SLOWLY SLOWLY WHEELY TURNY

Britain: Real cost of the banking crisis

Written by Mick BrooksThursday, 17 June 2010

What has the banking crisis cost us all? Andrew Haldane of the Bank of England has tried to work it all out in a paper called ‘The $100 billion question’. As Socialist Appeal has pointed out many times the ‘banking crisis’ is really a crisis of capitalism, but for the time being we’ll stick with Haldane’s terminology.

Bank of England. Photo by den99.He begins as follows:

“The car industry is a pollutant. Exhaust fumes are a noxious by-product. Motoring benefits those producing and consuming car travel services – the private benefits of motoring. But it also endangers innocent bystanders within the wider community – the social costs of exhaust pollution...

“The banking industry is also a pollutant. Systemic risk is a noxious by-product.”

Systemic risk means that the banks between them monopolise the circulation of money. So, if one fails, they all go down like dominos. Since the capitalist system is completely dependent on monetary circulation, this has profound knock-on effects on the livelihoods of the rest of us. He goes on:

“Banking benefits those producing and consuming financial services – the private benefits for bank employees, depositors, borrowers and investors. But it also risks endangering innocent bystanders within the wider economy – the social costs to the general public from banking crises.”

How much does this cost?

“The narrowest fiscal interpretation of the cost of crisis would be given by the wealth transfer from the government to the banks as a result of the bailout. Plainly, there is a large degree of uncertainty about the eventual loss governments may face. But in the US, this is currently estimated to be around $100 billion, or less than 1% of US GDP. For US taxpayers, these losses are (almost exactly) a $100 billion question. In the UK, the direct cost may be less than £20 billion, or little more than 1% of GDP.”

But this is just a tiny proportion of the real cost of ‘banking pollution’. What are the social costs of the banking crisis in lost output and mass unemployment all over the world?

“But these direct fiscal costs are almost certainly an underestimate of the damage to the wider economy which has resulted from the crisis – the true social costs of crisis. World output in 2009 is expected to have been around 6.5% lower than its counterfactual path in the absence of crisis. In the UK, the equivalent output loss is around 10%. In money terms, that translates into output losses of $4 trillion and £140 billion respectively.” (That is just for the UK and the USA, not the rest of the world.)

“As” (evidence given in the paper) “shows, these losses are multiples of the static costs, lying anywhere between one and five times annual GDP.”

Haldane is saying that the capitalist crisis lost the world between one year and five year’s output for ever. Remember capitalism, we are told, is the most efficient system going. Really?

Haldane tries to put a figure on our loss:

“Put in money terms, that is an output loss equivalent to between $60 trillion and $200 trillion for the world economy and between £1.8 trillion and £7.4 trillion for the UK. As Nobel-prize winning physicist Richard Feynman observed, to call these numbers ‘astronomical’ would be to do astronomy a disservice: there are only hundreds of billions of stars in the galaxy.

“For UK banks, the average annual subsidy for the top five banks (between 2007 and 2009) was over £50 billion - roughly equal to UK banks’ annual profits prior to the crisis. At the height of the crisis, the subsidy was larger still. For the sample of global banks, the average annual subsidy for the top five banks was just less than $60 billion per year. These are not small sums.”

Haldane has a considerable capacity for understatement, but note that, we were told the banks were formidable and indispensable wealth creating machines. If you include all the money we had to give to bail them out they, really only broke even. They made money for themselves but only equal to the money we lost on account of their failure.

In another paper called ‘Why banks failed the stress test’, Haldane tries to explain the reason for this tale of woe. Finance houses use phenomenally complicated mathematical models, often crunching out numbers with banks of interlinked computers, in order to predict the future. So how did they get it so wrong?

When things started to go pear-shaped in 2007 the Chief Financial Officer of Goldman Sachs told the Financial Times, “We are seeing things that were 25-standard deviation moves, seven days in a row.” This jargon translates as, ‘Unusual stuff is happening.’ How unusual?

According to Haldane this could be expected to happen once every  13.7 billion years or so. This, he comments, is roughly the estimated age of the universe. Haldane suggests another possibility – the economic model was wrong.

