Sustainable Debt — And West-Russia-China-Japan?
EDITORIAL, 17 Aug 2015
The game is dirty and has lasted 70 years. It came with the idea of development as imitating, but not catching up, with the West, for all states, including the deluge of states due to decolonization.
The formula for big profit is simple: give credit to a country poor enough not to be able to pay it off quickly, yet not so poor that it cannot go on servicing the loan for years. To be worthwhile the project must be capital-intensive, like (air)ports and highways to the (air)ports for import-export, assembling cars–something for the rich. Investment to lift up people in misery, or ravished nature, makes no sense: the poor need very little capital and can only pay back in labor, whereas nature pays back but is not capitalized.
Ideally, the country asks for more credit to service the first, and a second, third loan is then offered at higher interest. Till the debt is non-sustainable; the debtor country is then squeezed dry.
Then comes the time for debt relief, provided the profit made on investment in debt exceeds the debt forgiven.
From Agence France Presse comes a study (firstname.lastname@example.org 11 Aug 15): Germany made € 100 billion on the Greek crisis since 2010–amounting to 3% of the GDP–on the difference between interests paid to German banks and the interest they paid; from German banks to ECB 1%, to German banks from debtors, say, 6%.
Germany’s share of the total bailout package to Greece–with the latest for payment due August 20–is € 90 billion, meaning a € 10 billion profit if Greece cannot be squeezed further. The money flowing into Greece is to keep banks, not people, afloat. And to benefit USA, France and the Netherlands, but to a lesser extent than Germany.
This is the way the Third World has been treated by the USA-based IMF and the World Bank; what is new is EU treating a fellow EU member like a Third World country (or worse).
Next in line is Ukraine, divided by the same deep European faultline between Catholic-Protestant and Orthodox countries that puts Greece on the wrong side. Hence the strong reaction when Russia took back Crimea, the 1954 gift, and supported the Orthodox Eastern part fighting for autonomy, with troops and arms like the USA does for the Catholic part. That part is hopelessly corrupt, drowning in debt already, and the idea was that the richer Eastern part would pay.
However, with Kiev losing Crimea and, let us call it Donetsk, efficient, industrialized Ukraine’s debt is no longer sustainable. Off they went and the West is left with the debt, and the meager comfort of punishing Russia with sanctions also hitting themselves.
Thus, the West itself becomes less sustainable.
How about Russia?
No doubt sanctions hit, no doubt there is a sense of isolation. The alliance with China does not compensate, Russians and Chinese feel uneasy about each other at the personal level (“lazy drunkards” and “swarming all over”). Nevertheless, the economic, political and military ties are there and they are strong. The gas deal of the century.
In addition, Russia is playing a peace game, and a war game.
Pay attention to the parties invited to St Petersburg and other places for solving conflicts; right now the Syrian crisis, following one after the other, guided by the very competent Russian foreign minister Lavrov. Not long ago there was a big conference devoted to BRICS economy in general, and to a mixed world currency in particular. An image of peace-maker as opposed to the image of the USA as war-maker.
Add to that Russian electronic technology paralyzing Western navigation and fighting systems, including F-35!, catching up with US-NATO capability (Aftenposten 14 Aug 15); with NATO deeply split on Ukraine.
Much of the technology hitting enemy communication is Chinese, not strange given the general Chinese approach through infrastructure, for transportation all over (“silk road”), and for communication.
Russia is suffering; but Orthodoxy gives reason for optimism “in the long run”; China is based on the idea that there are forces and counter-forces in everything, also in their boom. Philosophically they are both better prepared for “non-sustainable” than the West.
How about China, the Chinese stock market?
One interpretation: massive launching attracted huge excess liquidity in Chinese society, much from corruption and saving “just in case”, given the weak Chinese safety net. Super-demand drove prices up; the stock bubble started bursting before controls became effective. Then came devaluation of the currency–the approach denied Greece–to become more competitive, with even lower prices for “Made in China” to their own and Walmart’s benefit (now the richest US family). Let us see if and how it works.
This may also have been an adjustment to the new currency profile on which BRICS is working as an alternative, or in addition, to the US $. The USA-CIA is doing its best to weaken all five but with SCO-Shanghai Cooperation Organization members, they exceed 50% of humanity. Plus, China has many cards in its deck.
How about Japan? PM Shinzō Abe opts for:
- even more periphery status under the USA by joining the anti-China economic bloc TPP-Trans-Pacific Partnership, and
- even more military clientelism by eroding the anti-war A9 article with collective self-defense, CSD.
Both were avoided in Abe’s 14 August communiqué; his focus was on how wrong was Japan and how right was and is the USA, with “profound regret”. Smart use of the perennial apology issue, for and against, to conceal Japan’s TPP-CSD suicide.
Greece: the debt will not be paid; civil war with US intervention and fascist coup.
Ukraine: the debt will not be paid; civil war on, neither will win, federation is the only option.
The West: end of the credit game makes it less sustainable.
The USA: itself a bubble.
Russia and China: survival, alone and together.
Japan: down alongside the USA unless it wakes up, looks at the map, and joins its neighbors.
The IMF is right in one thing: sustainability is not forever.
Johan Galtung, a professor of peace studies, dr hc mult, is founder of the TRANSCEND Network for Peace, Development and Environment and rector of the TRANSCEND Peace University-TPU. He has published 164 books on peace and related issues, of which 41 have been translated into 35 languages, for a total of 135 book translations, including ‘50 Years-100 Peace and Conflict Perspectives,’ published by the TRANSCEND University Press-TUP.
Tags: Economics, Greece, Japan, Russia, USA
This article originally appeared on Transcend Media Service (TMS) on 17 Aug 2015.
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