Quantitative Easing: What is this?
Quantitative Easing (QE) came into economic lexicon after the Year 2000. Text books on economics still avoid the subject. The Oxford dictionary defines it as follows: “A form of monetary policy that is sometimes used to stimulate the economy when interest rates have already been reduced.” That sounds succinct but it conceals more than it reveals. The reality of QE is that it is the creation of huge amounts of excess money, usually in great secrecy, by the Central Banks of the few countries that possess the internationally currencies, to overcome their otherwise irreversible economic problems resulting from mounting debts, huge budget deficits and sustained adverse balance of trade. The only Central Banks that can create money in this insidious form are the Federal Reserve Bank of the USA (which accounts for about 95% of the QE created), the Bank of England, the European Central Bank and the Bank of Japan.
There is a lot of obfuscation and the use of euphemisms to conceal the true nature of QE. Check this definition by Financial Times Lexicon: “When interest rates are close to zero there is another way of affecting the price of money: Quantitative Easing (QE). The aim is still to bring down interest rates faced by companies and households and the most important step in QE is that the central bank creates new money for use in an economy. Only a central bank can do this because its money is accepted as payment by everybody. Sometimes dubbed incorrectly “printing money” a central bank simply creates new money at the stroke of a computer key, in effect increasing the credit in its own bank account. It can then use this new money to buy whatever assets it likes: government bonds, equities, houses, corporate bonds or other assets from banks. With the central bank weighing in, the price of the assets it buys should rise and the yield, or interest rate, on that asset will fall. Companies for example with a willing central bank seeking to buy its bond, will be able to pay a lower interest rate when new bonds are issued or existing bonds come to the end of their life and need to be replaced.”
In the economics taught in schools, a Central Bank increases or decreases money supply by increasing or reducing interest rates. When interest rates are very low, people and businesses borrow more and thereby banks create new money. Consumers and businesses that can borrow at low interest will become more active and the economy supposedly improves. If the country needs more money it will sell bonds or treasury bills which are forms of borrowing, apart from resorting to obtaining loans from international
financial institutions. Borrowed funds have to be repaid. If a country simply creates new money to overcome its economic problems, there will be widespread inflation, as happened recently in Zimbabwe.
But there is this small club of the privileged few owning international currencies, overwhelming dominated by the USA, that can create new money to overcome systemic economic problems and still survive and prosper at the expense of the rest of the world. This iniquitous system was created at the United Nations Monetary & Financial Conference at Bretton Woods, USA, in July1944 when the “Allied nations” of 41 countries that were then winning World War 2 gathered to settle the economic structure of the world with a view to creating future prosperity and peace. Since all major economies had been devastated by the war while the USA prospered immensely from it by being the industrial goods supplier and lender to its European allies, the US GDP then represented 50% of the world GDP.
Bretton Woods made two major decisions for post-war reconstruction and future economic stability: 1) it set up the IBRD (The World Bank being its principal component), the IMF and GATT (now replaced by WTO); 2) it set up the Dollar Standard where the US dollar became the medium for international trade and settlements while the dollar itself would continue to be pegged to gold at $35/oz. The British pound sterling would continue to be used in the so-called Sterling Area comprising the Commonwealth and the British
colonies in a secondary role.
In vain the British representative, John Maynard Keynes, tried to introduce an international currency based on a basket of currencies managed by an international organisation. The USA rejected the idea and carried the day. But after a couple of decades it was apparent that the USA was creating excess money to fund its extensive wars in Korea and Vietnam and other regions. These could not be backed by gold and in 1968 President Charles De Gaulle of France called the US bluff by demanding gold for its dollar reserves. After a few adjustments, in 1971 the Nixon administration in the USA went off the gold standard. By this time, the dollar had been firmly established as the reserve currency of other nations and the currency of international trade. The Nixon administration, with the genius of Henry Kissinger, ensured this by getting the
OPEC to trade oil only in US dollars in return for US military protection for the
authoritarian Arab rulers. Oil is the largest traded commodity in the world.
Uniquely among Central Banks, the US Fed Bank (the Fed) is a private institution established by Congress in 1912 with links to the US administration. It comprises 12 regional Reserve Banks in which the private banks hold stock, the biggest institutions holding the most power. The Chairman and Vice-Chairman and the seven-member Board of Governors of the Fed are appointed by the US President and confirmed by the US Senate. The supervision and regulation of banks is done by the Reserve Banks, meaning banks are regulated by their own organisation. The Federal Reserve decides on monetary policy, sets interest rates and controls the US dollar money supply through its “open market operations”. The Fed creates new money by buying US government bonds and securities by writing a cheque against itself. It can then disburse this as money to the
other US banks and financial institutions as it pleases.
The Fed operates in a veil of secrecy even from Congress and the US public. Its open market operations had never been audited because it claimed that if these were made public the world financial system would be in jeopardy. Only its own internal balance sheet is audited. Senator Bernie Sanders, the only independent non-party member of the US Senate, managed to get through an amendment to legislation in mid-2011 to have the Fed’s operations audited by the US Government Accounting Office (GOA). He says the Chairman of the Federal Reserve Board had refused to answer his request for the names of the main beneficiaries of its recent QE operations. The results of the audit were a
revelation that shook many other nations but not the US public who is still in the dark as the US mass media largely ignored the GOA’s report. This description is taken from Senator Bernie Sanders’ official website.
The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great
Depression. An amendment by Sen. Bernie Sanders to the Wall Street reform law
passed one year ago this week directed the Government Accountability Office to conduct the study. “As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world,” said
Sanders. “This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.”
While the Government Accounting Office report came out with the details, it dutifully
white-washed the activity with pithy statements like this: “Between late 2007 and early 2009, the Federal Reserve Board created more than a dozen new emergency programs to stabilize financial markets and provided financial assistance to avert the failures of a few individual institutions.”
