Greece and the world capitalist crisis

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Published on Tuesday, 20 April 2010 03:48

A Greek tragedy? “All the world’s a stage”

After the October 4, 2009 parliamentary elections in Greece, it was publicly admitted the farce of the “creative accounting of the Greek statistics” and revealed the fiscal tragedy of the country crashed by the twin unsustainable burden of debt and deficit. The impeding catastrophe was described by Giorgos Papakonstantinou, the finance minister of the newly elected Papandreou government, by the metaphor of the legendary “Titanic” sailing in a fatal collision course towards the iceberg.

But is the ship in that metaphor, representing Greece - or, rather, the entire system of globalized capitalism? Or, looking from another vantage point, isn’t Greece just the most visible part of the hidden gigantic iceberg responsible for a generalized shipwreck of capitalism sinking now in an ocean of debts?

The implosion of the US sub-prime mortgage market triggered, in summer 2007, the eruption of an unprecedented world crisis and credit crunch that took dramatic dimensions with the bankruptcy of Lehman Brothers in September 2008, the meltdown of the entire global financial system, and the plunging of the world economy into a global Great Recession. It followed a State intervention in all the main capitalist countries, in 2008-2009, to halt the fall into the abyss. But, in turn, the ballooning of the State deficits and sovereign debts opened a new phase in the deepening crisis. At the end of 2009, Dubai was the first symptom of a globally propagated disease. Shortly it has been followed and superseded coming into the center in the world stage by what it has been called the “Greek tragedy”, the impending default of over-indebted Greece.

Commenting on the case of Greece, board members at large western banks rightly predicted that “after two years of worrying about mortgage and corporate risk, sovereign risk is going to be the big debate for 2010- both for banks, and the wider investment community”.[1]

Sovereign debt was normally considered as risk –free. “It is the touchstone by which other riskier financial assets are priced”, David Roche and Bob McKee write. “A repricing of sovereign debt as dangerous debt would be an earthquake for financial markets. It would blow a hole in the balance sheets of previously safe financial institutions. That would be a new chapter in the credit crisis.”[2] This new chapter is a logical progression in the current world crisis, according to these authors, and it has been already opened. The manifestation of a series of sovereign debt defaults as “black holes” in the space of globalized capitalist relations is threatening the entire system.

Sovereign debt in Organization for Economic Co-operation and Development (OECD) countries has, after 2007, exploded by nearly 70 per cent from 44 per cent of GDP in 2006 to 71 per cent.[3] The critical point for sovereign debt, according to studies by the IMF and by Reinhart and Rogoff, is in the area of 60-90 per cent of GDP. Sovereign debt in the US, the UK, and the Euro-zone has already risen far beyond, and in Japan is more than twice that level.

Dominique Strauss-Kahn, the head of the IMF, has warned that public debt in the advanced economies will rise to about 110 per cent of the GDP in 2014. He called that “a tremendous challenge” and he predicted that “for the next decade or two, cyclical upswings should be used to reduce public debt than finance expenditures or tax cuts”. [4]

The Greek case has to be situated in this global, peculiar and complex framework of a world capitalist bankruptcy. “Greece”, Mohamed El-Erian, chief executive of Pimco, writes, “is part of a wider, and historically unfamiliar phenomenon-that of a simultaneous and large disruption to the balance sheet of many industrial countries. Tighten your seat belts.”[5]

Warnings for the global implications of a fiscal tragedy not to be limited to Greece nor to Southern Europe are issued by the neo-liberal Niall Ferguson as well, who sees a Greek crisis coming to America itself: “It began in Athens. It is spreading to Lisbon and Madrid. But it would be a grave mistake to assume that the sovereign debt crisis that is unfolding will remain confined to the weaker eurozone economies [...] it is a fiscal crisis of the western world.”[6]

For the unfolding Greek tragedy “All the world’s a stage”. And all the players, all conflicting social forces, classes, and States are acting and clashing in “this wide and universal theatre”[7].

Capitalist globalization in crisis

The danger of a default of a Greek economy representing only 3 per cent of the European GDP never could reach such importance without a danger of a destructive “contagion” not solely to the peripheral countries of the Eurozone but to the hard core of the European Union itself, and even beyond it, affecting all the lenders of Greece, first of all the French, Swiss, and German banks. [8]

The centrality of the “Greek question” would be inconceivable without the high degree of interconnectedness of all parts of the world economy reached by the capitalist globalization of the last three decades, including the contradictory process of European capitalist integration, advanced particularly by the Maastricht Treaty after the demise of the Soviet Union and the collapse of the so-called “actually existing Socialism” in Eastern Europe.

Globalization and European economic and monetary unification under capitalist conditions do not abolish unevenness of social economic development in different countries; on the contrary exacerbate it, strengthening all centrifugal forces. With the post 2007 implosion of global finance capital, unbalances and contradictions emerged violently not between an “austere”, “disciplined” Germany accumulating surpluses at the center and a “profligate” peripheral Greece ridden by deficits, debts and corruption, nor solely between the strong European North and the weak Mediterranean South of the arrogantly denigrated “PIGS”                              (Portugal, Italy, Greece, Spain) but in the German-French central axis itself of the Maastricht project and of the European Monetary Union. 20 years after its re-unification, and following an austerity straitjacket imposed for decades to the German workers, thanks to Schröder and Social Democratic bureaucracy, industrial Germany is a major export country, second to China globally, confronted to a declining, des-industrializing as most other European countries, parasitic French capitalism. The specter of a default in a country-member of the Eurozone like Greece threatening a devastating contagion in other EU countries put the first major danger to the existence of the EMU, and a deadly challenge to the entire European imperialist project of integration of the Continent.

Commenting on the rising sharp antagonisms, tensions, and hollow compromises among the major countries of the EU core manifested before, during and after the Summit on March 25, 2010 in relation to a “rescue package”, a bail-out urgently needed to prevent an official declaration of a Greek default, George Soros rightly warned that the EU is “at the brink of disintegration”.[9]

This process has not stopped by the shaky and vague compromise in the March 25, 2010 EU Summit for a “rescue mechanism” including the crucial role of the IMF to avoid a Greek default – a decision which do not halted but exacerbated the crisis raising  the spreads of the Greek State bonds  and the CDS’ to astronomic heights . Even the attempted concretization of that vague “mechanism” by a EU promise of 30 billion euros as aid of last resort at the usurer’s rate of 5 per cent interest, in the tele-conference of the EU finance ministers on April 11, 2010 could not solve the solvency problem of the Greek economy nor to overcome the historic impasse facing the EU. On April 15, the Greek government started the formal procedures to activate the process of a bail-out, which involves new draconian austerity” measures demanded by the IMF[10].

The official call to the US-led IMF to participate in a rescue operation in Europe involving this time not Latvia or Hungary but a serious crisis internal to the Eurozone itself demonstrates not simply the narrow mind of Chancellor Angela Merkel but the impotence of European imperialism to challenge the world hegemony of its transatlantic antagonist, US imperialism, even if the later is in advanced decline and crisis.

The huge obstacle for a bail out of a Eurozone member like Greece reflects the absence of a common fiscal policy, which is possible only through a political unification. The historical verdict is clear: throughout a century, the European ruling classes failed to unify the Continent under their iron heel despite the barbarism of two world wars, a Cold War and more than 50 years of efforts to establish a common economic and monetary space. The historical task of European unification can be fulfilled only by the European working class by revolutionary means in a United Socialist States of Europe.

It is the crisis of finance capital globalization that erupted in 2007, a global crisis having as its center the United States that brought forward all the internal contradictions and weaknesses of European capitalism.

At the same time, it demonstrated the failure of three decades of finance capital global expansion and of the so-called neo-liberal strategy to give a sustainable solution to the tremendous crisis of overproduction of capital produced by the “Thirty Glorious Years” of post war capitalist development in the Keynesian framework of the 1944 Bretton Woods Agreement. It is this crisis of capital over-accumulation in the productive sphere, and the law of the falling rate of profit, the “Nemesis” of capital, the driving force both for the expansion of finance capital as well as for its current implosion.[11]

Keynesianism and anti-Keynesian neo-liberalism, the two economic strategies developed by advanced imperialist capitalism to confront its systemic contradictions and historic decline as a mode of production, have failed. The crisis of overproduction of capital prevents a return to the Keynesianism of the post war period because it will intensify the falling rate of profit and it will fuel inflationary pressure. From the other side, the globalization of finance capital and its policy, “neo-liberalism”, led to the worst crisis in the history of capitalism; its uncontrolled continuation of bubble creation will produce more uncontrolled catastrophes of fictitious capital deepening the world depression. This strategic impasse opens a protracted period of convulsions and disruption of all social and international relations where the questions both of imperialist wars and civil wars, all kinds of revolts, social and anti-imperialist revolutions are on the agenda.

