red lines and result in a major geopolitical flareup. Europe’s centre of gravity is shifting. And while the process of joining the European Union is driving change within these countries, it is also changing the nature of Europe itself.
WHERE’S MY PORSCHE?
Those Eastern European states which emerged from the break-up of the Soviet Union had been led to believe that a bright new world of West European living standards, enhanced pay levels, high rates of social mobility and consumption were on offer.
Unfortunately, they were sold an illusion: the result of the transition so far seems to have been the creation of a low-wage hinterland, a border economy on the fringes of the highly developed European core; a Euro version of NAFTA and the maquiladora, i.e., low tech, low wage, low skills production units on the Mexican side of the US’s southern borders.
This has had wider political and social ramifications for the entire European project. The Brave New World envisaged did not have any basic guiding principles or planning other than the usual neoliberal prescriptions of privatisation-deregulation-liberalisation, the well-thumbed policy triad of the neoliberal playbook.
Central to this policy implementation was a controversial prescription called ‘shock-therapy’. The fact that this policy had already been tried in Russia and failed spectacularly, didn’t seem to worry the PTB. Such is always the case with religious beliefs.
The doctrine itself had become popular among the ingenues and opportunists of the old ‘workers states’. Shock-therapy was designed to wipe-away all the old fuddy-duddy notions about state interventionism, welfarism, social and national protection; measures included the sudden removal of subsidies, fire sales of state assets (privatisation), and the abrupt removal of the controls and subsidies that had formerly applied to wages and prices.
But the neoliberal militants insisted upon a policy of ‘freeing up’ the markets which, according to them, would maximise growth and development. Predictably of course, these policies also opened these countries to maximum – and often predatory – western penetration and influence.
The shock was timed to occur before the establishment of financial markets within the region and, in the absence of investment capital, restructuring efforts became focused on labour – on reducing the unit cost of labour in order to become “competitive”. It should be understood that in neo-liberal, supply-side, economics the road to wealth and prosperity entailed policies that actually make their populations poorer. There seems to be a slightly Orwellian flavour here. ‘Poverty is Wealth.’
The wave of mass unemployment that this generated in the early 1990s goes well beyond the experiences of British recessions of the 1980s, with unemployment in some regions reaching 80 per cent. Shock therapy deliberately engineered a slump in the economies of the region, by shattering the region’s economic links, and then creating a massive domestic recession.
SHOCK-THERAPY – ALL SHOCK NO THERAPY
Regardless, the show must go on. The neoliberal religion taken up in many of these states, often by former members of the Communist nomenklatura, which resulted in high levels of structural unemployment were actually meant to do that, at least in the short-term. Painful as it was bound to be, this was the necessary shakeout of an inefficient and cosseted workforce and therefore the absolute precondition which would catapult these formerly backward economies into lean and mean competitors on Europe’s markets and the prelude of an entry into the developed economies on the Western European and US model. Yeah, right.
In the real-world Michael Hudson analysed just how this process panned out in Latvia.
Like other post-Soviet economies, Latvians wanted to achieve the prosperity they saw in Western Europe. If Latvia had followed the policies that built up the industrial nations, the state would have taxed wealth and income progressively to invest in public infrastructure.
Instead, Latvia’s Baltic miracle assumed largely predatory forms of rent-seeking and insider privatisation. Accepting the US and Swedish advice to accept the world’s most lopsided set of neoliberal tax and financial policies. Latvia levied the heaviest taxes on labour. Employers had to pay a 25% tax on wages plus a 24% of social service tax, whilst wage-earners pay another 11% tax. These three taxes making up to a 60% flat tax before personal deductions.
Additionally, in order to make labour high-cost and uncompetitive, consumers must pay a high value-added sales tax of 21% (raised sharply from 7%) after the 2008 blowout. No Western economy taxes wages and consumption at that level.
Latvia’s heavy taxation of labour finds its counterpart in a mere 10% on dividends, interest and other returns to wealth and the lowest property tax rate of any other economy. Thus, Latvian fiscal policy retarded growth and employment whilst concurrently subsidising a real estate bubble that is the chief feature of Latvia’s “Baltic Miracle”.