The US$16 trillion secretly disbursed by the Fed to the key US financial institutions and
corporations in 2007-2009 did not avert the world financial crisis. The same financial institutions (whose leaders are also the key figures in the Fed) that caused the world financial crisis through reckless financial gambling in the housing market, stocks and derivatives were then bailed out to the tune of trillions of dollars, allowing the same irresponsible financial managers to award themselves billions of dollars in bonuses with these funds and continue their speculative activity.
The world economy was plunged into chaos because of the irresponsible speculative actions of the major US financial institutions. But since world finance is still built largely around the US dollar, the flood of US QE funds did enable a partial recovery. CCTV
news reported a few days ago that business in China is helped by the flood of finance coming from the USA. At this moment, according to the Chairman of the Fed, it is disbursing $85 billion as QE every month to stabilise markets.
All this assumes that the USA must continue as the monetary controller of the universe like the feudal overlord who owns the lands and obtains rent from the serfs. This is the basic structure of the present world financial system. But the core of the system is
unsound. The US is the world’s biggest debtor, with the debt standing now at $16.4 trillion, an amount it can never hope to repay except by creating more money and postponing final payment as the US GDP is only $15 trillion. The US prosperity is based on using its borrowed or creatively manufactured funds to buy the products of other countries as US corporations have outsourced most of its manufacturing and support operations to developing countries. The GDP, which is primarily the total of private and public consumption, is also misleading as it is disproportionately based both on consumer and public debt. So how can a financial structure based on QE and debt survive?
The unique dominating role of the US dollar still makes the USA the most powerful country not only financially, but militarily. Its access to such a flood of created or
borrowed money makes it the world’s most important market for other nations who
labour to produce goods and services for the US market to be paid for in dollars. The USA has fought hard to prevent the emergence of competitive international currencies. It fought hard but could not prevent the formation of the euro by the European Union. Two developing country leaders who tried to by-pass the US dollar, Saddam Hussein and Muammar Gaddafi, were killed and their nations wrecked. The British pound sterling is small potatoes in international trade. The once powerful euro is in decline. But the new opposition is coming from the BRICS nations that decided to launch their own international currency (see my article on the BRICS Summit of 2012) to protect themselves from the manipulations of the US dollar. But it will not be easy to challenge US dominance which also has the support of the powerful Western bloc of nations that do want to see non-European developing nations challenge Western hegemony.
In essence, QE is the source of power that governs the world and it is given only to the leader.
It is the fashion today to scoff at Marxism and the writings of the old Marxists. But it was the prescience of Lenin that predicted this new world order almost a century ago in his classic study on the evolution of imperialism.
“Imperialism, or the domination of finance capital, is the highest stage of capitalism in which this separation (i.e. of finance capital from actual production) reaches vast proportions. The supremacy of finance capital over all other forms of capital means the predominance of the rentier and of the financial oligarchy; it means the crystallization of a small number of financially “powerful” states among all the rest.”
V.I. Lenin, Imperialism, The Highest Stage of Capitalism, 1916
20 May 2013
Who killed the Bangladeshi garment workers?
The news media in the West have been giving a lot of attention to the collapse of a building housing a garment factory in Bangladesh which killed over 400 workers, mostly young girls, on 24 April, 2013. This was not the first time. Bangladesh has had a series of disasters in their garment factories, lastly in November 2012 when 112 workers died in a fire in a factory where the doors were locked. Pope Francis condemned the living conditions of workers in Bangladesh and the European Union officials and trade unions expressed outrage at conditions in Bangladeshi factories. EU officials stated that they were considering punishing Bangladesh by altering the existing duty-free quota-free status given to Bangladesh garment exports. American experts said that there should be more training for Bangladeshi managers on industrial safety.
The moral outrage sounds very convincing, so let us look at the background. Bangladesh
is one of the poorest countries in the world and has a huge population of 164 million. Its per capita income level ranks 192 out of the 196 countries in the UN. It is now a part of the former Kingdom of Bengal, the richest state in Mughal India till it was conquered by the British East India Company after the Battle of Plassey in 1756. The country was looted and taxed heavily by the British and adventurers like Robert Clive became among the richest men in Britain. Since then, Bengal reverted to poverty and periodic famines killed millions. The last great famine was in 1943 during World War 2 when British Prime Minister Winston Churchill diverted food grains intended for famine-stricken Bengal, where droughts and a cyclone had destroyed farms, to overstocked food stockpiles in UK and Europe with some contemptuous references to Indians, killing 3 million Bengalis. The pleas of his own government in Delhi for famine relief for starving Indians were ignored and it was not permitted to use Indian money or ships for emergency food imports. ( http://www.time.com/time/magazine/article/0,9171,2031992,00.html)
Since 1996 Bangladesh has seen a commendable annual GDP growth rate of around 6% a year. It lacks the investment, the technology and the infrastructure for advanced industrial
production or industries. It depends heavily on the garment industry which is low investment and highly labour intensive. The garment industry accounts for 80% of its exports and brings in $30 billion in export revenues. The industry employs 3.6 million workers. Traditionally, the sweat-shop garment industries in Asia and South America employ unmarried girls who will work for very low salaries and work long hours with only one half hour break for lunch. It is reported that the average garment worker’s salary in Bangladesh is $38 per month. Bangladesh is a popular source for US and EU garment buyers, the second largest after China, as it is known as the world’s lowest cost producer. That is its recognised comparative advantage. This is how it gains custom among the giant corporations in the USA and the EU that buy cheap and sell at a huge profit. For example, a shirt bought from a Bangladesh factory for $1.75 will sell for $35 in the USA.
