Billionaires and the welfare of nations

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Occupy Wall Street protester in 2011.
Image: Glenn Halog Source: Flickr

The super rich are leaving only the scraps for everyone else to fight over, which is fuelling a mounting wave of intolerance as minorities and migrants are scapegoated for falling wellbeing. For the welfare of all, we must end these stark wealth inequalities before it leads to unmanageable social unrest.

Saturday 20 June 2020

Everyone has it tough during the COVID-19 pandemic and we are all in the same boat – this has been a common refrain throughout the crisis.

It is true that we are all aboard the Titanic together. However, some are riding first class, some are riding third class, and others are in the galley below rowing… Oh, and there are not enough lifeboats to go round.

In reality, the super rich are not only shielded from this crisis by their wealth, which enables them to shelter from the virus on superyachts or escape it on private jets, some are even enjoying an unprecedented bounty during these difficult times. This is especially the case in the United States.

During the coronavirus crisis, US billionaires accrued a huge windfall of more than $583 billion in the three months between mid-March and mid-June, according to the latest report by the progressive Washington-based Institute for Policy Studies and Americans for Tax Fairness. At a time when at least 45 million Americans are out of work, tens of thousands have died of the coronavirus (which has has killed black Americans at three times the rate of whites), and 265 million people around the world are at risk of dying of hunger, the United States minted 29 additional billionaires, according to the report.

While frontline workers risk their health and lives to keep society functioning and care for the sick, the biggest financial winners by far were America’s top five billionaires (Jeff Bezos, Bill Gates, Mark Zuckerberg, Warren Buffett and Larry Ellison) who saw their wealth grow by a total of $101.7 billion, or 26%.  Bezos and Zuckerberg saw their combined fortunes grew by nearly $76 billion, or 13% of the $584 billion total, according to the IPS study.

Whenever anyone, including myself, criticises the obscene wealth of billionaires, there are those who rush in to defend them, arguing that critics are just envious and that billionaires deserve this success and earned their vast fortunes.

But is this actually the case?

Like a superhero origin myth, there is a typical narrative that surrounds billionaires, especially those in the tech industry. It goes something like this: X, working in their bedroom/garage/dorm, came up with a brilliant idea, against the odds, brought it to market and is now enjoying the fruits of their brilliance.

It is true that quite a few billionaires started off with nothing (or at least with a more modest fortune), and many did exhibit inspiring brilliance in their early careers. However, is the acumen of these entrepreneurs really worth so much more than everyone else’s labour – combined?

Unimaginably, it would take an American household earning the mean $60,000 a year nearly 2.5 million years to accumulate the estimated $147bn which Jeff Bezos is estimated to be worth… if they did not spend a penny. A low-paid Amazon worker on the shopfloor would take more than 4 million years of saving their entire income to assemble their boss’s fortune.

And these are workers in the world’s richest country. Now try to imagine how long it would take a poor worker in South Asia or sub-Saharan Africa to make this kind of money.

It goes without saying that nobody’s ideas or work ethic or vision is worth thousands or even millions of years of everyone else’s labour. This notion is particularly insulting in this time of crisis, when the people society depends on to function are not tycoons, top CEOs or hedge fund managers but nurses, doctors, emergency workers, care-givers, supermarket staff, delivery people and utility workers.

Moreover, there is almost inevitably an ugly and underexposed underbelly which casts serious doubt on the idea that billionaires “earned” their unfathomable fortunes. While there are certainly “good billionaires” and “bad billionaires”, there are no billionaires, as far as I can ascertain, who made their billions fair and square, without employing some ethically dubious practices.

These practices may include underpaying or overworking staff, monopolising the productivity gains delivered by their workers by keeping the financial gains to themselves and automating jobs, exporting  jobs, stifling competition, and even exercising monopolies or near-monopolies.

One area where the billionaire class and large corporations have been laughing all the way to the bank, and where the rest of society has been crying in misery, is taxation. While ordinary wage earners in advanced economies, especially those with a robust social safety net, disproportionately bear the burden of taxation, corporate tax rates and taxes on high incomes and capital have hit historic lows, with a de facto regressive tax system increasingly becoming the new normal.