The nature of our epoch of capitalist decline as an epoch of transition to world communism comes forward negating all the bourgeois illusions for an “end of communism” prematurely celebrated in 1989-91. The diagnosis and prognosis made by Karl Marx in the Grundrisse and in Capital are historically vindicated. The “universalizing tendency of capital”, developed to its extremes in the epoch of imperialism, particularly in the last decades of finance capital globalization, drives it to its dissolution, “ finally to its violent overthrow” [12] and transition to a new mode of production in a classless society : “this[universalizing] tendency- which capital possesses, but which at the same time, since capital is a limited form of production, contradicts it and hence drive it towards dissolution-distinguishes capital from earlier modes of production, and at the same time contains this element, that capital is posited as a  mere point of transition ”[13].

The current world systemic crisis not solely accelerates all processes of dissolution (mass destruction of surplus capital, mass chronic unemployment and misery); it drives the transition as well beyond capital.

The Greek December: a message from the future

Prominent leaders of international capitalist institutions or of leading EU countries, like IMF chief Dominique Strauss-Kahn and French President Nicolas Sarkozy rightly characterized the popular revolt led by the youth in Greece in December 2008[14], following the murder by police of a 15 years old schoolboy, as the first political explosion of the current world economic crisis.[15]

The December revolt came indeed in the aftermath of the collapse of the Lehman Brothers, the meltdown of the international financial system and the panic produced by it. All the class conscious sections of the capitalists all over the world clearly saw in the events in Greece a message from the near future of world capitalism for social and political upheavals to come.

Comparisons were and still are made between the Greek revolt in December 2008 and the Argentinazo, the mass revolt in Argentina in December 2001 following the default of that Latin-American country. There are obviously similarities between the two popular revolts but more instructive are the differences.

In Argentina, the default preceded the revolt; from the other side, the Greek revolt was the first manifestation of a deep, on-going crisis, which will bring the over0-indebtedcountry in 2009-10 in a dramatic situation of social economic catastrophe and default.

Differences do not stop here. Argentina’s default in 2001, the bankruptcy of a country considered until then as the “success story” of neo-liberalism and “the jewel in the crown” of IMF, was indeed, in a sense, an announcement that the period of finance globalization and neo-liberalism has exhausted its dynamic- a fact that dominates reality after the 2007-2008 meltdown of the world financial system. But Argentina’s default had come at the completion of a full circle and in the opening of a new one.

It was the culmination of an international financial hurricane that started with the crash in Asia in 1997, and spiraled internationally, with Russia’s default in 1998, the Long Term Capital Management collapse, the bursting of the bubble of the US “dot.com” economy and recession in 2000-2001, the Enron debacle, the crises in Turkey and Brazil.

The Argentine default triggered the popular revolt. In Greece, the revolt foreshadowed the default to come.  But the global economic environment has completely and dramatically changed between the two revolts.

Immediately after the Argentinazo, more precisely during the period 2002-2007, a weak world economic recovery followed. The financial maelstrom was contained by means applied also in previous major shocks and crashes during the decades of finance globalization (for ex. after the 1987 international crash). Interest rates everywhere, following the leadership of the US Federal Reserve, were kept extremely low providing cheap access to liquidity lifelines. Finance capital turned massively to all kinds of exotic financial instruments-later to be proved to be “toxic”, explosive mines hidden everywhere in the globalized financial system. Derivatives permitted an extension of credit on a colossal scale as banks could “securitize” their loans.  Combined to this world “bubble” economy, growth of military expenditures linked to the imperialist “war on terror”, particularly the Afghanistan and Iraq wars, contributed to a short-lived recovery on a world scale.[16]

The backbone of that weak recovery of the world capitalist economy was the US-China axis. The huge deficits of the strongest and more over-indebted capitalist power in the world were financed thanks to the enormous reserves that the export-led hybrid economy of China accumulates, after its turn to capitalist restoration. It could not be more evocative image of the decline and parasitism of an economy representing the highest point of world capitalist development…

Professor Robert Skidelsky summarizes the web of Sino-American relations as follows: “Instead of having to borrow from the American public to finance its fiscal deficit, the US government could borrow Chinese savings by issuing Treasury bonds that were bought by the Chinese. Therefore federal deficits did not raise the cost of domestic borrowing, which they would have done had the government had to borrow American savings rather than selling debt to China. […] With Chinese savings available, the US government could run a deficit without crowding out private spending. This allowed the Fed to establish a  much lower funds rate- the rate at which banks borrow from the Fed and one another- than it would otherwise have been able to do, helped in this by the downward pressure on prices exerted by the import of cheap Chinese goods produced by cheap Chinese labor. Cheap money, in turn, enabled banks to expand their deposits and their loans to customers more than they could otherwise do. In short, it was via their impact on the financing of the federal deficit that Chinese savings made it possible for the US consumer to go on a spending spree. ” […] Capital over-accumulation in the productive sphere, and the fall of profitability, oriented the spending into speculative activities. Skidelsky continues: “The lack of opportunities for profitable investment determined the pattern of American spending. Americans borrowed not to invest in new machines but to speculate in houses and mergers and acquisitions. The resulting growth in paper wealth triggered a consumption boom. The situation was unsustainable because no new resources were being created with which to pay back either domestic or foreign borrowing”[17]. The immense pyramid of paper wealth could not but to collapse, starting from the sub-prime mortgage market in 2007 and leading to the world financial meltdown and recession.

It is this entirely new world situation, recognized even by the capitalists as the worst in the history of their system that produced the Greek December and initiated a qualitatively new period of social conflicts and political explosions not solely in Greece but also in Europe and internationally. There cannot be a return to the status quo ante. The massive State intervention in 2008-2009 was not limited to monetary policies, combining extremely low interest rates with enormous rescue packages, superseding in scale everything experienced in the past, after the 1987 or the 1997 international crashes. The fact that this kind of unprecedented intervention led at the end of 2009 to a non-sustainable gigantic public debt burden all over the capitalist world indicates the inadequacy of the old means to solve the current historical problem of world capitalism.

Greece, thus, is not an exception but a microcosm condensing in a peculiar, original way the main characteristics of the world process.

Why Greece?

Greece is considered as the weakest link in the international chain of the EU member states, the weakest even amidst the despised by the European center “PIGS” of the European periphery. The empirical data come to corroborate this observation: the combination of a staggering deficit of 12.7 per cent of the GDP for 2009 and of an enormous public debt of 113 per cent of GDP (about 300 billion euros) to be raised to 120.8 per cent in 2010[18], according to the forecast of Bank of Greece, make Greece more vulnerable than any other country of the European Union.

But empirical comparisons are not sufficient and do not reveal by themselves the structural-historical reasons that made Greece the “privileged” locus of the first political explosion of the current world economic crisis and of an impeding default threatening the entire Eurozone.

The accession to the European  capitalist integration process, and above all the integration ton the European Monetary Union in 1999 produced the appearance, accepted by the global  markets, that Greece made its exit from the ranks of “emerging countries” to join the “advanced economies”, in OECD language. Becoming a pole of attraction of surplus financial capital after the 1997 Asian Crash because of the creditworthiness given by its integration to the Eurozone, the Greek bourgeoisie attempted to realize its old ambition to transform itself into the regional hegemonic power by investing massively and controlling the banking system of the Balkans, and extending its economic influence in this vital geopolitical area, in the soft underbelly of Russia and in the front door of the Middle East.

Ten years after the introduction of the euro, the EMU and the EU are confronted now with their worst crisis and the danger of dissolution while Greece is under the shadow of a State bankruptcy. The centrifugal forces of capitalist integration intensified combined development but the centripetal forces of its historically established inner contradictions deepened uneven development as well. The moment of truth came with the crisis: misleading appearances are shattered when essential contradictions explode.

“Greek capitalism was born already old”, as Pantelis Pouliopoulos, the founder of Greek Trotskyism rightly has written.[19] The belated historical development of bourgeois Greece, with absence of a strong industrial base and an over-extended, bureaucratic public sector supervising and giving fiscal and financial support to local capital, determined a debt-led growth of the economy that made it dependent from and extremely sensitive to the flows of foreign capital and of world trends in capitalism, particularly in its imperialist stage.

Foreign loans and inroads by the international financial capital, to which   Greek capital linked its own accumulation and survival, played and still play a determining role in the course of the economic and political history of modern Greece.[20]

In one sense, the history of Greek capitalism is the history of its bankruptcies.  These bankruptcies, in turn, coincide with the crisis moments and Great Depressions in the history of world capitalism: the Great Depression of 1873-1896 led to the State bankruptcy of Greece in 1893; the 1929 Crash and the Great Depression of the 1930s led to the 1932 Greek default; the current crisis at the end of the fist decade of the 21^st century put again on the agenda a third State bankruptcy of the country. Each of these bankruptcies is connected with major political upheavals and new chapters in the history of class struggle.

