Though Cowards Flinch

10 days ago, Spanish Prime Minister Mariano Rajoy told Angela Merkel and the European Commission where they could stick their Fiscal Pact. 

He signed the pact, then promptly announced that Spain’s deficit budget target for the year would be 5.8%, not the 4.4% agreed with Brussels.

This took a lot of people by surprise, and accepted wisdom might have expected the markets to signal their displeasure at such blatant reneging on fiscal discipline.  

On Monday 5th March it looks as though the markets might do just that: 10 year Spanish bonds started to rise and soon topped 5% from their 4.95% starting point  On Tuesday they continued to climb, reaching 5.1%.

Then they fell.  Steadily, through the rest of the week, the rates fell back and closed on Friday at 4.99%, just 0.04% above where they’d started.  What had looked on Monday morning like it might be an inexorable move towards the unsustainable 6% level now looked consistent with a few moves from traders trying to get ahead of the game (and subsequent “herding“), followed by a realisation that nothing much had changed, and there were no great gains or losses to be made.

This little episode is, I suggest, provides a big lesson for the British Labour party.

Since the Autumn, Labour has been busy developing its new economic policy narrative.  This is encapsulated by the sages from the influential In the Black Labour team, who preach the overriding importance of “credibility“:

Taxpayers, voters and lenders to the British state feel they have a right to know what the main opposition party would do about high levels of borrowings and when they would do it by. Satisfying this demand is fundamental to being regarded as a credible alternative government.

At the heart of this new “fiscally conservative” narrative, though, lies a key false assumption.  This assumption is that “the markets” will always demand fiscally conservative policies, and will use their muscle to enforce these, through increased borrowing rates, if governments do not toe the line.

But 2012 is not 2010.  Those who work the bond markets for themselves or (mostly) for their financial institutions read the same economic news and analysis as the rest of us, and they recognise two things.   First, they know – much better than they did in 2010 – that forced austerity does not lead to economic recovery.  Second, they know that they stand to lose a great deal more if a country spirals towards default through enforced austerity than if it is allowed to pick a more sensible course of longer term deficit reduction.

Labour, however, is behind this curve.  It has taken a year since Miliband’s election for the hierarchy to work out that “credibility” can only be regained by talking tough on austerity, but in the time they have been reifiying* the markets in this way, they have moved on. 

This has negative consequences. 

Take last week’s PMQs.  Just as the markets were deciding that Spain had credible economic policies after all,  Cameron reached for the standard excuse for his welfare cuts: the government has a deficit to sort out and has to make difficult choices.   This time, he quoted Labour back in its face:

I think that it is time the right hon. Gentleman listened to his own shadow Chief Secretary, who said that “we must ensure we pass the test of fiscal credibility. If we don’t get this right, it doesn’t matter what we say about anything else.”

Cameron knows he’s on to a winner here.  As Labour Uncut points out, voters now appear to be more with the Tories on the need to cut spending than they were a few months ago:

Last Sunday brought a pivotal result in the polling. One of the intermittent questions asked by YouGov is whether voters prioritise action on the deficit or growth.

In last Sunday’s results, 38% agreed with the proposition that the government should stick to its current strategy of reducing the deficit, even if growth remains slow while 34% agreed with the statement that the government should change its strategy to concentrate on growth even if this means the deficit stays longer or gets worse.

For the first time, voters’ had prioritised tackling the deficit, and by a clear margin of 4%. In comparison when the question was last asked in late November, the numbers choosing growth had led by 1%.

Labour Uncut, being Labour Uncut, draws entirely the wrong conclusion from this polling, arguing that Labour should therefore focus on talking about where it will make cuts, not on where it will stimulate growth. 

In fact, the opposite should apply. Labour is currently caught in a trap of its own triangulation (or maybe that’s triangulatory reification).  The more it kowtows to fiscal conservatism, the more the voters appear to distrust it; after all, if you want fiscal conservatism, at the beck and call of the markets, as an overriding priority, and irrespective of the social costs, the Conservative party is bound to be a better bet.

While Labour triangulates the votes out of itself, Spanish rightwinger Rajoy has just provided pretty good evidence that the markets are, if the political will is strong enough, not the implacable force for austerity they’ve been taken for.  Meanwhile, across the Pyrenees, a central aspect of Francois Hollande’s campaign is the denouncing of high finance, and a commitment to growth over austerity**.  At the moment, lest you hadn’t noticed, Hollande is on course to win.

Labour, rather than working within the confines of the supposed economic realities set out by In the Black Labour, should be committing itself to change those realities.  Then, as in France (and even in Spain), the electorate might at least sit up and take note.

* By reification I simply mean ascribing to ”the markets” an independent “in themselves”-ness, tending to automaticity of action, rather than seeing them as a set of actors open to economic and social influences (while recognising that some trading is carried out via computer algorithm to the point that, in some cases, “the markets” might actually be acting automatically).

 ** This is not to say that Hollande’s campaign is without its commitments to spending restraint, but the broad narrative set out in his 60 engagements and subsequent speeches is about contesting the Merkozy orthodoxies, principally through a commitment to a renegotiation of the Fiscal Pact, where – strangely – he may now find he has support from Spain.

Last month I wrote a reasonably well-received essay debunking some myths about British aid to India.  People who understand India e.g. Indians liked it.  People who don’t want to understand India ignored it.

My central point was that it is wrong to view India as a single state when it comes to its domestic political economy; the deep legacy of colonialism is that India is an “incomplete” national state, currently fundamentally incapable of meeting the basic needs of a hundreds of millions of its citizens.

I’m pleased to say that the BBC has followed my lead, with this David Loyn article/radio piece about one of the poorest Indian states, Bihar:

The use of British aid money in India, with its rapidly growing economy and ambitious space programme, has critics in both countries. But in the state of Bihar, a carefully targeted aid project is successfully reducing corruption, and improving the lives of some of the poorest people in the world.

