Solution to social cleansing - rent control

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In response to the government's reduction in housing benefits, London councils are trying to move families to other parts of the country where private rents are more affordable. The selling off of council houses and the drastic fall in new social housing supply is part of this. But it's not enough to say the solution is building more council or social housing. That takes time and investment. Moreover, the problem is actually a massively disfunctional private housing market. Remember, it was the housing bubble in America that led to the financial crash. Rising house prices in the UK, combined with the buy to let market, led to a massive transfer of wealth to home owners and landlords over the last 30 years.
Where mortgages used to be difficult to obtain, in the late 90s they become easily available at 100% of house price and no questions asked. The result was a massive housing bubble. However because of migration and growing population in the UK, the housing market has not collapsed as in the US.
It is worth repeating that housing benefit is a subsidy to landlords, not tenants. Tenants do not get to keep the money, landlords do. Rents have been rising at 10% a year during this great recession. Yet somehow, the government and media are not outraged and taking action to stop these rises. Landlords today are like the nobility in the middle ages - no one dare criticise the way they fleece the peasants.
The solution is to re-introduce rent controls, which were abolished by Margaret Thatcher in 1980. Rents should not be allowed to rise higher than inflation nor to more than a reasonable proportion of the median (not average) wage, say 25%, allowing for house size and region. For each extra bedroom, this could be raised by 50%. So to rent in an area with median wages of £20,000 would mean a maximum average rent of £416 per month for a one bedroom house, £624 for 2 bedroom, £832 for three bedroom. Personally, even this sounds too high to me. The system could impose a freeze on all above average rents to gradually bring rents down to these levels. House prices would follow, as market speculation would be sucked out of the system. Tenants would be guaranteed the right to ask for a rent review based on the local rent guidance.
I have been a landlord and it is quite simply the easiest way of making money - with the possible exception of banking. The best way to reduce the cost of housing for the majority of working people is to take the wind out of the housing market through land value tax. It works very well in Germany and other countries. They never had a housing bubble and rents are vastly more affordable. The tax system should be used to divert capital into useful productive activity - diverting capital from landlords to workers will boost spending in the economy by increasing disposable income, and will also force capitalists to invest in productive activity rather than just buying property and sweating tenants.
So a combination of rent control and land value tax, plus investment in new social housing, should cure most of the evils of our exploitative housing market. Put that in your manifesto and you will get elected even if the Daily Mail calls you Stalin.

Bo mystery is part of China's emerging division over future

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From Lin Chun in The Guardian

The political upheaval triggered by the downfall of Bo and the "Chongqing model" – is still unfolding in China. Although the model is not fundamentally different from the national agenda of neoliberal global integration, it included more independent social policies. These proved so popular, it took what the Financial Times has called a "palace coup" to crush it. 

Corruption charges have been brought against Bo, and his wife Gu Kailai is detained, suspected of murder.... Under attack are not only these individuals, but also forces supporting the search for an alternative to the dominant growth pattern and the Chongqing model itself, with all of its hallmarks: changhong, or "singing red songs"; dahei, smashing criminal gangs and corruption; and minsheng, promotion of distributive social policies.

Also worth watching is the video interview from Real News Network:

Real News Network interview discussing the future political direction of China

Minqi Li is an Assistant Professor at the University of Utah specializing in Political Economy, World Systems and the Chinese Economy. He was a political prisoner in China from 1990 to 1992. He is the author of "After Neoliberalism: Empire, Social Democracy, or Socialism?

Transcript

PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Washington.
And in Washington on Tuesday, President Obama met with Vice President Xi of China, who's expected to be the next leader, leader of the Communist Party, and the next president of China. But most of the press has been commenting that not much is known about Vice President Xi.Now joining us to talk about the vice president and what's happening inside Chinese Communist Party is Minqi Li. Minqi is an associate professor at the University of Utah specializing in political economy, world systems, and the Chinese economy. He was a political prisoner in China from 1990 to 1992. He's author of the book After Neoliberalism: Empire, Social Democracy, or Socialism? And he joins us from Salt Lake City. Thanks for joining us, Minqi.