To understand the nature of the debt crisis behind each of these State bankruptcies it is needed to situate it in the proper historical framework as it’s is shaped by social struggle.

The historical background of the current impeding default involves the development of the class struggle, after the betrayed by Stalinism and defeated by imperialism Greek revolution of 1941-49, including, as a major milestone, the fall of the CIA imposed anti-communist military dictatorship of 1967-74 and its implications. The youth uprising in Polytechnic University in Athens in 1973, precipitating a crisis that the military junta could not, finally, survive, was, as a matter of fact, the last battle of the previous civil war putting an end to the post-civil war authoritarian regimes.

The inglorious collapse of the dictatorship in 1974 revealed a vacuum of power, which together with the political radicalization of the people produced the greatest threat to the power of the ruling class from the time of the civil war. To defuse the revolutionary potential, channeling it into a revived bourgeois parliamentary system, it was necessary to introduce political and economic concessions to the workers, peasant, and urban petty bourgeois strata.

At the same years when  the post war Keynesian edifice  was dismantled all over the capitalist world  after the collapse of the Bretton Woods Settlement in 1971( the collapse of the Greek military dictatorship itself was part of the international upheaval and revolutionary tide engulfing the entire planet from the late ’60s to the mid ’70s), in Greece, a reverse process took place:  immediately after the fall of the junta and particularly  after the 1981 ascent to power of the populist PASOK of Andreas Papandreou, were introduced Keynesian type of measures                             (nationalizations, growth of the State sector enterprises, raise of the popular income etc.) in order to check the re-affirmed militancy of the working class and diffuse a potentially revolutionary political crisis.

These measures were taken on the basis of a growing foreign debt. Greece’s over-indebtedness is due not solely to the corruption of its ruling class and of its politicians but also to their deep fear for the post-1974 popular pressures from below.

Greece was not immune to its global environment sinking into a crisis of overproduction of capital. The industrialization period of 1963-1973, due in a great measure to the penetration of multinational companies taking advantage of the absence of trade union activity under the military regime, has been halted and a so-called industrial “investors strike” followed. Industrial investment remained weak. Traditionally competitiveness of Greek products was based on high tariff protection and low relative labor costs.  Both factors were eroded from the mid-seventies; labor costs increased and tariff protection has been phased out after the 1981 entry in the EEC. “Furthermore”, Takis Fotopoulos remarks “the erosion of the Greek comparative advantage in terms of labor costs and the failure of free-market economic restructuring to change the export pattern implied a very weak response of exports to the continuous expansion of imports”[21].

The traditional agricultural sector based on small land property, despite the inflow of European subsidies, was drastically shrinking.  The agricultural population dramatically declined from 31 per cent of the active population in 1981 to 13 per cent in 2006.[22]

As the productive tissue of the economy both in industry and agriculture was decomposing, the declining occupation found as a relative way out only to the over-grown services and public sectors. Clientele networks tied to corrupt political personnel of the parliamentary system and a State bureaucracy both intimately connected with foreign and local capital proliferated precipitating the decay of bourgeois parliamentary democracy restored in 1974.

Social inequalities in income distribution supersede by far the EU average, with the 20 per cent of the poorest receiving less than 7 per cent of income, while 20 per cent of the richest receive almost 42 per cent.[23]

From the 1990s chronic unemployment was combined with the introduction of “flexibility” in labor relations, hitting particularly the younger generations. On the eve of the 2008 December youth revolt a quarter of the unemployed was youth, and one in two unemployed youth has a university degree.

Cheap labor by over-exploitation of foreign immigrants working under the most barbaric conditions became the basis for the preparations of Greek capitalism to join the EMU, as Yannis Papantoniou, then finance minister in the neo-liberal PASOK government of Costas Simitis, had cynically boasted.

The structural weaknesses of the Greek capitalist social economic formation, integrated now as a metropolitan knot in the plexus of globalized capitalist relations, were manifesting themselves into a growing deficit to be confronted by increasing foreign lending, and through the growing payments for debt servicing to a vicious circle of accumulation of debt.

Since the 1980s both the public debt and the external debt have increased three times, and according to the Deutsche Bank, the external debt today has reached the 150 per cent of GDP mark.[24]

Finance globalization with the protracted over-extension of credit sustained the growing mountain of public and private debt –until its inescapable implosion after 2007.

Wither Greece?

From early 2010, a de facto bankrupt Greece has been reduced into an EU protectorate[25] with its fiscal situation and economic policies put under the official “surveillance” of the EU Commission, the European Central Bank and the IMF. The government abdicates national economic sovereignty, and the country is reduced to the same quasi-semi-colonial position that it faced more a hundred years ago, in 1897, when, after the default and a disastrous Greek-Turkish war, an “International Economic Control” (DOE) of the foreign banks was imposed on Greece.

The introduction by the “Socialist” Papandreou government on March 3, 2010 of a misnamed “Stability and Growth Program” of drastic cuts of public social expenditures, wages and pensions, agreed with the EU to accomplish the impossible mission to cut the deficit from near 13 per cent to 3 per cent of GDP. This was solely the prelude of the drama, the entrance to “Wolfgang Schäuble’s torture chamber”, as aptly was called by Gideon Rachman referring to the name of the German finance minister.[26] This austerity program was followed by an anti-popular tax “reform” benefiting only the richest sections as well as money laundering of all kinds of Mafiosi and crooks, a new neo-liberal counter-reform in Education, and at the end of April 2010 by a new legislation smashing all pension rights.

The EU led by Merkel’s –Schäuble’s Germany with the assistance and “technical know how“of the IMF are “turning the screw” on the Greek working class and popular masses. It is an attempt not only to face the danger of  Greece’s State bankruptcy and its implications for the Eurozone but also a barbaric social “experiment” using the Greek people as a guinea pig, a frightening example for the entire European working class.

The call to the IMF ands its active involvement in Greece means further “turnings of the screw”, new draconian cuts to impose the kind of IMF plans already applied, with disastrous results, in Hungary, Latvia and Romania. Dominique Strauss-Kahn prescribed a massive deflation of wages and prices for an indefinite period as a condition to a bail-out.

Apart the enormous social catastrophe and mass sufferings of the people, could this deflationary offensive against the workers provide any real solution to the systemic crisis both of Greece and of the Eurozone?

“A Greek bail-out at last but no real solution”, Wolfgang Münchau had remarked[27]. “As a member of a large monetary union Greece can improve its competitiveness only through relative disinflation against the eurozone average, which in effect means through deflation. But as the French economist Jacques Delpla has pointed out, this will invariably produce a debt-deflation dynamic in the Greek private sector of the kind described by the economist Irving Fischer during the 1930s […] the really treacherous aspect about the Greek crisis is that the country’s liquidity position is better than its solvency position. Insolvency is a gradual, invisible process. The negative effects of debt-deflation dynamics have not yet begun, but will become inevitable as the Greek public and private sectors go through a simultaneous debt reduction process”.[28]

The debt-deflation spiral will depress further the economy and depression will increase again the deficit needing to be covered by the accumulation of more debt.

Arguing about the inevitability of a Greek default, Münchau stresses: “It is hard enough to imagine how Greece can get out of a simultaneous debt and competitiveness crisis without falling into some vicious circle- debt deflation, for example or just extreme public hostility that will thwart the government’s reform efforts. But it is impossible, at last for me, to imagine a situation in which Greece can manage to extricate itself from appending catastrophe without some debt restructuring”[29].

It is noteworthy in this statement not solely the pessimistic, from a bourgeois standpoint, prediction of a debt-deflation vicious circle but also the fear for an “extreme public hostility”, in other words, an “extreme” workers’ resistance to a barbarism that is more than extreme!

Furthermore, it is not only Greece caught in this vicious circle but the Eurozone as a whole. The danger of contagion remains hovering, first of all, over Portugal (already pressurized by Brussels for a new “fiscal adjustment’), and Spain, the fourth largest economy in the Eurozone with an annual GDP of more than a trillion euros, and whose hypothetical bail-out cannot but explode the entire difficult and unstable compromise, up to now, within the Eurozone, between Germany and France.

