Monday, August 4, 2014

Latest G-7 Declaration Against Russia Over Ukraine Heightens War Threat in Eastern Europe

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In a statement issued on July 30, the leaders of the top seven imperialist countries in the world plus the European Council and the European Commission expressed concern over what they call an ongoing threat by the Russian government to the "territorial integrity" of Ukraine. They say that Russia "must stop its support for the separatists in eastern Ukraine." The statement announced a new round of economic sanctions against Russia.
The accusation of Russian support for the popular rebellion in southeast Ukraine, and for the pro-autonomy sentiment more broadly in the east of the country, is a trope. It and the accompanying threats are a coded demand that the Russian government police the autonomy movement and pressure it to surrender.
The real, not fictional, story of Russian non-involvement in eastern Ukraine was detailed several weeks ago by a leader of the Donetsk Peoples Republic, Pavel Yurevich Gubarev. An Associated Press article of July 9, 2014,quotes Gubarev at a press conference in Donetsk: "We would like to receive help in the form of Russian forces. But we are realists and understand that's impossible."
The AP report continued:
Rebels in the Donetsk region and the adjacent Luhansk region have repeatedly called for Russia to send in "peacekeeping" troops as the fight against them intensifies. Russia has shown no inclination to do so . . .
Gubarev suggested that Russian tycoons are opposed to military action, fearing their businesses would be affected. Russia already has been hit with Western sanctions for its annexation of Crimea from Ukraine in March and for allegedly fomenting the unrest in eastern Ukraine, in which more than 400 people have reportedly been killed. Sending forces into Ukraine would almost certainly prompt even harsher sanctions.
"Their selfish interests are understandable," Gubarev said.
The G-7 says it wants a "prompt" investigation of the crash of Malaysia Airlines Flight 17. But since the crash, the government in Kiev, supported by the G-7, has stepped up its cruel and devastating military operations in the southeast. Ukraine army operations blocked access to the site for four days, from July 27 to 30.
Inspectors were finally able to access the site beginning on July 31. The New York Times reported, "Ukrainian officials said they had suspended offensive operations against the rebels to allow the monitors to reach the site safely. Commanders at Ukrainian military positions near the site confirmed that they had been ordered to halt their advance."
New York Times journalist Sabrina Tavernise reported from the crash site in the hours and days following the disaster. She told interviewer Charlie Rose on July 29 that rebel fighters created no barriers to the crash site during the time they controlled it and that the blockages that began on July 27 were instigated by Ukrainian government forces.
Why was access to the site blocked and what were Ukraine's forces doing during the four days they had the site to themselves? Answers to these questions have not been reported by mainstream journalists, let alone investigated.
The delay to the investigation created by the Ukraine government was criminally irresponsible and it strongly suggests that the government had compelling political or other reasons to keep inspectors at bay. The delay in recovery of the bodies was an unspeakable affront to their families and to human dignity. This apparent sabotage of a "prompt investigation" sheds new light on the unseemly rush to judgment and condemnation of Russia over the crash. As Robert Parry of Consortium News and other writers have argued so compellingly, the "blame Russia" chorus has compromised the possibility of an impartial and authoritative investigation.
In their statement, the G-7 imperialists condemn Russia's "annexation" of Crimea last March. A sanctions regime was imposed on Crimea shortly after the people there voted in a snap plebiscite to get out of the line of fire of Kiev's course to civil war and secede from Ukraine. Economic sanctions on Crimea and now on Russia are a violation of economic sovereignty. Historically, sanctions lead to war, and that is precisely the discussions over Ukraine that is now taking place in the halls of power of the G-7.
US and NATO actions in Eastern Europe underscore the war danger. The United States has increased its military aid to Ukraine - first with $33 million to its army, and now with $15 million to train its notorious National Guard. The Guard was a moribund institution resuscitated after the seizure of power by the neo-conservative and extreme right in Ukraine in February 2014. Its cadre includes large numbers of volunteers from the parties of the extreme and fascist right.
Kiev is making strong demands on other NATO countries to likewise provide military aid. Meanwhile, the United States is stepping up the training and equipping of the armed forces of Poland, Romania and Moldova. And for months, increased numbers of fighter aircraft and warships of NATO countries have assumed threatening postures in the skies and waters surrounding Russia.
Sanctions are also serving to deflect attention away from what should be at the center of the world's attention - the criminal war being waged by the neo-conservative government in Kiev. This is a government that includes fascists as ministers, including its secretary of the National Security and Defense Council, Andriy Parabuiy. Although its national treasury is broke and now dependent on loans from the big, international financial institutions, Kiev is planning to spend "billions" more hryvnias on its war and stretch it into winter if needed (12 hryvnias equals one US dollar).
The G-7 statement reaffirms support to President Petro Poroshenko's "peace plan" for southeast Ukraine. But the only "plan" that Poroshenko is implementing is a military offensive spearheaded by shellling and bombing of towns and cities until the population and its self-defense forces surrender. There are no signs of surrender, even if several thousand have died and more than half a million people have been made refugees.
Progressive parties and other political forces in the G-7 countries need to come together rapidly and effectively to oppose this war. We need to force Kiev to heed the popular will in eastern Ukraine and increasingly in other parts of the shattered country to stop its bombardments and ground attacks and negotiate with the citizen movements it calls "terrorists."
Russia and other governments have an obligation to act to stop the ongoing massacres. Passive lamenting of events and appeals for peace will have no effect on the NATO war makers. They are running amok, as is their partner Israel in Gaza. It is time for massive and sustained anti-war mobilizations on the scale of an earlier moment in history that, compared to today, looks positively benign - the era of the Cold War and the war in Vietnam.
G-7 Leaders Statement on Ukraine
We, the leaders of Canada, France, Germany, Italy, Japan, the United Kingdom, the United States, the President of the European Council and the President of the European Commission, join in expressing our grave concern about Russia's continued actions to undermine Ukraine's sovereignty, territorial integrity and independence. We once again condemn Russia's illegal annexation of Crimea, and actions to de-stabilise eastern Ukraine. Those actions are unacceptable and violate international law.
We condemn the tragic downing of Malaysia Airlines Flight 17 and the deaths of 298 innocent civilians. We demand a prompt, full, unimpeded and transparent international investigation. We call upon all sides to establish, maintain and fully respect a cease-fire at and around the crash site, as demanded by UN Security Council resolution 2166, so that the investigators can take up their work and to recover the remains of all victims and their personal possessions.
This terrible event should have marked a watershed in this conflict, causing Russia to suspend its support for illegal armed groups in Ukraine, secure its border with Ukraine, and stop the increasing flow of weapons, equipment and militants across the border in order to achieve rapid and tangible results in de-escalation.
Regrettably however, Russia has not changed course. This week, we have all announced additional coordinated sanctions on Russia, including sanctions on specific companies operating in key sectors of the Russian economy. We believe it is essential to demonstrate to the Russian leadership that it must stop its support for the separatists in eastern Ukraine and tangibly participate in creating the necessary conditions for the political process.
We remain convinced that there must be a political solution to the current conflict, which is causing rising numbers of civilian casualties. We call for a peaceful settlement of the crisis in Ukraine, and underline the need to implement President Poroshenko's peace plan without any further delay. To this end, we urge all parties to establish a swift, genuine and sustainable general cease-fire on the basis of the Berlin Declaration of 2 July with the aim of maintaining Ukraine's territorial integrity. We call upon Russia to use its influence with the separatist groups and ensure effective border control, including through OSCE observers. We support the OSCE and the Trilateral Contact Group as central players in creating the conditions for a ceasefire.
Russia still has the opportunity to choose the path of de-escalation, which would lead to the removal of these sanctions. If it does not do so, however, we remain ready to further intensify the costs of its adverse actions.