The results of this skewed, unjust system are clear to see. The fattest cats in America, for example, saw their wealth bloat by over 1,100% between 1990 and 2018, according to the Institute for Policy Studies report, yet their proportional tax obligations decreased a spectacular 79% over the same timescale.

Meanwhile, the rest of society is left to fight over the scraps, which has fuelled ugly identity politics and the massive resurgence of racism and xenophobia as minorities and migrants are incorrectly blamed and scapegoated for the corrosion of the majority’s welfare which was largely caused by the gluttony of the super rich and large corporations, not just in America but in many other parts of the world.

Over and above this, the unprecedented mobility of capital and wealthy individuals, facilitated by decades of deregulation and the absence of a global tax regimen or coordination of tax policies, has enabled many corporations and billionaires to transfer their profits to tax paradises, allowing them to dodge their tax burdens and, with them, their social responsibilities. This has also forced a race to the bottom between countries fearful of losing out to tax havens.

Even though corporate tax rates are at an all-time low, the IMF estimates that governments are deprived of up to $600 billion a year in corporate taxes at the reduced rates due to the kind of clever bookkeeping that has been made possible through decades of financial deregulation and walks the fine line between legal ‘tax avoidance’ and illegal ‘tax evasion’. Economists calculate that 40% of the profits of multinationals are artificially transferred to tax havens from higher-tax countries, especially in Europe.

To add insult and injury, not only has deregulation devastated the welfare state, but also among the biggest recipients of state welfare are, paradoxically, the richest, who benefit the most from the rescue packages designed to pull us out of crises, especially in the US. This occurred during the Great Recession following the financial meltdown of 2008-9 and is happening again during the current coronavirus crisis.

More enlightened billionaires have arrived at the realisation that such vast concentrations of wealth are not only bad news for society, they are bad for the wealthy. Warren Buffett and Bill Gates are both advocates of higher taxes for the rich, but the rates they consider fair are nowhere near enough to bridge the inequality chasm that has emerged, rebuild our tattered social safety nets, lift the world’s poorest out of poverty and heal the environmental devastation caused by such extremes of wealth.

Another solution is for billionaires to voluntarily divest. Buffet and Gates have not only pledged to give away their money, they have established the so-called Giving Pledge, where they encourage other tycoons to also part with their fortunes. However, the response to the initiative among the mega rich, or what I like to think of as wealth extremists, has been lacklustre at best, representing a tiny drop in the ocean compared with the total wealth billionaires control. Meanwhile, those who have signed up to the pledge are generally seeing their fortunes grow far faster than they are giving them away.

Besides, philanthropy is no substitute for taxation and social justice. Not only does it demean people by turning what should be their rights into acts of charity and largesse from the rich, it also puts what should be a collective decision-making process on societal priorities in the hands of unelected individuals, who may or may not be concerned about the greater good.

Moreover, this gigantic concentration of wealth gives billionaires the kind of political clout that makes a mockery of the one person, one vote foundation of democracy. We are used to the business class representing a powerful oligarchy in authoritarian and autocratic regimes, such as in Russia or the Arab world. In democracies, the massive lobbying power, both direct and indirect, of the billionaires and corporations erodes democratic governance and undermines the will of the electorate.

What we need are not half-baked efforts to make being a billionaire undesirable – we must make becoming a billionaire impossible. This requires a collective, global effort to introduce “equanomics“.

This can be achieved through a variety of mechanisms, from a coordinated taxation system so progressive that there remains no incentive or possibility to build up such vast fortunes, to enacting an actual cap on wealth and incomes.

This will both narrow inequalities and enable societies around the world to repair and expand their social safety nets, as well as to better reward those working in neglected vital sectors. Moreover, it will enhance the incentive for constructive, socially beneficial innovation because people will feel that the fruits of their labour are not just going to make fat cats fatter.

Failure to take corrective action will lead to greater social unrest and conflict as people’s welfare is further degraded. While minorities are currently paying, and will continue to pay, the heaviest price for this inequality, the super wealthy, as history has shown repeatedly, are not immune to the wrath of those they impoverish.


This is the updated version of an article that was first published by Al Jazeera on 26 May 2020.


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Gamal Mubarak’s get-rich-quick scheme

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By Osama Diab

How can you make a return that is 12,000 times greater than the initial “investment” in under a decade? Ask Gamal Mubarak.