Now Latvia was to open up its economy to foreign capital inflows – hot money – from foreign bank affiliates, mainly Scandinavian, whose chief interest was to finance the property boom. Of course, these cash inflows needed to be serviced and in doing so became a financial tax on the nation’s labour and industry. Other sources in overseas monies came in the form of privatisation of Latvia’s public sector stock. Sweden became a major source of these rent-seeking inflows.
Yet with all of this money flowing into Latvia absolutely no effort was made to restructure industry and agriculture to generate foreign exchange to import capital and consumer goods not produced at home. Having lost export potentialities during the COMECON period the existing production linkages were uprooted, industrial plants were dismantled for their land value scrapped or transformed into real estate gentrification.
The Baltic miracle had been nothing more than a property debt-bubble financed by foreign capital inflows. When the flows reversed the extent of debt deflation, deindustrialisation and depopulation (see below) became apparent.
The Austerity programme … Latvia was suffering was the world’s steepest one-year plunge in house prices which had peaked in 2007. Despite having emerged debt-free in 1991, Latvia had become Europe’s most debt-strapped country, without using some of its borrowed credit to modernize its industry or agriculture.”
What was true of Latvia was also generally the case in the rest of Eastern Europe’ Thus by 2008 it had become apparent that the post-Soviet economies had not really grown as much as they had been financialized and indebted.
Forbes economist Adomanis calculated in 2014 that convergence of these economies with those of the West…
…continues at its 2008-13 pace (about 0.37% per annum) it would take the new EU members over 100 years to match up to the core countries average level of income …to the extent that Central Europe’s most rapid and sustained burst of convergence coincided with a credit bubble that is highly unlikely to be repeated, it seems more likely than not that the regions convergence will be slower in the future than it was in the past.”
BUDDY CAN YOU SPARE A EURO
With the decimation of indigenous industry, the role of financialization and debt became crucial, as the new capitalist economies required a financial services industry that could support the growing tendencies towards property speculation and asset manipulation.
Different vulnerabilities arose from the actions of different institutions, but the overall effect was to create state dependency upon foreign direct investment (FDI), and support from the World Bank, IMF and the specially created European Bank for Reconstruction and Development (EBRD).
The general financialization of the region led to huge increases in debt, both personal and institutional. Western banks in a number of smaller states, most notably Austria and Sweden, sought to boost their profits through increasing their market share in the Central and Eastern Europe (CEE) region, by aggressive lending to households.
Drawing on the general expectation of CEE countries’ membership of the EU to borrow on the wholesale money markets and taking advantage of financial deregulation and poor consumer protection standards in the region, they lent money denominated in Euros, Swiss Francs and Japanese Yen. This allowed them to offer consumers lower interest rates than those available for borrowing in domestic currencies. And this borrowing has driven eye-watering increases in levels of personal household debt – especially in Hungary, Romania, Bulgaria and the Baltic States.
Another consequence of shock-therapy was the pressure that it would generate on the European Union to open up western European markets to the CEE countries. The model that peripheral states adopted – of being low-wage export-based economies – depended on access to EU markets.
However, in order to sell on EU markets, it is necessary to have something to export. But these states simply did not and do not have the industrial and/or financial capacity to compete with Western European states and are not likely to have in the foreseeable future. Being subordinated to a set of rules empowered by global institutions, the IMF, WB, WTO – neoliberalism – makes such development impossible.
Of course, there has been some Western investment in CEE but without wishing to be cynical – moi? Never! – not all of this investment has been for CEEs benefit, most of it was purely predatory.
For example, the US Transnational Conglomerate, General Electric, after sniffing out worthwhile opportunities for a quick buck decided upon buying a lighting company, Tungsram, in Hungary. They swiftly closed profitable product lines and were thus able to remove a source of domestic competition from the market.
Similarly, the Hungarian cement industry was bought by foreign owners, who then prevented their Hungarian affiliates from exporting; and an Austrian steel producer bought a major Hungarian steel plant only in order to close it down and capture its ex-Soviet market for the Austrian parent company. For a voracious appetite try Volkswagen.
VW acquired a controlling stake in SEAT in 1986, making it the first non-German marque of the company, and acquired control of Škoda (see below) in 1994, of Bentley, Lamborghini and Bugatti in 1998, Scania in 2008 and of Ducati, MAN and Porsche in 2012.
