An inequality chasm is fracturing Europe, warns the OECD

April in Berlin, Germany. A homeless man sat begging for euros or food in the entrance of an S-Bahn station.

Deepening inequalities in income between the richer and poorer families, greater relative income poverty in recent years compared with earlier, a greater burden borne by children and young people than before because of their being relatively poor – these are some of the stark conclusions contained in the OECD briefing, ‘New Results from the OECD Income Distribution Database’.

This is the picture of Europe today (and of the non-European members of the OECD). “Looking at the 17 OECD countries for which data are available over a long time period, market income inequality increased by more over the last three years than what was observed in the previous 12 years,” observed the new briefing, which is sub-titled ‘Crisis squeezes income and puts pressure on inequality and poverty’.

Annual percentage changes in household market income between 2007 and 2010, by income component. Chart: OECD

The figures and data show that many of the countries recording the most dramatic increases in inequality are European countries which have been subjected to punitive austerity measures by the European Union and International Monetary Fund. The OECD report singles out Spain and Italy, where the income of “the poorest 10 percent was much lower in 2010 than in 2007”.

Five percent falls in income (per year) amongst the poorest 10 percent were also recorded in Greece, Ireland, Estonia, and Iceland. The only non-European nation with a comparable level of income decline was Mexico. The report also stated that over the same period, poor families in the United States, Italy, France, Austria and Sweden all recorded income losses in excess of the OECD average.

Indeed the ‘New Results’ briefing has showed that across OECD countries, real household disposable income stagnated. Likewise, the average income of the top 10% in 2010 was similar to that in 2007. Meanwhile, the income of the bottom 10% in 2010 was lower than that in 2007 by 2% per year. Out of the 33 countries where data are available, the top 10% has done better than the poorest 10% in 21 countries.

This is the OECD picture till 2010. Since then, recession has been the companion of inequality. With an average growth of -0.2 per cent in the first quarter (against -0.1 per cent in the EU as a whole) and hardly better prospects for the whole rest of the year (-0.7 per cent), according to Eurostat, the dreaded “double dip” has become a reality. The press attributes the result largely to the austerity policies.

Gini coefficient of household disposable income and gap between richest and poorest 10%, 2010: Chart: OECD

“Eurozone sets bleak record of longest term in recession,” reported the Financial Times. The daily noted that “this latest dismal record came after unemployment hit 12.1 per cent in the bloc, its highest level,” and that this data “is likely to add to pressure on the European Central Bank to take further action after cutting interest rates this month, and to revise down its economic forecast predicting a recovery later in the year.”

Moreover, relative income poverty – the share of people having less income than half the national median income – affects around 11% of the population on average across OECD countries. Poverty rates range between 6% of the population in Denmark and the Czech Republic to between 18% and 21% in Chile, Turkey, Mexico and Israel. Over the two decades up to 2007, relative income poverty increased in most OECD countries, particularly in countries that had low levels of income poverty in the mid-1990s.

In Sweden, Finland, Luxembourg and the Czech Republic, the income poverty rate increased by 2 percentage points or more. In Sweden, the poverty rate in 2010 (9%) was more than twice what it was in 1995 (4%). Relative poverty also increased in some countries, such as Australia, Japan, Turkey and Israel, with middle and high levels of poverty.

The OECD briefing has stated bluntly: “Households with children were hit hard during the crisis. Since 2007, child poverty increased in 16 OECD countries, with increases exceeding 2 points in Turkey, Spain, Belgium, Slovenia and Hungary.” The ‘New Results’ briefing added: “Since 2007, youth poverty increased considerably in 19 OECD countries. In Estonia, Spain and Turkey, an additional 5% of young adults fell into poverty between 2007 and 2010. In the United Kingdom and Ireland, the increase was 4%, and in the Netherlands 3%.”

Annual percentage changes in household disposable income between 2007 and 2010, by income group. Chart: OECD

Between 2007 and 2010, average relative income poverty in the OECD countries rose from 12.8 to 13.4% among children and from 12.2 to 13.8% among youth. Meanwhile, relative income poverty fell from 15.1 to 12.5% among the elderly. This pattern confirms the trends described in previous OECD studies, with youth and children replacing the elderly as the group at greater risk of income poverty across the OECD countries.

These results only tell the beginning of the story about the consequences of austerity, growing unemployment, the burden on children and youth, and burden on immigrant wage labour. The OECD data describes the evolution of income inequality and relative poverty up to 2010. But “the economic recovery has been anaemic in a number of OECD countries and some have recently moved back into recession”, said the briefing.

Worse, since 2010, many people exhausted their rights to unemployment benefits. In such a situation, the briefing has warned, “the ability of the tax-benefit system to alleviate the high (and potentially increasing) levels of inequality and poverty of income from work and capital might be challenged”. These are unusually blunt words from the OECD and their use reflects the depth and persistence of the crisis of modern, reckless, destructive capitalism in Europe.

Across wintry Europe, the spectre of creeping poverty

An Europe darkened. The ESDE 2012 has said that the large unemployment shocks experienced at the beginning of the crisis and the rising shares of the long-term unemployed point towards serious risks of long-term exclusion faced by a significant share of the population.

