What's humanitarian about this aid?

The US has imposed on Russia an aid package that will leave the country poorer but American farmers

Here we are at the end of 1998. More than ten years has passed since Russia began experimenting with economic and political reform. During those ten years, we have had much experience of this reform and can now state with some certainty that there are at least three things Russia does not need. First, more loans to add to those that already cannot be paid back. Second, more financial resources placed in the hands of corrupt bureaucrats. Third, more economic measures that will harm any of the already fragile Russian domestic manufacturing industries.

What is the west doing to help Russia at the end of 1998? You don't need three guesses to work out that it is engaging in the one form of "aid" activity guaranteed to achieve all three of these negative goals: selling large quantities of cheap food to Russia. This is what is generally called "humanitarian aid". It is a farce.

Which is not to say that there aren't hungry people in Russia, or that hungry people shouldn't be helped. Even in Moscow, the richest city in the country, the metro stations are now tightly encircled by old ladies holding up single packs of cigarettes and bits of dried fish, the sale of which will finance the potato they will eat for supper. Even in Moscow everyone has a story: a cousin in Siberia, perhaps a PhD in physics, who hasn't received his salary for a year, or a friend whose child reports that schoolmates pass out in class through lack of food. The newspapers are full of such stories, too, and, although Russians generally seem to find ways to survive without starving, one doesn't have to look hard to see poverty that is far worse than in recent years.

There are good ways to help people and bad ways. There are also terrible ways, and the west, most notably the United States, appears to have chosen the most terrible way of all. At least the European Union has the decency to give its $500 million worth of surplus subsidised food to Russia for free. The United States, on the other hand, has graciously offered to lend the Russian government money to buy its $600 million worth of surplus subsidised food - thereby adding to the Russian government's vast and unrepayable debts.

More to the point, everything is being done to ensure that the money will not go directly to the people who need it. If the words "humanitarian aid" conjure up a heart-warming image of a little man in a shiny lorry giving out hot cross buns to beggars, forget it. According to the current plan, the aid will be distributed by private companies, which in Russia means fat, sluggish, semi-private companies stuffed with former Agriculture Ministry bureaucrats. Inevitably these companies have close links to the politicians who selected them to carry out said aid distribution.

At least one of these companies, Roskhleboprodukt, has done this sort of thing before: it distributed grain three times in 1991 and 1992. That is, it took the grain, sold the grain, accepted money for the grain and somehow appeared not to notice when large quantities of grain and money disappeared in the process. The president of Roskhleboprodukt has admitted that the last time around, food distribution wasn't entirely above board although, naturally, he denied that his company was involved.

Yet it isn't as if the aid is intended to help the Russian domestic food industry either. When a few semi-private companies sell free food below cost, what happens to Russian food producers in the meantime? Well, first they have trouble competing; then they go out of business. Cheap chicken legs from America mean that producers of Russian pork might as well go home. Ditto cheap wheat, rye, rice, beef, whatever.

Although there are conflicting reports about how good the Russian grain harvest was this past year, the view of the Russian grain market in the future is fairly uniform: the flood of foreign food will create a surplus, and that surplus can only, in the end, hurt domestic producers.

Unless, of course, those domestic producers simply start selling their products abroad, which they almost certainly will. Already Russia has exported 1.5 million tonnes of wheat this year, according to the Institute for Agrarian Market Research here. Hundreds of thousands more tonnes go abroad every month, and nobody has any intention of stopping them. True, Russia has agreed not to re-export American aid, but even if it keeps to this promise, which seems unlikely, Gennady Kulik, the deputy prime minister, whose pet project this is, insisted last week that "no, we are not going to stop exporting". And that is that.

Yes, Kulik is a cynic. But he does deserve some credit: he is not as cynical as the American secretary of agriculture who has openly described the aid deal as "good news for America's farmers and ranchers". He is right: if anyone other than the employees of Roskhleboprodukt stands to gain from this exercise, it is they.

And if anyone loses, it will be the Russians, and not only the hungry Russians. When, once again, a western effort to "help" Russia collapses into chaos and corruption, the appetite for doing something - anything - on Russia's behalf will sink further.

Yet it is not as if there aren't intelligent ways to spend aid money here: with $100 carefully invested, one could probably do a lot more than with $100 million handed over to Roskhleboprodukt. There are provincial reformers who need support, local charities to advise, schools to help with western books and funding. There is a whole generation to educate, a generation that is genuinely interested in, and open to, western ideas and culture. If that sounds like too big a job, other problems could be addressed. Russia is facing shortages of insulin, for example, without which diabetics die; and the newspapers are full of stories about tuberculosis, especially in prisons but among the poor as well.

A few foundations and the odd charity have worked out that there are ways to spend money intelligently. But, to date, almost no one in the official "help Russia" business has been interested in spending money intelligently. They have been interested in other things: shoring up Boris Yeltsin, or making the Russian money markets safe for American banks, or helping American and European farmers. No wonder our aid efforts have failed in the past, and no wonder they will fail again.

