Tag Archives: Losing Control

economics, politics

Pathologies of inequality

As the rich get richer, others suffer, but how this happens isn’t well known.

            Economic inequality can be toxic in many ways. The poor are the most obvious casualties. More generally, entire communities can be jeopardised by the political fallout from corrupted political institutions.

            These thoughts arise from reading four books that address inequality from dramatically different angles: waste, offshore finance, security, and tech platforms. Yet they have a common theme: the wealthy are indirectly causing havoc in society, and few people know about the scale of the damage because so much is done in secret. After describing the four books in turn, I’ll finish with a few thoughts about the implications.

Waste wars

Alexander Clapp’s book Waste Wars is a remarkable investigation of the afterlife of Western consumer products. Rather than countries handling their own waste, much of it is shipped to poor countries where it is dumped or deconstructed in highly risky and environmentally damaging operations.

            Clapp uses personal stories, including his own role, to motivate the topic, then delves into history and politics. The book has four main parts: (1) landfill in Guatemala; (2) e-waste in Ghana; (3) shipbreaking in Turkey; (4) plastic waste in Indonesia.

            For me, the highlight of his account is the story of electronics sent to Ghana, where a toxic deconstruction takes place, for example by burning plastics to extract copper. An entire community is supported by this noxious enterprise. Exporters get around anti-dumping regulations by labelling the material as used electronics; some doesn’t work, some does for weeks or a couple of years. As a consequence, another new industry has arisen in Ghana around using workable phones to run scams, with big scores from Western dupes used, ironically, to purchase new iPhones.

            Clapp tells how for decades China imported most of the world’s waste plastic, but then there was a shift. Chinese production of plastics became cheaper and in 2018 the government banned importing plastic waste, after which new destinations were found, including Indonesia.

            Waste Wars is an engaging study, giving close-up views of the lives of people dealing with waste or affected by it. The vivid detail almost obscures the big picture, a form of neocolonialism — exploitation of former colonies — hidden from Western publics, that makes recycling of consumer goods seem responsible, so long as the end of the waste journey is invisible.


Alexander Clapp

            There doesn’t seem to be much organised resistance to the waste trade. Some governments have legislated against it, but exporters can get around the rules, and some entrepreneurs (for example, in Turkey) seek waste.

            In summary, Clapp exposes the waste trade and its huge damage, and how it maintains a façade of responsibility. As he says, the driver is continually expanding production.

Offshore

The Cayman Islands are known as a place to have a bank account if you want to hide a large amount of money you don’t want others to know about, and don’t want it to be taxed. It’s called a tax haven. Switzerland is another favoured banking destination for ill-gotten gains, holding billions of dollars stolen by dictators from the countries they rule.

            Tax havens don’t get a lot of media attention, but there are some penetrating studies. By far the most engaging that I’ve read is Offshore by Brooke Harrington. An academic, she decided to learn about how wealthy people hide their cash by training to become a wealth manager. She did this because she knew something important about the wealthy: they don’t handle their own finances. Through discussions with experienced wealth managers, she learned about the secretive domain of tax havens.

            But she prefers the term “offshore finance,” because avoiding tax is just one of many functions of having money that others can’t access. It’s a convenient way of keeping your cash when going through a divorce or avoiding laws on campaign finance and environmental control. (The Tax Justice Network prefers the name “secrecy jurisdiction.”)

            There are many places where you can obtain this sort of protection. It used to be that the prime destinations were small jurisdictions like the Cayman Islands, but now the biggest harbour for illicit money is — I never would have guessed — the US.


Brooke Harrington

            “Offshore” really just means foreign. You live in one country and abide by its laws, including tax law, but you keep a stash of your money in a bank in another country where it’s taxed at a low rate, or not at all.

            Harrington says that offshore funds are huge, amounting to maybe 10% or more of the world’s wealth. And, she emphasises, this is an unproductive stash of funds. It’s not like an investment used to foster economic activity, but rather an extraction of potential investment from the world’s economy, money that might otherwise be spent on housing, healthcare and the like.

            Harrington says that offshore operations are not capitalist, but rather closer to feudal. The wealthy people who hide their money feel they are entitled to have their money, avoiding tax and regulatory scrutiny, while benefiting from services such as roads and schooling. Their sense of entitlement is so great that some think that laws and mutual-obligation expectations simply don’t apply to them. “Offshore finance survives and thrives based on a logic of predation rather than capitalism.” (p. 40)

            Secrecy is crucial to offshore finance. Without it, the whole operation would be in jeopardy. “Secrecy then enables the perpetrators to avoid legal and financial accountability.” (p. 42) Indeed, offshore accounts might be called secrecy accounts. Harrington notes that lists of the world’s wealthiest individuals are inaccurate, because there are so many billionaires whose assets are secret.

            “Thus, government and corporate leaders who appear in the offshore leaks should be understood not just as corrupt people who got caught: they are elites in revolt, engaged in a political project of refusing obligation to the societies that allowed them to become wealthy and powerful.” (p. 53)

            In 2016, a leaker released a stash of documents called the Panama Papers, comprising 2.6 terabytes of data and 13.4 million documents from the Panamanian firm Mossack Fonseca, showing accounts by many prominent individuals. This release generated headlines at the time, and later there were similar exposes with the Paradise and Pandora Papers. Despite these disclosures, Harrington says, much about offshore finance remains unknown.

            Harrington likens offshore finance to colonialism, with the difference that colonialism operated in the open, whereas offshore finance operates secretively, all the better to prevent “the revolt of the colonized” (p. 107). The colonised here refers to ordinary taxpayers who contribute to society and are exploited by the wealthy who avoid their obligations to the common welfare.

Losing control

Peace researcher Paul Rogers wrote the book Losing Control, first published in 2000. It is an analysis of global security, remarkable in anticipating future events, notably the 11 September 2001 terrorist attacks. Rogers identified several key developments that drive military and security politics. First is the growth of economic inequality, exacerbated by the rise of neoliberalism. Second is environmental constraints on growth, especially climate change, which means that economic growth will never be able to bring Western-style affluence to all the world’s population. Third is a Western military paradigm based on controlling challenges by force, rather than addressing the driving forces behind discontent, namely inequality combined with resource constraints.

            Add to this Western welfare systems, which had served to pacify working-class populations excluded from the massive economic growth that mainly benefited the wealthy. These systems are highly attractive to the excluded in less affluent countries. Finally, to top it off, there is asymmetric warfare. It has become ever more difficult for Western militaries to defend against adversaries using non-standard tactics such as suicide bombings.

            Rogers anticipated the rise of anti-immigrant politics in the West, as government leaders stigmatised immigrants as the source of problems, rather than their own policies that exploited people around the world, causing resentment and desperation.


Paul Rogers

            Losing Control has gone through four editions, the latest published in 2021. (I commented earlier on the third edition.) Rogers continues his careful examination of security developments, showing the power of his analysis for understanding and anticipating trends. His central concern is growing inequality in the face of environmental constraints as central drivers of challenges to Western hegemony, lamenting that these challenges will continue as long as the Western response is trying to repress them rather than address the drivers. As he puts it, there is a

“widening socio-economic divide resisted by an increasingly knowledgeable but marginalised majority of the world’s people, environmental constraints set largely by the impact of human activity on the global environment, and a marked trend by elite communities to address these issues by seeking to maintain the status quo, through military force if necessary.” (p. 171)

The age of extraction

Years ago I commented on Tim Wu’s book The Attention Merchants, and hence was keen to read his latest book. It’s about tech platforms like Amazon, Meta and Google. The title is The Age of Extraction, and his argument is that today’s tech company behemoths are extracting enormous amounts of money from their operations. They are akin to monopolies.

            Consider Amazon, where you can buy just about anything, often at a lower price and with a quicker delivery than from any other seller. Wu says Amazon has become the modern-day equivalent of a town square, a place where shops and people congregate for mutual benefit. The town square thrived by remaining neutral to its tenants and consumers. But Amazon is different from town squares in one important way: it is a profit-seeking company. Its semi-monopoly position allows it to squeeze businesses by reducing returns to them.

            Wu describes Amazon’s strategy in five stages.

  • Make the platform essential by setting low prices for both buyers and sellers.
  • Eliminate rivals by under-pricing or buying them.
  • Replicate dependent businesses, for example printing books itself.
  • Make it difficult for buyers and sellers to leave.
  • Raise fees and prices, and have more ads, to capture data and attention.

 

This is a general strategy of big tech: grow and prevent others from growing to a large scale. A key tool is buying potential rivals. Platforms try to prevent users from leaving — that’s what matters most to them. What users do on a platform matters less than that they are doing something, because the platform always takes a cut.

            Wu says that we, the users, are seduced by convenience. It’s a boring topic, but important, because it discourages exit. “To resist convenience — to not own a mobile phone, to avoid using online maps — has come to require a special kind of dedication that is often taken for eccentricity, if not lunacy.” (p. 79)

            Tech platforms do not operate in secrecy. Yet, most people do not realise they are giant extraction machines, sucking money out of users and small businesses, driving competitors to the wall. It’s a sort of invisibility in plain sight, with convenience as one of the ways that users are diverted from concern about exploitation.


Tim Wu

            Wu argues that there needs to be a balance between corporate power-seeking and government regulation. Today, while platforms are in ascendance, government regulation is too weak. This leads to an alarming sequence, outlined by Wu (pp. 122-124).

  • Monopolies develop.
  • The monopolies increase their extraction of wealth from users, creating a two-tier economy of the wealthy and the rest.
  • Mass resentment emerges, driven by inequality.
  • The government fails to respond to majority concerns by continuing to allow monopoly businesses to extract wealth.
  • An authoritarian leader comes to power, promising to address common concerns.

The end point of growing inequality

Wu’s sequence is alarming because it fits the pattern seen in many countries with the rise of populist authoritarian leaders. Rather than address the underlying causes of discontent and resentment, especially inequality, authoritarian leaders find scapegoats. Immigrants, minorities and dissidents are good for this purpose.

            Harrington, in her study of offshore finance, says that it’s possible that the entire enterprise may correct its own injustices, but that “Another possible trajectory is more common historically: many systems that create extreme imbalances of power and wealth simply self-destruct.” (p. 116)

            Then there is Luke Kemp, author of the massive and crucially important study of societal collapse titled Goliath’s Curse. Kemp examined dozens of states and empires, which he calls Goliaths. They operate by extracting wealth from populations to serve a small ruling elite. However, Goliaths have a weakness: growing inequality. Combined with power struggles among elites and external shocks like natural disasters, Goliaths always collapse eventually. (Afterwards, paradoxically, most people are better off.) Kemp says the world is now in the grip of a global Goliath, which means the collapse will be global.

Inequality tactics

Some years ago, my colleague Susan Engel and I wrote an article about the methods by which the scale of economic inequality is hidden or justified. We discussed five methods that reduce the outrage that might be generated by awareness of inequality.

  • Cover-up. When people aren’t directly aware of inequality, they are less upset about it. Gated communities, for example, prevent mixing between the rich and the poor.
  • Devaluation. Poor people are called lazy, unambitious, incompetent and ignorant.
  • Reinterpretation. Inequality is said to be an inevitable part of economic growth, which will improve everyone’s situation.
  • Official channels. Government policies support the wealthy.
  • Intimidation and rewards. Those who challenge inequality — such as tax-haven whistleblowers — may be threatened or attacked. Those who support the wealthy are rewarded.

            The basic idea is that many people are angry or disgusted by extreme levels of inequality, of contrasts between the wealthy and the impoverished, so a range of methods serve to prevent such reactions. The four books discussed here reveal some of these methods as applied to specific cases.

            Waste Wars. The waste trade should be a scandal, but most people don’t know anything about it, so cover-up is the key method of reducing public outrage. As well, affluent people are lulled into believing they are doing the right thing by recycling their waste.

            Offshore. The key method by which offshore finance, and its contribution to extreme inequality, is through secrecy.

            Losing Control. Wars and anti-terrorism alarmism divert attention from inequality and resource constraints, which are driving revolts from the margins. Immigrants are blamed for social problems, a reinterpretation technique.

            The Age of Extraction. Platforms like Amazon extract money and data from ordinary people and put it in the hands of the wealthy. The level of extraction is not obvious, and buyers are attracted by price and convenience.

What to do?

Challenging economic inequality is not easy. The wealthy have a great deal of power and can use it to perpetuate their advantages. Nevertheless, they are vulnerable, because, as Harrington says, offshore finance “conceals both the real extent of economic and political inequality and its source: a radical and deeply unpopular agenda that is not just anti-democratic and opposed to the rule of law but also surprisingly anti-capitalist.” (p. 38)

            Challenges can be classified as counters to the five methods listed above.

  • Exposure. Revealing the extent and impact of inequality.
  • Validation. Treating the poor with respect, and making connections with them.
  • Interpretation. Presenting data on inequality and its damaging effects, countering lies and deceptive framing.
  • Mobilisation. Taking action against inequality, like the Occupy movement, and in support of greater equality, like the free software movement.
  • Resistance to intimidation and rewards. Continuing to speak out despite threats, and refusing to support exploitation by the wealthy.

All four books serve as exposés, fitting the categories of exposure and interpretation. The challenge is to put inequality on the agenda as a key driver of today’s social problems.

Brian Martin
bmartin@uow.edu.au

Thanks to Susan Engel for useful comments.

economics, military, politics

Understanding global conflict

To get a handle on what’s happening in the world, read books like Paul Rogers’ Losing Control.

 

How can you make sense of world affairs? There are so many countries, politicians and power plays. If you follow the news, you hear about developments concerning tariffs, wars, elections and bombings. But how does it all fit together? The news tells mostly about events, with seldom anything much deeper to help put the events into context.

I’ve found that I learn far more by reading a book by a well-informed author, one that provides a framework for understanding. To aid my comprehension, whenever I read a book I take notes on it, including bibliographic details, a summary of the contents and specific points (with page and paragraph numbers) that are relevant to my interests. Sometimes the notes are just half a page; sometimes they are many pages long.

Going through my files recently, I came across my notes about a book by Paul Rogers titled Losing Control: Global Security in the Twenty-first Century. Published in 2000, I read the book two years later, and wrote in my notes that Rogers was remarkably prescient: his analysis seemed to have anticipated world events. In particular, between publication in 2000 and when I read the book, there were the terrorist attacks of 11 September 2001.

Looking at my notes in 2020, I was again impressed with Rogers’ assessments. Losing Control was a useful guide to understanding world affairs. I decided to read the book again, in the process discovering that there had been a second edition in 2002 and a third in 2010. Conveniently, these new editions were the original book with supplementary chapters.

Nuclear war-fighting

Losing Control starts off with a detailed analysis of nuclear politics during the Cold War. This may now seem irrelevant given that the Soviet Union collapsed in 1991 as did concern about nuclear war. Actually, though, it is a useful reminder that, for several decades, that the world was worryingly close to devastation. Furthermore, Rogers goes on to point out that, contrary to the impression you might get from the news, the threat of nuclear war has not disappeared. Governments have been “modernising” their arsenals, namely making them more effective.

Rogers says the major nuclear weapons states — US, Russia, UK, China, France, Israel, India and Pakistan — have no intention of ever relinquishing their arsenals. Instead, hypocritically, political leaders roar with indignation should some other state seek to acquire nuclear weapons. Just think of the attention given to the possibility of Iraqi, North Korean and Iranian weapons.

During the Cold War, the standard theory concerning nuclear weapons was that they served as a deterrent against attack: US and Soviet nuclear forces, by being poised to destroy each other’s population centres, discouraged initiating an attack. This was called mutually assured destruction. However, unbeknownst to most members of the public, both sides had strategic plans and targeting policies that were based on war-fighting: they hoped to be able to destroy their opponent’s communication and weapons systems in a first strike, thus winning a nuclear war.

            Back in the 1980s, I studied the effects of nuclear war and read about plans for nuclear war-fighting. The information was available but not widely known, with the result that most people did not appreciate how dangerous the so-called strategic balance was in those years. Rogers, in recounting these matters, provides a corrective to mistaken ideas about past and present nuclear threats.

Three drivers

Rogers argued that international conflict over the next two or three decades would be driven by three factors. The first is economic inequality, which is exacerbated by neoliberal economic policies. Inequality is a source of tension: some of the have-nots may want to challenge the dominant order violently; others may seek to migrate to more prosperous regions, triggering tensions over immigration.

            The second factor is environmental constraints. The massive expansion of human activity puts strain on land, water and the air. Resources, especially oil, become bones of contention. The wars in the Persian Gulf are partly resource-related. Rogers was initially writing in 2000, after the first Gulf war in 1991 but before the 2003 invasion of Iraq.

Today the most obvious environmental constraint is climate change. Already in 2000 Rogers identified this as a crucial factor in international conflict. Affluent industrialised countries have generated the most greenhouse gases, yet they want to keep consuming despite the looming dangers. It is at this point that environmental constraints interact with economic inequality.