Proposals are put forward for a way out for the EU from this vicious circle by the reformist European Left party and Synaspismos in Greece, a asking for a radical restructuring of the Stability Pact, and of the EMU, putting the ECB under the “democratic” (?) control of the European Parliament, asking from the ECB for cheap credit to countries on the brink of default, and form the EU amore re-distributive budget. Apart from revolutionary Marxists, Costas Lapavitsas and his research team have showed the futility of such wishful thinking for a “good euro”, for “a reformed EMU” in a ‘reformed EU’.[30] Leaving aside the tremendous political obstacles, these reforms are also economically utopian as they do not resolve but exacerbate the contradiction between the euro as a simultaneously international and national currency and the fiscal independence of the States-members of the Eurozone with final result the collapse of the EMU itself and the disintegration of the EU; last but not least, these reformist proposals are socially reactionary, misleading the workers’ movement into a blind alley, and tying its fate to the demands of a crumbling imperialist European Union of big capitalists .

It remains as an alternative solution, the exit from the Eurozone and from the EU. Lapavitsas makes the distinction between a “conservative” and a “progressive” exit, with the later necessarily connected with major transformations in the economy and society such as nationalizations of the banks, controls on capital outflows, nationalization of strategic sectors of the economy, a program of industrial revival, public works etc.

The terms of these measures are not clarified, and above all, the transformation of social economic relations seen by Lapavitsas et al. is separated form its central presupposition: a radical overthrow and transformation of existing class power relations in Greece, in Europe and internationally.

The Gordian knot of the debt and of debt servicing indeed has to be cut by class mass action, rejecting strangulation in the hands of the international usurers, of the EU/ECB and of the IMF policemen of finance capital. Exit from Schäuble’s torture chamber is a question of life or death.

A unilateral repudiation of the foreign debt to the international usurers, and a radical break from the EMU and the EU necessitate not solely a change in relations of distribution of social wealth but a radical break from the capitalist production relations, a re-organization of social relations on new, socialist bases; hence they raise the central question of a revolutionary confrontation with bourgeois rule and its State, the struggle for workers’ power,  and furthermore, the impulse to an international dynamics of extension these social revolutionary changes in Europe and world wide.

“Socialism in a single country” proved to be a tragedy that ended without a catharsis, ingloriously, at the hands of capitalist restoration. A repetition in today’s conditions of advanced interconnectedness of all parts of world economy, or reactionary nationalist dreams of autarky in “capitalism in a single country” could be only a short-lived tragicomedy.

The Greek tragedy –tragedy for the people, and a piñata of super-profits for financial predators- has as stage the entire world. The denouement will take place in this universal theater, where the Hubris of capital will be punished. The exit from the capitalist vicious circle of destruction cannot be but an exit from the system, a socialist revolution on an international scale, towards a new world to come, Communism without borders, bosses or bureaucrats. This is not the best alternative; it is the only solution.

April 15, 2010

Bombay: The Stalinist Leadership and the Destruction of the Left

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Published on Sunday, 04 April 2010 17:19

In the national context this was happening at a time of severe economic crisis of 70’s, when the national and local bourgeois could have risked such labour militancy, less than ever. The decade of the 1970's was infamous as a decade of acute fiscal deficit and mounting inflation. At this crucial juncture of the crisis of bourgeois regime, the militancy of workers arose and consequently the influence of the Communists over them. Under the influence of workers movement a militant youth movement was also taking shape at fast pace. The youth movement was to have tremendous impact on the political life of Maharashtra, once this movement integrated itself with the labour movement and succeeded in mobilising behind it the discontented Marathi youth. In that eventuality, the bourgeois, both liberal and fascist, would have been completely isolated.

The powerful levers of the real mass movement of the working class, elevated the CPI and its leader Krishna Desai, an MLA form Dadar, to the mass leadership in entire Maharashtra, followed not only by sections of petty bourgeois in the cities, but vast majority of the peasant toilers in the villages.

The puzzle then bogs the mind of a visitor to Bombay, how come this real left bastion, which rested upon the might of such a militant working class, with great fighting traditions to its credit, was bogged down by the fascist bands of Shiv Sena?

The roots of this historic failure, can only be traced to the fact that though the working class in Bombay and other cities of Maharashtra, showed heroism in the struggles against its class enemies, but unfortunately, the overall leadership of this movement remained, at the time, in the hands of the Stalinist CPI. The flawed policies of the Stalinists, which based themselves on class collaboration with national bourgeois and its parties in the name of popular-front, developed a very docile and capitulationist caricature of revolutionary Marxism. This tail-ist attitude of Stalinist leadership, was in fact, no match for the rising militancy of the working class. Sooner than later, the inevitable was to happen. Either the working would have overthrown its bogus Stalinists leadership, before setting out to overthrow the bourgeois power, or the bourgeois was to destroy the working class and its movement. It was in the interest of the bourgeois as a whole, and primarily of the Congress, to check the advance of rising militancy of the working class.

The bourgeois had sensed the danger in the offing, and rightly so, which the militant working class has aroused in its heart. The sword of a proletarian upsurge, was hanging right above the head of its regime, as Bombay was commercial nerve centre of the country, known as its commercial capital. Not the local bourgeois, but the national bourgeois was thus deeply concerned about the immense growth of the movement of the working class. If bourgeois rule was to survive, it was imperative upon its leaders to break the back of the labour movement, as soon as possible.

The bourgeois had already formed its rabidly fascist wing, under the banner of Shiv Sena in late 1960’s, on the tune and patterns of SS bands of Hitler, and white shirts of Mussolini, with an all out support of section of the State and its armed forces , primarily of the state police, to it. It started raising mass chauvinist hysteria against the South Indians, in Bombay, majority of whom, were workers. This was fuelled by the demands for a unified Maharashtra which had come to a conclusion in the formation of the state of Maharashtra on 1st May 1960. The Shiv Sena based itself on this passing mood, and by fanning it out of proportion, rose it to cultural regional chauvinism to gain support among the petty bourgeois middle classes of Mumbai and Pune. If it could meet with partial success, it was due to political impotence of the Stalinist leadership. Shiv Sena, however, failed to make any serious inroads even into the middle class petty bourgeois of Maharashtra, much less the trust and support of the workers. This was the strength and influence of the working class at that time.

The sectarian split of Stalinist leadership, in mid 1960’s, and the ensuing dog-fight between the two factions for bureaucratic controls over the movement for their narrow ends, adversely affected the unity of the working class. The Shiv Sena sought an opportune moment, finding the space for itself and the ground to discredit the leadership, as a political force, in the eyes of the workers. In tacit understanding with a section of the Congress, the Sena penetrated the rank and file in the Maharashtrian workers, and simultaneously started attacking non-Maharashtrian Communist leaders. This dual tactic, slowly but surely, yielded the results. Street fights often broke out between the fascist forces of the SS and that of the CPI. This reached a fever pitch in the late sixties in the famous Worli street fights which lasted for months. These clashes reached their climax in June 1970 with the murder of popular CPI leader Krishna Desai.

Preceding the murder was a Sena assault on the CPI office in Mumbai, in which the office was burnt down. The workers became furious on this, and a large gathering of armed workers numbering in the thousands assembled at the charred office. In this frenzied mood the workers vowed to wipe out the fascists in one day. Workers were all prepared to execute their will. But the bogus Stalinist leadership was frightened and could not dare to issue a signal. The armed workers looked towards the leadership, but the leadership consciously held them back. The truth is that the sight of armed workers ready to attack, struck not an inspiration but fear in the minds of the Stalinist leadership itself, because of its own allegiance to the bourgeois. They feared losing control over the workers at that moment and prevented the workers from rising against the impending fascist threat. The Shiv Sena, however, was not so sparing. It immediately identified an opportunity in the dwindling mood of Stalinist leadership and wasted no time in advancing the assault against the working class. Stalinist leadership, instead of signalling the workers to confront the fascist advance, ran away from Bombay.

Emboldened by the docile attitude of Stalinist leadership, the Sena dared to conspire to physically eliminate kill Krishna Desai. By this time the fascists in Mumbai had managed to muster the open support of the Congress leadership for their project. In June 1970, men from Shiv Sena, headed by Bal Thakrey himself, killed Krishna Desai in broad daylight, in full public view. The attack left the Stalinist leadership stunned. While Stalinists remained in dilemma, the fascists carried out the murderous campaign of annihilation of the movement. Having disposed of its arch communist nemesis, Shiv Sena became ever more bold, and by the mid-eighties it forced significant intrusion into the trade unions of Mumbai. Perplexed and confused Stalinist leadership, having no independent policy to counter fascists, kept on looking towards the bourgeois state to tackle the fascists, which in fact, lend a supporting hand to the fascists to wipe out the movement of the working class. With a do-nothing attitude, the Stalinist leaders looked at the labour movement being finished by the murderous hordes of the fascist Shiv Sainiks with the obvious backing of the Congress. This left the working class in disarray.
Thus came the tragic end of the labour militancy in Maharashtra and the rise of fascists!