Five years of economic crisis and the return of recession has pushed unemployment in Europe to new peaks not seen for almost twenty years. Household incomes have declined and the risk of poverty or exclusion is on the rise, especially in Southern and Eastern Europe, according to the 2012 edition of the Employment and Social Developments in Europe Review.

This, the second edition of the Employment and Social Developments in Europe (ESDE), has been released by the European Commission’s Directorate-General for Employment, Social Affairs and Inclusion. The 2012 Review builds on the integrated approach to employment and social analysis embarked upon in the first ESDE Review of 2011 which did very well to concentrate on cross-cutting themes covering employment, in-work poverty, wage polarisation and income inequalities.

In the Baltic States, Bulgaria, Greece, Hungary, Italy, Malta, Poland, Portugal and Romania the risk of entering into poverty among the population aged 16 to 64 is associated with few chances to get out again, meaning that individuals falling into poverty have limited chances to get back out of it in the following years. Among these countries, this situation is most worrying in Bulgaria, Romania, Estonia, Greece, Malta, Portugal and to a certain extent Italy. Graphic: EU-ESDE 2012

The ESDE 2012 has said that “impact of the crisis on the social situation has now become more acute as the initial protective effects of lower tax receipts and higher levels of spending on social benefits (so-called ‘automatic stabilisers’) have weakened”.

This means, the ESDE has added, that a new divide is emerging between countries that seem trapped in a downward spiral of falling output, fast rising unemployment and eroding disposable incomes and those that have so far shown good or at least some resilience. [The link to the full report [pdf 23 MB] is here.]

The situation has been described as “especially catastrophic in southern and eastern European countries” by the website of the International Committee of the Fourth International (ICFI). Previously, only wars have devastated national economies so thoroughly in such a short time as have the austerity measures of the European Union, the ICFI has observed.

This scene, as if from another age of blithe consumption in Europe, is now more likely to be found (instead of in Berlin where I took the picture) in the metropolises of Asia

Indeed the ESDE findings are a deep shade of gloom. The average EU unemployment rate climbed to almost 11%. The report confirms a new pattern of divergence, which is most striking between the North and the South of the eurozone. The unemployment rate gap between these two areas was 3.5 points in 2000, fell to zero in 2007 but then has widened fast to 7.5 points in 2011.

Despite the social catastrophe they have provoked with their austerity policies, European governments are intent on tightening the fiscal screws. They are no longer limiting themselves to the periphery of the euro zone, but are ever more ferociously attacking the working class in the core countries. In Greece and Spain, one in four is officially unemployed, and over half of all young people have no work.

Average household income has fallen by 17 percent in Greece over the past three years and by 8 percent in Spain. The health care, pension and social security systems face total collapse. And yet new, draconian austerity plans have been drawn up for Italy, France and Germany. In Britain, where almost a quarter of the population already lives in poverty, the Cameron government is systematically dismantling the National Health System, public education and social welfare.

Official, how the rise of the 1% deepened social inequality in the USA

The report, ‘Trends in the Distribution of Household Income Between 1979 and 2007’, by the Congressional Budget Office (October 2011) on income inequality underscores the total disengagement between the Obama administration and the entire political system on the one hand and the interests and desires of the vast majority of Americans on the other. In the USA, the political and media establishment is presently occupying itself instead with a debate over how much further taxes for the corporations and the rich should be cut and how much more deeply social programs for workers and poor people should be slashed.

The Congressional Budget Office (CBO) report stated: “To assess trends in the distribution of household income, the Congressional Budget Office (CBO) examined the span from 1979 to 2007 because those endpoints allow comparisons between periods of similar overall economic activity (they were both years before recessions). The growth in average income for different groups over the 1979–2007 period reflects a comparison of average income for those groups at different points in time; it does not reflect the experience of particular households. Individual households may have moved up or down the income scale if their income rose or fell more than the average for their initial group. Thus, the population with income in the lowest 20 percent in 2007 was not necessarily the same as the population in that category in 1979.”

The massive growth of social inequality over the past three decades has been the result of an unrelenting ruling class offensive against the working class. That assault has been carried out under Democratic as well as Republican administrations.

The CBO report stated: “Real (inflation-adjusted) mean household income, measured after government transfers and federal taxes, grew by 62 percent between 1979 and 2007. Over the same period, real median after-tax household income (half of all households have income below the median, and half have income above it) grew by 35 percent. Because the mean (or average) can be heavily influenced by very high or very low incomes, the large gap between mean and median income growth signals a pattern of growth that was heavily weighted toward households with income well above the median.”

The offensive against American labour and the working class was launched in earnest during the Ronald Reagan presidency, as early as 1981. That was the signal for more than a decade of wage-cutting, strike-breaking, union-busting and labor frame-ups, made possible by the complicity of the trade union bureaucracy. It deliberately isolated and betrayed scores of bitter struggles in order to break the militant resistance of the working class.

The CBO report stated: “The distribution of after-tax income (including government transfer payments) became substantially more unequal from 1979 to 2007 as a result of a rapid rise in income for the highest-income households, sluggish income growth for the middle 60 percent of the population, and an even smaller increase in after-tax income for the 20 percent of the population with the lowest income.”