I worked as a UNIDO consultant for the SME garment industry in Sri Lanka in 2002 and 2004 for a total of 19 months and got an insider’s view of the trade. Unlike Bangladesh, Sri Lanka has tight labour laws that are enforced. It is a richer country with a history of communist labour movements that succeeded in creating powerful trade unions. The Labour Ministry sets minimum wages for all recognised industries, together with working hours and minimum working conditions. Almost all Sri Lankan factories, even the small ones, are air-conditioned and well lighted. The minimum number of toilets and lunch room facilities are established by law. Computerised cutting is standard and all sewing machines are electric. But working hours are very hard and salaries are very small. Once the machines start, a worker cannot rise for water or the toilet till the half hour lunch break. After lunch, work will proceed for another uninterrupted fours hours and an additional fours hours of overtime is not uncommon when rush orders need completion. So workers endure this hardship for five or six years and leave to get married or do other
less demanding jobs.
The SME garment industry survives on the whims of the Western garment buyers for famous brand names advertised in the West. When the big retail chains make their plans for clothing styles for the next season, the buyers will show the manufacturers a sample and bid for a price. They will beat them down by threatening that they can always get better prices from competitors or in Bangladesh. This is the bargaining chip: there is always someone more desperate who will cut corners and try to get the business. The business itself is a matter of life and death for many poor countries. The manufacturers have no bargaining power.
How can an industrialist cut prices but by making cheaper factories, paying lower wages and greater exploitation of labour? The factory that collapsed in Dhaka on 24 April was making garments for Walmart, Sears, Gap, J.C. Penney, Cato Fashions, Benetton (all in USA), Primark (UK), Loblaw (Canada) and Mango (Spain). These billion dollar corporations were set on extracting the last possible penny from the suppliers so that they can make super-profits. In Sri Lanka I saw factories making Arrow brand shirts sold in the USA for $35-45 for a price of $2.0. Did these giant corporations and their millionaire owners not know where their profits were coming from?
In Bangladesh there has been widespread public agitation and anger against poor labour
standards after this disaster. It is not that the government and people of Bangladesh do
not care. They are helpless. If the garment industries do not employ their 3.6 million workers and bring $30 billion as exports, the Bangladesh economy would collapse. After the disaster, the government and the army made commendable efforts to save as many people as possible. We saw on TV soldiers in tears when they could not extract bodies. Public anger was turned on the building owner who is now being charged for murder and the High Court ordered the confiscation of his assets to pay the workers.
The EU can take the high moral ground, blame Bangladesh and cut even their economic
lifeline by imposing higher duties on their garment exports (a small bonus for the bankrupting EU). In the USA, the authorities talk of the need to fund training for Bangladeshi manufacturers, as though the Bangladeshis are an ignorant people. But no one in the West talks of increasing garment buying prices so that manufacturers can
improve working conditions and pay. After all, none of the Bangladeshi garment
manufacturers (whom I met with on an ITC/WTC project some years ago) are dollar
millionaires. The best that the EU and the USA could do is to establish a minimum import price for imported garments. But that is an unthinkable proposition. It would hurt corporate profits in the West.
01 May 2013
Letter to a US Congressman
Due to the deepening economic crisis in the USA and a dysfunctional US Congress that is unable to pass even the annual budget, the author sent this letter to the local Congress member. The US situation is reminiscent of the political chaos that Italy and France
experienced after the traumatic experiences of World War 2.
12 April 2013
We were happy to receive a copy of your brochure on constituent services and your assurances that you will give priority to serve working families. So permit me to expand on this subject. I have been a supporter of the Democratic Party for over two decades and, in my role as Coordinator of Friends of Sri Lanka in the US (FOSUS), have persuaded our associates to attend Democratic fund raisers and vote for Democratic candidates. As a retired elderly person I have no personal ambitions except to see a reversal of the decline of this great country of ours.
You are aware that the public approval rating of Congress now stands at a low of 9%, something which is a world record. The large numbers, particularly of younger people, who supported our President in 2012, despite misgivings about his first term performance, are again disillusioned. Campaign promises are once again broken with the excuse that compromises are needed to get bipartisan support. You will agree that the electorate has only a limited choice in our two party system, forcing voters to choose the lesser of the two evils on many occasions. This may change with time.
The Democratic party members can point to dozens of pieces of legislation they passed which are beneficial. But the key issues are still not addressed and they are the following.
More jobs for working people. We know that the official unemployment rate of 7.9% is misleading because it omits the large number who are not receiving unemployment benefits and have opted out of the job market or are only doing part-time jobs.
- More benefits for the working poor (now numbering 50 million), seniors and the unemployed. The rising level of poverty in the USA is a national disgrace. As poverty spreads, consumer purchasing power declines and businesses also decline.
- More inputs to make higher education affordable so that we will not need to import technically qualified professionals from India, China and Europe.
Without this, the USA will lose its technological lead.
The political debates on these key issues have been clouded by misinformation. This is because the national political agenda was set by the extreme neo-conservative wing of the
Republican Party from the time of President Reagan, reinforced by the organizers of The Project for a Greater America who carried out their projects under President George Bush with disastrous results for the country and the economy. And yet the response of the Democratic Party to this challenge by ideologues working for privileged 1% of this country has been totally inadequate. Except for a few like the late Edward Kennedy, Bernie Sanders and Kucinich, the Democratic responses have been muted. Even our President held up President Reagan as an icon, not President John Kennedy from our own party.
The Democratic Party has not done much to confront and destroy the neo-conservative myths that govern our economic thinking, for all these ills follow from the decline of the economy. Alan Greenspan gave the green light for the Bush era agenda that created a
bubble economy and none of the mainstream economists saw the 2008 collapse till
it happened. Instead they continue the same myths such as these.
- Social Security is bankrupt and causes the budget deficit. Social Security has 2.7 trillion dollars and is quite healthy. Whether it will weaken after 20 years will depend on how America handles its economy and politics and is too far off to predict now.