It is not, of course, the kind of piece that one-dimensional thugs like Peter Hitchens and Paul Staines will appreciate (or even understand), and some of the comments from ignorant Brits below the article reflect how sadly influential and damaging their type of narrow-minded ignorant peddlings have become.  Nevertheless, Loyn makes a good fist of setting out how aid, where it is spent in collaboration the willing partners, can help put in place the basic building blocks of a modern state, in spite of rather than because of India’s elite, who would rather British aid wasn’t there to embarrass them:

[T]he case that Britain retains its large aid budget to build the capacity of the Indian state may be a hard one to make to someone in the British public sector who has lost their job in the cuts caused by austerity at home.

But no-one could doubt the scale of the need.

If Bihar were a country, its per capita income would be the third lowest in the world. Only two countries in Africa would be below it.

Some Indian politicians and diplomats do not like Britain’s large aid programme because this is not the image of a land with global middle class aspirations they want to project. They live as if in another country from the lepers by the railway tracks.

Bihar has shaken off its past and is now the least corrupt state in India and from a low base its economy is growing at more than 14%. Given that, should it not now take care of itself?

The answer from the most senior civil servant in the state was simple. He told me that development would have come, but far more slowly without the British technical expertise that has changed the way they do things.

He said that millions would be lifted out of poverty far sooner because of the British help.

The article is far from perfect, though I suspect this is more to do with  Brit-centric editing rather than journalistic inadequacy.  In places, it carries a little of Mark Tully’s well-meant but patronising post-colonial tone, which does little to help in the longer term.

In particular, it would have been good to see a proper appreciation of the extent to which Chief Minister Nitish Kumar’s “squeeze formula” has been responsible for the extraordinary turnaround.  Kumar and his colleagues’ admirable determination to ”complete” their state has led to effective British aid, rather than the other way round.  This is a point made, by a couple of the Indian commenters, clearly aggrieved at the one-sidedness, on Loyn’s piece. 

In addition, the hiving off in 2000 of Jarkhand as a separate state, and with it a good deal of the ongoing Naxalite insurrection, has meant that the task of state completion has become easier in what remains Bihar state, while doing nothing to resolve the deep poverty and injustices exacted on those tribal and other communities now excluded from Bihar’s efforts.  This could perhaps have done with a mention, given that we’re talking 33 million people thus affected.

Nevertheless, it’s good to see a piece which reflects properly on the context for aid, and especially one which goes beyond the media simplicities of India as a space-age superpower making a conscious choice between building rockets and feeding the poor. 

It’s just a pity we’re unlikely to see David Loyn (or even better Nitish Kumar) on Question Time taking on Hitchens or the Tax Payer Association goons anytime soon.

This is a guest post from TCF friend and South Sudan expert/advocate, Tim Flatman.  It is a fuller version of the edit that appeared, with all the political bits taken out, at Liberal Conspiracy.  You can see footage of Tim’s recent visit to the area here.

When you’ve read both the politics and the action Tim’s involved in, please do consider sparing a few quid to help the Abyei returnees get through towards the next harvest in October. Blimey, even I’ve donated, and I’m a tight bastard.

In May last year, up to 150,000 people were displaced from Abyei when the Sudanese Armed Forces invaded the area, burned down the local Ngok Dinka population’s homes and looted schools and churches for materials that can now be found for sale in Muglad market.

I have just returned from a visit to Abyei, where I was able to meet with the first returnees north of the river Kiir, and distribute a small amount of food ($1,200 worth of grain & flour) bought with donations from family and friends. Government soldiers are still present in the town, but the former residents of the area have started to return to their villages and report that they are well-protected by the Ethiopian peackeepers (UNISFA) who are now fully deployed in the area. 

However, they missed the last planting season while they were displaced and have no food available now. They are surviving on wild fruit and gum, but report that they are not sure if some of it is poisonous and that it is making them ill.

The trouble is that, while the local people are returning, and UNISFA have cleared access routes of mines making it possible to distribute food, NGOs and even UN agencies are more reticent about re-engaging. Some are awaiting official confirmation that access routes have been de-mined. The local population suspect political interference from the Government of Sudan since official confirmation still looks a long way off, even though UNISFA confirm that routes are cleared, travel along them regularly and are willing to escort others along them.

Others are pointlessly waiting for permission from the Government of Sudan to enter the area. I travelled in on a South Sudanese visa, against the wishes of the Government of Sudan who appeared to be putting pressure on UNISFA not to let me in. The local community in neighbouring Agok won the argument with UNISFA that since the area is, under the Temporary Interim agreement signed in Addis Ababa, under the presidencies of both countries, a visa from either is sufficient to enter.

It is possible to assist returnees’ it is just a question of whether there is the will to do it.

A lack of food is not deterring returnees from telling their family and friends to come back. They cite a number of reasons – the most important of which is their strong emotional attachment to the land where their ancestors have lived and died. Some also see themselves as preparing the way for others to return. They are rebuilding tukuls and will prepare the land for cultivation – providing they can get hold of seed and tools – hoping to be able to support themselves from October when they can harvest crops.

Returnees also told me that the difficulties of living as displaced people in Warrap and Western Bahr-Ghazal states forced them to come back. One woman in Wunrok village on the edge of Abyei town told me she had come back the day before and that it was better to starve in your homeland than to starve elsewhere. A man in Lau reported that there had been nowhere to bury relatives who died of starvation in Warrap state and even cooking was difficult as neighbours demanded a fee for borrowing pans.

The numbers of returnees will continue to rise, despite the food shortages. Pressure must be brought to bear on NGOs to carry out regular distributions, as well as fixing water pumping systems that were vandalised by the Sudanese Armed Forces. In the meantime, people are starving now, and so with the help of friends and family of the returnees in nearby Agok, I intend to carry out a distribution as soon as possible. £4,000 will be enough to buy and transport enough grain to feed the returnees for a month.

For more details and to donate, go here:

The Irish government has consulted with its lawyers, and decided that it must hold a referendum on whether to ratify the EU fiscal treaty.  This is the treaty under which, as Owen noted when it was first announced by Merkozy in December, Keynesianism will become illegal.

