John Pilger on Latin America: the attack on democracy

An unreported war is being waged by the US to restore power to the privileged.

Beyond the sound and fury of its conquest of Iraq and campaign against Iran, the world's dominant power is waging a largely unreported war on another continent - Latin America. Using proxies, Washington aims to restore and reinforce the political control of a privileged group calling itself middle-class, to shift the responsibility for massacres and drug trafficking away from the psychotic regime in Colombia and its mafiosi, and to extinguish hopes raised among Latin America's impoverished majority by the reform governments of Venezuela, Ecuador and Bolivia.

In Colombia, the main battleground, the class nature of the war is distorted by the guerrillas of the Revolutionary Armed Forces of Colombia, known as the Farc, whose own resort to kidnapping and the drugs trade has provided an instrument with which to smear those who have distinguished Latin America's epic history of rebellion by opposing the proto-fascism of George W Bush's regime. "You don't fight terror with terror," said President Hugo Chávez as US warplanes bombed to death thousands of civilians in Afghanistan following the 11 September 2001 attacks. Thereafter, he was a marked man. Yet, as every poll has shown, he spoke for the great majority of human beings who have grasped that the "war on terror" is a crusade of domination. Almost alone among national leaders standing up to Bush, Chávez was declared an enemy and his plans for a functioning social democracy independent of the United States a threat to Washington's grip on Latin America. "Even worse," wrote the Latin America specialist James Petras, "Chávez's nationalist policies represented an alternative in Latin America at a time (2000-2003) when mass insurrections, popular uprisings and the collapse of pro-US client rulers (Argentina, Ecuador and Bolivia) were constant front-page news."

It is impossible to underestimate the threat of this alternative as perceived by the "middle classes" in countries which have an abundance of privilege and poverty. In Venezuela, their "grotesque fantasies of being ruled by a 'brutal communist dictator'", to quote Petras, are reminiscent of the paranoia of the white population that backed South Africa's apartheid regime. Like in South Africa, racism in Venezuela is rampant, with the poor ignored, despised or patronised, and a Caracas shock jock allowed casually to dismiss Chávez, who is of mixed race, as a "monkey". This fatuous venom has come not only from the super-rich behind their walls in suburbs called Country Club, but from the pretenders to their ranks in middle-level management, journalism, public relations, the arts, education and the other professions, who identify vicariously with all things American. Journalists in broadcasting and the press have played a crucial role - acknowledged by one of the generals and bankers who tried unsuccessfully to overthrow Chávez in 2002. "We couldn't have done it without them," he said. "The media were our secret weapon."

Many of these people regard themselves as liberals, and have the ear of foreign journalists who like to describe themselves as being "on the left". This is not surprising. When Chávez was first elected in 1998, Venezuela was not an archetypical Latin American tyranny, but a liberal democracy with certain freedoms, run by and for its elite, which had plundered the oil revenue and let crumbs fall to the invisible millions in the barrios. A pact between the two main parties, known as puntofijismo, resembled the convergence of new Labour and the Tories in Britain and Republicans and Democrats in the US. For them, the idea of popular sovereignty was anathema, and still is.

Take higher education. At the taxpayer-funded elite "public" Venezuelan Central University, more than 90 per cent of the students come from the upper and "middle" classes. These and other elite students have been infiltrated by CIA-linked groups and, in defending their privilege, have been lauded by foreign liberals.

With Colombia as its front line, the war on democracy in Latin America has Chávez as its main target. It is not difficult to understand why. One of Chávez's first acts was to revitalise the oil producers' organisation Opec and force the oil price to record levels. At the same time he reduced the price of oil for the poorest countries in the Caribbean region and central America, and used Venezuela's new wealth to pay off debt, notably Argentina's, and, in effect, expelled the International Monetary Fund from a continent over which it once ruled. He has cut poverty by half - while GDP has risen dramatically. Above all, he gave poor people the confidence to believe that their lives would improve.

