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TTIP: Trifling Economic Advantages at the Cost of Democracy and the Public Interest
by W Raza, H Schmitz and T Konicz
Email: marc1seed (nospam) yahoo.com
22 Jun 2015
TTIP represents a crisis for democracy and the constitutional state. A parallel private arbitration system allows three corporate lawyers to serve as judges. Richard Trumka of the AFL-CIA describes the TTIP as “secret tribunals” where only “foreign investors” can sue. Frank Bsirske Of the German Verdi service union said the TTIP is a “black box” transferring sovereignty from states and communities to corporations. Labor and environmental regulations can be chilled or invalidated as “takings” or “indirect expropriations.”
TTIP: TRIFLING ECONOMIC ADVANTAGES AT THE COST OF DEMOCRACY AND THE PUBLIC INTEREST
EU Trade Policy: Is Greater International Competitiveness the Solution to the EU Economic Crisis?
By Werner Raza
[This article published in: Kurswechsel 2/2014 is translated abridged from the German on the Internet, http://www.kurswechsel.at.]
The forced competition orientation of EU economic policy is not a new phenomenon but was raised to the rank of a strategic goal with the Lisbon Agenda of 2000…
The outbreak of the global financial- and economic crisis did not change this political-economic orientation. The answer of the EU to the economic crisis was marked by the firm belief that Europe can only overcome the economic crisis with a substantial improvement of its competitiveness. With its export surpluses, Germany is regarded as a model for the crisis-ridden countries of the European periphery. Behind this is the notion that a decline of the internal demand through strict austerity measures together with a strong reduction of nominal wages would improve the cost-position of the European export industry and thus positively influence net exports. In fact, EU imports from the rest of the world collapsed in 2008-2009 as a consequence of the global crisis and only slowly recovered while EU exports to the rest of the world quickly picked up steam. Thus the EU balance of trade surplus rose eightfold since 2008 and amounted to 255 billion E (trade in goods and services) in 2012. A further increase of the surplus was predicted for 2013 and the following years.
This development is very remarkable amid stagnating worldwide growth rates. Firstly, it is based on the stagnating import demand in the EU since 2008 above all in the EU-crisis countries. Secondly and more importantly, it is based on the strong export-growth of crisis-ridden countries like Spain and Greece, not only traditionally export-oriented countries like Germany. In 2012, Germany showed a balance of trade surplus of nearly 140 billion E and has more than doubled its surpluses with the rest of the world since 2008. Between 2008 and 2012, the exports of Spain to countries outside the EU rose around 43% and the exports of Greece around d 146%.
On first view, these developments seem to confirm the EU strategies for settling crises… Economically it is nothing but a beggar thy neighbor-strategy to the burden of third parties…
TTIP aims primarily at extensive de-regulation, dismantling or harmonizing norms, standards and legal conditions, for example in the areas of agriculture, food security, the service sector and in awarding public contracts. Liberalization and protection of investments and investors will play a central role. TTIP must be seen as a project with eco-political ambitions. It is both a reaction to the growing economic and political influence of the BRIC-states, above all China, as an attempt to set a new global benchmark in regulating trade and investments.
UNDERMINING DEMOCRATIC POLICY – A CRITICISM OF THE TTIP NEGOTIATION MANDATE
Recently the Commission tried very hard to show the political and economic advantages that the TTIP would provide the EU. Several studies were commissioned to substantiate the economic advantages from the agreement. The study of the London Centre for Economic Policy Research (CEPR 2013) quoted most often claims the annual income growth for the EU will amount to approximately 120 billion E. This is only 0.5% of the GDP of the EU (2012). This advantage will first appear after a transition time of 10 years or more. Thus TTIP is by no means a short-term turbo growth as claimed by proponents of the agreement. Around 80% of this wealth gain will result from the dismantling or simplification of regulations (standards, norms, approval procedures and others) and from the liberalization of trade in the service sector and publically commissioned works. The (temporary) loss of jobs is estimated at 0.2-0.5% of EU workers. The method of these studies underlying the estimates has serious shortcomings. They ignore adjustment costs, particularly for public budgets and the labor market. A recent OFSE study estimates these adjustment costs at 30-60 billion E for the transitional time of 10 years. TTIP will probably have a negative effect on intra-EU trade, that is on the domestic market and on the trade of the EU with non-EU member states, e.g. on countries of sub-Sahara Africa. Still the official numbers for TTIP are not impressive in an economic regard. No appreciable economic advantages will be gained from the tradition al trade liberalization since the average tariff barrier between the EU and the US is already very low (around 3%).
