Weekend Economists Second the Notion! December 12-14, 2014

[Demeter]

67. Uruguay Takes on London Bankers, Marlboro Mad Men and the TPP

http://truth-out.org/news/item/27932-uruguay-takes-on-london-bankers-marlboro-mad-men-and-the-tpp

What the hell is happening in tiny Uruguay? South America's second smallest country, with a population of just 3.4 million, has generated international headlines out of proportion to its size over the past year by becoming the first nation to legalize marijuana in December 2013, by welcoming Syrian refugees into the country in October 2014 and by accepting the first six US prisoners resettled to South America from the Guantánamo Bay prison on December 6, 2014...

For the past 10 years, Uruguayans have been conducting a left-leaning experiment in economic and social democracy, turning themselves into a Latin American version of Switzerland in the process. Under the leadership of the left-leaning Broad Front party, the International Monetary Fund (IMF) reports that Uruguay has enjoyed annual economic growth of 5.6 percent since 2004, compared to 1.2 percent annual growth over the last five years in Switzerland. The Swiss have decriminalized marijuana and gay marriage. Uruguay has legalized both. Prostitution is legal in both countries, and each provides universal health care. According to the Happy Planet Index, Uruguay has the same low per capita environmental footprint as Switzerland, with a similarly widespread sense of well-being among its people in spite of significantly lower per capita GDP.

Yet unlike Switzerland, with its highly developed financial services sector and, until recently, safe haven tax policies for global capital, Uruguay has become a prime target for the wrath of multinational corporations and the London bankers who fund them. In November 2014, Uruguayan voters voiced approval for their government's policies of social tolerance and public spending on early childhood education, affordable universal health care and social safety net programs by re-electing former president Tabaré Vasquez from the ruling Broad Front party. With support from allied green and radical left parties, Vasquez won a landslide victory against a neoliberal opponent who ran on a platform of slashing public sector spending and opening the nation's economy to foreign investors. Instead, Vasquez's return to the presidency in 2015 will extend the Uruguayan social democratic experiment another five years to 2020. London's neoliberal, supply-side bankers are not amused...The leftist economic experiment taking place at the opposite end of the globe in tiny Uruguay is more than the bankers in London can tolerate, never mind that Uruguay, with minimal military expenses, has annual deficits nearly 600 percent lower than the UK as a percent of GDP. From the bankers' perspective, Uruguay is setting a bad example by taking care of their people instead of catering to global financial speculators.

If the Capital Economics report is decoded, it functions as a virtual thesaurus for the language of financial tyranny, bullying and terror used by the new regime of global capital headquartered in London and New York.

Decoding the Language of Neoliberal Bankers

Capital Economics wants to ensure that Uruguay adopts polices that ease "labor market rigidities." While the preciosity of this formulation is not without entertainment value, in plain language, it means union busting in order to lower wages.

Capital Economics also insists that "supply-side reforms" are essential for Uruguay's survival. Here is a typical list of such reforms.

Cutting government spending, taxes and policies to cut government borrowing
Passing laws to control trade union powers
Reducing red tape to cut the costs of doing business
Implementing measures to improve the flexibility of the labor market, or reforming employment laws
Enforcing policies to boost competition such as deregulation
Privatization of state assets
Opening up an economy to overseas trade and investment
Opening up an economy to inward labor migration

In sum, the London financial establishment is telling pesky leftist Uruguay that it needs to crush its unions by encouraging an influx of low-wage, immigrant workers to reduce labor costs, slash social spending and privatize as much of the public sector as possible.

It is important to note that 55 percent of Uruguay's government bond debt is held by foreign investors, many of them British. The anti-labor austerity program being recommended by Capital Economics would be disastrous for Uruguay's domestic programs and quality of life, but it would provide a profiteering opportunity for speculative bankers in London by temporarily increasing the value of Uruguayan bonds. This is what is really meant by "a boost in medium-term growth."

In this moment, we are all Uruguayans. Their little-heralded stand against the emerging model of transnational governance by multinational corporations and global banks is everyone's battle. A Uruguayan victory at the ICSID tribunal has the potential to set a welcome precedent in favor of local governance versus the kind of transnational order envisioned in agreements such as the TTIP and TPP, yet it is a battle that is being fought on enemy territory. The fact that a sovereign nation trying to protect the health of its people is being forced to defend itself in expensive litigation against the profiteering of a multinational corporation in front of a supranational World Bank tribunal is already far down the wrong path.

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