The spread of social misery in the midst of soaring corporate profits and CEO pay is starkly shown in the growth of poverty in US suburbs. The New York Times recently reported that the ranks of the poor living in the suburbs of US cities rose by more than half between 2000 and 2010. Two thirds of these new suburban poor dropped below the official poverty line between 2007 and 2010. The Times article, reporting analyses of US Census data by the Brookings Institution, said the increase in poverty in the suburbs was 53 percent, compared with 26 percent in the cities.

In fact, average real after-tax household income for the 1 percent of the population with the highest income grew by 275 percent between 1979 and 2007. Average real after-tax income for that group has been quite volatile: It spiked in 1986 and fell in 1987, reflecting an acceleration of capital gains realizations into 1986 in anticipation of the scheduled increase in tax rates the following year.

Income growth for the top 1 percent of the population rebounded in 1988 but fell again with the onset of the 1990–1991 recession. By 1994, after-tax household income was 50 percent higher than it had been in 1979. Income growth surged in 1995, averaging more than 11 percent per year through 2000. After falling sharply in 2001 because of the recession and stock market drop, average real after-tax income for the top 1 percent of the population rose by more than 85 percent between 2002 and 2007.

Of German wurst, French fries and an IMF bullet

A closed chips stall called 'La Reine des Fritures' ('The Queen of French Fries') in French Flanders. Photo: Stephan Vanfleteren / Panos Pictures

Le Monde Diplomatique, that fearless critic of globalisation and the tyranny of the multilateral lending institutions, has said in its 2011 December issue that in November, the Franco-German directorate of the European Union, the European Central Bank and the International Monetary Fund — the ‘troika’ — were furious when the Greek prime minister, George Papandreou, announced plans to hold a referendum.

Absolute oligarchs dislike referendums because the idea has a great deal to do with consultation – not a favourite subject for the IMF in the 67 years it has claimed to shape the global economy. That is why, summoned to Cannes for an interview during a summit that his country was too small to attend, kept waiting, and publicly upbraided by Angela Merkel and Nicolas Sarkozy (who were responsible for exacerbating the crisis), Papandreou was forced to abandon the plan for a referendum and resign. His successor, a former vice-president of the ECB, promptly decided to include in the Athens government a far-right organisation banned since the Greek colonels lost power in 1974.

In ‘Europe in crisis, rule by troika’, Serge Halimi has written in LMD that the European project was supposed to secure prosperity, strengthen democracy in states formerly ruled by juntas (Greece, Spain, Portugal), and defuse “nationalism as a source of war”. But it is having the opposite effect, with drastic cuts, puppet governments at the call of the brokers, and renewed strife between nations. Everything, in short, that the IMF and the World Bank have pursued since 1944 mostly successfully in Asia, Africa and South America.

Former bankers Lucas Papademos and Mario Monti have taken over in Athens and Rome, exploiting the threat of bankruptcy and the fear of chaos. They are not apolitical technicians but men of the right, members of the Trilateral Commission that blamed western societies for being too democratic. “Having crushed Greece and Italy, the EU and the IMF have now set their sights on Hungary and Spain,” Halimi has written, and it is a grim warning.

A ferris wheel runs in the centre of Brussels next to an old building advertising Martini and Zanussi. Photo: Stephan Vanfleteren / Panos Pictures

Red Pepper has more on the ways and means of the IMF.

“It’s stripped millions of people of their livelihoods, but the global economic crisis has brought one institution back from the dead: the International Monetary Fund. Two years ago, the IMF looked to be on its last legs. It had got to the stage where nobody wanted to borrow its money. Many developing countries started accumulating reserves to avoid ever having to go to the IMF loan shark. Developed countries in trouble would go just about anywhere – China, Russia, Saudi Arabia – to avoid the IMF.”

Then came the meltdown. “The IMF failed to see it coming – pretty damning for a body supposed to oversee global financial stability – but bankrupt countries suddenly had no choice but to come begging.” Exactly the point – the IMF did see it coming because this is what its prescriptions for the previous decade were aimed at in the first place. In April last year, the G20 pumped the organisation with £330 billion of new funds. Uruguayan writer Eduardo Galeano called the decision ‘black humour’, saying it would ‘rub salt in the wound’ of countries hit by a crisis they did not create. The IMF is now re-armed and doubly dangerous, with large new areas in what was formerly the Eurozone to subjugate.

Not quietly by any means. After all, the Greeks are Greeks first and then, perhaps, Europeans. Ditto with the Italians, Portuguese, Hungarians, Spaniards and Latvians. It is looking rather like the Germans and the French (elite, mind you, not the labour, the unemployed, the migrants and the armies of informal workers struggling on 25 euros a day) are the last Europeans left.

But this is why major protests have been convulsing Greece throughout the autumn with strikes, and occupations of the main squares in many towns. Civil servants blockaded their ministries, preventing ministers from accessing their departments in September and October. The early November surprise announcement of a popular referendum in Greece on the EU-IMF loan terms and conditions would have marked the first time an IMF lending package was subjected to a test of popular ownership. In the end the political pressure heaped on the Greek prime minister by other European countries, the Greek political opposition and factions from within his own government forced him to back down and resign as prime minister.

