SINGAPORE : 2006 GENERAL ELECTION

People’s Action Party consolidates power but dissatisfaction grows

The recently concluded general election on 6 May in Singapore was considered an exciting election, at least by Singaporean standards.

For the first time since 1988, opposition parties succeeded in filing candidates. They stood in over half the 84 constituency seats. Therefore, in theory, Singapore’s ruling People’s Action Party (PAP), which has never before been challenged, ran the risk of losing power, especially if its fears of a rebellion among young voters came to pass. In fact, there was never any real doubt that the PAP would win, considering that 37 seats were not actually contested by the opposition.

With voting compulsory and the failure to cast a ballot punishable by a fine, there was a 94 percent turnout and the PAP has conserved its almost total domination of the Singaporean Parliament. Prime Minister, Lee Hsien Loong - oldest son of Singapore’s ‘founding father’, Lee Kwan Yew - led the party for the first time in an election and gained 82 seats against two for the opposition, and he managed to uphold the status-quo, even though the share of the popular vote for the PAP fell eight percent from the previous election.

Meanwhile, the two opposition members not only kept their seats but also won by much larger margins than in 2001, despite a PAP offer of more than $100 million in public housing improvements and other benefits to their districts if they switched sides. The PAP, which has never lost any election since 1959, employed a combination of hard-line campaign tactics and financial incentives to retain control. Before the election, the government - which denied buying votes - announced cash handouts ranging from $127 to $1,650 to adult citizens as their share of the national surpluses resulting from economic growth under the PAP.

Responding to the outcome of the election, the Economist commented that, “The PAP shows that it remains one of the world’s most successful political machines”. Undoubtedly, this ‘political machine’ has tremendously assisted the development of a special form of state capitalism in Singapore as well as benefiting the multinationals since the time of Singapore’s independence from Britain in the 1960s (via a brief association with Malaysia which ended in 1965).

However, in its early development, the PAP and Lee Kuan Yew used socialist rhetoric and welfare state propaganda especially, to gain the support of the working class and trade unions. (See separate historical background)

Singapore is regarded as one of the countries with the highest per capita gross domestic product (GDP) in the world, and indeed this is achieved by nothing less than the super-exploitation of local and foreign workers. In Singapore, working hours are long, overtime usually cannot be refused, pay is low, injury compensation inadequate. Hospitalisation and health care costs usually have to be borne by the workers themselves rather than by their employers. There is no provision for gratuity payments or pensions on retiring and redundancy payments are minimal. In short, other than the job itself, employers provide little else. Under the PAP, the “Nothing Is For Free” policy means that the rich enjoy the fat of the land while workers are put at a tremendous disadvantage.

Opposition and Democratic Rights

Since the PAP came into power, it has toughened its state machinery to subjugate the population and prevent the emergence of any radical opposition, progressive groups or labour movement in Singapore society.

In 1987, when a Catholic social workers’ organisation lobbied for better wages and more humane employment conditions for migrant workers, 22 people were arrested under the Internal Security Act and accused of being communists threatening state and national interests.

The government strictly controls the media and the internet and severely restricts freedom of expression and freedom of assembly. It uses tight restrictions on political protest and repeatedly takes out defamation suits against the opposition and against journalists. In the run-up to the recent election, the PAP sued one of the opposition parties, arguing that one of its campaign leaflets had impugned the ruling party’s honesty. Several opposition parties’ leaders have already been bankrupted by PAP lawsuits.

The opposition parties are almost all right wing. While they demand human and democratic rights, in reality they accommodate themselves to the needs of the system. According to a recent statement by opposition veteran, J B Jeyaretnam, the Workers’ Party, the main opposition party, is not willing or ready to take on the PAP over the most crucial issue – that of the system of government in this country.

However, workers and young people in Singapore are increasingly frustrated with the PAP regime. Despite the PAP’s diverse election strategies to attract voters, 44 percent in one working-class district supported opposition parties. This demonstrates the growing discontent on many issues ranging from the widening wage gap, unemployment, workers’ rights, healthcare, education and the cost of living. As far back as 1999 during economic turmoil, there were more than 19,000 labour disputes involving non-unionised workers demanding unpaid salaries. Migrant workers have begun to organise themselves after the infamous case of the Philippine maid who was brutally killed by her employer.

The increase in young Singaporeans joining the opposition illustrates the growing frustration of a new generation with the constrained freedoms under the PAP’s autocratic regime. The number of political blogs on the internet has been increasing. Considering the strict control of the media and severe restrictions on political comments being made, political blogs act as an opportunity for many to express their dissatisfaction with the PAP administration.

James Gomez, one of the Workers’ Party leaders from Singapore, speaking in Bangkok recently, urged the NGOs and human rights groups in the region to help with the development of human rights and democracy in Singapore. However, fighting merely for democratic rights without linking it to the need to change this brutal system will not make any real change for workers and young people in Singapore. Singapore under capitalism cannot solve the problems such as lack of space, migrant workers and other issues because it based on a profit-making system rather than catering for the needs of ordinary workers and young people.

Singapore needs a truly democratic government of workers’ and poor people’s representatives to benefit the majority instead of inflating the profits of several billionaires and business magnates under state capitalism. A genuine workers’ government would take over all the assets of corporations, multinationals, banks and others that control the economy and bring them under the democratic control and management of elected workers’ representatives, running them for the general benefit of society. It would nationalise all printing and broadcasting facilities and democratically decide access for all political groupings.

It would allow the right for all to form political parties and contest elections and the right of all workers, regardless of whether they are local or migrant, to organise, to be in a trade union and to strike, as well as ensuring the democratic right to meet, assemble and demonstrate with no fear of harassment by the forces of the state.

The right to organise should be established for rank and file members of the army and police, who should be encouraged to elect committees to investigate the record of their officers and to remove them from their posts where necessary. They must have the right to elect officers and to refuse to be used against workers’ leaders and opposition movements.

Local workers, migrant workers and young people’s issues must be linked and support campaigned for from workers regionally and internationally as well as working closely with genuine labour movements or socialists in the region in order to establish a federation of socialist states in Southeast Asia.

There is a need to link the day to day issues of workers and young people in workplaces and society to the need to end capitalist rule. Therefore workers’ leaders and young people who are concerned for genuine change have to take on the task of establishing a genuine workers’ party to unite all layers of the working class, young people and the oppressed behind a programme of struggle for a socialist society.

Ravichandren, CWI Malaysia

24 June 2006

VIDEO : THE ECONOMIC CRISIS OF CAPITALISM

WORLD ECONOMY : THE GREAT IMPLOSION...CAPITALIST FINANCE SYSTEM NEARS MELTDOWN

The economic crisis of capitalism is also an ideological and political crisis, and this unavoidably places Marxism back on the political agenda.

Over recent years, we have often been accused of being ‘catastrophists’. This is because we predicted that the debt-driven bubble economy, dominated by high-profit, high-risk finance capitalism, would at a certain point collapse, resulting in a serious downturn in the world economy. As a review of our articles will show, we have never proclaimed a ‘catastrophe’ at every point, but have presented a careful, balanced analysis of each stage of development. And our analysis is now being amply borne out.

Unfortunately, some on the left succumbed to the idea that the world capitalist boom, based on accelerated globalisation and ultra-free-market policies, could continue indefinitely. The events of recent weeks, following the collapse of the US housing bubble and the severe repercussions of the subprime mortgage crisis, have completely changed the picture. Now the headlines in the serious capitalist press are ‘catastrophist’. “Capitalism in convulsion”, read a headline in the Financial Times (20 September).

George Bush’s attempted multi-billion dollar rescue of the financial system, wrote John Plender, is “at the cost of inflicting severe damage on the US model of free-market capitalism”. (Financial Times, 20 September) After the government-financed bail-outs and takeovers of Bear Stearns, Fannie Mae and Freddie Mac, American Insurance Group, etc, it has become commonplace to refer to the ‘socialisation’ or ‘nationalisation’ of financial institutions. In reality, the colossal debts of reckless, predatory finance capitalism are being offloaded onto the shoulders of the working class.