The irony is that, unlike Fidel Castro in Cuba, he presented no real threat to the well-off, who have grown richer under his presidency. What he has demonstrated is that a social democracy can prosper and reach out to its poor with genuine welfare, and without the extremes of "neo liberalism" - a decidedly unradical notion once embraced by the British Labour Party. Those ordinary Vene zuelans who abstained during last year's constitutional referendum were protesting that a "moderate" social democracy was not enough while the bureaucrats remained corrupt and the sewers overflowed.

Across the border in Colombia, the US has made Venezuela's neighbour the Israel of Latin America. Under "Plan Colombia", more than $6bn in arms, planes, special forces, mercenaries and logistics have been showered on some of the most murderous people on earth: the inheritors of Pinochet's Chile and the other juntas that terrorised Latin America for a generation, their various gestapos trained at the School of the Americas in Georgia. "We not only taught them how to torture," a former American trainer told me, "we taught them how to kill, murder, eliminate." That remains true of Colombia, where government-inspired mass terror has been documented by Amnesty, Human Rights Watch and many others. In a study of 31,656 extrajudicial killings and forced disappearances between 1996 and 2006, the Colombian Commission of Jurists found that 46 per cent had been murdered by right-wing death squads and 14 per cent by Farc guerrillas. The para militaries were responsible for most of the three million victims of internal displacement. This misery is a product of Plan Colombia's pseudo "war on drugs", whose real purpose has been to eliminate the Farc. To that goal has now been added a war of attrition on the new popular democracies, especially Venezuela.

US special forces "advise" the Colombian military to cross the border into Venezuela and murder and kidnap its citizens and infiltrate paramilitaries, and so test the loyalty of the Venezuelan armed forces. The model is the CIA-run Contra campaign in Honduras in the 1980s that brought down the reformist government in Nicaragua. The defeat of the Farc is now seen as a prelude to an all-out attack on Venezuela if the Vene zuelan elite - reinvigorated by its narrow referendum victory last year - broadens its base in state and local government elections in November.

America's man and Colombia's Pinochet is President Álvaro Uribe. In 1991, a declassified report by the US Defence Intelligence Agency revealed the then Senator Uribe as having "worked for the Medellín Cartel" as a "close personal friend" of the cartel's drugs baron, Pablo Escobar. To date, 62 of his political allies have been investigated for close collaboration with paramilitaries. A feature of his rule has been the fate of journalists who have illuminated his shadows. Last year, four leading journalists received death threats after criticising Uribe. Since 2002, at least 31 journalists have been assassinated in Colombia. Uribe's other habit is smearing trade unions and human rights workers as "collaborators with the Farc". This marks them. Colombia's death squads, wrote Jenny Pearce, author of the acclaimed Under the Eagle: US Intervention in Central America and the Caribbean (1982), "are increasingly active, confident that the president has been so successful in rallying the country against the Farc that little attention will shift to their atrocities".

Uribe was personally championed by Tony Blair, reflecting Britain's long-standing, mostly secret role in Latin America. "Counter-insurgency assistance" to the Colombian military, up to its neck in death-squad alliances, includes training by the SAS of units such as the High Mountain Battalions, condemned repeatedly for atrocities. On 8 March, Colombian officers were invited by the Foreign Office to a "counter-insurgency seminar" at the Wilton Park conference centre in southern England. Rarely has the Foreign Office so brazenly paraded the killers it mentors.

The western media's role follows earlier models, such as the campaigns that cleared the way for the dismemberment of Yugoslavia and the credibility given to lies about Iraq's weapons of mass destruction. The softening-up for an attack on Venezuela is well under way, with the repetition of similar lies and smears.

 

Cocaine trail

 

On 3 February, the Observer devoted two pages to claims that Chávez was colluding in the Colombian drugs trade. Similarly to the paper's notorious bogus scares linking Saddam Hussein to al-Qaeda, the Observer's headline read, "Revealed: Chávez role in cocaine trail to Europe". Allegations were unsubstantiated; hearsay uncorroborated. No source was identified. Indeed, the reporter, clearly trying to cover himself, wrote: "No source I spoke to accused Chávez himself of having a direct role in Colombia's giant drug trafficking business."