- The millionaires and billionaires and big corporations need further tax breaks. The income tax rate for millionaires for the highest income slab is 75% in most European countries. They have no problem. In the US, there is an outcry when millionaires taxes are raised above what the rest of us pay, even to a meager 39.5%. In 2011 US businesses recorded profits of 11 trillion dollars, the highest ever. Yet 25% of the largest corporations paid no tax, the average tax paid varied from 11-16% and some were continually getting government subsidies.
- Corporations create jobs. Manufacturing corporations for the last two decades have destroyed jobs by transferring manufacturing to India, China, Mexico, Canada and other destinations. They make super-profits by using cheap foreign
production and marketing them at home. To add to this, they hide their profits in tax havens in the Caribbean and nothing has been done to curb this. There have been no penalties for these anti-national acts.
- We need to spend half the federal budget on the military and security services. The more wars we wage in other countries the more enemies we have made. Why do we not ask ourselves why terrorists do not attack the Scandinavians or the
Australians and other peaceful nations. How is it that China using its soft power is gaining more business and trade in Africa and Asia than we do by having military bases in these regions? The military allocations are the biggest hole in the federal budget.
- Social benefits and entitlements must be cut to reduce the national debt. Successive administrations have been creating easy money through the Federal Reserve without public awareness. On a congressional decision sponsored by Sen. Bernie Sanders, the Inspector-General’s office noted that around 13
trillion dollars had been issued by the Fed between 2007 and 2009 to banks
and financial institutions at token interest rates (http://www.sanders.senate.gov/newsroom/news/?id=7b088bfe-18a0-4add-8ec5-02d886b71d40).
One and a half trillion dollars went to save failing banks and corporations. More easy money is flowing under the euphemism “quantitative easing”. All this is transferring the national wealth to the rich 1%. Of the 500 million dollars allocated for helping house owners under threat of foreclosure, only 10% was spent.
I am writing at length because we love this country and want to secure its future for all our coming generations. Will Congress and the Democratic Party be up to the task or will
they carry on with the same agendas? You can help to provide the answer.
BRICS Summit Meeting of March 2013
The BRICS (Brazil, Russia, India, China, South Africa) summit meeting of March 2013 held in Durban, South Africa, which had an ambitious agenda which will have consequences for the world economy, has been all but ignored by the popular Western media. We could not find a word about it on CNN or Bloomberg News. The Washington Post had a small article hidden away which expressed skepticism about the partners’ ability to work jointly and proved their point by a quotation from an obscure London financial manager. The New York Times of 26 March stated that BRICS planned to set up a development bank to challenge the IMF and World Bank but cast doubts on their ability to work together and their professed support for developing countries in Africa. Only Der Spiegel, the German newsmagazine, had a good word for BRICS, also quoting a retiring top manager of Goldman Sachs, Jim O’Neill.
A Wall Street Journal article of 25 March had this comment: “Leaders from Brazil, Russia, India, China and South Africa hope to find ways to counterbalance western influence in the global economy, in part by swapping their currencies more efficiently and establishing a development bank to extend their influence in emerging markets”. The China Daily of 27 March 2013 stated: “He (Chinese Finance Minister, Lou Jiwei) also said the current global economic situation is very complicated, noting the debt crisis in Europe is not over yet, which along with the quantitative easing policy has created an unfavorable external
environment for the BRICS nations”. The World Bank welcomed the establishment of a BRICS development bank and was “ready to work closely with the new bank to end poverty and build shared prosperity throughout the developing world”.
This is the crux of the matter. One of the most perceptive political philosophers of all time, V.I. Lenin, writing Imperialism, The Highest Stage of Capitalism, predicted in 1915, before it became a matured reality that finance capital would become the major instrument of imperial power in the future. It is financial power that enables the West’s supreme military and political power and allows it to dominate world politics, punish countries not aligned with them by destroying their economies and invading others with impunity.
It is worth recollecting how the world’s biggest economy and currently the world’s biggest debtor nation (national debt of US now $16 trillion or one fourth of the world economy) owns the main currency for world trade and the reserve currency of most nations. In the Bretton Woods Conference of July 1944, the 44 Allied nations (meaning those at war at the time with Nazi Germany and Japan and their allies) set out to restructure the world financial and trading system to prevent future wars. It set up the International Bank for Reconstruction and Development (IBRD) of which the most important components today are the World Bank and the IMF, The General Agreement for Trade and Tariff (GATT) which has now been succeeded by the World Trade Organization (WTO) and the basis of the new international reserve currency which was to be the US dollar. The USA was the
world’s biggest creditor nation at the time and its GDP was equivalent to almost half that of the world due to the destruction of the powerful European nations during to the war. The caveat was that the dollar would be pegged to gold at $35 per ounce. Other nations’ currencies would be valued against the US dollar which would also be the most important reserve currency. John Maynard Keynes, the British representative and the most acclaimed economist of the time opposed this and suggested a neutral international currency, which he called Bancor, which would be operated by the International Clearing House that would settle currency exchanges for international trade. Keynes lost to strong
opposition by the USA. Having established the privileged position of the US dollar, in 1971 US President Nixon unilaterally abrogated the obligation to link the dollar value to gold. The USA now had acquired a licence to create money without external restraints and yet
retained its privileged position due to its universal acceptance as the reserve currency and the currency of trade. Even before this, the USA was creating more money than was warranted by its gold reserves till President Charles De Gaulle called off this bluff by exchanging large volumes of dollars for gold.
This is why the US strenuously, yet unsuccessfully, opposed the creation of the euro currency by the EU in 1999.
This is not to deny the US role in fostering industrial development and modern management around the world. It offered the world financial stability at this stage. The post World War 2 (WW2) recovery of Western Europe owes much to the newly created Bretton Woods institutions and the export of technology and management from the USA. In Asia, Japan, Korea and Taiwan were the new leaders in industrialisation after WW2 but initially battled huge restrictions on the entry of their products to the USA and Europe. With the political changes and economic reforms in China and India, US and many
European corporations discovered it was cheaper to manufacture in Asia and make bigger profits by marketing these back in their home countries. Asia has become the world’s premier workshop. An unintended consequence of this shift of manufacturing industries to Asia has been the loss of good manufacturing jobs in the West and mounting unemployment. To bridge this gap and maintain prosperity and dominant military power, the USA and the EU have resorted both to extravagant money creation and borrowing which has now become their biggest economic problem.
