The worthless superrich: How Heiress Barbara Hutton Blew Through A $900 Million Fortune And Died Penniless

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By  on August 1, 2013


Adapted from celebritynetworth

Hutton, the bourgeois, nickel-and-dime store princess in her prime.

Hutton, the bourgeois, nickel-and-dime store princess in her prime.

Decades before Kim Kardashian and Paris Hilton became famous for being rich girls with sex tapes, the original out of control Hollywood heiress-celebrity was Barbara Hutton. Hutton came from money on both sides of the family tree. Her maternal grandfather was Frank W. Woolworth, founder of the eponymous Woolworth's chain of retail stores. Her father was Franklyn Laws Hutton, co-founder of massively successful New York investment bank E. F. Hutton.

She was also the niece of General Foods cereal heiress Marjorie Merriweather Post which in turn made her first cousins with actress Dina Merrill whose $5 billion net worth makes her the second richest celebrity in the world today, right behind George Lucas. But that's besides the point. Long story short, Barbara Hutton was extremely rich. Her fortune peaked at an inflation adjusted $900 million. Which makes it especially shocking that when Barbara died in 1979, she was a penniless seven-time divorcee. How on earth did that happen?[pullquote] Get to know your ruling class!  After all, they run your life. [/pullquote]

The Life Of Barbara Hutton

Barbara's maternal grandfather, Frank W. Woolworth had a life that defined the American dream. He rose up from humble beginnings to become the founder of the Woolworth's chain stores, the first, and perhaps the most successful five-and-dime operation in the world. At its prime, Woolworth's was a $65 million (roughly $900 million today) corporation with more than 1,000 stores strong.

Frank died a rich man in 1919, but that was not always the case. As a child, he worked on his parents' farm to help them make ends meet, many times missing school in lieu of the backbreaking labor of small farm life in Rodman, NY. But he had his sights set on a different path, and as a teenager and young man he took on unpaid apprenticeships at local general stores, worked side jobs, and eventually made his way to the city lights, through night school, and to the helm of a major chain store. One that established a new way of doing business, which retail stores still model themselves after today.

Vintage Woolworth's Store

Vintage Woolworth's Store

Though he married and had three daughters, Frank's true love was always his business. He is rumored to have worked every day from the inception of the company to his death. Ironically, the success that took him a lifetime to establish took his family what seemed like mere moments to destroy. Enter Barbara Hutton…

Frank's middle child, Edna, married Franklyn Laws Hutton who founded the successful E. F. Hutton & Company, a respected New York investment banking and stock brokerage firm. They had one child, Barbara, born in 1912. Franklyn was a far cry from husband or father of the year. He was a workaholic, missing from the home front most of the time, and prone to extramarital affairs. His philandering and absence wore on Edna and is thought to be the motivation for her suicide. At the impressionable age of six, Barbara found her mother's lifeless body; a formative moment that family and friends believe shaped a life of excess and debauchery.

The Diamond Damsel's Debacles Begin

Barbara was tossed around like a hot potato from relative to relative after her mother's death, but she was still a Woolworth, and Woolworths got the best. Even in the midst of the crippling 1930s Depression when most families were struggling to make ends meet, Barbara enjoyed an elaborate coming out party for her eighteenth birthday, fit for royalty. The lavish soiree came with a $60,000 price tag (around $1 million today) and was the social event of the year with dignitaries and celebrities in attendance and no expense spared.

The public was in an uproar over the unrestrained excess of the party, which was highly publicized by the media. In an attempt at damage control, Barbara was shipped off to tour Europe in order to avoid additional bad press. This was possibly the first nail Barbara contributed to the coffin that was the fate of the Woolworth family and empire.

The Blushing Bride—7 Times Over

At age 21 Barbara's already hefty bank account had swelled to roughly $50 million (about $898 million today) after she received an inheritance from her grandmother. Far from the level-headed, business-savvy mindedness of her grandfather, Frank, Barbara spent money frivolously and extravagantly.

She lived an opulent lifestyle complete with the finest clothes, homes, vacations, and entertainment, but what she craved most—and what seemed to ever escape her reach—money couldn't buy. Barbara made the rounds down the wedding aisle and to divorce court seven times in her life, hoping each groom would be the one to fill the emotional void she felt. But the void remained open, and Barbara continued to fill it with failed marriages and extravagances. Her short list of grooms included a baron, three princes, a count, actor Cary Grant, and an international playboy. Most of these men were after Barbara for her money, which they spent freely during their time with her, then enjoyed millions in divorce settlements. During her marriage to Cary Grant, the couples' spending habits earned them the nickname, "Cash and Cary". Her other fleeting matrimonial endeavors received similar sentiments from the public.

Barbara Hutton and Cary Grant

Cary Grant & Barbara Hutton: The "Cash & Carys" couple.

TMZ: The Early Days

Much to the chagrin of the Woolworth family and company, the media followed every move of Barbara's over-the-top lifestyle, as she whittled away her family fortune on designer clothes, flashy jewelry, mansions, cars, husbands, and playboys. To make matters worse, her divorces played out in the public like dirty laundry hung out for all to see.

Barbara's motto was "If you've got it, flaunt it," and she was a skilled flaunter. She had an affinity for elaborate historical pieces and paintings and paid top dollar for them. Her collection of art included pieces from Marie Antoinette and Empress Eugénie of France; and she was infamous in the jewelry world for buying an extravagant and unique 40-carat Pasha Diamond, which she had recut to fit her fancy, bringing it down to 36 carats. She bought 2 palatial mansions in London, and others in Tangier, Palm Beach, Cuernavaca, and Pacific Palisades—all filled with servants and luxuries. A casual philanthropist, she would write hefty checks on a whim at cocktail parties and buy elaborate gifts for friends and strangers.

Barbara was completely out of touch with the roots of her wealth and the Average Joe strolling the aisles of her family's famous five-and-dime stores. And the public noticed. They grew weary of spending their dollars at a company tied to a woman with so little respect for those hard-earned paychecks. Woolworth's executive board blamed Barbara's antics when employees went on strike, and weeks later clerks picketed outside her swanky New York hotel bellowing: "Is 18 dollars a week too much?" Barbara was unaffected.

Frank Turns in his Grave and Barbara Makes Her Final Exit

Unable to find lasting love, and bored with her material world, Barbara turned to drugs and alcohol. She took to washing down cocktails of codeine, morphine, and Valium with up to 20 vodka-spiked Cokes daily and indulged in shots of amphetamines and megavitamins to get her kicks. With this downward spiral, her erratic spending habits only increased. She showered friends, acquaintances, and strangers with gifts and money to gain their affections and she is reported to have lost millions in fees for bad financial advice and poor fund management.

As Barbara's once overflowing pot of gold was dwindling down to a couple of coins she began liquidating assets in order to make ends meet. With her properties gone and possessions few, she lived out her final years in an L.A. hotel until she died of a heart attack at the age of 66. At the time of her death in 1979, she had a measly $3,500 to her name.

As for the demise of the Woolworth chain, Barbara can't be held solely responsible for its downfall, though her noteworthy contributions did not help the cause. With competitors opening similar retail stores paired with an all-too-soon expansion, the retail giant and original pioneer of merchandising as it stood in its heyday declined down to a handful of stores in the early 1980s and eventually went out of business in 1997.Kim Kardashian and Paris Hilton

No matter what you think of Kim Kardashian's brief marriages or Paris Hilton's lack of discernible intelligence, at least neither of them have blown through a nearly $1 billion fortune. But then again, Barbara Hutton's downward spiral occurred over 45+ years. Maybe Paris and Kim just need a little more time to follow suit!

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ABOUT THE AUTHOR 

Posts by Sara Schapmann

Sara Schapmann
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OpEds—Gates of Lefty Hell: The Keepers and Smashers

By Diane Gee

diane-gates

Sure, they are for women’s rights.  They post a ton on legalizing pot.  They hate Republicans, and are anti-war.  They don’t much like fracking, and will sign any cause d’jour that comes by, with little or no due diligence.  The Kony thing comes to mind…But given hard evidence of the feedback loops that have our planet racing to an irreversible ecological change, which will be absolutely unable to sustain human life?

They have to deny, obfuscate, or sing la-la-la with their fingers in their new age ears saying things like (and I quote)

Yes, education / knowledge of what is happening is vital. So too is understanding that our whole solar system is under going a ‘climate change’ phenomenon. You can verify that on space / solar dedicated sites.


Ummm, WHAT?
Let me define some terms for you.

Climate is the pattern of variation in temperature, humidity, atmospheric pressure, wind, precipitation, atmospheric particle count and other meteorological variables in a given region over long periods. Climate can be contrasted to weather, which is the present condition of these variables over shorter periods.

I hate to break it to you, but the solar system has no “climate.”  And your seminars and crystal waving prayer sessions are irrelevant.

Truth is subjective…..

Sack cloth and ash with the sign of its the end of the world … I simply don’t subscribe to.

And “vision” at this point, like Truth, is very subjective.

Hear no evil much?  There is nothing subjective about the North Pole now being underwater, nor 200 species a day becoming extinct.

…there is always the possibility of changing what it is causing this crisis. To point and say science has confirmed out extinction … I have a valid right to question that. What is science one day…. in the shadow of new discovery becomes obsolete the next day.

Ok, rather strange arguments, but just as effective as a right-wing bible thumper in shutting down any intelligent conversation on climate change.  “God said he wouldn’t flood the Earth again, so don’t worry!”  You know, its all good.  Don’t worry, be happy.  New age-ism is just as ideologically blind as their biblical counterparts.  There secular counter-parts are the “science will find a way” people, that truly cannot grasp the idea od “tipping points.”