TTIP proponents hope for advantages from dismantling so-called non-tariff trade measures, that is the huge number of technical norms, standards and legal regulations. The negotiations will concentrate on the so-called non-tariff trade measures and cooperation in the regulatory realm. According to the statement of EU trade commissioner De Gucht, this cooperation includes the following points: (i) organization of a process for cooperation in regulatory questions, (ii) harmonization of existing regulations through mutual acknowledgment of regulations and (iii) cooperation of regulatory authorities in the two economic blocs.
What may sound like a good idea on first view proves extremely problematic on second view. Firstly, the regulatory norms between the EU and the US are very different in highly sensitive social-political areas like food security, health, animal- and plant protection and worker- and environmental protection. Secondly, the regulatory philosophies in dealing with high risk technologies are fundamentally different. The precautionary principle is in effect in the EU so genetically-altered food is not allowed. In contrast, the cost-benefit principle of the US led to the business-friendly cultivation of genetically-modified plants, utilization of hormones in meat production and application of chlorine-dioxide disinfecting animals for slaughter. The US has clearly signaled that it demands an abolition of EU regulations in these areas or a mutual acknowledgment of regulations. Thirdly, there are great differences in policy as to protection of privacy and exchange of data. There are divergent approaches here which are expressions of unequivocal basic social convictions firmly anchored in legal norms and rules. Fourthly, a necessary democratic debate on all these questions is vital with the TTIP. Thus it is very worrying that both sides intend to call into existence “an institutional basis for further progress” with the regulations. “An accelerated procedure is proposed for changing present sectoral supplements through a simplified instrument that does not need any national ratification” (European Commission 2013). The strengthened cooperation between the regulatory authorities for the TTIP undermines the democratic right of parliaments in defining the direction and substance of public regulation.
That investors are granted special rights in the framework of TTIP is problematic. Besides granting rights of access to previously protected economic sections and limiting measures that previously earmarked a discrimination of foreign businesses or protection of strategically important industrial areas, the Commission seems willing to allow an out-of-court international process for settling disputes between investors and the state (ISDS) in the framework of TTIP (cf. Eberhardt). While this procedure already exists in many agreements for bilateral and regional projects, it was not a theme of EU trade agreements up to CETA (EU-Canada free trade agreement). The ISDS enables investors to sue for their rights in international civil law tribunals. This will lead to civil law lawyers attempting to enforce the interests of their clients with lawsuits that could cost the states enormous amounts in compensation. States have no possibility of appealing decisions of these tribunals (ICSID – International Center for the Settlement of Investment Disputes). Experiences show clearly that the danger of compensation demands by multinational conglomerates intensely restricts the readiness of governments to act in the public interest (the so-called chilling effect).
The ISDS was originally intended for international investment agreements to ensure a fair treatment of investors in countries whose legal systems were deficient in many regards. This agreement cannot hold up for the relations between the EU and the US where a fair treatment and fair procedures before courts are generally guaranteed.
The attractiveness of ISDS for transnational businesses is owed to the comprehensive and completely exaggerated term expropriation which covers missed profits throu9gh investments for the originally planned running time and not only all damages arising from investment costs that accrued in the past (for example through construction of a nuclear power plant). Thus an investor is presently justified in demanding compensation for missed profits when a government decides to exit from nuclear energy and a nuclear reactor is closed 20 years before the expiration of the operating time. This happened in Germany when the Swedish energy supplier Vattenfall sued the German government in 2012 for 3.7 billion E compensation. As a result, more and more ISDS procedures were attempted in the last 20 years. According to data from the UN Trade and Development conference, 514 such cases were known at the end of 2012. Hardly surprisingly 123 of these procedures were initiated by US investors, followed by 50 cases by EU investors in the Netherlands, 30 from Great Britain and 27 from Germany (Seattle to Brussels Network 2013). Given the great range of bilateral investments between the EU and the US, the ISDS offers investors a welcome possibility for putting pressure on governments on both sides of the Atlantic by means of threatened lawsuits.
