economic inequality

Zero tolerance=zero difference

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By Khaled Diab

Belgian media hysteria over crime and calls for zero-tolerance policing miss the real issue – social exclusion in the inner city.

16 February 2010

To the outside world, the scariest thing about Brussels is probably its bureaucracy. In Belgium, however, Brussels has something of a reputation for being an unsafe city where criminals of Moroccan and other immigrant extractions rule its mean streets and certain neighbourhoods are no-go areas not only for law-abiding citizens but also for the police.

Three recent incidents, including a dramatic one in which a police officer was shot with a Kalashnikov during a getaway after a thwarted armed robbery, have confirmed this perception in the minds of many.

The predictable media frenzy – with a tone that would be familiar to a British audience – about street crime and the need for "zero tolerance" followed hot on the heels of the tragic shooting, and voices of reason and nuance have been drowned out. The police even took to the streets to call for more resources and pay, as well as stiffer sentences and faster judicial procedures.

In addition to idle musings about who polices the police during such a protest (a friend suggested that perhaps anarchists and activist should get the chance to stand on the other side of the barricades), I wondered whether the Belgian capital's image is deserved and whether more draconian security measures are really the answer.

According to available statistics, Brussels has, by northern European standards, a high petty crime rate and it is top of the European league when it comes to domestic burglaries but is one of the safest capitals in the world – and possibly the safest in Europe – when it comes to violent crime, particularly murder. And despite the current media stampede, in the first half of 2009 Brussels registered the lowest crime rate in almost a decade.

Like many Brussels residents, my wife and I lived for years without problems beyond some minor annoyances, on the edge of what is regarded as one of the city's more dangerous neighbourhoods.

The public debate, carrying as it does racial and religious undertones, has not surprised locals in Brussels's problem areas but it has caused widespread disappointment. "The violence we hear about in the media is the exception and not the rule," Kamal, a 32-year-old Moroccan, told me. "With all this talk of zero tolerance, respect has reached zero level. We need a public debate, but one based on mutual respect and acceptance."

The sense of disillusionment is pervasive, especially in Kuregem, which is regularly portrayed as some kind of urban "war zone". Eric Gijssen, a video artist and social worker who has lived in Brussels for two decades and works with young people in Kuregem to help them find their voice through the medium of film, has noticed a growing apathy among his charges.

"The youth I work with and other locals are becoming increasingly apathetic," he said. This is a far cry from the active and engaged young people we met some years ago at the Alhambra centre who were keen to challenge stereotypes and misperceptions. "They no longer believe this will make a difference, and have turned their backs on the media to find their own information sources and forums online," Gijssen added.

While he acknowledges that there are plenty of problems, he finds that the sensation-seeking elements of the media and self-serving politicians are only making a delicate situation worse. "Instead of stigmatising entire communities, we must first of all engage with the youth and offer them alternative perspectives," he said.

Gijssen and others with grassroots experience see the fixation on security aspects of the Brussels question as short-sighted and even counterproductive. Instead of attacking the symptoms with a fist of steel, what is required is treatment of the root causes: poverty and social exclusion.

While it is not inevitable that poverty will lead to crime, ignoring the strong correlation between the two is disingenuous and an easy way for politicians and society to cop out of their responsibilities to create opportunities for the marginalised.

In Brussels, the contrast between wealth and poverty is extremely stark. As the country's main economic dynamo, Brussels has a per-capita GDP that is 233% that of the EU average! However, most of the wealth generated in the city is earned by people who live in its plusher suburbs or who commute there from other towns.

In contrast, inner-city Brussels, unlike most other capital cities, has the highest unemployment rate in the country (17.6%) and, according to Gijssen, in places like Kuregem, youth unemployment can be as high as 50%. Unsurprisingly, this chasm can often lead to feelings of resentment on one side of the wealth divide and fear on the other.

"In places like Kuregem, young people have very little or nothing, and not much of a future to look forward to," explains Gijssen. "One thing is essential: more investment."

But rather than investing more, the authorities have been siphoning off funds from community projects in Kuregem and other poorer neighbourhoods in Brussels and, at a time when everyone is feeling the pinch of the economic crisis, immigrant neighbourhoods have fallen off the political radar when it comes to employment and education.

"If jobs and other opportunities are found, then this security problem will vanish," Kamal told me. "We need to combat social exclusion through better socio-economic integration."

This column appeared in The Guardian Unlimited’s Comment is Free section on 8 February 2010. Read the related discussion.

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Making globalisation pay

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By Khaled Diab

Big corporations are using the banking crisis as an excuse for exploiting cheap labour. Is it time for a global minimum wage?

4 February 2010

For beer lovers, Belgium is the nearest place to heaven on earth. The country's 125 or so breweries produce an estimated 800 standard beers, each of which is served in its own distinctive glass. This mushrooms to nearly 9,000 when special editions are included.

Given this ocean of booze, you would expect that the temporary loss of a handful of beers would cause hardly a ripple. In a country where beer receives the kind of appreciation reserved for wine in other cultures, the recent threat to supplies of some of Belgium's favourite tipples captured headlines and caused distress.

The "Beer Crisis", as it became known, was caused by striking workers blockading three breweries owned by the world's largest beer giant, AB InBev, which, among other things, produces the popular but bog-standard Stella Artois and the more upmarket Abbey beer Leffe.

The immediate cause of the blockade was AB InBev's plans to trim its Belgian workforce by 300 (with another 500 to be scrapped in the UK, Germany, the Netherlands and Luxembourg), ostensibly because of falling beer consumption in western Europe.

Despite the inconvenience to the beer-drinking public, most Belgians are sympathetic with the strikers. “We’re with the strikers,” declared one regular at a café in Halle. “If the beer flows dry, that is only a relative problem.”

This is because, InBev (previously known as InterBrew), though it is admired for raising the global profile of Belgian beer, has become infamous for its cavalier attitude towards its workforces, which have endured several 'restructurings' in recent years to cut costs, while the management pays itself lavish bonuses, engages in expensive prestige acquisitions (such as the US makers of Budweiser), and exports jobs to countries where labour is cheaper.

Faced with this public relations disaster and the loss of market share to smaller breweries, InBev's management has backed down for the time being and the blockade is being lifted.

Workers at the nearby Opel plant in Antwerp have not been so fortunate. Despite an offer of a €500 million bailout from the Flemish government, and voluntary pay cuts agreed by the unions, troubled US car giant GM has decided to close the 85-year-old Antwerp plant, axing 2,600 jobs in the process. The decision is all the more puzzling because the plant still turns a healthy profit.

It seems that InBev and GM are taking advantage of the current financial crisis. Both are shifting jobs to countries where labour is cheap, while GM seems to be subsidy shopping and has successfully pitted the German government against the Belgian government.

And they are not alone. With their massive revenue streams and the mobility to shift their assets rapidly, countless multinationals have used globalisation to hold governments to ransom and stack the global trading system unfairly in their favour by 'outsourcing' their operations to so-called low-cost countries while selling their output in higher-cost wealthy countries.

So what can be done to curb this kind of corporate excess and greed and put a brake on this undignified race to the bottom?

One idea could be to develop an international minimum wage and integrate the concept into the architecture of the World Trade Organisation, especially since the Doha round of trade talks is ostensibly aimed at triggering sustainable development. What could be more sustainable for the global economy than affording all workers a decent income?

But, even assuming that WTO member states can muster up the political will to set such a global standard – after all, both rich and poor countries would have their own reasons for opposing it – attempts to set an international minimum wage would face umpteen practical hurdles.

For example, if you set it as an absolute amount, what would you take as your reference? Universalising, say, western European levels would be unaffordable for developing economies and unfair to European workers who have to contend with some of highest costs of living in the world.

Instead, we could determine a minimum standard of living to which all workers should be entitled and use that to calculate a fair wage for each country using purchasing power parity. However, given the magnitude of global income disparities, this would disadvantage local companies in poorer countries who, compared with multinationals, do not possess the resources to pay such wages – nor can the domestic markets they cater for absorb the extra cost.

So, until we have true global economic convergence, it would be far better to start the process of fairer trade at home, and more strictly regulate our multinationals. Today's giant corporations are often likened to small countries. However, there are important differences: they are not tied down by geography and, given the paucity of international regulations, they can get away with practices that would be considered unscrupulous or even illegal in their home territories.

Just as the vast majority of developed economies from which most multinationals hail have minimum wage systems in place, it's time global corporations were made to apply similar practices in their overseas operations in poorer countries.

In addition to an absolute rock bottom wage which they cannot go below, multinationals should be obliged to implement an indexed salary system in which workers in their overseas operations cannot earn less than, say, half of what a worker doing a similar job in their home territory earns.

Complaints are bound to be heard about how this interferes with the efficient functioning of the free market. But I doubt CEOs and top managers would be so blase if it was their own jobs that were to be outsourced. I'm sure India and other developing countries are teeming with intelligent, capable entrepreneurs who could probably do a better job than many of our current crop of avaricious business leaders, and at a fraction of the cost.

Besides, the free market already functions inefficiently – the rich domestic markets of multinationals are still quite well-protected fortresses. And, though we may have freer movement of goods and services than in the past, the movement of labour is severely restricted. In a truly free market, workers would go where the best-paying jobs are, rather than the jobs going to where the worst-paid workers are.

More importantly, at its core, economics is about human wellbeing and if free-market orthodoxy fails to deliver on this, then something needs to be done to balance efficiency against ethics.

This column appeared in The Guardian Unlimited’s Comment is Free section on 31 January 2010. Read the related discussion.

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Introducing equanomics

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By Khaled Diab

Governments need to rethink their economy policies to make them more equitable and responsive to citizens’ needs.