After the collapse of the Greek government, Elena Papadopoulou of the Athens-based Nicos Poulantzas Institute said: “Despite the proclaimed enthusiasm, there is no realistic reason to believe that the new coalition government – with the participation of the extreme right – will follow anything other than the socially destructive policies applied according to IMF recipes with the agreement of the European elites.”

The IMF, its directeur général, and a New York hotel maid

Friday afternoon, South Asia

"Do you really think I've nothing better to do?"

The business zine ‘Emerging Markets’ has reported that French finance minister Christine Lagarde “has emerged as the frontrunner to succeed Dominique Strauss-Kahn as IMF chief as the chances of former Turkish politician Kemal Dervis receded”. Apparently, there were hopes that Kemal Dervis would become the first emerging market politician to head the IMF, but these have faded Lagarde emerged as frontrunner to succeed DSK.

The zine has said that “senior policy officials” consulted by it said they were backing the French finance minister (pic left) in the wake of Strauss-Kahn’s dramatic resignation. A key ally of former Turkish economy minister Kemal Dervis, a leading contender for the role, acknowledged that his chances of clinching the top job had receded.

Asked whether Dervis woud become managing director Homi Kharas, a deputy to the former Turkish finance minister now at the Brookings Institution in Washington, told Emerging Markets: “Unfortunately I think it’s unlikely.” He said Lagarde’s appointment could undermine the IMF’s legitimacy if her candidacy is secured solely through a political deal among rich nations. “Major countries at the end of the day are prepared to forgo the principle of technocratic appointments for the short term expediency of having a politically trusted friend and that seems to be the way that the world is currently governed.”

The result will be a revolt against the Fund by developing countries, he added. “What we will see from the emerging nations is that they will vote with their feet. “Developing nations can make [international financial institutions] less relevant as global institutions and restrict them to being essentially institutions that play in the arena of the spheres of influence of the rich countries. That is what is happening more and more.”

Wednesday evening, South Asia

The IMF is obviously very slow to learn, or chooses not to, or has jettisoned Strauss-Kahn. Following its first bland, utterly non-committal and quite unconcerned statement about l’affaire DSK, it has come out with a second which, if possible, bests the first at idiocy in the face of a massive loss of moral face.

Here is the statement:

The IMF logo seen during a news conference in Bucharest, March 2009. Photo: Reuters/Bogdan Cristel/Files

“The following can be attributed to William Murray, an IMF spokesman, in response to questions regarding contact with the Managing Director and on speculation in media about his status: ‘We have not had contact with the Managing Director since his arrest in New York. Obviously, it will be important to be in contact with him in due course. We are aware of widespread speculation about the Managing Director’s status. We have no comment on this speculation, other than to note, as we did earlier this week, that the Executive Board was briefed informally on developments regarding his arrest in New York. We continue to monitor developments. Meanwhile, Mr. John Lipsky remains acting Managing Director, and the Fund continues its normal work’.”

This sounds a lot like the IMF is saying – “well it’s just one of those things, let’s just say not very much out of the ordinary is happening and let’s assure you that we’re still doing what we do best, which is wreck the lives of people in developing countries”.

Under Francois Mitterrand, Strauss-Kahn served as a minister, then became a corporate lobbyist in the 1990s. As finance minister in the 1997-2002 Jospin “Plural Left” government, Strauss-Kahn privatized several public firms—France Télécom, Crédit Lyonnais bank, and defense firm Thomson-CSF. After resigning as minister in 1999 in a bribery scandal, he remained a major figure inside the PS and corporate circles, taking the IMF post after being nominated by Sarkozy in 2007.

As IMF chief, he has overseen deep social cuts impoverishing workers in many indebted countries—Greece, Ireland, Latvia, Hungary, Romania, and Pakistan—in exchange for IMF loans. He recently oversaw financial negotiations with the military dictatorship in Egypt, as it tries to combat the resistance of the working class following the departure of Hosni Mubarak.

Zhu Min, Group Executive Vice-President, Bank of China, speaks during a session at the World Economic Forum Annual Meeting of the New Champions in Tianjin, China 28 September 2008. Photo: World Economic Forum

The ‘Letter from China’ blog in The New Yorker points to some of the turmoil over leadership of the IMF, and what is slowly being seen as Asian pressure over what has so far been Western dominance of the Fund and Bank senior positions.

As pressure builds on Strauss-Kahn, said the blog, today’s Huanqiu Shibao is decidedly less cautious: “If a Chinese person takes the post”—of managing director—“it will greatly promote economic exchange between China—the country with the largest trade volume and holdings of foreign reserves—and the international community.” Another Huanqiu article referred to speculation in the Western press that China’s top official at the IMF, Zhu Min, a Johns Hopkins-and-Princeton-trained economist, is among the oft-mentioned candidates. The story concluded gloomily that Western reports generally see Zhu as insufficiently experienced, and likely to reach only a deputy managing director “this time, in part because “Europe and America will oppose the appointment of a Chinese person to lead the IMF.”

