Kairos Hearing 1994.
Witnesses/experts introduce questions and proposals:
I will first ask Mr. Engelberts to take the floor.
Thank you. Ladies and gentlemen, friends, first of all I would like to thank Kairos Europa for inviting me to participate in this hearing as a representative of public service workers around the world who are in the front line of attack by the Bretton Woods institutions. We have a membership of 400 unions representing more than 16 million workers in 116 countries.
These are hard times. We face complex issues. We must find a way of addressing our problems constructively and collectively. To know what to do, we have to know what's wrong. This is no easy task and we won't all agree, but we must try to expand the common ground between us. We must strengthen our collective understanding to the point where it can guide our behaviour. Only then can we resist the powerful pressures fragmenting our society, our communities, ourselves. And I am glad to be amongst you as a trade union representative, because too often we have gone our own separate ways.
Some people already speak of the social crisis of the 90's. These are some of the dimensions of the crisis and the resulting human misery:
These are only the most visible elements of a crisis which affects many more working people. The problem is that a volatile, fiercely competitive global economy is destroying firms, jobs, industries, nations, communities and lives. Social stability is being sacrificed to the great god of competitiveness.
- 1,2 billion people living in conditions of extreme poverty that is one fifth of the world's population;
- countless millions unemployed and underemployed in the developing world, plus 35 million in the industrialised countries;
- an estimated child workforce of between 100 and 200 million, often subjected to the most inhuman forms of exploitation;
- some 33 million people held in servitude under different forms of forced labour;
- a growing migrant population of more than 100 million, about two in three of them so-called "economic migrants", who have left their countries in search of work;
- and gross discrimination against women and ethnic groups.
The "manufactured consensus view" tells us that globalisation is inevitable, that the disruption this causes is merely the "creative destruction" that is the secret of capitalism's dynamism, that we must "buckle down" to meet this competitive challenge whatever the cost, since there is no alternative. We must therefore be prepared to cut wages, social services, infrastructure investment and welfare to whatever level is compatible with our ability to compete in this brave new world.
The ability of transnational corporations to relocate their facilities around the world in effect makes all workers, communities and countries competitors for these corporations' favour. The consequence is a "race to the bottom" in which wages and social and environmental conditions tend to fall to the level of the most desperate. As each work force, community or country seeks to become more competitive by reducing its wages and its social and environmental overheads, the result is a general downward spiral in incomes and social and material infrastructures. Lower wages and reduced public spending means less buying power, leading to stagnation, recession and further unemployment. This dynamic is aggravated by the accumulation of debt, national economies in poor countries have become geared to debt repayment at the expense of consumption, investment and development. As a result of globalisation, the gap between rich and poor is increasing both within and between countries around the world. Tens of billions of dollars a year flow from poor to rich regions of the world, in the form of debt repayment and capital flight.
National governments have lost much of their power to direct their own economies. The ability of countries to apply techniques in pursuit of development, full employment or other national economic goals has been undermined by the power of capital to pick up and leave. Governmental economic power has been further weakened throughout the world by neoliberal political movements that have dismantled public institutions for regulating national economies. Globalisation has reduced the power of individuals and communities to shape their destinies.
Transnational companies have become the world's most powerful economic actors, yet there are no international equivalents to national antitrust, consumer protection and other laws that provide a degree of corporate accountability. It is clear, for example, that investment by multinational companies has now become a greater economic force than world trade between nations. According to the United Nations World Investment Report for 1993, sales generated by the subsidiaries of multinationally operating companies outside their countries of origin totalled $ 5.5 trillion, while the total value of world exports amounted to only $ 4 trillion. Between 1983 and 1990 foreign investment grew three times faster than world trade and four times faster than world output.
Behind the headlines that speak of inter-regional trade rivalries and free market competition, there is more actual cooperation, more planning of the global economy and more interlinking between interests than ever before in the history of mankind. But this cooperation does not take place in the public arena. It is not subject to democratic oversight. It takes place in the private and secretive boardrooms of the multinational companies.
The loss of national economic control has been accompanied by a growing concentration of unaccountable power in the Bretton Woods institutions. They are no longer just "agents of international capital", but they are increasingly seen as institutions guaranteeing some kind of global order. They became the centrepiece of a new global financial regime (in cooperation with the Paris Club and the "Group of Seven"), which not only infringed upon the sovereignty of the dependent debtor nations, but is also not dependent on consent by each creditor nation on each decision. The international financial system has become an element of a global state, setting its own rules through their Board of Governors, with the Group of Seven-Meetings as some kind of government-like council, and the apparatus of the World Bank and OECD as a think tank and public relations department.