When US treasury secretary, Hank Paulson, announced his $700 billion Troubled Asset Rescue Programme, the commentator, Paul Krugman (a liberal Democrat), commented: “Comrade Paulson is taking over the commanding heights”. One financial trader, Bill Perkins, a free-marketeer, placed an advert in the New York Times. It shows Bush, Paulson and Federal Reserve chairman, Ben Bernanke, the ‘new communists’, raising an American flag on the grave of ‘private enterprise’ and ‘capitalism’. Perkins believes that failed banks should be allowed to collapse, and not be bailed out at the taxpayers’ expense. “I think it’s a kind of trickle down version of socialism or communism”, he said. “You have the government nationalising more institutions than Venezuela”. (Guardian, 25 September)

For a few days, however, Bush, Paulson and Bernanke were facing the prospect of a new 1929-type crash of the financial system. If they allowed it to happen, as the Federal Reserve and the government did in 1929, it would threaten the survival of the capitalist system. From a capitalist standpoint, they had no choice but to intervene to try to stabilise the financial system. Whether Paulson’s package succeeds remains to be seen. There is a chain of crisis that is far from played out.

Nevertheless, the accumulation of state-finance bail-outs and de facto nationalisation, and now the $700 billion rescue plan, is a shattering blow to the prestige of US capitalism and the ideology of the free market.

Nationalisation by the Bush regime, of course, does not mean real ‘socialism’. Their aim is to use the state’s resources, including a massive increase in public debt, to stabilise capitalism and prepare the ground for a recovery at a later date. The bill for the bail-outs will be handed to the working class, who contribute the biggest share of taxes to the US government. Moreover, millions of working-class families have been ensnared by crooked finance companies into the subprime mortgage trap, and many are now losing their homes. Millions will face unemployment and poverty wages as the financial crisis pushes the US economy deeper into recession.

Real socialism would mean the taking over of the finance sector and the commanding heights of the economy by a government of the working class, to be run democratically under the control of those who produce the wealth. Democratic planning would replace the anarchy of the market. Production would be to meet the needs of society, not the profits of the few. Nevertheless, as Karl Marx and Friedrich Engels pointed out, even nationalisation measures carried out by the capitalist state for its own ends demonstrate the redundancy of private ownership and the possibility of an alternative, more advanced economic system.

Domination of finance capital

Many are now blaming the current crisis on the ‘greed’ and ‘fear’ of bankers, hedge fund managers, traders on financial markets, and so on. These people have undoubtedly played a predatory, parasitic role. Their speculative activities have concentrated wealth and profits into the hands of a tiny, super-rich minority. Last year, for instance, the average chief executive in the finance sector gained an income 275 times that of an average worker. Their egotistical motives, however, are a symptom of the system, not the cause of developments.

Over the last 30 years, the capitalist class in the US, Britain and elsewhere moved away from investing in productive activity, the production of goods and services required by the majority of people. They sought higher levels of profitability in the finance sector, both in the advanced capitalist countries and in China and other developing economies. The defeats of the working class in the 1980s, followed by the collapse of Stalinism in the Soviet Union and Eastern Europe, allowed the capitalist class to intensify the exploitation of the working class, especially in the neo-colonial countries of the underdeveloped world. The capitalist system as a whole became increasingly parasitic.

That was the basis on which the parasitic finance capitalism became dominant. It was allowed free scope by globalisation and ultra-free-market (neo-liberal) policies. But the growth of grotesque inequality, with the worldwide reduction in the share of wealth taken by the working class, increasingly restricted the market for capitalism. The capitalist class, especially those operating on the Anglo-US model, have sustained relatively high levels of growth on the basis of ever growing volumes of debt. In 1980, global debt was approximately equal to global GDP. Since then, however, global debt has ballooned to over 3.5 times global output. At the same time, finance capitalism, the channel through which this debt is traded for profit, took around a third of capitalist profits.

This trend, as we have pointed out many times, was unsustainable. It was only a matter of time before the whole edifice collapsed. That is what is happening now. The shadow banking system, the network of unregulated investment banks, hedge funds, and the banks’ own off-balance sheet vehicles, has imploded. The shadow network was developed to bypass the regulated commercial banks. But the major banks, which still form the core of the finance system, have not escaped the crisis of liquidity and capital availability. Derivatives, a whole array of exotic financial instruments that were supposed to spread if not abolish risk, have indeed turned out to be “financial instruments of mass destruction”, as the old-fashioned financier, Warren Buffett, warned.

There will be a profound reaction in the US and internationally to the capitalist crisis and the state bail-out of rotten finance capital. Apart from the economic contradictions, the crisis will undoubtedly produce a monumental scandal of corrupt practices, fraud and theft on an even bigger scale than the earlier Enron scandals. Workers will be forced to organise and fight against the effects of capitalist crisis. These events will create fertile ground for the growth of interest in genuine socialism and Marxism.

Countdown to meltdown

Events in September marked a new, critical stage of the crisis in the global finance system. The world was brought to the brink of a 1929-type collapse.

On 7 September, the US treasury was forced to step in and take over the direct running of Fannie Mae and Freddie Mac, the two giant government-sponsored mortgage providers. This followed the government intervention in July, when it guaranteed their $5 trillion mortgage debt in return for shares in these institutions – in effect, a partial nationalisation. Even that failed to stabilise these giants. Paulson’s ‘bazooka’ had not proved enough to reassure foreign investors, particularly Asian central banks, which have been selling off Fannie and Freddie bonds. A complete takeover by the government, effectively nationalising the institutions, was the only measure left.

Then (14-15 September) Lehman Brothers and Merrill Lynch, two of the five giant Wall Street investment banks, faced bankruptcy. Other Wall Street banks refused to intervene without a government undertaking to guarantee Lehman and Merrill toxic assets. Paulson and Bernanke refused. They had come under tremendous political pressure to avoid handing out any more taxpayers’ dollars. Moreover, free marketers were demanding that they avoid creating further ‘moral hazard’, that is, sending out another signal that reckless speculators would be protected from their own folly by the assurance of a government bail-out. By refusing to back a government rescue of Lehman and Merrill, Paulson and Bernanke hoped to send a message that there would be no more Bear Stearns-type government-sponsored bail-outs for failing banks. Lehman Brothers filed for bankruptcy, and Barclays International and other vultures began to cherry-pick the potentially profitable Lehman assets. Merrill Lynch, on the other hand, rushed to sell itself to the Bank of America, a deposit bank with much greater capital reserves.

Paulson and Bernanke, however, made a monumental miscalculation. They thought they could draw a line, but their refusal to back a rescue of Lehman or Merrill triggered a general slump in bank shares. This signalled that a whole swathe of banks were about to follow Lehman and Merrill into the dust. Among the most threatened were the two remaining investment banks, Morgan Stanley and Goldman Sachs. The whole ‘shadow banking system’, the unregulated, debt-financed, highly speculative network of investment banks and hedge funds, was imploding. Because of their multiple links with the major banks, which also operated off-balance sheet investment vehicles, the investment banks threatened to bring down many other institutions. If Paulson and Bernanke had backed a rescue of Lehman and Merrill, it would not have stopped the rot (as the subsequent bankruptcy of Washington Mutual shows), but by standing back as Lehman and Merrill sank, they accelerated the pace of the banking crisis.

In Britain, HBOS (Halifax-Bank of Scotland), a major bank and mortgage provider, faced bankruptcy. It was only saved by a rapid marriage of convenience, pushed by the Bank of England, with Lloyds TSB.

The failure of Lehman and Merrill had an immediate knock-on effect on the short-term money market. Money market funds, used by the banks to finance their short-term borrowing, have usually been regarded as almost as safe as cash. A key aspect of the credit crunch was the seizing up of this short-term money market, as banks hoarded cash and avoided making any potentially risky loans to other banks. Despite the Federal Reserve’s drastic interest rates cuts, the inter-bank lending rate, usually fractionally higher than the Fed’s rate, has soared to an unprecedented level. Reeling under the impact of the Lehman and Merrill bankruptcies, the severe credit crunch turned into a complete paralysis of this vital money market.

The Federal Reserve, cooperating with other major central banks, was forced to pump $180 billion into the global banking system (on this occasion, currency swaps, dollars for euros, pounds, etc). In the following few days, they pumped in another $100 billion into the system, and the central banks of Britain and Japan, and the European Central Bank also pumped in additional liquidity. Moreover, the Fed and other central banks agreed to accept a wider range of securities as collateral for the loans, including shares, company bonds, etc, in other words, much more risky assets than the government bonds they had previously insisted on. (Since then, more liquidity in the form of short-term loans have been pumped in by central banks.)

Paulson had allowed Lehman and Merrill to collapse, but faced with the possible collapse of a giant insurance company, American Insurance Group (AIG), the government was forced to step in. The AIG crisis was triggered by the downgrading of its security status by a rating agency. This threatened to trigger a run on AIG’s shares, thus further depleting its capital reserves. The problem was not with AIG’s massive insurance business in the US, Europe and Asia. The crisis arose from its involvement in the shadow banking system through its worldwide business in credit default swaps, a form of insurance used to guarantee the investment grade status of a wide range of securities (mortgage-backed securities, company bonds, municipal bonds, etc). AIG had issued $447 billion of such insurance (including $300bn to European institutions).