Defining Away Economic Failure

Redefinition Is America’s Most Powerful Factor of Production

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Last week’s government guesstimate that second quarter 2014 real GDP growth will be 4% seems nonsensical on its face. There is no evidence of increases in real median family incomes or real consumer credit that would lift the economy from a first quarter decline to 4% growth in the second quarter. Middle class store closings (Sears, Macy’s, J.C. Penney) have spread into the Dollar stores used by those with lower incomes. Family Dollar, a chain in the process of closing hundreds of stores is being bought by Dollar Tree, the only one of the three Dollar store chains that is not in trouble. Wal-Mart’s sales have declined for the past 5 quarters. Declining sales and retail store closings indicate shrinking consumer purchasing power. Retail facts do not support the claim of a 4% GDP growth rate for the second quarter, and they do not support last Friday’s payroll job claim of 26,700 new retail jobs in July.

What about the housing market? Don’t the headlines accompanying last Friday’s payroll jobs report, such as “Hiring Settles Into Steady Gains,” mean more people working and a boost to the economy from a housing recovery? No. What the financial press did not report is that the US is in a structural jobs depression. In the 12-month period from July 2013 through July 2014, 2.3 million Americans of working age were added to the population. Of these 2.3 million only 330 thousand entered the labor force. My interpretation of this is that the job market is so poor that only 14% of the increase in the working age population entered the labor force.