Another alarming development concerns the further liberalization of the financial services branch. Despite all experiences from the last global financial crisis, the financial industry should be granted more rights and protection while financial stability and consumer protection are scaled down. Interestingly enough, the EU Commission seems to be following a more radical approach than the US. In the past, the government of President Obama formulated reservations to two fundamental EU demands on the cooperative framework of financial services in the agreement and on the instrument of ISDS for the financial industry (Vander Stichele 2013). In view of this total concept, it is unlikely that people will agree in the negotiations on more than only the smallest common denominator in regulating the financial markets.
AN ALTERNATIVE EU TRADE POLICY IS URGENTLY NECESSARY
The TTIP negotiations are now oriented almost exclusively in the interests of businesses. This is because of the disproportional influence exercised by the lobby groups of the economy in the EU (and the US). Firstly, the negotiations must be more transparent. Both the European Parliament and civil society must be informed about the state of negotiations and all documents must be published. Essential contents of the negotiations turn around central concerns of the public interest and therefore must be discussed in public.
There are more reservations regarding the EU impact assessment. Unlike models that provide the desired result in advance, well conceived economic models help in analyzing the consequences of a transatlantic agreement. Still they must be supplemented by other methodological approaches for estimating likely consequences of such an agreement. Individual studies should focus on the probably consequences of such an agreement as to the rights and working conditions of employees, the environment as well as the implications of the proposed institutional frameworks for the future of democratic politics, transparency and control. None of these themes has been discussed.
With the help of such an approach, a realistic estimate and corroborated results on the effects of TTIP would be possible. Research institutes commissioned by EU institutions should be truly independent and not financed by business lobbies. The public interest should be protected in the substantive themes of the negotiations. Concretely this means:
• No lowering of standards in public health, public security, worker- and consumer rights and environmental care;
• No de-facto transfer of regulatory authority from democratic institutions to unelected technocratic groups;
• No arbitration court procedures for settling conflicts between investors and states (investor-to-state dispute settlement); the Commission’s proposal to reject “frivolous claims” of investors is not enough;
• No liberalization and no regulatory standstill for financial services and public services (services of the general interest), above all not in the areas of health, the social, cu9lture and water;
• No decrease of political action possibilities in important areas like public contracts for community projects and for other public goals.
Similarly subsidies of cultural productions or educational activities must be protected.
When essential public interests are sacrificed for trifling and dubious economic advantages, the severe economic crisis in Europe is not overcome. Successful crisis management and the urgent challenge of social-ecological transformation require a political system that strengthens democracy, expands action possibilities and subjects transnational capital to social goals again. The TTIP negotiations in their present form cannot make any positive contribution to this.
EuroMemo Group (2014): The Deepening Divisions in Europe and the Need for a Radical Alternative to EU Policies, http://www2.euromemorandum.eu/uploads/euromemorandum_2014.pdf
Raza W./ Grumiller, J/ Taylor L. (2014): Assess_TTIP: Assessing the Claimed Benefits of the Transatlantic Trade and Investment Partnership, OFSE-Austrian Foundation for Development Research, Vienna. http://guena.eu/uploads/plenary-focus-pdf/ASSESS_TTIP.pdf
Seattle to Brussels Network (2013): A Brave New Transatlantic Partnership. The proposed EU-US Transatlantic Trade and Investment Partnership (TTIP/TAFTA) and its socio-economic and environmental consequences, October 2013
Vander Stichele M. (2013): TTIP Negotiations and Financial Services, Issues and Problems for Financial Services Regulation. Centre for Research on Multinational Corporations (SOMO), October 16, 2013
TTIP AND CETA MUST NOT BE WAVED THROUGH!
By Heribert Schmitz
[This article published on December 1, 2014 is translated from the German on the Internet, http://blog.ethisch-oekologisches-rating.org.]
Unfortunately it seems as though the German government and many parliamentarians have resolved to wave through the CETA and the TTIP. The reasons why this must not happen will be summarized here.
If the agreements (CETA and TTIP) would maintain or further develop the effective standards (social-, environmental-, consumer-protection) in Europe and the US as global standards, I would be an ardent defender of these agreements.
Unfortunately the opposite is the case despite all soothing assurances of the US Commission and the German government.