Because in America, neither the Right nor the Left really wants to hear bad news.  Or bad TRUTHS.

Inevitably, someone breaks out the “community” argument in the Land of the Gatekeepers.  This is always the BEST way to shame a Liberal into shutting up.  You know, its divisive to say anything I don’t want to hear.  It makes me huuuuurrrt!  So, stoooooppppp!

So, when presented with something as emotionless as a series of links to hard-core Scientific Studies, you end up with this:

…we don’t feel like flipping out this morning.

Looks to me like there’s nothing anyone can do about it, based on the science articles provided, so why work yourself into anger and isolation?

I experience it as being pushed or hammered instead of understood and respected as another person who understands we’re all in this together.

You see, to not be isolated, to not be a “buzz-kill” the feel-good lefties tell you to please, please not expose them to things like science, math and facts. Dino-riding Jesus Christ might say the same thing.  Have we become a nation of children?  Where even the self-proclaimed left uses emotional manipulation to end any serious discussion of science?  Or is it that we have seen too many post-apocalyptic movies and magically think we will be fine?

This seriously came out of a leftist’s mouth.

…it dawned on me that I’d be one of the people making cockroach stew out in the woods somewhere taking care of little kids.

There’s a big difference between extinction and evolution.

I wish everyone had read Ishmael because it provides an anthropological framework to discuss Leavers, Takers and Civilization as we know it, or Mother Culture. The thing is that the TAKERS are toast, and although they’ve toasted the planet like we know it – once all that has passed, there will still be Leavers (sort of like tribal peoples) and there will still be this planet.

Won’t look like it does now, but it can still be beautiful.

The world becomes a super heated, waterless barren waste, and it will still be beautiful?  We can evolve past it in 30 years?  What the Fuck?  Thank the ever-loving Flying Spaghetti Monster, there are still those on the Left with the wits to point out:

The takers will have food and water in their bunkers, power, grow lights, they’ll be cooler deep in the Earth. WE will not survive. If we are the tribal people, we will not be making cockroach stew. There will be NO cockroaches. There will be no water.

I guess if you cannot fully deny, then head meets sand is the next best scenario. Or run off and write ill-written, semi-legible screeds on “doomers” and the pursuit of hedonistic pleasure.  Its kind of what my late husband used to say about why the 60’s failed…. too many were there for the party, too few brave enough to make real changes when the going got tough.

And yeah Near Term Extinction  says things are going to get tough really fucking soon.

I find it equally distressing that MSNBC’s talking heads are apologists for Obama and his very right-wing tenure in office.  Mother Jones would be projectile vomiting at the Obama worship her namesake now employs.  She, unlike Obama, was an actual Socialist.  A true Leftist.  But trickle down ignorance has become a flood, mirroring itself in the blogosphere.

Obamabots may be the worst of the Gate Keepers, but they certainly are not the only enforcers of the status quo.

I walked very late into a discussion on Socialism, under a post about Socialism on a supposedly Liberal FB Page.  It ended with me being told, both publicly and in private message, not to talk about Socialism, because it was “too upsetting and divisionary” among the page’s leftists.

It ran a similar gamut to the above climate change, starting from a place of gross ignorance, and ending in the place of emotional manipulation to stop the conversation from taking place at all.

The very 1st reaction?  Pure ignorance.

…if I want to have my own business where I trade services for money that enables me to have a comfortable life – does that make me a clanging cymbal shit head? Back before Walmart, when we had town squares with Mom & Pop soda shops and hardware stores, was that inherently evil? If Mom & Pop were in the Klan, maybe it was evil – but that’s Mom & Pop, not Capitalism as an economic system. And where does that leave family farms?
I don’t get it how I suck balls and should be sent to hell just because I would like to have my own business. Can’t there be people who make a few bucks and take care of the community? If I made a few bucks without raping people and the planet, and contributed to the care of the community – how does that make me shit?

Note the IMMEDIATELY hostile language.  No one called anyone a shithead, or said suck balls.  Of course, when you try to point out that Socialism won’t hurt them, they ignore it.  Even when its NOT about them making a few bucks more than everyone else?  To them it is.

I tried to explain:

Socialism does not mean anything in terms of your personal property. Or your small business or farm. No one is going to take away your creativity or chance to be innovative. If you hire 10,000 workers though? They become partners rather than tools. Socialism says you want your whole community to do well, not just you; conversely that they also look out for your interests.

What it does do is Nationalize NATIONAL assets. Power/Utilities, health, education, as well as sets tax rates and wages.

What it does do is stop mega-corporations from exploiting the labor and allows the workers themselves to “own” what they produce – think profit sharing with the bonus of voting on what is made and how.

Individuals who operate within our system aren’t inherently evil, but there is certainly room for education towards a better tomorrow for everyone.

The idea is that I don’t deserve a better quality of life because I have a high IQ than a person who is challenged. We both deserve nice homes and vacations. The idea is that if I am particularly cutthroat, I don’t get to drive everyone else out of business and hold a monopoly on an item – making them lose their businesses and homes while I dine on caviar on my personal jet – it is that we work together to make all businesses mildly profitable and no one goes without.

This was met with personal insults, and being told “labels are divisive.”  No, actually differing economic theories are divisive, especially capitalism that creates class war and abject poverty.

Then the real truth comes out, like most upper class leftish people, they talk a big game, but are terrified of losing their privilege. They are winners in that class war.

I have to say that it hurts my feelings to hear that people like my father are corrupt to the core. My dad is an entrepreneur in America – ergo: a capitalist. It’s not fair to say that he’s corrupt. Or that I’m corrupt to the core just because I think that most balanced systems are eclectic in nature.

The emotional manipulation to shut down the discussion happened faster than a “Yo Momma” jibe in a rap dual.  You see, if they make it personal about their Daddys?  They expect you to not speak of Socialism again.

Then straight out of the Commie McCarthy Era propaganda machine?  A leftist said this with a straight face:

Yea, kinda difficult to be told your creativity is shit… and everybody is creative.

Note, no where in the discussion had any Socialist addressed creativity.  But the underlying fear that economic equity would lead to personal conformity just reared its tiny head.

Apparently the Left believes that Socialism will take away their small farms and business, make us all automatons in grey, and steal our imaginations!  Our creativity will be gooooonnnnneee!  See what we are up against?

Then they resort to the “its not the system, its the greed” meme.  Because Capitalism served them well.  They have spent a few years in Europe on their parent’s dime.  Or Daddy bought them an upper-side NY flat.  Or they like their McMansion. Or their Trust Fund income…

When people make blanket generalizations, they often step on toes. While I can accept that many people believe capitalism is inherently predatory, I maintain that heartless greed is at the root of the problem. Not some theory.


Some people believe?
 Some?  No, darling predatory IS what Capitalism does.  It extorts the most value it can from underpaying workers, or for the raw materials, so it can make profit off of the end product.  It IS inherently predatory.  One person has to be underpaid for another to be overpaid.

Proof positive of the quip, “The Left is Center, the Center is Right, and the Right is Batshit Crazy.”

When simple definition of terms fails?  Again, emotional manipulation.  From a suicide threat “Talking about socialism makes me want to kill myself…” to this tripe from the person who made 70% of the comments – effectively saying, over and over, anyone who espoused the idea Socialism is good was trying to “dominate her and the conversation”:

The issue I have with conversations like these is not whether or not we label each other a socialist or a capitalist. My issue is that many conversations seek to dominate, (snip – women mostly) …the need to dominate a conversation breaks community.

Sell socialism all you want – as far as I’m concerned, all this is distraction from the real issue of building community and healing each other and the planet.

It’s like nobody even hears me.  And I have that right – no matter which one of you dominates the conversation

Its like a dominatrix bitching because her sub cries too loud.  Seriously?

After the suicide comment, which has since been removed?  The admins came in and said it was harmful to the feelings of “community” to speak further on the subject. As I said above, this is always the final card in the faux-left deck.  Stay within happy-feely centrist memes, or you are breaking the community up!  Now that?  Is enforced conformity, indeed, and illiberal to the max!

Its the Greed, not the “ism” became law of the land of leftiness, their brand, anyway. Economic theory hurts their little heads more than the looming extinction of the planet.  Even if Eco-socialism could save them?  They would refuse to even hear of it.

Talking about Socialism is bad, gotcha… it makes the limousine liberals cry.  They use passive/aggressive bullying techniques, put words never spoken in people’s mouths, then gang up on whomever speaks inconvenient truths.

The Left has been effectively kettled, corralled if you will, by both the keepers of the gate and the smashers of the gate.

One makes us look foolish, and feeds the 1% who would have unbridled power if the government was crushed.

The other makes sure we don’t work for a government more in favor of the working class.

Its a fine mess, and I have no idea what the fuck to do about it. Its the Gates of Lefty Hell.

So, I guess I will continue to be the whisper in the field speaking truth to power about the environment, about empowering people to create a system that is fair and sustainable, and hope someday?  They will hear.


 photo 62454_516200635115087_852666388_n.jpgABOUT THE AUTHOR

Diane Gee’s protean output includes the editorship of two busy political venues, starting with her personal blog, The Wild Wild Left , a Facebook group, Links for the Wildly Left, and a weekly radio program. Despite all this, she still finds time to live life to the fullest, run a household, keep the finances above water, and raise a young son. 




An Impending Bloodbath in Egypt: Will It Break the Coup?