The extravagant creation of new money in the West and its international borrowings impacted adversely on developing countries which have to play by the rules and cannot expand their own money supply without either expanding their real economy of goods and services or by international borrowing, unless it wants to invite catastrophic inflation, as in Zimbabwe. On the other hand, the owners of reserve currencies, the dollar and the euro, can live well beyond the worth of their real economies. Developing countries are disadvantaged because the value of their currencies is still measured against the dollar and the euro. The developing world is hence paying rent to the powerful West to maintain its financial position. Due to their dependent position, the developing countries lacked the
ability to challenge the situation. This is what this BRICS summit hopes to address, albeit cautiously. Among developing countries (though Russia cannot be classified as developing, it is still a victim of the system), it is only BRICS that can do it as it has a combined GDP amounting to a quarter of the world GDP and financial reserves of four trillion dollars.
The BRICS summit in Durban carried the theme: “BRICS & Africa: Partnership for Development, Integration and Industrialisation”. Twenty five African countries participated as observers. The main items approved at this meeting were these:
(1) Creation of a BRICS International Development Bank, (2) Creation of a
Contingent Reserve Arrangement, (3) Setting up of a BRICS Business Council (4) Setting up a BRICS Thank Tank Council.
Of these, the most significant is the BRICS Development Bank which will provide an alternative to the World Bank and IMF that are now controlled by the West and often supports Western political and economic agendas. The proposed bank will focus heavily on funding infrastructure in developing countries. It is a major new venture and will take a few years to become a reality. This proposal is what the West finds most irksome. But already many infrastructure projects in Africa are supported by China and to a lesser extent by India and Malaysia, projects that the other international agencies will not fund on advantageous terms. Chinese presence in Africa is already substantial with China being the main trading partner in the continent with a trade value of $198.4 billion in 2012.
The Contingency Reserve Fund is a protective measure to maintain adequate special reserve funds to protect countries from the type of financial crises that have occurred recently, such as the US originated crisis of 2008. The funds will be maintained by the Central Banks of the respective countries in the following volumes: China $41 billion, Russia, India and Brazil $18 billion each and South Africa $5 billion. The BRICS Business
Council will seek to expand trade between these countries and the first meeting was held immediately. A Think Tank would regularly evaluate and develop new strategies. BRICS also agreed to set up a permanent headquarters.
The BRICS countries, together with many other developing countries in Asia, are developing currency swaps for their external trade to by-pass the US dollar and the euro. China, which plans to make the renminbi an international currency, has already established currency swaps for trading with Russia, Australia, Turkey, UAE, and recently with Brazil. The biggest currency swap will be between China and Japan, the world’s second and third largest economies and the biggest trading partners among nations. The ASEAN region also trades among themselves with currency agreements. The Japanese and Chinese currencies are traded in Shanghai and Tokyo on their own perceived value without reference to US dollars or euros. A new world financial structure that is more inclusive and fair by all nations is already on the way.
06 April 2013.
David Miliband resigns from UK politics
David Miliband, former UK Foreign Secretary in the Tony Blair government, an architect of the illegal US-led invasion of Iraq based on false propaganda and a persistent critic of the successful Sri Lankan military campaign that ended terrorism in that country (http://davidmiliband.net/2013/03/sri-lanka-human-rights-and-the-commonwealth-heads-of-government-meeting/), resigned from UK politics on 26th March 2013 to take up the job of CEO of a New York based NGO, International Rescue Committee. He is 47 years
old. His departure from politics was due to his rivalry with his younger brother, Ed Miliband, for leadership of the UK Labour Party, a battle which he lost.
His resignation led to encomiums in the US media and by former US leaders but he received a hostile press in his own country. The UK Guardian newspaper of 28 March 2013 had an article that said that the appointment of a politician like him as CEO would hinder the aid work of the NGO because of the past political baggage against developing countries that he brings with him. The UK Telegraph of the same day called him a “greedy failure in cosmos sulk” and said that “he achieved nothing”.
By a coincidence, we had sent him a letter two weeks earlier pointing out to him that his criticisms of Sri Lanka were untenable in the light of his own dismal human rights record.
Letter to David Miliband
17 March 2013
The Rt. Hon. David Miliband, MP
Ede House, 143 Westoe Road
South Shields, NE33 3PD, United Kingdom.
Punishing Sri Lanka
The lead article on your website is headed “Standing Up for Human Rights in Sri Lanka”. Your article ends with the laudable assertion: UN conventions are the civilising product of the wars – and unstopped slaughters – of the 20th century. They are a universal badge of humanity. Our government should be standing up for them.
We are writing this because of our great respect for the democratic traditions of Great Britain and your membership of its legislature which is rightly acknowledged as the Mother of Parliaments. We do not hold any brief for the Sri Lankan government but your repeated criticism of the Sri Lankan Army during its final offensive to end the terrorist movement in Sri Lanka in 2009 is based on dubious assertions.
Firstly, the LTTE terrorist group, which was initially trained and funded by the Indian government of Indira Gandhi in 1980 to destabilise Sri Lanka, devastated that country through terrorist bombings for three decades and three decades of terror and government
military responses cost a hundred thousand lives. Hundreds of bombs were exploded in buses, trains, schools, public buildings, places of worship and at public gatherings in the most indiscriminate forms of murder. Civilians, including bus travellers and the entire population of villages, were executed at random to create fear. You will recall that when the London metro and a bus were bombed the UK government and security forces were hysterical in their responses. The LTTE engaged in open warfare with an army, navy and airforce, thanks to the freedom its representatives and fund-raisers enjoyed in the UK and other Western countries. They finally lost the war and their defeat and the death of its murderous leadership should be welcomed, not criticised, by the whole world. No political
opposition has the right to wage war against the state, whatever their demands, when a democratic parliamentary system exists. This is a basic. Minorities in the USA, UK and EU countries have many serious grievances but they would not, and should not, be allowed to take up arms to advance their cause. When they did, they were forcible put down.