The decline in the labor force participation rate is bad news for the housing market. The US labor force participation rate peaked at 67.3% in 2000 and has been in a sustained downturn ever since. The rate of decline increased in October 2008 with the bank bailout and Quantitative Easing. From October 2008 to the present, 13.2 million Americans were added to the working age population, but only 818 thousand, or 6%, entered the labor force. [1] Despite government and financial press claims, the Federal Reserve’s multi-year policy of printing money with which to purchase bonds did not restore the housing or job markets.

What about the stock market? It has been down in recent days but is still high historically. Isn’t the stock market evidence of a good economy? Not if stocks are up because corporations are buying back their own stock. Corporations are now the largest buyers of stocks. Recently we learned that from 2006 through 2013 corporations authorized $4.14 trillion in buybacks of their publicly traded stocks. Moreover, it appears that corporations have been borrowing the money from banks with which to buy back their stocks. Last year there were $754.8 billion in authorized stock buybacks and $782.5 billion in corporate borrowing. In the first three months of this year, companies purchased $160 billion of their own stocks. [2]

Borrowing to buyback stock leaves a company with debt but without new investment with which to produce revenues to service the debt. The massive stock buybacks demonstrate that American capitalism is now corrupt. In order to maximize personal short-term financial benefits flowing from bonuses, stock options, and capital gains, CEOs, boards of directors, and shareholders are decapitalizing public companies and loading them up with debt.

Well, isn’t the economy being helped by the return of manufacturing to America? Apparently not. Data for 1999-2012 indicate that the offshoring of manufacturing increased by 9%.

One economist, Susan Hester, an economist for the Retail Industry Leaders Association, has decided to turn the loss of manufacturing jobs into a virtue. Her argument is that retail employment dwarfs manufacturing employment and that more American jobs can be created by selling more imports than by encouraging manufacturing in order to provide exports.

According to Ms. Hester’s research, the US makes more money from the retail side than from the production side. She concludes that the value added to a product by offshore labor is a small percentage of the value added by “managing offshored production, handling Customs clearances, managing warehouses and distribution, marketing apparel products, and by millions of people in the retail sector stocking shelves and working cash registers.”

In other words, the US manufacturing jobs moved offshore are just a throwaway. The money is made in selling the imports.

Ms. Hester neglects to recognize that when offshored production is brought to the US to be marketed, it comes in as imports and results in a larger US trade deficit. Foreigners use dollars paid to them for the products that they make for US firms to purchase ownership of US bonds, stocks, and real assets such as land, buildings, and companies. Consequently, interest, profits, capital gains, and rents associated with the foreign purchases of US assets now flow to foreigners and not to Americans. The current account worsens.

It works like this: The excess of US imports over US exports leaves foreigners with claims on US income and wealth that are settled by foreign purchases of US assets. The income produced by these assets now flows abroad with the consequence that income earned by foreigners on their US investments exceeds the income earned by the US on its foreign investments.

According to Ms. Hester’s reasoning, Americans would be better off it they produced nothing that they need and in place of manufacturing relied on the incomes of US fashion designers and pattern makers who specify the offshored production for US markets, on the compliance officers and freight agents, on production planning and expediting clerks, and on longshore workers and railroad employees who deliver the foreign-made goods to US consumer markets.

Ms. Hester believes that the value-added by offshored manufacturing is inconsequential. How then did China get rich from it, becoming the second largest economy and employing 100 million people in manufacturing (compared to America’s 12 million), and acquire the largest foreign reserves of any country?

After Ms. Hester answers that question she can explain why US corporations go to the trouble to offshore their manufacturing if the contribution to value-added is so low? The value added is obviously substantial enough for the labor cost savings to pay for transportation costs to the US from Asia, for the cost of set-up and management of foreign based facilities, and for the cost of the adverse publicity from abandoning US communities for Asia and still leave value-added after all costs to enlarge profits and drive up stock prices and executive bonuses.

Ms. Hester fools herself. The low value that she calculates Chinese, Indian, or Vietnamese labor adds to the price of a shirt reflects the low foreign labor cost, not a low value of the shirt in US markets or a low value of an iPhone in European markets. Marketing, warehousing and distribution are done in the US by more highly paid people, and this is why it looks like the value added comes from sources other than manufacturing. Ms. Hester overlooks that the lower cost of foreign labor does not translate into a less valued product but into higher profits.