In fact, the UN Office on Drugs and Crime has reported that Venezuela is fully participating in international anti-drugs programmes and in 2005 seized the third-highest amount of cocaine in the world. Even the Foreign Office minister Kim Howells has referred to "Venezuela's tre mendous co-operation".

The drugs smear has recently been reinforced with reports that Chávez has an "increasingly public alliance [with] the Farc" (see "Dangerous liaisons", New Statesman, 14 April). Again, there is "no evidence", says the secretary general of the Organisation of American States. At Uribe's request, and backed by the French government, Chávez played a mediating role in seeking the release of hostages held by the Farc. On 1 March, the negotiations were betrayed by Uribe who, with US logistical assistance, fired missiles at a camp in Ecuador, killing Raú Reyes, the Farc's highest-level negotiator. An "email" recovered from Reyes's laptop is said by the Colombian military to show that the Farc has received $300m from Chávez. The allegation is fake. The actual document refers only to Chávez in relation to the hostage exchange. And on 14 April, Chávez angrily criticised the Farc. "If I were a guerrilla," he said, "I wouldn't have the need to hold a woman, a man who aren't soldiers. Free the civilians!"

However, these fantasies have lethal purpose. On 10 March, the Bush administration announced that it had begun the process of placing Venezuela's popular democracy on a list of "terrorist states", along with North Korea, Syria, Cuba, Sudan and Iran, the last of which is currently awaiting attack by the world's leading terrorist state.

http://www.johnpilger.com

John Pilger, renowned investigative journalist and documentary film-maker, is one of only two to have twice won British journalism's top award; his documentaries have won academy awards in both the UK and the US. In a New Statesman survey of the 50 heroes of our time, Pilger came fourth behind Aung San Suu Kyi and Nelson Mandela. "John Pilger," wrote Harold Pinter, "unearths, with steely attention facts, the filthy truth. I salute him."

This article first appeared in the 28 April 2008 issue of the New Statesman, Everybody out!

MILES COLE
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The new Brexit economics

George Osborne’s austerity plan – now abandoned by the Tories – was the most costly macroeconomic policy mistake since the 1930s.

George Osborne is no longer chancellor, sacked by the post-Brexit Prime Minister, Theresa May. Philip Hammond, the new Chancellor, has yet to announce detailed plans but he has indicated that the real economy rather than the deficit is his priority. The senior Conservatives Sajid Javid and Stephen Crabb have advocated substantial increases in public-sector infrastructure investment, noting how cheap it is for the government to borrow. The argument that Osborne and the Conservatives had been making since 2010 – that the priority for macroeconomic policy had to be to reduce the government’s budget deficit – seems to have been brushed aside.

Is there a good economic reason why Brexit in particular should require abandoning austerity economics? I would argue that the Tory obsession with the budget deficit has had very little to do with economics for the past four or five years. Instead, it has been a political ruse with two intentions: to help win elections and to reduce the size of the state. That Britain’s macroeconomic policy was dictated by politics rather than economics was a precursor for the Brexit vote. However, austerity had already begun to reach its political sell-by date, and Brexit marks its end.

To understand why austerity today is opposed by nearly all economists, and to grasp the partial nature of any Conservative rethink, it is important to know why it began and how it evolved. By 2010 the biggest recession since the Second World War had led to rapid increases in government budget deficits around the world. It is inevitable that deficits (the difference between government spending and tax receipts) increase in a recession, because taxes fall as incomes fall, but government spending rises further because benefit payments increase with rising unemployment. We experienced record deficits in 2010 simply because the recession was unusually severe.

In 2009 governments had raised spending and cut taxes in an effort to moderate the recession. This was done because the macroeconomic stabilisation tool of choice, nominal short-term interest rates, had become impotent once these rates hit their lower bound near zero. Keynes described the same situation in the 1930s as a liquidity trap, but most economists today use a more straightforward description: the problem of the zero lower bound (ZLB). Cutting rates below this lower bound might not stimulate demand because people could avoid them by holding cash. The textbook response to the problem is to use fiscal policy to stimulate the economy, which involves raising spending and cutting taxes. Most studies suggest that the recession would have been even worse without this expansionary fiscal policy in 2009.

