Call for Civil Society’s Participation
In the 2nd ASEAN Peoples’ Forum / 5th ASEAN Civil Society Conference
18-20 October 2009
Cha-am, Phetchaburi Province, Thailand
http://aseanpeoplesforum.net
Asian People's Solidarity for Climate Justice
The Gr8 Climate Sale
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The issue of climate change has come to the forefront and people both in the North and the South have been feeling the devastating effects of global warming. However, the links between the neo-liberal system and the model of over consumption to the climate crisis are not clearly stated.
IN THIS ISSUE of Focus on Trade, Chanida Chanyapate and Jacques-chai Chomthongdi shed some much-needed light on the political situation in Thailand, and Herbert Docena looks at why a breakthrough agreement between the Moro Islamic Liberation Front and the Philippines government unraveled at the last minute. Also writing from the vantage point of Asia, Walden Bello looks at the current financial meltdown with a certain sense of deja vu, and explains why it happened, step-by-step.
THE WALL STREET MELTDOWN: THE VIEW FROM ASIA
Walden Bello*
For many, the Wall Street crisis is a replay, though on a much larger scale, of the 1997 Asian financial crisis, which brought down the red-hot "tiger economies" of the East. The shocking absence of Wall Street regulation brings back awful memories of the elimination of capital controls by East Asian governments, which were under pressure from the International Monetary Fund and the US Treasury Department. That move triggered a tsunami of speculative capital onto Asian markets that sharply receded after sky-high land and stock prices came tumbling down.
Treasury Secretary Paulson's proposed massive bailout of Wall Street's tarnished titans reminds people here of the billions the IMF hustled up after '97 in the name of assisting them--money that was used instead to rescue foreign investors.
So Asian governments and financial players are skeptical about Washington's talk of re-regulating the financial sector, and, although their central banks and sovereign wealth funds are flush with cash, they're wary about being drawn into the Wall Street maelstrom. Among East Asian official funds, only Singapore's Temasek and the China Investment Corporation have stepped up to the plate. Temasek pumped over $4 billion into Merrill Lynch a few months ago, but only after driving a hard bargain. CIC invested $5 billion in Morgan Stanley last December but refused the troubled investment bank's recent desperate plea to increase its share of the firm. Initially seen as a potential savior, the Korean Development Bank turned down the overtures of Lehman Brothers a week before the latter's historic collapse into bankruptcy.
Trillions of dollars of Asian public and private money are invested in US firms and property, with the five biggest Asian holders accounting for over half of all foreign investment in US government debt instruments. Funds from Asia have become a key prop of US government spending and the middle-class consumption that have become the drivers of the American economy. With so much of Asia's wealth relying on the stability of the US economy, there is not likely to be any precipitate move to abandon Wall Street securities and US Treasury bills.
At home, however, there are growing worries, and consumer advocates, NGOs and academics are demanding more transparency about how much the local banking system is exposed to Wall Street's toxic assets. In the Philippines, there are calls from civil society groups for the banning of derivatives trading, the return of capital controls and the renegotiation of the country' massive foreign debt now that the international banks are in a weak position.
There is, moreover, resignation throughout Asia about the inevitability of a deep US recession and its likely massive impact on the East: the United States is China's top export destination, while China imports raw materials and intermediate goods from Japan, Korea and Southeast Asia to shape into the products it sends to the United States. Despite some talk a few months ago about the possibility that the economic fate of Asia could be "decoupled" from that of the United States, most observers now see these economies as members of a chain gang shackled to one another, at least in the short and medium term.
Greater regional integration is now seen widely as a healthy antidote to a global integration that has run out of control. Some elements of regional economic cooperation are now in place, notably the so-called "ASEAN Plus Three" formation, which unites the Association of Southeast Asian Nations with China, Korea and Japan in a mechanism to facilitate bilateral exchanges of funds in the event of a financial crisis. Eventually this arrangement could become a full-blown regional monetary fund.
On the other hand, NGOs and social movements, while in theory supportive of integration, distrust a process monopolized by governing elites they view as unaccountable. Active participation of civil society, they insist, must be central to the crafting of such regional formations.
*Walden Bello, professor of sociology at the University of the Philippines, is the author of Dilemmas of Domination (Holt), president of the Freedom from Debt Coalition, and senior analyst at the Bangkok-based institute Focus on the Global South. This article first appeared in The Nation (online) 24 September 2008.
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THE WOULD-BE REVOLUTION
Chanida Chanyapate and Jacques-chai Chomthongdi*
Events in Thailand in the past few months have baffled many people, not just outside, but also within Thailand. A large group of protestors, mainly comprising middle aged men and women, have occupied the grounds of Government House under the banner of the People’s Alliance for Democracy (PAD), demanding the removal of the democratically elected Prime Minister Samak Sundravej and his People’s Power Party (PPP). Both sides – PAD and PPP -- claim to represent people’s power, and published opinions on this phenomenon swing between the two extremes: “the tyranny of the minority” according to Thitinan Pongsudhirak (Bangkok Post, September 1, 2008) or “the tyranny of the majority” according to Sutthichai Yoon (The Nation, September 11, 2008).
Among Thai NGOs and social movements who have built their credibility on opposing dictatorship and promoting participatory democracy, and who have in the past employed street protests and blockades to pressure the authorities and publicize their demands, there has been much internal debate on what positions to take. Several public discussion fora have been organized to help society find ways out of the political deadlock. This article summarizes these discussions and actions among those of us who find ourselves caught in the middle of the verbal battle that has been raging on and off for the best part of the last two years.
In early 2006, at the height of the campaign against former prime minister Thaksin Shinawatra, the NGO Coordinating Committee on Development (NGO-COD) -- the main network of NGOs and people’s organizations -- were visible supporters of the PAD. Key NGO-COD members joined several of their friends and affiliates who became PAD leaders giving speeches on the PAD stage. The main objective was to raise public awareness of the issues of concern to the majority. These were the Thaksin government’s policies, ranging from the effects of trade liberalization on small farmers and producers, privatization and the poor’s access to energy and water, drug patents and access to medicines, etc., and their impact on ordinary people. It was noted that the PAD supporters, at times numbering over a hundred thousand, were readily appreciative of these more progressive analyses, not least because they gave fuel to the fire of their rallying call “Thaksin, get out!”
FTA Watch, a coalition of NGOs, academics and social movements of which Focus is a member, had been buoyed by the success in physically halting the 6th Thailand-US free trade negotiation round two months before the PAD was formed. The appearance of the PAD offered a new opportunity to debunk the myth of free trade and to expand their case against future FTA negotiations.
In response to the PAD, about 8,000 villagers from the North and Northeast regions, calling themselves the “Caravan of the Poor for Democracy” rode on motorized farm wagons to camp at a park just outside Bangkok to show support for Thaksin and his decision to hold a snap election as a way to end the PAD protest. Their call was simple: let democracy run it course. They reasoned that so far their people were satisfied with what they got from the Thaksin government, i.e., access to loans from the one million baht village funds, land title deeds for some occupiers of degraded forest reserves, and the thirty-baht universal healthcare scheme, and they wanted to make sure the promised two head of cattle per household were duly delivered. This side was given space to voice their opinions at a forum organized by Focus at Chulalongkorn University at the height of the confrontation.
An interesting fact was that one of the 15 leaders of the Caravan of the Poor was also a leader of the Assembly of the Poor (AoP) from Roi-Et province. While the official position of the AoP – a national coalition of social movements -- was non-involvement in what they saw as turf-fighting between political elites, this leader decided to seek a new platform to voice her opinion.