Banana Republic Without Bananas
by ESAM AL-AMIN

There is no parallel in modern history to the recent events in Egypt, which have so quickly and effortlessly stripped people of their will. Within a year, the nation that went to the polls in free and fair elections to elect the lower and upper houses of parliament, choose the first civilian president in a multi-candidate race, and approve a new constitution, remarkably witnessed the reversal and invalidation of its nascent democratic institutions. After the triumph of the great Egyptian uprising in February 2011, such a tragic outcome was not the anticipated feat of its promising trajectory.

But the setback to the march of freedom and democracy in a region that has been plagued with despotism, repression, foreign domination, and corruption, could not have taken place without the active scheming and subversive action by myriad players led by the fulool counter-revolutionaries, or Mubarak loyalists and corrupt oligarchs, as well as the “deep state,” which is a decades-old web of corruption and special interests entrenched within the state’s institutions. Former justice minister Ahmad Makki detailed in recent interviews the depth of the entrenched elements of Mubarak loyalists including the judiciary, which actively undermined Morsi’s introduction of real reforms. Other actors who were dismayed by the rise of the Muslim Brotherhood (MB) and the Islamists in general, also played a critical role in dislodging them from power and creating a constitutional crisis. These players have not only included most secular, liberal and leftist parties and elites, but have also involved foreign powers such as Israel, Saudi Arabia and the United Arab Emirates, which saw the Egyptian revolution as a threat to their interests. Moreover, youth groups and ordinary citizens were frustrated with the slow progress in fulfilling the declared promises of the revolution, namely “decent living, freedom, social justice, and human dignity.”

A Military Coup with Civilian Co-conspirators

As I argued before, the July 3 military coup was not in response to calls for a second wave of the revolution as falsely presented by the anti-Morsi forces. It was a determined and well-orchestrated plot to oust the democratically elected president after a single year in power. One of the co-conspirators, Mona Makram Ebeid, plainly exposed some of the details in her speech before the Middle East Institute (MEI) on July 11. Ebeid is a veteran of Egyptian politics, jumping between the regime de jure and the opposition. She was not only appointed to the legislature by Mubarak as well as Morsi, but she also served as an advisor to the Military Council during the transitional period. As a Coptic Christian woman who espoused a secular outlook, she embodied the elements of an ideal minority representative. She was also appointed to the Constitutional Constituent Assembly –  the body charged with writing the constitution – before the mass resignation of its secular members last November. According to her statement before the MEI, she was invited on the morning of June 30 to a meeting at the mansion of former Mubarak loyalist and housing minister Hasaballah Al-Kafrawi. Seated next to him was retired Gen. Fuad Allam, a former deputy chief of Egypt’s internal security service and a hardline MB foe. Having led the unit that monitored and investigated the religious groups for over two decades, Gen. Allam was one of the most notorious torture experts in the world. Among the attendees were also two-dozen secular journalists, academics, and opposition leaders. During the meeting, Minister Kafrawi stated that he had been in touch with the army, the Coptic Pope and Sheikh al-Azhar. He added that army chief Gen. Abdelfattah Sisi had privately requested a “written popular demand” in order to intervene on behalf of the opposition.  By 3:00 PM, a statement by over 50 anti-Morsi public figures was delivered to the army demanding its intervention. Since the organizers had previously announced that the demonstration at Tahrir Square would launch at 5:00 PM, the statement issued that morning was in fact requested by the army and provided by the secular opposition before any meaningful anti-Morsi demonstration had ever come onto the streets.

If the military is in charge, can anyone still say it’s not a coup?

Gen. Sisi ousted President Morsi on July 3 as his co-conspirators, including opposition leader Muhammad ElBaradei, were looking on. The anti-Morsi forces believed they had outmaneuvered the hapless president, the MB, and their Islamist allies.  Furthermore, they were convinced that within days their Islamist opponents would accept their fate and recognize the new status quo. If not, the new military-led regime was ready to beat them into submission using its Mubarak-era hardline tactics.

But contrary to these expectations, the MB, their Islamist allies, and hundreds of thousands of ordinary citizens who believed their votes had been discarded, took to the streets in large demonstrations. Tens of thousands camped out in major squares in Cairo, Giza, and around the nation. In their desperate attempt to scare off the demonstrators, the police and the army had committed within few days several massacres that included the July 5 carnage near the Presidential Guards social club that left over 50 people dead and hundreds wounded.

In his attempt to disguise the military rule behind a civilian façade, upon declaring the coup on July 3 Gen. Sisi appointed the head of the Supreme Court as the interim president. A few days later he chose ElBaradei as Vice President and economist Hazem Al-Beblawi, as Prime Minister. As the anti-coup demonstrations persisted for almost four weeks, Gen. Sisi delivered a speech on July 24 asking the public to demonstrate in the streets to give him “a mandate and an order” to crackdown against “violence and terrorism.”  It was a brazen request to use brutal tactics to subdue the anti-coup protesters, who incidentally had called for massive demonstrations across Egypt to take place on the same day in their call to reinstate Morsi, activate the constitution, and restore the parliament.

Legal experts were perplexed by Sisi’s request since the army did not need a mandate to fight terrorism. That was part of its mission anyway. Even if a popular mandate was needed to crackdown on the opposition in the name of fighting terrorism, such an appeal should be made by the interim president or prime minister, not the military leader of the country. It was another unmistaken sign of who is actually in charge.

In his attempt to justify and rationalize the coup, Gen. Sisi told the public during his speech that he had been loyal to the deposed president and had done everything in his power to counsel him to compromise with the opposition. As evidence he stated that all his attempts were witnessed by former presidential candidate Muhammad Salim Al-AwwaAhmad Fahmy, the president of the upper house of parliament, and Morsi’s Prime Minister, Hisham Qandil. Within 24 hours, all three figures denied his assertions.

License to Kill

By July 26, both pro- and anti-coup demonstrators were mobilizing in the streets. In response to Sisi’s plea, the former mainly gathered around Tahrir Square, the Presidential palace, and a few other places around the country such as Alexandria. But as I discussed in an earlier article Tahrir Square could not hold more than half a million demonstrators. Despite their unverified claims to the contrary, pro-Sisi crowds could not have exceeded one million nationwide. On the other hand, the anti-coup demonstrators assembled in 35 different locations in twenty-five provinces across the nation with some estimating the crowd to number 5-7 million. Yet both sides exaggerated their numbers as the pro-coup declared their number to be over 30 million while the anti-coup claimed 40 million. Since June 30, the opposition has insisted on using the figure of 33 million in order to beat the highest turn out of 32 million voters during the parliamentary elections won by the MB-affiliated party in early 2012. Such an improbable figure would mean that two-thirds of the Egyptian adult population was in the street.

Another popular myth is the claim that in less than eight weeks 22 million registered voters signed a petition to demand early presidential elections as a prelude to the June 30 demonstrations. But the Tamarrod (or Rebellion) movement was established in late April by three young individuals and did not have an organizational infrastructure. Such an improbable feat would have required 4 million hours or half a million man-hours per week. Needless to say, no one has ever verified the authenticity of this petition. By contrast, the MB in 2010 was only able to gather less than one million anti-Mubarak signatures over several months, even with its massive organizational infrastructure on the ground.

Meanwhile, the official and pro-coup private media (incorporating almost all Egyptian-based media with the exception of Al-Jazeera Egypt) totally ignored the anti-coup demonstrators and declared by the end of the day that the Egyptian people have given Gen. Sisi his mandate to clampdown on the MB and their supporters. By midnight, the police, supported by hundreds of thugs, attacked a peaceful march of tens of thousands of pro-Morsi demonstrators in northeast Cairo. Over several hours the police used thousands of tear gas canisters causing severe burns and suffocation. It used live ammunition thatdeliberately killed over 200 protesters including 66 that were pronounced clinically dead. It also used birdshot that caused serious injuries. By the end of the ten-hour turkey shoot there were over five thousand people injured in addition to the fatalities. Doctors at the field hospital next to the area where the demonstrators have camped for weeks appealed for the public to donate blood and emergency medical supplies. The next day the government blamed the demonstrators as Interior Minister Gen. Muhammad Ibrahim blatantly lied that his officers did not fire a single shot against any demonstrator, not just on that day but ever – not even during Mubarak’s time. BothAmnesty International and Human Rights Watch condemned the killing and categorically blamed the government.

The Manufacturing of Hatred, The Death of Conscience, and the Return of the Police State

After the triumph of the 2011 uprising, many Egyptians proudly asserted that the most important achievements of this momentous event was the freedoms enjoyed by all Egyptians unleashed in its wake – of speech, press, assembly, and political association. In his last speech to the nation, Morsi boasted that during his one-year tenure not a single TV channel or newspaper was closed or a journalist imprisoned because of political opinion. In fact, Morsi issued a decree last fall that decriminalized a Mubarak-era law that outlawed written or verbal insults hurled at the president. In addition, there were no political prisoners during Morsi’s reign even though hundreds of violent demonstrations had taken place including the torching of dozens of government buildings and private properties, including the attack on the presidential palace using a crane and Molotov cocktails.

Yet in less than a month after the military coup, there have been more than 480 people killed, over 10,000 injured, and over 2,000 political arrests without legitimate charges for simply rejecting the coup. Al-Wasat (Center) Party leader Abulela Madi and his deputy Esam Sultan were arrested on July 29 and later charged with incitement and conspiracy to murder. According to Madi’s son, both political leaders were told at the time of their arrest that if they were to publicly support the coup they would not be arrested. Both summarily rejected the offer and went to prison.