MINQI LI, ASSOCIATE PROF. ECONOMICS, UNIV. UTAH: Thank you.
JAY: So what do you know about the vice president? And what—do we expect any changes in terms of the course of the Chinese Communist Party? What's happening in the party and in terms of political circles outside of it, especially in a situation where we might be on the verge of another major global recession? European economy is—still seems to be ready to unravel. So talk to us about the debate that's happening in Beijing.LI: Well, this—Vice President Xi's visit in the U.S. takes place at a critical moment in term of what is going on within China. And Xi, of course, is widely expected to replace Hu Jintao to become the next general secretary of the Chinese Communist Party, as well as the next president of People's Republic. And then this transition will determine not only China's next leadership; potentially could also determine China's future direction in term of economic and political development in the next decade—and, in fact, intense debate that is now taking place within the Chinese Communist Party, with the party right wing [incompr.] further movement in the direction of free market capitalism. And on the other hand, it appears that a left wing has emerged within the party that is trying to some extent to adjust China's current direction towards capitalism, and even to some extent make some reversal.

JAY: Reversal meaning increase, rebuild the public sector and some of the elements of socialism.
LI: In that way, yes.
JAY: And do we have any sense were Vice President Xi is in all of this?
LI: It's not clear at this point. Xi, of course, is the son of a veteran revolutionary, Xi Zhongxun, who participated in the Chinese revolution with Mao Zedung. And then the experience of Xi Zhongxun, and then his son Xi Jinping, has been complicated one. On the one hand, Xi Zhongxun is believed to be among those party leaders who were purged during the Cultural Revolution. So for that reason he might have resentments against Mao Zedung. And on the other hand, because he belonged to this first generation revolutionary—and so it might be the case that they, the Xi family, disagree with China's current direction of capitalist reform.And as far as Xi Jinping himself is concerned, on the one hand, before he was promoted to the current position, he was the party's secretary of the Zhejiang province, where he led the economic development by promoting private enterprises. So in that way you might say he could be someone who was in favor of capitalist reform. But on the other hand, he had maintained close relationships with many children of the first generation revolutionary and has shown some support of the Chongqing experiment, the experiment in the southwestern city of Chongqing, which promoted more social spending, crackdown on organized crime, that is favored by the left but is opposed by the right.
JAY: Now, is there anyone that's particularly associated in the party as being of the left that's at a leadership level?
LI: Well, it is widely believed Bo Xilai, the party secretary in the city of Chongqing, is leading this left turn of the party. However, just before—a few days before Xi's visit to the U.S., the local police chief of the Chongqing city, for unknown reasons, entered into the U.S. consulate in Chengdu and stayed there for one day. And then the real reason behind that is still unclear, but there has been speculation that this incident could undermine the political prospect of Bo Xilai, the left leader in the party.
JAY: And there are suggestions that that's all tied up with some kind of local corruption scandal, is there not? And I guess it's not clear where this is all going to go.
LI: Yeah, that's part of the speculation. And then some others have speculated that it might be part of the conspiracy of the right wing in the party.
JAY: To actually go after this left-wing leader. Now, is this division between what you're describing as left and right a division of those who want to develop—or some form of kind of socialist framework? Or is it a little bit more like a division we see in the West, sort of, between austerity types and Keynesians?
LI: Well, it's the—of course this—you might want to compare this Chinese division between the left and right to—some way to what is going on in the West, although in the Western case we know that even the social democrats have basically become only moderate neoliberals. On the other hand, in the Chinese case, because China has got this socialist legacy—so even moderate change in the left direction could potentially lead to farther change more in the socialist or left development that could alarm the right wing.
JAY: Now, the recent sort of scandal, you could say, with the coming to international attention of what's happening at Foxconn, the enormous electronics manufacturer, which among other things works for Apple—but this is not just an Apple situation, and actually not just a Foxconn situation—but when you see the terrible working conditions and the violation of Chinese law—. You know, this is still supposed to be—I mean, they call themselves a workers party, the Chinese Communist Party. Is there any reflection of this in the struggle that—you know, how do you have such horrible working conditions and claim to be still a communist party?
LI: Well, that is, again, part of a debate that is going on within China now. The fact that Foxconn could enjoy this kind of brutal exploitation of the workers and then benefit from that suggest the capitalists like Foxconn have been enjoying the collaboration of many of the local and the provincial officials. In fact, related to the current debate within the party, the right wing is promoting this Guangdong model. So Guangdong is this southern province that has been pioneering this export-led capitalist growth where companies like Foxconn have prospered. And so a key question right now has to do with whether the Guangdong model or the Chongqing model is going to be favored by the next leadership of the Communist Party.