To understand the whole, the initial situation of the negotiations and the positions brought by the essential lobby groups must be grasped. These original positions must be clearly outlined.
The initial position of the negotiations was that the present standards should be accepted. The German government claimed our standards will not be lowered. However that was only a snapshot. In the competition, a mutual acknowledgment of standards means the lowest standards will ultimately prevail. That is the principle of the free market economy.
Using the agreement to lower the standards to the standard of the other side was the unequivocal goal of all lobby groups. The state would then be forced through the competition to lower the standards to the level most favorable in the competition. Business taxes lowered again and again on account of the competitive pressure are a good example for that. I recall the recent statement of the so-called “economic wise men” who recommended to the German government reducing the taxes by referring to more favorable taxes in developing countries. Although contempt or mockery is hidden, that continues to function.
When one considers how many different standards exist in Europe alone in social standards, environmental standards, consumer protection, taxes, and so forth, it is clear where the whole matter ultimately leads. In addition, there is the controversial investment-protection agreement that establishes a parallel justice giving security to all investors that there will be no laws in the future which have a negative impact on the profits. The states would be liable for compensation for any lower profits. This is not a mere theory. States are already sued worldwide by businesses. Several examples could be cited here. The Federal Republic of Germany was sued by Vattenfall for its nuclear exit, the Egyptian state for introducing the minimum wage and Australia for prohibiting tobacco advertising. There are thousands of other examples. Interestingly, all these lawsuits occurred under the strictest secrecy. Thus it is impossible for example to study the complaint of Vattenfall against Germany. An investment-protection agreement combined with an agreement on mutual acknowledgment of respective standards would mean the state and local governments could not pass any laws or regulations that could have a negative impact on the profits of businesses. Because of this, our democracy could become a paper tiger. Why our parliamentarians and the German government do not see this is baffling to me.
The argument that such an agreement should be a blueprint for further agreements with China for example and would then bring us into a better negotiating position is gladly used by advocates. How naïve must one be not to see we will ultimately land with the standards of the Chinese by applying the principle “acknowledgment of the respective standard”?
We all know our planet can only survive when we do everything in our power for a sustainable economy in all areas (energy, raw materials, agriculture). As we know, we are not doing justice to this today. We need more and consistent sustainability and not less. This means we must work so no costs may be “externalized” any more in the future and must abstain from other works and not shift costs to the general public or the environment. The ethical-ecological rating study group at the Frankfurt Goethe University is devoted to this challenge. Agreements like those now planned will make these efforts virtually impossible.
The agreement that such free trade agreements will lead to considerably increased growth in Europe and more jobs must be relativized. In the first case (according to official data of the EU Commission), the volume could improve 0.5% over 10 years, a ridiculous 0.05% per year.
TTIP AND THE IMPERIAL PAST
A Survey on the Geo-political Implications of the Transatlantic Free Trade Agreement
By Tomasz Konicz , 
[This article published on January 2, 2015 as Part 3 of Krisenimperialismus is translated from the German on the Internet, https://www.streifzuege.org/2015/krisenimperialismus-teil-3.]
The transatlantic free trade agreement TTIP was directed against certain countries. This was clear as daylight in its high and mighty, pompous announcement in the summer of 2013. To power blocs on both sides of the Atlantic, the desired free trade zone opens up the possibility of enforcing again the “global leadership” of the “Old West” in a multipolar world, the Wall Street Journal (WSJ) cheered in June 2013 .
The Neue Zuricher Zeitung (NZZ) newspaper was even clearer in its commentary . The transatlantic freed trade zone ultimately represents a “discriminating preferential agreement” between the US and the EU and would establish a “trade regime excluding China and other threshold countries.”
Most bi- or multilateral “free trade agreements” acted “as protective mechanisms against overly strong competition” and did not serve the goal of “liberalizing trade.” With that, Washington and Brussels “betrayed their own ideals” propagating a “multilateral trade system” in the scope of the postwar order “to overcome the discriminatory agreement of the 1930s.”
Thus the goal of the TTIP consists in the economic exclusion of developing- and threshold countries that are seen as an increasing threat to the eroding power of western centers of the capitalist world system. “Many citizens in OECD states ask whether they can survive in the global competition with up-and-coming countries,” the NZZ reported.
