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Varoufakis: The Brexit clock must be run down, not re-set – op-ed
The overwhelming defeat that
Britain’s Parliament inflicted upon Prime Minister Theresa May’s Brexit plan
was fresh confirmation that there is no substitute for democracy. Members of
Parliament deserve congratulations for keeping their cool in the face of a
made-up deadline. That deadline is the reason why Brexit is proving so hard and
potentially so damaging. To resolve Brexit, that artificial deadline must be
removed altogether, not merely re-set.
Leaving the European Union is
painful by design. The process any member state must follow to exit the EU is
governed by Article 50 of the bloc’s Lisbon Treaty, which, ironically,
was authored by a British diplomat keen to deter exits from the EU.
That is why Article 50 sets a two-year negotiation period ending with an
ominous deadline: If negotiations have not produced a divorce agreement within
the prescribed period – March 29, 2019, in Britain’s case – the member state
suddenly finds itself outside the EU, facing disproportionate hardships
overnight.
This rule undermines
meaningful negotiations. Negotiators focus on the end date and conclude that
the other side has no incentive to reveal its hand before then. Whether the
allotted negotiation period is two months, two years, or two decades, the
result is the same: the stronger side (the European Commission in Brussels in
this case) has an incentive to run down the clock and make no significant
compromises before the eleventh hour.
Moreover, this realization
affects the behaviour of other key players: Tory government ministers opposed
to their prime minister, the leader of the Labour opposition, Jeremy Corbyn,
members of Labour’s front bench who are opposed to Corbyn, and the German and
French governments. Every significant political actor in this game has an
incentive to sit back and let the clock tick down to the bitter end. With fewer
than three months left, the prospect of Britain falling out of the EU without a
deal is, understandably, terrifying. A natural response is to call for an
extension of Article 50, to reset the clock and give negotiations more time.
That instinct must be resisted.
Any resetting of the clock
would simply extend the paralysis, not speed up convergence toward a good
agreement. Giving May another three months, or even three years, would do
nothing to create incentives to reveal hidden preferences or to drop fictitious
red lines.
Indeed, the worst aspect of
May’s deal, which Parliament emphatically and wisely rejected, was that it
extended the transition process until 2022, with the UK committing to paying
around $50 billion, and possibly more, to the EU in exchange for nothing
more than unenforceable promises of some future mutually advantageous deal. Had
Parliament voted in favour of May’s deal, it would have prolonged the current
gridlock to a new cliff edge three years hence. The only plausible reason for
resetting the Article 50 clock is the aspiration to hold a second referendum on
whether to rescind Brexit altogether. But, unlike the first referendum, which
could be framed as a yes-no leave-stay question, there are now multiple options
to consider: May’s deal, a softer Brexit keeping Britain within the EU’s single
market, a no-deal Brexit, remaining in the EU altogether, and so forth.
Agreeing on the precise form of preferential voting between these options is no
easier than agreeing on Brexit in the first place.
To synthesize competing
views into one coherent position, Britain needs more than a voting scheme:
it needs a People’s Debate that the ticking clock makes impossible,
even if reset. The standstill and the phoney negotiations will thus come to an
end only if the made-up deadline is allowed to expire by a Parliament willing
calmly to say “no” to unacceptable deals negotiated by May and the EU. Allowing
the clock to run down is now a prerequisite for resolving the Brexit conundrum.
What will happen if the
impasse continues until March 29, without a formal extension of the Article 50
period? The threat from Brussels is that the EU will shrug its shoulders and
allow a disorderly Brexit, with substantial disruption to trade, transport, and
so forth. But it is much more likely that German business, along with the
French and Dutch governments, would be up in arms against such a turn, and
demand that the European Commission use its powers indefinitely to suspend any
disruption in Europe’s ports and airports while meaningful negotiations begin
for the first time since 2016.Once we are at, or close to March 29, heightened
urgency will dissolve tactical procrastination. May’s deal will have bitten the
dust, and Remainers will be closer to accepting that time is not on the side of
a Brexit-annulling second referendum, perhaps turning their attention to the
legitimate aim of a future referendum to re-join the EU.
At that point, government and
opposition will recognize that only two coherent options remain for the
immediate future. The first is Norway Plus, which would mean Britain would
remain for an indeterminate period in the EU single market (like Norway), and
also in a customs union with the EU. The second is an immediate full exit, with
Britain trading under World Trade Organization rules while Northern Ireland
remains within a customs union with the EU to avoid a hard border with the
Republic of Ireland. Narrowing it down to two options will enable Parliament to
choose.
Once MPs acknowledge that
freedom of movement between the UK and the EU is a red herring, the most likely
outcome is Norway Plus for an indeterminate, deadline-free period. Then and
only then will Parliament and the people have the opportunity to debate
the large-scale issues confronting Britain, not least the future of the UK-EU
relationship.
Norway Plus would, of course,
leave everyone somewhat dissatisfied. But, unlike May’s deal or a hasty second
referendum, at least it would minimize the discontent that any large segment of
Britain’s society might experience in the medium term. And, because minimizing
the discontent, along with a deadline-free horizon, are prerequisites for the
people’s debate that Britain deserves, the overwhelming defeat of May’s deal
may well be remembered as a vindication of democracy.
Varoufakis: Britain needs a People’s Debate, not a second Brexit referendum
Britain is teetering on a
knife’s edge: about to crash out of, or back into, the European Union. Either
outcome would represent a defeat for democracy in the UK and in the EU.
Crashing out would inflict substantial economic hardship on the weakest in
Britain. It would boost jingoism and parochialism, drive England further apart
from Scotland and Ireland, and expose the UK to the vagaries of a Trump administration
eager to divide Europe and to liberate US corporations operating on British
soil from all social and environmental constraints.
Crashing back into the EU (for
instance, via the revocation of Article 50) would undermine trust in democracy
among many in Britain, while on the continent it would strengthen the hold of
the EU’s staunchly anti-democratic ruling technocracy. An unintended
consequence would be the reinforcement of Europe’s xenophobic “nationalist
international”, whose power is proportional to the EU establishment’s capacity
to continue business as usual
If Brexit has an upside, it is
that it has revealed the need for a “People’s Debate”, not only regarding the
UK-EU relationship, but also the festering wounds that the British establishment
has kept out of sight: the disenfranchisement of rural England, an archaic
electoral system, the UK’s ailing economic model, and the Irish and Scottish
questions. Crashing out of, or back into, the EU would negate this opportunity
by thwarting such a People’s Debate.
Remainers are right to disdain
Brexit. In 2016, while representing the Democracy in Europe Movement 2025
(DiEM25) in the run-up to the referendum, I stood side-by-side with Caroline
Lucas, John McDonnell and others in a joint campaign for radical Remain. In
DiEM25’s language, the message was: “In the EU. Against this EU!” The
main reason Brexit won was that the Remain campaign was dominated by the
Cameron-Clegg-Osborne-Blair roadshow, fronting for the institutions of global
financial capital, for whom an anti-democratic EU was perfectly serviceable and
consistent with their capacity to rule on behalf of the privileged few.
Arrogance and inanity combined with Project Fear to drown out voices for a
radical Remain.
An elderly lady in Leeds
put it succinctly to me at one of the meetings I addressed: “I agree that
staying in the EU to fight for democracy would be best. But, my dear boy, you
are not in 10 Downing Street, and neither is Jeremy. Cameron is. A victory for
Remain is a victory for him and his mates.”
While I would relish having
access to a time machine in order to fight Brexit more effectively, if I had a
magic wand by which to annul Brexit now, I would not use it. For what would I
tell the lady in Leeds? She fully understood the costs of Brexit. She was not
duped by Cambridge Analytica or Facebook. Her vote was intended to strike a
blow at the establishment that did all it could to take the demos out of
British and European democracy. By annulling her choice today, in order to
avoid Britain crashing out of the EU, I would be betraying her in a way I could
not justify.
Proponents of a second vote
ask: why is giving her a chance to reconsider, having factored in new
information, an act of betrayal? The first referendum was agreed to by both
sides with plenty of time for debate. Yet a second referendum would have to take
place without the consent of half the country and with a countdown clock
ticking ominously in the background. Moreover, a parliament unable to agree on
Brexit will, equally, never agree on any plausible wording of the referendum
question, or on a voting mechanism for selecting between more than two options.
Might securing EU agreement
for a long extension to Article 50 (which expires on 29 March 2019) create the
space for the comprehensive People’s Debate that Britain needs? Not really. Any
extension beyond June means that the UK must participate in the May 2019
European Parliament elections – for even if Brussels and London agree that the
UK should not, British citizens will almost certainly win in the European
courts if they sue for their right to vote. DiEM25 would be delighted to
include the UK in its pan-European electoral campaign. But I cannot countenance
looking the lady in Leeds in the eyes and telling her that, despite the Leave
result in 2016, she must now vote in the European Parliament elections.
Moreover, any agreed extension
would shift the deadline without removing the deadline effect. Theresa May will
use the additional time to continue peddling her hopeless deal, run down the
clock anew, and blockade herself in No 10 until an exhausted public is yet
again faced with another 11th-hour crisis. A delayed deadline will extend the
standstill and the Prime Minister’s tenure, rather than enable compromise.
The lady in Leeds, I must
confess, has had a major impact on my thinking: if we want Britain to stay in
the EU but to fight against the European establishment, and if we want a
People’s Debate, we should not want the revocation or extension of Article 50, or
a second referendum. What we should want is a progressive in Downing Street.
Given our current predicament, there is only one way to speedily get May out
and Corbyn in: let the clock run down.
On 29 March, the European
Commission will undoubtedly use its emergency powers to stop the clock
indefinitely, not merely to extend the deadline. A general election then
becomes inevitable, giving the people an opportunity to vote for a government
that can allow them the great debate that they deserve regarding the UK’s
long-term relationship with Europe and with itself.
CO2 levels expected to rise rapidly in 2019, Met Office scientists warn
Josh Gabbatiss
This year will see one of the
biggest CO2 surges in more than six decades of measurements, according to the
Met Office.
Rising emissions due to the
world’s continued appetite for fossil fuels will combine with reduced
absorption of greenhouse gas by withering grasslands and forests.
Describing the prediction as
“worrying and compelling”, scientists said it was an urgent reminder that the
time to cut out carbon is now.
CO2 levels will be at a record
high once again after emissions reached unprecedented levels last year, dashing
hopes the world had finally hit “peak carbon”.
Besides fossil fuels pumping
out the harmful gas, natural weather fluctuations will exacerbate the problem
as they hamper the ability of carbon sinks to store it.
In 2019 an upward swing in
tropical Pacific Ocean temperature will make many regions warmer and
drier.
As drought sets in and plants
dry out, they will be less capable of sucking CO2 from the atmosphere, and
massive deforestation in places like the Amazon is making this problem even worse.
The new predictions were based
on monitoring at the Mauna Loa observatory in Hawaii, which has registered a 30
per cent increase in the concentration of CO2 since 1958.
“Carbon sinks have saved us
from what has already happened – the future rise would have been about double
if it wasn’t for the sinks. So we are lucky they exist, to be honest,”
Professor Richard Betts of the Met Office Hadley Centre told The
Independent.
“But the sinks themselves are
affected by the climate, and that’s an important thing because it shows that as
climate change continues in the future it may affect their strength.”
If emissions continue to rise,
a major concern is that the carbon sinks currently storing carbon will cease to
function, potentially leading to uncontrollable warming and a scenario dubbed
“hothouse Earth”.
Last year Mauna Loa
observatory recorded concentrations of over 410ppm in April, marking the
highest level that had been reached in at least 800,000 years.
This year CO2 levels in the
atmosphere are likely to hit 411 parts per million (ppm).
The Met Office forecast
predicts the average increase in CO2 will be around 2.75ppm, the third largest
annual rise on record, matched only by two years in which El Nino Pacific
warming events took place.
CO2 is by far the biggest
contributor to climate change, and global efforts to prevent environmental
disaster largely focus on transitioning away from industries that pump it into
the air.
Scientists welcomed the new
data collected in Hawaii, describing it as “a call to innovate with rapid and
radical responses” to the looming crisis.