This article first appeared in the 20 November 1998 issue of the New Statesman, A prejudice as American as apple pie

Jeremy Corbyn. Photo: Getty
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Lexit: the EU is a neoliberal project, so let's do something different when we leave it

Brexit affords the British left a historic opportunity for a decisive break with EU market liberalism.

The Brexit vote to leave the European Union has many parents, but "Lexit" – the argument for exiting the EU from the left – remains an orphan. A third of Labour voters backed Leave, but they did so without any significant leadership from the Labour Party. Left-of-centre votes proved decisive in determining the outcome of a referendum that was otherwise framed, shaped, and presented almost exclusively by the right. A proper left discussion of the issues has been, if not entirely absent, then decidedly marginal – part of a more general malaise when it comes to developing left alternatives that has begun to be corrected only recently, under Jeremy Corbyn and John McDonnell.

Ceding Brexit to the right was very nearly the most serious strategic mistake by the British left since the ‘70s. Under successive leaders Labour became so incorporated into the ideology of Europeanism as to preclude any clear-eyed critical analysis of the actually existing EU as a regulatory and trade regime pursuing deep economic integration. The same political journey that carried Labour into its technocratic embrace of the EU also resulted in the abandonment of any form of distinctive economics separate from the orthodoxies of market liberalism.

It’s been astounding to witness so many left-wingers, in meltdown over Brexit, resort to parroting liberal economics. Thus we hear that factor mobility isn’t about labour arbitrage, that public services aren’t under pressure, that we must prioritise foreign direct investment and trade. It’s little wonder Labour became so detached from its base. Such claims do not match the lived experience of ordinary people in regions of the country devastated by deindustrialisation and disinvestment.

Nor should concerns about wage stagnation and bargaining power be met with finger-wagging accusations of racism, as if the manner in which capitalism pits workers against each other hasn’t long been understood. Instead, we should be offering real solutions – including a willingness to rethink capital mobility and trade. This places us in direct conflict with the constitutionalised neoliberalism of the EU.

Only the political savvy of the leadership has enabled Labour to recover from its disastrous positioning post-referendum. Incredibly, what seemed an unbeatable electoral bloc around Theresa May has been deftly prized apart in the course of an extraordinary General Election campaign. To consolidate the political project they have initiated, Corbyn and McDonnell must now follow through with a truly radical economic programme. The place to look for inspiration is precisely the range of instruments and policy options discouraged or outright forbidden by the EU.

A neoliberal project

The fact that right-wing arguments for Leave predominated during the referendum says far more about today’s left than it does about the European Union. There has been a great deal of myth-making concerning the latter –much of it funded, directly or indirectly, by the EU itself.

From its inception, the EU has been a top-down project driven by political and administrative elites, "a protected sphere", in the judgment of the late Peter Mair, "in which policy-making can evade the constraints imposed by representative democracy". To complain about the EU’s "democratic deficit" is to have misunderstood its purpose. The main thrust of European economic policy has been to extend and deepen the market through liberalisation, privatisation, and flexiblisation, subordinating employment and social protection to goals of low inflation, debt reduction, and increased competitiveness.

Prospects for Keynesian reflationary policies, or even for pan-European economic planning – never great – soon gave way to more Hayekian conceptions. Hayek’s original insight, in The Economic Conditions of Interstate Federalism, was that free movement of capital, goods, and labour – a "single market" – among a federation of nations would severely and necessarily restrict the economic policy space available to individual members. Pro-European socialists, whose aim had been to acquire new supranational options for the regulation of capital, found themselves surrendering the tools they already possessed at home. The national road to socialism, or even to social democracy, was closed.

The direction of travel has been singular and unrelenting. To take one example, workers’ rights – a supposed EU strength – are steadily being eroded, as can be seen in landmark judgments by the European Court of Justice (ECJ) in the Viking and Laval cases, among others. In both instances, workers attempting to strike in protest at plans to replace workers from one EU country with lower-wage workers from another, were told their right to strike could not infringe upon the "four freedoms" – free movement of capital, labour, goods, and services – established by the treaties.

More broadly, on trade, financial regulation, state aid, government purchasing, public service delivery, and more, any attempt to create a different kind of economy from inside the EU has largely been forestalled by competition policy or single market regulation.

A new political economy

Given that the UK will soon be escaping the EU, what opportunities might this afford? Three policy directions immediately stand out: public ownership, industrial strategy, and procurement. In each case, EU regulation previously stood in the way of promising left strategies. In each case, the political and economic returns from bold departures from neoliberal orthodoxy after Brexit could be substantial.