During his press conference, Gen. Ibrahim nonchalantly acknowledged the return of the secret unit in charge of monitoring and prosecuting religious groups and individuals even though it was disbanded after the 2011 uprising. Not only was this unit reconstituted, but it rehired the same notorious officers who were in charge of the torture chambers during the Mubarak regime. They now have been re-instated to resume their infamous brutal tactics presumably with total impunity. Such blatant action prompted former presidential candidate Abdelmoneim Abol Fotouh, who initially accepted the ouster of Morsi, to reverse himself and question the coup’s real objectives.

Furthermore, within minutes of the ouster of Morsi, at least nine pro-Morsi TV stations were taken off the air. Remarkably, the Egyptian media, whether official or private, is precipitously singing to the same tune. With the exception of Al-Jazeera, rarely would one now find any criticism of Gen. Sisi or the coup on any TV channel. For weeks the Egyptian media has been relentless in portraying the MB and their supporters as violent, terrorists, extremists, foreign agents, conspirators, and murderers. The vicious
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campaign has the combined features of fascism and McCarthyism. It embodies the hate filled 1930s campaign of Nazi Germany against the Jews, and the ugly media-led incitement of the Rwandan genocide of the 1990s. It has even reached the point where the state and liberal media or government officials and secular elites have rarely shown any sympathy to the killed or injured at the hands of the army or the police, as if they were foreign enemies or dangerous criminals, and not simply their political opponents. Such portrayals prompted prominent columnist Fahmy Howaidy toquestion whether the collective conscience of the Egyptian people has been fatally wounded.

In the aftermath of the December 16, 2011 massacre by the army in front of the Council of Ministers building that resulted in a few deaths, ElBaradei tweeted that the brutal crackdown on the peaceful demonstrators was unacceptable, inhuman, and in violation of all standards of decency and human rights. In addition, during that period Hazem ElBeblawi resigned as deputy prime minister to protest the army’s crackdown on the youth protesters, calling it barbaric. Having been appointed by the coup leaders as vice president and prime minister respectively, both men have given lip service to the hundreds of people killed while peacefully protesting the coup. One of the few voices that questioned the double standard of Egyptian liberals was Amr Hamzawy, himself a secular and liberal. He decried the death of Egyptian liberalism and cried out for its revival, for which he was not only criticized by the Egyptian media and the liberal elites, but has since been ostracized and viciously attacked.

Regrettably, many U.S. and Western media outlets, including such alternative media as Democracy Now! (DN), repeated much of the fabricated rhetoric about the violent behavior of MB supporters and anti-coup protesters within their camps and designated sit-ins. For example, without citing any evidence, the DN correspondent in Cairo repeated the preposterous claim that the MB demonstrators exhibited violent behavior or carried weapons. In fact, the anti-coup leaders have extended an open invitation to all journalists, media outlets, human rights organizations, and NGOs to join them and have unfettered access to inspect the whole area to demonstrate the nature of their peaceful protests.

Showdown: A Humiliating Proposal faced with Determination to Reinstate Morsi and Restore the Constitution

Meanwhile, the anti-coup demonstrators have shown determination and resilience. For five weeks they have not only rallied by the hundreds of thousands within major squares in Cairo and Giza, but were also able to expand and attract many pro-democracy groups and ordinary citizens who did not consider themselves particularly ideologically affiliated with the Islamists. Every day dozens of rallies in every province attract thousands of ordinary citizens who in turn march against the military coup declaring their rejection of its ramifications. Despite the intense heat, the fasting during the month of Ramadan, and the police crackdowns and harassment, the demonstrators have only increased in numbers. Furthermore, dozens of groups have been formed that joined the protesters against the coup: academics against the coup, students against the coup, journalists against the coup, etc., as well as lawyers, judges, farmers, laborers, professional syndicates, Azhari scholars, and even some Coptic liberals such as human rights activist and lawyer Nevine Milak.

However, throughout the crisis, coup leaders have shown no sympathy or willingness to compromise or engage in serious dialogue. Their empty rhetoric exhibited the language of the victor over the vanquished. According to a well-placed source close to the MB, by the fourth week, the military sent a proposal to a senior MB leader and former minister. It called for the MB to immediately disband their sit-ins, end their demonstrations, recognize and accept the new political reality (i.e., the military coup), and admit to their mishandling of ruling the country. In return, the military promised to release all MB prisoners, drop the charges, and allow the group to participate in the political process. The intermediary further told the MB leadership that in the next parliamentary elections the group would only be allowed to win 15-20 percent of the seats, while all the Islamic parties combined would not exceed 30 percent, a warning sign of fraudulent elections. The interlocutor then made it clear that the proposal was not subject to negotiation, but was a matter of “take it or leave it.” He warned that if the proposal was rejected, the military not only would crackdown heavily on the group to end their protests, but also that their group and affiliated party would soon be dissolved and outlawed. The MB defiantly rejected the offer out of hand, and vowed to remain in the streets, continue their peaceful protests, escalate their mobilization efforts, and further develop their civil disobedience until victory or death at the hands of the military and the police.

The U.S. and the West: It is not Confused, but Confusing

Throughout the process of planning and executing the ouster of Morsi and the MB, the U.S. was fully in the loop. Even though the U.S. was not certain whether the coup plotters would be able to pull it off, it urged Morsi during the months of May and June to appoint ElBaradei as prime minister even though the latter was quietly plotting to oust him. During late June, Secretary of Defense Chuck Hagel called Gen. Sisi at least five times while the coup was in progress. Along with National Security Advisor Susan Rice, Hagel eventually gave his blessing provided that civilian rule is restored within a few months. Gen. Sisi promised his counterpart that stability and calm would be swiftly restored. The Obama administration struggled to give the coup its blessing in public as it was clear that such support would contradict a 1961 law that prohibited providing aid or the support of the overthrow of a democratically elected government. But with few exceptions such as Sen. Rand Paul, most lawmakers including Intelligence Committee Chairman Congressman Mike Rogers gave their blessings and supported the coup. Sen. Tim Kaine of the Foreign Relations Committee even exposed the role of the UAE and Jordanian ambassadors in lobbying congress on behalf of the military coup.

Meanwhile, the leaders of the military coup have become very nervous as they failed to stabilize the country or tame the opposition one month after the coup. Only five countries, all monarchies, have publicly declared their support of the coup. They are Saudi Arabia, the UAE, Kuwait, Bahrain, and Jordan. Ironically, Tamarrod’s founder Mahmoud Badr has reversed himself with regards to his assessment of Saudi Arabia. Last year he strongly criticized the authoritarian system of Saudi Arabia, yet after the coup he profusely thanked its rulers for their support.

It is not by coincidence that much of the support to the coup in the U.S. has come from the pro-Israel quarters. Israel has been mourning the loss of Mubarak ever since his ouster. It considered Mubarak its “strategic asset,” which was demonstrated by Israel’s chief of staff,former Israeli ambassador to Egypt, and Israel’s enablers in the U.S. A retired pro-coup Egyptian general even argued that Morsi was toppled by the military for his strong support of Hamas in Gaza, which in his view threatened Egypt’s national security. Thus, with the return of the military at the helm of the country, Israel and its supporters believe they could regain their strategic relationship.

The reaction to the coup by the West has been timid to say the least. Initially, the West was cautiously waiting to see if the military was able to restore stability and move forward on its declared political roadmap. But by the fifth week, it became apparent that the political scene was still in turmoil with a complete political stalemate as the anti-coup protesters have remained defiant and determined to restore democracy, and defend Morsi’s legitimacy. The African Union has emphatically rejected the coup and suspended Egypt’s membership in the AU until democratic rule is restored. Similarly, Turkey, South Africa, Tunisia, Iran, Pakistan, Malaysia, and Indonesia strongly criticized the coup and called for reinstating the elected president.

Meanwhile, European Union foreign affairs chief Catherine Ashton visited Egypt within days of the coup. She was told then that the country’s stability would be restored within a short period of time. By the fifth week she again visited the country and demanded to see Morsi as his supporters filled the streets in their daily protests. In essence, Ashton sought a compromise that would incorporate the MB and their Islamist allies in a future political map. Europe could not look the other way as a dangerous and volatile situation continues to develop to its south. Uncharacteristically, she interrupted her press conference with ElBaradei and left abruptly after he rudely did not allow her to answera question by a French reporter. The questioner asked whether Morsi would play any political role in the future, to which ElBaradei quickly answered with an emphatic no, without allowing Ashton to answer, at which point she withdrew from the press conference. In addition, much of Ashton’s replies to the few questions she answered were mistranslated, thereby giving the audience the false impression that Europe had supported the coup. This sorry spectacle was a diplomatic disaster for ElBaradei and the coup leaders. But on August 1, the U.S. came to their rescue as Secretary of State John Kerry defended the military takeover in Egypt during his visit to Pakistan.

Possible Imminent Scenarios: Is a bloodbath around the corner?

It appears that everyone was passing the buck. Gen. Sisi asked the public on July 24 to give him a mandate through mass protests to crackdown on “violence and terrorism.” On July 27, military spokesperson Col. Muhammad Ahmad Ali declared that the mandate has been received. But in the days since the military has actually withdrawn from most of the areas surrounding the protesters. Military and political experts have been warning that the possible involvement of the army in killing the protesters might undermine not only the institutions of the state, but also unravel the army itself. By July 30, the interim president then gave Prime Minister Beblawi a mandate to declare a state of emergency and crackdown on the protesters who refuse to disband. Yet on August 1, Beblawi’s cabinet transferred that authority to Interior Minister Gen. Ibrahim, whose ministry immediately issued a stern warning to all protesters to disband or otherwise face a certain ending to their sit-ins and possible death. The protesters categorically rejected this unambiguous threat, and even dared the police to attack vowing not to resist while protesting peacefully.