“We need to reduce emissions
from fossil fuel use, increase soil carbon sequestration to ‘lock-up’ CO2,
decelerate deforestation and land conversion, and promote less polluting more
sustainable agriculture,” said Professor Nick Ostle from Lancaster University,
who was not involved in the Met Office research.
“It’s a massive challenge but
there are real opportunities to make an impact individually and globally.”
Betsy DeVos and the Privatizers She Backs Have Met Their Match
Amy Goodman and Denis Moynihan
It took a week, but the public
school teachers of Los Angeles won. Over 30,000 teachers and school staff,
members of the United Teachers Los Angeles (UTLA) union, went on strike for the
first time in 30 years, demanding more resources for their classrooms, nurses
and librarians in every school, smaller class sizes and higher wages. In rain
and shine, they were joined on their picket lines by students, parents and
other allies. On Tuesday, LAUSD, the Los Angeles Unified School District — the
nation’s second-largest school system, with about three-quarters of its
students Latino — agreed to meet the strikers’ demands. Classes resumed
Wednesday. This major strike also joins a wave of similar labor actions around
the country confronting the attempt by corporate interests to privatize public
education.
“We went on strike, in one of
the largest strikes that the United States has seen in decades,” UTLA President
Alex Caputo-Pearl said Tuesday night, after a supermajority of union members
ratified the agreement. “The creativity and innovation and passion and love and
emotion of our members was out on the street, in the communities, in the parks,
for everyone to see.”
Arlene Inouye, a speech and
language specialist with 18 years’ experience in the LAUSD, chaired the UTLA’s
bargaining committee. “This was a historic agreement and gave us more than we
expected,” Inouye said on the “Democracy Now!” news hour. All of their
principal demands, including a cap on charter schools to reverse the trend
toward privatization, were met. Additionally, Inouye explained, “we were also
able to bring in some non-mandatory subjects of bargaining into our schools …
like green space on campus, stopping the criminalization of youth. We were able
to bring in an immigrant defense fund. We’re making a statement of our values.”
Also speaking on “Democracy
Now!,” investigative journalist Sarah Jaffe, author of “Necessary Trouble:
Americans in Revolt,” said: “There have been reform currents within the UTLA
for at least a decade … going back to the 2008 financial crisis, recession, the
layoffs of a lot of teachers. In 2014, the Union Power caucus took charge …
teachers like Arlene, with Alex Caputo-Pearl, brought in an organizing
department, a research department, a political department, that the union
didn’t have before. [They] actually voted to raise their own dues in order to …
invest in really becoming a fighting, organizing union.”
On the picket lines, teachers
repeatedly brought up privatization. “Ultimately, this fight is about the
privatization of schools,” teacher Marianne O’Brien told us. “Superintendent
Austin Beutner is pushing to privatize schools. … Our students would be
disproportionately hurt by that and not have access to a quality education, if
all the funding for public school is pulled into charter schools.”
Beutner, a wealthy investment
banker, has no background in education. The 2018 LAUSD school board election,
Jaffe explained, “had $14.7 million in outside funding spent on it by charter
school advocates, big-dollar hedge funds … they got a majority of pro-charter
school candidates on there. They put Beutner in.” One of Beutner’s plans is to
break up the LA Unified School District into 32 “portfolio” districts, copying
efforts in cities like Detroit and Newark the UTLA says “are riddled with a
patchwork of privatization schemes that do not improve student outcomes.”
Charter schools can not only
fire teachers more easily than public schools can—they can fire students as
well. By choosing high-performing students and rejecting those who have special
needs or score poorly on standardized tests, charter schools drain resources
from schools in poorer neighborhoods. Another teacher on the picket line, Lilit
Azarian, told us, “This is about fighting for communities of color, because
those are the communities that are affected by this privatization.”
A special election in March to
fill a seat on the LAUSD school board, vacated when a member pleaded guilty to
felony campaign finance violations, is being hotly contested between charter
school advocates and the UTLA and other allies of traditional public schools.
“If the teachers want Beutner gone, that’s going to be the way to do it,” Jaffe
said.