Given the Irish public’s experience of enforced austerity, a bote in favour of ratifying the treaty must be unlikely, and the commentators are hard at work now trying to work out what the consequences will be, both for Ireland and the EU as a whole.  Michael Burke is optimistic:

If Irish voters do reject the treaty, they will be performing a great service to the population of Europe. It could mark a turning point in the EU and beyond, pulling the brake on the austerity express before it hits the buffers.

I wish I could share with Michael’s enthusiasm, and hope that leftwing governments, led by an incoming socialist government in France, and backed by Ireland and others, could get on with offering a new vision for Europe based on sustainable growth; that is, after all, what I was advocating not long ago.

That, however, was before I had read up properly on the six EU regulations (the so-called ‘six pack’) that came into force on 16th November 2011, three weeks before the Merkozy plan was made public. 

These six regulations (if you’re short of time, 2011/1176 and 2011/1174 are the crucial ones) mean that the treaty is little more than the political icing on the cake.  The regulations passed in November, with no oversight from national parliaments and no news coverage to speak of,  already enshrine in law the way in which governments must run their economies, the measures by which they will be judged and (in the Eurozone) how and to what level fines will be levied on countries with “macroeconomic imbalances”. 

These fines will run at 0.1% of a country’s GDP.  Spain, with a GDP of roughly £1 trillion, would therefore stand to be fined £1 billion in each year of non-compliance.

But this is only the start of the madness.  To get a real feel for how crazily counter-productive the new arrangements  are – they’re already in force, remember – you have to look at the detail of the “scorecard” by which country compliance will be measured.  This is a good summary.

The “scorecard” has two areas: a) External imbalances and competitiveness; b) Internal imbalances

The external imbalance part calls foul when a country has a “3 year average of the current account balance as a percentage of GDP, with a threshold of +6% and – 4% of GDP”.    This is drawn from the original Growth and Stability Pact, and has been the focus of comment to date, as it is also the lynchpin of the proposed treaty.

Even so there are measures which cause greater concern, including the requirement that export market shares must not dip by more than 6%, and – most worryingly – that “the nominal unit labour cost” must not exceed +9% in euro countries and +12% in non-euro countries.  These two measures are, to any sane person (let alone a sane socialist) are extraordinary, in that they a) punish governments for economic activity over which they have relatively little control; b) effectively outlaw workers gaining better terms and conditions for the same labour, over and above a certain point (this would mean that a government could not raise its national minimum wage as a pro-active policy measure, by say 25%, for fear of being called out for “macroeconomic imbalance”.

But we’re not done yet. The regulation scorecard moves from external to internal imbalances.  Here, alongside the requirement to hold down private sector debt to less than 160% of GDP (again, largely beyond a government’s control in a market economy), there is the baffling idea that a country is unsustainably imbalanced if house prices deflate by more than 6% year-on-year.  Woe betide any country which decides that it might be not such a bad idea to let house prices decline so that people  – in areas where there is little rentable accommodation – can actually afford to live in a house.

And to top it all, countries stand to be fined if they let unemployment exceed 10% on a three-year average.  This little pearl comes at the end of a set of criteria which directly militate against lowering unemployment.

So while I’d like to share enthusiasm about the potential for seeing off the austerity treaty – and I wish the Irish public all the best in their efforts – I can’t help feeling that deep in the bowels of the EC/EU, those who wield the power by regulation will not be too concerned.  They’ve already imposed the treaty – they just didn’t bother to tell us.

Remember the date – 16th November 2011: the day Europe finally lost its marbles.

Martine Aubry, a big player in Francois Hollande’s presidential campaign, gave a newspaper interview yesterday.  It marked a real step forward for the campaign, but I hope it will also embolden the British Labour party.

Central to the interview is Aubry’s attack on Sarkozy’s scapegoating strategy:

Avec son interview au Figaro Magazine, M. Sarkozy commence sa campagne de 2012 comme il a gouverné depuis 2007: en voulant désigner des boucs émissaires - les chômeurs, les étrangers, les homosexuels, les professeurs, la gauche…- qui seraient les responsables de tous les maux du pays. Une nouvelle fois, il cherche à diviser les Français au lieu de les rassembler.

[Trans:  With his interview in Le Figaro, Sarkozy begins his 2012 campaign as he has governed since 2007: by creating scapegoats - the unemployed, foreigners, gays, teachers, the left - whom he would have us believe are responsible for all that is wrong with the country.  Once again, he seeks to divide the French people instead of bringing them together].

Sarkozy’s interview in Le Figaro (a key rightwing newspaper) does indeed reflect a lurch for the dog whistle, as he tries to shore up his vote against Le Pen’s Front National, which may not yet be surging but certainly isn’t retreating as a threat to Sarkozy even making the second round (assuming Le Pen makes it onto the ballot paper with the 500 nominations she needs).  His suggestion that allowing immigrants from outside the EU to vote would result in “des cantines scolaires hallal” (Halal school canteens) all over France, for example, gives us a pretty good indication of the votes he’s pitching for.

The Sarkozy interview is also notable for the quite bizarre idea that if re-elected he might put vocational education (formation professionelle) policy to a full referendum, and when the interviewer then follows up with two questions about whether other matters would need a referendum, it feels as though he’s mocking Sarkozy.  It’s so odd a move that even the Daily Mail has noticed.

Sarkozy may be getting desperate already, so it can be argued that it’s all easy enough for the Hollande campaign team, and that they can well afford (and need) to court the leftwing vote even at the expense of the few that might go missing as a result of their approach.   Even so, it’s good to see  Aubry, on Hollande’s behalf, calling out Sarkozy so directly on his scapegoating strategy. 

From a British left perspective, there is inevitably a sense of regret that the Parliamentary Labour Party lacks the confidence, as yet, to speak out firmly on the right side of the argument.  As I said back in July:

If Labour keeps on trying to scare the shit out people on things like crime and immigration, as a way of getting Labour votes, it’s making a big mistake; it’s really just doing the Tories’ job for them*.