When the Thaksin government went for a snap election in April 2006 to seek a new mandate, the Thai electorate was split. Although the major opposition parties boycotted the election, twelve million voted for Thaksin’s Thai Rak Thai party while ten million simply voted ‘no’ to express their opposition.
The military coup d’état of September 19, 2006, despite its rationale of preventing widespread bloodshed between the pro and anti-Thaksin mobs and calling for national unity, was an obvious attempt by the power bloc, comprising the military, the bureaucracy and the judiciary loyal to the King, to wipe out the power embedded in not just Thaksin, but all visible supporters of the party. Although some sectors welcomed the coup, Focus was not alone in denouncing the coup as "the most regrettable setback in the country's democratization process".
Following the April 2006 election, Thaksin’s Thai Rak Party was found by the courts to have broken the law in trying to win uncontested constituency elections (which required a minimum number of votes to be valid). Under the law at that time, this would have lead to the dissolution of the Thai Rak Thai party. But then, under retroactive application of a provision of the 2006 interim constitution written by a military-appointed committee after the offence was committed, all 111 Thai Rak Thai party executives were banned from politics for five years.
At the Thai Social Forum in October 2006, thousands of Thai activists including NGOs, farmers and workers gathered and marched in defiance of military rule, calling for progressive social and political reform. Subsequently various open fora debated the content of the new constitution throughout most of 2007. The common understanding was that these voices were independent of both the PAD and the Caravan of the Poor and other pro-Thaksin groups.
FTA Watch led a campaign specifically on the inclusion in the constitution of an article requiring prior public participation and parliamentary approval of all trade and partnership negotiations with foreign countries. When the draft constitution was put to the national referendum in August 2007, members of the NGO Coordinating Committee, including FTA Watch, decided against it for the simple reason that overall the new constitution gave more power to the military, the judiciary and the bureaucracy than to the ordinary people. The NGO-COD and FTA Watch also joined forces with the larger independent NGOs, workers and farmers’ groups in a protest blockade of the final meetings of the coup-installed National Legislative Assembly that was rushing through other pieces of legislation, particularly the Internal Security Bill, that were deemed in violation of human rights. The argument was that with a new constitution passed and elections scheduled, there was no necessity for an un-elected assembly to hurriedly pass legislation that could be left for an elected assembly to deliberate in a month’s time.
In the meantime, a number of Thaksin’s supporters were joined by a number of anti-coup activists to form the United Front for Democracy Against Dictatorship (UDD) to organize rallies against the military and the coup-installed government. Among other things, they also called for rejection of the new constitution.
The constitution, however, was passed by about 60% majority vote in the August 2007 national referendum, after a relentless pro-constitution propaganda effort by the military and the government they had installed. Although the new constitution was designed to prevent Thaksin’s return to power, the elections of December 2007 saw a Thai Rak Thai comeback. Re-branded as the People’s Power Party, with the same membership base, MPs and buildings, and almost the same logo as the Thai Rak Thai party, and led by Samak Sundaravej, a veteran politician hand-picked by Thaksin, along with the wives, relatives and in-laws of the 111 banned Thai Rak Thai Party executives, PPP won the highest number of seats in the parliament, although not quite enough to form a government in its own right.
When it became obvious that the new coalition government’s first objective was to amend the new constitution in order to reverse the ban imposed on the Thai Rak Thai party, the PAD, which had been dormant during the interim government installed by the coup, re-mobilize to stop this move. The NGO Coordinating Committee and their networks, however, took a different position arguing that any amendment must follow a process of inclusive popular debate and approval by referendum.
Although the Samak government backed off from the constitutional amendments, the PAD stepped up their demands to include the removal of Samak and his “proxy” government altogether. Both Samak and the PAD leaders called upon all the people to take sides. After occupying a major intersection for weeks, the PAD declared their intent of advancing towards their “last battle” and occupied Government House.
The response from the NGOs and people’s organizations was split for the first time in history. The NGO-COD of the Southern Region openly declared its support for the PAD while the national-level and other regional committees chose not to. Several state enterprise workers’ unions and several urban and rural community groups also joined PAD, while the rest remained sceptical.
At the last count, the politically neutral silent majority that refuses to take sides amounted in Bangkok, where PAD is thought to be strong, to 60%, while the PAD received 20.5%, and the Samak government, 19.6%. In the north-eastern province of Nakhon Ratchasima, thought be a pro-Thaksin area, the silent majority was even higher at 65.8%, with the PAD and the government 17.7% and 16.5% respectively (ABAC and Rajabhat University polls reported in the Bangkok Post, September 8, 2008).
The PAD as it is currently constituted calls itself the “force of purity”. It is a motley group comprising Bangkok middle-class followers of media personality and entrepreneur Sondhi Limthongkul and ex-politician and leader of a non-mainstream Buddhist community Chamlong Srimuang. It also includes supporters of state enterprise union leader Somsak Kosaisuk. Joining these are some community-level organizations from the East, Northeast and the South loosely connected to the Campaign for Popular Democracy led by Piphob Thongchai and Suriyasai Katasila, and finally an academic turned opposition politician, Somkiat Pongpaibun, who was long known as advisor of the Assembly of the Poor.
It is thus hardly surprising that their long-term goals have not been expressed in a coherent way, sometimes even in a contradictory way. What is clear is the PAD’s staunchly nationalist approach of reaffirming their allegiance to the nation, monarchy, and religion. They speak of a “sacred mission” to eradicate the country of “the evil of money politics” as epitomized by Thaksin and his associates in the “Thaksin regime” (PAD Announcement No. 20) which had been inherited by Samak and the People’s Power Party. But both sides have one thing in common; they keep hurling lese majeste charges at each other.
Many may agree with the problem of money in politics. This operates at the level of vote-buying, mostly in rural areas, although the middle-class analysis of this is quite shallow. It also works at the level of MP-buying. This was most blatantly practiced by Thaksin, who recruited local politicians like paid employees of a company of which he was a CEO.
But many also have concerns about the “new politics” model floated by the PAD as an antidote to the problem.
In order to break the patronage system dominated by local “canvassers”, the PAD’s idea is to reduce the number of representatives directly elected from geographical constituencies by balancing these with “public representatives” selected from occupation- or group-based constituencies.
There are widespread concerns about how this can in practice preserve the principle of equal and universal voting rights. First there has been some confusion about how the representatives of occupations or groups will be chosen. Are they appointed, as early PAD statements seem to show? If so, by whom? Or are they elected? And if so, how would the problem of money politics be prevented from re-appearing? This is not to mention the near impossible task of classifying the population by occupation.
If vote-buying is the root of the problem of Thai democracy, as the PAD claims, surely the problem-solving process starts by investigating its rationale and proposing solutions among the people assumed to be guilty of vote-selling, not by depriving them of their voting rights or by decreasing the weight of their votes.
In July, Thaksin’s wife, Podjaman, was sentenced to three years in jail for tax evasion, the first in a series of corruption cases brought against the Thaksin family and Thai Rak Thai politicians. She and Thaksin then slipped bail and fled the country. Some activists want to take advantage of the sense of collective triumph over this to take a short-cut to a new political beginning by rooting out Thaksin’s political cohorts once and for all. But many are wary of the nationalist and royalist sentiments that seem to guide the PAD’s ideas of political change, not least because such changes are more likely be regressive than otherwise.
The PAD has used unprecedented media power and organization in getting aunties, uncles and parents, and later young students, to sacrifice the comfort of their homes to camp out in the streets and in the grounds of Government House. Yet many cannot agree with their unquestioned belief, reinforced in daily pronouncements by their core leaders, that their’s is the force of good and that anybody who disagrees with them is consequently unredeemably bad. This mirrors the passion that authoritarian Thaksin instilled in his followers.
