Bangladesh and us: outsourcing poverty

Walmart, Las Vegas in 2006. The world's largest retailer was cutting costs to counter a sales slump. It has held out against signing a fire and safety agreement for Bangladesh, saying its own inspections are more efficient. (AP Photo/Jae C. Hong)

After the darkest week in decades for Bangladesh’s workers, glimmers of light are appearing on the horizon. But like all glimmers, they may be an illusion.

Some -- and only some -- of the big brands whose cheap-chic clothes are produced in Bangladesh are ready to sign accords on boosting the appalling safety conditions. And after 1,100 of its underpaid citizens died under tons of rubble in the Dhaka factory collapse, the Bangladesh government is pledging a wage hike.

That wouldn’t be hard, you’d think, with a minimum wage that averages $38 a week.

But think again.

One reason those wages are so abysmally low – and likely not to change very much -- is because wages in the West have also sunk or stagnated while the richest few have burst their metaphorical piggy banks.

That’s created a vicious circle of demand for cheaper goods among the poor and shrinking middle class, increased the pressure from Western-based corporations to keep down costs in their outsourced factories overseas and redoubled efforts of Bangladesh (and other low-waged countries) to stay “competitive” by downloading destitution onto their workers.

“We’re living at a time of year-round deals,” says economist Armine Yalnizyan of the Centre for Economic Policy Alternatives. “There’s a cut-throat level of competition and we’re moving toward lower and lower prices – but somebody is making the sacrifice.

“The flip side of every low price is a low wage.”  

And not merely in the poorest countries. A new report from the Organization for Economic Co-operation and Development – whose 34 members are from advanced and emerging countries -- shows that income inequality  increased more during the slump years preceding 2010 than in all the previous 12 years. And there’s little sign of a turnaround any time soon.

Even where government welfare programs cushion the blow, the OECD said, there is a threat of “greater inequality and poverty in the years ahead” as austerity programs batter social spending at the time of greatest need.

Among the countries with the biggest equality gap is the U.S. – statistically the world’s wealthiest nation. Canada rates a mediocre 22nd out of 34 on the equality scale.

Meanwhile more workers in “wealthy” countries are in temporary and precarious jobs and minimum wages have fallen behind the rising costs of food and shelter.

What does it mean to Dhaka?

“The next generation (in the West) will be paid less,” says Yalnizyan. “There will be less disposable cash. But there will also be a demand for profits. So the way to feed the beast is to squeeze costs.”

Whether the survivors of the factory disaster reap the benefits of the current sympathy surge is an open question. Whether their children will is more in doubt.

Olivia Ward has covered conflicts, politics and human rights from the former Soviet Union to South Asia, winning national and international awards.
 

Is the worst over for Greece?

During the May Day march in Athens to protest against crippling austerity measures, an African immigrant holds hands with a Greek protester in solidarity.  (Yannis Behrakis/Reuters)

After six years of recession the Greek economy is looking brighter -- sort of.

The International Monetary Fund, based in Washington and one of the troika of European lenders bailing out struggling nations, on Monday issued its first consultation mission report on the state of Greece since 2009.

Their verdict: "Greece is making progress in overcoming deep-seated problems in the midst of a very serious and socially painful recession."

In Greece, the country's finance minister Yannis Stournaras, said in advance of the IMF release that "the worst is over" and that the country has reached the bottom of the "trough,"  according to the Greek Reporter. 

The recession in Greece has been much deeper than anyone ever expected, noted the IMF, but the Mediterranean nation gets full marks for trying to preserve financial sector stability, making progress on fiscal adjustment and for far-reaching labour market reforms.

Greece has borrowed a staggering 173 billion euros, roughly $226.6 billion, from its European partners since the country's economic downward spiral began.

Without Europe's money things in Greece would have been far worse, said the IMF. "This has significantly cushioned the adjustment need, preventing what would otherwise have been much more serious social hardship, while containing negative spillover to the rest of the euro area."

Well, on that last point, there is the little matter of Cyprus, the tiny island that nearly went broke recently partly to due with bad investments in Greek bonds, but, I digress.

However, says the IMF and here comes the rub, there are still some serious obstacles to overcome in order for Greece to recover. Three are singled out in their report.

Tax evasion is still enemy number one. "The rich and self-employed are simply not paying their fair-share, which has forced an excessive reliance on across-the-board expenditure cuts and higher taxes on those earning a salary or a pension," the report said.

Not to mention market reforms are causing a "notable decline" in nominal wages and, again, making life hard for those earning wages and pensions as people try to make ends meet with less, they noted.

Then there is the woeful unemployment issue. The youth jobless rate is about 50 per cent and for seasoned adults it tips 27 per cent in Greece.  Meanwhile, the IMF said the "over-staffed public sector has been spared, because of a taboo against dismissals."

The social strain on the downfall of the Greek economy has been immense to those living through the crisis -- from rising homelessness, mental health and suicide problems to violent protests and the rise of the extreme right.

However, the IMF has faith the Greek government is "refocusing its program" in recognition to the three economic albatrosses noted above.

Greece, and the rest of the European Union, holds its breath and waits.

Tanya Talaga is the Star's global economics reporter. Follow her on Twitter @tanyatalaga

 

Love in the time of austerity: A Greek tragedy

(Warning: the above video clip contains graphic language.)

The consequences of severe austerity policies in Greece have caused an epic social crisis as the country battles sky high unemployment rates, violent riots, a rising homeless problem and climbing suicide rates.

But what has austerity done to the Greek heart?

BBC Newsnight's economics editor Paul Mason's production team in Greece, director Theopi Skarlatos and cameraman Kostas Kallergis are both trying to capture that story in a moving documentary called, "Love in the Time of Crisis."

The film will feature the stories of young lovers, elderly couples, women "choosing to walk unconventional paths" in order to pay the bills and "men forced to renegotiate their traditional roles in society," Skarlatos explains on his blog.

"Perhaps love seeks refuge in the unlikeliest of places. Perhaps love is even greater in the face of loss and hardship. On the streets of Athens there is a famous graffiti: "Love or Nothing" -- this film aims to tell the story of what happens to a society when that becomes, literally, the only choice," he wrote.

Skarlatos has been covering the Greek crisis since 2010 -- documenting the riots, strikes, the fall of government and the rise of the extreme right movement.

"But there is an element of the story that remains untold: what happens to love in the time of crisis? Does the heart beat differently when the world around us starts to fall apart?"

The statisticians aren't keeping track of the human toll of the Greek financial disaster. Many Greeks are now bemoaning the Greece that once was and are wondering if it will ever be again, he notes.

"This film will show how more and more people are choosing not to settle down or begin families. Women are having IVF treatment, but aborting their babies because they can no longer afford to have them. Relationships are being torn apart by stress. Prostitution is rising. Birth rates are decreasing," he writes.

The evolving love story Skarlatos and Kallergis are trying to tell, gives the world a glimpse of the painful stresses economic collapse can bring. The two are currently raising money for the project. Everything they get will go to production costs and paying the crew.

RELATED: The rise of the super-rich. Is the economy just going through a bad patch?

Tanya Talaga is the Star's global economics reporter. Follow her on Twitter @tanyatalaga

 

Tallinn's mayor says fare is fair

A public bus and tram move side by side in the Estonian capital. Tallinn is the world’s first capital to introduce free public transport for all of its residents. (AP Photo/City of Tallinn)

You walk to the nearest streetcar, hop on, and carry on without passing go – or dropping your fare in the box.

You're not dreaming, you're in Estonia’s capital Tallinn, where an electronic uhiskaart, or free pass, is your ticket to a transport of delight.

Last year controversial left wing Mayor Edgar Savisaar wheeled out a scheme to green the city, cut congestion, and give austerity-stung residents a break. He calls it the “13th month salary,” claiming that families can save that much by foregoing the fare cost for a year.

As the average monthly income in the eurozone’s poorest country is about $1,200, that means a lot. In the first quarter of 2013, passenger numbers climbed 10 per cent and auto traffic has fallen by up to 15 per cent.  A city opinion poll says that 90 per cent of residents are happy.

But not all of them.

The tough-minded Reform Party (no connection with Canada) calls it populist propaganda and a waste of taxpayer’s money. There are mutters of city bankruptcy. And taxi-drivers have seen a disastrous 25 per cent decline in fares.

But free riders aren’t complaining – yet.

Savisaar’s scheme has a catch. Only registered Tallinners are eligible for a pass (sorry tourists.)  And that means a tax bill will be landing sometime soon.

In the first quarter of this year, the city’s registration rolls have increased by a record 5,000, and Deputy Mayor Taavi Aas says that will make up for $16 million in lost ticket sales.

The no-pay system could become a magnet for new housing and development. Or it could begin to crumble under the weight of its growing success.

For now, Tallinners are just relaxing and enjoying the ride.

Olivia Ward was the Star’s European Bureau Chief from 1997-2002. She has covered conflict, politics and human rights from the former Soviet Union to the Middle East and South Asia, winning national and international awards.

Even Euro boss has had it with austerity

There was a big meeting of European minds on Monday at the Brussels Think Tank Dialogue.

While no doubt, lots was said on lots of things, some comments by European Commission president Jose Barroso are causing waves in euro newsrooms and in the Twitterverse.

At the austerity and growth debate, Barroso said "we are reaching the limits fo the current policies," according to transcripts.

This is Barroso, former prime minister of Portugal whose tough economic policies helped lay the foundations of an austerity charge in his own nation when he was in power from 2002 to 2004. Portugal continues to struggle under high unemployment and sluggish economic growth and it is one of the most indebted countries in Europe.

While the current policies are "of course appropriate" Barroso said when it comes to addressing the "challenges of unsustainable debt" and the need to put Europe back on sound footing, he mused now may be a good time to turn the page. Try something else.

"So while this policy is fundamentally right, I think it has reached its limits in many aspects, because a policy to be successful not only has to be properly designed.  It has to have the minimum of political and social support."

On that last point, let's look at Exhibit A. For the past few years there have been violent clashes and protests on the streets of Athens, not to mention the rise of far-right extremism. French unions are angry. Immigrants are fleeing Spain to find work elsewhere. The United Kingdom is now getting subtle warnings from the International Monetary Fund to tone down its austerity push. The Italian political system is twisted up in knots.  And if you are under 25 and looking for a job in Greece, Spain or Portugal, well ... one in two of you may find one.

"We need to have a policy that is right," Barroso continued. "At the same time we need to have the ways, the means of its implementation and its acceptance, the acceptability, political and social. This is where I think we have not done everything right ..."

Right.

Politically and socially, one policy that is only seen as austerity, is "not sustainable," he added.

"We need sound fiscal policy. We need deeper reform for competitiveness and we need investment, namely with a social dimension."

Right again. Next?

Tanya Talaga is the Star's global economics reporter.  Follow her on Twitter @tanyatalaga.

 

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Swiss electorate vote to prevent golden handshakes

German states pool their euros, buy CD containing bank deposit details. Swiss authorities are not amused

If you can't beat 'em, buy 'em.

Spiegel Online is reporting German states, fed up with tax evaders sticking all their money into Swiss bank accounts, pooled their resources and bought a CD containing bank deposit details.The Rhineland-Palatinate state and four others bought the info for about $5.2 million, according to reports.

Apparently, the CD had information on 10,000 bank customers and German authorities used it to conduct "raids" on 200 alleged tax evaders, Spiegel Online said.

Rhineland-Palatinate officials have high hopes for their treasure trove. They are expecting to get their hands on about $650 million in back taxes.

Spiegel says customers with bank accounts in Credit Suisse, and the former Clariden Leu AG and Neue Aargauer Bank are affected.

Understandably, Swiss authorities are not amused.

One has to wonder who sold the information to the Germans, and, how the informer obtained it in the first place.

The International Consortium of Investigative Journalists blew the lid off of trillions of dollars hiding in tax havens, last month, when they published stories concerning the release of 2.5 million banking documents.

Nearly 260 gigabytes of emails, documents, corporate files and account ledgers were obtained by the ICIJ's director Gerard Ryle. The information came to him on a hard drive in a big, brown envelope. There has been no suggestion, whatsoever, that he paid for it.

READ MORE: Europe’s economic crisis: How the rich avoid paying their tax bill

Tanya Talaga is the Star's global economics reporter. Follow her on Twitter @tanyatalaga

The rise of the super-rich. Is the economy just going through a bad patch?

Traders work the floor of the Cyprus Stock Exchange in Nicosia, in August 2000. Stock riches piled up until the divided island nation's boom went bust. (AP Photo/Christos Theodorides).
 
So the rich are different. What’s it to you?

Quite a lot, if you see some of the recent analysis of the growing gap between the 1 per cent and the rest of us whose chins are barely bobbing above the financial waves.

Chrystia Freeland’s new book Plutocrats: the Rise of the New Global Super-Rich and the Fall of Everyone Else throws a hand grenade into the (hopeful) belief that the economic system is just going through a bad patch.

This week Plutocrats won the Lionel Gelber Prize for best English language non-fiction book on foreign affairs. Freeland will speak at U of T’s Munk School of Global Affairs on April 15.

Her message is both ground-breaking and chilling. Hyper-rich plutocrats are not only living on an ideological Pluto, but their power, influence and vast wealth are creating a global gated community that bodes ill for the majority here on Earth.

Freeland, now digital editor at Thomson Reuters, shared her thoughts from her office in New York:

Q:  Are we seeing a whole new order of capitalism?

A: We are. Business has really gone global. Capital flows have gone global. It’s partly the result of globalization and technology and those trends are related. They have a broader reach. It means if you have a brilliant idea, like the 17-year-old kid who invented the algorithm, Yahoo will spot it and buy it for $30 million.

What that means is you have this winner-take-all phenomenon becoming much more powerful. It results in a thin slice at the top of the economy getting the lion’s share.

Q: And its first loyalty is to acquiring and expanding wealth.

A: It’s not necessarily about personal choice, it’s about a flawed way of thinking. By the nature of their business and their lives today they are inevitably pulled into a globalized world. They have much less connection and fewer ties to their national community. And their rewards are in the global world.

Q: Like Cyprus, where international money goes to hide from the national tax man.

A: Business has slipped the traces of national government. One way to think about it is the collective realization that you are no longer a captive of a nation state.

Q: You’ve focused on the richest 0.1 per cent. What did you discover about them?

A: One of my favourite anecdotes was from a private equity guy who said that Beijing and New York look a lot alike: same restaurants, same people. He said it with genuine sentiment. If you put an ordinary person on the street for five minutes they won’t be confused.

But for people in this space, those cities really are similar. It’s a disconnect that shapes their world view and their politics. Not just in subtle ways.

There’s also a disconnect of economic interests – Henry Ford said that you need to pay workers enough to buy your cars. That was the deal of post war America. The core idea was that the middle class needed to prosper because they were the consumers your business depended on. Now there are other markets.

Q: If the middle class – let alone the poor – don’t count to the power brokers, is the welfare state becoming extinct?

A:  It’s both more necessary and harder to get political support for it. The middle class is hollowed out. Equality of opportunity is also eroded. Social mobility is getting worse. My favorite metaphor is that the distance between the rungs on the ladder is getting bigger.

The middle class needs more support. But the state’s ability to tax individual companies and the wealthy – and their view that it even matters – is less.

Q: And the effect on democracy?

A: These things are connected. One danger is that as you gain greater economic power, inevitably you use it to exert political influence. In the U.S. the most obvious sign is the “super PAC” (which can raise unlimited funds for political causes). But even more important is the tremendous money spent on lobbying.

It’s a human instinct to slant the rules of the game in your favour. As the gap (between very rich and the rest) gets greater their political influence also grows. When the middle class is hollowed, it’s harder to be engaged in the political process.

Q: Any lights at the end of this tunnel?

A: I think the process (of growing inequality) is inevitable. Economic forces pushing it are really powerful, and if anything, are getting stronger. The forces widening the gap will increase rather than weaken.

But it’s good to be optimistic. And it’s important to remember we have been there before. The strains imposed by the industrial revolution were in some ways worse. The poor were poorer and the system more closed – yet we got to a better place.

I don’t think it will happen in a day and it won’t be easy. I see it as our generation’s work of citizenship.

This interview was condensed.

Olivia Ward  has covered conflicts, politics and human rights from the former Soviet Union to the Balkans, Northern Ireland, the Middle East and South Asia, winning both national and international awards. She has collaborated on two Emmy-winning films based on her work.



 

'I'm not afraid to go to jail': crusading Greek journalist

A hunted man: Costas Vaxevanis at the office of his magazine, Hot Doc, in Athens . (John Kolesidis/Reuters)

Greek investigative journalist Costas Vaxevanis has been awarded the 2012 Index on Censorship Journalism Award for publishing the account details of 2,000 suspected tax evaders, the so-called Lagarde List. 

Greece’s society and economy is in tatters despite the billion-dollar bailouts from Europe. Austerity has brought misery to its citizens.

In the midst of all that, Greece’s public prosecutor is going after Vaxevanis for violating privacy data laws. He was acquitted last year on those charges but faces a second trial in June. 

When I interviewed Vaxevanis in Athens last November he expressed no regrets about publishing the list.

Actually, he did have one regret – how little coverage the Lagarde List has received at home. He believes journalists are muzzled because all the major media outlets are owned by a narrow band of business interests. His own case was symptomatic of the state of Greek democracy and journalism, he told me.  

“Instead of chasing (the list) they (journalists) said it was fake,” he said. “How did I get it the list? They questioned the way it was released to the public when it was private. They didn’t question the substance of the allegations.”

When I asked him if he would win his war against the bankers this was his thoughtful response:

"Either the economy will prevail over our politicians or politics will prevail over our economy. The tragedy is those who support the banks say this is how markets operate and when those banks go bankrupt they are bailed out by the state. People say we have to save Europe but that is not just the City of London. It is French culture, German philosophy. It’s the people." 

As for his award, he said in his acceptance speech in London last week that he had been attacked in his home, which was made to look like an attempted burglary. But he was not afraid of going to jail for his beliefs.

“I want to state that if I am going to be convicted I will not appeal but I will ask to be put in jail. I want to be a journalist in a country that is not afraid of the truth,” he said in the speech. 

READ MORE: How Europe’s rich avoid paying their tax bill 

Hamida Ghafour is a foreign affairs reporter at The Star. She has lived and worked in the Middle East and Asia for more than 10 years and is the author of a book on Afghanistan. Follow her on Twitter @HamidaGhafour

 

Making sense of the Cyprus mess: A reader's guide

People line up at an ATM at a branch of Laiki Bank in Nicosia, Cyprus on Thursday. (Yannis Behrakis/Reuters)

As the tiny Mediterranean nation of Cyprus teeters on the brink of collapse, top financial writers have quickly turned their gaze on an island that wasn’t seriously on anyone’s radar until last week.

Nobel prize winning economist Paul Krugman summed it up for most global biz watchers in a recent New York Times blog post: “Ok, I didn’t see that one coming. With all the problems in Greece, Italy, Spain, and Portugal I wasn’t watching Cyprus.”

But in the span of a few days, writers have charged up to speed incredibly fast and produced everything from near "For Dummies" guides on the Cypriot imbroglio to dramatic, insightful narratives reconstructing events leading up to the precedent-setting idea of taxing depositors' bank accounts to save the nation.

Here are some of my favourites:

• - Atlantic writer Matthew O’Brien hit it out of the park with his story, appropriately titled, "Everything you need to know about the Cyprus bank disaster." O’Brien’s piece is fast-paced, funny and 100 per cent readable to those who don’t have an economics degree.

• - Reuters journalists in Moscow and Cyprus have also been second to none on this file, breaking news left and right. This story, "How Europe stumbled into the scheme to punish Cyprus savers," by Annika Breidthardt and John O'Donnell, details newly elected Cyprus President Nicos Anastasiades' trip to Brussels to confront European creditors only to be badgered into agreeing to confiscate money out of people’s bank accounts. Apparently the meeting was so emotionally charged, one EU official wanted to vomit over what they were doing.

• - Here is Reuters again with an exclusive. This time by Luke Baker. He was made privy to detailed notes of conference calls by the Eurogroup Working Group on Wednesday as they tried to come up with rational solutions and discussed Cyprus leaving the single currency eurozone.

• - If you want business context with teeth, London's Financial Times has owned this story. Worth signing up for the paywall. This shorty neatly packages four bailout options.
  

• - And of course, the last word should be Paul Krugman’s, whose blog posts have read like an academic exercise. In each blog, you can see his brain tossing the Cyprus situation around, trying to make sense of a complicated problem. As Krugman puts it, this is all, “Truly awesome stuff.”

RELATED: Dead Russian whistleblower at forefront of Cyprus bailout crisis

Tanya Talaga is the Star's Global Economics correspondent. Follow her on Twitter @tanyatalaga

New Brit strategy: Maybe if they are drunk, they won't notice what is in the budget ...

Big news coming out of the British budget – the price of a pint of beer will now be 1 pence less.

You have got to give it to George Osborne, the British Chancellor of the Exchequer. Guess he thought he could mask the bad news of Wednesday’s budget by, ever so  slightly, reducing the price of a pint.

Also in the budget, Osborne revealed the economic growth forecast for 2013 will not be 1.2 per cent as predicted in December, but 0.6 per cent.

That means the British are narrowly avoiding falling into a recession. But it also means the hardline austerity measures taken by Prime Minister David Cameron, three years ago, don’t appear to be performing any magic -- only pain.

Apparently, the London Evening Standard was so enthusiastic with the news on the reduced price of beer that someone on staff tweeted a image grab of the frontpage with the headline, “Things Can Only Get Bitter.”

That move was a big faux pas. On budget day in Canada and Britain, journalists are briefed and allowed to study the budget under strict agreement they won’t release details until the respective finance minister stands up to deliver the deets.

In Westminster, members of the Labour Party were ready for Osborne when he stood up to announce the budget. They jeered and waved photocopies of the Standard’s front page, the Independent reports. 

On the Standard’s website, Editor Sarah Sands posted an apology. “We are devastated that an embargo was breached and offer our heartfelt apologies.”

The unnamed employee who made the mistake has been suspended while an investigation takes place.

Oops.

Tanya Talaga is the Star's Global Economics correspondent. Follow her on Twitter @tanyatalaga