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The global strategy for world domination

Beginning in the 16^th century, with the so-called “voyages of discovery”, Europeans set out to conquer, subjugate and rule over the rest of the world. The modern era of human history officially begins with these events. The Industrial Revolution enabled the innate militarism that characterises the Western psyche to develop such military power as to overwhelm highly advanced non-European nations and make them colonies, extract their wealth, weaken their cultures and make their citizens subordinate people. In the chaos of World War 2, basically a European/American/Japanese War fought on many fronts and misnamed a world conflict, subject nations in Asia and Africa managed to wrest back their freedom. But is the quest for world domination by the West, now led by the American “policeman of the world”, over?

During the era of the Cold War after World War 2, the West advanced the theory of the expansion of communism in terms of a domino effect. After the Soviet Union’s military victories in Eastern Europe it was able to create communist regimes favourable to the dominant Russian communists. Communist political parties had a substantial following in France, Italy and Greece and it took a lot of American money and clandestine CIA intrigues to keep them out of power. The victory of the communists in China was followed by communist gains in Korea and Vietnam. Sparsely populated Mongolia was already a communist state under Russian tutelage since 1924. In the Caribbean, a communist revolution had triumphed in Cuba in 1959 despite US counter-measures.

The Americans and their Western allies felt that their economic and political dominance of the world was under serious threat. Even the newly freed Western colonies in Asia and Africa were espousing socialist ideas and nationalising Western corporations that dominated their economies. It became the cornerstone of foreign policy that no other nation should be allowed to become communist or even socialist. Consequently, we have the Western invasions of Korea and Vietnam, the destruction in Cambodia and Laos, the US sponsored overthrow of President Arbenz Salvador of Guatemala (1954), the murder of President Patrice Lumumba of Congo (1961), overthrow of President Soekarno of Indonesia (1967) with the attendant massacre of a million communists, the murder of President Salvador Allende of Chile (1973) and the continuing intervention in the internal affairs of countries in South America, Asia and Africa. But the real target was the USSR which could not be attacked head on because of its nuclear arsenal and military power.

Ideologically, communism or socialism could not be presented for what it was at that time: a national alternative to Western mega-corporate capitalism which had drawn its tentacles around the globe to dominate the world economy. So communism was presented as an evil system that was a violator of human rights. The earlier USSR under J. V. Stalin did much to confirm this by his authoritarian rule.

The collapse of the USSR in 1990 and of communism changed the dynamics but not the goal which was the continuation of Western domination of the rest of the world. Russia was fine as long as a senile drunkard named Boris Yeltsin ruled with the backing of the USA while the Russian economy was being destroyed so it could never again become a super-power. The economy of that state was destroyed by the Western sponsored privatisation of its assets to corrupt oligarchs who rose, like Yeltsin, from the former communist apparatus. The country was deeply in debt to Western banks. But all that quickly changed with the election of President Vladimir Putin in 2000. The economy revived, the international debts were paid and Russia again refused to be subservient to Western interests.

To the east of Russia, in China, Mao Zedong and his calamitous economic and social experiments ended with his death in 1976. Under the new reforms beginning with Deng Xiaoping, the Chinese economy and industries were expanding at rates unsurpassed in history. It was also becoming a world economic power. Could the West tolerate these other races that were becoming economically and politically powerful and seeking to be independent of Western leadership? Japan had been the first Asian nation after World War 2 to become an economic power, followed by South Korea, Taiwan and Singapore. They had become obedient followers of USA and the West, giving unconditional support to Western military adventures and policies. But Russia and China remained obstacles despite becoming free market economies because they declined to be subservient.

That such impertinence was unacceptable to the USA is well documented in policy papers prepared by the top neo-conservative think tanks and political leaders. The objective of American policy was to be continued dominance over the rest of the world and it is well documented in the Project for the New American Century founded in 1997. It was not secret and its vision was presented as public documents available to Americans on internet at http://www.newamericancentury.org/statementofprinciples.htm

America was not only to be dominant but it would carry out “constabulary” duties around the world. This would be done by creating the most powerful military. How the military would be used and developed is found in the following 90 page document based on the assessments of US military leaders and policy makers.

http://www.newamericancentury.org/RebuildingAmericasDefenses.pdf

This is the summary of the mission and strategy taken from this document.

“ESTABLISH FOUR CORE MISSIONS for U.S. military forces:

• defend the American homeland;

• fight and decisively win multiple, simultaneous major theater wars;

• perform the “constabulary” duties associated with shaping the security environment in critical regions;

• transform U.S. forces to exploit the “revolution in military affairs;”

Now it is not the USSR but Russia and China that is the focus of attention in 2000 when this document was prepared. It goes on to state that the US must

“MAINTAIN NUCLEAR STRATEGIC SUPERIORITY, basing the U.S. nuclear deterrent upon a global, nuclear net assessment that weighs the full range of current and emerging threats, not merely the U.S.-Russia balance.

RESTORE THE PERSONNEL STRENGTH of today’s force to roughly the levels anticipated in the “Base Force” outlined by the Bush Administration, an increase in active-duty strength from 1.4 million to 1.6 million.