The downgrading of AIG’s credit status automatically meant a downgrading of securities insured by AIG-issued credit default swaps. This would, in turn, create problems for any finance house using AIG-insured securities as collateral for their own borrowing. In other words, a collapse of AIG would mean a huge increase in the quantity of toxic debt in the global finance system. The losses would be absolutely staggering (one estimate is that it would mean at least $180bn for the global financial sector). At the same time, AIG’s collapse would also mean the collapse of its worldwide insurance business. To avoid a catastrophic crash, Paulson was forced to step in by guaranteeing $85 billion of AIG assets in return for preference shares in the insurance company.

During the critical week, 15-19 September, world stock exchanges plunged. The government bail-out of AIG failed to stabilise share markets. At the same time, the price of oil, which had been tending to fall over recent weeks, began to rise – probably due to a panicky buying of oil futures. Paulson and Bernanke evidently realised that they were faced with a stark 1929 situation. If they stood aside, there would undoubtedly be a collapse of the global finance system which, in turn, would provoke a major slump in the world capitalist economy. Having learned the lessons of the 1929 crash, when the Federal Reserve and the US government stood aside and allowed the financial dominoes to collapse, Paulson and Bernanke decided that they had no choice but to step in to save the capitalist system.

On 19 September, Paulson announced his Troubled Asset Relief Programme (Tarp), a $700 billion ‘plan’ to place a floor under collapsing financial institutions and re-stabilise the US and world banking system. Paulson’s announcement averted a global crash, at least for the time being. But it is really a palliative measure that will not in itself overcome the credit crunch and the paralysis of the banking system.

As we go to press, there is news of the bankruptcy of Washington Mutual, the biggest bank failure in US history. WaMu was seized by the regulator (25 September) and sold to JP Morgan Chase.

European banks have also been hammered by their huge losses from toxic subprime mortgage securities. The hardest hit is the Swiss bank, UBS, which has made total write-downs of around $50 billion (more than Merrill Lynch). The Financial Times has commented that many European banks are now not only ‘too big to fail’, but “too big to save”. “For example, the total liabilities of Deutsche Bank (leverage ratio over 50!) amount to about €200 billion (more than Fannie Mae) or more than 80% of the gross domestic product of Germany. This is simply too much for the Bundesbank or even the German state…” (European Banking Lives on Borrowed Time, Financial Times, 24 September)

Paulson’s package

After the crisis with Lehman Brothers and Merrill Lynch, and the seizing up of the short-term money market (despite continuing, massive injections of liquidity by the Federal Reserve and other central banks) Paulson was forced to announce (18 September) a rescue package, the Tarp. Without giving any details, Paulson proposed to spend $700 billion of taxpayers’ money to establish a toxic waste dump for the unsellable securities still on the books of financial institutions.

A reported $500 billion of losses have already been written off, but some estimates put remaining securities from the housing market at a further $1,000 billion. Global stock exchanges immediately revived following Paulson’s announcement. Almost immediately, however, congressional leaders, both Democrat and Republican, began to protest at the sweeping character of Paulson’s rescue plan and the extraordinary powers that he was claiming as treasury secretary.

Paulson proposed that the treasury secretary should be given (initially for two years) unlimited powers to buy securities from anyone at any price according to his discretion. Moreover, he was claiming immunity from any kind of action by courts or administrative agencies of the government. Initially, he proposed buying the securities from US banks only, but soon widened this to include the US subsidiaries of foreign banks.

If this were accepted by Congress, Paulson would be the most powerful treasury secretary in US history. On its cover, Newsweek dubbed him ‘King Henry’. In effect, the treasury secretary would become the economic executive of US capitalism, with no oversight (merely reporting to Congress twice a year), a rival source of power to the presidency itself.

Like Bush after 9/11, Paulson, backed by Bernanke, is attempting to use the threat of global financial collapse to get rapid congressional approval of his proposals without a thorough discussion of their content. Paulson, for instance, is demanding the package should be ‘clean’, meaning that it should not be encumbered by any proposals such as the government acquisition of shares in exchange for buying toxic debt, or limits on the remuneration of bankers, or relief to homeowners facing foreclosure. Keen to bail out bankrupt bankers, Paulson brutally rejects the legitimate claims of home-buyers.

Paulson is proposing to pay something near the face value of toxic securities, over 60 cents in the dollar, as opposed to their current market value of 20 or 30 cents. Moreover, a variety of banks, finance houses and other companies are lobbying to widen the scope of the rescue. For instance, there are demands for municipal bonds, credit card debt and car-purchase debt to be included. Wall Street firms are already looking forward to the fees they hope to collect from being drawn in to administer the operations of Paulson’s programme.

It is hardly surprising, then, that the heads of finance companies are enthusiastic about Paulson’s proposals. However, some free-market Republicans have vehemently denounced the plan as the ‘socialisation of debt’. Senator Jim Bunning, a Republican from Kentucky, proclaimed: “The free market for all intents and purposes is dead in America”. He said that Paulson’s plan would “take Wall Street’s pain and spread it to the taxpayers… It’s financial socialism, and it’s un-American”.

Democrat leaders, on the other hand, are demanding measures to help distressed homeowners. Paulson has rejected this demand on the grounds that the bundles of toxic securities are too complex to allow the reduction of individual homeowners’ payments. “The banking and securities industries… are fighting the change with all their might, as they did when it came up with the housing bill that was adopted in July”. (International Herald Tribune, 24 September)

Paulson’s current proposal is completely different from the measure used to rescue the savings and loans banks (thrifts) in the early 1990s. At that time, the US government effectively nationalised the failing thrifts, and sold off their remaining assets over a period, before returning the thrifts to private ownership. The robust growth of the economy after 1994 restored the value of mortgaged property and allowed the government to recover part of the cost of the rescue.

A similar measure was taken by the Swedish government after the collapse of the housing bubble in 1991-92. The government nationalised a large section of the Swedish banking sector, cutting out the shareholders of these failed institutions and, subsequently again, any sellable assets were sold off and the banks were later returned to the private sector. The rescue, however, cost about 4% of Sweden’s gross domestic product (though some of this was recovered over time). The US capitalist class, however, would undoubtedly strongly resist full-scale nationalisation of the US banking sector.

The current Paulson rescue proposal, costing around $700 billion, is the equivalent of about 5% of GDP. However, Paulson has no intention of taking over the failed US banks, merely bailing them out by buying up their toxic debts, thus allowing them to replenish their capital and carry on as usual. Paulson is not even demanding shares in the banks in return for buying their bad debt.

Will Paulson get congressional approval for his package? Given the strength of congressional opposition, there is likely to be some delay, and Paulson may be forced to accept some modifications, particularly to the extraordinary, unchecked powers he is claiming. However, faced with the threat of further falls in financial markets and the possibility of new convulsions, it seems likely that Congress will accept the package in one form or another before dispersing for the November elections.

A socialist alternative

Paulson claims that people do not care who owns the banks. Millions of homeowners, however, will care that the government is using taxpayers’ money to bail out the banks which have sold and securitised toxic mortgages while millions are facing penal interest rates and the threat of foreclosure. In fact, millions of Americans are already incensed at Paulson’s plan.

Community organisations, unions, and all those who defend the interests of working people should demand that, instead of the nationalisation of finance capital’s toxic assets and bad debts, the banks and financial institutions (insurance companies, hedge funds, etc) should be nationalised and run in a democratically planned way under workers’ control and management. Compensation for small shareholders and depositors should be on the basis of need only.

The banking sector should be run to promote the interests of industries providing goods and services needed by the majority of the population, not funding the speculative activities of a hyper-rich minority of financiers. The banks should provide cheap mortgages for personal home buyers (with a ceiling to exclude luxury houses for the wealthy). They should also provide cheap credit to small businesses and small farmers serving the needs of local communities.

Such measures, of course, would for many raise the question of ownership and control of wider sectors of the economy, and the need for democratic planning to replace the anarchy of the market and the naked pursuit of personal profit. The US government, for instance, is currently considering a package of state-guaranteed loans to the big auto companies, Ford, Chrysler and GM. These corporations are in deep crisis and should also be taken over and run under democratic workers’ control and management to meet the needs of society.