But the decision to reject the offer of safe passage should not be surprising. In 1954, there was a similar standoff between the army and the MB. After weeks of massive demonstrations by the MB against the authoritarian rule of the military, the army asked for calm and requested dialogue and negotiations with the MB. Consequently, MB leader and judge Abdel Qader Odeh dismissed the crowds, but by the evening he was arrested along with many other senior MB leaders. Within weeks most leaders were charged with subversive activities including the assassination attempt of army leader Gamal Abdel Nasser. Eventually, six MB leaders were executed including Odeh.

Regrettably, government prosecutors and judges have politicized the judicial system and made a mockery of it, aggressively using Mubarak-era tactics. Former MB head and General Guide Mahdi Akef, as well as the current Guide Muhammad Badie, and his two deputies Khayrat Al-Shater and Rashad Bayoumi, were charged with murder and treason and could face the death penalty. Other Islamist political leaders were charged with ridiculous accusations in order to publicly humiliate them. For example, former parliamentary speaker and head of the Freedom and Justice Party (the MB affiliated political party), Saad Al-Katatni, and former presidential candidate Hazem Abu Ismail, were charged with forming a gang to rob houses. Meanwhile, as President Morsi was detained illegally for weeks while world leaders demanded his release, government prosecutors charged him this week with communicating with Hamas, a charge that is only considered criminal by Israel. Another accusation against Morsi was his escape from prison on January 27, 2011, when he was detained illegally by Mubarak’s goons at the height of the 2011 uprising.

For the past month, liberal and secular elites have urged the government to crackdown hard on the protesters regardless of how many people lose their lives. Some liberal supporters of the coup even argued that it is necessary to sacrifice blood in order to establish a secular democracy and ban the involvement of any religious group in politics. Meanwhile, the U.S. administration is willing to give the army and police one more chance to end the challenge posed by the anti-coup protesters. While the U.S. might look the other way if the loss of life is in the hundreds, it is unlikely that it would back the crackdown if the casualties are in the thousands.

Egyptian generals initially justified their military coup as the only option available to prevent bloodshed. Now they promise to spill blood, perhaps lots of it, in order to preserve their increasingly disintegrating coup. Meanwhile, the defenders of democracy and constitutional legitimacy are determined to stay the course until the will of the people is respected. It is the classic struggle between right and might. History shows that right ultimately prevails.

Esam Al-Amin is the author of The Arab Awakening Unveiled: Understanding Transformations and Revolutions in the Middle East. He can be contacted at alamin1919@gmail.com.




The Presumed Innocence of Capitalism and Lac-Mégantic (and elsewhere)

Socialist Project - homeHarry Glasbeek

If the soul is left in darkness, sins will be committed. The guilty one is not he who commits the sin, but he who creates the darkness.”— Monseigneur Bienvenu in Victor Hugo’s Les Miserables

It is always the same. First the shock and horror, then the anger. A terrible environmental disaster inflicted by BP in the Gulf of Mexico; a horrendous explosion at Union Carbide’s Bhopal plant; a mine disaster, burying people at Westray in Nova Scotia; a factory building collapsing in Bangladesh; a train’s cargo exploding and incinerating people and the city of Lac-Mégantic.

capital-LakeMeganticEach time there are the same questions:

Why was anyone allowed to engage in this activity, given its known risks? Why, more specifically, were people with poor reputations in respect of safety and/or people with little experience allowed to run these risky activities? Why did governments not have better laws and regulations? Why did governments not have better monitoring and policing of such laws and regulations they had enacted? How dared the leaders of these risk-creating entities try to blame their hapless underlings? How could they be so cavalier, so callous, so arrogant? Who was to pay for the compensation? Should anyone go to jail?

The reasons for the shock and anger are obvious: the burned bodies, destroyed lives and livelihoods, ravaged environments, disrupted communities, misery all round. And each time, sombre-looking politicians and policy-makers walk around the sites, solemnly promise to learn from the event, assuring the stunned public that they will not let it happen again, that heads will roll if legal justice demands it.

Civilized Political Economy?

Each time people are shocked and horrified because they believe that they live under a regime of a mature and civilized political economy. They have been told that for-profit entrepreneurs care about their health and safety; they are taught that their elected governments will force entrepreneurs to put health and safety and environments ahead of profit-maximization. They want to believe all of this because their daily lives would be miserable if they thought that their food was unsafe, that most products they use are unchecked for dangers, that there are hundreds and thousands of untested toxic substances used in profit-making activities and released into their environments, that their physical recreational activities are largely unmonitored and unregulated, that their workplaces are high hazard zones. They are gulled into believing that everyone, profit-chasers and governments, cares about them because, at any one time, there is a high decibel vociferous debate, usually dominated by apparently respectable profit-seekers and their professional think-tanks, about how unnecessary government regulations impede the creation of wealth while, at the same time, they fail to protect society.

An impression is left that there is a great deal of supervision and monitoring. It looks to all the world that it is not the lack of regulation by governments, but its excesses, that impoverish and endanger us. Thus it is that, when a Lac-Mégantic occurs, everyone is surprised that it could happen at all: surely something has gone wrong with the otherwise satisfactory operations of profit-seekers and/or the well-established government oversight over profit-making?

But, the only thing that is special about a Lac-Mégantic is the sudden manner in which a huge amount of harm is inflicted. The infliction of harms is a daily event; but it is experienced as atomized, isolated events, unworthy of news coverage. We hardly notice the steady dripping of blood, the innumerable illnesses, serious and minor, daily deaths and incremental deterioration of our physical environments. We are systematically desensitized to the catastrophic dimensions of the injuries that regulated profit-seekers inflict. This is an amazing triumph for harm-inflicting profiteers. To illustrate:

While the trauma of a Westray, understandably and rightly, demands everyone’s attention, the 26 miners who died in one spectacular explosion are but a tiny fragment of the number of workers injured and killed every day. In Canada, roughly one thousand people are killed on the job each and every year, nearly 5 every working day; 10,000 die earlier than they might have because of occupationally related illnesses each and every year. World-wide, 2 million people die at work every single year; 260 million more are injured while at work. And, yearly, 160 million are afflicted by job-related illnesses. The number of deaths and illnesses attributable to environmental pollution and degradation are equally staggering; product contamination, unsafe vehicles, equipment, drugs and pharmaceuticals, all exact huge tolls.

Sadly, then, Lac-Mégantic is but an eye-catching example of a common phenomenon. It is but a vivid example of the routine operation of competitive capitalism, our supposedly well-regulated competitive form of capitalism. There should be no sense of surprise. Anger, yes, surprise, no. The key to this parlous state of affairs is the fact that our regulatory laws and standards are intended to legitimate a harm-causing, risk-shifting system. Regulatory law works on a set of assumptions:

  1. Productive activities create material welfare;
  2. All productive activities entail risks;
  3. Productive activities create the most material welfare if they are undertaken privately for selfish motives;
  4. Productive activities should be promoted and facilitated by governments and their agencies;
  5. Any materialized risks may harm the producers, the consumers and users of the goods and services produced and the general environment;
  6. Promoting and facilitating governments and their agencies should ensure, as much as possible, that the wealth generated by any productive activity outweighs the harms it inflicts. They are to engage in a cost-benefit analysis.

This framework assumes that private actors chasing profits are engaged in virtuous activities and that they are virtuous. All want to produce welfare; no one wants to do harm. Thus when risks materialize, we should compensate the victims and educate all concerned about that particular risk and, if necessary, enact laws and standards to ensure that appropriate precautions be taken to avert or diminish the materialization of this and similar risks. The enforcement of those standards may well require imposing sanctions on those producers who violate them but we should not think of them as anti-social wrongdoers. After all, we should be grateful that they are voluntarily engaging in the virtuous activity of contributing to the general welfare. Only in extremis should we think of them as moral lepers, as criminals.

The logic of this assumed state of play means that

  1. Its cost-benefit approach does not require that all risks be eliminated. A price has to be paid for the general good, a price to be paid by workers, consumers, users, communities and their natural environments.
  2. It legitimates a certain amount of acceptable harm, a certain amount of bleeding and illness, a certain number of deaths, a certain amount of environmental despoliation. We are told that, in our desire for welfare, we must, and are assumed to be, willing to sacrifice bodies, lives and our ecology. The assumptions of our regulatory theory embody the crass social Darwinism of John D. Rockefeller, who wrote:
    “The American Beauty Rose can be produced in the splendor and fragrance which bring cheer to its beholder only by sacrificing the early buds which grow up around it. This is not an evil tendency in business. It is merely the working-out of a law of Nature and a law of God.”The harms inflicted by the entrepreneurial class initiating productive activities are designed into them, either by not setting standards at all or by having some rules balancing benefit against what is deemed to be an acceptable level of harm.

This is why we are not shocked by the daily atomized materializations of risks built into the productive processes. We expect a certain kind and amount of damage. What we do not know in advance is who the victims will be or the full extent of the harm they will suffer. It is only when a Westray or a Lac-Mégantic occurs that we ask questions and they are all about whether there was anything peculiar about the circumstances: were there defensible rules balancing benefit against harm in place? were they satisfactorily monitored and enforced or were the governmental regulators too lax? was the particular entrepreneur not virtuous, a rotten apple in the barrel of goodness, who flouted perfectly acceptable rules?