Friday 4 November 2016

Gamal Mubarak, the younger son of deposed President Hosni Mubarak, who was being groomed to become the country’s president before the 2011 revolution put an end to those plans, made an investment in which each dollar became 12,000 in fewer than 10 years.

In 2002, the businessman-turned-politician signed a contract with EFG-Hermes Holding, Egypt’s largest investment bank. Through the contract, which an anonymous source provided to Mada Masr, he managed to take in a net non-taxable profit of about $21 million from an initial investment of just $1,750 in less than a decade. Here is how he did it.

In 1997, the Cyprus-based company Bullion, which Gamal Mubarak co-owns, struck an agreement with EFG-Hermes Holding – in which Bullion would hold a 40% partnership share – to establish an offshore company called Egypt Fund that would manage EFG-Hermes Holdings’ private equity business.

In July 2002, about five years later, Egypt Fund was renamed EFG-Hermes Private Equity (EPHE) and its headquarters were opened on the British Virgin Islands. Bullion now owned a 35% stake and Gamal Mubarak was its director. The paid-up capital of the new company was a mere $10,000, of which Gamal’s share was $1,750.

Over the next decade, Gamal Mubarak’s initial $1,750 investment grew to about $20 million in “fees and commissions” through his ownership stake in Bullion. The vast sum was received with Gamal Mubarak barely making any significant investments, taking any risk or providing any real service that added value.

This is how this complex journey went:

Under the terms of the contract, which was signed on October 2002 as an “investment advisory agreement” between EFG-Hermes and EHPE, EFG-Hermes (the real holding company) appointed EHPE (the shell company) as an investment advisor for its private equity portfolio.

In other words, the subsidiary that only existed on paper and was without resident experts was intended to give investment advice to the holding company, which housed hundreds of experts.

The services described are listed in detail in the contract and include: carrying out regular reviews of the private equity portfolio, recommending and giving general investment advice to the customer in matters concerning the portfolio, coordinating with industry specialists and analysts, as well as risk management advisors, preparing a quarterly valuation of the portfolio and proposing minimum sale prices.

All of these services would have required manpower, but, in a shell company, there is none to provide these services. The people who provided these services were in actuality employees of the Cairo-based company.

While money was paid annually to a company whose existence didn’t extend much beyond a PO box and a mailing address at 3443, Road Town, Tortola, BVI, the holding company was buzzing with 876 employees, according to the company’s website.

This kind of agreement has been known to move profits from a tax jurisdiction like Egypt, where the government currently charges corporations a 22.5% tax on corporate profits, to a tax jurisdiction like the British Virgin Islands, where the corporate tax rate is 0%. The point is to record lower profit by inflating expenses in Egypt and greater profits in the British Virgin Island shell company.

One way of inflating expenses is to buy expensive “advisory services” from one of your subsidiaries in a tax haven, which would be recorded as an expense in the holding company’s accounts and reduce its profits on paper, but the money still appears in the holding company’s accounts, because it is still received by a subsidiary.

Profits in this case are usually transferred to a fully owned subsidiary. Because shell companies normally have a very small amount of capital invested in them and do not serve any material function, the rate of return on capital investment is usually very high, as the profits are not generated from real activities that require capital expenses. EHPE, with a mere capital of US$10,000 (LE61,500), garnered a net profit of about LE497 million between July 2003 and December 2009.

How Gamal Mubarak benefited from the deal

According to the 2002 contract, 10% of EFG-Hermes Holding’s capital gains in excess of cost or 2% of sale value, whichever was higher, would still be paid to Gamal’s company – in addition to an annual allowance of LE250,000 paid to him for his position on the company’s board.

However, it doesn’t make clear economic sense to allow an external party like Gamal Mubarak access to the large artificial rate of return that offshore entities garner, without him having anything to do with the parent company from which the funds were originally transferred. This discrepancy poses questions about the nature of Gamal Mubarak’s relationship with the holding company.

EFG-Hermes has repeatedly declined to answer our inquiries about the contract signed by Gamal Mubarak and refused to comment beyond their short 2012 statement on the involvement of the Mubarak family with EFG-Hermes. In the statement, the company said that no member of the Mubarak family held any shares in the EFG-Hermes Holding or its subsidiaries, with the exception of Gamal, who acquired 18% of EHPE in 1997, before he entered into political life.

Other than Gamal Mubarak’s direct gains as EHPE’s director, the contract seems to have served another purpose, namely to facilitate the movement of money through a lengthy chain of companies that terminates in secret accounts.

In 1993, Gamal and Alaa Mubarak started a complex network of secret offshore entities by establishing a company called Panworld Investment in the British Virgin Islands. Three years later, the company made its first known investment as a co-manager of a $9 million fund called International Securities Fund. In 1997, Panworld Investments, along with many of Mubarak’s associates, made a $250,000 investment in Horus I, one of Egypt’s first private equity funds. This was the same year that Mubarak’s Bullion entered into partnership with EFG-Hermes Holding to found what would become the British Virgin Islands-based EHPE. Bullion owned 35% of EHPE, with Panworld Investment owning half of this share, 17.5%.

This means that the profits would leave the holding company in Cairo and travel to the secret jurisdiction of the British Virgin Islands, before traveling back to Cyprus and then returning to the British Virgin Islands: a complex journey attempting to obscure the identity of the politically vulnerable beneficiaries.

Although Gamal owns half of Bullion, his name does not appear on official documents because his stake was brokered through Panworld Investment, the other British Virgin Islands-based shell company.

A Central Bank of Egypt report makes reference to US$22.5 million in net profits that were transferred from EHPE’s bank account to Bullion’s Cypriot bank account between 2008 and May 2011.

Further, according to a report by a judicial committee appointed by an Egyptian criminal court to investigate an insider trading case in which Gamal is a defendant, Bullion garnered $24.1 million in profit shares from 2007 to 2009, of which Gamal took in around $12.05 million. 

EFG-Hermes confirmed this information in a previous correspondence, saying that Gamal’s annual profit averaged $880,000 a year. “In the course of his investment in EFG Hermes Private Equity, Mr Gamal Mubarak received total dividends of $880,000 annually, in the context of which EFG Hermes notes that exchange rates were lower at that time than at present,” reads the 2012 EFG-Hermes statement issued to clarify the Mubarak’s involvement with EFG-Hermes.

Additionally, Bullion owned a 40-percent indirect stake in Horus Consultancy, to which EHPE transferred a total sum of LE92.3 million. Gamal Mubarak’s share of this sum was LE18.4 million, or around US$3 million, according to the average exchange rate at the time, as well as $1.25 million in compensatory payments for his role as a board member of EHPE.

Hazem Shawki, the director of EHPE during the 2011 revolution, said in an official interrogation held at the general prosecutor’s office that Gamal’s shareholder equity in EHPE was LE27 million, approximately US$4.5 million adjusted to the exchange rate at the time, in 2011.

This means that, between 2003 and 2011, Gamal made at least $20.8 million, a 1,188,400 percent rate of return on his paid-up capital of $1750. In other words, for every dollar he invested, he took in $11,884 in less than a decade.

Other deals

When looking into the registration location of EHPE, where Gamal Mubarak has an 17.5% indirect stake, we find that it was registered in a building called the KPMG Centre, also known as the Tropic Isle building, in the British Virgin Islands. It is an address that the Offshore Leaks database lists as the home of at least dozens of companies.

Managing partners of private equity funds are often registered in low-tax jurisdictions so that the fees and commissions they receive are exempt from taxes. EHPE was the managing partner of at least eight private equity funds worth collectively close to US$1 billion and received their share of profits made on these investments, of which 18% went straight to the Mubarak sons.

The judicial committee’s report in the insider trading case affirms that at least LE497 million in profits were shifted to the British Virgin Islands between July 2003 and December 2009. The report also notes that there is no indication that EHPE paid any taxes on these profits.

What is more, a similar investment advisory agreement seems to have been signed between EHPE and Bank Audi, in which EFG-Hermes Holding held a 28% ownership stake.

EFG-Hermes’s 2007 annual report states that Bank Audi transferred more than LE16 million in financial advisory services fees to EHPE, an indication that a similar agreement may have been in place between Bank Audi and EHPE.

These agreements have certainly reduced the Cairo-based holding company’s tax bill. “The effective tax rate for 2008 decreased substantially to 10%, from 13.1% in 2007, as revenues from outside of Egypt and non-taxable entities increased,” reads the 2008 financial statement of EFG-Hermes.

How does tax evasion occur?

Holding companies typically establish subsidiaries, also known as Special Purpose Entities (SPEs), in tax havens using a mere PO box, but without establishing real operations. Companies state that these subsidiaries have been founded for “tax planning” purposes, a euphemism for tax evasion and lax regulation.

“It is interesting to see that EFG-Hermes Private Equity is based in the British Virgin Islands, a notorious tax haven. The structure of the private equity industry makes great use of tax havens,” says Nick Mathiason, the director of Finance Uncovered, a global investigative initiative on illegal capital inflows. “Some of this is for legitimate reasons. When you have investors from all over the world, it is often simpler to base yourself in a tax neutral zone. However, on many occasions, businesses, including private equity firms, take advantage of the benefits of basing themselves in a tax haven, thereby denying governments huge sums in tax.”

Comprised of 35 of the world’s richest countries, the Organization for Economic Cooperation and Development is the world’s most important tax policy agency. It is currently trying to tackle Base Erosion and Profit Shifting (BEPS), which it defines as “tax planning strategies that exploit gaps and mismatches in tax rules, which big businesses often use to artificially shift profits to low or no-tax locations where there is little or no economic activity.”

The OECD says that, although some of the schemes used by big businesses are illegal, most are not, adding that “this undermines the fairness and integrity of tax systems because businesses that operate across borders can use BEPS to gain a competitive advantage over enterprises that operate at a domestic level. Moreover, when taxpayers see multinational corporations legally avoiding income tax, it undermines voluntary compliance by all taxpayers.”

A “tax haven” is a term used to describe a microstate – typically an island or a group of islands in the Caribbean Sea – in which corporate tax rates are zero percent and where the ownership of companies can remain unknown. Tax havens have been typically used as destinations to artificially shift profits in order to escape the sovereign tax authority operating in the territory where the corporation actually makes its profits.

These islands are so small and house such small populations that they can run their governmental affairs by charging the many large businesses they host very small administrative fees, rather than real taxes. Among the most famous tax havens are the British Virgin Islands, the Cayman Islands, Panama and the Bahamas.

Due to the fact that most registered companies have no real operations there, small buildings of no more than four stories can house as many as 20,000 companies. Even president Barack Obama took note of this phenomenon.

“For years, we’ve talked about shutting down overseas tax havens that let companies set up operations to avoid paying taxes in America,” Obama said in a 2009 speech on international tax reform. “I used to talk about the outrage of a building in the Cayman Islands that had over 12,000 businesses claiming this one building as their headquarters. And I’ve said before, either this is the largest building in the world or the largest tax scam in the world.”

Mathiason thinks that when there are literally thousands of companies operating out of a single address, it is a sign that there are thousands of shell companies there. “The way businesses have been allowed to organise themselves is that they can have subsidiaries set up as self-contained companies, trading and shifting revenues with each other,” says Mathiason. “Even big multinationals have shell companies in out-of-the-way places, in which not a single real employee actually works. This is a symptom of the systemic failure of our international tax system. It promotes artificial transactions and secretive companies to avoid tax. The very same system tremendously benefits organized crime, drug gangs and terrorists.”


This article first appeared on Mada Masr on 20 October 2016. Republished here with the author’s permission.

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Hungary for a better future?

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By Swaan van Iterson

Faced with soaring unemployment and the lack of prospects, many educated young Hungarians are being drawn to the radical right. But will it give them the better future they seek?

Friday 5 August 2011

The Turul bird is the national symbol of Hungary. Jobbik voters often wear it on T-shirts, necklaces, bracelets and other accessories. Photo: Swaan van Iterson

Until last year, the international media paid little attention to Hungary. This changed when the nationalist and conservative Fidesz party, under the leadership of Viktor Orbán, won a two-thirds majority in the elections of April 2010, thereby gaining the power to push through radical changes. 

Orbán moved quickly to nationalise private pension funds. In addition, he pushed through a controversial media law, which stipulates that a government-appointed media authority should monitor whether journalists provide “moral” and “objective” reporting.