After betraying the cause of the working class, the Stalinists, however gained through parliamentary manuevre, on the back of the crushing defeat of the working class. As an echo of the heroic battle of the working class in the recent past, the CPI managed to gain a considerable number of seats in the state assembly, in 1978 elections, with the lifting of the emergency. This shadow influence however, could not have last long. Instead of fighting, the Stalinists, rapidly adapted to the influence of armed hordes of the Shiv Sena fascists, who in time managed to decimate the entire labour movement in Maharashtra.

Shiv Sena, thus gradually increased its strength with the tacit support of the Congress and the overt support of the bourgeois, both local and national. By 1995, Sena managed to form the government in Maharashtra with support of the BJP. In the meanwhile the working class in Maharashtra, continued to be more and more marginalised as a political force, partly under the Stalinists and partly under fascists.

And what of the workers? The onslaught of fascism and the subsequent move to liberalization in the 1990s and the first years of the twenty first century have lead to ever greater pains for the working masses. The decade of the 90's witnessed to major riots pitted against muslims, a clear effort to further divide and weaken the proletariat of Maharashtra who had already been weakened by the destruction of its movement and its further division at the hands of fascists, on the lines of regional chauvinism and false identities.

The failure of the Stalinist CPI to mobilise the working class for a virtual fight against the fascists, thus led to the complete destruction of the labour movement as a whole in Maharashtra, paving way for the eventual rise of fascism. This bogus policy of Stalinists, was only the replica of their old policy which had led to defeat of Communists in Germany, Spain etc. at the hands of the fascists. In both cases it was the hopelessly reactionary line of the Stalinist Comintern, which had paved the way for the defeat of mature revolutions and the eventual rise of fascist forces.

The events of 1970 are a watershed in the history of the working class in India. The lessons of 1970’s call for an ouster of Stalinist leadership from the labour movement, not only in Bombay, but everywhere in the country. The line propounded by Leon Trotsky of confronting the fascists directly relying upon the forces of a United Front of the working class, is the only way to advance.

Thailand: New stage in the “class war”

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Published on Sunday, 04 April 2010 17:04

Danielle Sabaï

 (Reproduced from International Viewpoint)

For over a week the “red shirts” have been demonstrating in the streets of Bangkok. Coming mainly from the provinces of the North and East, up to 150,000 demonstrators have marched throughout the week in calm and good humour to demand early legislative elections and the return of democracy.

The demonstrators are grouped under the banner of the "National United Front of Democracy Against Dictatorship" (UDD) , a broad movement composed of supporters of former Prime Minister Thaksin Shinawatra (overthrown by a coup in September 2006), republicans and activists for the restoration of democracy.

This "class war", as the demonstrators call it, is indicative of the deep crisis in Thailand since the coup of September 2006. The country remains more than ever divided between the elites of Bangkok and the popular and poorest layers, mostly peasants and workers who live in the provinces of the North and East of the country.

In promoting a coup in 2006, the Thai military, with the endorsement of the monarchy, intended to restore the old political agenda - dominated by the monarchy, bureaucracy, the military and the Democrat Party – which had been seriously undermined by 5 years of Thaksin Government: coming to power to defend his own interests as a billionaire, Thaksin had succeeded in a few years in dominating political and economic life. In a country where business and politics are closely intertwined, Thaksin directly threatened the economic and financial interests of the Royal family and the “big financial families” not related to his own clan. At the same time, he skilfully adopted policies favouring the poor, which had never happened before in Thailand. This earned him the staunch support of the popular classes, a support which directly competed with the popularity of the King and the Bangkok elite could not stand this. The King is the guarantor of the “unity of the country”, which in fact has until recently involved smothering all the demands of the popular classes and the maintenance of the system in favour of the establishment.

Thaksin has learned to his cost that it is difficult and risky to upset the balance of power in the Thai political system. The elites are not ready to accept the verdict of the ballot box if it is contrary to the maintenance of the traditional order.

Since Spring 2006, three democratically elected governments, all involving Thaksin, have been brought down by the military or the judiciary with the support of the monarchy. The current government, led by the Democrat party leader Abhisit Vejjajiva, was put in power by the military by promoting a reversal of parliament alliances in December 2008. This party is in the minority in the country and has not won an election for more than a decade. It supported the 2006 coup. Since then, Abhisit has proved a valuable ally to the army on many issues. But, for the army and the monarchy, problems are coming. Parliamentary elections will be held within a year, and the Democrat Party seems unlikely to win.

It is in this political context that we should see the decision of the judiciary at the end of February: 46.6 of 76.6 billion baths belonging to Thaksin and his ex-wife Pojama, frozen since the coup of 2006, were seized by the courts. This is a new episode in the establishment’s battle against Thaksin. The military first sought to destroy the Thaksin party by resorting to the exorbitant power of Thai justice. The new constitution of 2007, written under the dictation of the military, indeed offers the judges the ability to dissolve a party if they consider that one of its members have committed a fault. This possibility has already been used twice since 2006 against Thaksin and his party, the Thai Rak Thai (TRT – Thais love Thais) and then its heir the People’s Power Party (PPP). Despite his exile, the monarchy and the military have failed to eliminate Thaksin from Thai politics, so they now seek to tackle his other instrument of power, money, in order to prevent the emergence of any other political alternative.

This judicial verdict has been seen by the popular classes as profoundly unjust and illustrative of showing how Thai justice is two-faced. Those responsible for the assault on Suwannaphum airport in support of the coup have still not been brought to justice after a year and a half.

Following this verdict the UDD leader decided to organise the current mobilisations. The objective of bringing 1 million demonstrators to Bangkok, was far from reached and the government did not give way to the request for dissolution of parliament. But contrary to what has been written by numerous commentators who relay the information of the dominant classes, this movement has attained numerous highly significant political objectives. First, the “red shirts” have definitively entered onto the national political scene and the old élites can no longer ignore their weight and their demands. In rallying 150,000 persons, the UDD has shown its capacity for mobilisation and its real popularity. Such a movement, historic according to some analysts, has not been seen since the country became a constitutional monarchy in 1932. Also the Front has widened its social base. It can no longer be said that this struggle opposes the rural hordes of the countryside to the elites and middle classes of Bangkok. A part of the middle classes has become conscious of the high cost of the coup in both political and economic terms and it now supports a movement which seeks to re-establish democracy. The current political system is in full decomposition and the death of the king who is now aged 82 and has been hospitalised for several months with respiratory difficulties could lead to its collapse. The “red shirts" are not alone in believing that only a free election and a minimum of devolution of power to the provinces could begin to resolve the political crisis.

The popularity gained by the “red shirts”, the broadening of the movement’s support, is a new step in the long struggle for the restoration of democracy and social justice. Current events show that this is no longer an opposition between different sectors of the bourgeoisie or between the city and the country as it has often been presented. The divisions are deep and based on a questioning of the privileges of the dominant classes, in other words on class differences. The Thai popular classes remain deprived of a political party that truly represents their interests. This movement is a first step which puts an end to the exclusion of the workers from the political sphere. But for a real democratisation of Thai society, they need to completely free themselves of populists of the Thaksin type and develop a genuine programme of social transformation.

• Danielle Sabaï is one of IV’s correspondents in Bangkok.

Sticking to the Gujarat government's version

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Published on Sunday, 04 April 2010 16:59

This article originally appeared in THE HOOT, http://www.thehoot.org/web/home/story.php?storyid=4439&mod=1&pg=1&sectionId=20&valid=true and is reproduced with the permission of the author.

The Civil Liability for Nuclear Damage Bill 2010

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Published on Sunday, 28 March 2010 07:59

Some Preliminary Observations

Sukla Sen

The Run Up

The draft Bill which had been approved by the Union Cabinet on November 20 2009¹ was eventually listed for tabling in the Lok Sabha on March 15 2010², the penultimate day of the first half of the Budget Session of the Parliament, after a lapse of almost 4 months.

In fact, the Bill was in the offing for quite some time by then, since the successful clinching of the Indo-US Nuclear Deal, on October 10 2008³.

The Deal has, it may be pertinent to recall, opened up for India the doors to the global nuclear market, thereby making the tag ‘Indo-US’ somewhat of a misnomer in so far as the tag conveys the impression of strict bilaterality⁴. The market had remained out of bounds since the first (“peaceful”) nuclear explosion carried out by India way back on May 18 1974 with the plutonium obtained from the spent fuel rods of the nuclear reactor CIRUS supplied by Canada⁵ to mentor India onto the path of developing capabilities to generate nuclear power (only) for “peaceful” purposes. The nuclear explosion, despite the disingenuous tag, “peaceful”, was looked upon by the rest of the world as a clear breach of faith, if not worse. The reactions were strong and almost instantaneous. India was, as a consequence, practically shooed out of the global nuclear market. With passage of time the barriers went further up and up. And, more so, after the second round of five blasts, on May 11 and 13 1998, declaring itself openly as a nuclear weapon power and attracting strong condemnations from the rest of the world^5A. Things became even tougher.