We all know about Structural Adjustment Programmes being imposed on developing countries and on Central and Eastern Europe, but in December 1991 a structural adjustment programme was also imposed on Western Europe when the Treaty on Economic and Monetary Union was agreed upon. We, in Public Services International, soon voiced our concerns about the EMU convergence criteria and its negative consequences for employment and welfare.
e now hear from strong backers of the Maastricht aim of economic and monetary union, such as Prof. Andr Sz sz, an executive director of the Dutch Central Bank, and I quote the Financial Times of the 18th June: "Rarely was a treaty coWncluded with such far-reaching implications and such lack of clarity as to what was intended and why". A study, published in April 1994, commissioned by the Directorate-General for Research for the European Parliament on the social consequences of economic and monetary union has brought more clarity. Some quotes from this working paper:
"Forecasters in Europe are generally agreed that there will be substantial problems for the Member States as a whole to meet the convergence conditions laid down in the Treaty before the end of the century, even with a generous interpretation of the debt ratio criterion. The likelihood that EMU will have adverse social consequences is greatest for Greece, Italy, Spain and Portugal which start the process with varying degrees of difficulty over inflation, government deficits and unemployment. This means that convergence to EMU will have its most disadvantageous impact on regions that are already less-favoured within the EU. As a result, the existing lack of social cohesion is likely to be exacerbated unless new measures are undertaken to offset these adverse forces.
A greater emphasis should, therefore, be placed on growth and employment as targets to complement and, if necessary, to over-ride the nominal convergence criteria. Employment has to be stressed as the best social policy. In this regard the investment in human capital and the scope for improving it through social policy has to be highlighted. Such 'positive' flexibility increases mobility, improves productivity and safeguards income, and should be preferred to the erosion of conditions in order to drive down wage rates in an ultimately futile downward spiral. This is how to avoid the emergence of a vicious circle of higher unemployment leading to worsening public finances, followed by further austerity measures and even worse unemployment. Instead, the aim should be a virtuous path of higher growth, lower unemployment, improved fiscal positions and improved competitiveness."
That is exactly, what the European Trade Union Confederation (ETUC) urged the Corfu European Council to do, to ensure that the EU's Economic Policy Guidelines for 1994-1995 make the fight against unemployment the prime objective of national and European policies.
With the nominal convergence objectives on stability met ahead of time, the Guidelines adopted in 1993 can and must be changed. An obsessive desire to reduce inflation to ever lower levels would jeopardise the slight upturn and mean that unemployment would continue to increase. Instead, the Guidelines should lay the basis for the active monetary and fiscal policies which will ensure that the upturn becomes a real recovery.
The level of real interest rates must be addressed since this continues to pose a major obstacle to recovery. Contrary to all predictions about the beneficial effects of low inflation and of the responsible wage policies being pursued by trade unions, long-term interest rates have recently been rising, and not falling. This calls seriously into question the competence and indeed the commitment of the monetary authorities to the fight against unemployment.
Hopes that personal consumption will help generate or sustain recovery are misplaced in view of the outlook for wages, and because in the climate of fear and uncertainty generated by high unemployment and campaigns for "flexibility", people will not be prepared to reduce their savings' ratios and so boost consumption.
Since over 90 % of Europe's needs are met from the domestic economy, a self-generated recovery is possible and would not face the constraints that a purely national recovery might. The ETUC recognises that budget deficits must be reduced but this has to be done over the medium term through economic recovery since short-term expenditure cuts would make the situation worse and not better.
Therefore, an immediate and major cut in interest rates is essential. It is necessary to mobilise the political will which was recently demonstrated with regard to the strength of the US dollar. It would be totally unacceptable were central banks to refuse to cooperate and if, given that inflation can no longer be regarded as a short- or even medium-term threat, they failed to "support the general economic policies in the Community", which is in article 105.1 of the Maastricht treaty.