Far be it for me to suggest that Haldane, a true Mandarin of the Bank of England, is a Trotskyist. But he comes to the same conclusion as Trotsky in his ‘Transitional Programme’:

“In their structure the banks express in a concentrated form the entire structure of modern capital: they combine tendencies of monopoly with tendencies of anarchy. They organize the miracles of technology, giant enterprises, mighty trusts; and they also organize high prices, crises and unemployment. It is impossible to take a single serious step in the struggle against monopolistic despotism and capitalistic anarchy – which supplement one another in their work of destruction – if the commanding posts of banks are left in the hands of predatory capitalists. In order to create a unified system of investments and credits, along a rational plan corresponding to the interests of the entire people, it is necessary to merge all the banks into a single national institution. Only the expropriation of the private banks and the concentration of the entire credit system in the hands of the state will provide the latter with the necessary actual, i.e., material resources – and not merely paper and bureaucratic resources – for economic planning.

“However, the state-ization of the banks will produce these favorable results only if the state power itself passes completely from the hands of the exploiters into the hands of the toilers.”

That’s a job that needs doing more than ever.

Source: Socialist Appeal (Britain)

Will the bourgeoisie empty the banks before there is change?

Air Canada breaks 

 by Benjamin HellerWednesday, 28 July 2010

Even as it enjoys a new wave of growth and prosperity, Canadian airline giant Air Canada has launched another in a series of attacks on its workers. Breaking a promise made earlier this year, the company announced that it will dramatically increase executive compensation, while simultaneously refusing to negotiate with pilots, flight attendants, and maintenance workers who have borne the brunt of Air Canada's supposed financial difficulties.

Last year, amid warnings of a possible bankruptcy, Air Canada negotiated a deal with its employees that froze wages for 21 months and unfavourably restructured pensions. The severity of this attack was mitigated by an agreement that senior executives would receive a similar freeze in earnings. On 27th May of this year, however, Air Canada decided that the agreement no longer concerned them and announced that executive incentives would be effectively quadrupled. Air Canada shareholders accepted this new policy with a characteristic indifference to the fervent opposition of the workers.

With no trace of embarrassment, airline president and CEO Calvin Rovinescu declared that only the amount of shares available would be changed, while declining to clarify what possible use those shares could have while remaining “available.” He was all too happy, however, to point out the necessity of having proper incentives for executives. “We are looking for ways of not only recognizing talent,” he emphasized, “but rewarding it, highlighting it, and putting it on a pedestal.”

Meanwhile, he also assured us, “Increasing wages doesn't give you a recipe that you're going to necessarily have a better quality of service.” The lesson here is that executive compensation occupies a sphere somehow distinct from wages, in that it is simultaneously more effective and more exclusive. The company has said that it needs these shares “to attract, retain, and motivate employees in key positions,” yet this practice is apparently not attractive enough to extend to the rank-and-file workers who actually run Air Canada.

While executive compensation is in line to increase with company profits, Air Canada continues to hold out against its employees, in a stark contrast to its benevolent generosity towards its bosses. Robert Milton, the CEO of Air Canada's parent company, ACE Aviation, received almost $15-million in 2009, which included salary, incentives, and a severance package. Milton's severance package, and those of two of his co-workers, was awarded even though he did not leave the company. Overall, the five main executives of ACE received $13.1-million more than in 2008.

News of this angered many Air Canada employees, who have been on edge since the company began asking for sacrifices. “If you’re asking employees to tighten their belts at the same time as these obscene payouts,” said the president of the Air Canada Pilot's Association, “then that is not leading by example and does not motivate us or make us feel very good.” Indeed, it is hard to feel good, let alone very good, when it turns out that all your sacrifices were in vain. It is impossible to feel motivated to work in an environment that routinely undercuts your livelihood. It is for this reason that there is lingering resentment over the formation of ACE, which occurred in 2004 following Air Canada's escape from bankruptcy. The airline's survival in 2004 was due to severe concessions made by the workers, yet it subsequently dissolved into various smaller businesses, ACE being one of them.

And while the workers have been asked to keep quiet and continue to bear the company's financial load, Air Canada continues to expand and invest. On 4th June, they announced a new partnership deal with Northern Airlines. Less than a week later, they secured over $170-million in loans to buy 16 new planes. The next day they, announced new daily flights to Brussels. This is while the airline claims that it is trying to cut costs by $400-million, in order to achieve “stability”. For a company in such financial trouble, they are spending quite a bit of money.

Indeed, “costs” for the Air Canada executives do not include their own benefits, nor do they include purchasing machines or lucrative deals. The $400-million that is going to be “saved” looks as though it will come from the workers’ pockets. And although Air Canada continues to declare its own poverty, the facts do not show this. While profits have fallen as a result of a decrease in the number of passengers, this has abated somewhat of late. “This is the sixth consecutive month in which we have reported a monthly traffic increase year-over-year on a consolidated basis," Rovinescu informs us. It is clear that Air Canada has money to spare, which it has largely allocated to a few individuals. All the while, employees struggle through rising costs of consumer goods with frozen pensions and truncated salaries, while the executives and shareholders refuse any sacrifices from their end.

Meanwhile, Air Canada's long-lost cousin, Jazz Airlines, is involved in a heated struggle with its workers. The company's pilots, backed by the flight attendants, are demanding “improved pensions and allowances,” which have been frozen since Jazz emerged from the wreckage of Air Canada in 2004, and “modest salary increases.” On 27th May, faced with unyielding opposition from the executives for over a year, the union overwhelmingly voted in favour of a strike, which can take place any time after 12th June. The flight attendants’ union has also voted to strike unless their demands for increased wages and improved working conditions are met.

These are not isolated phenomena. Across the continent, airline companies are trying to push through, or maintain, severe cuts for their workers. Pilots from Spirit Airlines have stated that they are planning a strike in the coming days, and labour talks at AirTran Airways are becoming increasingly tense. In the United States, unions representing over 100,000 workers are currently negotiating for a change from the bankruptcy contracts they have been dealing with for the last few years. And, workers are starting to see that their fight is not theirs to fight alone. Pilots representing over a dozen airlines joined the Spirit picket lines on June 11, even though Spirit's 500 pilots represent less than one per cent of the Air Line Pilot's Association.

These attacks may serve the capitalist class in the short term, but they will become their downfall. A consciousness is developing amongst the workers as they feel the suffering of other workers to be their own. It starts small, as we have seen. The flight attendants back up the pilots, and visa versa. And then it grows. The workers realize that their fight is the same fight, and that their interests are the same interests. Half leading, half dragged, the capitalists across the world are declaring war on the workers. Yet with each blow that falls, the workers rise, not fall. And with each new step they take, they see all the more clearly what the future offers them.

The philosophy of contemporary housing!

 

Written by Dan Morley in LondonWednesday, 28 July 2010

We conclude Dan Morley's three part study of the crisis inside UK housing.

Right to Buy

The situation with Right to Buy (RTB) is not much different. Just as government siphons off rents and does not reinvest them, so it siphons off the capital receipts (which have been hugely subsidised by government for decades in a crude attempt to bribe tenants into buying their homes, doing unknown amounts of unnecessary damage to government finances) from 'right to buy' sales. Councils have lost literally millions of homes to the market, at knock down prices, and haven't even seen any of this admittedly limited amount of money! This policy has now been finally overturned, but only after almost 30 years of hidden damage.

Of course RTB is dressed up as the liberation of the working class, signaling their emergence into the amorphous middle classes. We are also told that it was an extremely clever tactic of Thatcher, because she managed to create a large pool of middle class aspiring workers now ready to vote Tory. People who say this have bought into the myth that wealth is created by individuals speculating on the rising 'value' of their home.

There is little or no evidence that significant numbers of these people started voting Tory. In the 1980s Terry Fields, the Militant Labour MP, was elected in a constituency with a particularly high number of RTB leaseholders. Just before the miners strike, the Guardian claimed that miners would not strike because so many of them had mortgages! Of course, having a debt burden where there wasn't one before does to an extent have a 'disciplining' effect on workers, just like student loans do for students. In that sense it is a setback for the working class.

Thatcher was never elected by the working class, but at best by their abstention from voting Labour. And the general effect of RTB has been to depress the working class and the Labour movement, especially the tenants’ movement, because it was recognized as a defeat for the working class. The defeat of the miners in 1985 has not ended the labour movement, nor did it herald an era of triumphant middle class individualism. No - it depressed the labour movement and handed the ideological initiative to the bourgeoisie, who have merely been declaring the rise of universal middle class individualism. Of course, an individual may apply for RTB and make a quick buck or two, and be quite pleased with themselves. But they remain working class, and nevertheless this is not the general picture, which has instead been the crippling of council housing for the working class.

Mostly those who carry out a RTB are acting for short term gain that does not take them out of their conditions or give them the ability to realise any aspiration for middle class status. They are often conned by property companies, who have also used the law for their benefit, as Polly Toynbee points out:

“One evening a leaflet came through the door from an estate agency/finance house. 'Are you a council tenant? Have you ever considered giving up your tenancy? If so you could earn between £6,000-£26,000.' I called them up, pretending to be a long-term resident and said I was considering moving out. 'It would be silly to give up your tenancy for free when you could make money instead, wouldn't it?' said a silky voice. He explained the deal: I would apply for the right to buy, his company would put up the cash and by law I would be able to sell it to them in three years time. Until then for the next three years I would assign them a lease and they would let it out, (for £180 a week, instead of my £59 a week rent.)

“How much is the flat worth, I asked? £83,000 he said, but the council was presently only valuing them at £78,000. Because of the generous discount, it would only cost me £39,000 to buy. A fantastic bargain: you couldn't buy a garden shed in the area for that. So, I asked, how much would I make out of this deal? £7,000 said the silken voice. For giving up a lifetime's right to a flat in London, that was a scandalous offer. But it is the offer thousands of hard-pressed tenants are accepting. Either they don't know any better or else they are in such desperate debt that £7,000 seems like an answer to their prayer - though they will never, ever get another council flat. All this is totally legal. Housing officers report thousands of people cheated shamelessly out of their homes, their rights and a lot of money this way. I discovered the true worth of the flat was in fact £150,000, which I would be relinquishing for a mere £7,000. Right to buy may often be a leg-up for the upwardly mobile, but it is often a crash down into homelessness for the most vulnerable and gullible. Lambeth alone lost 800 properties last year through right to buy, and has already sold another 800 this year.”

This also shows how any backdoor privatisation always corrodes the principle of social provision. And government subsidies to lubricate the wheels of privatisation, which is what RTB really is, simply lead to inflation. Because instead of building new council homes and in the process creating new value, money is effectively handed to property companies to simply take over and sell on already existing (and deteriorating) housing.

Today our country has enormous visible scars in the form of deteriorating and scarce housing and unemployment. Massive regional inequalities in wealth, jobs, health and education stalk the land. Although this marks the impasse of British capitalism, it is to the benefit of capitalists. In this respect, RTB and the principle of working class 'home ownership' has had a large role to play. Because home ownership atomizes the working class it also ties workers down 'to the land', thus weakening bargaining power as jobs leave but workers stay. Of course, the only real solution to this is to plan production and employment, breaking down regional tensions and inequalities. But tying workers to one place with artificially atomized home ownership in the midst of council estates weakens bargaining power, driving down wages and leading to the constant and gradual deterioration of whole regions.

We are sold the myth that council tenants are 'dependent'. But the power of the working class and its ability to take society forwards is in its mutual interdependence. Contrary to what the Thatcherites assert, society does exist to the point that we can study its laws of development and predict its future - as the demographic studies we saw earlier so clearly show. The bourgeoisie wrongly imagines that independence means the freedom of the individual to, say, buy their council house. But genuine independence means to understand the laws of society, so that we can understand what really is possible, instead of blindly succumbing to necessity. When an individual is compelled through external circumstances not under their control to buy their home to make a quick buck, whilst at the same time we know that the only affect of this is to cripple social housing and inflate house prices, we can definitely say that both the individual and society are not free or independent, but that we remain thoroughly dependent, helpless and blind to social laws. But it has not always and need not be this way.

Workers have fought for council housing. The first housing law and plan of council housing in the 1920s was described as a measure 'against bolshevism' by ministers at the time. They had to grant it because workers demanded it. And it marked an enormous step forward, often giving workers running hot water and indoor bathrooms, as well as security of tenure, for the first time. In the 70s the tenants’ movement successfully defeated Tory rent hikes. Today council tenants vote against stock transfer and according to Shelter most people list affordability and security of tenure ahead of the aspiration to own a home as their priorities. The looming housing disaster (in truth it is already with us) and its disastrous affects on poverty, health, education, employment and racism demands a plan of socialised housing as part of a more general plan for the economy.