The dust and din of the battle of words and the threats of violent clashes have drowned out the voice of a minority that tries to propose a more progressive agenda for political reform, including a broader-based participatory process. Long seen as an enemy by the pro-Thaksin side, as soon as this part of civil society challenges, or even questions, the PAD, it immediately falls victim to regular virulent attacks from the PAD stage and through its TV and press media outlets.
Whatever is thought of their tactics, the PAD has made one noteworthy step for the Thai society: it has made its oppositional voice heard against the monopoly of state power by politicians with vested interests and has created a space to challenge the legitimacy of the government. The fact that the PAD has been able to occupy Government House for over a month, forcing the PM and Cabinet to work elsewhere, that the PAD leaders can ignore court summons, and that even under emergency powers, the security forces seem reluctant to move against them, leads to the conclusion there is no shortage of tacit supporters and sympathizers, particularly in high places. But while the PAD may enjoy the secret support of the privileged and powerful, what is lacking is the voice of the poor and the underprivileged.
The test of whether the PAD can instigate positive changes does not depend on how long it can occupy the Government House, but on how it can generate a more inclusive political and social reform process. New politics would require new processes that are not dictated by one group, but that guarantees equal participation of all independent-minded groups.
* Chanida Chanyapate is the coordinator of Focus on the Global South and Jacques-chai Chomthongdi is a research associate. Both are working with Focus’ Thailand programme.
TOWARDS A MEMORANDUM FOR SELF-DETERMINATION
Herbert Docena*
In early August, the Philippine government and the Moro Islamic Liberation Front (MILF) stood on the verge of signing a breakthrough agreement that could have moved both sides closer to the closure of a three-decade-long war. The Moros, minority Muslims living in the southern Philippines, have been fighting the central government for greater self-rule since the 1970s. But the agreement, facing wide opposition, soon unraveled.
Force has kept the Moro people within the Philippines: Against their will, the Moros, who were already living in their own states in the south, were incorporated beginning in the early twentieth century into what became the Philippine nation-state by American colonizers and their Filipino partners from the north. (1) Without their consent, the Moros’ and the indigenous peoples’ (IP) lands were declared Philippine property. Tens of thousands of hectares were sold or leased to foreign and Filipino-owned corporations. Dominated by Filipino landlords seeking to douse mounting demands for land redistribution in the north, the Philippine government set off massive resettlement programs that encouraged and pushed millions of landless, impoverished peasants to the region where the Moros and the IPs lived. Laws discriminated against the Moros and the IPs: In the 1920s, for example, corporations were allowed to own up to 1,024 hectares of land each, Christian settlers could claim up to 16 hectares each, but non-Christians were allotted only four. (2)
But it was not the settlers who benefited most. By the late 1980s, more than half of the lands in the region were in the hands of a few plantation owners, multinational corporations, and logging concessionaires that extracted the area’s resources but plowed the wealth out of the region. (3) At one point, it was estimated that the region provided half of the products being exported by the Philippines. The Moros, meanwhile, have become among the poorest in a poor country: Up to 80% of them are now landless and they have among the shortest life expectancy, the lowest literacy rates, and the least access to education, health, and other services in the country. If, before, they made up the majority of the region’s population, now they account for less than a fifth. (4)
Terrorized by militias supported by landowning politicians and government security forces, cornered into a narrowing portion of the region, but increasingly conscious of their collective plight, the Moros fought back. Beginning in the 1970s, they rose to wage armed struggle against the Philippine government. With nearly universal public support among the Moros, the struggle took on the character of a popular uprising for national liberation. Though poorly armed and poorly trained, the Moros managed to bring the US-supported Philippine military to a stalemate. Peace talks ensued. The Moros momentarily laid down their arms and their bid for an independent state in exchange for the promise of greater autonomy – a promise that the Philippine government has repeatedly broken by conceding only limited power to Moros in autonomy arrangements that it put in place on its terms. (5)
The Memorandum of Agreement on Ancestral Domain (MOA-AD), the result of the latest round of negotiations between the Moros and the government, could have broken that history of broken promises. Having sparked widespread and strident opposition, however, the agreement has since been unilaterally abandoned by the Philippine government. The prospect for peace has never appeared bleaker since the 1970s: Despite the government’s reversal, however, the Moros want the peace negotiations to continue; the government, for its part, now says that the talks will resume only if the Moros disarm. In other words, surrender. For the government, it is force, yet again, that will keep Moros within the Philippines. The door to negotiations slammed on their faces, Moros are faced with no other option but to resist.
For those committed to peace with justice, our duty does not end in merely preventing the outbreak of full-blown fighting or calling for a ceasefire, if such a ceasefire ends up perpetuating a status quo in which Moros continue to be held at gunpoint within the Philippines. It merely begins with advocating a long-term solution that addresses and ends the historical oppression suffered by Moros. No solution will lead to peace if it is not just; and it won’t be just if it does not advance the Moros’ right to self-determination. While advancing this right is not all that is required, no solution will be complete without it.
Viewed from the precipice of a full-blown conflagration, the vision offered by the MOA-AD becomes sharper and clearer. Though it has since been killed, its proposals and principles – whether it retains the name or not – can still resuscitate the moribund peace process.
A STATE WITHIN A STATE
The MOA-AD envisions the establishment of – without as of yet establishing – a so-called Bangsamoro Juridical Entity (BJE), described as a “state within a state” or a “sub-state” in an “associative relationship” with the Philippines. (6)
This governing entity is to exercise “shared responsibility and authority” with the Philippine government over a particular territory: the area covered by the current Autonomous Region for Muslim Mindanao (ARMM); a number of municipalities which voted to be with ARMM in a plebiscite in 2001 but did not become part of the ARMM; plus another 735 villages whose residents will be asked whether they wish to be part of the territory in a plebiscite to be held within 12 months upon the signing of the MOA. Another category, encompassing around 1,500 villages, is proposed to receive targeted socio-economic assistance from the government. After 25 years, their residents will also be asked whether they wish to join the BJE. (7)
The BJE is to have its own “basic law,” its own security forces, its own system of taxation and finance, and its own political and administrative structures, including civil service, electoral, judicial, educational, and other institutions. It may send trade missions to and enter into economic agreements with other countries. It will be allowed to exercise greater authority over its territory’s resources such as minerals, oil, natural gas, etc. and it will have the power to grant or enter into resource-extraction concessions and agreement. Royalties from these resources are to be split 75% and 25% between the BJE and the Philippine government, respectively.
A COMPROMISE
Though the MOA-AD falls far short of the Moros’ original goal of establishing an independent state, it goes farther – and is more specific – than any of the previous agreements in providing for greater Moro self-rule. Politically, the BJE will have more power than the current ARMM, itself a governing entity created as part of previous peace agreements but mandated with very limited powers. Rather than paving the way for Moro self-determination, the ARMM ended up being further eroded by the government, and later on dominated by powerful clans and warlords favored by the Philippine government.
Signifying the Moros’ acceptance of the demographic changes that resulted from the government-sponsored resettlement policies, however, the BJE’s territory will be smaller than the area originally claimed as the “homeland” of the Moros – and even less than the area that was supposed to have been under Moro autonomy, as promised in the earlier 1976 Tripoli Agreement between the Moro National Liberation Front (MNLF) and the government. Though the territory is proposed to cover more villages beyond ARMM, their inclusion is far from assured: the government, with all the advantages it enjoys, can be expected to do all it can to win the scheduled plebiscite. Within what will remain of BJE-governed territory, no one is to be evicted: the MOA-AD states that existing property rights will be respected, meaning land previously awarded by the government to settlers and corporations – as well as lands claimed by IP communities – will not be expropriated. (8)
In other words, the MOA-AD is a compromise document. Contrary to the widely held view that the agreement is “too good to be true” – that the government is being too generous – the MOA-AD arguably requires more on the part of the Moros’ than on the Philippine government. The latter won’t lose anything more than a still undefined fraction of political and economic control over a small part of Philippine territory – the government will still wield “shared authority and responsibility” in ways that will only be spelled out in a final agreement – and no individual’s or corporation’s property will be taken away. The Moros, on the other hand, will not only be abandoning their claim for more land or their share of resources already extracted; they will be setting aside their dream of a country to call their own.