Your political leaders and the media have since waged a ceaseless attack on the Sri Lanka Army for its victory. Totally unsubstantiated claims have been made on civilian deaths, rising from 40,000 to 200,000. What is known is that the Sri Lankan armed forces confirmed that 6,250 of their personnel were killed in this last war and that 24,000 were
injured. The UN also confirmed that the LTTE leadership conscripted around 300,000 civilians to accompany their army and these people were used to make military fortifications and also serve as reserve soldiers. They were not simply innocent bystanders caught in the midst of a conflict but active participants. Whatever the exact number, which not even the LTTE would currently know, 296,000 civilians were rescued by the military during the last stages at a high cost to the soldiers.
Compare this with the illegal war in Iraq in which your government was a major partner. Can you tell the world the number of innocent civilians who were killed in Iraq? None of your Western governments count the number of dead civilians in your conflicts in Iraq, Afghanistan, Libya, Syria, etc. You only count your casualties. Non-Europeans are also officially non-persons in these wars. But The Lancet studies estimated in 2006 that civilian deaths were around 654,905 and that four and a half million are refugees. Likewise, the civilian deaths in Afghanistan are uncounted. You will recall the revenge attack on Fallujah in 2004 when that city was razed to the ground through indiscriminate bombing. You must also have read the media reports on torture by British soldiers in Afghanistan which reveal only the tip of a nasty iceberg.
Consider Britain’s own Irish minority problem in Northern Ireland. Ireland is a country Britain occupied by force in the past, terrorised the population and confiscated its lands and planted British people as an occupying race. Only Northern Ireland remains as a relic
of this colonisation and exploitation. Despite all the agitation for independence from Britain, will the British ever consider returning this region to Ireland? And did the British
government stand by meekly while the IRA planted bombs (though nowhere with the
murderous intent of the LTTE in Sri Lanka)?
There is a serious moral hazard in the attitude of the British government and opposition leaders of your Labour party towards the Sri Lankan Army.
Billionaires Rule the World
The prestigious Bloomberg News, which provides a barometer for reading the
international business world, has announced that this world of seven billion people has 1,426 billionaires who owned US$5.4 trillion in 2012, an increase in wealth of 17% over the previous year. At the same time, about 1.29 billion people live in poverty (World Bank figure for 2008) unable to have access to basic human needs like adequate food, health services, sanitation, water and education. So should they celebrate this with champagne and caviar in luxury yachts and private planes and avert their eyes from the mass of humanity struggling for survival? Yes, they would. It is the new world order, so get
used to it.
In the USA, EU and Japan which produce the largest number of these superior super-rich humans, the economies are in a spiral descent since 2008: unemployment is rising, basic
social benefits are being cut by governments while public monies are allocated to corporations in debt or financial institutions which made bad loans and risky speculations. In Greece unemployment is 26% and in Italy 12%, Spain 26%, Portugal 17%, Ireland 14%. In the USA it is 19% if you wade through the cloud of official misinformation that only counts temporary unemployment payment recipients.
Almost everywhere in the world, the spread of neo-liberal economics and the political
doctrine of the Divine Rights of Billionaires increased the gap between the rich and the poor. In the USA, the 400 richest people, out of a population of 320 million Americans, own 36% of the national assets. Yet 46.2 million live in poverty (US Census Reports for
2011) with limited access to basic amenities and 50 million are without access to health services. Despite this, US corporations made record profits of $11 trillion in 2011, outsourcing much of their work to developing countries and reaping profits through marketing at home. While the New York stock markets keep rising to astronomical figures, to the cheers of the complicit mass media, no one cares to say that this is fuelled by an excess of money in the hands of a privileged few. And when the markets collapse, the financial houses that lead this charge can depend on public money to bail them out and keep increasing their millions of dollars in annual bonuses, salaries and perks.
Neil Baroffsky, former Special Inspector General of the US Troubled Assets Relief Program (TARP) intended to save the US financial institutions that created the 2008 world financial crisis through gross speculative dealing and mismanagement, has exposed the inner workings of a system where government and the super-rich are allied to maintain their power and financial control of the state (Bailout, by Neil Baroffsky, published by Simon & Schuster, Inc. New York, July 2012). He states that while only $1.4 billion was spent of the $50 billion allocation to save troubled homeowners whose houses were being foreclosed, the funds expended to save the banking and financial corporations and the people who caused the crisis totaled $4.7 trillion.
The malaise is evident around the world, even in Communist China and all the major
developing countries. But it is easier to protest these inequities in the developing countries like India, Brazil, China, South Africa, and others in South America, where leaders are at least publicly acknowledging a massive problem and promising to limit inequality. In the EU and America, mass protests raging for the last two years against this inequity were largely being ignored by governments that merely sent the police to quell the street protests, often violently. As a palliative, the EU has just passed legislation to limit top
executive bonuses, though it falls short of the recent Swiss Referendum that will now also place some limit on top executive salaries. Surprise, it is Communist China at the recently concluded National Congress that regarded income inequality and poverty as the major problems that are to be addressed by the government in the coming years. Or is that a surprise at all.
On the contrary, politicians in the USA justify income inequality as desirable. They have refused to increase the tax on billionaires and millionaires from the standard of 35% for all to 39.5% at the highest tax bracket of a million dollars and above. In most of Europe, this top income slab is taxed at 75%. The constant refrain is that billionaires and giant transnational corporations create jobs. The stark reality is that they create jobs in China
and India and have destroyed millions of jobs in the USA.