Monday evening, South Asia

Dominique Strauss-Kahn, head of the International Monetary Fund, is lead from a police station Sunday, May 15, 2011 in New York where he was being held. Photo: AP

In Europe and in the multilateral financial institutions, positions are cautiously being taken over the Strauss-Kahn case. So far, the Euromedia has focused a great deal on the effect l’affaire DSK is having on the French presidential election and the challenge to Sarkozy. But what about the IMF and World Bank? Silence. What about the men and women who run these enormously powerful and influential organisations – what do they have to say about this case and its reflection on their collective values? More silence.

We have heard from The Economist, which has long been a staunch ally of the Fund and the Bank. “Whatever the fall-out on French politics, Mr Strauss-Kahn’s arrest has left the IMF reeling. One insider called it a ‘disaster’,” the commentary noted. “Although he had been expected to leave within a couple of months, Mr Strauss-Kahn, unless quickly exonerated, will now presumably be forced out far sooner. That leaves the fund without a political heavyweight at the top in the midst of important negotiations with European policymakers over Greece’s debt crisis.”

What is noteworthy is the ways in which these institutions are discussed by the biggies of global and international economics. Only 10 days ago, Joseph E Stiglitz is University Professor at Columbia University, a Nobel laureate in Economics, and the author of ‘Freefall: Free Markets and the Sinking of the Global Economy’, had this to say about the IMF and DSK.

“For progressives, these abysmal facts [growing inequality, recession, unemployment] are part of the standard litany of frustration and justified outrage,” wrote Stiglitz. “What is new is that the IMF has joined the chorus. As Strauss-Kahn concluded in his speech to the Brookings Institution shortly before the Fund’s recent meeting: ‘Ultimately, employment and equity are building blocks of economic stability and prosperity, of political stability and peace. This goes to the heart of the IMF’s mandate. It must be placed at the heart of the policy agenda.’ Strauss-Kahn is proving himself a sagacious leader of the IMF. We can only hope that governments and financial markets heed his words.”

I really wonder what Prof Stiglitz thinks of his encomiums now. Reality outside the cozy models of macroeconomics can be startlingly, starkly different.

Sunday evening, South Asia

Le Nouvel Observateur's website on Sunday was entirely Strauss-Kahn.

The Sunday lurched on about L’affaire DSK and in my view the most confused reactions have come from the media in France. They seem confused about what they ought to feel and say. There are some responses concerning the blow to the honour and prestige of France dealt by the sordid allegations, but there is also a sense of bemoaning the end of a challenger to Sarkozy, and quite a few mutterings that this is a dreadful plot to trap Strauss-Kahn.

Here is a selection of the reaction and early views on the impact of L’affaire DSK.

Euronews has reported that lawyers for Dominique Strauss-Kahn, the head of the International Monetary Fund, said on Sunday that their client will plead not guilty to accusations of trying to rape a maid at a New York hotel. “A spokesman for the New York Police Department said Strauss-Kahn faces charges of a criminal sexual act, attempted rape and unlawful imprisonment. The IMF chief does not have diplomatic immunity and was set to appear in court later on Sunday.”

Business Insider has quite bluntly said that ‘IMF Throws Dominique Strauss-Kahn Under The Bus’. “The IMF is not exactly standing up for the man,” they wrote, referring to the bland and shifty IMF statement issued today. “The IMF has already had to investigate and apologize for one Strauss-Kahn sex scandal (an affair with a subordinate). Strauss-Kahn survived that one, after apologizing publicly to the IMF and his wife. His surviving this one, at least with his job intact, seems unlikely.”

The New York Times has pronounced in a headline, ‘Arrest Throws French Politics Into Disarray’. This is hardly so. What has thrown France and its suffering workers into disarray is not such conduct, but the imperial ambitions of Sarkozy in Africa and his government’s ramshackle social spending at home. “For months, France has been buzzing with speculation that Dominique Strauss-Kahn, the popular chief of the International Monetary Fund, would quit his job in Washington to take on President Nicolas Sarkozy in next year’s presidential elections,” the NYT said. “On Sunday, French politicians and media met news of his arrest in New York for alleged sexual aggression with stunned disbelief and expressions of national humiliation. The incident threw Mr. Strauss-Kahn’s political party, the Socialists, into confusion and set the stage for a new political calculus that could allow the National Front, the far-right party led by its founder’s daughter, Marine Le Pen, to become a more dominant force during the election campaign.”

The Guardian has got to the point. “The allegations threaten to severely damage the standing of the IMF, where Strauss-Kahn was leading the response to the global financial crisis.” The newspaper reported that Strauss-Kahn had been on his way to Europe to discuss the worsening European debt crisis. A meeting in Berlin with Angela Merkel scheduled for Sunday has been cancelled. He was also scheduled to meet European financial ministers on Monday and Tuesday and was to have discussed how best to tackle Greece’s debt crisis and finalise Portugal’s €78bn bailout package. The British newspaper also provided the information that the Sofitel hotel in New York where Strauss-Kahn was staying is in the heart of the theatre district, and he had a US$3,000 (£1,850) a night suite.