WITH THE MOROS’ BACKING
Despite requiring more concessions from them, Moros have expressed their readiness to accept the compromise proposed in the MOA-AD. In fact, the agreement is being pushed by the Moro Islamic Liberation Front (MILF), the largest, most powerful Moro liberation organization today -- and supported by other Moro organizations, including those that are ideologically unaligned with the MILF, along with non-Moro groups with Christian migrants and IP communities in their membership. (9)
Though the MILF’s leadership is reputed to be conservative – with many coming from the landowning class – one does not have to be fond of the MILF to acknowledge that the Moro people – just like any other people – have an inherent right to self-determination. Regardless of what one thinks of the MILF’s politics, it cannot be regarded as unrepresentative of Moro aspirations. As an indicator of its support among Moros, who are estimated to number around 4-5 million people, the MILF has demonstrated its capacity to mobilize at least a million people – possibly more – for its assemblies. No other single political group in Mindanao – or even in the rest of the Philippines – can match this. And as the government has come to realize, no negotiated settlement with Moros will be possible and sustainable without the MILF’s participation. According to MILF spokesperson Eid Kabalu, “The MOA-AD is the best of all agreements so far because it directly addresses the root of the problem: the homeland of the Bangsamoro people.” (10)
Such enthusiasm is, of course, not necessarily shared by all Moros. Others within the MILF, particularly among the ulama, reportedly felt dissatisfied with some of the MOA’s provisions, saying it doesn’t go far enough. Some Moro leaders are reportedly not prepared to completely abandon the bid for independence. Though it is not clear how wide this view’s support is within the MILF – given that such views have not been made public, it is expected to gather more adherents if the peace talks fail yet again. What is clear at this point is that the MILF leadership and organization are committed to a negotiated settlement and only they – and not the government or any other Moro organization today – enjoy the legitimacy to be in the position to rally the majority of Moros behind any solution.
The other large – though increasingly marginalized and factionalized – Moro organization, the Moro National Liberation Front (MNLF), is seemingly divided on the question: Some of its key leaders have signified their support for the agreement; others, like MNLF founder Nur Misuari has gone on record to question it. The concern, however, appears not to be that the MOA-AD fails to advance Moro self-determination. Rather, the objection seems to spring from apprehensions about the future of the MNLF’s earlier agreement with the government which – with the clipped autonomy it brought – is now widely seen as a failure.
Though the MILF will obviously be placed at an advantage in case the BJE comes to life, its officials have repeatedly stressed that the leaders of future governing entities will be decided by all Moros – and not just by the MILF alone. And though the MILF leaders have said that they want to establish an “Islamic state” in their homeland, the MILF’s vision on how this state would look like remains vague; in fact, its position on this question has been inconsistent. The MILF's founder has signified that the question will only be decided on later. (11)
Supposing the Moros do succeed in getting greater self-rule, how the Moros will govern themselves is to be a continuing contest among Moros: it could well be that the rich and landed Moros, many of them already with the MILF, will only be replacing – or conniving with – current Filipino rulers in oppressing the Moro people. But just as Filipinos – to quote former Philippine President Manuel Quezon – should be able to choose “a government run like a hell by Filipinos than a government run like heaven by the Americans,” so should the Moros.
This time though, given the way Filipinos have been running the country, it may well be a choice between a government run like hell by Moros than a government already run like hell by Filipinos. In any case, Moros are not doomed to perdition: they may actually be better at running their own government if only they were given the chance. At this stage, those who seek to extend solidarity to Moros struggling for emancipation within Moro society can contribute most by supporting the Moro struggle for emancipation from Filipino domination.
SELF-INTERESTED PRAGMATISM
A solution can be just not because it satisfies what the aggressor wants but because it addresses what the victims deserve. It is the Philippine government that annexed the Moro states without their peoples’ consent; it is therefore not up to it to dictate the terms of the solution to the aggrieved party. Balance is not to be achieved by exacting equal concessions from two uneven sides; it is to be attained by seeking the required solution to bring about a desired balance that does not currently exist.
Having said that, the MOA is groundbreaking in demonstrating that the Philippine government can actually offer much more on the negotiating table than it has previously claimed it could. In an unprecedented break from its erstwhile unyielding stance, it turns out that creating a “state within a state” for Moros, for example, is within the realm of the possible – at least in the minds of some in government. It is not the ridiculously outlandish demand that it has been made out to be in the past.
Such perceived “generosity” has prompted some to claim that the agreement was a trap: if it was “too good to be true,” it could only be because it was “designed to fail.” (12) The government, the reasoning goes, deliberately agreed to promise things it had no intention of giving supposedly to cast itself as the magnanimous party that is willing but unable, as a result of constitutional hurdles and the predicted opposition that will follow, to give ground. This will then supposedly provide a backdoor to charter change and/or provoke large-scale fighting, boosting public support for a war against Moros -- even a pretext for declaring martial law -- thereby allowing her to extend her term.
Without allowing that the government is actually being generous, this ‘war’ scenario is problematic because it takes for granted the following questionable assumptions: that the Philippines is in a position to continue waging war against the Moros, that such a war will be to its benefit, and that such a war will not prove destabilizing to the President’s own rule.
As it is, the war has already cost billions of pesos that a cash-strapped government could hardly afford; underpaid and demoralized soldiers are bogged down fighting a protracted war with other resurgent armed groups. Should a war escalate, the government will lose more billions that it could otherwise have spent on other expenditures. It will lose soldiers that it could otherwise send to fight other ‘enemies’ – all for a war that it is not assured of winning.
Moreover, government negotiators could not have been aware that giving ground on the issue of governance and territory could be an extremely risky gambit: in recognizing, and thereby according legitimacy, to the Moros’ key demands, the government has paved the way for those demands being advanced as the Moros’ minimum set of demands in future negotiations. If the government’s game plan at the outset was really more fighting, then agreeing to the MOA-AD – just to lure the Moros – actually undermined its own – and not the Moros’ – position. Intentionally or not, the government has pushed out the boundaries of what’s acceptable.
An alternative explanation for the much-vaunted “generosity” could be this: more pragmatic, though no less self-interested, Filipino leaders – as well as their supporters in the US – have realized that they can’t afford to continue the war without risking greater probability of defeat at the hands of ‘enemies’ they are fighting simultaneously; that they have assessed that the over-all benefits from a negotiated solution will ultimately outweigh the costs; and that they have accepted that a more stable Philippines, less distracted by war on one front and with its coffers bleeding less, could stabilize the rule of the President more.
In other words, it could well be that sections of the Philippine government have realized that it is in their larger interest to reach a compromise with the Moros -- not because they support Moro self-determination but because they seek to protect their own interests. That the government subsequently abandoned the agreement does not necessarily prove that doing so was the intention all along; only that other narrow interests – the rule of local politicians and landlords, the support of business groups worried about their investments, the loyalty of hawkish and right-wing generals, the need to prevent traditional opposition politicians from courting the support of jingoistic sections in the media, the church, and the public – prevailed.