REPOSITION U.S. FORCES to respond to 21st century strategic realities by shifting permanently-based forces to Southeast Europe and Southeast Asia, and by changing naval deployment patterns to reflect growing U.S. strategic concerns in East Asia. …………….

DEVELOP AND DEPLOY GLOBAL MISSILE DEFENSES to defend the American homeland and American allies, and to provide a secure basis for U.S. power projection around the world.

CONTROL THE NEW “INTERNATIONAL COMMONS” OF SPACE AND “CYBERSPACE,” and pave the way for the creation of a new military service – U.S. Space Forces – with the mission of space control.

EXPLOIT THE “REVOLUTION IN MILITARY AFFAIRS” to insure the long-term superiority of U.S. conventional forces.  ….

NCREASE DEFENSE SPENDING gradually to a minimum level of 3.5 to 3.8 percent of gross domestic product, ……”

It notes the need to deal with the new enemies with nuclear superiority.

“A new assessment of the global nuclear balance, one that takes account of Chinese and other nuclear forces as well as Russian, must precede decisions about U.S. nuclear force cuts.”

The signatories to the project principles, all members of the Republican Party’s neo-conservative wing who played the leading role in early 21^st century US politics in the Bush administration, are noted in the main document as follows:

Elliott Abrams , Gary Bauer, William J. Bennett, Jeb Bush, Dick Cheney, Eliot A. Cohen, Midge Decter, Paula Dobriansky, Steve Forbes, Aaron Friedberg, Francis Fukuyama, Frank Gaffney, Fred C. Ikle, Donald Kagan, Zalmay Khalilzad, I. Lewis Libby, Norman Podhoretz, Dan Quayle, Peter W. Rodman, Stephen P. Rosen, Henry S. Rowen, Donald Rumsfeld, Vin Weber, George Weigel, Paul Wolfowitz.

While the project for the dominance of the world by America using its overwhelming new military power resonates with the American public brought up to believe that the USA is a super-nation destined to govern the world, the rest of the world needed a different propaganda message. The main propaganda message was now the protection of human rights, with the cryptic advertising slogan of R2P, with the USA being the worldwide arbiter of human rights. So Russia and China became the main violators of human rights and its people needed the protection of the USA. Other countries that do not accept US hegemony automatically become major violators of human rights: the former Yugoslavia in Europe, Cuba, Venezuela, Nicaragua in South America; North Korea, Burma and Sri Lanka in Asia; Syria and Iran in the Middle East. The grossest violators of human rights in the Middle East, Saudi Arabia and the Gulf States, are off the hook as they are client states with US military bases.

Direct military intervention is costly and fraught with an element of danger. Before such action, countries can be destabilised by interference in their internal politics through US and EU funded NGOs which could later be supplemented with assistance to opposition movements or local terrorists. Recently, a German television interviewer asked President Vladimir Putin why foreign funded NGOs in Russia were now required to reveal their sources of funds. He pointed out that foreign government funding of NGOs was prohibited by a 1938 law in the USA. On the other hand, there were 654 NGOs in Russia funded by Western diplomatic missions who received a total of almost US dollars one billion that were interfering in Russian politics. Russia only required them to reveal their sources of funds. There were only two Russian NGOs in the West: one in UK and another in the USA. See http://rt.com/politics/official-word/political-russia-schnenborn-russian-399/

The administration of George W Bush implemented the New American Century policies with brazen invasions of Afghanistan and Iraq behind a massive cover of false propaganda. He added a new dimension to R2P: combating worldwide terrorism. Forget that the USA supported Cuban terrorists, Afghan terrorists against that government in the 1980s, Chechen terrorists against Russia, Uighur terrorists in Xinjiang, China, by aiding the World Uyghur Congress, Israeli terrorism against Palestinians, aided terrorists in Libya and are now aiding Al Qaeda terrorists against Syria, to name just a few. Blatantly false propaganda was manufactured and disseminated worldwide by Western leaders and the Western-controlled mass media to justify Western intervention in other nations. Their domination of the UN and its agencies gives them the opportunity to legitimise some of these depredations.

Sri Lanka knows this strategy very well. Throughout the Eelam Wars, the US and its allies refused to support the government and allowed terrorist offices and funding from their soil. At the very end of the war, desperate attempts were made by the US alliance to save the terrorist leadership to live and fight another day. Subsequently, they have permitted the creation of the Transnational Government of Tamil Eelam and the Global Tamil Forum on their soil and continue to discredit Sri Lanka. Sri Lanka has been dubbed a major human rights violator deserving of punishment. Post-war reconciliation efforts are downplayed.

George Bush’s successor has carried on the same policies with the “democratic revolutions in North Africa”, the threat to destroy Iran and now the threat to destroy the Syrian government. Coupled with this is the administration’s “Pivot to Asia” which is nothing new but a strengthening of an existing programme of encircling and intimidating the ascendant China.