But if the US had earlier taken the lead to impose sanctions in response to Indian blasts, under George Bush, it took a unilateral initiative to radically reverse the situation in 2005. The contours of that move were duly captured in a joint statement issued on July 18 by George Bush and Manmohan Singh from Washington DC. After traversing a long and tortuous path marked by cajolements, mainly by India, and muscle flexing by the US, the international community was sort of coerced into accepting India back as a legitimate partner in (civilian) nuclear trade. The 45-member Nuclear Supplier Group (NSG) on September 6 2008 at the end of two rounds of stormy sessions granted a unique waiver to India, completely disregarding Pakistan’s shrill cry for a similar, and even-handed, treatment. The grand reward for the grossly aberrant India stood out in sharp contrast also with the harsh treatment being meted out to Iran, a signatory to the NPT, on the ground of its presumed intention to develop nuclear weapons under the guise of working towards nuclear power despite repeated denials and access granted to IAEA inspections of its facilities.⁶

This Bill is generally being looked upon as a continuum of that process, allegedly, in order to ensure a “level playing field” for the American enterprises – to let them have a significant share of the cake⁷, the Indian nuclear market – a part payback for the American generosity bestowed upon India, for its very own reasons though. The move had, however, been first conceived by the then NDA government way back in 1999⁸.

When the US Secretary Of State, Hillary Clinton, visited India in July 2009⁹, there were talks of the Bill getting passed by the Indian Parliament. But nothing of that sort happened. Again in late November 2009, when Singh was to meet Obama in Washington DC¹⁰, there was talk of getting the Bill enacted. Even then, it did not happen. The Union Cabinet had dutifully approved the Bill just on the eve of the visit though. With Manmohan Singh to visit the US to attend the Nuclear Security Summit, called by President Barack Obama, slated to be held on April 12-131¹¹, the government was again trying to push it through. Never mind the considerable cooling off of Indo-US relations in the meanwhile as compared to the George Bush days¹².

It is of course quite another matter altogether that the Bill could not eventually be tabled on account of the shift in relationship of forces within the Parliament caused by the introduction, and its passage in the Upper House, of the much lauded and controversial Women’s reservation Bill¹³. And now, given the realignment of forces, whatever be the intentions of the government, no easy or early passage is on the cards. But that does in no way mitigate the salience of the Bill and its serious implications. In any case, Barack Obama is scheduled to visit India later this year¹⁴. So the pressure will persist. 

The Bill

Since the Bill was approved by the Union Cabinet on November 20 2009, at least three significant changes have been made. One, the name has been changed from ‘The Civil Liability for Nuclear Damage Bill 2009’ to ‘The Civil Liability for Nuclear Damage Bill 2010’¹⁵. Two, in clause 6. (2), the quantum of “liability of an operator for each nuclear incident” has been revised upwards from “rupees three hundred crores” to “rupees five hundred crores”. Three, a new “Chapter”, ‘Offences and Penalties’ with 4 clauses, has been added. Also, the Chapter IV, ‘Claims and Awards’, has been somewhat restructured and expanded.

The Bill, in the present form, is contained in 28 (26 + ii) pages. It has 7 Chapters constituted of 49 clauses and also ‘Statement of Objects and Reasons’ with ‘Notes on clauses’ following plus two memoranda.

The objective of the Bill as laid down in the extended subject line is:

To provide for civil liability for nuclear damage, appointment of claims Commissioner, establishment of Nuclear Damage Claims Commission and for matters connected therewith or incidental there of

Para 7 of the ‘Statement of Objects and Reasons’ further lays down that the purpose of the Bill is: to enact a legislation which provides for nuclear liability that might arise due to a nuclear incident and also the necessity of joining an appropriate international liability regime.

The “appropriate international liability regime” clearly refers to ‘Convention on Supplementary Compensation for Nuclear Damage’ (CSC) – 1997¹⁶, which is purportedly based on the earlier Paris and Vienna Conventions. India is as yet signatory to none of these Conventions.¹⁷ And the CSC is yet to come into force¹⁸. And, that being the case, India has got to get a national law enacted so as to be able to declare that its national law complies with the provisions of the Annex to the subject Convention, before it is considered for membership of this Convention (i.e. CSC).

This Bill appears to be very much a move in that direction. It is, however, interesting to note while the CSC provides that “liability” of the “operator” is absolute, i.e. the operator is held “liable” irrespective of fault; the corresponding provision in the subject Bill, as contained in Clause 5 (Chapter II), is pretty much contrary to that. This Clause lists out the circumstances under which the “operator” will not be “liable” in case of an accident.

Regardless of justifiability or otherwise, the motivation for such a clear departure deserves to be properly explored.

The range of implications of joining this Convention, the main purpose of which appears to make Supplementary Compensation available jointly by the member countries in case of a (catastrophic) accident over and above the “liability” limit of the “operator” and the concerned state¹⁹, also need be thoroughly examined.

The author of the Bill is Prithviraj Chavan (Minister of State for Science and Technology and Earth Sciences).

The Bill, in pursuance of the objective as spelt out above, in the Clause 9 (Chapter III) provides:

The Central Government shall, by notification, appoint one or more Claims Commissioners for such area, as may be specified in that notification, for the purpose of adjudicating upon claims for compensation in respect of nuclear damage.

The Chapter IV provides the details as regards ‘Claims and Awards’.

The heart of the Bill is however, arguably, constituted of clause 5, 6 and 7 (Chapter II). The clause 6 gives out the limits of “liabilities”, clause 7 spells out the “liability” of the Central Government and the clause 5 lists out the circumstances under which the “operator” shall not be “liable”.

The Major Problems

The major problems are as under:

I. The Bill paves the path for private participation as "operator" of nuclear power plants in India.

One of the central elements of the Bill is to define the "liability", arising out of any nuclear accident, of an individual "operator" – independent of (and unaffiliated with) the Government of India.

Till now all nuclear establishments/ventures, including power plants, without any exception, are run by the state through affiliated bodies – the Uranium Corporation of India Limited (UCIL) for uranium mines and the Nuclear Power Corporation of India Limited (NPCIL) for the power plants.

Given that fact, this provision makes sense only in the context of an impending programme for participation of private players as “operators” of nuclear power plants.

In fact, the Clause 6. (2), inter alia, provides:

The liability of an operator for each nuclear incident shall be rupees five hundred crores

And, the Clause 7 (1), inter alia, provides:

The Central Government shall be liable for nuclear damage in respect of a nuclear incident.

(a) where liability exceeds the amount of liability of an operator specified under sub-section of section 6;

(b) occurring in a nuclear installation owned by it

Furthermore, the Clause 6. (1) provides:

The maximum amount of liability in respect of each nuclear incident shall be the rupee equivalent of three hundred million Special Drawing Rights.

Therefore in case of the power plants operated by the NPCIL, as is the case with all the plants as of now, the quantum of “liability” is “three hundred million Special Drawing Rights” or equal to the “maximum” (i.e. total) “liability”.

The much lower quantum of “rupees five hundred crores” will apply only in case of nuclear power plants not owned/operated by the NPCIL. As of now, there is neither any such plant nor has any such plan been announced.

But these provisions taken together are a clear pointer to that direction.

The nuclear industry is unique in character in terms of safety hazards. And a nuclear power plant is potentially catastrophic, as so chillingly demonstrated by the Chernobyl disaster on April 26 1986²⁰, in particular. Given the fact that profit maximisation drive is the very raison detre of any private enterprise giving rise to the intrinsic and inevitable tendency to cut corners in the field of "safety", the envisaged ushering in of private players as “operators” of nuclear power plants is an open armed invitation to disaster.

A regulatory body overseeing safety measures can at best mitigate this trend, not eliminate it by any stretch. And given the tremendous clout of the private operators in this field given the scale of investments required, the efficacy of any regulatory body, in any case, would be highly suspect.

Hence, this move calls for all out resistance.

And, the CSC does in no way obligate its members to open up their wombs to private “operators”.

II. A. The Bill proposes to limit the total “liability" (of the (private) "operator" plus the "state") regardless of the scale of the disaster.

This is just unacceptable.

II. B. On top of that, the total or “maximum” “liability" has been "capped" at "three hundred million Special Drawing Rights [SDR]". This works out to just around Rs. 2,100 crore and 450 million US$.²¹

In case of Bhopal Gas Disaster, the Supreme Court had approved a deal between the contending parties providing compensation to the victims amounting to US$ 470 million²². That was way back in 1989, more than two decades ago. Even at that time this was considered grossly inadequate.