More recently, in July of this year, his government passed a new church law, which officially recognises only 14 religions, and hence strips the others of the right to receive state subsidies. The Institute on Religion and Public Policy (IRPP) called the legislation the “worst religion law in Europe”.

And Orbán and his party are not finished yet. His latest idea is to allow secondary school children to study “basic military science” starting from the coming academic year.

But it is not just the Fidesz party that is making news in Hungary. Further to the right on the political spectrum the radical Jobbik party, which won 16.7% of the vote in the 2010 elections to become the third largest party in Hungary, is drawing attention.  The Movement for a Better Hungary’s (A Jobbik Magyarországért Mozgalom) manifesto is mainly based on, among other things, nationalism and the combating of so-called “gypsy criminality” (cigánybűnözés). Many believe that the party was closely linked to the Magyar Gárda (the Hungarian Guard that is now dissolved, but still active under different names), which was established to protect the population against this “gypsy crime”.

Jobbik’s main support base is not only found in the ranks of the poor and poorly educated workers in the northeast of the country, but increasingly amongst the urban young. In early 2010, some 15% of under-25s said they would vote for Jobbik – the party was particularly popular among university students specialising in the humanities or history.

This raises the question of why Jobbik is attractive to more highly educated students in Budapest. Most narratives paint a picture of a faceless crowd of “societal losers” who vote for the radical right. Can the same terminology be used to describe these students? I travelled to Budapest to find out. During a month of extensively interviewing students and hearing their story, while trying not to judge and to remain objective, I learned that radical right voters can be far from being the indistinguishable mass of victims they are often taken to be.

 Of multinationals and gypsies

A Jobbik student attends class with pen and bracelet in the colours of the Hungarian flag. Photo: Swaan van Iterson.

Farkas Gergely (25), a recent graduate in economics and sociology, is a Jobbik member and one of the youngest members of parliament. According to Gergely, the lack of prospects many students face leads them to vote for his party: “Many students in Hungary cannot find work once they graduate… For 20 years, no party stood up for young people and so they looked for something new. We have filled that gap.”

A lot of the students I have spoken to indicate that having a university degree in Hungary is no guarantee for a secure future. According to Marcell, a 25-year-old public administration student, the bad socio-economic situation is a result of, amongst other things, foreign interference: “Multinationals, transnational companies and foreign banks have come to the country in droves since 1989. They were able to operate here without paying any taxes while local firms had to pick up the tab – they got no special perks,” he says. “The result is that the multinationals have devoured our economy. They became the rulers of our homeland. Every Hungarian government over the past 20 years has been their unquestioning servant.”

Szuszanna (21), a medical student in Budapest, believes that it is mainly Jewish enterprises that have received this beneficial treatment: “We’re not happy with the Israeli companies which buy up everything here – they ruin everything. They take a lot of money out of the country and invest very little,” she argues.

In Szuszanna’s view, the trouble is that if you want to do something about the situation, you’re immediately labelled as an anti-Semite. According to her, the same problem arises around the “gypsy question”. The Jobbik introduced the term “gypsy criminality” into Hungary’s political discourse, which finally made it, in Szuszanna’s view, possible to talk about the situation – something that is very urgent, she believes: “During communist times, everybody was obliged to work, but that changed with the advent of capitalism,” Szuszanna tells. “Now that you can get benefits, a lot of gypsies don’t work anymore. They spend their benefits on alcohol and cigarettes and when this runs out, they often steal.”

Radical change

Student supporters of Jobbik greet one another by saying “Szebb Jövőt”, meaning “A better future”. They would like to see change not only in the socio-economic conditions but also in the political situation. János (26), who studies IT, believes that students vote for Jobbik because they want radical change. According to him, Hungary never underwent a change of the regime (rendszerváltás). He thinks that many communists continue to be in power under the guise of socialism and that communism actually never went away in Hungary. Moreover, like János, a lot of students view the socialists as being corrupt.

For a lot of the students, 2006 was the time they decided to join the Jobbik party. That year, an audio recording surfaced from a closed-door meeting, featuring the then socialist president Ferenc Gyurcsány. On the recording, Gyurcsány admitted that “we have been lying for the last one and a half to two years” about the economic situation in Hungary. The leak led to public outrage and mass demonstrations, including the occupation of the state television building by football hooligans and radical-right students.