JAY: And again, do we have any idea where the vice president, Xi, is on this? He seems not to speak a lot publicly, in the sense that even you who follows this stuff so closely kind of have to speculate about where he stands on things.
LI: Well, I guess part of the implicit rule for the Chinese leadership is that if you speak too publicly about your position, that will dramatically reduce your own chance of being promoted. But on the other hand, now there is wide recognition that China's current social and economic model cannot be sustained much longer, both because China could no longer rely upon the export-led growth model—therefore China will have to find alternative ways to promote effective demand—and because rising social equality could potentially lead to huge political instability. And, therefore, in these kind of circumstances it's necessary for China to search for an alternative mode of development, and ideally that will lead to more redistribution that will favor the great majority of Chinese people. That will in turn make China's development more sustainable.
JAY: Now, is there any debate (I guess there must be some, but how intense is it?) to allow legitimate, independent unions? I mean, it doesn't seem that you're going to have any real possibility of enforcement of Chinese laws in places like Foxconn unless the workers have some more right to organize unions and defend themselves. What's—how is the debate on that issue going?
LI: To some extent there have been discussions about that. But in the Chinese context, on the one hand, it's not just a question about labor laws. As you said earlier, China has already got many labor laws. But the question is that they are not being enforced. So unless the central government is serious about that, then could have—really push the local governments to enforce existing labor laws, additional labor laws probably would not help.
JAY: And as I say, what's happening in terms of organizing independent unions? For example, if independent unions do get started in certain places—if I understand correctly, it used to be it was very possible that workers could wind up being arrested, or threatened, at any rate, lose their jobs. I mean, is that still happening?
LI: Well, [incompr.] I guess arrest is happening less these days, I mean, arrest by the police. But if serious workers protest taking place—and then, of course, the bosses would still call in the police as a way to repress workers. Then of course the strike leaders could still be threatened by losing their jobs. And so in many ways it depends on what is taking place on the ground, what is taking place in the term of actual organizing capacity of the workers against the ability for the capitalists to use their own social influence.
JAY: And how does this—is there a trend within the party—is it possible to speak up in the party about this kind of issue? Are there advocates for workers, you know, this kind of workers rights or independent unions? Can they speak publicly about this in the party? Is there any sense of it?
LI: Well, there's—the debate is probably taking place in implicit ways. So part of the right-wing strategy right now is that they also talk about the Chinese economy is suffering from imbalances. But they are arguing that the solution to that is to redistribute income from the government to the capitalists. They are calling for more tax cut for the capitalists. And, of course, if this strategy is indeed implemented, it will further undermine the public sector. While the left-wing is in favor of redistribution from the capitalists to the workers. So in the coming month or years, we will know which side will prevail in this intra-party debate.
JAY: And outside the party, is there signs of these workers protests taking on more political form?
LI: Not yet. What is going on is that the workers in the capitalist sector, the new capitalist sector, when they are organizing struggles for higher wage, better working conditions—so primarily it's still economic struggle. And on the other hand, you might argue that the state sector workers, or the old state sector workers, as they are organizing struggle against privatization—and over the past few years, that have got a growing political character, especially when that is in combination with more and more mass-based pro-Maoist movement.
JAY: And just finally, how significant is that mass-based pro-Maoist movement?
LI: It in fact has become quite significant. It has become something that is comparable to the Occupy Wall Street movement that is taking place in the U.S., except in the Chinese case, in fact, it's taking place on larger scales, involving possibly hundreds of thousands of people across the whole country, and more regularly every year, twice, on the birthday of Mao Zedung and on the day when Mao Zedung passed away.
JAY: And is—I keep saying finally, but this is too interesting not to ask another question. So is this kind of nostalgia for going back to the past? Or is this an idea that China needs to go into some new form, but of socialism and sort of the original ideals, if not the way it actually worked out?
LI: Well, it certainly has to do with nostalgia to some degree, but then I think it's more a protest of China's current economic social model and China's current direction of development, and then calling for the benefits of economic growth to be shared more evenly. So in that way it reflects people's desire for more direction in the socialist form.
JAY: Alright. Thanks very much for joining us, Minqi.
LI: Thank you very much.
JAY: And thank you for joining us on The Real News Network.