DISCRIMINATING PREFERENTIAL AGREEMENT
Western functional elites react to this erosion process of western power with a kind of free trade protectionism that is ultimately an attempt to return to the imperial past when the economic and military superiority of the West prevailed.
The NZZ also named the geopolitical dimension of this “discriminating preferential agreement.” The TTIP obviously aims at Russia’s exclusion and the most far-reaching repression of Russian influence in Europe. Washington forced a similarly structured “free trade agreement” in the Pacific area that aims at China’s exclusion.
Obama’s government is now pursuing a transpacific mega-project, not only a transatlantic mega-project. Twelve countries including the economic heavyweight Japan are participating in the transpacific partnership agreement (TPP). China is not invited to join this agreement. Anew bipolar system in trade policy could arise if the US successfully concludes both the transatlantic and transpacific agreements.
A globally extended Atlantic-Pacific free trade zone would excluded most threshold countries and most important global challengers of western hegemony who could put in question the dominance of the US dollar as the leading world currency: China and Russia. On its Internet site , the German weekly Die Zeit describes TTIP as a “protective wall against the threshold countries,” a “revenge of the North” to “strengthen dominance of the two largest economic blocs of the world.” Around 50 percent of global output and a third of worldwide trade would be left out of the transatlantic free trade zone.
In a commentary, Deutsche Welle showed the concrete consequences of the exclusion mechanisms of the free trade zones on all unallied national economies . “Where there are many winners, there must also be a few losers.” The volume of world trade will experience a rerouting through the TTIP, not a rapid increase. While the mammoth trading blocs may strengthen their exchange of goods, the imports from “Latin America, Asia and Africa” would decrease in this ”super-free trade zone.”
TTIP AS “ESCAPE” FROM THE CAPITALIST SYSTEM CRISIS
Therefore critics term the project a “trade NATO” aiming at “dividing the world.” The Chinese newspaper Global Times commented  the planned free trade zone would force China “in a corner” because the People’s Republic and other threshold countries could not afford being excluded and ultimately would come “on board” – on the conditions of the “Old West.”
TTIP is also an attempt to delay the system crisis of capitalism on both sides of the Atlantic through a further liberalization push. This involves a kind of “escape” from the increasing dislocations and contradictions of the capitalist system crisis. On the larger transatlantic plane, a similar process should be initiated as in the founding and expansion of the European Union. Europe enjoyed a brief decade of credit-financed growth up to the outbreak of the crises.
Within the EU, the transatlantic integration was also understood as a reaction to the continuing economic crisis. The TTIP is the cheapest stimulation program that can be imagined,” argued EU Commission president Jose Manuel Barrosa who promised an increased economic output of 120 billion Euros per year.
The Wall Street Journal  summarized Brussels’ calculus as a kind of flight or escape from the escalating crisis contradictions.
For leaders of the EU, it is an attempt to demonstrate the European project has more to offer than recession and grim austerity.
“THE CHEAPEST STIMULATION PROGRAM IMAGINABLE”
The desired exclusion of nearly the whole semi-periphery of the capitalist world system from this exclusive free trade club is grounded on the strategic calculation of reducing the medium-term dependence of the centers on the most important commodity supplied to the “Old West” by developing- and threshold countries: the energy supply.
The Russian geopolitical conception of an “energy empire” relying on control of the whole value-creation chain from energy supply – from the oil or gas field and the pipeline net to gas suppliers and the gas station net – to gain a power politics lever – clutches at thin air. The strengthened efforts to push back Russia’s influence in the East European energy sector [Let’s go East (8)] can be understood as a strategic offensive to eliminate Russian competition to American energy suppliers.
With the TTIP, Europe should reduce its dependence on Russian natural gas, Bruce Stokes from the German Marshall Fund of the US explained to the BBC . By means of the transatlantic free trade zone, legal restrictions on gas exports could be suspended that for a long time made the export of American energy dependent on approval of the US Department of Energy.
American shale gas or Canadian crude oil gained from the oil sands deposits in Alberta Canada  could be intensively exported to the Eurozone. The American trade deficit and dependence on Russian gas could be reduced, Stokes said.
Thus there are momentous geostrategic reasons for the US to bind its allies to itself through energy exports. Whether the exports could be high enough to completely push back Russian natural gas is uncertain. Still it would be a very important symbol.
