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copenhagen special: why action can’t come soon enough Pp5-7
Debt to the rescue
Crisis over. Thanks to generous injections of public money, the banks are fighting fit again: bigger than ever, and even more likely to take the state hostage when the next storm blows up.
Once again it’s expedient for western governments and central banks to sound the alarm on debt. Expedient to raise the spectre of financial failure, temporarily set aside when unimaginable sums had to be paid to rescue Goldman Sachs, Deutsche Bank and BNPParibas. Expedient to introduce the notion of profit and commercial practice in areas that had been spared. The problem of debt, exacerbated by the economic breakdown, is being used once again as an excuse for cuts in social security and public services. Endless claims that there is no more money have been a wake-up call for dormant liberals.
Their political revival is gathering pace. In Germany, the deficit will amount to nearly 6.5% of GDP next year (almost double the maximum authorised under the EU stability and growth pact), but the new coalition in power in Berlin has promised €24bn ($36bn) in additional tax breaks. The UK Conservatives have undertaken to decrease corporation tax. In France, the right has abolished tax on overtime, established a tax shield for unearned income and reduced death duties since Sarkozy was elected. And it is to abolish the business tax payable to local authorities.
Conservatives were once so keen to balance the books they could even agree to tax hikes. But over the past 30 years, they have deliberately created public deficits in order to stifle any public impulse to intervene. This policy of easy money and reduced revenue is accompanied by alarmist calls for cuts in the cost of the welfare state.
“Reagan proved that deficits don’t matter,” Vice-President Dick Cheney told the US Treasury Secretary in 2002 when he expressed concern about further tax cuts. What Cheney really meant was that deficits don’t necessarily harm those who create them: Reagan was re
elected by a comfortable majority in 1984, despite a three-fold increase in the US deficit during his first term. But their successors are subject to tighter financial constraints, especially when they are suspected of being spendthrift lefties. So, in order to have some chance of getting his healthcare measures adopted, Obama had to promise that they would not increase the national debt by a single cent. Are military ventures ever subject to this kind of condition?
The French government recently reduced VAT payable in cafés and restaurants by two-thirds, a loss of $3.6bn in tax revenue. A few weeks later, to restore the “balance”, it recovered $225m by introducing a tax on compensation paid to victims of industrial accidents. It is clearly a very promising pupil but it still has a long way to go to catch up with Reagan, who slashed taxes on the rich and then, to reduce the deficit he had created, ordered school canteens to count ketchup as a vegetable when assessing the nutritional value of the meals they provided for the kids.
The fiscal counter-revolution to sweep the world started in 1978 in California, where Reagan had once been governor. California’s coffers are now empty (there is a $26bn deficit), so on 17 November, the University of California, with 2,000 staff cuts to its credit, increased student tuition fees by 32%.
TRANSLATED BY BARBARA WILSON
JEAN-MARC POLIZZI – ‘Circus equilibris’ (1993)
WASHINGTON-TEHRAN NUCLEAR DEAL
HASN’T WORKED OUT
Iran’s fuel for
Barack Obama created the hope of a diplomatic breakthrough between the US and Iran after 30 years of enmity. Now talks
between the West and Iran over nuclear issues have stalled and each side wants to claim a political victory rather than
solve the problem
BY GARETH PORTER
Talks between Tehran and the West were stalled for months over the question of uranium enrichment: Iran was allowed to do this under the Nuclear NonProliferation Treaty (NNPT) but forbidden to do so by UN Security Council resolutions. Then a possible solution emerged from an unexpected quarter. More than 40 years ago, the US had built a nuclear reactor in Tehran to produce radioisotopes for medical research. After the 1979 revolution and the severance of diplomatic relations with Washington, Iran had to look elsewhere for the supply of uranium enriched to 20% that it needed to operate this reactor. It obtained 23 kilograms from Argentina under an agreement signed in 1988, enough to feed the reactor until 2010.
With this date approaching, Iran’s foreign minister, Manouchehr Mottaki, sent a letter to the International Atomic Energy Agency (IAEA) in June 2009, asking for help in purchasing fuel, which would be allowed under the provisions of the NNPT but would require that international sanctions against Iran’s nuclear programme be lifted.
On hearing of this request, the Obama administration decided on a strategy that would force Iran to divest itself of its stock of lowenriched uranium (LEU), then estimated at 1,500 kilograms. During a visit to Moscow in July 2009, Gary Samore, President Obama’s chief adviser on the Iranian issue, put forward a proposal that he had formulated with Bruce Reidel for the Brookings Institution in
December 2008 (1). This would require Iran to send most of its stock of LEU to Russia to be enriched to 20%, which would set Iran’s nuclear programme back at least 12 months.
Then, just one week after agreeing to talks with the G5+1 (the US, France, the UK, Russia and China + Germany), Tehran informed the IAEA that it was building a second uranium enrichment facility near Qom, in addition to the plant at Natanz. The US, Britain and France denounced this action, suggesting that Iran had only informed the IAEA because it knew that western intelligence services were about to reveal the plant’s existence.
Tehran said it had complied with the NNPT’s time limits for informing the IAEA and insisted that the site was intended as a backup in the event of an Israeli air strike on the Natanz site, threats that Tel Aviv regularly makes and which Washington uses to exert pressure on Tehran. (Samore has advocated making use of these threats in his arm-wrestling matches with Iran.) And on 6 July 2009, in an interview with ABC, Vice-President Joseph Biden declared: “Israel can determine for itself, it’s a sovereign nation, what’s in their interest and what they decide to do relative to Iran.” Many observers saw this as a green light for an Israeli strike.
‘confidence-building m e a s u r e’ Whatever the truth may be, the revelations about the Qom site, which Iran allowed the IAEA inspectors to visit, encouraged the Obama administration to take a tough line at the G5+1 talks in Geneva on 1 October. This resulted in a proposal that Iran should send 80% of its LEU to Russia, after which it would go to France to be turned into fuel rods for the research reactor in Tehran. Presented as a “confidence-building measure”, the offer was intended to deprive Iran of most of its uranium reserves immediately, for 12 months or so, which would delay any technological breakthrough. Obama would have been able to claim an agreement as a diplomatic victory.
Washington suggested that this timeframe would allow the two sides to reach a broader agreement that would eliminate the possibility
Continued on page 2
Gareth Porter is a journalist and historian, and author of Perils of Dominance: Imbalance of Power and the Road to War in Vietnam, University of California Press, Berkeley, 2005
inside this issue Haunting the skies: drones cast sinister shadows over modern warfare page 2 Communications revolution: how the internet is reshaping democracy page 4 Chinese interests crush hopes of electoral reform in Burma page 8 Manufactured misery in Mexico page 10
Will Michelle Bachelet’s appeal endure at Chile’s next election? page 12 Pandemics and panic attacks: should we really worry about swine flu? page 13 Small wonder: dreams and fears embedded in a single chip page 14 Yemen’s thriving qat culture page 16