With these interests stoking anti-Moro prejudice and Filipino chauvinism, it is no surprise that many Filipinos appear to have rejected the MOA-AD offhand. Conditioned by the media, the educational system, and the larger society to view Moros with suspicion, most Filipinos have been kept deliberately ignorant of the Moros’ marginalization. And yet, informed of the stakes, aware of history, and empowered to have a say in the government’s negotiating stance, the Filipino majority can potentially be the strongest advocates for a just resolution to the war. Unlike a number of hawkish military officials, they have no careers to build or military contracts to profit from; only better relations with their Moro sisters and brothers to gain. Unlike the Piñols and the Lobregats, they have no lands to protect; only a future of peace to win. (13)
DIVIDED SOLIDARITY
While many Moros – presumably the majority who support the MILF – see in the MOA a step forward in their struggle for self-determination, those who already profess support for their struggle – in the left and in the peace movement – have had a harder time uniting behind it. A number of peace coalitions, leftist parties and left-leaning social movements, have dared to come out to counter the popular wave rejecting the agreement. Others have been more equivocal: they have neither categorically expressed their opposition nor support for the MOA but their pronouncements have had the effect of further discrediting the agreement. Whether this has been intended or not, it has contributed to the hostile public opinion against something that the Moro movements themselves want signed.
For the most part, the point of contention has not been whether the agreement sufficiently advances the interests of those that they claim to support; the concern, rather, has been that the agreement could also benefit those that they oppose, with anticipated consequences and implications. President Gloria Macapagal-Arroyo, some fear, foisted the MOA-AD as a “Trojan horse” to extend her stay in power. The United States, for its part, pushed for the agreement to secure its geopolitical objectives in the region.
Even if one grants both premises, the conclusion – that the MOA, even if good, should therefore be rejected or, at least, not actively supported – is problematic. It burdens the Moros with impossible conditions for attaining their aspirations: First, that the parties they negotiate with should have only altruistic motives in their negotiations. Second, that the result of their negotiation should not only be good for them but be bad for the other side. Should the Moros wait until they find someone they can deal with who has only the purest of intentions? Is it their fault that the country they see as a colonial power happens to have a scheming President whom the opposition, which counts the left among it, has so far failed to remove? Must a final solution wait until the revolution is won?
Implicit in the conclusion is the evaluation that the Moros’ self-determination is secondary to the goal of unseating the President or undermining US strategic objectives. Such a trade-off is unwarranted because it should, in fact, be the task of the left and the peace movements to both prevent GMA and the US from achieving their goals and to support the Moros’ aims at the same time.
Not only is this stance more principled, it is also more strategic: Replacing the GMA administration with one that can mediate among different interests-- and rally support around decisions that will advance the larger public interest rather than valuing only its survival by pandering to the hawks and the Lobregats – could be the first step in putting in place a negotiating side that would commit to and defend a just and peaceful settlement with the Moros. As the Moros strive to gain or have more power over their government, our task is to change ours without depriving the Moros of the chance to have theirs. Moro self-determination should not be made conditional on our success or held hostage by our failure.
Challenging the US’ geopolitical thrust in the region entails supporting the many Moros who have been at the forefront of opposing US military presence in Mindanao. It is by supporting their demands for self-empowerment that we strengthen their capacity to oppose the Philippine-supported US agenda in the region. In doing so, we also help them isolate those Moros among them who have been sidling up to the US to promote their own interests or in the misguided belief that the US will champion their legitimate cause without a Faustian bargain.
The alternative – explicitly or implicitly rejecting or undermining the Moros legitimate aspirations – could end up assisting GMA and the US in securing their goals by leaving Moros with no choice but to succumb to their self-interested advances.
NOT THE MOROS’ STRUGGLE ALONE
While the Moros form a large marginalized minority, they have not been the only ones who have been dispossessed and who have been resisting. The other indigenous peoples in the region have likewise been displaced from their lands, many evicted by logging companies, miners, plantations, and other corporate interests with the backing of the Philippine state. Driven to migrate to Mindanao because lands in the north remained in the grip of a few, many Christian settlers remain poor and landless – their misery and resentment fanned and unleashed against the Moros by the landlords and politicians who have grabbed the most lands and resources. No solution will be just if it does not address the injustice that has also been perpetrated against the IPs and Christians migrants.
As it is, the MILF through the MOA-AD has effectively given up their claims over areas they consider part of their homeland but which are now demographically dominated by migrants. It is the obligation of the Philippine government to ensure that lands – within and beyond Mindanao – are more equitably distributed to more Filipinos in order to dilute the concentration of lands in the hands of a few powerful families or corporations.
Within the BJE, no one is to be expelled. As mentioned earlier, all existing property rights will be respected and can only be revoked with due cause. The MOA-AD explicitly states that IPs will be given “free choice” as to whether to be part of the BJE. The agreement also lists the Indigenous People’s Rights Act, a Philippine law meant to protect IPs’ rights to their ancestral domains, among its references. Though some have expressed their opposition to the BJE, it is telling that a number of other IP groups – particularly the ones living inside the territory to be covered by the BJE – have thrown their weight behind it. Given the way they have been treated by the Philippine government, some have even said that they are more confident of enjoying more harmonious relations with the Moros within the BJE.
The IPs’ right to self-determination should not be subsumed under the Moros’. At the same time, self-interested parties should not be allowed to cynically appeal to one oppressed people’s rights in order to deprive another oppressed people of theirs. Both oppressed peoples will lose. A solution must be found to ensure that all rights are simultaneously advanced. Though its provisions are reassuring, the MOA-AD – or subsequent agreements – could go farther. For example, it could explicitly state the following: that the IP’s ancestral domains will not only be recognized but protected from encroachment through more specified measures; that the IPs and non-Moros will not be treated as second-class citizens within the BJE by stipulating that they will enjoy equal rights and will be entitled to the same privileges and services as the Moros; that the IPs will likewise enjoy self-determination through the establishment of political institutions that ensure their autonomy; and that the IPs, should they decide to be part of the BJE, can still subsequently withdraw from the BJE if they so desire.
BEYOND NATIONALISMS
A world divided by ethnicity – with each group of people that claims its own identity fighting for its own piece of land – will be a world of endless wars. Instead of sub-dividing the world into more and more states based on constructed notions of ethnicity, race, or nationhood, we should move towards creating a world drawn together by our common humanity: The earth’s lands and resources should belong to everyone – and not to whoever happens to have been accidentally born within the artificially and often arbitrarily drawn boundaries that enclose them. Everyone should have equal rights regardless of their state or nationality.
Moving towards this post-nationalist, post-imperialist world should not, however, entail depriving the Moro people what other peoples now currently have: greater autonomy or their own independent state. In recognizing their right to have their own state within the Philippines, the MOA-AD is a step forward from the Moros’ current subordination and marginalization within a country they did not choose to be a part of.
But while the MOA-AD does not go far enough, it also does not close the door towards more substantive sovereignty for Moros in the future. By providing an interval of time for the Moros to be empowered by having greater power over their society and their resources, the Moros – wearied by fighting and disadvantaged by dispossession – can have the opportunity to build their collective capacity as a people. Achieving this affords them a better position to exercise their democratic choice later: They can opt to remain within the Philippines as part of the BJE. Alternatively, they can choose to have their own state in a federal system which they would be able to jointly construct on more equal terms with the rest of the Philippines – instead of being forced into a federal system that they will have little role in designing, as current proposals go. What should also not be ruled out, however, is that Moros may actually opt to be part of a unitary Philippines if they freely and without any imposition reach the conclusion that they can do so on their own terms. The absence of coercion could be the basis of a stronger, more lasting – because less unequal – union.