In March 2014, President Obama assured Europeans of deliveries of shale gas. “The energy question must be an essential element of the negotiations on the TTIP,” Obama said. In the course of the negotiations, Washington wants to simplify awarding licenses for delivering liquid gas to the EU by US corporations that is controversial on account of the production method that is ecologically disastrous in Europe .
The geopolitical establishment of the United States sees a strategic geopolitical upheaval in the forced production of fossil energy from unconventional deposits  that will transform the US to an “energy superpower.” New production methods previously regarded as uneconomical – horizontal oil drilling and production of natural gas from shale stone formations – have led to a “dramatic increase of energy production” in the United States, the journal Foreign Affairs (FA) boasted last March.
Between 2007 and 2012, the production of shale gas rose more than 50 percent annually and its share in total production climbed from five percent to 39 percent. US terminals once built for importing liquid gas in the US are re-equipped for exporting American liquid gas… This boom has also contributed to the reversal of the long-term decline of oil production in the US that rose around 50 percent between 2008 and 2013. Thanks to these developments, the United States could ascend to an energy-superpower. In 2014 the US surpassed Russia as the largest energy producer and in 2016 will outstrip Saudi Arabia as the top producer of crude oil according to predictions of the International Energy Agency.
WILL THE US BE A FUTURE ENERGY SUPER-POWER?
This energy boom could trigger an economic upswing with the US gross domestic product increasing up to four percent annually. The US according to FA will rise to a net exporter of energy and will create around 1.7 million new jobs. Among the great losers of this boom, FA counts threshold countries like Iran, Venezuela and Russia. Reduced dependence on energy imports will also enable Washington to pursue its strategic goals with a “greater degree of freedom” – obviously because the White House in the future will have less regard for the classical energy producers.
The “sharpened instruments” of US geopolitics include greater leverage in sanctions by Washington since a “diversified energy supply” is indispensable for averting price fluctuations on the world market. The negotiations on the Pacific and Atlantic free trade zones (Transatlantic Trade and Investment Partnership and Trans-Pacific Partnership) could be organized on the basis of potential US energy exports, FA remarked.
In the case of Japan, the prospect for a favorable American energy supply was “crucial” for Tokyo’s decision to join the negotiations. The United States could succeed “in strengthening its alliances” by offering allied states – like Poland or the Ukraine – support in developing their shale gas deposits. The new technical possibilities for mining unconventional fossil energy should be closely interwoven with US foreign policy, FA says. The boom in oil- and gas production combined with its military, economic and cultural power could reinforce “the global leadership role of the US in the coming years.”
However this renewed ascent of the center of the capitalist world system dreamt-of by FA can only be carried out at the expense of the periphery – the so-called developing and threshold countries [On the Threshold to the New Crisis (14)]. Many national economies of the semi-periphery see themselves endangered by a disastrous pincer-movement in which falling energy prices interact with the consequences of the rising US dollar .
Since the US Central Bank (Fed) announced its interest-turn and began reducing its purchases of bonds and securities, threshold countries – that often developed debt-financed deficit economies in the phase of the Fed’s expansive monetary policy – see themselves confronted with massive capital outflows. This has led to economic collapses in the indebted countries that make difficult the debt service of the state, economy and consumers.
The huge debt mountain that accumulated in the phase of the expansive US monetary policy (when the money printing of the Fed scattered investment-seeking capital around the globe) in the semi-periphery of the capitalist world system is in fact impressive. The Wall Street Journal concisely summarized this [15}.
In 2015 businesses from the threshold countries have transferred dollar bonds in the amount of $193 billion. Over the past five years they amounted to almost $800 billion. The states themselves will issue bonds this year for $73 billion. Since 2005 they have amounted to $500 billion.
DISASTROUS EFFECTS ON THRESHOLD COUNTRIES
The value of the US dollar increases compared to most currencies since capital now again flows into the US that seems in an interest-turn and an energy boom. Consequently these debts permanently increase in value. Many crisis-laden countries whose revenues from raw material- and energy exports collapse must expend ever larger amounts of their domestic currency since they became indebted earlier on the world financial markets in the world’s key currency.