But VW’s cherry-picking didn’t stop there.
Case Study: VWs takeover of Skoda
Five months after the fall of Communism and before of any kind shock-therapy had been launched Citreon, GM, Renault, and Volvo were clamouring for Skoda. VW won the bid promising DM7.1 billion, promising to raise production to 450,000 cars per year by 2000. Engine parts were to be manufactured in Bohemia and a promise was made to use Czech suppliers. The Czech workforce was to be retained. The Czech government was favourably disposed to this sort of Foreign Direct Investment (FDI) and gave VW a protected position in the home market in addition to a two-year tax holiday writing off Skoda’s debts.
Things turned sour, however, when VW reneged on its debts and promises. The original investment of Deutschmark(DM)7.1 billion was reduced to DM3.8 billion, there would be no Czech engine plant, and no commitment to produce 405,000 cars by year 2000. The labour force would be cut to 15,000 followed by more redundancies, and VW would increasingly to German parts suppliers rather than Czech subsidiaries, bringing in 15 such firms to replace their Czech competitors.
These are examples of the ways in which the “peripheral economy” status of the CEE region was imposed. An exploitative relationship between East and West. The Skoda experience of the negative outcome from opening up of the leading sectors of a target’s country’s (the Czech Republic) production apparatus into the global strategy of a Western TNC is not unique and is a common feature of FDI flows.
After only a couple of years of “shock-therapy”, much of the core industrial infrastructure of the peripheral states had fallen into the hands of multinational companies – from chains of shops, to power generating plant and steelworks. Two political/social phenomena resulted from the asset-stripping (whoops, I mean productive investment).
POLITICAL
Since the advent of the shock therapy, it would have been expected that East European voters would have voted en masse for parties of the left for the usual reasons. Namely to mitigate the worst social and economic effects of the capitalist transition.
But these parties themselves had become Blairised, i.e., heavily committed to the pseudo-reformist ‘third-way’ along with the orthodoxies of neoliberal economics, as this was seen as part of their commitment to European accession. Into the ideological vacuum and emerging across the region came populist and right-wing movements, in Poland and Hungary in particular as well the semi-fascist Baltics where they have always had a presence.
These groups have attempted to harness people’s discontent. Political forces that flourished in the time of the Austro-Hungarian empire have re-emerged – such as anti-Semitic “Christian socialism” and patriotic “national liberalism”. and perhaps more important came mass migration and depopulation in the whole area…
DEPOPULATION
Depopulation of Eastern Europe is connected not only with the outflow of labour resources: after 1989, the era of wild capitalism began in the former “socialist countries”, accompanied by the collapse of social and medical systems, a sharp increase in mortality, especially among men, with a simultaneous fall in the birth rate…”
The French newspaper Le Monde diplomatique wrote about the unprecedented demographic catastrophe that hit the countries of Eastern Europe after the collapse of the communist system in its June issue.
The process began in late 1989, immediately after the fall of the Berlin Wall. There followed a massive exodus of the population from East Germany, Poland, and Hungary to the countries of Western Europe in search of higher earnings, which continues to this day, covering practically all former countries of the socialist camp.
As a result of the new “resettlement of peoples”, the human losses of Eastern Europe were much greater than those of both world wars. Over the past 30 years, Romania lost 14% of the population, Moldova – 16.9%, Ukraine – 18%, Bosnia – 19.9%, Bulgaria and Lithuania – 20.8%, Latvia – 25.3% of the population. Depopulation also affected the parts of Germany (the former DDR), which in the literal sense of the word were emptied.
A kind of exception was made by the Czech Republic, where it was possible to preserve the main “gains of socialism” in the form of social support for the population, a free medical system, assistance.
Depopulation of Eastern Europe is connected not only to the outflow of labour resources: after 1989, the era of wild capitalism began in the former “socialist countries”, accompanied by the collapse of social and medical systems, a sharp increase in mortality, especially among men, with a simultaneous fall in the birth rate.
However, the main blow to demography caused the outcome of the population, especially the youngest, active, qualified group. In the historical homeland remained children, pensioners and persons incapable of actively seeking work abroad. And this despite the fact that for 40 post-war years in the countries of Eastern Europe there was a slow but steady growth of the population.