Otherwise, the Moros can and should be able to choose to have their own independent state if they so wish. Recognizing this right would not only correct a historical injustice, doing so moves us one step closer towards a world with more equality and less domination, and hence, one step closer towards a post-imperialist post-nationalist world.
* Herbert Docena is research associate with Focus on the Global South, based in the Philippines.
NOTES
1. For a historical background, see W. K. Che Man, Muslim Separatism: The Moros of Southern Philippines and the Malays of Southern Thailand (Quezon City, Ateneo de Manila University Press, 1990); Cesar Adib Majul, Muslims in the Philippines (Quezon City: University of the Philippines Press, 1999); Kristina Gaerlan, and Mara Stankovitch (eds.), Rebels, Warlords, and Ulama: A Reader on Muslim Separatism and the War in Southern Philippines (Quezon City: Institute for Popular Democracy, 2000); Thomas McKenna, Muslim Rulers and Rebels: Everyday Politics and Armed Separatism in the Southern Philippines (Pasig City: Anvil Publishing Inc., 2000); Marites Danguilan Vitug and Glenda M. Gloria, Under the Crescent Moon: Rebellion in Mindanao (Manila: Institute for Popular Democracy and Ateneo Center for Social Policy and Public Affairs, 2000); Patricio N. Abinales, Making Mindanao: Cotabato and Davao in the Formation of the Philippine Nation-State (Quezon City: Ateneo de Manila University Press, 2000)
2. R.J. May, “The Wild West in the South: A Recent Political History of Mindanao,” in Mark Turner, R.J. May, Lulu Respall Turner (eds.), Mindanao: Land of Unfulfilled Promise (Quezon City, New Day Publishers, 1992); Samuel K. Tan, “The Socioeconomic Dimension of Moro Secessionism,” Mindanao Studies Report 1995/ No. 1; Aijaz Ahmad, “Class and Colony in Mindanao,” in Kristina Gaerlan and Mara Stankovitch (eds.), Rebels, Warlords, and Ulama: A Reader on Muslim Separatism and the War in Southern Philippines (Quezon City, Institute for Popular Democracy, 2000); Eric Gutierrez and Saturnino Borras Jr., “The Moro Conflict: Landlessness and Misdirected State Policies,” East-West Center Policy Studies, Number 8, 2000.
3. cited in Kit Collier, “The Theoretical Problems of Insurgency in Mindanao: Why Theory? Why Mindanao?”, in Mark Turner, R.J. May, Lulu Respall Turner (eds.), Mindanao: Land of Unfulfilled Promise (Quezon City, New Day Publishers, 1992)
4. Eduardo C. Tadem, “The Political Economy of Mindanao: An Overview,” in Mark Turner, R.J. May, Lulu Respall Turner (eds.), Mindanao: Land of Unfulfilled Promise (Quezon City, New Day Publishers, 1992); Samuel K. Tan, “The Socioeconomic Dimension of Moro Secessionism,” Mindanao Studies Report 1995/ No. 1; Aijaz Ahmad, “Class and Colony in Mindanao,” in Kristina Gaerlan and Mara Stankovitch (eds.), Rebels, Warlords, and Ulama: A Reader on Muslim Separatism and the War in Southern Philippines (Quezon City, Institute for Popular Democracy, 2000); Eric Gutierrez and Saturnino Borras Jr., “The Moro Conflict: Landlessness and Misdirected State Policies,” East-West Center Policy Studies, Number 8, 2000.
5. See Kristina Gaerlan, and Mara Stankovitch (eds.), Rebels, Warlords, and Ulama: A Reader on Muslim Separatism and the War in Southern Philippines (Quezon City: Institute for Popular Democracy, 2000)
6. Soliman M. Santos Jr. “BJE and the question of independent statehood,” August 12, 2008
7. “Memorandum of Agreement on the Ancestral Domain Aspect of the GRP-MILF Tripoli Agreement on Peace of 2001”
8. “Memorandum of Agreement on the Ancestral Domain Aspect of the GRP-MILF Tripoli Agreement on Peace of 2001”
9. For example, the agreement is supported by the Anak Mindanao party-list, a secular left-leaning political party of Moros, as well as the Philippine Council for Islam and Democracy, a group that includes moderates and conservatives, plus peace groups such as the Mindanao Peoples Caucus, a broad grouping that includes Christians and indigenous peoples in its membership, to name a few.
10. Public forum, August 11, 2008
11. Patricio N. Abinales and Donna J. Amoroso, State and Society in the Philippines (Pasig City: Anvil Publishing Inc, 2005); Joseph Chinyong Liow, “Muslim Resistance in Southern Thailand and Southern Philippines: Religion Ideology and Politics,”East-West Center Policy Studies Number 24, 2006
12. See for example the editorial “Designed to Fail,” Philippine Daily Inquirer, August 9, 2008, which articulates a popular theory
13. The Pinols and the Lobregats are some of the most powerful families that have acquired huge tracts of lands in Mindanao. They have been at the forefront of opposing the MOA-AD.
NEW YORK — Flying into New York Tuesday, I had the same feeling I had
when I arrived in Beirut two years ago, at the height of the Israeli
bombing of that city — that of entering a war zone. The immigration
agent, upon learning I taught political economy, commented, “Well, I
guess you folks will now be revising all those textbooks?” The bus
driver welcomed passengers with the words, “New York is still here,
ladies and gentlemen, but Wall Street has disappeared, like the Twin
Towers.” Even the usually cheerful morning shows feel obligated to
begin with the bad news, with one host attributing the bleak events to
“the fat cats of Wall Street who turned into pigs.”
This city is shell-shocked, and most people still have to digest the
momentous events of the last two weeks:
• a trillion dollars’ worth of capital going up in smoke in Wall
Street’s steep plunge of 778 points on Black Monday II, Sept. 29, as
investors reacted in panic to US House of Representatives’ rejection of
President George W. Bush’s gargantuan $700 billion bailout of financial
institutions on the verge of bankruptcy;
• the collapse of one of the Street’s most prominent investment banks,
Lehman Brothers, followed by the largest bank failure in US history,
that of Washington Mutual, the country’s largest savings and loan
institution;
• Wall Street effectively nationalized, with the Federal Reserve and
the Department of Treasury making all the major strategic decisions in
the financial sector and, with the rescue of the American International
Group (AIG), the amazing fact that the US government now runs the
world’s biggest insurance company;
• Over $5 trillion in total market capitalization has been wiped out
since October of last year, with over a trillion of this accounted for
by the unraveling of Wall Street’s financial titans.
The usual explanations no longer suffice. Extraordinary events demand extraordinary explanations. But first…
Is the worst over?
No, if anything is clear from the contradictory moves of the last week
— allowing Lehman Brothers and Washington Mutual to collapse while
taking over AIG, and engineering Bank of America’s takeover of Merrill
Lynch — there is no strategy to deal with the crisis, just tactical
responses, like the fire department’s response to a conflagration.
The proposed $700-billion buyout of banks’ bad mortgaged-backed
securities is not a strategy but mainly a desperate effort to shore up
confidence in the system, to prevent the erosion of trust in the banks
and other financial institutions and preventing a massive bank run such
as the one that triggered the Great Depression of 1929.
What caused the collapse of global capitalism’s nerve center? Was it greed?
Good old fashioned greed played a part. This is what Klaus Schwab, the
organizer of the World Economic Forum, the yearly global elite jamboree
in the Swiss Alps, meant when he told his clientele in Davos earlier
this year: “We have to pay for the sins of the past.”
Was this a case of Wall Street outsmarting itself?
Definitely. Financial speculators outsmarted themselves by creating
more and more complex financial contracts like derivatives that would
securitize and make money from all forms of risk — including exotic
futures instruments as “credit default swaps” that enable investors to
bet on the odds that the banks’ own corporate borrowers would not be
able to pay their debts! This is the unregulated multi-trillion- dollar
trade that brought down AIG.