Cost-Benefit Analyses

The questions about whether the existing regulations were satisfactory ones are not questions about the validity of the cost-benefit analysis that gives life to these kind of regulations, but rather about the difficulties that inhere in setting an appropriate and acceptable level of harm. And the questions about regulators arise because we realize they have an unenviable task.

The cost-benefit analyses required involves calibrating incommensurables. There is the cost of putting in a preventive system which theoretically can be calculated in dollars and cents, although the asymmetry of information means that, in practice, regulators have to rely on data provided by entrepreneurs who have an incentive to exaggerate the expense to put in, say, a new ventilation system, and to be less than forthcoming about exactly how much profits they have to earn to be willing to stay in business. On the other side of the equation, it is hard to measure the benefit bestowed by any one productive activity and even harder to measure the cost of the economic losses suffered by the victims of a materialized risk. This difficulty is compounded by our total inability to measure the pain, suffering or the emotional and psychic losses of such victims. The design of regulations is always going to be contested and their legitimacy easily contestable, making for great enforcement difficulties. These difficulties are compounded by the complexity and dimensions of the problems of drafting these kinds of regulations.

There are innumerable productive activities out there, all to be welcomed, to be sure, but they are so many and so varied, that regulators have to rely on information provided to them. There is no incentive for entrepreneurs, other than their assumed virtue, to establish that their particular enterprise presents risks and/or that they should spend money to avert them. Governments depend on their own instincts and, to some extent, on academic research (this is notoriously under-resourced) but, mostly, on the accumulated experience of harms suffered in the past. Hurt and killed workers, consumers, users, and visible environmental degradation are the main sources of information for regulators charged with balancing the supposed benefits of productive activities against the harms they inflict.

We get new safety standards when the harms inflicted by for-profit activities become too great, too politically embarrassing to accept. If one worker loses a hand in a machine, it is an accident; if ten workers lose a hand using the same machine, it is a cluster; if 100 lose their hand to this machine, we get a regulation requiring that a guard be put on the machine. This is the history of our Factory Acts and the regulations now attached to our contemporary omnibus health and safety legislation. And, it is the story of Lac-Mégantic. The media already carry stories as to how railways are saying that they will revise their own safety rules in expectation of a barrage of regulatory activity by governments that now have the bodies, destroyed property and polluted air and water of Lac-Mégantic piled on their doorsteps. The rail operators hope that the optics of sincere concern will minimize the extent and expense of the inevitable regulations to come. (Toronto Star, 19 and 20 July).

When the regulators have information about the potential for injuries to people, their property or the environment, they consult with the entrepreneurs whose initiatives create the potential harms but whose initiatives they do not want to inhibit. Thus, after the Lac-Mégantic disaster, we learned that federal rules already provided that trains left unattended must have sufficient handbrakes applied to prevent movement and that the operators of the trains must ensure that this has been done. But, in promulgating this standard, the government had entered into an agreement with the regulatees, the train operators, and the definition of what had to be done to comply with the requirement of ‘sufficiency’ is still kept secret. (Toronto Star, 19 July, 2013). This imposition of a public duty was privately arranged. Regulators rely on, and trust, the people they regulate. The cost-benefit analyses begin with the notion that virtuous actors must not be discouraged from engaging in virtuous activities. And the premise of the virtue of enterprise means that the field in which regulations will be crafted is seriously tilted in favour of allowing the benefit of production to be hyped and the risks and potential adverse impacts to be minimized. The starting point is that the materials used, the equipment deployed, the technologies employed, the mode of operation, are not to be questioned by outsiders, lest efficiency is impaired, unless there is clear evidence that the harms they might cause are likely to occur and, should they do so, be grave.

The starting point, then, is that entrepreneurs and their choices are entitled to the presumption of innocence.

Asbestos, lead, mercury, iso-cyenates, DDT, vinyl chloride, thalidomide, fracking, nuclear power plants, off-shore oil drilling, unsupervised cooltan mining by desperate people in Africa, peddling infant formula in poor countries without proper precautions, and so on, are all presumed innocent.

Unlike the racially different-looking people who are profiled, harassed, questioned when standing on bus stops, driving a car, walking in a fancy neighbourhood, and sometimes shot for being the wrong person in the wrong place;

Unlike Mohamed Harkat who was arrested pursuant to the National Security Act ten years ago on suspicion of being a sleeper agent. He was never convicted of such an offence and has, just now, been given mild relief from the restraints put on him. He was under house arrest for 7 years and had to wear a tracking bracelet at all times, a prisoner in his home. He now may have a mobile telephone, but must still allow the border police to get access to his record of communications kept by his server; he now may have a home computer, but it, too, is subject to monthly inspections. He may even travel outside the Ottawa area where he resides, but he must give the border agency his itinerary and five days’ notice;

Unlike the ‘militants’ killed by drones or any of the people on what the press call the ‘kill lists’ kept by the U.S. and NATO. None of those people are ever charged with an offence, let alone convicted of one;

Unlike all of us, as the Edward Snowden revelations told us. The dragnet nature of surveillance by NSA and PRISM is posited, not on the belief that those surveyed have done anything warranting action, but that they might do so. If we are not necessarily presumed to be guilty, we are certainly not assumed to be virtuous, unlike those who invest for profit and unlike the substances, equipment, technology and processes they use.

Entrepreneurs Are Capitalists

The assumptions about the virtuous nature of our private wealth generation regime and the attendant presumption of innocence mean that the regulatory balancing and bargaining takes place on a tilted field, tilted in favour of the so-called virtuous producers, guaranteeing that we will suffer more Westrays and Lac-Mégantics and thousands and thousands of unkind, hurtful, atomized cuts and harms. What is wrong with the assumed framework is that it assumes capitalism away.

This piece has persistently referred to capitalists as entrepreneurs wedded to profits because this is the characterization regulatory relies on to work its magic. It permits the treatment of profit-maximization to be portrayed as one undertaken for the public’s well-being. But, these benign-sounding entrepreneurs are capitalists and they do not care about the public’s welfare; only their own.

Capital and capitalists should not be seen as virtuous, as entitled to start with the presumption of innocence. Capitalists are out to maximize profits. They decide how much to invest, for what reason, for how long, where it is to be invested, what kind of equipment and resources and technologies will be used, how many workers and what kind of a labour force will be recruited, and so forth. This is called business planning. But, it is planning to enable them to become rich, it is planning that aims at the private accumulation of socially produced wealth. They are to do this by out-competing their rivals. Competition is the driver of the system. In recent times, this elemental force, competition, appears to have intensified, pushing capitalists to greater and greater extremes.

Capitalists need to, and want to, reduce the costs of production. They do this by forcing workers to compete with each other; unemployment is not such a bad thing; the increasing capacity to outsource work is a marvelous thing; they drive down wages and benefits by any means at hand, including the development of new technologies and innovative processes that allow them to displace human beings. They also reduce their costs to improve their profits, of course, by externalizing the costs of production, that is, by making others pay these costs. This includes the harms inflicted by the productive processes and the goods and services they produce. Injured and hurt workers and their dependents, consumers, users, and the environment in which we all live are to pay the price.

Inasmuch as regulations are imposed to protect workers and to internalize some of those production costs otherwise shifted to non-profit seekers, they are unwelcome. They are to be resisted. And capitalists do. They threaten to withhold their capital if regulators threaten them. They ask for ‘no or, at worst, reasonable’ regulation. It follows that a bargaining regime that lets these exploiters help set the limits on their exploitation is bound to fail. Capitalists will gild the lily when they tell the regulators about the risks and the precautions they are taking; they will prevaricate when they declare how high the costs of compliance will be; they will violate the standards set if this is likely to yield a profit, especially if they think they will not be caught and, if caught, not be punished very severely.

The obvious fact that capitalism and capitalists do not care a whit about the public welfare, should put some doubt in regulators’ minds about the virtue of ‘entrepreneurs.’ Yet, it does not. ”

Lying and cheating are built into a legal regulatory framework that pretends that it merely has to address the problems of productive activities engaged in by virtuous actors for virtuous reason. The frailty of this assumption is further demonstrated by the fact that regulatory theory ignores evidence all around us: in their drive to accumulate, capitalists will produce literally anything that sells, from food, to medicine, to tobacco, to alcohol, to guns, to body parts, to anything at all. The obvious fact that capitalism and capitalists do not care a whit about the public welfare, should put some doubt in regulators’ minds about the virtue of ‘entrepreneurs.’ Yet, it does not. The ugly drive to make everything saleable has no logical limits in capitalism, corroding our values and cultures. Capitalists are self-interested, uncaring, anti-social actors, not worthy of presumptions in their favour.

Capitalism and capitalists are not virtuous. The system is criminogenic.

So, while it is true that all productive activities entail risks, they are not the same risks for the same people or locales if the aim of production is not set by the competitive model to maximize profits by reducing costs. If people’s needs were the object of production, the safety of the workers doing the producing, that of the consumers and users of the goods and services produced, the maintenance of a healthy environment would be front and centre in what is now called business planning. More, it would make perfect sense to have all these people whose needs were most likely to affected, participate directly in the planning and in the decision-making about what risks to accept and about what needs they wanted to satisfy, rather than have them participate by bleeding and dying. Productive activities would still entail risks, but risks more democratically accepted and acceptable.

Until we make the points about the toxic and fraught nature of our regulatory framework and the radical changes this demands, the bleeding, the dying, the illnesses, the degraded environment will continue, and likely get worse.