Green view:The geography of geoengineering

                                        

Jul 20th 2010, 21:39 by The Economist online

IN DISCUSSIONS of climate change it is an article of faith that there are no winners, only losers. This is in part an expression of bien-pensant solidarity, but it is also realistic. It recognises the degree to which current human arrangements—farming practices, positioning of cities, etc—are adapted to current climatic conditions, and that shifts in those conditions will impose transition costs even if not in absolute terms dreadful. It also acknowledges the world’s ever greater level of interdependency. If the local effects of climate change in Syldavia, say, are pleasing to the residents, those benefits can still be offset by a loss in trade with the much worse affected Ruritania, or through conflict over water resources with now-parched Borduria, or by influxes of refugees from Vulgaria, and so on.

Underlying all this is a concern about uncertainty. There are various places where small shifts in climate might seem locally desirable. But uncertainties in both climate science—how strongly, and with what geographic pattern of effects, does the earth respond to increased greenhouse gases?—and political economy—what levels of greenhouse gas will the earth be subjected to?—make it impossible to guarantee the small shifts that people in those places might like. They might well instead end up with larger changes they liked much less. Better to assume that everyone is a loser, because thanks to the uncertainties it is undoubtedly the case that everyone could be.

In discussing geoengineering schemes, though, talk of winners and losers is rife. Increasingly, the question asked about any scheme to alter the climate in a way that acts to counter greenhouse warming—by scattering sulphates in the stratosphere to cut down incoming sunlight, for example—has been "whose hand will be on the thermostat?" The assumption has been that while geoengineering schemes might help some people and places they will harm others, and that this will lead to inequity and conflict.

The thinking that lies behind this is that though a stratospheric veil of microscopic sulphate particles would undoubtedly cool the earth (they have been clearly seen to do so after large volcanic eruptions) its cooling effect would not be exactly equal and opposite to the warming greenhouse gases provide. Cutting down sunlight delivers less cooling in winter, and none at night. It also has its most direct cooling effect on the surface of the planet, while increasing greenhouse gases warms the surface indirectly by warming the atmosphere above it.

These things can average out. One can imagine setting a system in which the net effect of increased greenhouse gases and increased sulphates in the atmosphere kept the average global surface temperature the same. But that would not mean the climate was unchanged in other ways. In particular, the different effects on the surface and the atmosphere mean that the hydrologic cycle would be changed. Various studies with computer models (and experience with volcanoes) suggest that a greenhouse world kept cool with a sulphate veil will see less precipitation, all things being equal, than a non-greenhouse, non-veiled world with the same average temperature. The pattern of precipitation will change, too, as well as the overall amount.

A new study in the journal Nature Geoscience looks at these issues and what they might mean using the power of a system called Climateprediction.net, one of a number of intriguing attempts to use the spare capacity of a large number of computers to run calculations of scientific interest. Katharine Ricke and her co-authors used its remarkable power to run thousands of simulations of how the climate might develop over this century with different levels of geoengineering, all beginning, in the simulations, in 2005.

They found that for every region of the planet there were geoengineering scenarios in which the projected climate in the 2020s was more like the climate of the 1990s in terms of temperature and, crucially, precipitation than if there were no geoengineering. However there was no scenario that did that for both variables in all regions. And the longer the geoengineering went on, the more striking the effect became; scenarios that kept one region’s temperature 1990-like would push the precipitation out of bounds somewhere else, and vice versa.

A particularly salient example of this comes from Asia. There were a number of geoengineering scenarios in which the climate in both India and China in the 2020s looked quite like that of the 1990s, though in all geoengineering scenarios using this particular model India gets a bit wetter than it was before and in most of them China gets a bit drier. Go out to the 2070s, though, and the geoengineering scenarios strong enough to keep China’s temperature 1990s-ish cool India below its baseline temperature, while weaker scenarios that keep India’s temperature at the levels of the 1990s see China heat up.

That said, in both cases all the geoengineering options gave results for both temperature and precipitation closer to 1990s levels than the models projected for a world without geoengineering. In this sense both countries were "winners"—but maximising the benefits for one would still come at the expense of the other. The same lesson seems to apply quite generally across the world. Few if any regions stand out as certain losers from geoengineering if you accept that it is worth trading off a large change in temperature for a smaller drop in precipitation (in terms of change on the levels seen before the geoengineering). But different levels of geoengineering seem optimal for different regions.

Though the specific regional differences seen in the simulations are interesting, and Ms Ricke intends to explore them further in future work, they should not be over interpreted. Climateprediction.net allowed the researchers to run their model many times, but it was always the same model, and no model of the global climate has as yet any strong claim to getting the details of regional climates right. The core message here is not what level of geoengineering any given region might prefer, but rather the lesson that, though many regions might benefit from geoengineering, they will not all do so to the same extent in any single geoengineering scenario.