So, while whatever cap on “liability” is unacceptable; this cap on total “liability" or the "maximum amount of liability", as the draft Bill has put it, is woefully paltry. More so, given the fact that a catastrophic nuclear accident may very well dwarf the Bhopal Gas Disaster in terms of devastations.

In case of Chernobyl Disaster, while no precise estimate of total economic impact is available, as per one report, the total “spending [only] by [neighbouring] Belarus on Chernobyl between 1991 and 2003 was more than US $ 13 billion.²³

That’s incomparably larger as compared to the “maximum liability” pegged in the Bill – 450 million US $!

However, once India joins the CSC, and it comes into force, the cap on total “liability” would undergo significant change as additional compensation over and above 300 million SDR would become available. In fact the CSC also permits the concerned states to provide for further (“third tier”)²⁴compensation over and above the CSC limits. As long as the nuclear power plants in India obtain, joining the Convention may in fact turn out to be beneficial for the potential victims. But then the government must come clean on its plans, make specific commitment and explain the implications. The onus clearly lies with it.

III. The liability of an individual non-state (i.e. private) "operator" has been "capped" at a mere Rs. 500 crore. Less than one-fourth of the total or "maximum" liability.

And, the difference between the actual compensation to be paid and the "liability" of a private "operator" would be borne by the Indian government i.e. the Indian taxpayers/people.

So, while the very concept of cap is unacceptable and the total cap could very much turn out to be woefully inadequate; the cap on individual private "operator is abysmally low - less than one-fourth of the total cap.

It is evidently an attempt to brazenly favour a private "operator" at the cost of Indian masses.

The eminent jurist, and former Attorney General, Soli Sorabjee has argued in details²⁵:

Any legislation that attempts to dilute the Polluter Pays and Precautionary Principle and imposes a cap on liability is likely to be struck down as it would be in blatant defiance of the Supreme Court judgments. Moreover, it would be against the interests and the cherished fundamental right to life of the people of India whose protection should be the primary concern of any civilised democratic government.

Not only that, there is a further provision that this cap for an individual "operator" may be fixed lower or higher than the normative cap of Rs. 500 crore, but in no case lower than Rs. 100 crore. Quite significantly, while the cap of Rs. 300 crore, as had been understandably approved by the Union Cabinet, now stands revised upward to Rs. 500 crore; there is no corresponding revision of the floor level of Rs. 100 crore. So this “revision” in actual practice may turn out to be just a ploy, an act of deception.

It is not clear what stops the Indian government, or its designated agency, to peg such caps, while actually operating this provision “having regard to the extent of risk involved in a nuclear installation” – and no objective parameters whatever having been laid down, at the minimum of Rs. 100 crore, or thereabout?

In that case, the "cap" for the private "operator" becomes even less than one-twentieth of the total or "maximum" "cap. That's just ridiculous.

It is also equally significant that while “the Central Government may, having regard to the extent of risk involved in a nuclear installation by notification, either increase or decrease the amount of liability of the operator”, there is no such corresponding provision for the “maximum [i.e. total] liability”. If the risk assessment of any particular “installation” makes it liable for adjusting the “liability” for the private “operator” it would be quite logical to adjust the “maximum [i.e. total] liability” for that “installation” in alignment with that. That nothing of that sort has been provided in the Bill clearly gives away the real intention behind. To lower down the “liability” of a private “operator” even much below the otherwise abysmally low amount of Rs. 500 crore – not even one-fourth of the “maximum liability”. That’s evidently just a stratagem to deceive.

Furthermore, with passage of time, the Indian Rupee is expected to depreciate against the SDR. With the total or "maximum" cap having been defined in terms of SDR and the cap of individual private "operator" in terms of Indian Rupees, the proportion of the financial burden to be borne by a private "operator", in case of a catastrophic accident, would further go down! Here again, there is no apparent reason, other than to favour the private “operator”, why in one case it is SDR and in the other case it is Indian Rupees.

Here it is pertinent to keep in mind that the CSC does not establish either a floor or a ceiling on the liability of the operator or require the concerned state to limit the liability of the “operator”. It in no way makes it incumbent upon any member country to either bring in private “operator” or limit/cap its “liability” at a level lower than the “total liability” (of minimum 300 million SDR).²⁴

The Situation in the US

In case of the US, in the event of an accident, the first $375 million is paid by the insurer(s) of the plant. It is mandatory to insure the plant.

Beyond that, up to US$ 10 billion is paid out of a fund jointly contributed by the “operators” as mandated by the Price-Anderson Nuclear Industries Indemnity Act.

Beyond that, the Federal Government pays.²⁶

The contrast is too stark.

Other Issues

The argument by some commentators that without this Bill being enacted, the American companies would be at a disadvantage appears to be somewhat confused and only partly true. The American vendors will conceivably be at no disadvantage as compared to their competitors as the vendors are routinely "indemnified for consequential damages". Even otherwise, the Bill does not prohibit the “operator” from making the equipment vendor “liable” on account of an “accident”. That is between the “operator” and the “vendor”. But as far as the victim is concerned, the “operator” will be “liable” subject to the applicable cap. From the (potential) victim’s point of view, such single point responsibility should actually be welcome. That would conceivably cut down much of legal complications which may arise otherwise.

The US-based enterprises will, however, be at a distinct disadvantage as prospective "operators" in absence of a cap on their “liability”.

The mainstream, and also radical, critics, known to be otherwise knowledgeable, have rather pitiably missed the central point that the essential thrust of the Bill is to enact a law in compliance of the CSC and usher in private players as "operators" and peg their “liability” at ridiculously low levels, going well beyond the framework of the CSC.²⁷

The other point that has been raised is that the Bill “lets nuclear equipment suppliers and designers off the hook”²⁸. This, however, appears to be fairly misconceived – at two distinct levels. One, the vendor, the designer or even the turn-key contractor is customarily indemnified (i.e. given immunity) from consequential damages (which include third party damages). That is the standard norm. Two, the Bill itself does not do anything to prohibit the plant owner/operator from incorporating suitable clause(s) in the contract with the vendor/designer/turn-key contractor to hold them liable for any damage caused to any third party arising out of their faults.

Much to the contrary, the Clause 17, inter alia, provides as under:

The operator of a nuclear installation shall have a right of resource where –

(a) such right is expressly provided for in a contract in writing;

(b) the nuclear incident has resulted from the wilful act or gross negligence on the part of the supplier of the material, equipment or services, or of his employee;

That evidently knocks the bottom out of the argument that the Bill “lets nuclear equipment suppliers and designers off the hook”.

It, however, holds the “operator” responsible vis-à-vis the victims of any accident. That is both logical as the accident would take place while the “operator” is “operating” the plant; and highly welcome from the potential victim’s point of view as this would eliminate likely complications in determining and pinpointing “responsibility” resulting in interminable delays in obtaining any succour.

The objections raised as regards the 10-year limit to “liability” ²⁹, as provided in Clause 18 (Chapter IV), are quite valid. In case of exposure to low dose radiations, the injuries caused thereby – mostly in various forms of cancer, may take much longer time to manifest. But then it would be that much difficult to establish the causal link.

Conclusion

All in all, the Bill has got to be opposed on the following grounds:

I. The Bill paves the path for private participation as "operator" of nuclear power plants in India. That’s an open invitation to disaster.

II. A. The Bill proposes to limit the total “liability" (of the (private) "operator" plus the "state") regardless of the scale of the disaster. That’s just unacceptable.

II. B. On top of that, the total or “maximum” “liability" has been "capped" at "three hundred million Special Drawing Rights [SDR]". This is too paltry.

III. The liability of an individual non-state (i.e. private) "operator" has been "capped" at a mere Rs. 500 crore. Less than one-fourth of the total or "maximum" liability. And it has provisions to further lower this amount, and pretty steeply at that. This is a blatant negation of the Polluter Pays and Precautionary Principle clearly and assiduously laid down by the Indian Supreme Court.

The Bill, if not withdrawn outright, must be referred to the concerned Standing Committee after tabling in the Parliament and widespread, open and transparent public consultations must follow thereafter to consider all the pros and cons, including the implications of joining the CSC, before taking any further step forward.

26 03 2010

Notes:

1. See: <http://www.dailyindia.com/show/364588.php> or <http://www.kseboa.org/news/us-pressure-civil-nuclear-liability-bill-likely-in-parliament-session.html>, for example.

2. See: <http://news.rediff.com/report/2010/mar/13/nuke-bill-to-be-tabled-in-rs.htm> and <http://www.business-standard.com/india/news/nuclear-bill-to-be-tabled-in-rsmarch-15-govt/388495/>, for example. A significant point to note is that as late as on March 14, and 13, both these news items, from otherwise credible sources, are quoting the concerned Minister to the effect that the Bill would be tabled in the Rajya Sabha on March 15. While, in reality, it was to be tabled in the Lok Sabha. That shows the degree of non-transparency prevailing.