Hopefully, as Hollande maintains his lead and goes on to become President, Miliband and team will learn that constant rightwards triangulation is less effective as a route to electoral success than doing the right thing.

*George Monbiot made much the same point  last week, claiming that only he and Charlie Brooker had realised what was going on (perhaps he’s just not reading the right blogs):

Confronted with mass discontent, the once-progressive major parties, as Thomas Frank laments in his latest book Pity the Billionaire, triangulate and accommodate, hesitate and prevaricate, muzzled by what he calls “terminal niceness”. They fail to produce a coherent analysis of what has gone wrong and why, or to make an uncluttered case for social justice, redistribution and regulation. The conceptual stupidities of conservatism are matched by the strategic stupidities of liberalism.

Aid to India is back in the news.  Following so-called “revelations” in the Telegraph  about the Indian government’s attempts to bring UK aid to an end –  in fact the Financial Times covered the story 18 months ago – the Daily Mail’s headline runs:

A £2bn space programme and Swiss bank accounts: I’ve seen how aid to India is wasted.

The Sue Reid piece below opens, almost inevitably, with a lie:

A picture on the Department for International Development’s website shows a 20-year-old named Meenakshi polishing the new solar panel on the roof of her village shack in Orissa, on the east coast of India.

This gleaming piece of kit to provide electricity has been paid for by you, the British taxpayer.

By the end of this year our Government will have shelled out £1.5billion since 2009 to pay for solar energy and other grand schemes to combat climate change in foreign countries, including India.

Let’s leave aside the fact that most of Orissa, and all of the bit DfID has any engagement with, is many miles from the coastal strip.  The main lie here is that Meenaksi is not actually “polishing the new solar panel on her village shack”. 

Had Reid been inclined to read any of the words around the picture and the associated article, she would know that Meenakshi is not in fact pictured next her own household’s solar panel, but next to one which she installed for the whole of a village, to bring electricity to it for the first time.  She would know that Meenakshi is employed under the State of Orissa’s Tribal Empowerment and Liverlihoods Programme as a solar power engineer delivering and maintaining to install and maintain solar technologies across a range of villages and train other women in the same field, that DfID contributes to her salary (not to the actual panels), and that the whole programme is much more about female empowerment and basic services than it is about climate change, which Reid appears to think shouldn’t happen in “foreign countries” (because carbon dioxide obeys border controls, obviously).

Of course, Reid is happy to portray Meenakshi as the passive recipient of solar panels, whatever the facts, because it fits with her broader narrative about how all aid to India is wasted (she knows this for sure because she’s been to a school classroom in Bhopal).  Reid’s main energies in the piece are then devoted to pointing out that we shouldn’t give aid to India because it has a lot of rich people who drive Rolls Royces and have Swiss bank accounts, and because India has a space programme.

Whether we like it or not, though, Reid is tapping into a powerful narrative.  In particular, the mantra that the poor in India don’t need aid because the Indian government has a space programme has become lodged in many people’s minds, trotted out regularly by Newsnight’s rightwingers.   In June it was Hitchens, and last week it was the turn of the TPA representative to lap up the applause for her extraordinary insights.

The big question for those on the Left who are interested in the 350 million or so Indian people who live far below the poverty line (that’s around 5% of the world’s population) is how we counter this narrative most effectively.  That question seems particularly pertinent today, as officials negotiate in Delhi over the final ”political settlement” details of the EU-India Free Trade Agreement, which will consign many of this 350 million to an even more uncertain future.

Increasingly though, I think Reid, Hitchens et al’s  narrative cannot be countered effectively simply by pointing out – as Development Minister Andrew Mitchell has done – that there are still poor people in India.  Most people living in Britain today have no real conception of poverty and hunger in the third world.  Given this, the consistent messaging from the right, that the Indian (or any other government) could look after their populations properly if only they pulled their finger out, dovetailed with the old “charity begins at home” message ideally suited to time of self-imposed austerity, means that simple appeals to humanity are unlikely to have any great effect any time soon.

What is needed instead is the development of a new, distinctively leftwing narrative about why the Indian government in Delhi is not in any kind of position to assist properly in the development of its massive rural hinterland (even if it wanted to be), and how the only way 5% of the world’s population can be properly assisted in the long-term is through a total re-evaluation of why aid is still needed and how it can be re-engineered.

This means going back to some starting principles about why India is where it is now.

The crucial thing to recognise is that India is not a complete state, at least in the European liberal democratic sense of the term, and that for the right (or anyone) to base their argument on assumptions about state capacity is entirely invalid.

At one level, this means simply that the central government of India is, in terms of domestic policy implementation, only a relatively small player.  Most of the responsibility, and some of the funding, lies with the 33 fairly autonomous states - to a much greater extent than in, say, the Lander in Germany.  Thus, while the right-wing papers talk of British aid as though it is delivered in a big brown envelope to a corrupt high official in a plus New Delhi office, the reality is that, national level permissions aside, it is agreed at state level through partnership agreements.

Sensibly, DfiD now provides its aid only to the poorest 8 of the 28 Indian states, mostly to the East and North, and in which 65% of India’s poor live.

As the Southern and Western states do grow their way out of poverty (though inequalities remain), these poorest 8 states are being steadily left behind, not least because the central state has dramatically withdrawn its financial support since 2005/06, when the Twelfth Finance Commission recommended a process of “disintermediation”, a euphemism for cutting states adrift from the Centre and leaving them at the mercy of the markets.   This means that all States are now borrowing at rates over 9% (seen as unsustainable in the Eurozone) and this, combined with reductions in States’ income from the National Small Savings Fund, means that the poorer States, with their lower tax base growth projections, face a very uncertain fiscal future, especially from 2017/18 as many of the recent loans come to maturity*.

In this macroeconomic context it surely makes sense, for those who support the idea of 350 million people having more secure livelihoods, to promote their position by making as clear as possible that aid is not in fact going to the Indian State at all, but to areas which are effectively, and increasingly as a result of central policy, “countries within a country”.