I think the coming months will show that the role foreseen for the European Central Bank will need modifying and that the trend towards complete detachment will have to be reversed. The unsatisfactory nature of the current and proposed Guidelines reflects the lack of transparency and accountability in the procedure for drawing them up and monitoring them. The arrangements agreed at Maastricht, in fact, tipped the balance too far in favour of intergovernmental institutions, such as ECOFIN, which are much better at agreeing on what should not be done than on agreeing common actions. Therefore ECOFIN and not just the Commission must accept prior consultation with the social partners. The ETUC believes that the Commission and the Parliament must become more assertive again, even at the risk of rows with bodies such as ECOFIN. We simply cannot leave the fate of millions of people in the hands of ministers of finance and central bankers.
The role of the Parliament and through it the role of public opinion in general must be enhanced, one way of doing this is by making the adoption of the Guidelines subject to the existing cooperation procedure as laid out in article 189 c. These are only some of the demands made to the Corfu summit, since time does not allow me to go into further detail.
But was there a political will to act in Corfu? There should have been. The political consequences of slow and uneven growth are becoming increasingly apparent. Anti-democratic movements of an overtly racist, xenophobic or religious character are growing in many countries. In addition, available statistics on, for example, crime, drug abuse and epidemics like aids also indicate a trend of social disintegration in many countries. Environmental damage is continuing at an alarming pace despite the successful conclusion of treaties on climate change and biodiversity.
The democratic opening created by the fall of communism is threatened by the failure of democratic parties whether of the right or left to find credible solutions to the problems of social exclusion.
All UN bodies, the G7 Summit, the OECD, the European Council, are now giving a higher political priority to the fight against poverty and unemployment. However, declarations of concern have not been matched by action and the lack of leadership from the Group of Seven major industrialised countries is alarming. Next year a Social Summit will take place in Denmark. But, these high-level discussions have yet to produce clear policy initiatives and have not addressed the need for linking action on poverty and jobs in the developing world to coordinated recovery in the industrialised countries.
That is why it is more important than ever to work together at a global level in international solidarity to fight the policy grid-lock, the manufactured consensus, the unaccountable powers and to bring to account the international financial institutions and the multinational companies. We, in Public Services International and in the International Trade Union Movement as a whole, pledge our full support for this fight.
We thank Mr. Hans Engelberts for his contribution. Now, I think, we are expecting a duet which is composed of a Dutch-Belgian cooperation which is needed after what happened on Saturday on the soccerfield as well as for the election for the coming presidency. This is Mrs. José Höhne-Sparborth and Mr. Luc Peeters who will share their time.
I come from the Netherlands and am a member of the organisation "Living with Disabled Pople", which tries to show that our society is disabled because it does not manage to live with the disabled.
The first seven years of my life I was hungry. I still feel the consequences on my body. Then I spent two years in a refugee camp and as an undesirable alien in the Netherlands. Now I have managed to integrate. I have never earned more than the minimum and since my accident have been unable to work, I now receive the minimum welfare benefit.
I have been asked to give a concrete picture of poverty in eight minutes. That is impossible. Poor people know exactly how rich people live and organise their wealth. Rich people and people who do not know about the daily struggle for survival have no idea of what poverty is like.
The existing economic system aims to produce money. Production is geared to increasing the money of the capital-owners. Since the 70s the bulk of this money production and circulation has consisted in strengthening currencies, and in devaluing all those who are no use to money production. Africa has already been devalued, i.e. written off. This has also happened to a few countries in Asia and Latin America. Eastern Europe is struggling not to be written off in its turn. In North America and Europe there are whole population groups that have been devalued, i.e. written off, groups of people who are no use to the production of money.
I will limit myself to a few comments on what poverty looks like in North-west Europe as that is where I live and I belong to the poor there. In the South and East of Europe poverty looks different. There is little documentation to date on poverty in North-west Europe. We are forced to live at a level we cannot afford. A few structural aspects of poverty now.
In North-west Europe the poor have been made poor, and they are devalued and written off. But this is not said in public. Public opinion is that we are not willing to do our part for money production. The poor can be divided into different groups. There are the disabled and incapacitated, to which I belong. The pace of work has been speeded up to enable companies to make a profit despite paying good wages. Yet people are increasingly getting sick because they cannot keep up and there are no jobs left for many disabled people because they cannot meet the high demands of work. So we are declared to be unable to work. As of then we are not allowed to take a paid job. We would be a risk factor for the employer who would have to pay if we got sick. So we get income support. In the Netherlands there are 900.000 of us as against 7 million people in work.