But why is the Middle East so important to the USA and its allies? It is not merely because of its oil. The region is the underbelly of Russia. The US military bases are mainly stationed to encircle China and Russia. The objective is not direct invasion, which is impossible considering their power, but intimidation. The other part of this plan is to ensure that countries in their neighbourhood are also weaned away from Russia and China. Hence the importance of lining up the Middle Eastern, East and South Asian countries as camp followers. Those that recalcitrant are targeted for punishment. Syria and Iran happen to be friends of Russia in a Middle East that is now mostly allied with the West. They could not be allowed to remain as such.

This paper will not go into the internal dynamics of the US political system that begets such policies. After all, the US and Western economies are today in relative decline, unemployment is high, social benefits are being cut while the military and internal security budgets are rising. The current US Department of Defence figure is that there are 750 US military bases in 40 foreign countries while there are 153 countries where there at least a handful of US military personnel working in military facilities or as military advisers. For the full official list, see

http://siadapp.dmdc.osd.mil/personnel/MILITARY/history/hst1109.pdf

The tragedy for the USA, and consequently for the world, is that the vision for the New American Century has no concern with humanistic values: alleviation of poverty, improved access to education and health, improvement of the environment, assistance to poorer nations, etc. Its focus is the projection of military power and world dominance. Its beneficiaries are the American mega-corporations supplying the military and the oil and gas industries. The ordinary American people are among the most generous you can find but their sensibilities are blunted by the demonization of manufactured enemies. Unfortunately, these continue to be the guiding principles of US foreign policy. That a great country with such a capacity to help the rest of the world, and its own people, should be stuck with such a narrow vision is a tragedy for the whole world.

Thepanis Alwis

Baddegama, Sri Lanka.

10 September 2013

Revisiting the Peradeniya Campus

and thoughts on a  Sri Lankan dilemma

On the morning of 02 February, 1969, contingents of the Sri Lanka Army disembarked at the small Peradeniya University railway station with much fanfare for their forthcoming participation in the Sri Lanka Independence Day celebrations. They were to be housed in the university gymnasium. The government of Prime Minister Dudley Senanayake had decided that the annual Sri Lanka independence celebrations of 1969 would be held in Kandy and not in the capital city, Colombo. The Sri Lankan Army was small, with a total of around 12,000 personnel, and poorly equipped with antiquated World War 2 equipment. But it was high on ceremonial parades and spit and polish. The small army contingents had always been the main attraction of the annual Independence Day parades.

I was a major in the Sri Lanka Army Service Corps (Volunteers) or the SLASC(V) and was to lead the SLASC contingent. Having been a student at the Peradeniya campus a little over a decade ago, I looked forward to this visit with nostalgia. There were over a thousand students lining the roadway leading from the station: curious admirers, we thought. As we disembarked, the stentorian voices of sergeant-majors yelling at their troops to form up were being heard. The marching band of the Ceylon Light Infantry formed the head of the line and the drum-major struck the first note. Just then it started. Hails of rock stones were hurled at the troops by the now jeering students. One large stone hit the drum-major’s large drum, tearing its side with a gaping hole. Others fell on the soldiers bruising some of them. But the officers showed their grit, yelling at their troops, “Ignore the missiles. Form up to march forward in good order! Eyes front!”

Throughout the half hour march to the gymnasium, we were accompanied by wildly jeering students throwing whatever missiles they could pick up. Finally, we reached the safety of the gymnasium. The students did not cross the path leading to the entrance. They were not going to risk a direct physical encounter with the much tougher soldiers.

For most of the soldiers, mainly from poor families from rural areas of the country, Kandy, the picturesque capital of the last Sinhala kingdom, was a tourist attraction and a place of pilgrimage to the famed Temple of the Tooth. After the student attacks subsided and all seemed clear, small groups of soldiers in civilian dress went to visit Kandy. They had to return before 6.00 p.m. As these small groups or individuals returned, they were ambushed by large bands of students who savagely manhandled them and stripped them of their clothing. Soldiers were running back to the gymnasium in the nude with a hand covering their genitals. There was uproar in the gymnasium. Soldiers were screaming to go out and thrash the students. Major-General D.S. Attygalle, the Commander of the Army, had arrived and he sat on a chair at the entrance. He yelled out that no one was permitted to leave the gymnasium. He shouted at his men: “Damn it! You are soldiers and you must bear a beating. I cannot answer to the Prime Minister if you go out and maul the students.”

It was not an easy situation. One soldier came running naked saying that he was held to the ground while female students urinated on his face. There was an angry roar from the soldiers. Inside, we officers were doing our best to quell the revolt among our men who were shouting that they could not bear this outrage. However, General Attygalle’s strong personality prevailed. He himself could be as loud and nasty as any among us. That night, army trucks transported the troops out of the campus to the Gannoruwa School of Agriculture for the rest of our stay.

I had my own share of adventure. I had gone to Kandy with two of my fellow officers and was returning in the evening when we saw the mob of students once again gathered on the other side of the road opposite the gymnasium, screaming obscenities at the army. We had no choice but to get to our soldiers inside the gymnasium. So we boldly mingled with the students pretending to be part of them. Some of the students looked askance at my companions, who were much older than me, and challenged them: “You two fellows are too old to be students. Who are you?” One of them tactfully replied they were school teachers studying for the teacher’s diploma in the campus. But we had to get inside. After a while we saw a large SLASC truck approaching. The driver recognized us and drove the truck fast and made a screeching halt in front of us. “Now” I said and we jumped in front of the truck and raced to the other side behind its cover. The mob screamed in frustration.

It was rumoured that the night after the troops left the campus, a small band of soldiers dressed only in their underwear and carrying clubs, led by a young infantry officer, entered the halls of residence under cover of darkness and beat up the students who were asleep, forcing them to run away to the nearby hills, screaming out in fear. This was not verified. But soldiers usually do not tolerate a humiliation of their colleagues.

Eventually, the military show at the Independence Day parade in Kandy went off without a hitch (see the link to the British Pathe News channel film on this parade).

http://www.britishpathe.com/video/21st-independence-celebrations-in-ceylon/query/331420

Most people look forward nostalgically to a return to their alma mater. I graduated from the University of Ceylon, Peradeniya Campus, in 1958, with fond memories of that place where I had spent some of the happiest years of my life. I was elected President of Ramanathan Hall where I resided, and also of the Union Society, the apex student body. We had our version of student rebellion, with protest demonstrations over the quality of the food and the laundry services. But our relations with the university authorities and staff were cordial and never confrontational. Most of the students claimed to be socialists and Marxists but this was of a non-violent type. The Vice-Chancellor, Sir Nicholas Attygalle, was a man with a gruff exterior but in our many private meetings he was a kind and helpful gentleman.

The universities in Sri Lanka are free for students, part of the package of free education from kindergarten to university level granted by the government since 1944. It is a benefit not found anywhere else in the world (except in the former Soviet Union). Peradeniya was also a residential campus and poorer students got an additional bursary to cover other expenses. Further, all public health services and hospitals were free. Sri Lanka was still a poor developing country that could barely afford such generous social benefits.

Later that year in 1969, there was an explosion in Marrs Hall within the campus. Investigating police officers discovered that students were manufacturing bombs and collecting firearms. The Inspector-General of Police, John Attygalle, a highly respected Police veteran, presented the government with a report detailing plans by Marxist students to overthrow the government by violent revolution. The Prime Minister and her cabinet dismissed the report as a figment of police imagination. Army intelligence officers confirming this report were ridiculed by left-wing cabinet ministers.

Unbeknown to us, we had stepped into the hotbed of a violent revolutionary movement. In 1971, two years later, it broke out with a fury, with large bands of well armed youths from around the country simultaneously attacking police stations, military detachments, killing hundreds of local political leaders and those suspected of being allied to the government in politics. The then government of Prime Minister Sirimavo Bandaranaike, that had succeeded that of the gentle and mild mannered Dudley Senanayake, was caught completely by surprise. Her government had faced a right-wing coup attempt by some disgruntled army officers in 1962 and her present cabinet also consisted of left-wing leaders from the Communist and Trotskyite parties. So the government dismissed any prospect of a leftwing revolt. Eventually, she herself was forced to take refuge in a ship in the Port of Colombo for fear of being captured by the rebels.

Sri Lanka was a properly functioning democracy at the time when the USA, which was denying basic voting rights to minorities and legalising widespread discrimination against them, was not. But left-wing revolutionary fervour had been growing in Sri Lanka. And violence against the state, as distinct from peaceful protests or political organisation, once allowed, has a habit of perpetuating itself. It recurred in Sri Lanka again in 1987 and then gave way to the armed revolt of the Tamil Tigers that went on for three decades. As in Pakistan, where military coups became a pattern of political life, Sri Lanka was to be threatened by violence against the state for half a century.

After the 1962 attempted military coup, successive governments deliberately kept the military small, ill-equipped and unprepared for military action. That was a crucial mistake, rectified only after 2006. It kept the government weak and vulnerable to these armed revolts. In hindsight, it is seen that the students’ attack on the army in Peradeniya in 1969 was a test to gauge the reaction of the government to their planned insurrection. The government failed the test, giving the student revolutionaries the confirmation they needed.

Kenneth Abeywickrama

28 August 2013.

Has Detroit collapsed?

The City of Detroit, once the pride of the USA and the automobile capital of the world, is in decline and this is a warning to the rest of the country. The city declared bankruptcy, has $18.5 billion in debt which it is unable to meet, and has cut its staff and reneged on its pension obligations to retirees. This is the 61^st local government bankruptcy in the USA since 1954 but it is the largest. Its population has dwindled from 1.8 million to a mere 700,000. Large areas of this once rich city are derelict with abandoned homes and filthy streets where public services have been cut off. These surreal pictures mimic films depicting the end of this world and the death of humanity. But in its boom days it was hailed as the auto capital of the world and its workers were among the highest paid in America.

But has Detroit really collapsed? The city still hosts the Big Three in the US auto industry: General Motors (GM), Ford and American Motors. True, these corporations were nearly bankrupted by the US inspired world financial collapse of 2008 and were saved by generous federal government loans or other loan facilities and the booming car markets in China and, to a smaller extent, in India. Also, the economic crisis in the EU contributed substantially to these companies’ losses. But it is a mistake to assume that Detroit is in collapse: another part of the city is thriving in luxury.

China has contributed in no small measure to the revival of the US automobile companies. The Chinese car market is the largest in the world, almost 40% more than that of the USA, and is also the fastest growing, despite Chinese government efforts to currently curb car ownership due to over-crowded roads and air pollution. The US auto companies are a big presence in China, manufacturing and selling in China, with nearly 25% market share. The other little known fact is that US car makers are now increasingly sourcing their auto parts from China and employing large numbers of Chinese white collar workers in their factories and research facilities. The New York Times of 13 May 2013 in an article states that around 50,000 Chinese engineers and researchers work in Detroit for GM and Ford. Chinese talent has also contributed to the turnaround of these corporations.

(http://www.nytimes.com/2013/05/13/business/global/chinese-automakers-quietly-build-a-detroit-presence.html?pagewanted=all&_r=0)

Chinese auto parts manufacturers like Wanxiang have also bought up several US Detroit-based auto-parts makers that were financially strapped and are expanding their supplies to the US auto industry. This replaces the cheaper auto parts bought from US factories in Mexico. Chinese auto companies like Changan have set up research facilities in Detroit and hired many US researchers who had lost their jobs in US auto firms. The Chinese companies are able to make the large investments in these companies that the US companies are unable or unwilling to make.

As in other parts of the world, the Chinese maintain a very low profile and go out of the way to avoid advertising their presence, in stark contrast with US businesses. But they also contribute to social services, sponsoring sporting events and contributing to charitable organisations doing poverty relief.

Detroit is a microcosm of what is happening in America. According to the New York Times, corporate profits after tax were the highest in recorded history: 9.7% of GDP in 2012. At the same time, wages and salaries for the total US population was the lowest in history at 44% of GDP.

(http://www.nytimes.com/2013/08/10/business/economy/us-companies-thrive-as-workers-fall-behind.html?src=recg)

What has happened in Detroit is what is happening in the USA as part of its new economy: the massive transfer of national wealth to the microscopic class of super-rich and the impoverishment of the general population. Detroit has not collapsed: its middle and working class have been marginalised and evicted. Despite the massive government bailouts for General Motors in 2008, the company closed down several of its US facilities, most of them in Michigan. Fifty of these had been set up with tax breaks and outright grants by local authorities anxious to create local employment.

(http://www.nytimes.com/2012/12/02/us/how-local-taxpayers-bankroll-corporations.html?pagewanted=all)

Have US corporations failed the nation? US corporations and their lobbyists are always complaining of foreign competition and demanding lower taxes, even though their real tax rate after exemptions is around 10-15% of profits actually declared (two trillion dollars in profits are hidden annually in tax havens abroad). At the same time, most of America’s manufacturing, including auto manufacturing, and much of its services have been shifted to other countries like China, India, Mexico and Canada. And yet, foreign auto makers are investing in US manufacturing and doing well: Toyota, Honda, Mercedes, Hyundai, Volkswagen, Fiat.

While US cities decline due to the impoverishment of the middle and working class, one hundred mega cities (defined as having a population of over a million) are being created annually in China for the last decade. But Detroit has not failed: it is the US politico-economic system that now transfers most of the national wealth to the super-rich and impoverishes the middle class that is failing the cities and states.

Kenneth Abeywickrama

14 August 2013.

Rizana, a play, by Jolly Somasunderam

This is a polemical tale based on the real life case of a poverty stricken Sri Lankan housemaid from a Muslim village in Sri Lanka who was beheaded in Saudi Arabia
for a crime she did not understand or commit. It illustrates the plight of the poor in an exploitative world of government apathy to poverty, vote-seeking politicians, corrupt public officials, ruthless businessmen and UN agencies engaged in serving the powers
that fund them. Rizana herself is a voiceless teenager who never appears directly but whose tragic story is told by her loving mother, her mother’s good friend and others. The irony of it is that Rizana’s family members are devout Muslims who venerate the fundamentalist Islam that Saudi Arabia exports around the world. It is Saudi Arabia,
with its medieval Islamic sharia laws and punishments and primitive social attitudes that destroys Rizana and her family’s aspirations but it is the naivety of the family that sustains them in this tragedy through their dogmatic belief in fundamentalist Islam and the Will of God.

Rizana is the poster child for the millions of poor migrant workers from developing countries who go to the oil-rich Middle East to work in slave-like conditions for a pittance because they are marginalized in their own native lands. The situation is worse for the millions of housemaids who are ill-treated and sometimes sexually exploited as Islam grants limited rights to females over males. International human rights organizations, all funded by corporations or Western governments, who clamour loudly on behalf of their
patrons, rarely talk of the egregious exploitation of these migrant workers in the Middle East. There is no national or international campaign to campaign for their human rights or regulate this trade in the poor from the Third World in the Middle East. Even the countries from which these poor are exported depend heavily on the remittances they send and are in no mood to offend tyrannical Middle East rulers by demanding fair labour contracts.

Rizana’s story is told through others as Rizana herself, as a young Muslim girl, has no voice in her future plans. She is the helpless pawn of others, including her own family. Her rustic parents, like millions of others in South Asia, seek to employ her in the Middle East
to alleviate their poverty. It is a choice between marrying her off to an 80 year old Muslim man as his fourth wife (the father’s choice) or sending her to Saudi Arabia as a housemaid (the mother’s choice). Saudi Arabia is a preferred destination as it is the holy land for Muslims. Since she is only 16 years of age and cannot qualify to work abroad, a corrupt foreign employment agency bribes the Foreign Employment Bureau officials to alter her age in the passport to the acceptable 18 years. Untrained and incapable of handling her numerous chores as a domestic servant to an exploitative Saudi household, the baby she
is feeding chokes and dies while she is alone and she is accused and found guilty of deliberate murder.

The her plight becomes a cause célèbre in Sri Lanka as the local media and politicians step in, responding to public outrage. The government’s best diplomatic efforts fail as under Saudi Arabia’s sharia laws the victim’s family alone can grant a pardon and this is stubbornly refused by the child’s mother. She is condemned in public as a wicked witch and cruelly beheaded.

The latter part of the story is taken up by the efforts of politicians in the Sri Lankan legislature who want to exploit this tragedy for their political advantage. This last section deals with the debates in the legislature and the vindication of the minister who is falsely blamed for failure to save her. Whether some of the lengthy speeches made in the legislative chamber can sustain the interest of the audience in a theatre can only be tested out in practice.

But the story of Rizana is an important one and the play draws attention to a larger human rights problem that the world must address.

Kenneth Abeywickrama

12 August 2013

World  financial system causing international disharmony

The world has recently seen an increasing frequency of financial  crashes, each one more virulent than the previous ones. Leave out the East  Asian financial crisis of 1997-98, basically caused by a sudden outflow of  Western capital for which the Asian countries were nor prepared, the other  crises have been caused by the USA, with the European Union being an active  partner. With the US dollar being the main vehicle of international trade,
international investment and the reserve currency of most nations, its  management by the US Federal Reserve has failed to ensure the continued  stability of world financial markets. The US is the world’s largest debtor  nation with the heavy burden of ensuring stability in world financial markets  handled by a coterie of elite private bankers and financiers who control the US  Federal Reserve. The bargain has not worked well even for the US public which  suffered heavily in 2007-2008 due to easy money pouring in to housing and
credit card users in the vain hope of sustaining an economic bubble while
manufacturing and servicing were being outsourced and the real economy was
declining.

The US Federal Reserve is currently the real equivalent of the world’s  Central Bank while its stated role is to control and guide the US financial  structure with a view to creating employment and business development. Its  method of stabilising markets in the liquidity crises caused by private bank failures is to create more and more dollars and pass them around the world  through US banks and financial institutions, a method with the seemingly  harmless equivocal name of Quantitative Easing. The massive bank failures of
recent times in the USA  and the EU were caused by profit-seeking speculative trading in commodity  markets and derivatives rather than lending to solid manufacturing enterprises.  Additional easy finance for the same banks through continuing tranches of
massive Quantitative Easing, with the same corrupt managers, has created more
economic bubbles which will appear in the future.

The Europeans are aware of the need for more regulation of the banking  system whose complex new speculative financial instruments baffle even the  bankers themselves. It is a system run wild, justified by its proponents that  the markets are self-regulating and must rule. However, this theory of  self-regulating markets is denied when the bankrupted banks demand massive transfusions  of public taxpayer money to bail them out after each failure. The timid  solution comes in the form of the Basle ll and  Basle III agreements that now define basic safety margins that banks must keep  while doing business. Yet even this has not been ratified by the USA and is not  enforceable.

The International Monetary Fund (IMF) was once supposed to be a Central  Bankers’ Central Bank. Its stated purpose is this: “The IMF is a cooperative  institution that seeks to maintain an orderly system of payments and receipts between  nations.” (http://www.imf.org/external/pubs/ft/exrp/differ/differ.htm)  It also claims to be “the trusted advisor governments.” But it failed to ring  the alarm before the recent financial collapses and it has failed to reign in  the excesses of the US Federal Reserve or the Bank of England. Since its  control has been firmly in the hands of the Americans and Europeans, it could  never play this role with an even hand.

The major economic powers of the world, located in Europe and North America, are now facing economic problems caused by  unsustainable debts. In the USA, the world’s largest economy, the mounting debt  which now well exceeds the GDP, has led to repeated budget crises in the  legislature and cuts in public spending that is threatening the welfare of the
of the public, except for the politically dominant super-rich. In the second  most important economic area, the European Union of 28 states, bank debts have  led to severe economic hardships and violent social protests and no happy  ending is in sight. In much of the developing world, once ruled directly or  indirectly by the Americans and Europeans, the flood of easy money being  created in the form of US dollars, euros or, to a small extent, sterling  pounds, has led to economic distortions that devalue their products and  services in international trade and maintain them in a state of economic  subservience. It is the irony of modern economic history that the biggest  debtor nations control the world financial structure.

The most successful nations outside this charmed circle have now dubbed  themselves the BRICS – Brazil,  Russia, India, China  and South Africa  – to challenge the hegemony of the Western coalition. China, the  world’s second largest economy, biggest exporter and holder of the largest  capital reserves, is positioning itself to make the Chinese renminbi another
major international currency. Banks in UK,  France, Australia, Russia,  Brazil,  are now buying the Chinese currency for trade with the expectation of later  drawing on massive Chinese capital reserves. But this will only add one more  player into an unfair system that retains power for the owners and sets the  rules for other nations.