In Paris, France Soir asked in disbelief: “Accusé d’agression sexuelle, DSK est-il victime d’un complot? DSK est-il victime d’un complot, d’une manipulation? Quelques heures après le coup de tonnerre et l’annonce de l’arrestation du patron du FMI, les déclarations en ce sens sont de plus en plus nombreuses.” Melodrama apart, what this means is that France Soir has said that Strauss-Kahn could well be the ‘victim of a conspiracy’ and the ‘target of manipulation’.

A more bizarre response has come from Liberation, which usually seems to have its finger on the pulse of things. “Pour 2012, DSK semblait le mieux armé pour répondre au désarroi des Français, épuisés par la crise et désorientés par le règne foutraque de Sarkozy: l’expérience internationale, la crédibilité de l’économiste, la fibre sociale, le savoir-faire d’un négociateur hors pair leur laissaient penser qu’il saurait mieux que tout autre défendre leurs intérêts et ceux de la France.”

Roughly translated, this means: “For 2012, DSK seemed best equipped to respond to the distress of the French, who are exhausted by the financial and social crisis and disoriented in the reign of Sarkozy. With his international experience, the credibility of being an economist, his knowledge of the social fabric and negotiating skills left them thinking that he would defend their interests and those of France.” What exactly is Liberation talking about? Perhaps it’s not a good idea to get their writers to consider anything serious on a Sunday morning.

The New York Daily News on the IMF head

[Earlier post] It’s too early to tell the whys and wherefores, but here’s a small selection of reportage about the astounding Strauss-Kahn incident. The French media have lots to say too, since the IMF head is/was expected to run for president of France.

Update: The IMF has released a very short statement on the bizarre affair. Here is the text from the IMF website:

Ms. Caroline Atkinson, Director of External Relations at the International Monetary Fund (IMF), issued the following statement today: “IMF Managing Director Strauss-Kahn was arrested in New York City. Mr. Strauss-Kahn has retained legal counsel, and the IMF has no comment on the case; all inquiries will be referred to his personal lawyer and to the local authorities. The IMF remains fully functioning and operational.”

The Boston Globe – The head of the International Monetary Fund was taken into custody and accused of a sexual assault yesterday, just before he was to fly to Paris from John F. Kennedy International Airport, authorities said. Dominique Strauss-Kahn was accused of attacking a maid earlier in the day at a Times Square hotel, authorities said.

WNYC News Blog – NYPD Deputy Commissioner Paul Browne confirmed that Strauss-Kahn, the 62-year-old managing director of the International Monetary Fund, was being questioned by detectives from Manhattan’s Special Victims unit about an alleged sexual assault said to have taken place around 1 p.m. Saturday at the Sofitel Hotel. “The 32-year-old maid reported that Strauss-Kahn emerged from the bathroom naked and sexually assaulted her,” said Browne.

Update: Al Jazeera has carried a brief and generally unflattering profile of the IMF head. It has called him an architect of France’s economic recovery in the late 1990s, Strauss-Kahn, popularly known in France as “DSK”, served in a Socialist government as finance minister between 1997 and 1999. He cut the public deficit to qualify France for the euro and took steps that led to the privatisation of some state firms.

The profile has said that Strauss-Kahn, 62, was forced to resign from Socialist prime minister Lionel Jospin’s government in 1999, after he was caught up in a corruption scandal, but a court later cleared him. A former professor of economics at the Institut d’Etudes Politiques de Paris, Strauss-Kahn has come in for criticism over his luxurious style, seen by some as inappropriate for someone who wants to become the leader of the French left. Despite being based in Washington, he has continued to spend a lot of time in France, and the New York Post newspaper reported that he had a deal with Air France to get on any flight. New York police pulled him off a Paris-bound flight on Sunday night.

Some early reactions from the press in France:

Dominique Strauss-Kahn, popularly known in France as 'DSK', served in a Socialist government as finance minister between 1997 and 1999. He cut the public deficit to qualify France for the euro and took steps that led to the privatisation of some state firms. Photo: Al Jazeera/AFP

Le Parisien – En Direct.  DSK arrêté à New York pour “tentative de viol” présumée – Dominique Strauss-Kahn était venu au siège du Parisien-Aujourd’hui en France pour y rencontrer des lecteurs. Le patron du FMI et favori des sondages pour la présidentielle 2012 en France.

Le Monde – Le directeur général du Fonds monétaire international (FMI), Dominique Strauss-Kahn, a été arrêté samedi 14 mai à l’aéroport JFK de New York et placé en garde à vue pour une agression sexuelle présumée dans un hôtel de la ville.

RTL.fr – Le mot utilisé et qui fait parler tout Internet est “sodomy”, qui signifie avant tout “agression sexuelle”. Le directeur général du FMI, Dominique Strauss-Kahn, 62 ans, a été placé en garde à vue samedi à l’aéroport JFK, à New York, où il est interrogé.

nouvelobs.com – Le directeur général de l’institution avait fait l’objet d’une enquête concernant une liaison qu’il avait eu avec une subordonnée. Le directeur général du FMI Dominique Strauss-Kahn, arrêté samedi à New York suite à des accusations d’agression sexuelle.

Le Monde – L’arrestation samedi 14 mai à New York de Dominique Strauss-Kahn, accusé d’agression sexuelle, pourrait donner un coup d’arrêt à la potentielle candidature à la primaire socialiste pour la présidentielle de 2012 du directeur général du FMI.