Unions and community groups should totally oppose all foreclosures. Where dodgy mortgages have been sold through fraud or deception, they should be cancelled. Home buyers who cannot meet their mortgage repayments should have the right to rent the property at an affordable, social rent. Where, through foreclosures and the bankruptcy of builders and property companies, there are empty houses, state and municipal government should take over unoccupied homes and rent them out at affordable rents. Decisions regarding mortgage defaults, foreclosures, and home owners’ rights in general, should be taken not by government officials or bankruptcy courts, but by popular, elected committees which will safeguard the rights of working people.

A new period

If passed by Congress, Paulson’s package, probably with some modifications, may avert a financial crash. There will still be serious wrangles over the detailed measures to be implemented. However, the rescue plan will not in itself revive the finance sector. The US housing crisis, the root of the credit crunch, is far from over. Huge losses in the financial sector mean that the credit crunch will continue for years, even if the toxic waste is taken over by the government.

The rescue of the finance sector will not avert a recession in the US economy, which is already gathering pace. Moreover, the US slowdown, combined with financial crisis in many other economies, is pushing the world towards an economic downturn. There is now a sharp recession in the European economies. Japan, after a weak recovery in recent years, has once again lapsed into zero growth. China, still seen as a dynamo of the world economy, is expected to slow down from 11-12% growth to around 8% during 2008. Though 8% is relatively high, this would have serious effects within China, economically and politically.

The underlying crisis of capitalist production and profitability has been postponed several times since the 1980s through a series of financial bubbles that have fuelled debt-based consumer spending in the US and elsewhere (driving the production of cheap goods in China and other low-cost economies). But now is the time of reckoning. The collapse of the extreme debt mountain almost certainly means a prolonged period of weak growth in the world capitalist economy. Undoubtedly, there will still be an economic cycle, but it is not likely that there will be a return to the kind of global boom that was experienced between 2001-07.

The recent phase of accelerated globalisation and unfettered neo-liberal policies is drawing to a close and an entirely new period of developments is opening. Massive state intervention in the finance sector has wider implications for trade, international currency flows and industrial policy. There will be even deeper tensions between the major capitalist powers. Prolonged stagnation, punctuated by weak recoveries and renewed recession, will provoke social crisis and mighty political struggles. The economic crisis of capitalism is also an ideological and political crisis, and this unavoidably places Marxism back on the political agenda.

Editorial, Socialism Today, October 2008

TEXTILE WORKERS WON CONCESSION

With determined leadership, workers realizing their collective strength could win concession from employers.

After 4 months’ campaign following their company ownership change, on 5th September 2008 Hualon Corporation textile workers in Nilai and Melaka received compensation ranging from RM1, 000 to RM17, 000 based on years of service.

Malaysian law does not guarantee worker rights for compensation when a company goes bankrupt. Worker compensation normally comes last after settling debts and paying creditors. In most cases worker rights are denied.

Hualon, a Taiwanese multinational was brought under receivership and management of Ernst and Young in November 2006 when its owner was declared insolvent. Since then, the receivers had managed the company before it was sold at the end of 2007 to Reliance Industries Limited (RIL), an Indian multinational. From 1 Sept 2008, Recron, the RIL’s Malaysian sister company has managed the plants.

Two textile plants of Hualon in Nilai and Melaka employed about 8,000 workers – almost half were migrant workers from Indonesia, Vietnam and Bangladesh. Since the ownership change issue emerged last year, Hualon workers in Nilai had queried the management over compensation for their labor. Some workers who had worked since the establishment of Hualon became infuriated when they were denied compensation.

CWI members met several workers during worker rights campaign in Nilai.

Established in Malaysia in 1989 with RM39 million capital, Hualon had since become a main exporter accumulating RM858 million capital with RM2.1 billion turnovers yearly. The workers argued that they had helped Hualon generate huge profits which Hualon largely used to invest in other countries. Moreover, in 19 months under the receivership, Hualon registered significant profit. The receivers had also gained billions of ringgit by selling Hualon’s assets to RIL.

With laws favoring the employer and without a union to initiate a campaign among workers in Nilai and Melaka, Committee of Hualon Workers (CHW) was formed. CHW first demanded the receivers to immediately clarify about retrenchment benefits, remuneration and positions under the new ownership. CHW’s campaign and petition over these issues were supported by around 500 mostly local workers. CHW realized the management would pressure the migrant workers and even revoke their work permit. However, few of the migrant workers supported the campaign.

After persistent demand from CHW, the receivers finally agreed to pay the workers retrenchment benefits according to the labor laws, and their positions and benefits be retained under the new management. It then rumored that only permanent local workers would get retrenchment benefits.

Subsequently, CHW petitioned again, specifically focused on compensation, and this time was supported by more than 1200 workers. The demands were (a) The minimum retrenchment benefits per the labor laws plus ex-gratia of up to 25 days pay per year according to their years of service for local and migrant workers (b) Retrenchment benefits to workers who had achieved retirement age but whose service had continued, should be calculated from the first year they joined the company and (c) Retrenchment benefits to contract and semi-contract workers.

The receivers then agreed to the second and third demands but they would not give more than the minimum amount per the labor laws. CHW demanded the receivers justify their unwillingness to meet the first demand through negotiations. CHW argued that the workers had been working for low wages under Hualon, and should be compensated more than the minimum guaranteed by law. But under pressure from CHW, the receivers finally assured that wages and other remunerations would improve under the new ownership.

Meanwhile, the management staff and professionals in the company rode on the workers’ success to demand compensation for them as well. They took a day off to protest against the receivers’ unwillingness to compensate them. This pressured the receivers, and after a few negotiations, the receivers agreed to pay them two-month salaries.

This modest victory has increased the confidence of workers in CHW. Now CHW is discussing with workers about joining the state textile union to strengthen worker bargaining power.

CWI will continue supporting CHW and Hualon workers, and campaign for a fighting and democratic union:

1. Trade union democracy – form rank-and-file groups in every union.

2. Regularly elect and recall union officials and organizers.

3. Union officials to receive average wage of workers they represent, and funds for actual expenses.

4. Elect delegates or shop stewards by workers in every workplace.

5. Hold regular mass delegate meetings.

6. Vote on major issues at mass meetings of union members.

7. No secret negotiations between union officials and employers. Delegates or shop stewards to accompany union officials in negotiations with employers.

8. Fight anti-union laws with worker mobilization and industrial action.

9. Conduct a mass campaign to defend worker rights to organize, strike and picket without legal restrictions.

10. Fight for equal rights for migrant workers. Abolish immigration laws that restrict them to organize.

11. Internationalism – Unions to collaborate on resources, solidarity boycotts and industrial action.

12. Support workers fighting for wages rise and conditions in so-called ‘third world’ countries and prevent employers from shifting plants offshore.

13. Build a genuine mass workers’ party based on trade unions, progressive community organizations and working class people.

CWI Malaysia,

20/9/2008

ECONOMY : CAPITALIST CRISIS - KARL MARX WAS RIGHT

"It is a moment Karl Marx would have relished. From every angle financial capitalism is taking a battering" (The Guardian).

The economic witch-doctors and soothsayers of capitalism were wrong and the socialists and Marxists were right. This is what the collapse of Lehman Brothers - the fourth largest investment bank in the world - means.

The financial 'bloody Sunday' was followed by 'meltdown Monday' and the collapse of share prices worldwide. This has shattered the current ideological foundations - and much more besides - of capitalism.

Capitalism's representatives argued that the collapse of Stalinism and, with it, the planned economies of Russia, Eastern Europe and elsewhere, left capitalism as the only effective vehicle for delivering goods and services to the peoples of the world. The future was one of endless rises in living standards.

We argued that the inherent contradictions within capitalism - a system based on production for profit and not need - remained, particularly the economic cycle of 'boom and bust'. These, however, were masked for an historical period by the unprecedented 'financialisation' of the system through the massive extension of credit.

But like an elastic band stretched to breaking point, it was bound to snap at some stage. Lehman Brothers, for instance, was 'leveraged' - that is, borrowed - on a monumental scale of 35 times the value of its assets. It was 164 years old, had survived two world wars, the depression of the 1930s and a collapse and rescue in 1984 but has now been brought to its knees by this crisis. Yet its chief, Dick Fuld, known as the 'gorilla' for his aggressive manner, paid himself £22 million last year when the weaknesses of the bank were already obvious! He will not suffer - except from loss of face - but the 25,000 Lehman Brothers employees will.

The roots of the crisis are well known. They lie in the disintegration of the housing market in the US and particularly the subprime sector which lent to mostly poor people who had no prospects of repaying their inflated mortgages. However, there is not just one financial problem but now a chain of looming crises, unexploded bombs, which could yet ignite, with further huge slabs of masonry falling off the 'financial architecture' of US and world capitalism.