Veil of sulphate, meet veil of ignorance

A future programme to compare the effects of geoengineering as simulated by a range of different climate models should reveal any plausibly robust regional predictions that can be made at the current level of scientific understanding. It will not get rid of the fundamental uncertainties, though, and nor would it necessarily be a good thing if it did. Uncertainty about who might do best from what sort of project allows discussions of geoengineering to take place without the parties to the debate knowing in any detail where any nation’s specific interests might lie. This introduces what the philosopher John Rawls called a “veil of ignorance”; making decisions as if such a veil existed, Rawls thought, was a good basis for justice. (If regional outcomes could be predicted accurately, a different Rawlsian idea, that of the difference principle, might come into play. This states that just action consist not just of improving things for everyone, but specifically for improving things for the worst off, and would give the effects of geoengineering on the least developed countries a particular importance.)

The continuing uncertainty also emphasises the extent to which discussions of geoengineering do not constitute an alternative to other approaches to climate change: they are instead just an expansion of those efforts. Taking geoengineering seriously is not a question of opting for some clarifying technological fix—of saying, in effect, forget the politics, here come the sulphates. It is a matter of taking the current problems of decision making in conditions of uncertainty to new levels in order to consider possible worlds that aren’t quite as bad.

Desperate Times

Bolivar exhumed

Jul 22nd 2010, 11:38 by The Economist | CARACAS

Venezuela’s president buries bad news by disinterring a national icon

FOR a president facing a weak economy and declining popularity, a centuries-old murder mystery could prove a useful distraction. Venezuela’s Hugo Chávez is not one to let the lack of any such mystery stand in his way. On July 15th, at the president’s order, a team of white-clad soldiers and forensic scientists opened the lead coffin holding the remains of Simón Bolívar, the Caracas-born South American independence hero. He was exhumed to see if he died of tuberculosis, as historians assert, or was poisoned by political rivals—“crucified like Christ,” as Mr Chávez insists.

The president has long idolised Bolívar, the nation’s secular saint. He even renamed the country the “Bolivarian Republic of Venezuela.” Although Bolívar was in fact quite conservative, Mr Chávez sees him as a socialist, and advertises his own movement as the long-delayed realisation of the Liberator’s dream. In this scheme, the descendants of the “oligarchs” and “imperialists” who purportedly killed Bolívar are now plotting to assassinate his ideological heir.

Mr Chávez first aired his revisionist theory of Bolívar’s murder on the anniversary of his death, in 2007, just two weeks after the president had lost a referendum on constitutional reform. The next month he set up a commission to investigate the claim incorporating ten ministers and the vice-president.

With legislative elections looming this September, Mr Chávez decided that 180 years of mystery were too many. In a 19-hour operation, a scan was taken of Bolívar’s skull, and samples were extracted from his teeth and vertebrae. They will now be tested for authenticity. But according to Mr Chávez, his own doubts were assuaged by Bolívar himself, who helpfully called out “Yes, it’s me” from the grave. “I confess we wept,” the president later wrote on Twitter. “That glorious skeleton must be Bolívar, for we could feel his spark.”

Once the forensic analysis is over, Bolívar will be resealed in a new coffin, wrapped in a new flag and—during next year’s bicentennial celebrations—interred in a new mausoleum. A useful by-product is that his remains will then be separated at last from those of heroes who are not to Mr Chávez’s taste.

Lal Khan: “Pakistan‘s Other Story - The 1968-9 Revolution” book presentation in Frankfurt/Main (Germany)

Written by Redaktion Der FunkeThursday, 22 July 2010

Lal Khan was in Germany recently to present his book, Pakistan‘s Other Story - The 1968-9 Revolution. You can also buy the book online from Wellred Books.

On Sunday, July 11, 45 people attended the German presentation of Lal Khan’s book, Pakistan’s Other Story The 1968-9 Revolution, in Frankfurt. Lal Khan is a leading Pakistani Marxist and has been fighting for decades and under very dangerous conditions for a free workers’ movement and for a genuine socialist democracy on the whole South Asian subcontinent.

The meeting was attended by a large group of emigrant Pakistani, some Germans, including representatives of the “DIE LINKE” party (“The Left Party”), and one person from the United States. Lal Khan spoke about the history of Pakistan as well as the present situation faced by ordinary Pakistani working people. The main topic of his lecture was not Islamic fundamentalism but the origins of the present misery. He stressed the point that his book is written from the perspective of ordinary working people and thus it is definitely not a piece of the officially written history.