It looks very like prescience for, on 6 April, Bretton Woods Project published an article titled, ‘Heading for the right choice? A professional approach to selecting the IMF boss’. This said: “In 2009, the IMF agreed to ‘adopt an open, merit-based and transparent process for the selection of IMF management’. It was a commitment that was long overdue. The informal ‘gentlemen’s agreement’ made at the end of World War II that European governments could select the head of the IMF so long as the US got to choose the World Bank boss had long been regarded as outdated and illegitimate.”

The impression that the rich governments which have run the IMF have dragged their heels on this enormously important issue is hard to avoid. “It matters who the head of the IMF is, and it matters how they are chosen. It matters for the legitimacy of an organisation that, through the stringent conditions often attached to its loans, has a powerful hand in economic policy making – and hence politics – in many countries, particularly poorer ones.”

I am sure that those who have long been calling for IMF reform will be wondering about this week-end’s events concerning Strauss-Kahn. They are: ActionAid, Afrodad, Bond, Bretton Woods Project, Cafod, CRBM, Christian Aid, CIDSE, 11.11.11. Halifax Initiative, Eurodad, Jubilee Debt Campaign, Forum Syd, New Rules for Global Finance, The Norwegian Forum for Environment and Development, Oxfam, The Social Justice Committee of Montreal, SLUG, WDM, TWN and Weed.

US Census poverty data: more poor today than 50 years ago

Outside a community centre, Los Angeles

A finding of great importance was released this week, of the number of people living in poverty in the United States of America (USA). The data was released by the US Census Bureau, which is carrying out the 2010 census of the USA.

The message is a stark indicator of the acute ill-health of the current global economic system and needs to be treated as such. The number of people living in poverty in the USA rose to 43.6 million in 2009 – this is the largest number since the agency began making such estimates 50 years ago and represents an increase of 3.8 million compared to 2008. As of last year, one in every seven Americans was poor, according to the government’s definition of poverty. The official poverty rate of 14.3% is the highest since 1994.

Handicapped man begging at a traffic light, Los Angeles

The poverty rate jumped more than a full percentage point, from 13.2% in 2008. There were 8.8 million families living in poverty in 2009, including one child in every five. This is the same rate of child poverty that existed nearly five decades ago, when President Lyndon Johnson announced his “War on Poverty”. With this data, the government of the USA is advised to cease and call off all the other wars it is waging and renew the war on poverty within its own boundaries.

Reflecting the impact of the economic slump and mass layoffs and wage-cutting, the increase in poverty was concentrated among working-age adults and their children – the poverty rate for working-age adults rose from 11.9% to 12.7% percent, for children the poverty rate rose from 19.4% to 20.7%, and the poverty rate for those 65 and older fell from 9.7% to 8.9%.

The new figures on poverty in the USA have powerfully shown that what passes for contemporary economic theory, such as the efficient markets hypothesis, has nothing whatsoever to do with human development. The ‘efficiency’ of markets are a direct expression of the needs of finance capital which has assumed such a powerful role in the world economy over the past three decades.

Why has such devious and destructive theory been turned into policy for so long? Because it serves definite financial interests. Because, without such hypotheses and the support given them by the system we call ‘globalisation’, most of the trading and risk models used by major financial institutions would have to be thrown out.. These figures from the USA – amplified a thousand times in the figures from less industrialised countries – show why the system is choking every species on the planet including our own.

For readers from the USA, there is an objective commentary of the new poverty data here. The actual US Census Bureau data, analysis and supporting information is available here.

The Economic Policy Institute commented: “For the first time on record, the nominal (non-inflation adjusted) income of the median, or typical, household actually fell, from $50,303 in 2008 to $49,777 in 2009. Inflation was negative from 2008 to 2009, dropping by 0.4%, so real (inflation-adjusted) income did slightly better. Real median income declined by $335 from $50,112 in 2008 to $49,777 in 2009, a decline of 0.7%. The real median income of working-age households declined even more, falling by $754 from $56,575 to $55,821. African Americans were hit particularly hard in 2009, with the median African American household income dropping by 4.4%.”

The retail price of fuel advertised at a petrol pump (gas station)

The EPI said the 4.7 million drop in the number of earners working full-time, full-year, was “particularly astonishing”. A disproportionate amount of this decline was among men — the number of men working full-time, full-year dropped by 3.8 million, while there was a 900,000 drop in the number of women working full-time, full-year. The job loss and hours reductions of 2009 meant there was a 3.7 million drop in the number of workers with any earnings at all in 2009, and a 1.1 million increase in the number of workers working part-time and/or part-year.

That’s not all, said the Urban Institute. “This 15-year high still understates the dire straits of many Americans today.” The current recession began in December 2007, and the unemployment rate doubled (from 5 to 10%) between December 2007 and December 2009. The Census poverty estimates are based on family income received during the 2009 calendar year. Since the unemployment rate rose during the year, the 2009 poverty rate understates deprivation at the end of the year.

Making sense of OECD’s new ‘interim’ assessment

What's all the ruckus about then? We know the economy's broke.