Yet this is only the first part of the “incomplete state” narrative that the left needs to develop in defence of the 350 million.

The more important element comes when we consider not just the way in which the Centre is steadily withdrawing  from its responsibilities towards it States, but also the fundamental incompleteness of government at the level below the State.  It is this incompleteness which requires such a thorough evaluation of what development aid can and should be for.

In many rural areas of India, government administration still exists on paper only, and in the minds of the officials at State headquarters.  It doesn’t administer anything in the real sense. A tax economy, and the administrative capacity that goes with that, does not exist in areas where most people live subsistence farming lives.  Law and order as we recognise it in western liberal states, and as it is experienced in more urban areas of India, has not reached these parts.

That is, the process of state formation that took place between the 16th and 18th century in Europe, and earlier in Imperial China, has simply not taken place in India. 

In Europe, as historian and sociologist Charles Tilly has demonstrated, the process of state formation was a long and complex one, in which governments moved from a position of reliance on local “magnates” for their indirect rule – under which huge discretion was granted at local level for fear that these same magnates might turn swiftly from supporters to rebels – towards:

two expensive but effective strategies: (a) extending their officialdom to the local community and (b) encouraging the creation of police forces that were subordinate to the government rather than individual patrons, distinct from war-making forces, and therefore less useful as the tools of dissident magnates (p.175).

Ultimately, with the means of violence firmly under their control, states could become open to the rise of the kind of civil institutions we enjoy in western liberal democracies today.

In India, this necessarily long process of state formation did not take place, because colonial rule happened instead (again, cf. China).   As Tilly notes:

Whether forced or voluntary, bloody or peaceful, decolonization simply completed that process by which existing states leagued to create new ones.

The extension of the Europe-based state-making process to the rest of the world, however, did not result in the creation of states in the strict European image. Broadly speaking, internal struggles such as the checking of great regional lords and the imposition of taxation on peasant villages produced important organizational features of European states: the relative subordination of military power to civilian control, the extensive bureaucracy of fiscal surveillance, the representation of wronged interests via petition and parliament. 

On the whole, states elsewhere developed differently. The most telling feature of that difference appears in military organization. European states built up their military apparatuses through sustained struggles with their subject populations and by means of selective extension of protection to different classes within those populations. The agreements on protection constrained the rulers themselves, making them vulnerable to courts, to assemblies, to withdrawals of credit, services, and expertise. To a larger degree, states that have come into being recently through decolonization or through reallocations of territory by dominant states have acquired their military organization from outside, without the same internal forging of mutual constraints between rulers and ruled (p. 185-6). 

In these circumstances, it is not surprising that state legitimacy should continue to be actively contested.   The ongoing Maoist insurgency may rarely reach the Western media, but it continues to be very real, and is being conducted in precisely those places – the remote, mountainous and forested areas - where State government is weakest.    In these areas, the state does not necessarily exist as prima facie legitimate power, and the Maoists are often in a position to impose their own legitimacy – effectively their own alternative state form.

It is strangely symbolic that the central state’s latest attempt to deal with it involves the purchase of a drone to track Maoist (Naxalite) movements – it is almost an admission that the state can not reach these places by conventional state means, and must resort to copying the air war tactics of the US, as though the areas concerned really are foreign countries.

This may all seem a strange digression, but if the 350 million people now at risk of total abandonment by whatever exists of the “official” Indian state are to be aided properly, it is important to recognise exactly why simply banging on – as the right do – about the Indian elite’s responsibilities will not get us anywhere; the Indian state cannot reach out to the poorest, even if it wanted to.

Moreover, it increasingly looks as though the Indian elite is no longer interested in a total state, in which everyone – rich or poor - has a place.  As noted, the centre has already withdrawn its borrowing powers from State governments, but there are clearer signs than that.  Take the EU-India Free Trade Agreement, where the Indian negotiating team’s biggest “aggressive interest” is to secure Mode 4 concessions from the EU, allowing India’s middle class to work within the EU for Indian multinationals.   To secure this, they are quite happy to grant tariff removal on agricultural products which will almost certainly lead to the loss of livelihoods for millions of their semi-citizens on the margins.

Taken together, the effective abandonment of whole-state formation by the Indian elite which controls the central state, and the evolution of  impoverished “countries within a country”, demands, as noted, not simply a narrative in defence of current aid provision, but a total re-evaluation by the left of what aid should be about. 

This is not easy. On the one hand, it might be argued DfID’s current half-focus on working with State governments to allow them to “state-form”, in a way which might have happened had colonial rule not intervened, might be the best practical way forward. 

On the other hand, Tilly’s work suggests that simply to support the formation of states which have not gone through an evolutionary pattern of settlement between those with the means of violence at their disposal, such that civil institutions develop safely, may end up being counterproductive.  It may simply lend false, short-term legitimacy to governments unfit and unable to govern without resorting to violence and exploitation.

Perhaps the most we can say is that this is a debate the left needs to have urgently, and in a spirit of solidarity with the 350 million Indians who are effectively “stateless”, and of course with all those others around the world whose interests have been similarly damaged -first by colonialism, then neoliberalism, and now by the new post-neoliberal phase, in which they have become, in the eyes of a flourishing elite, simply expendable.  Once, the poor were seen as possible resources if only development could happen effectively.  Now, they’re just not worth the effort.

And this new expendability of the poor , it seems to me, is the key rationale for a new international solidarity, or in this case solidarity between the British left and the Indian poor (and the organisations that represent them). 

For this is a truly global phenomenon. In Britain, as I’ve set out, we are now ruled by an elite whose high politics-low politics operational code actively requires that those on the margins should simply be disregarded as far as possible, with inconvenient matters such as the NHS and education delegated to efficient (in their own terms) free-marketeers.  In all Western states, the ideological clock is being turned back to a time when liberalism carried within it its own exclusionary logic (see Domenico Losurdo’s Liberalism: A Counter-History for the details**). 