He stressed that the present situation in Pakistan is not determined by Islamic fundamentalism. Only a very small minority of the population is hanging on to this ideology. The main problem of the country is the terror of capitalism that is driving ordinary people to desperation and in some cases to suicide as well. The extremely poor and often illiterate population is being threatened by massive inflation for basic goods and daily electricity power cuts in whole cities and regions.

He pointed out that only the organised workers’ movement is able to act against these barbaric living conditions. But the actions of the workers’ movement are limited because of the repression by the local capitalists and landlords as well as by mighty foreign powers. As an example of the repression by imperialist foreign interests Lal Khan mentioned the German chemical company Merck, located in the city of Darmstadt, just a few miles south of Frankfurt, that recently fired striking workers in its factories in Pakistan. Lal Khan urged the workers’ movement and the left in Germany to build up solidarity work on this issue.

An internal problem for the development of Pakistani society is the fact that army officials are often owners of great tracts of land and also of locally based companies. As a consequence the army has a big influence on the Pakistani economy. This situation was set off long ago by British imperialism. Before the times of the rule of the British Empire, landlordism, or feudalism, was unknown to the Pakistani people. The British introduced this form of property relations with the intention to creating a loyal native upper class that possessed the power to suppress the colonised masses.

However, during the Pakistani Revolution of 1968-9 it was clearly demonstrated that the rule of such an elite and its oppressive state apparatus could have been defeated in a very short time. The final success of the revolution, the conquest of power, was prevented because of the lack of a conscious leadership of the mass insurrection. In collaboration with imperialism the ruling class reacted with the fostering of the might of the generals and the creation of a military dictatorship.

A phenomenon that originated historically and which was also deeply linked to the phenomenon of a degenerated state under the social and political might of the army is the emergence of religious terrorism, of extremist Islamic fundamentalism. This has very little support among the people but it is allowed to act freely and effectively as it serves the purposes of this degenerate state.

After the Afghan Revolution in 1978 the CIA nurtured the awakening of Islamic reaction throughout the whole region with the intention of holding down the rising masses by exploiting religious superstitions and naked fascist violence. Just as today, within the scope of the so-called “War on Terror”, in the 1980s the CIA had used the services of the Pakistani military state apparatus to exchange men, material and information, mainly through the northern Pashtu areas on both sides of the Afghan “boarder”, with their allies in the region.

Since those days important layers of the Pakistani state apparatus have been directly mixed up with the Islamic fundamentalists in both countries. As in the past, today many corrupt civil servants and whole state institutions are making material gains because of their services provided to the US as well as to the religious fascists. Enormous amounts of money, originally dedicated to finance the so-called “War on Terror”, are thus in reality directed into a corrupt state infrastructure and this has been going on for decades because of the cynical role of both US imperialism and Islamic fundamentalism in the region.

This is although the explanation as to why Islamic tendencies have been able to gain a great audience in Pakistan as well as among the worldwide opinion makers – and hugely influence the state of Pakistani society, even though their social influence on the mass of the population is definitely irrelevant. It thus follows that it is a really dangerous illusion to harbour any hope that a way out of the Pakistani misery can be provided by any sectors of the state.

The material and political interests of al-Qaeda, the Merck Company, the Taliban, US imperialism, the local elite and the state-apparatus may be very different. But one thing unites them: their oppressive behaviour and their material interests pit them all against the liberation of the toiling masses in the whole region.

It is the task of the organised workers’ movement, coordinated by a conscious and serious leadership, to end poverty, exploitation, despotism and Islamic reaction once and for all. Christoph Mürdter from the Wiesbaden DIE LINKE, the Offenbach DIE LINKE and Kazmi of the Chingaree Forum all stressed the importance of the lessons of the struggles for social liberation in other parts of the world for the changing of the political situation in Germany. Together with Lal Khan they called for the immediate withdrawal of all imperialist armies from Afghanistan and confirmed their intention to strengthen the consciousness of the common interests of the exploited masses here in Germany and also in Pakistan through concrete solidarity work.

• See also: Pakistan: The Revolution Betrayed, an Introduction to Pakistan's Other Story - The 1968-9 Revolution By Alan Woods.