End

Argentine oil takeover raises fury of austerity Europe

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It is a decade since Argentina defaulted on its debt and abandoned its peg to the dollar. The country was mired in a terrible economic crisis. Four governments fell in a matter of weeks and violent protests were seen on the streets. A decade later the country has enjoyed a remarkable period of growth, reducing poverty and inequality under a left-wing Peronist government. Now President Christina Kirchner (pictured), recently re-elected on a landslide, has caused a rift with the EU by renationalising its oil company YPF, which was owned by Spanish oil conglomerate Repsol.

As Mark Weisbrot wrote in The Guardian:

Of course this success story is rarely told, mostly because it involved reversing many of the failed neoliberal policies – that were backed by Washington and its International Monetary Fund – that brought the country to ruin in its worst recession of 1998-2002. Now the government is reversing another failed neoliberal policy of the 1990s: the privatisation of its oil and gas industry...

In response the EU cancelled a planned meeting with Argentina "in solidarity with Spain". Spanish Foreign Minister José Manuel García-Margallo warned that the takeover would hamper Argentina's access to international credit and export markets. "The damage to Argentina could be irreparable," he said. In Europe under EU treaties, nationalisation is effectively illegal - except in the case of bank bailouts. By contrast, Argentina has been taking back its sovereignty from international financial institutions where in Europe governments of all hues make it a point of honour to bow down to them and impose austerity.

Reading the news anyone would think Argentina is on the verge of collapse. In reality, the last decade has seen it enjoy a remarkable comeback. As reported by the Centre for Economic and Policy Research, the Argentine economy has grown 94 percent for the years 2002-2011. This is the fastest growth in the Western Hemisphere for this period, and among the highest growth rates in the world. It also compares favorably to neighboring economies that are commonly seen as quite successful, such as Brazil, which has had less than half as much growth over the same period.
During this period, Argentina has seen considerable progress on social indicators. Poverty has fallen by over two-thirds from its peak, from almost half of the population in 2001 to approximately one-seventh of the population in early 2010. Unemployment has fallen by over half from its  peak, to 8.0 percent. And employment, by early 2010, had risen to 55.7 percent, the highest on record, as social spending nearly tripled in real terms. Income inequality has also fallen dramatically.
Argentina was trapped in a severe recession from mid-1998 to the end of 2001. Attempts to stabilize the economy and maintain the currency peg to the U.S. dollar, through monetary and fiscal tightening, led by the IMF and backed by tens of billions of dollars in lending, failed to arrest the economy’s downward spiral. In December of 2001, the government defaulted on its debt, and a few weeks later it abandoned the currency peg to the dollar.  Recovery began after one quarter of contraction and continued until the world economic slowdown and recession of 2008-2009. Now it has rebounded, and the IMF projects growth of 8 percent for 2011. Critics claim the government has mangled economic statistics that it doesn't like and threatened economists who criticise it. But surely this progress is undeniable - certainly polls show Argentinians enthusiastically back Kirchner's government's policies.

Of course this does not mean that Argentina does not have all kinds of problems, including 20% inflation and a widening trade deficit. But it does again point to the fact that countries which have not followed the neoliberal orthodoxy of the last two plus decades have not suffered the economic disasters that their critics have predicted. Even now many are saying that Kirchner's nationalist stances on the Falklands and on oil nationalisation are some kind of deflection against growing problems at home. But the truth about the politics of Argentina and many other Latin American governments is that they have combined socially progressive policies and economic growth that have benefited the majority population. This has meant emphatic re-election of left of centre governments in Argentina, Uruguay, Venezuela, Brazil, Ecuador, Bolivia and Nicaragua. This is a striking lesson that proves politics can be done differently - not just serving the 1% as in Europe and North America, but concretely improving conditions for the majority. One can argue that starting from a much lower base makes this task easier in developing countries than in the rich West. But that ignores the fact that every one of the governments mentioned has faced fierce resistance from domestic and international elites.