A second group is those who have been made unemployed, the official jobless group. They have lost their jobs because the companies are using more and more automation and rationalising. This group also includes young people who can no longer get a job at all. In the services sector, e.g. in schools and health, a lot of jobs are being cut because the state wants to economise. The unemployed receive benefit as long as they can prove that they are looking for a job. In general they are considered lazy, and people say, "Anyone who really wants to work can find a job". In actual fact they are simply superfluous to the production system. In the Netherlands this group amounts to 500.000 people.
Then there is the group of women on social welfare, divorced women who cannot find work because they got married young and so were not trained, because they have small children, because they were beaten up by their ex-husbands so that they are physically and psychologically no longer able to work. In the Netherlands there are 250.000 women in this group.
Then there are the elderly, who have to live on a minimum pension after a hard working life.
In the Netherlands and Belgium we are not allowed to do voluntary work, unless we are senior citizens. If we want to, because we are going mad with nothing to do we have to ask permission first. In North-west European countries it is also forbidden to earn money through unofficial trade, or to get food this way. We have to live on benefit, which is continually being cut. We are not allowed to work a bit on the side as that is a crime and punishable. Many people still do, working in companies for low wages and without paying social security contributions or income tax. They are tightening up on this. It seems as though in the Netherlands 20% of social benefit recipients work illegally, in other words, fraudulently. Moreover, the politicians get terrible angry about this. We are abused as parasites and profiteers in public. Politicians and the press publicly question our claims which offends our good human record.
Then there is the group of the so-called illegals. They are victims of women's trade, rejected refugees and non-registered immigrants. They have no permission to live in our country and they have no claim on health care and training. They live through prostitution, drugs, illegal work or the black market. If the police discover them they are expelled or thrown into prison.
All these impoverished persons live in a country of great affluence. That means that there is very little cheap, good accommodation. We often have to pay half of our benefit for rent. Then there is energy, essential but expensive in our cold countries, plus public transport, which is good but also very expensive. Since the sixties people have had to travel up to 80 km or more from their homes to seek work, or move house. That means that social contacts are located far away from their homes. They cannot afford to travel to see their families, friends, former colleagues etc. That is a factor leading to social isolation.
Many can only survive by proletarian purchasing: in other words, stealing. That means living in constant fear of getting caught. Most people who have had to live on benefit for a long time, get into debt in order to be able to survive at all. Some people find ways, although little help is offered. Some people can't manage and commit suicide. Some people pay of debts for years and have to write off any chance of a decent life. I don't have time to describe all that. Try to believe me when I say that in our industrialised and affluent countries a decent life costs a lot. Anyone with no money gets isolated in the crowded cities and goes hungry in the midst of wealth. Of course there are people who do manage not to get into debt even after 10 years of social benefit. But don't ask what that means in terms of deprivation, struggle, organisational talent and grit. People manage because they refuse to be ashamed of their poverty. They keep fighting and understand that the system is wrong and it is not their own fault.
My name is Luc Peeters, and I work with an organisation called "Aktie Strohalm Flaanderen", which works on developing alternative microfinance systems for a sustainable economy.
All North-west European countries have vast public debts, i.e. they are in debt to banks, companies and private persons. Public debt is only falling in the United Kingdom, elsewhere it is still growing. The government floats loans (government bonds) and pays interest rates above the average market rates. Interest has to be paid on these loans year after year. The interest burden now weighs heavily on public budgets. In Belgium e.g. the public debt looks like this:
In 1991 it amounted to 136.4% of GNP. In the same year 10.4% of GNP was devoted to repayment and debt servicing. Despite this extremely high burden on the state budget the governments continue to pay high interest on new loans. To economise, however, they limits social spending. There is method in their madness: poor people are hardly able to oppose cuts in welfare or general social benefits. Capital-owners, by contrast, can dictate conditions regarding state loans. In a word: the rich have a right to interest and income, while the poor lose their claim to appropriate support. Saving on 2 million poor people yields more than saving on 10.000 rich people.
However, they did not consider what the whole thing would cost that the 2 million poor people have to be administered. So now they are continually stepping up controls on the poor: personal data is pushed back and forth between the different authorities like the social welfare office, housing department, health services and inland revenue. Welfare recipients also have to constantly expect to receive unannounced visits from these authorities. In addition, representatives of the authorities in many countries, e.g. the Netherlands, have the right to inspect bank data of their "clients" in order to find out about their financial situation.