January 2009

Reading the business pages is like wading through a nuclear wasteland littered with ‘toxic assets’. Gordon Brown is now working to limit the damage from this radioactive debt with a multi-billion pound safety net for the financial system. This, along with the hundreds of billions the government has already pledged, not to mention the tens of billion it has already spent, has sparked warnings of possible bankruptcy for the UK.

Since it rippled out from the subprime scandal in the United States, the global financial crisis has seen taxpayers exposed to mind-boggling liabilities, potentially counting in the trillions. While the financial sector sends the wider economy into a recessionary tailspin, what have the architects of the disaster been up to?

Rather than face paying the price for the ruin they have visited on others, top executives have been giving each other golden handshakes before donning their diamond-encrusted parachutes and leaping out of the blazing wrecks they have left for governments to keep airborne with both engines burning.

But even in the United States, it seems that people have lost patients with the executive caviar train. Last week, the Senate said it would not approve any more bailout money without strict limits being imposed on executive pay.

The brewing outrage is hardly surprising when you consider that, as millions face the prospect of the dole and losing their homes, top managers are sitting pretty and laughing. Take the Merril Lynch executive who got $25 million for three months work or, on this side of the Atlantic, the €4 million payoff received by the former chief financial officer of Belgian-Dutch Fortis Bank, which benefited from a government bailout to the tune of €11.2 billion.

Even George W Bush, a leading cheerleader of neo-liberal economics who has probably done more than any other president to fatten the bottom line of corporate America, has been making ominous threats. “Anyone engaging in illegal financial transactions will be caught and persecuted,” he recently said. Appalled as I am by the exuberant excesses at the top, as a strong believer in human rights, I cannot tolerate talk of persecution.

What needs to be done is not only to limit executive pay in banks receiving government bailouts but across the board. We need a general cap on earnings, which would be high enough to provide an incentive for people to perform and strive but low enough to prevent major economic injustice.

But that, in itself, is not enough. We need to rethink our approach to the economy and herald in a new age of what I call equanomics, where the success of an economy is judged by how well it improves citizens’ well-being, narrows the gap between them, and truly provides them with equal opportunities.

At present, there is too much of a tendency to regard the economy as somehow existing outside of society. But this false separation has led policy-makers in many countries to put the interests of the market ahead of the interests of the people. Equanomics would remove the false barriers between the economy, markets and society, and social indicators – such as quality of life, education and health – would count as much as macro- and microeconomic indicators.

In addition to maximum and minimum limits on income, under equanomics, salaries would be determined not only according to a job’s market value but also its social worth through, say, an impartial index which draws on the views of experts and the general public to assess the social value of different jobs. Of course, this might mean that top executives will be taxed extra to raise the pay of nurses.

Some will argue that only free markets can create the wealth needed to improve people’s lives and that communism only succeeded in impoverishing societies in its quest for equality. I am not advocating the imposition of a communist dystopia, but the sort of enlightened blend of socialism and capitalism that served Europe well in the post-war years and has helped Scandinavia to have its cake and allow the majority of citizens to eat it.

Besides, free market capitalism has failed dismally to create the utopia it promised. Despite the laudable talk of equal opportunities, economic disparity robs millions of the opportunity to shine and succeed. For example, an upper-class boy in the UK is 30 times more likely to land a top job than a boy from the unskilled working class. Contrast this with the countries with the highest social mobility, such as the Nordic countries and Canada, which also happen to be the countries with the lowest inequality. This means that there can be no equal opportunity without greater economic equality.

The free market, as we currently know it, is actually not an ‘invisible hand’ that dispenses impartial economic justice. The big players, from oligarchs to dominant or pseudo-monopolistic corporations, have a massive distortionary effect on the efficient functioning of the market.

This is reflected in the rapidly rising levels of global income and wealth inequality, which has led the UN to sound the alarm on the possibility of widespread social unrest, not only in developing countries, but also in the United States, Britain, Spain and Greece (which was recently plagued by riots).

In the UK, since income disparity rose at unprecedented rates in the 1980s, those Thatcherite levels of economic inequality have been perpetuated, with the super rich racing even further ahead, the middle classes getting a modest piece of the action, and the lowest income groups being left behind to eat everyone else’s dust.

Of course, given the fact that multinationals are of a size to rival small, prosperous nation states and the financial markets can punish governments for stepping out of line, the need for coordinated intergovernmental action has become all the more urgent. In this regard, governments can harness the power of the EU and other regional blocs, and even reinvent the World Trade Organisation, to make globalisation fairer and more equitable.

The current crisis risks deepening the wealth gap, as millions in the middle and lower income brackets face the prospect of imminent unemployment and pay cuts, while government funds are exhausted underwriting the welfare of the wealthy. We need governments to put equanomic principles at the heart of their policy if we are to avoid widespread social conflict and enhance socio-economic justice.

This column appeared in The Guardian Unlimited’s Comment is Free section on 19 January 2009. Read the related discussion.

This is an archive piece that was migrated to this website from Diabolic Digest

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