The austerity programmes in Europe are currently pushing countries toward the situation faced by Argentina a decade ago, from which it had to escape through defaulting on its debt and a new economic policy. Europe may one day have to learn something from the successes of Latin America's populist tide.

Here are the comments of an actual Argentinian about the changes seen in his country. The revocation of fishing licenses to foreign fleets that he mentions is a powerful example of concretely favouring the interests of  local people rather than multinationals:

As an Argentinian-born I am quite satisfied by the fact that Argentina is once again in a position to own its oil company. It will hopefully render some benefits with oil prices being so high and investment will hopefully be directed towards improving Argentina' s public services. Nonetheless I feel it was done in a very clumsy way and it is culturally hard to understand for other countries.
In the 1990s everything was privatised with the promise that would make Argentina a first world country. It happened exactly the opposite. Former state-run companies began downsizing and it became an employers market which produced awful working conditions (with complicit policy from President Menem's administration). As a young lad of 20 years old I had to leave the country because they were no prospects. In my city, Mar del Plata, unemployment surpassed the 50% mark. Poverty was rampant: there were abandoned kids everywhere, people begging everywhere. It was awful to see your friends, family and society breaking into pieces.
I would have liked the Argentinian government doing this different. For example, buy a portion of Repsol YPF so as to sit in the board and have a say in decision-making. However, Spain is now in bad shape an the promised investments in energy could not materialise. Argentina should help Spain in any possible way so they can get out of this terrible crisis. I assume this is the same fear the EU has, Spain has lost "extraterritorial" energy reserves. It is a blow.
Now Mar del Plata is a new city. Fishing contracts given to the Japanese and Taiwanese fleets (that forbade Argentinian fishermen to fish) have been revoked. The city now enjoys full employment back again and improved standards of living. It is once again clean and the public services work.
Argentina is a young nation that half of its history was governed by dictatorships and power tensions between rural landowners and urban commercial elites. English, Spanish and French had (and have?) interests in it. These are still an issue today. It is a country of contrasts and very passionate where sometimes people fail to see all the shades of grey. Privatisations were not done right in the 1990s and re-nationalisation now also fall short of being well done.

True face of coalition tax credits for 1m poor families axed

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One million poor families will lose up to £4000 in working tax credits from today as part of the Lib Con spending cuts. Those who work less than 24 hours a week will lose all tax credits unless they can make up those hours. The lower their income, the more they will lose. I woulld like to have been at the meeting where the Coalition decided to do this. They could have moved the cut off up from 16 to 20 hours - if you follow the perverse logic of destroying Gordon Brown's great legacy to families inn the name of deficit reduction. But no - 24 hours is the minimum, or you are on your own. The tax credit losses apply to up to 1 million families.
The Resolution Foundation, a thinktank aiming to improve living standards for people on low and middle incomes, said thousands of working families would lose up to a quarter of their household income from Friday.
It said a young couple working 23 hours with one child and a household income of £15,500 would have received nearly £6,000 this year in working tax and child tax credits.
From Friday their entitlement to working tax credits would be switched off. Even taking into account the increase in the personal allowance and a small increase in child tax credits, the family is still projected to lose £2,961 a year (about 19% of total income) as the gains are offset by the wages squeeze and frozen child benefit.
The impact is greater the less income households have, as they have more working tax credits to lose. A single earner on the minimum wage of £6.08 an hour, working 20 hours a week, will lose £3,910 – more than a quarter (27%) of their income.

This is what a pernicious ideology does in the hands of a government of millionaires and lackeys. A million families made to suffer, not because it was unavoidable, but because this government does not waant to take money from the people who actually have lots of it. Take Amazon, who moved their UK business to Luxembourg in 2006 and haven't paid a penny in tax in the UK since.