Why did the US Federal Reserve bail out Bear Stearns, and Freddie Mac and Fannie Mae, and not Lehman? The simple answer is that Hank Paulson, US Treasury Secretary, and the economic strategists of US capitalism believed that unless the former were rescued, a new financial crash like 1929 was possible. Nouriel Roubini, a capitalist economist who has consistently agreed with us Marxists on the seriousness and scale of this crisis, called Paulson's action "socialism for the rich".

Other threatened banks and industries therefore lined up with their begging bowls, asking for bail-outs from the state, which they previously maintained had 'no role' in the workings of so-called free market capitalism. If they were to be helped, what about the two million US workers who have already lost their homes - estimated to rise possibly to ten million by Roubini - who would demand equal treatment with the financial plutocrats? Failure to do so could undermine McCain, the right-wing Republican presidential candidate, who would be seen as openly on the side of the rich, who have been 'saved' by his friends in the Fed.

Therefore, Lehman Brothers has been allowed to die but an 'unofficial' rescue operation was undertaken to save Merrill Lynch. Another financial whale, American International Group (AIG), responsible for insuring against 'risk' in the huge derivatives market - and also the sponsor of Manchester United - is teetering on the brink. But Ken Lewis, the chief executive of Bank of America, said the failure of AIG would be a bigger shock to the system than the bankruptcy of Lehman. He urged the authorities to find a way to support the company. "I don't know of a major bank that doesn't have some significant exposure to AIG," he said. "That would be a much bigger problem than most that we've looked at."

Lehman was, it seems, not crucial for the US economy whereas Fannie, Freddie and even Bear Stearns are major players in US local government finance. Half of the 9,000 banks in the US could have collapsed if they were not rescued. But, the fall-out from the collapse of Lehman could still be very severe, with big international repercussions; debts to Japanese investors in Lehman are considerable, for instance.

Instability

US capitalism - and particularly the financial sector - is therefore not yet out of the woods. The derivatives 'industry' is highly unstable, commercial property prices are declining and, crucially, 'insurance' institutions (as a safeguard against the financial collapse of firms) also could collapse. A financial domino effect threatens, which means that this crisis is no 'five-minute wonder'.

It will extend - in fact, it already has done - into the 'real economy', both in Britain - which has entered a recession - and in the US. This has inevitably drawn in Europe, Japan, the rest of Asia and, ultimately, China. It will be the workers in the finance sector - and most of them are white-collar workers - who will be the first to suffer. Sixty-three thousand have already gone down the road, mostly in London and New York. A further 20,000 jobs in UK financial services could vanish in the next year or so.

Some 1.04 million people work in banking, finance and insurance in Britain. Some affected have posted heartbreaking messages on websites: "dh (slang for dear husband) lost job. No savings and likely not getting paid this week... How on earth will we manage? How long will the lenders give you if you can't pay the mortgage?"

Spare a tear for these workers but not for the well-oiled, well-dressed 'masters of the universe' who, despite their crocodile tears, will not really suffer. Unemployment will now rise substantially, with an estimated half a million lost jobs adding to the dole queues in Britain. These events represent a massive indictment of neo-liberal capitalism, the untrammelled rule of the 'market', in which a handful of billionaires can ruin the lives of millions.

Moreover, they do not fully understand the workings of their own system. Alan Greenspan, former chairman of the US Fed, confessed with regards to the "new financial instruments" that "he didn't get it". Eddie George, former governor of the Bank of England, has also admitted that he did not understand them! What chance then for the rest of us understanding these devices which have become "financial weapons of mass destruction"?

The solution is not just the 'de facto' capitalist nationalisation of Bear Stearns or the more explicit example of the US government's takeover of Fannie and Freddie. These failing banks should not only have been nationalised, but put under workers' control and management, with compensation based on proven need and protection of small depositors. Moreover, it should be just the first step to them joining a socialist and democratic plan of production for the economy as a whole.

Great events either confirm or falsify ideas. Capitalism has failed in a period most favourable to this system. If working people are not to be dragged into the abyss of unemployment and poverty, they should embrace the political weapons of socialism and Marxism.

Editorial from The Socialist, paper of the the Socialist Party, cwi in England and Wales

17 September 2008

THAILAND : IN GRIP OF POLITICAL DEADLOCK

LESS THAN a year after elections that ended military rule, yet another political crisis has gripped Thailand. The military initially ruled out a further coup but now general Somjet Boonthanom has threatened: "If the problems cannot be resolved by democratic means and the country is caught in a deadlock, a coup may be necessary". This would be the 18th military coup in Thailand's history!

Exactly two years ago, with the support of the monarch, the military carried out a coup to oust the billionaire tycoon-turned prime minister, Thaksin Shinawatra. This was after Thailand's opposition parties, the urban population and 'civil society' groups, unions, students and others united under the 'People's Alliance for Democracy' (PAD), and staged protests and demonstrations over several months.

This resulted from a deep political crisis that had divided the rural and urban populations. The majority - the 60% rural population, (mostly poor farmers, particularly in the country's north and northeast) had been supporting Thaksin's populist programmes like subsidising healthcare and initiating poverty-reduction programmes which dramatically lifted their incomes.

On the other hand, Thaksin's neo-liberal policies had very much affected the working and middle classes and much of the population in the urban areas, especially in Bangkok, the capital city. PAD at that time welcomed the intervention of the military with the illusion that the generals' action could end the political uncertainty brought about by the Thaksin regime.

The military in their 15 months rule attempted to reshape Thailand's 'democracy' to protect the interests of the capitalist class which had been threatened by mass street protests in Bangkok. However, the military's failure to manage the economy, further undermined the position of the capitalists.

Subsequently, the December 2007 general election which was supposed to bring the country back to a democratically elected administration after military rule, could not resolve the country's deep divisions and bitter resentments among its population.

The pro-Thaksin People's Power Party (PPP) which won December's election (the majority of its votes coming from its rural strongholds), has maintained Thaksin's populist agenda. However, since winning the elections, Thaksin's proxy, prime minister Samak Sundaravej, has been unable to fulfil the needs of the urban population. He merely has followed Thaksin's neo-liberal policies and crony capitalism. This has once again enraged the working and middle classes in Bangkok.

PAD populism

The PAD's main leaders, media mogul Sondhi Limthongkul and ex-general Chamlong Srimuang, (a former Bangkok governor, who played a key role in the anti-government protests of 1992) are connected to the conservative sections of the military, state bureaucracy and royalist establishment.

The PAD first emerged in September 2005. At the time it was a largely personal crusade by Sondhi, once a passionate Thaksin supporter who turned on his former mentor after feeling abandoned when his business went bankrupt.

The populist programmes advocated by Thaksin for rural populations sparked fears in the country's elites and conservatives that the wealth gap that gave them their privileges could evaporate. Sondhi and other national capitalists have used various allegations of corruption to oppose a further loosening of protectionist measures and market reforms that threatened their pursuit of wealth.

Since May, PAD - which consists of middle and upper-class Bangkokians and Southerners, supported by the conservative elite as well as factions of the monarchy and Thai army - has been trying to use the discontent of the working and middle classes in Bangkok to overthrow Samak's government.

PAD has railed against "the democracy with one-man, one-vote [that] gives too much weight to Thailand's rural majority". Instead, as "parliamentarian democracy is not working in Thailand", they propose to re-enact "the post-1973 dictatorship era to make Parliament a body in which most lawmakers are appointed and only 30% elected."

Occupation

In August, PAD members seized Government House and later were joined by tens of thousands of members, including the PAD's paramilitary force, who barricaded themselves in with barbed wire, bamboo spikes, and an electric fence.

PAD members and allies seized airports in Phuket and elsewhere, blocked off major roads, and stopped train operations, which severely affected especially the tourist industry. They also seized a television broadcaster as well as several government ministries to undermine Samak's government.

It is clear that the opportunist PAD leadership is getting support from a faction of the military and utilising the "we love the king" slogan to realise its pro-business agenda.

In order to strengthen its position and attract the working and middle classes, PAD has advocated nationalistic and democratic demands such as dropping the government's attempt to amend the constitution, a halt to large infrastructure projects, commitment to political reform and accepting a Thai court ruling in a dispute with Cambodia over an ancient temple.

"The right-wing PAD leadership has not the slightest concern for the jobs and conditions of working people, nor, despite its name, for the defence of basic democratic rights," says Janya Yimprasert, a labour activist.