Economists assume that the labor cost savings are passed on to the consumers in lower prices, but I have not experienced declining prices of Nike and Merrell sports shoes, of sheets and towels, of Brooks Brothers and Ralph Lauren shirts, of Apple computers, or whatever as a result of moving US production offshore. The labor cost savings go into profits, managerial bonuses, and capital gains for shareholders and is one reason for the extraordinary increase in income and wealth inequality in the US.

Focused on short-term profit, manufacturers and retailers are destroying the US consumer market. The average annual salary of a US apparel manufacturing worker is $35,000. The average salary of US retail employees is less than half of that amount and provides no discretionary income with which to boost consumer spending in retail stores.

The American corporate practice of offshoring manufacturing has made it impossible for the Obama regime to keep its promises of creating manufacturing jobs and exports. Unable to create real jobs and real exports, the US government has proposed to create virtual jobs and virtual exports made by “factoryless goods producers.” In order to keep his promise of doubling the growth of US exports, the Obama regime wants to redefine foreign output as US output.

A “factoryless goods producer” is a newly invented statistical category. It is a company like Nike or Apple that outsources the production of its products to foreign companies. The Obama regime is proposing to redefine companies such as Apple that own a brand name or a product design as manufacturing companies even though the companies do not manufacture.

In other words, whether or not a US company is a manufacturer does not depend on its activity, but on its ownership of a brand name made for the company by a foreign manufacturer. For example, Apple iPhones made in China and sold in Europe would be reported as US exports of manufactured goods, and iPhones sold in the US would no longer be classified as imports but as US manufacturing output. Apple’s non-manufacturing employees would be transformed into manufacturing employment.

Clearly, the purpose of this statistical deception is to inflate the number of US manufacturing jobs, US manufacturing output, and US exports and to convert imports into domestic production. It is a scheme that eliminates the large US trade deficit by redefinition.

The reclassification would leave the government’s Office of Statistical Lies with the anomaly that products made in China, India, Indonesia or wherever become US GDP as long as the brand name is owned by a US corporation, but the payments to the Asian workers who produced the products remain as claims on US wealth and can be converted into ownership of US bonds, companies, and real estate.

For example, Chinese workers produced the Apple products, and China has the claims on US wealth to prove it. How are these claims accounted for statistically by the Obama regime’s redefinition? The US can add China’s production of the Apple products to US GDP, but how does the US deduct the Chinese-produced Apple products from China’s GDP? And how does the Obama regime’s redefinition get rid of the payments by Apple to the Chinese labor that produced the products? These payments comprise claims on US wealth.

In other words, the reclassification would double count the output of Apple’s products. If every country does this, world GDP will rise statistically regardless of the fact that no more goods and services are produced. Perhaps this is the way to define away world poverty.

“Factoryless goods producers” was foreshadowed by Harvard professor Michael Porter’s 2006 competitiveness report, a justification for jobs offshoring. Defending jobs offshoring, Porter downplayed the rise in the US trade deficit and decline in the US GDP growth rate caused by jobs offshoring. Porter argued, in effect, that ownership of the revenues and products, not the location in which the revenues and products are produced, should determine their classification. As I pointed out in my critique (see The Failure of Laissez Faire Capitalism and Economic Dissolution of the West), the result would be to raise US GDP by the amount of US production outsourced abroad and by the output of US overseas subsidiaries and to decrease the GDP of the countries in which the manufacturing actually takes place. Consistency would require that the German and Japanese autos, for example, that are produced in the US with US labor would become deductions from US GDP and be reported as German and Japanese GDP.

As I have emphasized for years, the West already lives in the dystopia forecast by George Orwell. Jobs are created by hypothetical add-ons to the reported payroll figures and by inappropriate use of seasonal adjustments. Inflation is erased by substituting lower priced items in the inflation index for those that rise in price and by redefining rising prices as quality improvements. Real GDP growth is magicked into existence by deflating nominal GDP with the understated measure of inflation. Now corporations without factories are going to produce US manufacturing output, US exports, and US manufacturing jobs!

Every sphere of Western existence is defined by propaganda. Consequently, we have reached a perfect state of nihilism. We can believe nothing that we are told by government, corporations, and the presstitute media.

We live in a lie, and the lie is ever expanding.