With its customary fence-sitting and misplaced political correctness in times of trouble, the OECD (Organisation for Economic Co-operation and Development, all of 33 members strong now) has released its ‘Interim Assessment’ of the economic outlook for OECD countries.

The material and pontifical tone is attributed to Pier Carlo Padoan, OECD Chief Economist and Deputy Secretary-General, whose opening salvo is enough to put you off interim assessments for the rest of the year: “Recent high-frequency indicators point to a slowdown in the pace of recovery of the world economy that is somewhat more pronounced than previously anticipated. Against this background and according to the OECD short-term forecasting models, growth could slow in the G7 economies to an annualised rate of about 1.5% in the second half of the year. There is nevertheless great uncertainty in the outlook arising from a combination of weaknesses and strengths.”

Shorn of the absurd caution with which tenure economists of the neo-classical persuasion litter their pronouncements, here is what the esteemed Mr Padoan has said: households are becoming broke, the recession has had a lot to do with their becoming broke, there are not enough jobs for the members of these households, the jobs that they do have are by no means secure, and that’s why they’re being very very careful with spending.

The “interim assessment” put it differently in what purports to be Anglais: “Private consumption growth may be constrained by additional adjustments by households to the balance-sheet losses suffered during the recession and in response to housing market developments, should house prices weaken further. In addition, uncertainty about unemployment could put a damper on the expansion of private consumption. A weak economy and uncertainty in sovereign debt markets might also affect adversely the financial system and private demand gowth through deleterious feedback mechanisms.”

Losses, deleterious, uncertainty, unemployment, damper, weak, debt – these are the keywords. You’ll get the hang of it.

MDGs, hunger and the global food system

Rawal Dam Running Dry: A canoe near the former bank edge of Rawal Dam reservoir was left high and dry when waters receded to dangerously low levels due to the prolonged drought afflicting much of Pakistan. Officials of Pakistan’s Small Dams Organization (SDO) told the nation’s English-language Dawn newspaper that dam water was just 20 feet (6 meters) above the dead level and that the current supply might last only until mid-July. The reservoir has reached such low levels only once before, during the drought year of 2003. Photograph by Aamir Qureshi, AFP/Getty Images

A new report from the International Food Policy Research Institute (IFPRI, a US-based think-tank), discusses meeting the UN Millennium Development Goal to halve hunger. The report is called Business As Unusual.

The report says that the global food governance system itself needs to be reformed to work better. Reforms should include (1) improving existing institutions and creating an umbrella structure for food and agriculture; (2) forming government-to-government systems for decision-making on agriculture, food, and nutrition; and (3) explicitly engaging the new players in the global food system-the private sector and civil society-together with national governments in new or reorganised international organizations and agreements. A combination of all three options, with a leading role for emerging economies, is required.

The first step in reducing poverty and hunger in developing countries is to invest in agriculture and rural development. Most of the world’s poor and hungry people live in rural areas in Africa and Asia and depend on agriculture for their livelihoods, but many developing countries continue to underinvest in agriculture. Research in Africa and Asia has shown that investments in agricultural research and extension have large impacts on agricultural productivity and poverty, and investments in rural infrastructure can bring even greater benefits.

After the 2006-08 crisis, when staples such as maize, rice and wheat climbed to their highest prices in 30 years, many donor countries, aid agencies and analysts suggested that the existing Committee on World Food Security (CFS) be reformed. The CFS is a technical committee of the FAO, and serves as a forum in the UN system for the review and follow-up of policies on world food security, food production, nutrition, and physical and economic access to food.

Islamabad Water Carrier: Water shortages have become common for many people in the capital who must gather their daily water from government tankers or private trucks, when it's available at all. The nation’s acute rainfall shortage has also cut water supplies at hydroelectric dams, exacerbating disruptive power shortages and forcing officials to implement some rather dramatic solutions. Photograph by Aamir Qureshi, AFP/Getty Images

Jacques Diouf, director-general of FAO, announced last week that the CFS was being reformed to make it a “global platform for policy convergence and the coordination of expertise and action in the fight against hunger and malnutrition in the world”.

Uncoordinated policy actions of governments across the world during the 2006-08 food crisis made prices even more volatile and affected access to markets, said a new joint Agricultural Outlook for the next 10 years, produced by the Organization for Economic Cooperation and Development (OECD) and FAO. Food prices have come down, but are still high, according to FAO.

“While food prices have dropped, incomes because of the recession have been reduced by a much higher rate,” said Holger Matthey, an economist at the UN Food and Agriculture Organization (FAO). Some aspects of this “business as unusual” approach have already been successful in a few countries, but they need to be scaled up and extended to new countries to have a real impact on the reduction of global hunger.

Scaled-up investments in social protection that focus on nutrition and health are also crucial for improving the lives of the poorest of the poor. Although policymakers increasingly see the importance of social protection spending, there are still few productive safety net programs that are well targeted to the poorest and hungry households and increase production capacity.

The OECD-FAO Outlook has acknowledged that the 2006-08 food price crisis “was due to the contemporaneous occurrence of a panoply of contributing factors, which are not likely to be repeated in the near term. However, if history is any guide, further episodes of strong price fluctuations in agricultural product prices cannot be ruled out, nor can future short-lived crises”.