In India and other post-colonial creations (for the very idea of India as a state is a British imperial one), that process is easier because there is, by and large, no complete state to “uncomplete”, but the interests of a new global elite  – the 1% – create the same driving force.

The conditions are ripe for new stage of international solidarity.  One route to its development is for a rational defence of aid – to India and elsewhere – in the face of the right-wing thugs who currently dominate the media debate with their simplistic warblings about India’s space programme.  In Britain, the Conservatives have conspicuously failed to counter the Daily Mail’s aid bullshit, despite the faintly laudable efforts of Andrew Mitchell and others to defend the status quo, so Labour and the left must take up the challenge.

* The 11 “special category states” of India, primarily in the far North and East and defined as such largely because of their remoteness and geopolitical importance (bordering Pakistan and China) are currently benefiting from lower rates because a much larger amount of their State income comes from the Centre and the markets appear to be pricing in this “stability”.  This suggests that the poorer states in the heart of India may in time face even higher rates as they become increasingly decoupled from the rest of the more prosperous Indian economy.

** I cover the development of this New Liberalism in more detail in my forthcoming book, The Sixth Tradition.

When Cameron vetoed the ‘Merkozy treaty’ in early December, it meant that the deal could not be signed off as a variation to the Lisbon Treaty, and that any deal would need to be an intergovernmental treaty of the 26 participating countries.  As such, any deal is separate from the workings of the European Union.

This threw into doubt whether the 26 countries signing up to the Merkozy “non-EU” treaty could legitimately use the Court of Justice of the European Union (ECJ) to police the deal and punish states which failed to abide by the proposed fiscal rules.  At the time, Cameron threatened legal action to stop the other 26 governments trying to use the ECJ in this way.

Unsurprisingly, now that he’s gained cheap political brownie points from using the veto, Cameron’s not bothered about pursuing this threat.  Diplomats are calling it a “heat of the moment” thing, and it’s being dropped as quietly as possible. 

This does, however, raise an intriguing possibility.

If the 26 member states now do go ahead uninterrupted and sign offtheir economically absurd pact, and include within it provision for ECJ ruling authority, it sets an important precedent for any set of European countries to come together, bash out a deal, and then call on the ECJ to do its thing.

Logically and legally, what could stop Francois Hollande, coming together with other like-minded European countries to sign a pact running entirely counter to the Merkozy pact, and asking the ECJ to be the binding arbiter on that too? 

After all, Hollande has already set out a clear manifesto promise around the need for a new ‘pact’.

Je proposerai à nos partenaires un pacte de responsabilité,de gouvernance et de croissance [growth] pour sortir de la crise et de la spirale d’austérité qui l’aggrave. Je renégocierai le traité européen issu de l’accord du 9 décembre 2011 en privilégiant la croissance et l’emploi, et en réorientant le rôle de la Banque centrale européenne dans cette direction. Je proposerai de créer des euro-obligations [Euro-bonds]. Je défendrai une association pleine et entière des parlements nationaux et européen à ces décisions. Cinquante ans après le traité de l’Élysée, je proposerai à notre partenaire l’élaboration d’ un nouveau traité franco-allemand.

Why would this new pact have any less legal weight than the one now being rushed through before Sarkozy is sent packing?

The  like-minded countries Hollande needs for such a scheme might include Spain, whose (rightwing) government is now calling for a ‘new realism’ about how to manage the economic crisis in light of its descent into economic chaos, and Greece,  fuming at Germany’s proposal to make its government subservient to an EU budget commissioner. 

It might, in 2015, also include Britain (or England/Wales/NI & Scotland) if Labour were minded to push for an entirely new approach to the European economy, something Ed Miliband at least hinted at in Davos this week (though clearly ideas on what to do are not yet formed).  If Labour has its wits about it, it should see jumping on the Hollande bandwagon, in a common drive to reorientate the EU towards the welfare of its people, as a very attractive proposition.

The alternative ‘Holliband’ pact might include shared commitments to investment in jobs, with targets for the reduction in unemployment levels, as a mirror to the stupid fiscal targets advocated by Merkozy, and call on the sanction of the ECJ for countries that failed to meet the employment and other needs of its citizens.

Clearly, two diametrically opposed  intergovernmental pacts, formed outside the EU but calling on the same EU institution for their operative legitimacy, would create a legal and institutional crisis at the heart of the EU that Cameron could never possibly have dreamed of when he stook his foot in his mouth in December, but that might well be better than simply allowing the current rightwingers in France and Germany to carry through their plans for the outlawing of  socialist econmics in Europe.

And what better payback for Cameron’s arrogant but wholly ignorant politicking with the EU than for him, in time, to see it used as the opening for a few Left front for a new Left ascent in Europe.

Guest post by John McDonnell MP

Yesterday, in a parliamentary debate on UK-India trade, I found myself in the somewhat unusual position of quoting Peter Mandelson approvingly.  Writing for the FT in advance of the major IPPR report on globalization (published today), Mandelson argues:

[L]iberalisation of trade and financial markets requires a careful parallel process of building domestic institutions and capabilities. It is not the absolute level of openness in the global market that matters for growth so much as the fact that it is governed by shared rules and sustainable practice.

I agree. 

Sadly, when it comes to the EU-India Free Trade Agreement (FTA), negotiations on which began when Mandelson was still EU Trade Commissioner, the reality falls a long way short of his aspiration. 

As a result, many millions of Indians stand to be driven towards poverty and hunger.

The sudden removal of import tariffs, especially on dairy and poultry products, and the consequent flood of imports from the EU, is likely to have a devastating effect on millions of marginal and landless farmers, who will suddenly find their markets swamped by produce – notably skimmed milk and poultry meat deemed unsuitable for the European market – which remains heavily subsidized through the European Common Agricultural Policy. 