However, the reactionary and bureaucratic trade union leaders have thrown their uncritical support to the yellow-shirted anti-government protesters from PAD who welcome military rule with royal patronage!

Somsak Kosaisook, the Chairman of SRUT, the State Railway Workers' Union of Thailand (affiliated to the International Transport Workers Federation - ITF) is one of the key leaders of the PAD.

Other ITF affiliates under the umbrella of SERC (State Enterprise Workers Relations Confederation) including TG Union (Thai Airways International State Employees Union), AOT-SWU (airport), LU-PAT (port) and LU-ETA (expressway), have all been playing an active and important role in PAD.

The trade union leaders are using the concerns among government workers that Samak will continue Thaksin's economic restructuring (which involved the privatisation of state enterprises and job losses), to advocate support for PAD.

This is despite neglecting serious attacks on trade unions and the working class by the government with its pro-business laws and policies. Only now are they prepared to call for strike action when they know that their actions are supported by pro-business elites and conservatives and their positions and privileges won't be harmed by the government.

However the union bureaucrats' role in PAD and its calls for the replacement of democracy with military dictatorship have lost them much support among workers. This was apparent when most workers generally ignored the call for strikes on 3 September. This also undercut the attempt by PAD to paralyse the government.

On the other hand PAD actions have irked the rural populations that supported Thaksin and Samak and this has further divided Thai society. Red-shirted pro-government supporters from the Democratic Alliance against Dictatorship confronted PAD supporters in Bangkok which led to the death of one PAD supporter and many injured.

Although the PAD is not as strong as in 2006 when it ousted Thaksin, with its support from a faction of the military and monarchy, they could continuously cause serious problems for Samak's government.

At the same time, Thailand's ruling class is facing immense pressure from international capitalists to avert this conflict, which has been distressing the already volatile economy. This conflict has also affected tourism, one of the country's main economic contributors.

At this juncture Samak is still adamant that he will not resign as prime minister and he has proposed a referendum in October to determine his government's fate. It is expected that the referendum as well as a snap election could favour Samak.

However, neither measure can end the conflict. With further pressures from the business class, ultimately either Samak has to resign and be replaced by another candidate from his coalition, or the royalist and conservative Democrats, the main opposition party, will form a new government as PAD would "accept anyone as an interim leader as long as Samak left".

Mass workers' party

Neither this nor a military takeover, will resolve the current crisis as long as the social and economic needs of the rural and urban population are not met. However, this is unattainable under the profit-oriented market economy that has been supported by the monarchy, military and the ruling and opposition political parties.

Only a democratic socialist planned economy that is based on the fundamental needs of all could find permanent solutions to the economic and social needs of Thai society.

The trade unions and other working class organisations have to act independently as a class to oppose the hypocritical policies and capitalist agenda of the ruling class and reactionaries that divide Thai society.

Building a mass party of the working class and poor peasants is crucial in order to genuinely unite the rural and urban populations. Such a party also needs to link the demand for democratic rights and reforms to the need to transform the system to establish a workers' state and appeal for the support of the workers in Southeast Asia and worldwide towards building a socialist society.

Ravichandren, CWI Malaysia

7/9/2008

MALAYSIA : GROWING POLITICAL UNCERTAINTY AMID GLOBAL ECONOMIC SLOWDOWN

Independent working class policies vital

Will the Malaysian government collapse or can it overcome an attempt by the opposition to take power? Could Anwar Ibrahim, the main leader of the opposition, become the next Prime Minister with the Pakatan Rakyat in government? These are the two big questions that have been revolving in the minds of most Malaysians since the 8 March general election.

The ruling Barisan Nasional (BN - National Front) is a coalition of communal and racially based parties dominated by UMNO (United Malay Nationalist Organisation) and is increasingly challenged by an emboldened coalition of opposition parties, the Pakatan Rakyat (PR – People’s Alliance).

The three PR parties are the Malay-led multi-racial Parti Keadilan Rakyat (People’s Justice Party), the Chinese-dominated DAP (Democratic Action Party) and the Islamic PAS (Pan-Malaysian Islamic Party). They humbled the governing BN coalition with unprecedented gains in the election (See previous articles). Rallied by Anwar, the parties won more than a third of parliamentary seats and five of the 13 states in the general election, delivering BN its worst result in fifty years. Since these unprecedented election setbacks to the rule of the BN government, Malaysian politics have been in continual disarray.

On the one hand, the ruling government of BN, under Abdullah Badawi with its weakest position ever, has been going all out with every opportunity, using the state’s apparatus, to undermine the chances of the PR and its leader Anwar Ibrahim from getting into power. On the other hand, Anwar Ibrahim, with the opposition parties’ strongest parliamentary position ever, has been advocating that the PR would eventually take over the government by mid-September when some of the MPs from the BN jump over into the opposition camp. At present the BN and PR have 140 and 82 MPs respectively and Anwar and Pakatan would only need another 30 MPs to get a simple majority.

Nonetheless, who the ultimate winner will be and how long this political drama will go on very much depend on the economic performance of the country and that is very much determined by circumstances in the global economy.

In reality the ‘powers’ which direct this political drama are none other than the national and the multinational capitalists. The former, mainly comprised of the Malay capitalists and the political elite who have been groomed by crony capitalism, support protectionist economic measures such as the New Economy Policy (NEP), a four-decade-old affirmative-action programme favouring the predominant Malay community. The latter is pushing for a level playing field in winning opportunities to get a share in the Malaysian economic cake. This is only possible if the special advantages accorded through the government’s policies to the Malay capitalists, as well as the Government-linked companies (GLCs), are dismantled. In order to avoid this, the Malay capitalists and political elites are going all out to safeguard their interests by supporting UMNO/BN. Meanwhile, the multinationals and ultra free-market apologists, especially in the Middle East, the US and Europe, are supporting Anwar Ibrahim’s ‘New Economic Agenda’, which promises economic liberalisation and competition in the natural resource-rich economy of Malaysia.

Worsening crisis in UMNO and BN

Although the BN has a majority, with 60% of the parliamentary seats, its historical defeat has demoralised its most ardent supporters who are mainly careerists and privilege-oriented leaders and members. This phenomenon has been weakening it. It has a leadership crisis and internal bickering in almost all of its component parties. The Malaysian Chinese Association (MCA), Malaysian Indian Congress (MIC), GERAKAN (Movement) and the People’s Progressive Party (PPP) - the major components of the BN besides UMNO - have almost lost their grassroots support in the election, and are effectively overshadowed by the opposition parties. Meanwhile, UMNO, which still has significant support in certain states, especially among the Malay rural population because of its Malay supremacy, has been forced to call for Abdullah Badawi to resign the premiership in order to recover from the humiliating defeats and prevent it from losing the political grip of Malay hegemony.

The BN majority was sustained mainly by the victory of its component parties in East Malaysia (Sabah and Sarawak). Because of that, the government has been pressured by BN component parties in these states to award more goodies and promises to these states to keep them in the BN fold and to prevent them jumping over to the Anwar opposition camp. However, these parties in East Malaysia could cross over to PR if the BN coalition is further weakening.

Food and fuel price hike

Since the political tsunami of March 8, the parties in the ruling BN are trying to consolidate its loosened grip by advocating more reforms to improve its reputation. Some of the reforms announced were in relation to the judiciary, the Anti-Corruption Agency (ACA), and the University/College Act. However these reforms are in a limited form and have not challenged much the government bureaucracy and autocracy. However the reform attempts have been welcomed, especially by some middle class and professional people who wanted more integrity, transparency and democratic rights in the running of the government. But for the majority of working and middle class people, the reforms have been insignificant when set against the increasing inflation due to exorbitant fuel and food price hikes which is severely affecting their day-to-day life; disposable incomes have fallen and many are finding it hard to make ends meet. The number one issue for Malaysians at present is the economy and some say the economic situation today is worse than at the height of the financial crisis in 1997/98.

Obviously, the people’s resentment against the BN government has been further enraged following the deeply unpopular hike in petrol and diesel prices by 41 and 63 per cent respectively in June. The government off-loaded its responsibility by blaming global economic circumstances. The Abdullah Badawi and BN government’s popularity further diminished with this untimely act of slashing the fuel subsidies consumers were entitled to. Many people have questioned the rationale behind the fuel hike, pushed through despite the fact that Malaysia is a net exporter of fuel. Petronas – one of the GLCs - is among the ten most profitable oil multinationals.