On Dec. 17, 2005, when International Financing Review (IFR) announced
its 2005 Annual Awards — one of the securities industry's most
prestigious awards programs — it had this to say: "[Lehman Brothers]
not only maintained its overall market presence, but also led the
charge into the preferred space by ... developing new products and
tailoring transactions to fit borrowers' needs…. Lehman Brothers is the
most innovative in the preferred space, just doing things you won't see
elsewhere."
No comment.
Was it lack of regulation?
Yes — everyone acknowledges by now that Wall Street’s capacity to
innovate and turn out more and more sophisticated financial instruments
had run far ahead of government’s regulatory capability, not because
government was not capable of regulating but because the dominant
neoliberal, laissez-faire attitude prevented government from devising
effective mechanisms with which to regulate. The massive trading in
derivatives helped precipitate this crisis, and the US Congress paved
the way when it passed a law excluding derivatives from being regulated
by the Securities Exchange Commission in 2000.
But isn’t there something more that is happening? Something systemic?
Well, George Soros, who saw this coming, says what we are going through
is the crisis of the “gigantic circulatory system” of a “global
capitalist system that is…coming apart at the seams.”
To elaborate on the arch-speculator’ s insight, what we are seeing is
the intensification of one of the central crises or contradictions of
global capitalism which is the crisis of overproduction, also known as
over-accumulation or overcapacity.
This is the tendency for capitalism to build up tremendous productive
capacity that outruns the population’s capacity to consume owing to
social inequalities that limit popular purchasing power, thus eroding
profitability.
But what does the crisis of overproduction have to do with recent events?
Plenty. But to understand the connections, we must go back in time to
the so-called Golden Age of Contemporary Capitalism, the period from
1945 to 1975.
This was a period of rapid growth both in the center economies and in
the underdeveloped economies — one that was partly triggered by the
massive reconstruction of Europe and East Asia after the devastation of
the Second World War, and partly by the new socioeconomic arrangements
that were institutionalized under the new Keynesian state. Among the
latter, key were strong state controls over market activity, aggressive
use of fiscal and monetary policy to minimize inflation and recession,
and a regime of relatively high wages to stimulate and maintain demand.
So what went wrong?
Well, this period of high growth came to an end in the mid-seventies,
when the center economies were seized by stagflation, meaning the
coexistence of low growth with high inflation, which was not supposed
to happen under neoclassical economics.
Stagflation, however, was but a symptom of a deeper cause: the
reconstruction of Germany and Japan and the rapid growth of
industrializing economies like Brazil, Taiwan, and South Korea added
tremendous new productive capacity and increased global competition,
while social inequalities within countries and between countries
globally limited the growth of purchasing power and demand, thus
eroding profitability. This was aggravated by the massive oil price
rises of the seventies.
How did capitalism try to solve the crisis of overproduction?
Capital tried three escape routes from the conundrum of overproduction:
neoliberal restructuring, globalization, and financialization.
What was neoliberal restructuring all about?
Neoliberal restructuring took the form of Reaganism and Thatcherism in
the North and Structural Adjustment in the South. The aim was to
invigorate capital accumulation, and this was to be done by (1)
removing state constraints on the growth, use and flow of capital and
wealth; and (2) redistribute income from the poor and middle classes to
the rich on the theory that the rich would then be motivated to invest
and reignite economic growth.
The problem with this formula was that in redistributing income to the
rich, you were gutting the incomes of the poor and middle classes, thus
restricting demand, while not necessarily inducing the rich to invest
more in production. In fact, what they did was to channel a large part
of their redistributed wealth to speculation.
The truth is neoliberal restructuring, which was generalized in the
North and south during the eighties and nineties, had a poor record in
terms of growth: global growth averaged 1.1 per cent in the nineties
and 1.4 in the eighties, whereas it averaged 3.5 per cent in the 1960’s
and 2.4 per cent in the seventies, when state interventionist policies
were dominant. Neoliberal restructuring could not shake off stagnation.
How was globalization a response to the crisis?
The second escape route global capital took to counter stagnation was
“extensive accumulation” or globalization, or the rapid integration of
semi-capitalist, non-capitalist, or pre-capitalist areas into the
global market economy. Rosa Luxemburg, the famous German revolutionary
economist, saw this long ago as necessary to shore up the rate of
profit in the metropolitan economies. How? By gaining access to cheap
labor, by gaining new, albeit limited, markets, by gaining new sources
of cheap agricultural and raw material products, and by bringing into
being new areas for investment in infrastructure. Integration is
accomplished via trade liberalization, removing barriers to the
mobility of global capital, and abolishing barriers to foreign
investment.
China is, of course, the most prominent case of a non-capitalist area
to be integrated into the global capitalist economy over the last 25
years.
To counter their declining profits, a sizable number of the Fortune 500
corporations have moved a significant part of their operations to China
to take advantage of the so-called “China Price” — the cost advantage
deriving from China’s seemingly inexhaustible cheap labor. By the
middle of the first decade of the 21st century, roughly 40 t0 50 per
cent of the profits of US corporations were derived from their
operations and sales abroad, especially China.
Why didn’t globalization surmount the crisis?
The problem with this escape route from stagnation is that it
exacerbates the problem of overproduction because it adds to productive
capacity. A tremendous amount of manufacturing capacity has been added
in China over the last 25 years, and this has had a depressing effect
on prices and profits. Not surprisingly, by around 1997, the profits of
US corporations stopped growing. According to another index devised by
economist Philip O’Hara, the profit rate of the Fortune 500 went from
7.15 in 1960-69 to 5.30 in 1980-90 to 2.29 in 1990-99 to 1.32 in
2000-2002.
What about financialization?
Given the limited gains in countering the depressive impact of
overproduction via neoliberal restructuring and globalization, the
third escape route became very critical for maintaining and raising
profitability: financialization.
In the ideal world of neoclassical economics, the financial system is
the mechanism by which the savers or those with surplus funds are
joined with the entrepreneurs who have need of their funds to invest in
production. In the real world of late capitalism, with investment in
industry and agriculture yielding low profits owing to overcapacity,
large amounts of surplus funds are circulating and being invested and
reinvested in the financial sector — that is, the financial sector is
turning in on itself.
The result is an increased bifurcation between a hyperactive financial
economy and a stagnant real economy. As one financial executive notes,
“there has been an increasing disconnect between the real and financial
economies in the last few years. The real economy has grown … but
nothing like that of the financial economy — until it imploded.”
What this observer does not tell us is that the disconnect between the
real and the financial economy is not accidental — that the financial
economy exploded precisely to make up for the stagnation owing to
overproduction of the real economy.
What were the problems with financialization as an escape route?
The problem with investing in financial sector operations is that it is
tantamount to squeezing value out of already created value. It may
create profit, yes, but it does not create new value — only industry,
agriculture, trade and services create new value. Because profit is not
based on value that is created, investment operations become very
volatile and prices of stocks, bonds, and other forms of investment can
depart very radically from their real value — for instance, the stock
of Internet startups that keep on rising, driven mainly by upwardly
spiraling financial valuations, that then crash. Profits then depend on
taking advantage of upward price departures from the value of
commodities, then selling before reality enforces a “correction,” that
is a crash back to real values. The radical rise of prices of an asset
far beyond real values is what is called the formation of a bubble.
Why is financialization so volatile?
Profitability being dependent on speculative coups, it is not
surprising that the finance sector lurches from one bubble to another,
or from one speculative mania to another.
Because it is driven by speculative mania, finance driven capitalism
has experienced about 100 financial crises since capital markets were
deregulated and liberalized in the 1980s.