Lac-Mégantic should make us angry. Let our anger be informed anger. Let us not go down the path of looking for reform to a regulatory system that is designed to fail us. •

Harry Glasbeek is a Professor Emeritus and Senior Scholar at Osgoode Hall Law School, York University, Toronto. His most recent book is Wealth by Stealth: Corporate Crime, Corporate Law and the Perversion of Democracy. This article is also published at Climate and Capitalism.




A Greek tragedy on the London stage: the City, the Eurozone crisis and an urban dark age to come

By Simon Parker [1] 

Capitalist perpetrators of the crash are intent on using the opportunity provided by austerity to divert political and economic power to compliant nation states and emergent para-sovereign bodies, such as the EU Troika, that operate outside the constraints of democratic control and public accountability.

greekPublicWorkers

Greek public sector workers strike at wage cut announcement. Demotix/Stathis Kalligeris. All rights reserved

Nor human Spark is left, nor Glimpse divine!
Light dies before thy uncreating word:
And Universal Darkness buries All.
Finis.”

Alexander Pope, The Dunciad, Book 4 (1743).

The financial crash of 2007-8 that saw trillions of dollars wiped off the value of pensions, savings, stocks and national income accounts had its origins in the sub-prime mortgage market in the United States [pdf] [17]and the obscure financial instruments by which these default-prone loans were subsequently parcelled up and traded.

Low-income people in poor urban neighbourhoods trying to keep a roof over their heads became the last El Dorado for an unregulated international credit industry that took in institutional prospectors from Iceland to Hong Kong.

The commodification of property—or what David Harvey refers to as ‘the secondary circuit of capital’—is the alpha and omega of the worst global economic crisis in living memory. ‘Urbanisation’, as Harvey [18]observes, ‘is a field for the deployment of capital, and in particular surplus capital’. Everyone, but especially the urban poor and the growing global army conventionally referred to as ‘the precariat’, will live with its damaging effects for decades to come.

As Harvey also explains, cities have provided the key sites of resistance [19] to the depredations of the world economy and the global environment by a self-serving governing, financial and corporate elite.

From the Paris Commune to the Occupy movement, from the indignados of Spain and the protesters of Syntagma square in Greece, from the summer riots in England in 2011 and Sweden in May 2013 and more recently to the mass urban protests of June 2013 in Turkey and July in Brazil—dissent and contestation is once more finding its voice in the public spaces of the world’s urban centres.

These protesters are clear that the roots of the crisis lie not in a failure of financial self regulation but in capitalism’s complete decoupling of the economic from the social, and the hyper-concentration of the world’s wealth into the hands of a very small but astonishingly powerful number of states, banks, transnational corporations and super-rich investors.

Over the past 30 years or so, democratic controls on the operation of global financial markets and over how businesses can ethically trade and operate have all but disappeared. At the same time the distinction between ‘public’ and ‘private’ in terms of government-business relations has largely been eroded, and with respect to the relationship between financial and political elites it has become entirely meaningless.

Set against the increasingly fragile economies of cities around the world is the financial colossus that resides within the municipality appropriately known as ‘the Corporation of London’. As the novelist and author John Lanchester reminds us, ‘The City is collectively astonishingly wealthy. It earns 19 per cent of Britain’s GDP.’ That means 1 pound in every 5 of Britain’s national net wealth is made within the square mile of the City of London—the smallest and richest Treasure Island in the world. In 2008, the year that Lehman Brothers collapsed, City financiers awarded themselves £19 billion in bonuses.[i]

City bonuses fell to a more modest £13 billion pounds in 2012—but this is still more than four times what the government expects to receive from the sale of the UK’s last remaining public asset—the  Royal Mail. The consequences remain, however, ‘almost entirely toxic’. ‘City money’, writes Lanchester, ‘is strangling London life’. But the toxic effect of The City and its financial institutions are not limited to the super inflated London property bubble, its tentacles spread from the mean streets of Detroit, Chicago and Cleveland to the debt burdened finance ministries of Dublin, Lisbon, Madrid, Rome and Athens.

At the centre of most of the dubious financial transactions that fuelled the City’s high octane bonus culture was Goldman Sachs—euphemistically known in financial circles as ‘Government Sachs’ because of its revolving door relationship with key central bankers, including the recently appointed Governor of the Bank of England, Mark Carney, and senior national and intergovernmental policy makers including former US Treasury Secretary Hank Paulson.

Goldmans played a key role in the promotion of cross-currency swaps in which a government would issues debt priced in, for example, dollars and yen that are then converted into euros and then swapped back into the original currencies at some future date.  In 2001-2002 Goldman Sachs’ London team were involved in a secret and complex deal with the Greek government that in effect allowed $10 billion worth of debt swaps to be hidden from the national balance sheet. Goldmans made a huge profit from the inflated transaction fees in putting together the derivate. Christoforos Sardelis [20], the head of Greece’s Public Debt Management Agency, said Greece ‘didn’t understand what it was buying and was ill-equipped to judge the risks or costs’. Nevertheless one very beneficial outcome of the deal was to create the impression that Greece was reducing its public debt liabilities, whereas thanks to an estimated €2.3 billion loss on the Goldmans swap it was racking up even more debt. By 2003, Standard and Poor was so impressed by Greece’s illusionary debt management policy that it upgraded the country’s debt rating from A to A+.

Save the banks

Six years later it had become clear that with a debt in excess of €300 billion, Greece could no longer service its debt repayments and S&P moved to downgrade Greek debt to junk bond status [21]. In 2010 the EU discovered the scale of the public accounting discrepancy that the Greek government with the aid of Goldman Sachs had been able to conceal. The reported 2009 budget deficit of 3.7 per cent turned out eventually to be 13.6 per cent—more than four times higher than the limit allowed by EU rules. Eventually, the Greek Prime Minister, George Papandreou was forced to agree to a bail-out and a Troika comprising the European Central Bank, the European Commission and the International Monetary Fund effectively took command of the Greek economy.

The key EU negotiators of the Greek ‘rescue package’ included Mario Draghi, President of the European Central Bank and an ex senior Goldman Sachs partner and fellow Goldman Sachs alumnus, Jean-Claude Juncker, the former President of the Eurogroup of EU Finance Ministers. As Prime Minister of Luxembourg, Juncker understands the requirements of international financial investors and the need to protect their assets from prying eyes and unwarranted tax demands. His country has some of the most secretive banking laws in Europe and during the 2000s Luxembourg’s financial institutions carried assets worth in excess of 2,600 per cent of GDP (the highest figure for Greece was 206 per cent).

Along with Angela Merkel and Mario Draghi, Juncker was instrumental in imposing the bail out and the accompanying painful public expenditure reductions that were designed to prevent Greek banks and the Greek state from defaulting—thus ensuring that the Greek population and not foreign investors would endure the ‘hair cut’.

Since the crash in 2007:

  • – Greece’s deficit has grown from 6.8 per cent of GDP to 15.6 per cent in 2009 and falling to only 9.2 per cent in 2011.

– The Greek economy has shrunk from a real GDP growth rate of 3 per cent in 2007 to ever increasing contractions in the subsequent austerity years of -0.2 per cent, -3.2 per cent,-3.5 per cent and -6.9 per cent in 2011.

  • – From 2004 to 2009 average wages grew from between 2 and 7 per cent per annum, in 2010 salaries fell by 3.8 per cent and in 2011 by 4.7 per cent.
  • – Household disposable income growth fell from 9.4 per cent in 2007 to minus 10.3 per cent in 2010.
  • – Unemployment, which had been 7.7 per cent in 2008 climbed to 17.7 per cent in 2011 and is currently running at 27 per cent.
  • – Nearly two-thirds of under-25 year olds in Greece are without work.

Recognising that the greatest share of the austerity measures had fallen on pensioners, those with low incomes and the unemployed, the IMF wrote something of a mea culpa in its ‘ex post evaluation’ of the Exception Access Agreement for the Greek government in June 2013:

There are also political economy lessons to be learned. Greece’s recent experience demonstrates the importance of spreading the burden of adjustment across different strata of society in order to build support for a program. The obstacles encountered in implementing reforms also illustrate the critical importance of ownership of a program, a lesson that is common to the findings of many previous EPEs (ex-post evaluations) (my emphasis).

But Christine Lagarde’s evaluators saved their harshest criticisms for the IMF’s European partners:

the EC tended to draw up policy positions by consensus, had enjoyed limited success with implementing conditionality under the Stability and Growth Pact, and had no experience with crisis management. The Fund’s program experience and ability to move rapidly in formulating policy recommendations were skills that the European institutions lacked (my emphasis).

Unsurprisingly this was a position that the European Commission rejected. A Commission spokesman told The Daily Telegraph [22]:

We fundamentally disagree. With hindsight we can go back and say in an ideal world what should have been done differently. The circumstances were what they were. I think the Commission did its best in an unprecedented situation. We tend to forget that when the discussions were taking place the situation was much, much worse. The fear of contagion and the high volatility…

Juncker was rather more conciliatory, claiming that the EU was ‘overly optimistic’ in the early stages of the €240 billion bail out operation—not about the effectiveness of the austerity package but about the Greek government’s readiness to engage in deep public sector cuts early enough. There were no apologies, however, for forcing the leader of PASOK into a humiliating repudiation of his party’s social democratic values and political past—however corrupt and self-serving its hold on power had undoubtedly become. In his endorsement of the European Financial Stability Facility for Greece, George Papandreou wrote:

We support the ambitious privatization and public asset development plan under the program…our Party has decided and supports the deep structural reforms in the labor, product, and service markets. The agreed adjustment of labor market parameters have been taken in order to give a strong upfront impetus to unit labor cost reductions and promote employment and economic activity [sic].