In the face of immense pressure from below in society, the government announced early this month that a windfall profits tax will be imposed on oil palm plantation operators and independent power producers (IPPs) who are making huge profits through the increased price of fuel and palm oil. Although the quantity of the tax is not great, these companies have already demanded that the government withdraw the tax, warning that it would affect the overall economy. Socialists support this taxation measure but it should also be implemented to other sectors of the economy such as banking, finance capital, GLCs, multinationals and others who are also making huge profits. However, this should be a first step towards the nationalisation of these assets, to be run as public companies under workers’ control and management, to meet the needs of the majority of society.

Inflation and economic slowdown

According to the recent report of the Asian Development Bank (ADB), “The external economic outlook for emerging East Asia has dimmed amid prospects for slower growth, tighter credit conditions and higher inflation…Heightened inflationary pressures will require more decisive tightening of monetary policies across much of emerging East Asia”.

The Malaysian inflation rate has soared to a 26-year high at 7.7 percent when transport costs and food prices have increased by 41 percent. According to the central bank, the Bank Negara Malaysia (BNM), for the next 12 months the country could risk a further slow-down in growth and higher inflation. It indicates that the Malaysian economy will not be immune to any of the major slowdowns in the regional and global economy.

There are already many signs of global effects on the local economy. For instance the construction industry is facing the impact of the rising price of building materials such as steel bars and cement to an all-time high even with the Price Control Act. The Real Estate Housing and Developers’/Builders’ Association has warned that, “Contractors may be forced to stop work, delay or even abandon projects as a result of the costlier building materials…This will cause a lot of hardship to many people - clients, designers, suppliers, sub-contractors and 140 other related industries, including the financial system”.

At this juncture, the central bank said it would hold its interest rates at 3.5%. This could be due to the low interest rates in America, making it harder for BNM to raise its rates. However, raising interest rates, although it would make Malaysia more attractive for FDI, it could result in rapid appreciation of the Malaysian Ringgit (RM). A stronger RM would lower the cost locally of importing goods but would also reduce the competitiveness of exports “at the time when demand for Asian goods is weakening in the US”. Nevertheless, it is expected that the BNM will have to raise its rates if it cannot stem growing inflation in the same way that India, Indonesia, Thailand, Philippines, Vietnam and Taiwan have all raised interest rates this year under the immense pressure of inflation speeding up globally.

All this is happening while the strong demand for commodities such as fuel, palm oil, rubber and tin has to some extent insulated the economy which has been able to grow at the rate of about 5 per cent. However, the demand for these commodities very much depends on the economy of the US, China, Japan, India and Europe, as shown by the recent drop in the price of crude palm oil (CPO) this week. The Business Times has reported that, “A sharp drop in the price of CPO on the international front has raised alarm bells in Malaysia as the government had targeted this vital edible oil to bring in up to RM60 billion in revenue this year…Early this year, CPO fetched up to RM4,000 per tonne…now it is RM3,095 per tonne”.

On the other hand, “Malaysia’s economic prospects have weakened as global demand for the country’s key hi-tech exports falters”. This is mainly because of the slowing down in the US, the main importer of Malaysian electronic goods. In early July, Nikko Electronics, a multinational company operating in Penang for 20 years, had been losing money for last three consecutive years. Increasing operating costs, as well as a slump in demand, forced the company to shut up shop unexpectedly. Nine hundred and fifty employees, mostly over 40, lost their jobs. Turning up at the factory they were met with a surprise - receiving termination letters instead of resuming their duties! This trend could spread to other manufacturing and electronic companies in Malaysia if the slowdown in the US and global economies worsens. The consequent slowdown in economic growth undoubtedly could lead to higher unemployment as currently there are already half a million unemployed.

In relation to the current political situation, the Centre for Public Policy Studies has warned that, “Investors are already considering the situation as unstable…They are already reconsidering their options in the country. The new investors are possibly not looking at Malaysia as a viable option, and previous investors would be thinking of extracting their funds to be put in more stable and viable locations".

The Pakatan Rakyat’s performance and reforms

After almost five months administrating the state governments in four states, the PR could claim they have done better in certain areas than the previous BN state governments. Many community and local government issues have been highlighted and brought to the PR state governments. Even in certain cases, some PR MPs and ADUN (State Assembly Representatives) were involved in confronting the BN federal government on ordinary people’s concerns such as the Bandar Mahkota Cheras tolls in which the residents in the areas affected defeated the private company, Grand Saga, from closing the access roads to their residential areas after big struggles. People are also seeing some differences in the approach of some of the MPs and ADUN in PR in dealing with people’s immediate problems. In short, these PR governments have reduced corruption and bureaucracy, as well improving transparency in state administrations to a certain extent. But in most other matters or policies of running the governments there is not much difference.

This is mainly because there is not much participation of ordinary people in the decision-making process. While in certain cases like selecting councilors in district administrations, the top down approach used has caused much dissatisfaction among ordinary people. This has also led to a racial or religious-centered approach practiced by the BN being repeated by the PR for electing people’s representatives or solving people’s issues. In the meantime there is not much idea of elevating the social and economic needs of workers and ordinary people or concrete solutions from PR governments. In most cases these governments are using the same excuses as the BN such as lack of funds and economic uncertainty.

This will be the justification for these governments not challenging the status quo and pro-capitalist system of the BN government. For instance, recently the PR governments in Penang and Perak launched propaganda magazines, just as the previous BN governments had done and which they had earlier criticised. Civil society groups in the two states blasted them saying: “The Pakatan Rakyat governments are no different from the previous ones after all. They are hypocrites by copying BN media policy to serve their cynical self interests…Even if a state government funds and publishes a state magazine, it should be run by an independent editorial board to provide free and fair news coverage”.

Sometimes these Pakatan governments have to go against the wishes of the people under the pressure of capitalism. One such thing was the adamant attitude of the Pakatan Chief Minister of Kedah state, led by PAS, to go on with his plan of logging a forest area in the state to “add more funds to government coffers”. This was despite some 63,000 farmers and environmental groups warning of the impact on the environment and the livelihoods of ordinary people if the plan was implemented. In fact, he was against the BN government when he was in opposition, when they wanted to implement such a plan. One reader of the New Straits Times wrote, “It is shocking how quickly the politicians from PR forget their election manifestos and promises…It is not just that this action goes against the principles of good governance and would cause an environmental disaster, there appears to be a lack of transparency with the MB (Chief Minister) deciding on the awards of the concession without an open tender”.

On the other hand, the methods or approaches used by the PR state governments are not much different in finding solutions to workers or ordinary people’s issues. For instance, there were not any concrete solutions on behalf of workers by the DAP-led Penang government over the closure of Nikko Electronics. They only promised to find alternative jobs for the retrenched workers and not much pressure was given to the employer to save the plant and the jobs of the workers. On the other hand, although the state government of Selangor, led by the PKR, pledged to give the first 20 cubic feet of water free to the people of Selangor, the Chief Minister could not even pressure the private company, SYABAS, to offset the cost from its profits. On the contrary, SYABAS has succeeded in forcing the state government to pay the cost by using the state’s own income.

In short, all these state governments of the PR, have all this while been avoiding collisions with investors or the business community and have been adjusting rather than confronting the needs of these capitalists. These approaches are in line with their pro-capitalist agenda as highlighted in their propaganda - to manage capitalism or the free market system better than the BN governments. Nonetheless, as proven by the way they run the state governments, the PR parties did not have a programme for challenging and mobilising against central government and exposing the exploitative nature of capitalism itself.

Fragile opposition…PAS sidelined

Although, from outside, the PR coalition looks somewhat intact, there are contradictions and disagreements internally between the parties. This is only to be expected, given their different positions and approaches on some issues. The most recent one was when the PAS leaders announced that there have been secret meetings between PAS and UMNO since the General Election to discuss about ‘Malay and Islam’. This attempt by PAS was mainly to indirectly warn the PKR and DAP, which are secular in their approach, to stop sidelining the Islamic agenda of PAS in the state governments of PR. However, this opportunistic act of PAS has enraged non-Malays who voted for PAS in the last general election and some of them who have joined the PAS Supporters Clubs, which were created for non-Muslims. This action shows more clearly that, even though certain social activists considered PAS to have grassroots support or an ability to mobilise people, when it comes to ‘Malay or Islam’, PAS leaders are prepared to abandon the multi-racial wishes or rights of workers and ordinary Malaysians in relation to religion.

Nonetheless, Anwar is the mediator who maintains this coalition intact by promising that the PR has the ability to be brought in as a government. At the same time, this fragile coalition could break up if Anwar’s intention to come into power does not materialise as soon as promised.