A wave of teacher strikes
swept the nation last year, but in largely Republican-controlled red states
like West Virginia, Oklahoma and Arizona. Teachers and staff went on strike and
achieved remarkable improvements, not only in pay and benefits but by directing
more resources to schools and classrooms. Now the teachers are rising up in
Democratic strongholds like Los Angeles. On Tuesday, as the UTLA declared
victory, ending the strike, the teachers union in Denver, voted overwhelmingly
to strike. Unionized teachers in Oakland, California, also are expected to
strike, as are teachers in Chicago’s community colleges.
If the Los Angeles teachers
are any indication of what’s to come, the privatizers and their champion in
Washington, D.C., President Donald Trump’s billionaire Secretary of Education
Betsy DeVos, may have met their match.
The Financial Secret Behind Germany’s Green Energy Revolution
The “Green New Deal” endorsed
by Rep. Alexandria Ocasio-Cortez, D.-N.Y., and more than 40 other House members
has been criticized as
imposing a too-heavy burden on the rich and upper-middle-class taxpayers who
will have to pay for it. However, taxing the rich is not what
the Green New Deal resolution proposes. It says funding would come
primarily from certain public agencies, including the U.S. Federal Reserve and
“a new public bank or system of regional and specialized public banks.”
Funding through the Federal
Reserve may be controversial, but establishing a national public infrastructure
and development bank should be a no-brainer. The real question is why we don’t
already have one, as do China, Germany and other countries that are running
circles around us in infrastructure development. Many European, Asian and Latin
American countries have their own
national development banks, as well as belong to bilateral or multinational
development institutions that are jointly owned by multiple governments. Unlike
the U.S. Federal Reserve, which considers itself “independent” of government,
national development banks are wholly owned by their governments and carry out
public development policies.
China not only has its own
China Infrastructure Bank but has established the Asian Infrastructure
Investment Bank, which counts many Asian and Middle Eastern countries in its
membership, including Australia, New Zealand and Saudi Arabia. Both banks are
helping to fund China’s trillion-dollar “One
Belt One Road” infrastructure initiative. China is so far ahead of the
United States in building infrastructure that Dan Slane, a former adviser on
President Donald Trump’s transition team, has warned,
“If we don’t get our act together very soon, we should all be brushing up on
our Mandarin.”
The leader in renewable
energy, however, is Germany, called “the
world’s first major renewable energy economy.” Germany has a public
sector development bank called KfW (Kreditanstalt für Wiederaufbau or
“Reconstruction Credit Institute”), which is even larger than the World Bank.
Along with Germany’s nonprofit Sparkassen banks, KfW has largely funded
the country’s green energy revolution.
Unlike private commercial
banks, KfW does not have to focus on maximizing short-term profits for its
shareholders while turning a blind eye to external costs, including those
imposed on the environment. The bank has been free to support the energy
revolution by funding major investments in renewable energy and energy
efficiency. Its fossil fuel investments are close to zero. One
of the key features of KfW, as with other development banks, is that much
of its lending is driven in a strategic direction determined by the national
government. Its key role in the green energy revolution has been played within
a public policy framework under Germany’s renewable energy legislation,
including policy measures that have made investment in renewables commercially
attractive.
KfW is one of the world’s
largest development banks, with assets totaling$566.5
billion as of December 2017. Ironically, the initial funding for its
capitalization came from the United States, through
the Marshall Plan in 1948. Why didn’t we fund a similar bank for
ourselves? Simply because powerful Wall Street interests did not want the
competition from a government-owned bank that could make below-market loans for
infrastructure and development. Major U.S. investors today prefer funding
infrastructure through public-private partnerships, in which private partners
can reap the profits while losses are imposed on local governments.
KfW and Germany’s Energy
Revolution
Renewable energy in Germany is
mainly based on wind, solar and biomass. Renewables generated 41 percent of the
country’s electricity in 2017, up from just 6 percent in 2000; and public
banks provided over 72 percent of
the financing for this transition. In 2007-09, KfW
funded all of Germany’s investment in Solar Photovoltaic. After that,
Solar PV was introduced nationwide on a major scale. This is the sort of
catalytic role that development banks can play—kickstarting a major structural
transformation by funding and showcasing new technologies and sectors.