The slaughter in Gaza: A warning to the international working class

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The Israeli military’s horrific slaughter in the Gaza Strip continued unabated over the weekend. The death toll of Palestinians, overwhelmingly civilians, climbed to 1,822, including hundreds of children. Nearly 10,000 have been injured, overflowing hospitals that are at breaking point, like much of the rest of the infrastructure in the enclave of some 1.8 million people.

The latest atrocity—a missile strike on a UN school in Rafah on Sunday—killed at least 10 people and wounded 35 others. The facility—the third UN school to be hit—had been sheltering some 3,000 of the more than 450,000 people who have been driven from their homes in the Gaza Strip over the past month. UN officials had repeatedly advised the Israeli military of the school’s coordinates.

Amid mounting international anger, outrage and protests, the attack on the school brought forth utterly hypocritical criticisms from Washington and its allies, who have been backing the Israeli offensive to the hilt. US State Department spokeswoman Jen Psaki declared that her government was “appalled” at the “disgraceful shelling” of the school and called on the Israeli military to do more to avoid civilian casualties.

The Obama administration, however, has not only given its full political support to Israel’s criminal war against the population of Gaza; it has also provided the means for waging it. The US, which arms and finances Israel to the tune of $3 billion a year, last week opened the huge cache of arms, known as the War Reserves Stock Allies-Israel, to restock the Israeli military’s depleted supplies of ammunition, mortar rounds, grenades and other weapons.

While announcing a seven-hour pause in operations today, the Israeli regime has made absolutely clear that it will not stop until its objectives have been achieved. Prime Minister Benjamin Netanyahu declared yesterday that the military would continue for “however long it will take and with as much force as needed.”

The aim of the murderous assault on the Gaza Strip is not simply to prevent the crude rockets being fired into Israel by Palestinian militants, or to destroy their network of tunnels. The attacks on civilians along with schools, hospitals and vital infrastructure are not mistakes but part of a calculated plan aimed at terrorising an entire population and breaking the 66-year history of Palestinian resistance to occupation.

The methods devised and honed over decades by the Israeli military and security apparatus—detentions without trial, torture, targeted assassinations, collective punishment, indiscriminate shelling of urban areas—recall nothing so much as the Nazi atrocities in occupied Europe during the 1930s and 1940s. The resort to such barbarism testifies to the bankruptcy of the Zionist project, which justified the establishment of Israel as a refuge for the Jewish population from such horrors.

Moreover, it has a broader international significance. The war crimes being carried out in Gaza today, and the fact that they are being supported by all the major powers, are a warning of what is being prepared against the working class in every country. The massacres in the Gaza Strip coincide with centenary of the outbreak of World War I when the major powers sent millions to the death in pursuit of their predatory ambitions. Once again, the imperialist powers are preparing for catastrophic war.

Six years after the worst financial breakdown since the 1930s, the crisis wracking global capitalism has deepened, threatening new calamities. Around the world, the ruling classes have no rational solution to the immense social and economic difficulties stemming from the irresolvable contradiction between global economy and the outmoded nation-state system in which capitalism is rooted. All of the imperialist powers are seeking to extricate themselves by preparing for war against their rivals abroad and class war against the working class at home.

The Israeli onslaught in Gaza is a forewarning of the measures that will be used in every country against working-class resistance to war, militarism and the agenda of austerity. The methods developed in the course of a decade of the US-led wars in Afghanistan and Iraq to terrorise hostile populations will also be used against workers fighting to defend their jobs, living standards and basic democratic rights.

The scaffolding of a police state has already been erected. In the United States, fundamental democratic rights and constitutional norms have been systematically undermined, most flagrantly in the massive NSA and CIA spying apparatus and in the Obama administration’s authorisation of the assassination of American citizens by drone strikes. The lockdown of an entire American city—Boston—in 2013 by heavily-armed soldiers and police backed by armoured vehicles and helicopters exposed the extent of the military-police preparations underway against the working class in the event of widespread social opposition and rebellion.

The preparations are no less advanced in the imperialist centres in Europe, Japan and Australia. Under the banner of the “war on terror,” the legal framework has been laid of profoundly anti-democratic measures, including detention without charge, mass surveillance and the call-out of the military to enforce the dictates of the corporate and financial elite. Major international sporting events and global summits are now routinely surrounded by a massive security presence and function as trial runs for the roll-out of police-state measures to suppress working people.

The drive to war and austerity, to be enforced by ruthless autocratic measures, is the product of a bankrupt social order. To defend its basic democratic and social rights, the working class must make its own preparations—the building of a unified international movement to put an end to capitalism and all its depredations and to refashion society in the interests of the vast majority of humanity, not the profits of a wealthy few.