 

European decisions that will continue to enhance the effectiveness of the wider firewall, calm the international bond markets, and oversee the European and global financial system in areas such as rating agencies, will be crucial for the effectiveness in similar programs. [PDF [23]]

Despite the fact that well over 60 per cent of the Greek people oppose the scale and severity of the austerity measures—privatisations, fire sales of government assets, wage reductions, increased taxes, pensions cuts and public service reductions (including the switching off of the national state TV and radio network) are all seen as essential by the Troika and the current coalition in order to reassure the world’s bond markets that the sick man of Europe is continuing to take the extremely nasty medicine.

It’s politics, stupid…

However, a report by J.P. Morgan[ii] explains what investment banks and their political allies in Northern Europe really thought the roots of Southern Europe’s debt crisis were:

At the start of the crisis, it was generally assumed that the national legacy problems were economic in nature. But, as the crisis has evolved, it has become apparent that there are deep seated political problems in the periphery, which, in our view, need to change if EMU is going to function properly in the long run.

The political systems in the periphery were established in the aftermath of dictatorship, and were defined by that experience. Constitutions tend to show a strong socialist influence, reflecting the political strength that left wing parties gained after the defeat of fascism.

Here we have a frank admission that the very principles of social solidarity and democratic advance which the European Community’s founding fathers—Jean Monnet and Robert Schuman hoped would banish Nazism and Fascism for ever—are identified as a major obstacle to the imposition of the type of financial and labour force discipline required by ‘self-regulating markets’ in the southern Eurozone:

Political systems around the periphery typically display several of the following features: weak executives; weak central states relative to regions; constitutional protection of labor rights; consensus building systems which foster political clientalism; and the right to protest if unwelcome changes are made to the political status quo.

The shortcomings of this political legacy have been revealed by the crisis. Countries around the periphery have only been partially successful in producing fiscal and economic reform agendas, with governments constrained by constitutions (Portugal), powerful regions (Spain), and the rise of populist parties (Italy and Greece).

Since the end of the dictatorships, not only have Europe’s Mediterranean governments failed to stand up to the demos and organized labour, and to silence protests against austerity and inequality, but there has been a lamentable decentralization of power to regions and cities where local citizens are more emboldened to demand control of the economic system and the institutions involved in its reproduction. The strategy of the J.P. Morgan doctrine—and there is reason to believe it is widely shared among the chief negotiators of the Troika—is to stockade all economic and political power at the level of the nation state, the better to apply ‘post democratic’ shock doctrine to the extremities of neoliberal-resistant Euroland.

A new urban dark age

One of the most visible consequences of the devolved austerity of the on going financial crisis is that cities around the world are literally being switched off. Civic leaders across the United States and Europe no longer have the money even to keep streetlights on all night. Throughout most of July, the Greek Central Union of Municipalities decided to suspend all municipal services because the central government has committed itself to sacking 15,000 public sector employees by the end of 2014 and to transferring another 12,500 to new positions this year.

Under the instructions of the German Finance Minister, Wolfgang Schäuble and the Troika, the Greek parliament passed the bill [24] by all of 3 votes in the face of angry protests. But as the uneven geography of the new austerity intensifies we can expect to see more allied municipal and regional contestations of this nature. The keenly fought battle over an independent Scotland, and the recent speech by the leader of Plaid Cymru, Lean Wood [25], on the need for a national-regional alliance as a counter-balance to the economic strangle-hold of the City of London, are examples of a more assertive territorial politics in the context of the UK which are beginning to find echoes in England’s cities and regions, as Alan Harding [26] pointed out in his keynote lecture to the University of York’s Centre for Urban Research’s Post-Crash City conference.

The Federal Republic of Germany has 130 billion euros in combined municipal debt with no prospect of Angela Merkel coming to the rescue any time soon—this in part explains the widespread hostility in Germany to further bail-outs for the government of Greece. Der Spiegel [27] reports that even the small town of Goslar in Lower Saxony needs to cut its spending by half to balance its books. The mayor has therefore decided to turn off the streetlights at midnight in a bid to save money. He is likely to be elected unopposed at the next election. Matthias Bernt [28] has shown that in East Germany, rather than ‘growth coalitions’ we are now seeing ‘grant coalitions’ as entire cities find themselves dependent on welfare hand-outs from Berlin. How long this internal solidarity will continue as Germany increasingly polarises between a conservative west and a socialist east remains to be seen. But with Anglo-American style workfare being enthusiastically rolled out by the Merkel government, the idea that Germany has somehow managed to escape the global financial crisis through export led growth needs qualification. In 2008 (when the EU27 recorded its lowest unemployment figures for some years) unemployment rates of over 15 per cent were recorded in Halle, Leipzig and Berlin [Eurostat [29]].

In England and Wales some £7.5 billion is being cut from local authority budgets up to 2015—still only 40 per cent of the City bonuses paid in 2007—but amounting to a 25 per cent cut in budgets meaning some local councils will be unable to meet their statutory service obligations. Some may even follow West Somerset into bankruptcy. According to the Local Government Association, the Conservative-Liberal Democratic Government has no plan for managing the serious problems with local authorities finances or service provision. This is seen as a problem because ‘in the current funding environment…there is an increased risk that a number of councils become financially unsustainable’.[iii] Outsourcing and the strategic abandonment of all but essential services is becoming the norm in local authorities in many parts of England and Wales—with the deepest cuts affecting the larger and poorest conurbations outside London.

In the United States, Motown—the once great city of Detroit, home to Ford and General Motors has officially filed for bankruptcy [30]. Its state-appointed emergency manager, Kevyn Orr is threatening ‘haircuts’ for municipal bond holders but also redundancies and pension withholdings for municipal workers.  Decades of the erosion of the city’s tax base by mostly white population flight and the contraction of the auto industry has left the city bankrupt and deemed unworthy of ‘too big to fail’ bail outs from the state and federal executives. As Jamie Peck [31] pointed out in his keynote speech ‘Pushing Austerity’ for the Post-Crash Cityconference, dozens of smaller US cities are also on the point of bankruptcy and many are reducing their local governments to fire and police services, and some such as Josephine County [32] in Oregon, not even that. Worse even than Goslar, the city of Highland Park [33] in Michigan has had all its street lights removed because it is unable to pay its electricity bills—just one of the many cities that are going dark right across America as a result of austerity-driven public divestment and a political climate that is increasingly hostile to the provision of collective goods through taxation.

Conclusion

For the still powerful financial masters of the universe like J.P. Morgan and Goldman Sachs, the problem with the world’s economy is that it suffers from an excess of democracy and political permeability. The emergence of the Troika demonstrates the advent of an incompetent, fractious yet powerful para-sovereign cartel that is partly dependent on the constitutional legitimacy of national-state executives but strongly conditioned and staffed by a small coterie of international financial elites. The raison d’être of the Troika and its equivalent in the United States surrounding Ben Bernanke’s Federal Reserve Bank and the ‘too big too fail’ behemoths of Wall Street is the maintenance of an unregulated financial system that nevertheless makes full and extensive use of national sovereignty to meet the costs of its morally hazardous gambling addiction.

At each descending territorial scale, the cascading revanchism of austerity capitalism intensifies and depoliticises—denying regions and cities the resources to sustain economic life and growth and instrumentalising their political leaders as agents of self-inflicted social harm. In her final book published in 2004, Dark Age Ahead, Jane Jacobs wrote:

Post-agrarian states do not increase their wealth by aggrandizing territories and seizing lands and natural resources…the key to post-agrarian wealth is the complicated task of nurturing economic diversity, opportunity, and peace without resort to oppression. Dark Ages and spirals of decline are in prospect for agrarian cultures that can’t adapt themselves to generating wealth through human ingenuity, knowledge and skills.

The 2007-8 financial crisis and its long aftermath has seen the domination of the world’s economy by those who have used their ingenuity, knowledge and skills to generate wealth only for a tiny fraction of the world’s population—while impoverishing and commoditising the rest. Cities and regions which have been too long the victims of this asymmetric warfare of accumulation by dispossession must become the rallying grounds of a counter-movement that re-socialises the economy as a medium of exchange based on principles of care and solidarity. Without concerted collective action against the dehumanizing logic of the self- regulating market, the threat of a long de-civilising spiral of decline remains an all too real prospect. Another world is not only possible, but as Immanuel Wallerstein insists, creating an alternative to capitalism is an urgent and essential task for the long time survival of human society.

[i] John Lanchester, Cityphilia, London Review of Books, 3 January 2008 http://www.lrb.co.uk/v30/n01/john-lanchester/cityphilia [34]

[ii] J.P. Morgan, ‘The Euro area adjustment: about halfway there’, Europe Economic Research, 28 May 2013

http://culturaliberta.files.wordpress.com/2013/06/jpm-the-euro-area-adjustment-about-halfway-there.pdf [35]

[iii] Department for Communities and Local Government: Financial sustainability of local authorities – Public Accounts Committeehttp://www.publications.parliament.uk/pa/cm201314/cmselect/cmpubacc/134/13404.htm [36]

 

This article is part of an editorial partnership between openDemocracy and the Centre for Modern Studies at the University of York. It was funded by the University of York’s Pump Priming Fund, the British Academy, and York’s Centre for Modern Studies.

 

 

 

 

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