The European Commission’s own Sustainability Impact Assessment calculates that the FTA may be of benefit “in the long run to those “who are able to participate in evolving supply chains“, but it acknowledges that  “integrating small farmers and producers into the supply chains is a daunting task which is only possible through domestic policy measures only.”  A subsequent Right-to-Food Impact Assessment, conducted in 2011 by NGOs, came to very worrying conclusions about the impact of the FTA on the Indian poor, some 27% of whom already live with chronic hunger.  

Similarly, if multi-brand retailing is suddenly and without safeguard opened up to EU retailers such as Carrefour, Metro and Tesco, 1.8 million jobs may be created, but at the cost of up to 5.7 million people working as street vendors.

In other words, Peter Mandelson’s condition for good globalisation – well-developed  “domestic institutions and capabilities” which allow the poor to engage on something like equal terms – has clearly not yet been met in the case of this EU-India FTA.

This is precisely why the European Parliament resolved, in December 2010, that the European Commission should carry out impact studies on human rights in addition to those on sustainable development.  To date, the Commission has completely failed to act on this resolution, even though the FTA is due to be agreed and ratified by member states during 2012.

The European Commission currently appears unwilling to listen to the views of its own Parliament, so it is up to the UK Parliament to ensure that the human right are not trampled on in the rush towards global trade. 

I reiterated this call for a full Human Rights Impact Assessment in parliament yesterday, in support of a broad range of EU and Indian civil society organisations (including Traidcraft), who are doing the same.

In his FT piece Peter Mandelson goes on to say:

Globalisation is a means, not an end. This way of seeing things challenges equally the political right and left. The anti-globalisers of the left have always underplayed or ignored what is good about the expanding reach of global markets by focusing on the (legitimate) grievances of the short-term losers. The right has too often shrugged off the negative social effects of global markets as unavoidable or even a price worth paying for the benefits of ‘liquidity’.

Mandelson’s analysis may be astute, but it skirts round the brutal reality – that these “short term losers” are hundreds of millions of men, women and children going hungry for want of a fair free trade policy, and for whom being a “short term loser” can be the difference between life and death.  These people are as much a part of the 99% as those now occupyingSt Paul’s.

Time is short.  I hope we can build a coalition for the defence of the Indian 99%.

John McDonnell is the Member of Parliament for Hayes & Harlington. You can read his full speech in the UK-India Trade debate here.  If you would like to help, please ask your MP to sign John’s Early Day Motion 2645, calling for a Human Rights Impact Assessment on the EU-India Free Trade Agreement.

(This article is cross-posted from Liberal Conspiracy, though we’ve got a slightly fuller version.)

In this post, I set out the risk to the livelihoods of millions of the Indian poor from the proposed EU-India Free Trade Agreement.  Below is my letter to my North West MEPs (excluding Nick Griffin), seeking their support and action for an ex-ante Human Rights Impact Assessment before a potentially disastrous agreement is signed.

I hope some readers might copy and paste (or adapt) and send on to their MEPs. I’ll also be approaching friendly MPs for their informal support.

Dear [name of MEP]

EU-India Free Trade Agreement

I am a constituent of yours, resident in Bickerstaffe, Lancashire.

As you will know, the European Commission is currently in the final stages of negotiation with the Indian government on the EU-India Free Trade Agreement.  The Agreement could be in place as soon as February 2012.

You will also be aware that many Civil Society Organisations in India, along with their international non-governmental partners, have grave reservations about the likely impact of the Free Trade Agreement on the poorest in India.

The most complete assessment of the likely impact is contained in a new report, A Right-to-Food Impact Assessment of the EU-India Free Trade Agreement published jointly by a group of Indian and European non-governmental organisations.  It is available online at http://www.boell.de/downloads/2011-12-ecofair_rfia.pdf

The report provides an assessment of the likely or possible impacts on the food security of the population most at risk (those suffering from chronic hunger already make up 29% of the Indian population), and is based both on detailed desk research and field research in areas and communities most at risk.

While budget constraints on this research meant that only a few areas currently under negotiation for the FTA could be assessed, the findings are striking.  

The researchers find that in terms of the poultry products, for example, there is a ‘toxic’ combination of the rural poor’s major dependence on poultry as a means of livelihood, the rural poor’s lack of access to producer technologies and efficiencies, consumer trends around poultryconsumption, and the support offered to European farmers through the Direct Payments system of the Common Agricultural Policy.  All these factors combined mean that the tariff reductions proposed under the FTA are likely to have a very deleteirous effect on millions of people in India, and make existing chronic hunger problems even worse.

Given this context, it is appropriate to take note (as the research report does) of the duties of the European Union and its member states, set out both in international law and in the Lisbon Treaty in respect of human rights, including the right to food.

The human right to adequate food forms part of Article 25 of the General Declaration of Human Rights of 1948 and Article 11 of the International Covenant on Economic, Social and Cultural Rights (ICESCR) of the United Nations (UN), which became effective in 1976. All EU Member States and India have ratified this Covenant and hence obliged themselves to realise the right to adequate food in all policy areas, including trade policy.

When it comes to the EU, ‘respect for human rights’ is one of the fundamental values ‘on which the Union is founded’ (Article 2).  Article 3.5 also elevates these values, making them the basis for the Union’s ‘relations with the wider world’. This is reaffirmed in Article 21, which states explicitly:

‘The Union’s action on the international scene shall be guided by the principles which have inspired its own creation, development and enlargement, and which it seeks to advance in the wider world: democracy, the rule of law, the universality and indivisibility of human rights and fundamental freedoms, respect for human dignity, the principles of equality and solidarity, and respect for the principles of the United Nations Charter and international law.’

Article 21 expressly obliges the EU to ensure ‘consistency’ with these principles in all areas of its external action. Moreover, concerning the common commercial policy of the EU, Article 207 of the Treaty on the Functioning of the European Union refers directly to these values and principles of the EU, and clearly stipulates: ‘The common commercial policy shall be conducted in the context and principles of the objectives of the Union’s external action’.

This is the background to my principle request to you.