By contrast, the wealth of the rich is not individually recorded, let alone monitored. If there were such registration it would bring in a lot of money for the government. In Belgium alone tax fraud is estimated at an annual 8 to 11 million pounds. It would be easy for the government to stop this fraud, but it is apparently the intention of many governments not to pursue these tax debtors, and so to deliberately go without considerable revenue. For this reason, we argue for the official recording and notification of all financial assets.
The existence of "tax havens" encourages tax evasion. There is even public advertising for off-shore banking in the European Union. These are the branches of banks whose transactions are not subject to national governmental control. They offer the rich a marvellous possibility to distribute their money all over the world without paying taxes. In North-west Europe the states are even poorer than the asset-owners and so they try to keep the money of their rich citizens in the country. Governments even see themselves forced to compete with banks for this money. For this reason they offer state loans at a higher interest rate than available on the money market. We call for the closure of tax havens and the official introduction of taxation at source in the EU, plus a global agreement to supervise international financial transactions. Also we want the North-west European states to lower the interest on their loans in order to reduce their debts.
In addition, a high national interest rate influences the exchange rates of a national currency and "hardens" it. Hard currency attracts money from countries with weaker, "softer" currencies. A hard currency policy is used to combat inflation, but also entails growing unemployment. This policy brings about a gap between the upgraded and the downgraded and their work. We therefore call for this hard currency policy to be abandoned in order to be able to better fight the excessive unemployment in NW Europe. In our opinion this needs more than e.g. "flexibility" on the labour market, which is clearly to the detriment of the employees.
The hard currency policy has now become very relevant to the European Union, which is working on introducing a common currency. In order for this new currency to remain hard, all member states have to fulfil a few minimum conditions, the so-called convergence criteria. These demands force the governments to extreme austerity regarding running costs in their budget, e.g. social spending cuts. This procedure strongly recalls the conditionalities imposed on developing countries to accompany the Structural Adjustment Programmes of the IMF and World Bank.
A hard ECU means division within the Union between the upgraded and downgraded member countries and their inhabitants. While it is still possible, we would like to press for this hard currency policy to be abandoned. We want the ECU to be a parallel currency alongside the national currencies. We refer here to Keynes' proposal to introduce Bancor as a world currency. Such a solution would make it possible for each country to adapt their social policy to their own needs.
To sum up, in black and white: the governments in North-west Europe are powerless over against the capital transactions of their rich citizens because a transnational financial market has developed without any form of control at all. This money market allows the capital flows the freedom they need in order to maximise profits. We therefore demand that international organisations be authorised to control capital flows, thus enabling taxation of international speculation profit and the monitoring of financial transactions of transnational corporations. We also call for international rules enabling central banks to limit speculation against their currencies.
Thank you for this duet. We will now listen to Dr. Mascha Madörin from Switzerland who is sitting next to me. You have the floor.
Ladies and gentlemen friends I come from Switzerland and I work in an institution called "Aktion Finanzplatz Schweiz Dritte Welt" (Action Finance Place Switzerland Third World). Above all we are concerned with the Swiss banking system and its connections to the Third World. Our main theme is the flight of capital, but increasingly also illegal trade in general in the area of finance. And conversely we are occupied with ethical investment and possibilities of alternative `banking'.
Before I come to my main theme, I would like to give an aside. After many years of work on the question of Swiss banks and the Third World, I have come to the conclusion that the problems with international regulations, which have always been very acute for the countries of Asia, Africa and Latin America, are now increasingly a catastrophe for our societies. Perhaps this will be a chance for us truly to come to better regulations when we have the same problems that they have had for years in the so-called Third World.
I would like to expound this using the example of the so-called corrupt elite. As far as I am aware, up to this point bribery of foreign authorities is not an offence in any European country; only bribery of your own authorities. This means that the systems of justice and the democracy of other countries are never respected by our own governments, and most especially the judiciary and democracy of the southern countries. Judicial assistance was never offered when it came to prosecuting corrupt dictators. Only now, in connection with the cases of corruption, above all those in Italy, has the problem of bribery become a policy issue here in the establishment; and it is shameful that we have never succeeded in making this problem a major theme here in Europe, and especially in Switzerland, despite the great work of the solidarity movement with the Third World so long as it was not a problem with us. That just as an aside.