3. See the Editorial, and other articles under the section, Indo-US Nuclear Deal, in the Peace Now, March 2009 at <http://www.cndpindia.org/download.php?view.16> for an account of how the deal crossed its last hurdles. The news item at <http://www.kseboa.org/news/us-pressure-civil-nuclear-liability-bill-likely-in-parliament-session.html> explicitly links the Bill with the Deal thus: "The passage of a civil nuclear liability Bill is one of key steps in implementation of the India-US civil nuclear agreement." And, it is no unique. Here is another example: "The US has linked the completion of the Indo-US nuclear agreement to India’s capping of nuclear liability and that is why the hasty move to introduce this in parliament." at <http://indiacurrentaffairs.org/civil-nuclear-liability-bill-prefering-interests-of-us-companies-over-indian-people/>. There is no specific provision in the Deal to this effect though. A rather well-informed article at <http://www.american.com/archive/2010/march/india-the-united-states-and-high-tech-trade> lists out 3 hurdles in full implementation of the "landmark U.S.-India Civil Nuclear Agreement—the crown jewel of the U.S.-India strategic partnership".

4. See the Editorial in the Peace Now, February 2010 at <http://www.cndpindia.org/download.php?list.13>.

5. India’s first reactor, the 1 Megawatt (MWt) Aspara Research Reactor, was built with British assistance in 1955. The following year, India acquired a CIRUS 40 MWt heavy-water-moderated research reactor from Canada. The United States agreed to supply heavy water for the project. ... India commissioned a reprocessing facility at Trombay, which was used to separate out the plutonium produced by the CIRUS research reactor. This plutonium was used in India's first nuclear test on May 18, 1974, described by the Indian government as a “peaceful nuclear explosion.” Excerpted from India’s Nuclear Program by Volha Charnysh at <http://www.nuclearfiles.org/menu/key-issues/nuclear-weapons/issues/proliferation/india/charnysh_india_analysis.pdf>. Also see Nuclear Power in India: Failed Past, Dubious Future by M. V. Ramana at <www.npec-web.org/Essays/Ramana-NuclearPowerInIndia.pdf>. This talks of India being largely cut off from the international nuclear market as a consequence.

5A. For world reactions to May 98 blasts, see <http://www.fas.org/news/india/1998/05/wwwhma14.html>.

6. For a brief evaluation and the trajectory of the Deal (till early 2008), see <http://www.europe-solidaire.org/spip.php?article10224>. For a timeline, see p 7/8, Peace Now, Feb, 2010 at <http://www.cndpindia.org/download.php?list.13>.

7.  See <http://indiacurrentaffairs.org/civil-nuclear-liability-bill-prefering-interests-of-us-companies-over-indian-people/>, for example. The pleadings of Omer F Brown, a key spokesperson for the US nuclear industry, that India enacts a nuclear liability law, as referred to above, has further validated this position.

8. See: <http://www.business-standard.com/india/news//govt-open-to-raising-nuclear-liability-cap//388512/>, for a very concise history of the move towards enacting a nuclear liability cap bill, locating the first move way back in 1999, and an explication of the government's point of view.

9. See <http://www.america.gov/st/texttrans-english/2009/July/20090720161943xjsnommis0.2136499.html>.

10. See: <http://news.bbc.co.uk/2/hi/business/8374050.stm>.

11. See: <http://www.deccanchronicle.com/national/pm-may-visit-us-april-n-summit-158>.

12. See the Abstract at <http://acdis.illinois.edu/newsarchive/newsitem-indiausrelationsfrombushtoobamanewchallenges.html>, for example. Also <http://pragmatic.nationalinterest.in/2010/03/24/understanding-indo-us-relationship/>.

13. See: <http://www.hindustantimes.com/india/Nuclear-liability-bill-not-to-be-tabled-in-Lok-Sabha-today/519134/H1-Article1-519210.aspx>, for example. The news item also reported that: "Government sources say that Prime Minister Manmohan Singh is keen to get the bill passed in parliament ahead of his US visit in April." Also see <http://www.dailyindia.com/show/363428.php>.

14. See; <http://www.hindustantimes.com/News-Feed/americas/Obama-to-visit-India-later-this-year/Article1-518487.aspx>.

15. See the revised Bill at <http://www.cndpindia.org/download.php?view.36> and compare with the description of the earlier version given in Nuclear Liability Law in Developing Countries - Indian Case by B. B. Singh at <http://www.cndpindia.org/e107_plugins/content/content.php?content.65>.

16. See: <http://www.iaea.org/Publications/Documents/Conventions/supcomp.htmll>.

17. See B B Singh, op cit.

18. See A flawed Bill by Praful Bidwai at <http://www.flonnet.com/stories/20100409270709500.htm>. It provides: since it was opened for signature in 1977[read 1997], the CSC has only been signed by 13 states and ratified by only four countries (Argentina, Morocco, Romania and the U.S.) – in place of the minimum of five countries needed for its entry-into-force.

The relevant provision, Article XX. 1, reads: This Convention shall come into force on the ninetieth day following the date on which at least 5 States with a minimum of 400,000 units of installed nuclear capacity have deposited an instrument referred to in Article XVIII.

19. See The Convention on Supplementary Compensation for Nuclear Damage: Catalyst for a Global Nuclear Liability Regime by Ben McRae at <http://www.nea.fr/law/nlb/nlb-79/017-035%20-%20Article%20Ben%20McRae.pdf> for detailed explanations.

20. For a quite conservative, but exhaustive, estimates of the impacts of the disaster, see Chernobyl’s Legacy: Health, Environmental and Socio-economic Impacts and Recommendations to the Governments of Belarus, the Russian Federation and Ukraine by The Chernobyl Forum at <http://www.iaea.org/Publications/Booklets/Chernobyl/chernobyl.pdf>. For an alternative assessment by the Greenpeace, look up

<http://archive.greenpeace.org/comms/nukes/chernob/read25.html>

21. The exchange rate on March 25 2010 stands at 0.6603090000 SDR per US$, at <http://www.imf.org/external/np/fin/data/rms_five.aspx>. And, SDR 0.0144709000 per Indian Rupee.

22. A news item at <http://beta.thehindu.com/news/national/article53103.ece> provides: According to an agreement on February 15, 1989 facilitated by the Supreme Court, the Union Carbide Corporation, U.S. provided a compensation of $ 470 million (Rs. 715 crore) …

23. See: <http://www.greenfacts.org/en/chernobyl/l-3/5-social-economic-impacts.htm#1p0>. The comparable estimate reported by the Greenpeace, at <http://archive.greenpeace.org/comms/nukes/chernob/read25.html>, is:

The Belarus Government estimate the total economic damage caused between 1986-2015 would be (1992 June prices) $235 billion. In Ukraine, in 1995 the Ministry for Chernobyl needed 286.4 thousand billions of karbovanets ($2.3 billion), but received only one third of this. It is therefore possible to estimate that the total bill for those countries most effected will exceed $300 billion by 2015.

24. Ben McRae, op cit.

25. See: <http://beta.thehindu.com/opinion/lead/article64688.ece?homepage=true>.

26. See: <http://en.wikipedia.org/wiki/Price%E2%80%93Anderson_Nuclear_Industries_Indemnity_Act >.

27. India-US Nuclear Deal Redux: Another Showdown by Radha Surya at <http://www.zcommunications.org/india-us-nuclear-deal-redux-by-radha-surya>, which refers also to various other eminent critics including Brahma Chellaney, a known nuclear hawk, and Gopal Krishna, of the Toxics Watch Alliance (TWA), is an excellent illustrative case.

28. The bill lets nuclear equipment suppliers and designers off the hook. Excerpted from The great nuclear folly by Praful Bidwai at <http://www.thedailystar.net/newDesign/news-details.php?nid=130882>. The oft repeated references made to the Bhopal Gas Disaster and the “liability” of the Union Carbide therein is plainly misleading. The Union Carbide was the owner/operator of the plant. Apparently, no one at any stage even as much talked of holding the (yet unheard of) vendors of equipment(s) or designer of the plant responsible or “liable”. Siddharth Varadarajan, even while noting the provisions of the Right to Recourse has rather curiously refused to acknowledge the implications in a forthright manner. Ref. <http://svaradarajan.blogspot.com/2010/03/nuclear-liability-law-has-sting-in-tail.html>.

29. Equally obnoxious is the 10-year limit to liability: many forms of radiation injury, including cancer and genetic damage, reveal themselves only 20 years after exposure. See Bidwai, ibid.

Health Reform: Theirs and Ours

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Published on Thursday, 25 March 2010 04:24

By Paul Street