More than ever, the world needs a truly democratically created monetary  centre which will oversee and regulate currency markets and currencies. But  that is a dream that lies beyond the visible horizon.

Kenneth Abeywickrama

05 July 2013.

Letters to a Sri Lankan Cabinet Minister on management

The responeses to these letters are omitted for confidendiality

12 December 2011

Hon. D.E.W. Gunasekera, MP

Minister of Human Resources

128 Beddagana Road

Pita Kotte, SRI LANKA.

COPE Report:  Under-Performing Public Enterprises in Sri Lanka

Background

The recent report of the parliamentary Committee on Public Enterprises (COPE) that 40 public enterprises (PEs) are under-performing is nothing new. PEs in Sri Lanka have been
under-performing since independence because of poor management, external political pressures and lack of formal oversight. Having been at one time one of the country’s most successful CEOs of a PE, and also as an international consultant and lecturer on public enterprise management for two decades working for the World Bank and United Nations Industrial Development Organisation (UNIDO) in 26 countries, I feel I can provide some gratuitous comments on this subject that could be useful.

I was Chairman/Managing Director of the State Timber Corporation (STC) from 1979 to end 1981, on leave of absence from Lever Brothers where I was Head of Marketing Department. When I took over, there was a lot of labour unrest and the corporation had only a turnover of Rs.60 million and had never made a profit but was getting subsidies from the government. Within 6 months it was making profits and when I left in 3 years the turnover was Rs.325 million and the profit after tax was Rs.125 million. Because of good
management systems, the STC continued to expand over the next 5 years to a turnover of around Rs.850 million. Each year, during my tenure, employees’ salaries were increased by around 30% and the corporation’s royalty payment to the Treasury was increased from 10% of turnover to 20%. When I left the corporation had no debts and Rs.90 million in fixed bank deposits. This work gained international recognition when Harvard Business
School made it a case study and the Asian Wall Street Journal ran two articles about this (copies available).

In early 1980, Hon. Gamini Dissanayake, who was the Minister of Lands & Land Development, told me: “Kenneth, your organisation is the only one that is well managed in my ministry. I would like you to conduct some training for the heads of the other public departments and enterprises in the ministry.” I told him that was not feasible as I was an
outsider in the ministry and the very senior public officers in ministry would resent my advisory role. Instead, I offered to bring in an Indian consulting team from the Indian Institute of Management, Ahmedabad, with whom I had connections, and work with them. The minister agreed that Indian consultants would have a much better understanding of the local situation unlike Westerners (Later, I was for three years an external lecturer on public enterprise management at this institute.) The whole project was paid for by the State Timber Corporation in the absence of a state budget allocation.

Outline of management development project

The project had two components. The consulting team first carried out a quick assessment of each enterprise to produce a diagnostic of the principal shortcomings facing the enterprises. Then we organised a seminar for the Chairmen, Managing Directors and General Managers on the elements of corporate planning, which was held at the Queen’s Hotel, Kandy. Up to then, planning was a spurious exercise based on unsubstantiated financial projections by the Chief Accountants. Based on this training, formats were issued to each department/enterprise to prepare a corporate plan extending from the current
year for the next five years. Consultants sat with the top managers of all the departments/ enterprises to guide them through the preparation.

The corporate plans included detailed implementation programmes to achieve monthly and annual performance targets in areas of production, marketing, finance, research, new product/project development, personnel development, etc.

Once the plans were submitted to the ministry and approved, a performance monitoring unit was established at the ministry. The ministry trained and appointed an Additional Secretary of the Lands Ministry as head of planning & monitoring. Every department/ enterprise had to submit a tabulated form indicating performances against targets for the past month which had to reach the Planning Unit within 10 days after the end of the
month. By mid-month, the performances of each enterprise was evaluated at a meeting presided over by the minister himself. As the chart for each organisation was put up, the CEO of the organisation was asked to come up and explain the variances. If the targets were achieved, no comment was required. If they were not achieved, the minister would make some harsh comments and ask how improvements could be made in future. Incidentally, this review meeting was a copy of the same type of monthly performance review I had established earlier at the State Timber Corporation.

This system worked extremely well for about 8 months. At that point, the minister handed over the task of chairing the review meetings to the Permanent Secretary at the time (my colleague at the university and namesake), claiming he had political work to attend to. The system quickly broke down as the Secretary was unable to maintain discipline and participating members gradually kept away from the review meetings. Due to lack of will, the whole system fell into disuse.

Basic requirements for PE management

The oft repeated theory that the private sector can manage better than the public sector is ideologically based and blatantly untrue. Even here in the US, public sector departments like the Social Security, Medicare, Post Office, are better managed than many private sector companies and provide more efficient services at a lower cost. PEs have failed in many developing countries as they are regarded as cash cows for politicians and so governments lack the will to create conditions for good management. At one time in the past in the 1980s, I calculated that the costs of subsidies to Sri Lankan PEs and their losses exceeded all the foreign aid that came into the country.