Many of the Jobbik supporters believe that socialist “indoctrination” does not only occur in the political sphere, but also in the education system. Jószef, a PhD student in political science who is researching euroscepticism, would like to build an academic career but, in his view, it is very difficult to earn money as an independent political scientist in Hungary: “You need to have a political colour, otherwise you’ll get nowhere in this field,” he says. “Personally I have had no problems but I have heard others say that it is difficult to get a good position if you’re not a socialist.”

And it’s not just academia. In Katalin’s opinion the media is also dominated by “liberal leftists” (referring to the socialists). The “simplistic and oversexualised” American programming on television annoys her: “The Hungarian media is extremely prejudiced and, above all, extremely liberal,” she complains. “People watch MTV, use drugs, find it normal to be gay and encourage others to become so too. That’s just ridiculous.”

The “bias” of the Hungarian media does not stop Jobbik from reaching the public, János stresses. He says that the party bypasses the mainstream media by being very active on social networking sites like Facebook and Twitter. Moreover, this helps the party to connect better with young people.

Eszter, a master’s student in public administration, thinks that Jobbik is a party for the young generation in a country where there is an intergenerational divide in politics: “Older people lived through communism and miss the security and stability of those times. In those days, there was still work for everyone. This means that older people vote more frequently for the socialists. Young people don’t have the same experiences and sympathies.”

Hungary’s Young Turks?

Badges worn by a Jobbik supporter. Photo: Swaan van Iterson.

Péter is a university lecturer at both ELTE and Corvinus University. He says that students who vote for Jobbik regularly voice their political views in their essays and assignments. According to him, history students in particular are drawn to the party – a phenomenon that does not surprise him in the least: “Hungarians have a history of lost wars and lost independence. This gives you a reason to become nationalistic. Young people are convinced that, given all they’ve lost, Hungarians can only count on themselves.”

Many of the students I spoke to integrate their political views not only into their studies but also their plans for the future. Ákos (21) describes knowledge as his “weapon” with which he can build his future and change the world. Towards that end, he is studying history and Turkish. He believes that Hungarians must have more control over their country, and the only way to achieve this is to become more independent from the West.

Surprisingly for all those right-wing Europeans who oppose Turkish membership of the EU because of the supposed civilisational differences, Ákos wishes to strengthen ties between Hungary and Turkey, as he believes the two countries share a common history: “Most people believe that the Hungarians are descendants of the Finno-Ugric tribes, but this is untrue. The Turks and Hungarians are brothers and there is a lot of research which shows that Hungarians are related to tribes in Kazakhstan.”

For other students, Jobbik is more a part of their daily reality than their future dreams. Barnabás (20), also a history student, wears black jeans and a leather jacket bearing Hungarian nationalist iconography, as well as an armband in the colours of the Hungarian flag. His interest in the Hungarista subculture began when he turned 16 and started listening to nationalist rock bands like Kárpátia and Romantikus Erőszak, whose songs include 100% Magyar (100% Hungarian) and Lesz még Erdély (Transylvania will be ours).

“It is very, very important for me to be part of the Jobbik movement. It is an integral part of my Hungarian identity,” Barnabás admits. “You really get the feeling that you belong to a group. Jobbik helps people who feel out of place but have a strong bond with Hungary to find a community. Before I joined Jobbik, I often felt alone, like I didn’t belong anywhere.”

According to Ákos, this sense of loneliness is common among young Hungarians who have few extracurricular activities to engage in or groups to join. For him, Jobbik is almost more like a family than a party: “At Jobbik, you feel that you’re at home. You are surrounded by people who think just like you and who want to reach the same goals.” He ended our conversation with the following words: “We’re there for each other. We fight for each other. Also for you, a better future!”

The students I talked to are trying to change their future through the Jobbik party. The way they actively engage their political ideas in their daily activities, studies and career plans, and use modern utilities like social media, makes it impossible to label them as ‘losers of the modern world’ or the modernisation process. But despite the solidarity and belonging that Jobbik inspires in its young members, the question is whether the radical right path they are treading is the way to achieve their dreams of independence, pride and well-being.

This article is part of a special Chronikler series on far-right extremism. It is published here with the author’s consent. ©Swaan van Iterson.

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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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