I want to talk about a particular aspect of the functioning of finance systems, namely: through finance systems more and more financial resources are taken away from the state, and this has serious consequences with regard to the social rights of the disadvantaged in our societies. As I said, I am Swiss. You will know that Switzerland has been the second-richest country in the world as far as per capita income is concerned. 40 to 50% of the much-quoted `Private offshore Banking' occurs through the Swiss financial market. But if we look at the reality in Switzerland, then this richness seems only relative. According to the latest tax statistics, half of the tax-payers have between 1 and 2% of income. If we divide the income into thirds, we get the following: 90% of the population has one third, 9% a second third, and 1% the third third. That is, our greatest problem and the problem of the whole world is some 10% of the population (and less rather than more). I have made a rough estimate based on World Bank and UN statistics, and have concluded that roughly half of income is controlled by some 3-4% of the world's population, and these are mainly people from the OECD, and mainly male. I live in Basel, which is one of the richest cities of the world. There, a study has shown that some 15% of the population lives at the poverty line, and if rents were to go up just a little, a further 10% would have to live on the poverty line. The Swiss parliament has just decided to remove extreme discrimination in the rules concerning rent for women. Following from that, the pensionable age for women has been raised by two years, with the reasoning that the Swiss state, nearly the richest country in the world, has no money to allow justice for women.
I would now like to address tax evasion. Some of the principal reasons that there is tax evasion is because there are differences in taxation between regions and nations, because of progression that is, higher taxes for higher income and in the fact that there are more concerns in the financial sector which are tax-free. Even in Switzerland millions of Swiss franks go missing through tax evasion to say nothing about the southern countries, and even less about some other places. I believe more steps need to be taken. One would be to harmonise the international tax system. The same tax rates should apply universally. A second has to be high taxes at source for all revenue from financial dealing, so that when people officially declare their taxes, they can then take the appropriate amount off their allowances. Otherwise tax evasion by the rich will never be got in hand. A further point would be removal of bank and tax secrecy. In Switzerland, we have been trying for this for a long time. Again and again we hear that this would be impossible. And then you have to reckon also with Luxembourg and Liechtenstein and other new centres of offshore banking belonging to the EC.
With regard to bank and tax secrecy, I would also like to say: in Switzerland, bank secrecy was brought in at the start of the 30s to protect the German Jews, who had much money in Switzerland and wanted to save it in Switzerland. At the beginning of the 80s, there was a referendum in Switzerland as to whether bank secrecy should be partly withdrawn. Only 27% agreed. The reason was that the people were frightened that state control would also be extended over people with low incomes. The state of play is this: poor people above all invest their money so that they do not have to pay tax on it, because they would be unable to survive on social security or old-age pensions if they did not have some savings. They only receive supplementary benefit if they have no savings. Therefore they hide their savings. I believe that we need to find a solution quickly which would really be a control for the 10% richest, and not for the 80-90% of the rest of the world. I think that this is central. General regulations are always a problem for the people at large.
Another demand that we have always made is that judicial assistance must come about much more quickly. Take for example the Marcos money which is in Switzerland. After eight or more years the judicial assistance case still hasn't been completed. A further point which has already been demanded often is transparency. The statistics have to become much more detailed about income and above all tax returns and tax payments must be in the public domain. We have to know who earns what and who pays what in taxes. By the way, this does happen in some of our cantons in part, but it is decreasing. It is getting harder to find the figures.
A further aspect that I would like to touch on briefly is the `transfer pricing' of multinational concerns. A third of world trade is carried out internally in concerns, and the concerns set themselves prices which are most advantageous with regard to tax on profits. On the one hand, this has enormous consequences for the poorer countries, which have higher rates of tax on profits, and on the other it has enormous consequences for the balance of payments and trade balance. It has the direct consequence of occasioning debt. Thirdly, authorities and unions are obviously very prone to blackmail. There is absolutely no problem for a multinational concern to massage a balance from one year to another in such a way that unions no longer dare for example to ask for higher wages. I would have thought that we needed an international tax system which would tax profits by these concerns differently. There is the example of California, where it is not the profit which is taxed, but the entire world profit weighted according to the level of trade in California. That has had great consequences. It is estimated in California that some 800 million dollars more tax revenue will arrive if this law achieves its aims. There is much to change in the tax system.