KfW is not only one of the
biggest financial institutions but has been ranked one of the two safest
banks in the world. (The other, Switzerland’s Zurich Cantonal Bank, is also
publicly owned.) KfW sports
triple-A ratings from all three major rating agencies—Fitch, Standard
and Poor’s, and Moody’s. The bank benefits from these top ratings and the
statutory guarantee of the German government, which allow it to issue bonds on
very favorable terms and therefore to lend on favorable terms, backing its
loans with the bonds.
KfW does not work through
public-private partnerships, and it does not trade in derivatives and other
complex financial products. It
relies on traditional lending and grants. The borrower is responsible
for loan repayment. Private investors can participate, but not as shareholders
or public-private partners. Rather, they can invest in “Green Bonds,” which are
as safe and liquid as other government bonds and are prized for their green
earmarking. The first “Green Bond—Made by KfW” was issued in 2014 with a volume
of $1.7 billion and a maturity of five years. It was the largest Green Bond
ever at the time of issuance and generated so much interest that the order book
rapidly grew to $3.02 billion, although the bonds paid an annual coupon of only
0.375 percent. By 2017, the issue volume of KfW
Green Bondsreached $4.21 billion.
Investors benefit from the
high credit and sustainability ratings of KfW, the liquidity of its bonds, and
the opportunity to support climate and environmental protection. For large
institutional investors with funds that exceed the government deposit insurance
limit, Green Bonds are the equivalent of savings accounts—a safe place to park
their money that provides a modest interest. Green Bonds also appeal to
“socially responsible” investors, who have the assurance with these simple and
transparent bonds that their money is going where they want it to. The bonds
are financed by KfW from the proceeds of its loans, which are also in high
demand due to their low interest rates, which the bank can offer because its
high ratings allow it to cheaply mobilize funds from capital markets and its
public policy-oriented loans qualify it for targeted subsidies.
Roosevelt’s Development Bank:
The Reconstruction Finance Corporation
KfW’s role in implementing government
policy parallels that of the Reconstruction Finance Corporation (RFC) in
funding the New Deal in the 1930s. At that time, U.S. banks were bankrupt and
incapable of financing the country’s recovery. President Franklin D. Roosevelt
attempted to set up a system of 12 public “industrial banks” through the
Federal Reserve, but the measure failed. Roosevelt then made an end run around
his opponents by using the RFC that had been set up earlier by President
Herbert Hoover, expanding it to address the nation’s financing needs.
The RFC Act of 1932 provided
the RFC with capital stock of $500 million and the authority to extend credit
up to $1.5 billion (subsequently increased several times). With those
resources, from 1932 to 1957 the RFC loaned or invested more than $40
billion. As with KfW’s loans, its funding source was the sale of bonds, mostly
to the Treasury itself. Proceeds from the loans repaid the bonds, leaving
the RFC with a net profit. The RFC financed roads, bridges, dams, post
offices, universities, electrical power, mortgages, farms and much more; it
funded all of this while generating income for the government.
The RFC was so successful that
it became America’s largest corporation and the world’s largest banking
organization. Its success, however, may have been its nemesis. Without the
emergencies of depression and war, it was a too-powerful competitor of the
private banking establishment; and in 1957, it was disbanded under President
Dwight D. Eisenhower. That’s how the United States was left without a
development bank at the same time Germany and other countries were hitting the
ground running with theirs.
Today some U.S. states have
infrastructure and development banks, including California, but their reach is
very small. One way they could be expanded to meet state infrastructure needs
would be to turn them into depositories for state and municipal revenue. Rather
than lending their capital directly in a revolving fund, this would allow them
to leverage their capital into 10 times that sum in loans, as all depository
banks are able to do, as I’ve previously
explained.
The most profitable and
efficient way for national and local governments to finance public
infrastructure and development is with their own banks, as the impressive track
records of KfW and other national development banks have shown. The RFC showed
what could be done even by a country that was technically bankrupt, simply by
mobilizing its own resources through a publicly owned financial institution. We
need to resurrect that public funding engine today, not only to address the
national and global crises we are facing now but for the ongoing development
the country needs in order to manifest its true potential.
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