How is all this possible in “democratic” western countries with the highest living standards and educational and scientific achievements? When Charles II of England and Louis XIV of France proclaimed the Divine Right of Kings and acted accordingly, the masses beheaded them and changed the system. Modern societies have developed more sophisticated mass thought control methods (backed by sometimes visible, sometimes invisible terror against dissidents) that enabled J.V. Stalin, Hitler, Mussolini, Mao
Zedong, Kim Il-Sung and others of that ilk to deceive the masses and stay in power with wide popular support. So Western billionaires with access to even more sophisticated scientific resources and a captive mass media can feel confident that they can continue to safely exploit the hundreds of millions of their countrymen for years to come. Fooling the public and diverting attention from national problems over the long term is no big problem for people with such unlimited resources and access to governments and major international institutions.
For all the pretense of religiosity, this is an age of widespread immorality. It is a world with political and economic philosophies that justify meanness.
17 March 2013.
Sri Lanka: Church Missionary Society during early British rule
Recollections of Ceylon, after a residence of thirteen years; with an account of the Church Missionary Society’s Operations in the Island by Reverend James Selkirk, Curate of Middleton TVAS, Yorkshire. First published in 1844. Reprinted by Mrs. Nirmal Singal for NAVARNG booksellers & publishers, RB-7 Inderpuri, New Delhi 110012, India, 1993.
The early efforts of the Church Missionary Society (CMS) to proselytise in Ceylon (Sri Lanka) are described in this book, first published in 1844, titled Recollections of Ceylon by Reverend James Selkirk. The author lived in the country for 13 years and was involved in setting up the first CMS school in the island in Baddegama, in the Southern Province. The frustrations of the CMS missionaries, who found that, despite their sophisticated propaganda and educational and financial inducements, the natives remained unconvinced and held on to their traditional religions, Buddhism, Hinduism and Islam, was expressed by their angry Anglican clergyman, Bishop Heber, in this bilious complaint.
What though the spicy breezes
Blow soft o’er Ceylon’s isle
That every prospect pleases,
And only man is vile!
In vain with lavish kindness
The gifts of God are strewn;
The heathen, in his blindness,
Bows down to wood and stone.
Bishop Heber supervised the work in Sri Lanka from his palace in South India. Having visited Baddagama (currently spelt Baddegama, where the greenery and the vegetation entranced him) and Kandy mission stations with his wife in 1825, he was scheduled to arrive in Ceylon to visit Nellore in Jaffna the next year but for his unfortunate and inexplicable death in his bathtub at his residence in Trichinopoly at the age of 42.
The Christian religion was the handmaiden of the European imperial powers from the 15th century onwards but their tactics differed. In Sri Lanka, the Portuguese Roman Catholics
(1505-1658) were both cruel and rapacious, like their Portuguese and Spanish counterparts in South America. The Dutch were more urbane and civilised but those who were not formally baptised and registered in a church could not inherit land (the natives had no system of registering births and deaths) and, consequently, nominal Christians abounded. The British were more sophisticated. They had acquired the Kandyan Sinhala kingdom by deceiving the gullible Kandyan chieftains, persuading them to betray their own king and country with promises of a better life under the British monarch. One of
the clauses in the Kandyan Convention was the undertaking of British Crown support
for the Buddhist religion. Yet, under pressure from the Church of England in the UK, the British administration helped the CMS by providing land and other facilities, while top administrative officials, including the Governor, participated in CMS public functions, conveying the message to the public that this church was backed by the government and therefore had to be respectfully received.
The policy of the Christian Missionary Society and the British government was to make Anglicised English speaking natives who were adherents of the Anglican Church and loyal citizens of the British Crown. The chosen methods were to establish Christian schools for both native children, church services for adults, public meetings and distribution of Christian tracts. The main targets were vulnerable social groups: very young children, prisoners and indigent people who were provided with alms and religious instruction. Unfortunately for them, their success in religious conversion was very limited though they
were far more successful in Anglicising the lifestyle of the urban native population.
Ironically, of the 7% of Sri Lankans who are Christians today, the majority are Roman Catholics whose ancestors were converted through terror.
Rev. James Selkirk was no simple religious ideologue: he was also an intelligent man with a wide intellectual curiosity and his book, despite some jaundiced views, is a goldmine of information on Ceylon and its inhabitants in the early 19th century. The first chapter deals with a very accurate description of the country’s harbours, cities and towns, their populations, landmarks and history. The detail is astonishing and must have involved a lot
of study and research. Chapter 2 deals with a description of the former Sinhala and the then British administrative structures. It also describes the fauna and flora of the country. Chapter 3 describes the different races, their social structures and their lifestyles. The unflattering descriptions of the Portuguese and Dutch descendents in Sri Lanka are sometimes very perceptive. Chapters 4, 5 and 6 describe the Buddhist religion in Sri Lanka and its history, religious practices and books. Chapter 7, the longest chapter, deals with the
work of the Church Missionary Society in Kandy, Baddagama (Baddegama), Nellore and Cotta (Kotte). Chapters 9 to 13 give stories from the journal that he kept and contains descriptions of the activities of the various missionaries, some revealing encounters with the local people and the travails and the frustrations endured by the CMS because of its very limited success.
This was not an age of political correctness. It was still the era when Europeans openly flaunted the view that all non-European peoples and cultures were inferior and their religions were an abomination that was the work of the Devil. Rev. Selkirk does not hide his anger and contempt of Buddhism, Hinduism, Islam and also the Roman Catholic Christians.
The first four CMS missionaries left Britain in December 1917, two years after the British occupation of the Kandyan kingdom. They worked closely with the British administrations of Governor Sir Robert Brownrigg and later his successor, Sir Edward Barnes. The missionaries quickly set about establishing several schools for boys and girls to teach them English to learn the catechism, recite the scriptures and learn to pray. Local teachers were
recruited and they were paid according to the performance of the students when tested monthly. They visited Buddhist monasteries and Hindu temples to lecture the priests and also preached to the sick in hospitals and prisoners in jails. Yet the result of all this labour was pitifully small.
It is not that the missionaries found the environment hostile. Being seen as agents of the colonial government, they had to be respected. The people treated them with kindness because of their endeavours and departing missionaries were given presents and fond farewells. The Buddhist monks showed a genuine curiosity about their teachings though they remained unconvinced. This is one of the encounters with Buddhist monks in Kandy that he writes about.
“During this year (1832) Mr. B. (Rev. Brownrigg) had several long discussions with the Buddhist priests. They sometimes requested religious books, asked for a copy of the Bible, and from the questions they asked on Christianity, showed that in some measure they were casting aside the contempt which they had always shown to other religions besides their own. Though on these occasions they proposed such questions as the following:- When was God born? How long was it after the creation of the world that Christ came? Has God no body? Did God know before he created Adam that man would sin? Who made the Devil? If God made all things, why is there so much diversity of rich and poor,
black and white, sick and well? &c. What is the Holy Spirit? Why have men divers languages, if they all came from one family? Why did God distress the man whom he had made, by robbing him of one of his ribs?”
The frustrations of the missionaries in Kandy are noted, despite the formation of many congregations and the expressed willingness of the people (Buddhists) to come and listen to Christian sermons. The author complains:
“These labours, owing to the carelessness of the people, were nearly useless, as, after having visited them regularly every week for three or four months, and taught them some of the simplest truths of Christianity, such as, “Jesus Christ is the Son of God – Jesus Christ came into this world many years ago – Jesus Christ is now in heaven – Jesus Christ came into the world to save sinners – We are all sinners, but if we trust in him he will forgive us our sins – If we now believe in him and trust in him to save us, when we die we shall be very happy;” … Many of them can scarcely tell me who Jesus Christ is, or the purpose for which he came into the world, though I have never yet spoken to them on any other subject.”
In the Galle district, the mission was given to a Mr. Robert Mayor and he chose the village
of Baddagama, 12 miles from Galle, as the most suitable site for his church and school. He was encouraged because he felt Buddhism was in decline here as the people were given to devil worship to cure their sicknesses and problems in contravention of Buddhist teachings. He says that this area had the most extensive devil worship in the island and had as many kapuwas (exorcists) as Buddhist monks. Here “the first Protestant Episcopal Church built by the English for the native population was laid on the 14th of February, 1821, and consecrated by Bishop Heber.” The original school, called Christ Church, still exists and the present writer himself attended it from 1941-1944. It is recorded that his great great grandfather, Don Dionis De Silva Abeywickrama, was a teacher in the school from 1828 before he became Thomboo Aarachchi (Land Registrar) for the area in 1836.
By 1829, five new schools had been established. In 1830, even Maj. Colebrooke, Chairman of the Royal Commission on constitutional reform for the country, visited the students at their monthly examination and was pleased with what he saw. There were now in excess of five hundred pupils and around a dozen seminarians. But despite the education that enabled students to read and write in English, listen daily to the Lord’s Prayer and religious instruction, there were hardly any real converts. Mr. Trimnell, who was in charge in 1833, is quoted:
“… though the greater part of the population were nominally Christian, in consequence of the law made by the Dutch government that none should inherit property but those who were baptised and registered, the grossest darkness and ignorance prevailed.”
But despite the more determined and painstaking efforts of the CMS missionaries, and the attendance at school and the regular prayer meetings, they were not much more successful. The author explains:
“He (Mr. Trimnell) then notices at length the three following causes of discouragement:- 1. There is scarcely any evidence of anyone being really converted; 2. The disregard of the Lord’s day among the natives; 3. The disinclination of the people to assemble to hear the Word of God.”
In Nellore in Jaffna, the CMS had a little more success. Mr. Joseph Knight who came to Jaffna in 1818 learnt the Tamil and language and by 1820 was conducting services in
Tamil. Together with Rev. Joseph Bailey, they obtained a former Dutch church from the government to establish a printing press. Christian tracts were printed and widely distributed and read in the bazaars and even the Hindu temples. By 1839 there were 22 male teachers, 17 schools, 761 students, 30 seminary youths and 77 communicants.
Cotta (Kotte), being in the vicinity of Colombo, received special attention. The school system was established here three years after Baddagama and Kandy. Facilities were
provided by the government to set up a printing press to publish religious tracts in Sinhalese for mass distribution. A Christian Institution was set up here in 1827/28 under the patronage of the British Governor, Sir Edward Barnes, the purpose of which was to provide “a superior education” for selected students based on “abilities, good conduct and piety”. By 1839 Cotta had 43 schools, 72 teachers and 1629 students. By 1834 two natives had also been ordained as Anglican priests, a Tamilian and a Portuguese.
There was a positive side to the work of these missionaries. On the new missionary, Mr. Powell, taking over in Baddagama in 1839, the Modaliar (a local government official) of the area gives him these words of encouragement.
“Those who have been educated among you, even though they do not turn out religious, yet build better homes, know better manners, are more industrious, and are more respected by the people around them than those who have not; while, with respect to girls, they almost all of them get better husbands, and are treated much more kindly ….”
This is the real CMS contribution. Contact with Europeans and exposure to their education and culture introduced a more dynamic element into Ceylonese society that had seen centuries of stagnation.
All religions have acquired fanciful legends over the millennia. The book describes many of the Buddhist Jataka stories from the many lives of the Buddha and the numerous myths connected with the lives of Hindu gods to illustrate their implausibility. But the author cannot quite understand why the Sri Lankan people, with religious, educational and cultural traditions that pre-dated Christian Europe by several millennia, would find the Christian myths about creation, virgin birth and a God that considered all humanity sinners and demanded constant obeisance, much too fanciful to be credible.
03 March 2013.