With regard to stock exchange speculation there is still something to say. Sweden recently had to intervene and support a large bank, and the state paid for that 1.500 Swiss franks per head of population. And when I have to hear at the same time that people keep talking about and philosophising about the possibilities that the social security system could be abused and a few poor folk might just get a few hundred franks more than they should, then I find it more and more perverse. Based on the international debate going on about derivatives at the moment, I have made the following calculation: If you take a risk of 1% it is generally said that trade in derivatives carries a risk of some 1% then it would appear that the large Swiss banks are taking a risk of some 40 to 50 billion Swiss franks. Which would be more than six times the total profit paid by concerns to the Swiss state, fifty times the maternity benefit which is still denied to Swiss women. We keep hearing about the problems of the social state. I reckon we should hear more about the problems of the interventionist-supporting state, which has to keep stepping in when large concerns get into crises because of their speculation. The question is as to who actually is responsible for irresponsible economies on an international and a national scale. I think that we should invent instruments of sanction for all those who blindly take risks.
I would like to say something else to the current trend. The Bretton Woods institutes were created so that we would avoid situations such as occurred in the 20s and 30s. I believe they have not fulfilled their objectives. Today there is an increasing debate in Europe about internal security. Laws are passed for example against foreigners in Switzerland, analogous to the former pass laws in South Africa. It may affect fewer people, but the dimension is the same. That which is being done today in a European context with regard to internal security is a fascist reply to the problems which have to be solved urgently in the context of global order.
Thank you for listening.
Luciano Nunes Padrão:
My name is Luciano Nunes Padrão, I am a Brazilian sociologist and I work for an NGO called "Centro Ecumênico de Documentação e Informação" (Ecumenical Centre for Documentation and Information).
For the last years I have been developing in my country various activities among people who live and work in the rural areas. I am working to prepare them to face the different challenges that agricultural industrialisation is imposing on people. And so, it is about the questions related to agriculture that I would like to talk to you.
The 50 years since Bretton Woods have only intensified the contradictions and inequalities that my country inherited from centuries of colonialisation. During the last few decades, Brazil has engaged in intense exploitation of its natural resources to pay off foreign debts. Today, our agricultural economy includes a sector which uses modern technology and which is oriented toward exporting its goods. This sector exists alongside a population of some 7 million peasant families without any subsidies from the government who have small amount of land to produce the minimum they need to survive and bring up their children and some who have nothing at all.
We have reached the decade of the 90s as one of the biggest exporters of agricultural products in the world. However, about two third of the population suffer from malnutrition. I am talking about Brazil as an example of a so-called Third World country: high cost of living, concentration of property and income, low levels of literacy, a high infant mortality rate and widespread hunger. These are some of the elements that we can identify with Third World people.
However, it is not only the marginalisation of this part of the world's population that I am concerned about here. Over the last few days, I have had the opportunity to visit Italy through an exchange programme, and I would like to share with you some impressions from this journey that bothered me considerably.
In Italy I visited the Urbino region, situated in the central part of the country. It is a region where agriculture is highly significant, typically peasant, agriculture practised in the mountains which dominate the countryside. During the visit, the peasant families I met told me that there is a profound change taking place. This change is not only effecting the economic profile of the region but also the social, political and cultural structure. The underlining element here is the growing marginalisation of the existing small holdings and their peasant farmers as a direct effects of market integration at the international level. The same peasant farmers who have worked through generations on the production of different types of cheese and wines, in the traditional way, in equilibrium and harmony with nature, are now unable to continue these economic activities due to a new legislation. They lose their access to the markets because they cannot longer meet the required bureaucratic demands and health standards which are far beyond the economic and cultural reality of their daily life.
Take for example regulations 92/46 and 92/47 of the European Union, adopted on June 16, 1992. These established a series of norms for production and commercial distribution of milk and milk-based products. They are demands that oblige peasant farmers to change their work habits and way of life. At the same time, they are obliged to purchase new technology which is extremely expensive and often not appropriate for use on small holdings, because this particular technology is manufactured only to satisfy the needs of big producers. Peasants who do not follow these regulations are prohibited from selling their products on the local markets.
To illustrate what I mean I would like to show you a book that was given to me as a present and which is called "The Italy of Cheeses: a great heritage". This book identifies more than 80 different types of cheese that are, or were, hand-made in Italy. Ladies and gentlemen, a good number of the cheeses are now disappearing because the people who do produce them can no longer do so because of the demands that I have mentioned already. You will no doubt have worked out by now that similar things are happening with wine, pasta, and even with eggs. And this is probably happening all over Europe.