Granted that the political will now exists, there are three basic requirements for better PE management: 1) Selection of competent CEO and directors, 2) Formalised systems of management, which includes corporate plans, 3) Periodic formal performance oversight by the shareholder, the government.

Selection of Chair Persons & Directors

The appointment of political supporters without qualifications has often ensured that PEs are doomed to failure, even though they may have competent managers. Many UN consultants like us have advanced the idea of ensuring better PE boards of directors by establishing a List of Eminent Persons from whom these office bearers could be chosen. The government would advertise and call for persons with proven top management or professional experience to be included in the list and these would be vetted and approved by COPE. The supervising minister will then be able to exercise his choice but only from this list which has been approved. This will ensure that chairmen and directors of PEs are at least competent to do their job.

Formal management systems and performance review

All PEs must be compelled to prepare formal corporate plans for 5 year periods and submit these for approval to the supervising ministry. These ministries must also have a performance review department that is qualified to evaluate these plans and approve them. Once approved, the board of directors must be held accountable for the results.
Periodic management review meetings must be held in the ministries to ensure
performance against targets. Ideally, this should be presided over by the Minister and his Permanent Secretary.

There are very good management training institutes in the public sector in Sri Lanka such as the NIBM and the SLIDA. Their services are under-utilised. Foreign aid programmes bring in Western consultants (I am speaking from experience as a retired World Bank and
UNIDO consultant) by-pass the local public sector management institutes and have tried to create new ones. PEs should be made to use these state institutions on a regular basis and seek their services for management development.

These are some brief thoughts. As I am retired, I am willing to expand on these ideas if necessary.

(Kenneth Abeywickrama)

09 May 2013

Hon. D.E.W. Gunasekera, MP

Minister of Human Resources

128 Beddagana Road

Pita Kotte, SRI LANKA.

GDP growth and economic prosperity in Sri Lanka

Permit me once again to write to you on some unanswered issues arising from your recent meeting with IMF officials which I followed with great interest in the Sri Lanka media. As a retired UN business consultant for two decades, and as Sri Lanka was the land of my birth, I feel an urge to refer to some of the issues.

You asked the IMF experts how it was that Sri Lanka was showing over 6% GDP growth when it is faced with hugely unprofitable public enterprises, increasing adverse balance of payments and sharply reduced government revenues. The answer is that GDP growth is not accurately indicative of real economic growth. This is explained in detail in a book titled Mis-measuring our Lives: Why GDP Doesn’t Add UP by three of the most eminent economists in the world: Nobel Laureate Joseph Stiglitz, Amartya Sen and Jean-Paul Fitoussi. GDP is calculated on the basis of private and public consumption as this is the only way of adding up the additional values that go into the production and sale of goods
and services. At the point of sale there is a receipt and these are reflected in the income tax statements of businesses. What is not receipted becomes part of the black economy.

This calculation does not take into account consumption which is not productive based on debt. In Sri  Lanka, a fair proportion of the GDP is public consumption. When the government spends on large infrastructure projectsand subsidises public enterprises with borrowed foreign funds, money is spent and adds to the GDP. Sri Lanka, I believe, has borrowed over $5.0 billion from China and the IMF, apart from Japan and the Asian Development Bank. But if the Hambantota port and Mattala airport are loss-making, like most of the giant public enterprises, the government will have to borrow more money, locally or abroad, to make debt repayments. The GDP will grow with the borrowings but the economy will be in decline till a breaking point is reached.

The other issue is the collection of tax revenues. Tax revenues are said to be about 11% of the government budget, largely because local billionaires and millionaires and influential public figures evade taxes. I have no answer to this as it is local political issue.

The question may well be asked: Why have so many enormous infrastructure projects failed to yield adequate revenues? Infrastructure development, after all, is a sine qua non for development. You may know the answers but my view is that massive projects are undertaken without proper scrutiny by people who have little knowledge of economics. Before a large project is begun there should be at least two stages of evaluation: a feasibility study by experts which should be studied and approved by the cabinet and then a detailed project proposal, also done by high-level experts, that is then studied and approved by the cabinet of ministers. At any of these stages, the cabinet can disapprove and cancel or send the proposal for further study. Cabinet members should have time to study proposals and should also get experts to help them in the evaluation.

The problems faced at one time by Dubai will illustrate what can happen. Some years back Dubai developed the most spectacular projects in the world and then, to the astonishment of investors, the country was bankrupt and couldn’t pay the contractors. But Dubai
is the financial hub of the oil-rich Gulf  States and was able to rebound. Sri Lanka does not have that advantage.

Debt based prosperity is illusory. The USA and the EU are facing the same problem. But they are in a different category as they have the international currencies that others use for trade and as Central Bank reserves.

Sincerely,

(Kenneth Abeywickrama)

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

Kenneth Abeywickrama

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.
Nice profits!

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.

Kenneth Abeywickrama

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

Dear Congressman:

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.

1. 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.
2. 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.

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.

Sincerely,

(Kenneth Abeywickrama)

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.

Kenneth Abeywickrama

06 April 2013.