While not banned outright by EU law, public ownership is severely discouraged and disadvantaged by it. ECJ interpretation of Article 106 of the Treaty on the Functioning of the European Union (TFEU) has steadily eroded public ownership options. "The ECJ", argues law professor Danny Nicol, "appears to have constructed a one-way street in favour of private-sector provision: nationalised services are prima facie suspect and must be analysed for their necessity". Sure enough, the EU has been a significant driver of privatisation, functioning like a ratchet. It’s much easier for a member state to pursue the liberalisation of sectors than to secure their (re)nationalisation. Article 59 (TFEU) specifically allows the European Council and Parliament to liberalise services. Since the ‘80s, there have been single market programmes in energy, transport, postal services, telecommunications, education, and health.

Britain has long been an extreme outlier on privatisation, responsible for 40 per cent of the total assets privatised across the OECD between 1980 and 1996. Today, however, increasing inequality, poverty, environmental degradation and the general sense of an impoverished public sphere are leading to growing calls for renewed public ownership (albeit in new, more democratic forms). Soon to be free of EU constraints, it’s time to explore an expanded and fundamentally reimagined UK public sector.

Next, Britain’s industrial production has been virtually flat since the late 1990s, with a yawning trade deficit in industrial goods. Any serious industrial strategy to address the structural weaknesses of UK manufacturing will rely on "state aid" – the nurturing of a next generation of companies through grants, interest and tax relief, guarantees, government holdings, and the provision of goods and services on a preferential basis.

Article 107 TFEU allows for state aid only if it is compatible with the internal market and does not distort competition, laying out the specific circumstances in which it could be lawful. Whether or not state aid meets these criteria is at the sole discretion of the Commission – and courts in member states are obligated to enforce the commission’s decisions. The Commission has adopted an approach that considers, among other things, the existence of market failure, the effectiveness of other options, and the impact on the market and competition, thereby allowing state aid only in exceptional circumstances.

For many parts of the UK, the challenges of industrial decline remain starkly present – entire communities are thrown on the scrap heap, with all the associated capital and carbon costs and wasted lives. It’s high time the left returned to the possibilities inherent in a proactive industrial strategy. A true community-sustaining industrial strategy would consist of the deliberate direction of capital to sectors, localities, and regions, so as to balance out market trends and prevent communities from falling into decay, while also ensuring the investment in research and development necessary to maintain a highly productive economy. Policy, in this vision, would function to re-deploy infrastructure, production facilities, and workers left unemployed because of a shutdown or increased automation.

In some cases, this might mean assistance to workers or localities to buy up facilities and keep them running under worker or community ownership. In other cases it might involve re-training workers for new skills and re-fitting facilities. A regional approach might help launch new enterprises that would eventually be spun off as worker or local community-owned firms, supporting the development of strong and vibrant network economies, perhaps on the basis of a Green New Deal. All of this will be possible post-Brexit, under a Corbyn government.

Lastly, there is procurement. Under EU law, explicitly linking public procurement to local entities or social needs is difficult. The ECJ has ruled that, even if there is no specific legislation, procurement activity must "comply with the fundamental rules of the Treaty, in particular the principle of non-discrimination on grounds of nationality". This means that all procurement contracts must be open to all bidders across the EU, and public authorities must advertise contracts widely in other EU countries. In 2004, the European Parliament and Council issued two directives establishing the criteria governing such contracts: "lowest price only" and "most economically advantageous tender".

Unleashed from EU constraints, there are major opportunities for targeting large-scale public procurement to rebuild and transform communities, cities, and regions. The vision behind the celebrated Preston Model of community wealth building – inspired by the work of our own organisation, The Democracy Collaborative, in Cleveland, Ohio – leverages public procurement and the stabilising power of place-based anchor institutions (governments, hospitals, universities) to support rooted, participatory, democratic local economies built around multipliers. In this way, public funds can be made to do "double duty"; anchoring jobs and building community wealth, reversing long-term economic decline. This suggests the viability of a very different economic approach and potential for a winning political coalition, building support for a new socialist economics from the ground up.

With the prospect of a Corbyn government now tantalisingly close, it’s imperative that Labour reconciles its policy objectives in the Brexit negotiations with its plans for a radical economic transformation and redistribution of power and wealth. Only by pursuing strategies capable of re-establishing broad control over the national economy can Labour hope to manage the coming period of pain and dislocation following Brexit. Based on new institutions and approaches and the centrality of ownership and control, democracy, and participation, we should be busy assembling the tools and strategies that will allow departure from the EU to open up new political-economic horizons in Britain and bring about the profound transformation the country so desperately wants and needs.

Joe Guinan is executive director of the Next System Project at The Democracy Collaborative. Thomas M. Hanna is research director at The Democracy Collaborative.

This is an extract from a longer essay which appears in the inaugural edition of the IPPR Progressive Review.

 

 

This article first appeared in the 20 November 1998 issue of the New Statesman, A prejudice as American as apple pie

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