            The third factor is the commitment by dominant powers to address these issues by attempting to maintain the status quo, if necessary by force. Instead of addressing inequality and environmental constraints, Western governments have tried to subdue challengers, especially those that use force themselves. The context is that groups with relatively few resources and little technological expertise have the capacity to wreak havoc in rich developed societies. Putting this another way, industrial societies have developed in ways that make them vulnerable to attack.

Security paradigms

Rogers describes two security paradigms, namely assumptions and ways of thinking that guide action. The first paradigm, which he dubs “old,” is based on attempting to maintain control. This is called “liddism”: the dominant powers attempt to keep a lid on the discontent stimulated by continuing economic inequality and escalating environmental impacts. Rogers’ second paradigm is quite different. Instead of trying to maintain the status quo and keep a lid on discontent, this alternative “new” paradigm involves addressing the roots of conflict: inequality, environmental impacts and military deployments to maintain them.

Rogers gave considerable attention to the 1993 attack on the World Trade Center. A truck filled with explosives was driven into an underground parking station and detonated. However, the plotters had not positioned the location quite right to achieve their goal of bringing down the tower. If they had succeeded, 30,000 people might have been killed. Concerning this possibility, Rogers rhetorically asked “… would it have resulted in any rethinking of security? Probably not. A more likely result would have been a massive and violent military reaction against any groups anywhere in the Middle East that were thought to have had even the slightest connection with the attack.” (p. 118)


Damage from the 1993 World Trade Center bombing

            How’s that for a prediction made in the year 2000? We now know that this is the security trajectory followed after 9/11. There was a declaration of a “war on terror” with no possibility of peace envisioned, the invasion of Afghanistan, the invasion of Iraq, a continuation of neoliberalism and economic inequality and a slow and tepid response to climate change. In contrast, the new-paradigm response to 9/11 would have been to treat the attacks as a criminal matter. It didn’t happen.

The 1993 attack highlighted the interaction of the three factors that Rogers identified. Resource factors, namely the location of cheap and abundant oil in the Gulf region, led to US military involvement in the Gulf, including troops stationed in Saudi Arabia. The quest for control over energy supplies aggravated the perception of inequality, with Western affluent countries seeking control. The attack did not lead to any change in ways of thinking about security.

Learning from Rogers

There is a lot to learn from Losing Control. It contains all sorts of information about international security, from nuclear arsenals to political grievances to neoliberalism. The information is presented in a coherent way, enabling an appreciation of trends and impacts.


Paul Rogers

            More important than the information is the framework that Rogers developed to understand the driving forces underlying the security environment: economic inequality, environmental constraints (especially Gulf oil politics and climate change) and the old security paradigm of trying to maintain control. Grasping these three factors and their interactions provides a remarkably powerful way of understanding geopolitical developments.

Reading and digesting Losing Control offers a way of making sense of the crush of current affairs. You could spend years watching or reading current affairs in the news and still have less idea of what it all means than by spending a few hours reading this book. Alternatively, if you prefer shorter treatments, Rogers writes a regular column for openDemocracy.

This speaks to a more general issue. By acquiring an understanding of patterns and driving forces, it’s possible to make sense of the world far more efficiently and accurately than by taking in one event after another. If you can find the right book or article, one that cuts to the core, you can know far more with far less time and effort.

To find works like Losing Control isn’t easy. If you want to acquire powerful conceptual tools for making sense of the world, the initial challenge is to find lucid, insightful expositions. This can take a bit of effort. Then it’s a matter of spending some time reading history, politics, psychology or whatever fascinates you and of keeping doing this despite the temptations to read the latest headlines and social media commentary.

Postscript

How’s this for a prediction made in 2010, in the third edition of Losing Control, before the emergence of Islamic State?

 “Even if US troops are largely in barracks, they can still be readily represented by al-Qaida propagandists and others as ‘ghost’ occupiers of a major Islamic state. Given the decades-long timescale of the al-Qaida movement’s aims, and the potentially decades-long significance of Persian Gulf oil, the value of Iraq to the al-Qaida movement may be far from over.” (p. 168)

The fourth edition appeared in 2021, covering another decade of world events, with the same basic argument:

“Three interlinked trends in world affairs are leading to a thoroughly unstable and violent world. These are the combination of a failing economic system that increases socioeconomic divisions and mass marginalisation, an impact on the world environment that is fast exceeding the capacity of the global system to self-regulate and a security paradigm that prioritises the status quo and ensures the well-being of wealthier societies.” (p. 225)

Brian Martin
bmartin@uow.edu.au