According to the UN, all ten of the world’s most “endangered” countries are in Eastern Europe: Bulgaria, Romania, Poland, Hungary, the Baltic republics and the former Yugoslavia, as well as Moldova and Ukraine. According to the forecasts of demographers, by 2050 the population of these countries will decrease by another 15-23%.
This means, in particular, that the population of Bulgaria will drop from 7 to 5 million people, Latvia – from 2 to 1.5 million. According to experts of the Wittgenstein International Demographic Centre in Vienna, “it is unprecedented for peacetime depopulation.”
Among the main reasons called the killer combination of three factors – low birth rate, high mortality and mass emigration. But if in the countries of Western Europe, the fall in the birth rate is compensated by the new migration waves, the countries of Eastern Europe categorically refuse to accept the “fresh blood” in the person of migrants, and this issue has acquired an extraordinary political poignancy.
At the height of the migration crisis of 2015, Slovakia and the Czech Republic took 16 and 12 refugees respectively, Hungary and Poland did not accept anyone.
Meanwhile, Eastern Europe continues to lose its “golden cadres” – the best specialists and young people. In Hungary alone, since joining the EU in 2004, 5,000 doctors have left the country, mostly under the age of 40. There is a shortage of technicians and mechanics who also left for Austria, Germany and other countries of Western Europe.
This is perfectly understandable since in Hungary they receive 500 euros a month for heavy manual work, and in Austria for the same work – 1 thousand euros per week.
In other countries, the outflow of specialists of medium qualification is felt even more: hundreds of thousands of nurses, carpenters, locksmiths and skilled workers moved from Poland, Romania, Serbia, and Slovakia to the West. In Romania, the outcome of the population is called a “national catastrophe”. The population of this country declined for the post-communist period from 23 to 20 million people.
The transfer of labour from the East was not only spontaneous but also systematically predatory. Numerous German and British firms of “head-hunters” in large numbers began to entice Eastern specialists immediately after the accession of Eastern European countries to the EU. As the German Die Welt writes, qualification, youth and money flow from Eastern European countries, while the old people and children remain deeply disappointed in “freedom” and “democracy.”
Since the early 1990s, Bosnia lost 150 thousand people, Serbia – about half a million. However, the most significant outflow was observed in Lithuania: over 300,000 people out of 3 million left the country.
But the most tragic consequences of the “post-communist breakdown” have been experienced by Ukraine – once one of the most developed republics of the USSR. If in the early 1990s there were 52 million people in the republic, now the population does not exceed 42 million. According to the forecasts of the Kiev Institute of Demography, by 2050 the population of the republic will be 32 million.
This means that Ukraine is the fastest dying state in Europe, and possibly, in the world. According to Ukrainian sources, the country was abandoned by 8 million people (experts believe that number is from 2 to 4 million people – ed.), who went to work in the countries of the European Union and neighbouring Russia. According to recent polls, 35% of Ukrainians declared their readiness to emigrate. The process accelerated after Ukraine received a visa-free regime with the EU: about 100,000 people leave the country every month
It was in Ukraine in the most extreme form three factors coincided: a fall in the birth rate, an increase in mortality (the death rate was twice the birth rate) and mass emigration of the population. Compare the corresponding dynamics in France and Ukraine. If before 1989 the growth rates of the population in these two countries were comparable, then in the subsequent period the population of France increased by 9 million people, and Ukraine lost the same number of people.
Experts believe that the demographic crisis in Eastern Europe cannot continue indefinitely. The systems of social support and healthcare cannot physically work in conditions when the majority of the population is pensioners and children, at some point, inevitably there will be a collapse of statehood.
But you should not flatter yourself about Western Europe, where the birth rate is also extremely low. While the developed part of the continent temporarily benefited from human resources from Eastern Europe, a much more rapid influx of migrants from the Middle East and Africa will inevitably change the sociocultural image of Western European countries, where religious and ethnic conflicts already arise.
If the fertility rate for native French women is 1.6 children per woman, then for adults from the countries of the Middle East and Africa this figure is 3.4 children or more. Today’s kindergartens in France are already three-quarters composed of representatives of ethnic minorities, and in the future, great socio-cultural changes await the country. This has already been written in his best-selling Soumission by the French writer Michelle Houellebecq.