I would like to ask you, ladies and gentlemen: who are the beneficiaries of the market integration which is building on this base? For me, it was clear that small local peasant farmers certainly are not benefiting, in fact there are fewer of them each year. It was also clear to me that the local people were not benefiting: they were having to change their eating habits. So, who are the laws made for, laws which regulate, patronise and homogenise the production process and habits of eating? How could the European Union, in the name of the integration of the market, disintegrate in such a short period of time, social and cultural systems established over centuries of history?
I would also like to share with you the sense of deep disappointment and frustration that I will take back to my country. There it is commonly said, that the European Union has protected small scale agriculture. But now I can see that this is not the case. Who are the really protected by these politics? I also left my country with one thing in mind: that was to visit peasants, and here in Europe I found families who are involved in economic activities now considered illegal, and who live with the threat of being punished at any time.
Finally, I would like you to understand and to think about the fact that for these people it is not merely a question of economics but what is really at stake is their way of life.
Thank you. The last contribution will be given by Dr. Rudi Buntzel from Germany who now has the floor.
Fifty years of Bretton Woods mean for the farmers of Europe 50 years of intensive market integration and of integration into the world market. They mean the violent break-up of regional markets, closed supply cycles, local food consumption habits and intact agricultural structures to the benefit of industrial structures and globally operating agrobusinesses. This development took place with the aid of enormous capital investment in agriculture, state agricultural and food policy and the penetration into all aspects of production of technical progress that has increasingly led to environmental degradation. For European farmers this has meant that an extreme shake-out process has set it, involving structural change, growing debt and dependency.
The example of Italian cheese symbolises these mechanisms. Political guidelines and standard-setting, in the food sector particularly, tended to limit the farmers' possibilities of direct marketing and to reduce them to mere raw material suppliers. Industrial-type mass production with highly problematic ecological effects has meant cheap supplies for big agribusinesses.
The Common Agricultural Policy (CAP) devours enormous subsidies. It seems as though a lot is being done for farmers. Yet most of the money is spent on export subsidies. Producer prices have been cut by more than 30% to world market levels. Farmers depend on state subsidies since even the most efficient producers have no chance of covering costs at world market prices. This also applies to the farmers in the United States, Australia or Argentina. World market prices have been artificially lowered by the struggle of the agricultural superpowers USA and EU for world market share with the aid of subsidies. The countries of the Third World, who cannot keep up in this subsidy race, are increasingly abandoning their agriculture. Forced by the IMF, they are opening their borders for agricultural imports. Out of 140 developing countries, 117 are now net importers of food, supplied from Northern surpluses. The EU keeps its farmers afloat with the aid of welfare programmes since it is trying to conquer the world market with cheap food.
The great promise of the GATT negotiations was to put an end to this destructive world agricultural trade. Yet the results are far from having achieved that. The United States and the EU have each claimed nothing is wrong with their agricultural policies. Yet, regarding dumping, the treaties were watered down even more at the last minute. That kind of European and US subsidising was sanctioned as the only legitimate way of promoting agriculture, at the expense of the agricultural programmes of the developing countries worldwide. This decision has absolutely nothing to do with free trade.
Welfare programmes for European farmers benefit the large, fertile farms, moreover. Here the compensation payments per hectare and the area subsidised per farm are the highest. DM 700 per hectare in cash are plenty for a 300-ha farm to cover income needs and fixed costs. World market prices then cover the variable costs. Small farmers will die out, however. Because of its social injustice within European agriculture alone, but also in regard to e.g. the unemployed of Europe, this agricultural policy is totally unacceptable in societal terms and must not be allowed to continue.
The way out of the global agricultural fiasco of the world market is to make agriculture consistently more ecological. This is necessary anyway, in view of worldwide environmental damage and the contribution of modern agriculture to global warming. Ecological agriculture is a feasible model both for the tropics and for the industrialised states, as has been sufficiently shown by many studies now. This must be made possible by a deliberate support policy and at the same time by a change in market and price structures, and also through statutory restrictions on environmentally destructive technologies. The GATT idea of market economy aiming for a delinking of environmental and social concerns from price mechanisms is to be rejected. We therefore call on the EU to mark the 50th anniversary of the Bretton Woods institutions in agricultural policy by:
- replacing its CAP, oriented to conquering the world market, by a socially oriented policy;
- integrating an ecological agricultural policy into all its agricultural programmes;
- subjecting the CAP to the criteria of coherence, with the goal of achieving a transition to sustainable agriculture as a part of a food security strategy.
The contribution of Rudi Buntzel concludes this part of the session, but I think that we have to be thankful for the witnesses and experts who gave us this information.