The debt trap closes tight. Collapsing revenues, paralyzed economy and the increasing debt burden interest. Spiegel Online remarked on this .
Threshold countries with enormous foreign trade deficits that long profited from the import of cheap capital could be laid low by the new dollar strength: Turkey, South Africa, Peru and Columbia.
A crisis-phase similar to that phase in the 1980s when the high interest policy under Fed chairman Paul Volcker curbed the escalating US inflation and at the same time catapulted the dollar through the global capital inflows in the US threatens the threshold countries – as well as being a booster for the explosive growth of the financial markets characteristic for late neoliberal capitalism. Simultaneously many threshold countries in the 1980s lived through the most grievous economic dislocations, debt crises and state bankruptcies.
Does a similar constellation to the 1980s now threaten in which the center of the capitalist world system shifts the consequences of crisis to the periphery and semi-periphery [at that time it was the vanquished phase of stagflation (17)} and stabilizes itself at their expense? Does the US strategy rely on promotion of unconventional fossil energy and far-reaching exclusion of threshold countries through free trade zones?
The ecologically disastrous extension of the fossil age forced with all its power seems to rest largely on wishful thinking. In the middle of 2011, the New York Times (NYT) published an article researched at great expense  whose authors spend half a year comparing the internal information flow of the branches with their public reports.
Thousands of internal E-mails, reports and analyses of several corporations active in the branch were presented to the east coast paper. In the course of its analysis, the NYT identified a dominant tendency in the branch to boundlessly exaggerate the economic potentials of the production technologies and available deposits. It is by no means certain how many of the discovered shale gas deposits can be profitably mined.
The shocking production costs surpass the profits from production according to the business data of 10,000 drilling holes in the US, the NYT reports. “The data shows there are several very active drilling holes that are often surrounded by less productive drilling holes,” whose running costs in some cases outstrip the revenue from the gas sales.
Moreover the output of many successful drilling holes declines much faster than initially predicted.
This rapid decline of production makes it hard to gain profits through shale gas mining, the NYT noted. “Money flows in the branch” even though shale gas is inherently unprofitable, the east coast paper quotes an internal E-mail of an analyst. This recalls the “dot-com bubble” at the beginning of the century when billions were invested in windy unreliable Internet businesses without a solid earnings base. This led to bankruptcies one after another when this speculative bubble burst in 2000.
HANGOVER MOOD IN ENERGY INTOXICATION
In the meantime hundreds of billions of dollars have flowed into this energy sector which threatens to run aground in its own “success.” The falling price of energy makes the extremely expensive production of unconventional fossil energy in the US simply unprofitable, noted the Frankfurter Allgemeiner Zeitung newspaper that recently reported on a “hangover mood in energy intoxication” in the US .
Drillings in shale rock are ten to twenty times as costly as classical vertical drillings so production from these newly opened sources are first rewarding from an oil price of more than $80 per barrel. The shale rock must be “refracted” again and again at a high price. This oil price of $80 was exceeded from 2008 when the fracking boom in the US began. However this production boom triggered a price drop that puts in question the profitability of the whole branch.
A few weeks ago this oversupply led to the price drop. In the meantime WTI-oil is traded far below $70 per barrel. If this downward trend continues for a long while, mining new shale gas deposits will not be rewarding any more. The first wild cats have now stopped fracking in their smaller claims.
Thus the energetic foundation of the geopolitical strategy of the US is on shaky foundations. The whole new sector will be simply unprofitable as soon as the fracking production becomes rampant – through the projected development of the deposits in Europe- and the demand for energy decreases because of the crisis. Ultimately this conception of an American “energy empire” suffers in the false implicit delusion that the present system crisis of the capitalist world society [Die Krise kurz erklaert (20)] can be overcome by flooding world markets with fossil energy.
from: Telepolis , 1,1/2015
Steven Jonas, The Suicide of Capitalism, January 9, 2015
Tomasz Konicz, Florian Roetzer, Aufbruch ins Ungewisse. On the Search for Alternatives to the Permanent Capitalist Crisis, 2014
Tomasz Konicz, The Systemic Causes of the Crisis, 2012
Tomasz Konica, Ways out of Capitalism, December 2014
Ben Ptashnik, Russia Blamed, US Taxpayers on the Hook, as Fracking Boom Collapses, January 8, 2015