Prior to the current Wall Street meltdown, the most explosive of these
were the Mexican Financial Crisis of 1994-95, the Asian Financial
Crisis of 1997-98, the Russian Financial Crisis of 1996, the Wall
Street Stock Market Collapse of 2001, and the Argentine Financial
Collapse of 2002.
Bill Clinton’s treasury secretary, Wall Streeter Robert Rubin,
predicted five years ago that “future financial crises are almost
surely inevitable and could be even more severe.”
How do bubbles form, grow, and burst?
Let’s first use the Asian Financial Crisis of 1997-98 as an example.
• First, capital account and financial liberalization at the urging of the IMF and the US Department of Treasury;
• Then, entry of foreign funds seeking quick and high returns, meaning they went to real estate and the stock market;
• Overinvestment, leading to fall in stock and real estate prices,
leading to panicky withdrawal of funds — in 1997, $100 billion left the
East Asian economies in a few weeks;
• Bailout of foreign speculators by the IMF;
• Collapse of the real economy — recession throughout East Asia in 1998;
• Despite massive destabilization, efforts to impose both national and
global regulation of financial system were opposed on ideological
grounds.
Let’s go to the current bubble. How did it form?
The current Wall Street collapse has its roots in the Technology Bubble
of the late 1990s, when the price of the stocks of Internet startups
skyrocketed, then collapsed, resulting in the loss of $7 trillion worth
of assets and the recession of 2001-02.
The loose money policies of the Fed under Alan Greenspan had encouraged
the Technology Bubble, and when it collapsed into a recession,
Greenspan, to try to counter a long recession, cut the prime rate to a
45-year low of 1.0 per cent in June 2003 and kept it there for over a
year. This had the effect of encouraging another bubble — the real
estate bubble.
As early as 2002, progressive economists such as Dean Baker of the
Center for Economic Policy Research were warning about the real estate
bubble. However, as late as 2005, then Council of Economic Adviser
Chairman and now Federal Reserve Chairman Ben Bernanke attributed the
rise in US housing prices to “strong economic fundamentals” instead of
speculative activity. Is it any wonder that he was caught completely
off guard when the subprime crisis broke in the summer of 2007?
And how did it grow?
Let’s hear it from one key market player himself, George Soros:
“Mortgage institutions encouraged mortgage holders to refinance their
mortgages and withdraw their excess equity. They lowered their lending
standards and introduced new products, such as adjustable mortgages
(ARMs), “interest only” mortgages, and promotional teaser rates.” All
this encouraged speculation in residential housing units. House prices
started to rise in double digit rates. This served to reinforce
speculation, and the rise in house prices made the owners feel rich;
the result was a consumption boom that has sustained the economy in
recent years.”
Looking at the process more closely, the subprime mortgage crisis was
not a case of supply outrunning real demand. The “demand” was largely
fabricated by speculative mania on the part of developers and
financiers that wanted to make great profits from their access to
foreign money — lots of it from Asia — that flooded the US in the last
decade. Big ticket mortgages or loans were aggressively made to
millions who could not normally afford them by offering low “teaser”
interest rates that would later be readjusted to jack up payments from
the new homeowners.
But how could subprime mortgages going sour turn into such a big problem?
Because these assets were then “securitized” with other assets into
complex derivative products called “collateralized debt obligations”
(CDOs) by the mortgage originators working with different layers of
middlemen who understated risk so as to offload them as quickly as
possible to other banks and institutional investors. These institutions
in turn offloaded these securities onto other banks and foreign
financial institutions. The idea was to make a sale quickly, make a
tidy profit, while foisting the risk on the suckers down the line.
When the interest rates were raised on the subprime loans, adjustable
mortgages and other housing loans, the game was up. There are about six
million subprime mortgages outstanding, 40 percent of which will likely
go into default in the next two years, Soros estimates.
And five million more defaults from adjustable rate mortgages and other
“flexible loans” will occur over the next several years. But securities
whose values run into trillions of dollars have already been injected,
like virus, into the global financial system. Global capitalism’s
gigantic circulatory system was fatally infected.
But how could Wall Street titans collapse like a house of cards?
For Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie Mac, and Bear
Stearns, the losses represented by these toxic securities simply
overwhelmed their reserves and brought them down. And more are likely
to fall once their books — since lots of these holdings are recorded
“off the balance sheet” — are corrected to reflect their actual
holdings of these assets.
And many others will join them as other speculative operations such as
credit cards and different varieties of risk insurance seize up.
American International Group (AIG) was felled by its massive exposure
in the unregulated area of credit default swaps, derivatives that make
it possible for investors to bet on the possibility that companies will
default on repaying loans. Such bets on credit defaults now make up a
$45 trillion market that is entirely unregulated. It amounts to more
than five times the total of the US government bond market. The
mega-size of the assets that could go bad should AIG collapse was what
made Washington change its mind and salvage it after it let Lehman
Brothers collapse.
What’s going to happen now?
We can safely say then that there will be more bankruptcies and
government takeovers, with foreign banks and institutions joining their
US counterparts; that Wall Street’s collapse will deepen and prolong
the US recession; and that in Asia and elsewhere, a US recession will
translate into a recession, if not worse. The reason for the last point
is that China’s main foreign market is the US and China in turn imports
raw materials and intermediate goods that it uses for its exports to
the US from Japan, Korea, and Southeast Asia. Globalization has made
“decoupling” impossible. The US, China, and East Asia are like three
prisoners bound together in a chain-gang.
In a nutshell…?
The Wall Street meltdown is not only due to greed and to the lack of
government regulation of a hyperactive sector. The Wall Street collapse
stems ultimately from the crisis of overproduction that has plagued
global capitalism since the mid-1970s.
Financialization of investment activity has been one of the escape
routes from stagnation, the other two being neoliberal restructuring
and globalization. With neoliberal restructuring and globalization
providing limited relief, financialization became attractive as a
mechanism to shore up profitability. But financialization has proven to
be a dangerous road, leading to speculative bubbles that lead to the
temporary prosperity of a few but which ultimately end up in corporate
collapse and in recession in the real economy.
The key questions now are: How deep and long will this recession be?
Does the US economy need another speculative bubble to drag itself out
of this recession? And if it does, where will the next bubble form?
Some people say the military-industrial complex or the “disaster
capitalism complex” that Naomi Klein writes about is the next one, but
that’s another story?
* Walden Bello is professor of sociology at the University of the Philippines and senior analyst at the Bangkok-based research and advocacy institute Focus on the Global South. This article first appeared in Foreign Policy in Focus, 26 September 2008.
Focus on Trade is a regular electronic bulletin providing updates and analysis of trends in regional and world trade and finance, the political economy of globalisation and peoples resistance, and alternatives to global capitalism. Nicola Bullard edits Focus on Trade. Your contributions and comments are welcome. Write to
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.
Water justice, like water, travels in networks: notes on reclaiming public water
An
international seminar of the Reclaiming Public Water Network brought
together participants from more than 30 countries, who shared knowledge
and experiences about how to improve water provision through the
democratization of water management.
The initiative People’s Agenda for Alternative Regionalisms, involves regional alliances such as Hemispheric Social Alliance (Latin America), Southern African People’s Solidarity Network- SAPSN (Southern Africa), Solidarity for Asian People’s Advocacy – SAPA (South East Asia), People’s SAARC (South Asia) as well as organisations and networks in Europe, including Transnational Institute (TNI), that struggle for “Another Europe”. These networks and the organisations part of them, share a strong commitment on the need to RECLAIM the regions, RECREATE the processes of regional integration and ADVANCE people-centered regional alternatives.
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