The research report referenced above makes a key recommendation. This is that the European Commission should take seriously its human rights obligations, and commission a full ex-ante Human Right Impact Assessment of the proposed Free Trade Agreement, before it goes forward for ratification, with changes made as appropriate in light of that Impact Assessment. The report also calls for a post hoc report on any FTA implementation after a specified period.

This seems to me like a sensible approach, which potentially fosters free trade but provides appropriate safeguards.   Such calls for a full impact assessment have, however, not been well received by the Commission as yet, and I therefore turn to you, as my elected representative in Europe, for support. 

When you have had time to digest both this letter and the report, perhaps you would respond with answers to the following questions:

1) Do you agree that a full Human Rights Impact Assessment on the EU-India Free Trade Agreement currently under negotiation is appropriate?

2) If not, why not, given the EU’s (and by extension your legal obligations in this respect?

3) If you do agree, what steps do you propose to take to seek to ensure that a Human Rights Impact Assessment is commissioned by the European Commission?

4) How will you measure any success you have in your efforts?

5) How will you keep me, and other interested parties (including the NGOs who undertook the research report I have referred to) informed of your progress?

I will look forward to your answers.

Let me stress that I have no problem, in principle, with the development of global free trade.  However, any free trade agreement must ensure that what is agreed is fair to all partners not just in terms of the reduction of formal tariff barriers but also as regards the need to address pre-existing inequalities between trade partners.  In this case these inequalities include the fact that, technologically, Indian producers are often far behind the cost-efficiencies of European producers, through no fault of their own, and also that Europe, through its Common Agricultural Policy, is able to subsidise its agriculture at a point before tariffs come into play.

Most importantly, though, any free trade agreement must ensure that the human rights of the populations concerned are protected, as set out under international and European law.  In the case of the EU-India FTA, there is a risk that, were it to come into force as currently proposed, the EU, and its MEPs, would be failing to abide by these laws.  I am sure y0u do not want to be in this position.

 I think, given the relative urgency and importance of the situation, a response with 14 days will be appropriate.

Best regards

Yours sincerely

Paul Cotterill

There’s been little coverage in the UK blogosphere of the EU-India Free Trade Agreement (FTA), due to be signed off in February 2012 after 5 years of negotiations.  What coverage there has been has tended to focus on the possible impacts of the WTO Mode 4, built into the FTA at the demand of the Indian government, will have on the terms and conditions of British workers.  This is a relatively insignificant part of the whole.

Economist Left Outside (LO) does provide a decent overview of some of the real issues:

Will the trade help poor countries restructure their economies in productive ways or will it retard or reverse that process.

I’m tempted to believe it will with respect to India’s already well established services sectors. Demand from Europe should swell employment in the relatively high productivity service sector, which is what we want to see.

Even LO, though, expresses doubts:

However, investment in agriculture will probably become depressed in India as competition from subsidised European crops depresses returns in this sector. This could increase low-investment subsistence farming and decrease large scale efficient farming methods.

Sadly, it’s an awful lot worse than that.  Unless the European left acts quickly in concert with Indian colleagues, there is a very real risk that the Trade Agreement now in its final stages of negotiation will consign millions of already impoverished Indian villagers to further destitution.

An important new document, A Right-to-Food Impact Assessment of the EU-India Free Trade Agreement by an NGO Consortium, finds that the sudden arrival of subsidised food imports from an EU desperate to increase cheap exports in the light of falling domestic demand is likely to have devastating consequences on local producers, and on their ability to feed themselves and their families.  This is in a country where 224 million (26.9%) of the population already live with chronic hunger.

Because of budget constraints, the report focuses on two agricultural areas, milk and poultry. In both areas, it provides convincing evidence that small-scale farmers will be hit hardest by cheap imports and increased price volatility in circumstances that are already heavily debt laden.   When it comes to poultry meat, we find that domestic producers (amongst them 50% of all landless and marginal farmers) will suffer because chicken legs that would otherwise head for waste disposal, because Europeans prefer fillet, will instead be heading for urban India.

Perversely, the impact will be greater because, while India looks like it will agree to the abolition (over the next seven years) of import tariffs, the Common Agricultural Policy Direct Subsidy arrangements will remain untouched.

Even more perversely, these new developments come at a time when India is being urged to buy European sovereign debt to keep the world economy going.   Effectively therefore, the Indian government appears to be on the verge of agreeing to subsidise the EU’s continued support for its farmers, so that EU farmers can then export food to India, which in turn will mean that poor Indians do not get to eat.

The Impact Assessment report is long and detailed, but is well worth reading.  Of particular interest is the forensic scrutiny of the EU’s own formal obligations towards the people of India, which are currently being ignored. 

[The Lisbon] Treaty defines ‘respect for human rights’ as one of the fundamental values ‘on which the Union is founded’ (Article 2). Article 3.5 also elevates these values, making them the basis for the Union’s ‘relations with the wider world’. This is reaffirmed in Article 21, which states explicitly:

‘The Union’s action on the international scene shall be guided by the principles which have inspired its own creation, development and enlargement, and which it seeks to advance in the wider world: democracy, the rule of law, the universality and indivisibility of human rights and fundamental freedoms, respect for human dignity, the principles of equality and solidarity, and respect for the principles of the United Nations Charter and international law.’

Article 21 expressly obliges the EU to ensure ‘consistency’ with these principles in all areas of its external action. Moreover, concerning the common commercial policy of the EU, Article 207 of the Treaty on the Functioning of the European Union refersdirectly to these values and principles of the EU, and clearly stipulates: ‘The common commercial policy shall be conducted in the context and principles of the objectives of the Union’s external action’.

The Impact Assessment report calls on the EU to respect these obligations by carrying out its own, more extensive, ex-ante Right-to-Food Impact Assessment before the FTA is signed, followed by a further post-hoc assessment after a specified period. 

To date this call has fallen on deaf ears.  I’ll be writing to my MP/MEPs about the matter, urging them to do what they can to ensure that millions of rural Indians do not simply become the latest collateral damage of the latest drive to globalisation in the interest of those with the global power.