Fiscal stimulus changed to fiscal contraction, more popularly known as austerity, in most of the major economies in 2010, but the reasons for this change varied from country to country. George Osborne used three different arguments to justify substantial spending cuts and tax increases before and after the coalition government was formed. The first was that unconventional monetary policy (quantitative easing, or QE) could replace the role of lower interest rates in stimulating the economy. As QE was completely untested, this was wishful thinking: the Bank of England was bound to act cautiously, because it had no idea what impact QE would have. The second was that a fiscal policy contraction would in fact expand the economy because it would inspire consumer and business confidence. This idea, disputed by most economists at the time, has now lost all credibility.

***

The third reason for trying to cut the deficit was that the financial markets would not buy government debt without it. At first, this rationale seemed to be confirmed by events as the eurozone crisis developed, and so it became the main justification for the policy. However, by 2012 it was becoming clear to many economists that the debt crisis in Ireland, Portugal and Spain was peculiar to the eurozone, and in particular to the failure of the European Central Bank (ECB) to act as a lender of last resort, buying government debt when the market failed to.

In September 2012 the ECB changed its policy and the eurozone crisis beyond Greece came to an end. This was the main reason why renewed problems in Greece last year did not lead to any contagion in the markets. Yet it is not something that the ECB will admit, because it places responsibility for the crisis at its door.

By 2012 two other things had also become clear to economists. First, governments outside the eurozone were having no problems selling their debt, as interest rates on this reached record lows. There was an obvious reason why this should be so: with central banks buying large quantities of government debt as a result of QE, there was absolutely no chance that governments would default. Nor have I ever seen any evidence that there was any likelihood of a UK debt funding crisis in 2010, beyond the irrelevant warnings of those “close to the markets”. Second, the austerity policy had done considerable harm. In macroeconomic terms the recovery from recession had been derailed. With the help of analysis from the Office for Budget Responsibility, I calculated that the GDP lost as a result of austerity implied an average cost for each UK household of at least £4,000.

Following these events, the number of academic economists who supported austerity became very small (they had always been a minority). How much of the UK deficit was cyclical or structural was irrelevant: at the ZLB, fiscal policy should stimulate, and the deficit should be dealt with once the recession was over.

Yet you would not know this from the public debate. Osborne continued to insist that deficit reduction be a priority, and his belief seemed to have become hard-wired into nearly all media discussion. So perverse was this for standard macroeconomics that I christened it “mediamacro”: the reduction of macroeconomics to the logic of household finance. Even parts of the Labour Party seemed to be succumbing to a mediamacro view, until the fiscal credibility rule introduced in March by the shadow chancellor, John McDonnell. (This included an explicit knockout from the deficit target if interest rates hit the ZLB, allowing fiscal policy to focus on recovering from recession.)

It is obvious why a focus on the deficit was politically attractive for Osborne. After 2010 the coalition government adopted the mantra that the deficit had been caused by the previous Labour government’s profligacy, even though it was almost entirely a consequence of the recession. The Tories were “clearing up the mess Labour left”, and so austerity could be blamed on their predecessors. Labour foolishly decided not to challenge this myth, and so it became what could be termed a “politicised truth”. It allowed the media to say that Osborne was more competent at running the economy than his predecessors. Much of the public, hearing only mediamacro, agreed.

An obsession with cutting the deficit was attractive to the Tories, as it helped them to appear competent. It also enabled them to achieve their ideological goal of shrinking the state. I have described this elsewhere as “deficit deceit”: using manufactured fear about the deficit to achieve otherwise unpopular reductions in public spending.

The UK recovery from the 2008/2009 recession was the weakest on record. Although employment showed strong growth from 2013, this may have owed much to an unprecedented decline in real wages and stagnant productivity growth. By the main metrics by which economists judge the success of an economy, the period of the coalition government looked very poor. Many economists tried to point this out during the 2015 election but they were largely ignored. When a survey of macroeconomists showed that most thought austerity had been harmful, the broadcast media found letters from business leaders supporting the Conservative position more newsworthy.