Anwar against corruption and cronyism

The main agenda of Anwar is to clean up the system that has been corrupted and to dismantle cronyism in order to get the free market system into better shape. He is also advocating the need to build ‘civil society’ to guarantee more democratic rights. Although some people are still suspicious with his role over 16 years in BN government, his populist agenda such as ‘to reduce the price of oil the day after he becomes prime minister’ has garnered him further support.

At the same time, Anwar is cautious in his statements regarding capitalist policies. In a recent live debate on TV between him and the Information Minister on fuel, Anwar blamed corruption and cronyism for mismanagement of the income the government gains from Petronas but praised the ‘professional’ way that Petronas has invested and managed the billions of profit it has accumulated.

Since the election, Anwar has continually announced that he will come into power by mid-September. This has made the Abdullah and UMNO/BN government nervous and uneasy. Since then, they have been using the PR’s weaknesses and have attempted to frame up accusations against Anwar to tarnish his reputation. Last month an aide to Anwar lodged a police report alleging that he was sodomised by Anwar. Subsequently police arrested Anwar but released him the next day following some international pressure from government leaders and capitalist leaders. Recently a medical report revealed that the sodomy did not happen but the government was still adamant to go on charging Anwar in court. It is expected that the government would use this issue to discredit Anwar politically. But, given that this is an exact repeat of the treatment meted out to him when he posed a threat to Mahathir Mohammed at the head of the BN government in 1998, this attempt will only increase the sympathetic support for Anwar locally and internationally.

The UMNO/BN government is worried about the threat of Anwar because if he managed to take the premiership, Malay hegemony and crony capitalism will be in jeopardy. Furthermore, they are afraid that their past wrongdoings will be brought back into the limelight and this will ultimately destroy their political careers.

Since being released from prison in 2004, Anwar has revealed some of the BN’s political scandals. One of them was that of case-fixing in the judiciary. A businessmen’s son videotaped a government-linked lawyer brokering a deal with a chief judge. The videotape later was widely distributed on the internet and seriously tarnished the image of the judiciary and the government. Following intense pressure from the Bar Council and the public, the government was forced to appoint a commission to investigate the scandal. Subsequently, amongst those implicated by the investigation’s results were chief judges, a billionaire and former Prime Minister, Mahathir.

Recently, Anwar with the help of a private investigator, revealed the involvement of Najib, the Deputy Prime Minister and his wife, in the killing of a Mongolian model who was blown-up by police when she was in Malaysia and the attempt to remove all traces of the body with special explosives. The private investigator also alleged that Najib had an affair with this woman. Anwar has also exposed the involvement of the present Attorney General and Inspector General of Police in the framing-up of cases against him during the conflict with Mahathir in 1998.

Is crossing over from BN possible?

At this juncture, Anwar would have enough MPs from the BN camp to jump over to help form a PR government, abandoning the weakened UMNO/BN coalition. But these MPs are reluctant to publicly announce their intentions until they are certain that this new majority will materialise. Last week Anwar started his by-election campaign to be elected as an MP after five years of suspension from eligibility to stand. If he succeeds, this will further enhance the possibility of fulfilling his ambitions. Although he has a clear chance of winning the by-election, it is expected that the BN/UMNO machinery will go into full swing using every possible fraudulent practice to defeat him.

The UMNO/BN could also mount a desperate fight to ensure its own survival by intensifying its racial and religious rhetoric; too many of its people have got too much to lose. There have been some signs of a move in this direction. The first was last Saturday when a forum organised by Malaysia’s Bar Council to discuss the overlapping jurisdictions of civil and shariah courts was stopped abruptly as some protesters from Muslim organisations barged into the hall. About 1,000 demonstrators, including activists from UMNO and PAS, gathered outside the Bar Council’s building holding placards that read ‘Don't challenge Islam!’, ‘Long live Islam!’ and ‘Bar Council, don't play with fire!’. Racial slurs like ‘Pig!’, ‘Traitor!’ and ‘Go back to China!’ were also thrown about. Following this in another event, hundreds of ethnic Malay students demonstrated at the office of Selangor State Chief Minister, Khalid Ibrahim, a member of the opposition PKR, after he suggested that 10 per cent of the quota for Universitie Technologi Mara (a university that only caters for Malay students) be opened to non-Malay and foreign students. The demonstrations which accused Khalid of selling out the Malay race, were further ignited by UMNO. The incident was used by Prime Minister Abdullah Badawi to threaten the use of the Sedition Act and the draconian Internal Security Act, which allows for detention without trial, on those who discuss ‘sensitive’ matters of race and religion.

It is clear from this that the UMNO/BN machinery, with the support of some of the crony capitalists, will utilise every means to stop Anwar. However, if UMNO is further weakened by internal power struggles or the economy suffers more severely, this in turn could favour Anwar. In that situation, more national capitalists would look to Anwar as a saviour from economic catastrophe. Meanwhile, the international capitalists, among them former IMF and World Bank leaders, and most of the world leaders would lend him support directly or indirectly to advocate liberal capitalism in Malaysia.

Two party system only favours capitalism

The workers and ordinary Malaysians that are facing the heavy burden due to the food and fuel price hike are looking for an alternative to the BN. Intellectuals, NGOs, opposition party leaders as well as some activists are proposing that a two party system is the only way to create a healthy democracy in Malaysia. Some have suggested that workers’ organisations should “ally with the people” to defend the PR as the PR was a phenomenon “created by the people” and have advocated that workers should first support the PR to counter BN/UMNO and only at a second stage fight for implementation of their own programme.

While Anwar and the PR advocate ‘clean’ government, other aspects of their policies are clearly reactionary. They are pro-profit but with an agenda of reducing corruption, red-tape, and cronyism and to increase transparency and democratic space in order to make the system look better. Their populist rhetoric during elections is merely to get themselves elected and they most probably would surrender under the pressure of capitalism for the benefit of the profit system. The few reforms enacted by the PR state governments are limited in form and have not endangered the exploitative system of capitalism. Sometimes they have succumbed to the pressure of capitalism. This shows that reforms under capitalism are unsustainable and can be revoked if they endanger the business class.

On the other hand, the ordinary people and workers were pushed to support this PR when there was not any credible mass workers’ party as an alternative. The populist rhetoric of the PR has given them some illusions. The attitude adopted by ordinary people and workers was not much different from that seen in most countries where there has been no independent mass party of the working class.

It has been ten years since thousands of students and workers ousted Suharto’s autocratic regime, paving the way to turn Indonesia into the world’s third largest ‘democracy’. When Indonesia held its first free election in more than three decades in 1999, some 86% of the population came out to vote, reflecting their euphoria and hopes that democracy would improve their lives. However, since then, four new governments have come into power, but the so-called ‘democratic space’ has not alleviated the suffering of the majority of workers and poor people. According to Azyumardi Azra, professor of history at the State Islamic University, “In the last few years, many people have begun to lose faith in democracy as it has not been able to improve their economic and social lives”. It is expected that the voter turnout for next year’s general election in Indonesia could be 50% or less which symbolises their disillusion with the political system. The people’s disappointment is being exploited by Muslim radicals to push for an Islamic state, arguing that democracy is a Western product which has failed the people. Hasyim Wahid, an opposition politician is predicting that “the people will distrust the civilian government…Indonesia will become a collapsing state and just a step away from anarchy”.

Elsewhere, the Left forces in the Philippines supported a so-called progressive capitalist party which in turn had to be overthrown by another ‘people power’ movement when it became corrupted. Even in advanced countries such as the US, the UK and Australia, the two-party system only safeguards the ruling class. The working class in those countries is also marginalised by the anti-working class policies of these governments.

At this juncture it is crucial for socialists and trade unions in Malaysia to campaign among workers and youth for an independent party of the working class as an alternative to reactionary and pro-capitalist parties. But in reality some who try to act as “an opposition inside the opposition coalitions” have merely disappointed workers and young people. They base themselves on the inadequate idea that ‘the enemy of my enemy is my friend’ and do not judge objectively the need for a clear independent working class alternative at this crucial juncture of Malaysian politics. Even now, many ordinary people in ‘Makkal Shakthi’ (a ‘people power’ movement formed by supporters of the Hindu Rights Action Group), the PAS Supporters’ Club and even workers and youth that are disgusted with the ‘political games’ between UMNO/BN and PR are looking for other alternatives.

In this respect, with the unfolding crisis in global capitalism, socialist ideas and the need for a party of the working class will become attractive. Socialists should aim to educate these young people and workers along those lines towards fighting for and achieving a socialist society.

19 OGOS 2008
RAVICHANDREN