Is there a solution? Is it possible to stimulate the birth rate mechanism among Europeans? Demographers believe that this is impossible either in Western or Eastern Europe. In the west of the continent, the consumption standard is so high that the appearance of a new child will automatically mean a decrease in the standard of living. In Eastern Europe, another mechanism operates: poverty, lack of prospects and the breakdown of family relations make the birth of children undesirable. Meanwhile, the proportion of Europeans in the world’s total population is decreasing. If in 1900 Europe accounted for 25% of the world’s inhabitants, now it is about 10%
CONCLUSIONS
As with other earlier examples of catch-up modernization the development policies, Eastern Europe presents a textbook example of the development of under-development.
The general liberal theory of gradual evolution was penned by W.W.Rostow, an American economist, professor and political theorist who served as Special Assistant for National Security Affairs to US President Lyndon B. Johnson from 1966 to 1969.
His theory of 5 Stages of Growth held that all societies progress through similar stages of development, and that today’s underdeveloped areas are thus in a similar situation to that of today’s developed areas at some time in the past, and that therefore the task in helping the underdeveloped areas out of poverty is to accelerate them along this supposed common path of development, by various means such as investment, technology transfers, and closer integration into the world market.
This view, however, was a source of a major counter-critique. Dependency theory (see Immanuel Wallerstein, Andre Gunder-Frank, Samir Amin and Paul Baran) is essentially a body of social science theories predicated on the notion that resources flow from a “periphery” of poor and underdeveloped states to a “core” of wealthy states, enriching the latter at the expense of the former.
It is a central contention of dependency theory that poor states are impoverished, and rich ones enriched by the way poor states are integrated into the “world system”. Dependency theorists, argued that underdeveloped countries are not merely primitive versions of developed countries, but have unique features and structures of their own; and, importantly, are in the situation of being the weaker members in a world market economy, whereas the developed nations were never in an analogous position; they never had to exist in relation to a bloc of more powerful countries than themselves.
In opposition to free-market economists (vide supra) the dependency school argued that underdeveloped countries needed to reduce their connectedness with the world market so that they could pursue a path more in keeping with their own needs, less dictated by external pressures.
About right.
Peripheral and semi-peripheral states being integrated into the world system are ‘ruled’ if that is the right word, by comprador elites who are part of a cosmopolitan overclass in a global financialised world system. Capital leakages and flight from periphery to core – a common feature of the world system, as are raw material and other energy products from the ‘developing’ world. Eastern Europe and its elites fit entirely into this comprador category supplying raw materials, labour and tourism as well as East to West capital flows/flight.
As we have seen the notion that FDI brings about growth and development is the wrong way around. No developed economy got that way by opening up its economy to competition and inward (invariably predatory) investment from more highly developed countries and economies. Policies of State-capitalist mercantilism and nation-building have always been the road to development. The UK being the first, followed in short order by the United States and Germany, in the 19th century, and in the 20th century by a number of East Asian states in historical order, Japan, South Korea and China, and a number of others.
In the case of Russia, this state has a semi-peripheral global position, in both political and economic terms. Too big and to small in economic terms with a small GDP, although very low debt-to-GDP ratio (15%). It is both semi-sovereign and semi-peripheral and a somewhat less than submerged struggle is going on between the Eurasian sovereigntists and the Atlantic integrationists with Putin balanced between the two factions.
[Russia] is not exactly classical peripheral capitalism but rather a semi-periphery.
Its phenomenon is characterised, on the one hand, by its dependency on the core, but on the other hand by its ability to challenge the domination of the latter in some particular areas. This semi-dependent position of Russia is conditioned by its shift to capitalism, whilst its semi-independent position is due to the Soviet legacy.
In particular, this legacy found its manifestation in a significant nuclear arsenal still comparable with that of the United States. If it had not existed, Russia would have been subjugated to Western interests a long time ago, just as Ukraine was.”
Russia and the world’s future are yet to be played out.
As for Eastern Europe, it would not be stretching credulity too far to say that it has been had, falling straight into the trap of under-development where it will probably remain for the foreseeable future.
via ZeroHedge News https://ift.tt/2MouKL8 Tyler Durden