***

In my view, mediamacro and its focus on the deficit played an important role in winning the Conservatives the 2015 general election. I believe Osborne thought so, too, and so he ­decided to try to repeat his success. Although the level of government debt was close to being stabilised, he decided to embark on a further period of fiscal consolidation so that he could achieve a budget surplus.

Osborne’s austerity plans after 2015 were different from what happened in 2010 for a number of reasons. First, while 2010 austerity also occurred in the US and the eurozone, 2015 austerity was largely a UK affair. Second, by 2015 the Bank of England had decided that interest rates could go lower than their current level if need be. We are therefore no longer at the ZLB and, in theory, the impact of fiscal consolidation on demand could be offset by reducing interest rates, as long as no adverse shocks hit the economy. The argument against fiscal consolidation was rather that it increased the vulnerability of the economy if a negative shock occurred. As we have seen, Brexit is just this kind of shock.

In this respect, abandoning Osborne’s surplus target makes sense. However, there were many other strong arguments against going for surplus. The strongest of these was the case for additional public-sector investment at a time when interest rates were extremely low. Osborne loved appearing in the media wearing a hard hat and talked the talk on investment, but in reality his fiscal plans involved a steadily decreasing share of public investment in GDP. Labour’s fiscal rules, like those of the coalition government, have targeted the deficit excluding public investment, precisely so that investment could increase when the circumstances were right. In 2015 the circumstances were as right as they can be. The Organisation for Economic Co-operation and Development, the International Monetary Fund and pretty well every economist agreed.

Brexit only reinforces this argument. Yet Brexit will also almost certainly worsen the deficit. This is why the recent acceptance by the Tories that public-sector investment should rise is significant. They may have ­decided that they have got all they could hope to achieve from deficit deceit, and that now is the time to focus on the real needs of the economy, given the short- and medium-term drag on growth caused by Brexit.

It is also worth noting that although the Conservatives have, in effect, disowned Osborne’s 2015 austerity, they still insist their 2010 policy was correct. This partial change of heart is little comfort to those of us who have been arguing against austerity for the past six years. In 2015 the Conservatives persuaded voters that electing Ed Miliband as prime minister and Ed Balls as chancellor was taking a big risk with the economy. What it would have meant, in fact, is that we would already be getting the public investment the Conservatives are now calling for, and we would have avoided both the uncertainty before the EU referendum and Brexit itself.

Many economists before the 2015 election said the same thing, but they made no impact on mediamacro. The number of economists who supported Osborne’s new fiscal charter was vanishingly small but it seemed to matter not one bit. This suggests that if a leading political party wants to ignore mainstream economics and academic economists in favour of simplistic ideas, it can get away with doing so.

As I wrote in March, the failure of debate made me very concerned about the outcome of the EU referendum. Economists were as united as they ever are that Brexit would involve significant economic costs, and the scale of these costs is probably greater than the average loss due to austerity, simply because they are repeated year after year. Yet our warnings were easily deflected with the slogan “Project Fear”, borrowed from the SNP’s nickname for the No campaign in the 2014 Scottish referendum.

It remains unclear whether economists’ warnings were ignored because they were never heard fully or because they were not trusted, but in either case economics as a profession needs to think seriously about what it can do to make itself more relevant. We do not want economics in the UK to change from being called the dismal science to becoming the “I told you so” science.

Some things will not change following the Brexit vote. Mediamacro will go on obsessing about the deficit, and the Conservatives will go on wanting to cut many parts of government expenditure so that they can cut taxes. But the signs are that deficit deceit, creating an imperative that budget deficits must be cut as a pretext for reducing the size of the state, has come to an end in the UK. It will go down in history as probably the most costly macroeconomic policy mistake since the 1930s, causing a great deal of misery to many people’s lives.

Simon Wren-Lewis is a professor of economic policy at the Blavatnik School of Government, University of Oxford. He blogs at: mainlymacro.blogspot.com

 Simon Wren-Lewis is is Professor of Economic Policy in the Blavatnik School of Government at Oxford University, and a fellow of Merton College. He blogs at mainlymacro.

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt