Greece Outside In: 08/12/13

Monday, August 12, 2013

Obama administration backs Greece in prayer lawsuit

Obama administration backs Greece in prayer lawsuit
Rochester Democrat and Chronicle
The case is an appeal of a lower court ruling that said Greece ran afoul of the Constitution's ban on establishment of a religion by allowing predominantly Christian prayers to be offered before the meetings. Two town residents sued over the practice ...

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BT's great broadband scam

The former public utility is gambling with your money, but doesn't think you should know where it's going

This month, BT launched a very expensive-sounding TV station. BT Sport's ads practically reek of eau de chequebook, as they list all the on-screen talent that has already been signed up: Michael Owen, David Ginola, Martina Navratilova, Lawrence Dallaglio, Clare Balding … on the list goes, like Top Trumps on steroids.

Then there's the £152m for exclusive coverage of the rugby premiership, £736m for 38 football Premier League matches and a vast TV studio in the Olympic Park. Totting up the bill for all this across BT's channels, sportswriters arrive at a round figure of "a billion-pound gamble". But chuck in other sporting rights, presenters' fees, staffing and a marketing blitz, and the sum is surely higher still.

The same BT was last month hauled over the coals for its part in what is fast turning out to be a fiasco: providing rural Britain with decent broadband. This is another billion-pound job: around £1.2bn of public money will be sunk into the project and most will be handed to BT to ensure it makes an "acceptable return" on the job. Except that the telecoms giant's definition of an acceptable return is murky to officials in local government, central government and the state auditors – and has been found to include millions in overcharging of the public.

With one hand, a £25bn company is taking more than a billion off taxpayers, to provide a public good. With the other hand, it's splashing out a billion – and further inflating football's Premier-League bubble. And in that ugly symmetry is a lot that's rotten with big corporates in Britain, and how lightly Westminster lets them off the hook.

But let's go back to broadband. From economists to politicians, everyone agrees that fast internet access is as essential as roads, rail and airports to a modern economy. Whether it's a studio editing films, a company storing files in the cloud, or a care-home warden wanting medical advice on a resident, everyone needs decent internet connection. That's also true if the UK is ever to develop an economic model that isn't obsessed with London.

Yet for swaths of rural Britain and for some deprived urban pockets, the internet is slow to non-existent. Peter Cochrane, former chief technology officer with BT, reckons he has been to Greek islands and parts of Colombia with faster broadband than villages a few miles outside Norwich. This connective dearth is all the more aggravating for city dwellers whose commutes to work are regularly disrupted by roadworks to put down fibre-optic broadband cable.

Given that everyone agrees that getting Britain online is a public good, what do those giants at the Department for Culture do? Why, award juicy subsidies to private companies to bribe them to do the work.

At the root of this is that post-Thatcherite dogma: that competition always helps the customer. Or, as Ofcom puts it: "Competition has driven the success of the current generation of broadband services … the result has been greater choice, innovation, lower prices and high levels of broadband adoption." Except that's plainly not the whole truth, because otherwise we wouldn't have this problem in the first place. In any case, there's only really one private company able to do this work, and that's the one formerly known as the public utility British Telecommunications.

Yet first the thinker-statesman Jeremy Hunt and now Maria Miller have desperately tried to create a vibrant market in laying down cable where none could ever exist. The results have been predictable: of the 44 regional contracts up for tender, a total of 32 had been awarded as of yesterday: all of them to BT. As forthcoming research from Manchester University's centre for research on socio-cultural change observes: "Here is a natural monopoly which the government is unwilling to accept as such."

And in the negotiations, BT's lawyers have run rings around town hall staff and Whitehall civil servants. Like a cowboy builder, the company has quoted prices that public officials have found difficult to verify and has been conveniently vague on how it arrives at its sums. Last month, the National Audit Office recorded BT had overcharged by £3m in one region alone. It also found that BT was withholding contractual details from the Department for Culture, claiming they were commercially sensitive. Auditors noted: "This makes it difficult for the department and for local bodies to gain transparency over the level of costs included in BT's local bids."

This is your money that's being wasted, yet BT doesn't think you should know where it's going. Speaking to the Public Accounts Committee last month, one expert estimated that taxpayers were putting in 77p of every pound going into rural broadband (BT disputes this figure). In Sweden, country of forest and islands, a comparable project had required a maximum of 33% from taxpayers.

Yet government officials who have blown the whistle on BT's opaque charging have been sacked, and community groups who have tried to lay their own broadband connections have found themselves under pressure from local councils.

Given this level of public subsidy and the lack of any real competition, it would have been far simpler and possibly even cheaper to have done this through a public entity. But 21st-century market-fundamentalist Britain must always run a race, if only to give a gold medal and a massive handout to the one competitor that actually ran. Yet, as Cochrane points out, only one part of the British Isles actually has superfast broadband running at 1 gigabyte a second: Jersey, which ran the entire thing through its publicly owned telecom company.

Meanwhile, our former public telecoms firm is busy creating jobs for recent retirees from Premier League football.

Aditya Chakrabortty

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Benefit and immigration cuts won't make a single person better off. And voters know it

As Labour's Chris Bryant struggles, the party must realise it can't win on Tory terms and should instead fight for decent wages

It is wonderfully convenient both for the Tories and for employers in general that, when a Labour frontbencher talks about low wages he can be accused, first, of thinking Dagenham is in Kent and, second, of jingoism and bigotry. Then he ends up praising Next and Tesco, which has a distribution centre in Dagenham, Essex, as fine upstanding patriots. But it isn't just because he's shadow immigration minister that Chris Bryant is compelled to turn what ought to be issues of fair pay and social justice into ones of who we allow in to the country.

The Tories want to talk about immigration, how Labour opened the floodgates, how British workers miss out on jobs because foreigners will work harder for less. They also want to talk about benefits, how Labour lost control of them, how high benefits price people out of jobs and how cruel it is to "trap" them in poverty in this way. They also like to bring the conversation round to how Labour gains from high benefits and high immigration (immigration of burger flippers or hop pickers, that is, not immigration of spin doctors or bank governors) because both create a demographic that is more likely to vote for it.

Labour should ignore all this and let the Tories, as the tacticians say, "own" issues such as immigration and benefits. It should talk about the very things the government doesn't want to talk about: low wages and declining living standards.

Under this government – and, it must be said, New Labour did its bit to help the trend – Britain is being turned into a low-wage economy with a casualised, compliant workforce (or "flexible workforce", to use the too commonly accepted euphemism), alongside levels of wealth and income inequality unseen since the Edwardian era. Those accustomed to low-wage, low-employment economies, whether they are Poles, Romanians, Somalis or Bangladeshis, will inevitably be at a competitive advantage against Britons who look for higher standards.

Bryant is right to say that employers want to recruit workers at the lowest possible rates. That doesn't make them, as Bryant also says (or planned to say before he foolishly leaked the draft of a speech to Sunday newspaper journalists), "unscrupulous". They are just behaving in what is now a normal commercial fashion: driving down costs, squeezing suppliers (think of how supermarkets treat farmers), maximising profits and management bonuses.

As new figures from the House of Commons library show, the real value (discounting inflation) of hourly pay rates has declined by 5.5% in Britain since the beginning of the recession, one of the largest falls in the European Union, with only the workers of Greece, Portugal and (by a narrow margin) the Netherlands faring worse. But the issue of falling wages isn't confined to Europe, nor did it begin with the recession.

In the United States, average wages have been more or less stagnant for 40 years; the inflation-adjusted value of the minimum wage is 15% below what it was in 1979. The best way to improve living standards, according to the conventional narrative, is for people to acquire more education and more skills. But as a paper last year from the Centre for Economic Policy and Research in Washington DC, pointed out, the US workforce, like Britain's workforce, is better educated than it was 40 years ago. In both countries, more people stay in school until 18 and more go to university. The suggestion that inadequate education is the main cause of low wages doesn't stack up.

Nor do the justifications at the other end of the income scale. Top pay rises, we are told, as firms compete globally for the best talent. In fact, as the High Pay Centre recently reported, only 0.8% of the chief executives of Fortune Global 500 companies were poached from another company in a foreign country and 80% got their jobs as the result of internal promotion. Besides, though the gap between rich and poor has increased somewhat in all countries since the 1970s, it has grown far more rapidly and become far wider in Britain and America than it has in continental Europe or Japan.

The truth is that ordinary working people, whether highly educated or not, take too small a share of the cake while management, shareholders and financiers take too much. That is simply because the latter control the money, and there aren't enough restraints – political, legal, social or cultural, to stop them keeping most of it for themselves. It isn't just that trade unions have become weaker thanks largely to the anti-union laws of the 1980s, alongside privatisation of publicly owned industries and outsourcing of state services. It is also that management began to act according to new cultural norms. "Management," the late JK Galbraith wrote in 1967, "does not go out ruthlessly to reward itself – a sound management is one expected to exercise restraint." He added: "With the power of decision goes opportunity for making money … Were everyone to seek to do so … the corporation would be a chaos of competitive avarice."

Now competitive avarice rules. That is what Labour should address because it is a problem to which other parties have no answer. Ed Miliband says he wants to do a Thatcher in reverse: to change the British soul. He will fail if he enters, on enemy terms, debates on immigration and benefits. Bryant should demand British jobs with decent pay, not British jobs for British workers. Liam Byrne, the shadow social security minister, should demand higher wages, not compete with the Tories on who can best "control" the benefits bill. The bill will control itself if wages improve.

Labour should ensure that the next election is fought on living standards. The centrepiece of its campaign should be how to compel employers to pay more, or how to create the conditions in which workers can claim more for themselves. It should discuss how far the minimum wage can be increased, or the merits of restricting top pay, perhaps by linking it to a multiple of a company's median wage. It should discuss how best to legislate against abusive "zero-hours" contracts. Cutting benefits and keeping out immigrants won't make a single Briton better off and, in their hearts, the voters know this. Recalling that it was set up to improve the condition of people who worked "by hand or by brain", Labour should go into the next election with a credible programme to reverse the long decline in wages.

Peter Wilby

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Greece recession eases but not enough to boost tax revenue

Greek government in danger of missing bailout targets unless tax revenues improve

Greece's recession eased slightly in the second quarter of 2013 but not nearly enough to boost tax revenues to levels the government needs to meet its bailout targets, figures showed on Monday.

The news followed a magazine report that said Germany's central bank saw risks to the rescue package aimed at keeping Greece afloat and expected Athens to need more aid in 2014 after it scraped through the last aid review.

As Europe's largest economy Germany has funded a large proportion of the Greek bailout but there has been resistance from German voters, who are also facing tight budgets. The subject of Greek aid has played into the campaign for elections next month.

The Greek data showed the economy shrank at an annual pace of 4.6% in the second quarter, according to the country's statistics agency Elstat.

The economy has slumped 23% in real terms since 2008, hurting tax revenues and making it hard to meet targets agreed with international lenders who backed the 2010 bailout.

The figure was slightly better than economists' average forecast for a 5% contraction, but that will be cold comfort for Greeks, who are facing a sixth consecutive year of recession in 2013, as austerity measures have crippled private consumption, the main engine of its economy.

The slump, one of the biggest peace-time recessions recorded in history, is undermining the ability of firms and households to pay taxes, separate budget figures showed on Monday.

Gross tax revenues lagged behind targets by about €1.5bn (£1.3bn) in the first seven months of the year, hit by record unemployment of nearly 28%and a wave of corporate bankruptcies.

The government managed to plug the budget hole by cutting spending, withholding tax refunds, freezing public investment and cashing in a much higher amount of European Union subsidies than initially planned. But Athens will not sustainably fix its finances unless it boosts tax revenue, the EU and the International Monetary Fund have said.

Greece may fall short of its budget targets this year because a large part of planned tax revenues has not been cashed in yet, lenders warned last month. Athens aims to have a primary budget surplus, before interest payments, in 2013, to qualify next year for additional debt relief promised by its euro zone partners.

However, economists said the second-quarter GDP figures may show that the worst of the recession may be over. "Recession will decelerate in the third quarter, helped by tourism, and in the fourth, helped by base effects," said Dimitris Maroulis, an Athens-based economist with Alpha Bank.

Manufacturing expanded at its fastest pace in five years in June and tourism revenues in May also jumped more than expected.

"That means that recession will not exceed 4.2% this year," Maroulis added. That would be in line with a current forecast by the government and its lenders, who have provided Athens with about €240bn in bailout funds since mid-2010.

The Greek economy is expected to recover at an anaemic pace of 0.6% next year and accelerate after 2015. The forecasts help determine the country's future finance needs and whether Athens might need even stricter austerity to meet its bailout targets.

Greece, the EU and the IMF will update growth forecasts when they meet for a round of bailout talks in September and October. The outcome of these talks will determine whether Athens will needs to adopt harsher austerity measures to keep receiving bailout funds – a prospect which its fragile coalition government has repeatedly ruled out.

Positive growth rates and a potential primary surplus would allow Athens to return to bond markets, from which it has been excluded for four years, Greece's finance minister Yannis Stournaras has said. The Greek statistics service does not provide seasonally adjusted figures or data on quarter-on-quarter changes.

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Letters: Capital's role in the economic crisis

Two stories illustrate central dynamics of our time – the climate of fear generated around migration and the rise in house prices ('Go home' campaign denounced by human rights groups, Buy-to-let fuels property boom, both 9 August).

The house price rise, especially in London, is caused partly by the international movement of money as the wealthy seek to capitalise on speculative investment. At the same time those with access to money can borrow more and invest in buy-to-let properties, to profit from those who must rent. So this system works to move capital to where it will make more and to divide those who have it from those who don't. Wealth accumulates in fewer hands and and its movement produces rapid, uneven developments.

Writ large, that is the story of our world, and the free flow of capital is followed inevitably by the flow of labour, as people move from areas of forced decline to wherever there is a prospect of work. Employers benefit from cheaper labour but the migrants are blamed for displacing unskilled workers and competing for scarce resources in housing and health.

To reverse these processes requires economic planning and wealth taxes to put accumulated private capital back towards social use; in the UK the £4.5 trillion owned by the top 10% could pay off the national debt four times or finance re-skilling, infrastructure, green technology and much else. It also requires politicians and media to stop blaming the migrants, refugees and other victims of the system, and to look instead at how to rebuild our world so it is more use to all who have to live in it.
Professor Greg Philo
Glasgow University Media Group

• As Larry Elliott rightly says, the proliferation of zero-hours contracts represents an increase in the "reserve army of labour" in an attempt to reverse a long-term decline in profitability (Why stop at zero hours? Why not revive child labour, 5 August). But neither this nor the other responses he mentions, such as financialisation, can ultimately overcome the tendency for profit rates to fall.

This is an inherent feature of capitalist competition, resulting not from pressure on prices but from each capitalist's attempt to raise their individual profit rate by investing in more capital-intensive production processes. The overall capital, relative to total profit, goes up, and the profit rate goes down.

Although such things as attacks on wages can offset the basic tendency, sooner or later it results in crises such as the one in progress since 2008. Since the cause is too much capital, the only cure (within capitalism) is destruction of capital through bankruptcy of less-profitable enterprises. Palliatives such as increasing workers' purchasing power can help the system limp along for a while but only at the cost of preparing a bigger and worse crisis.
Julian Wells
Economics department, Kingston University

• John Harris appears to suggest that Labour's problems in 2007/08 were caused by a global financial crash (Where is Labour going wrong?, G2, 12 August). They weren't. They were caused by a Labour party pursuing Thatcherite policies. A failure to rein in the wild west financial sector inherited from Nigel Lawson or to reform the idiocy of right-to-buy, deregulated rents and our national obsession with bricks and mortar. These were the selfsame policies that gave us boom and bust in 1990. Which countries went down? Britain, America, Iceland, Ireland, Spain, Greece. Which countries survived better? The western and north European states that pursue a more social democratic style of capitalism. This was not a crisis of global capitalism; it was a crisis of Friedmanite Anglo-Saxon capitalism, and it beggars belief that after three decades of this unworkable, malign ideology, the left are not shouting their opposition from the rooftops.
David Redshaw
Gravesend, Kent

• Labour's ambivalent attitude to foreign workers highlights the dilemma facing the party (Report, 12 August). Why are employers "unscrupulous" because they recruit the workers best able to fulfil the required roles? That is what all employers do, and are entitled to do under European legislation. If there is a problem with EU law, Labour should tackle that deficiency directly, instead of carping about "localised" side effects. Perhaps the Labour party hierarchy could steal a march on its rivals by proposing a system of controlled EU immigration, a proposal that would resonate strongly with the electorate.
Dr Mark Ellis
Huddersfield

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Turkey Launches Competition For Assault Boats

(RMK Marine) An artist's rendering of a Turkish-type assault boat that is going out for bids from defense contractors. It comes as Greece is cutting its defense spending yet again. ANKARA - Turkey's procurement authorities have launched a new competition to acquire 10 new assault boats, a program dubbed the "Turkish-type assault boat," officials here said. They said an ...