They're All Dammed

The British government appears ready to fund another ethnic cleansing scheme in Turkey

George Monbiot. Published in the Guardian 26th February 2002

Events in isolation do not establish that a government is corrupt. Tony Blair's support for Lakshmi Mittal, the Labour donor hoping to buy Romania's steel industry, looks suspicious, but could, perhaps, be the result of a misjudgment. To suggest that a government is corrupt, you must first detect a pattern of behaviour.

Three months ago, human rights and environmental campaigners won a famous victory. The Turkish government, with the help of the British company Balfour Beatty, had been planning to drown the ancient city of Hasankeyf, in Anatolia. The Ilisu dam was presented to the public as an electricity scheme, but for Turkey there were certain collateral benefits. Hasankeyf is the cultural capital of the Kurds, whom the authorities have been seeking to crush and assimilate. By submerging it, the government would displace some 78,000 Kurds from their homes. And by damming the Tigris it could hold its troublesome neighbours Syria and Iraq -- whose survival depends on the river's water -- to ransom.

Scandalously, the British government planned to underwrite this project. The export credits guarantee department (ECGD), which is a division of the department of trade and industry, would provide pounds140 million of insurance for Balfour Beatty. If Turkey had failed to pay Balfour Beatty on time, the department would have given the company the money it was owed, then added the deficit to Turkey's national debt. As companies will not proceed with projects like this without guarantees from their governments, the ECGD's backing was critical to the construction of the Ilisu dam.

So the Labour government, which has made so much of its commitment to international human rights, peace-keeping and environmental protection, was preparing to support a project which would assist Turkey's ethnic cleansing programme, destroy one of the most archaeologically important cities on earth, and threaten armed conflict between Turkey and its southern neigh

ture for the same amount of money. At the moment, most of the repayments go into interest on the loans raised to build the works. Some projects have to be paid for many times over, merely because they are funded on an interest-bearing basis. Under this proposal, the capital cost would be cancelled over the lifetime of the project. Again, the process is deflationary unless the rate of project implementation outstrips the capacity of the economy to construct new projects.

The proposal requires only minor amendment to the Reserve Bank Act. There is already provision in the Local Government Act requiring Local Government to adopt the form of project funding that most benefits ratepayers and residents.

The introduction of a unilateral variable surcharge on currency conversion is a veritable silver bullet. The objective is to correct the current account deficit. There could be some well-defined exclusions, such as for computers, machinery, and raw materials used directly to increase New Zealand's productive base and possibly for some oil products. The surcharge might initially be substantial, (perhaps 10% or more), but would decline as the current account balance is achieved. (It could even turn negative if the current account balance turns positive after allowing for public foreign debt repayment).

A positive surcharge will produce an income stream. Its initial inflationary effect on the price of imported goods can be neutralised by a compensatory reduction in internal taxation, such as a reduction in GST.

The import reductions will help correct the trade balance, increase import substitution and create jobs. It will not affect exports except insofar as the exchange rate alters when the policy is introduced..

Very long term foreign investment will not be hindered, but short to medium term speculation will be stopped absolutely dead as long as the surcharge is positive.

The repatriation of profits and capital abroad will be subject to the surcharge. This will produce a currency regime based on the real economy rather than one based on the speculative paper economy.

The introduction of an appropriate inflation measure would involve coordination with the Department of Statistics. The existing CPI could be continued to satisfy international financial institutions. At the very least, the new measure would separate out increments reflecting additional real or improved value from those reflecting increased price only. It should also take into account changes in the "basket" of goods and services that serve to mask declines in purchasing power (reflected by changes to the quantity as well as the price of goods and services available from a given income, such as occurs through the monetisation of previously unpriced goods and services).

The introduction of appropriate measures of production would involve separating "goods" from "bads" and accounting for the other factors like resource depletion, pollution costs, and social and environmental degradation. The existing GDP measures could be retained to satisfy International Financial Institutions Other new measures, on a per capita basis could also be offered in other forms such as Genuine Progress Indicators and social indicators.

All New Zealanders can share in the increased wealth and well being of the country through the introduction of a national dividend. Such a dividend might eventually be expanded into a universal basic income or UBI that would replace the existing superannuation and welfare system with a single guaranteed non means-tested income. Initially, the dividend might be used primarily for non-inflationary increases in the money supply reflecting the increase in production in the economy.

It would increase the purchasing power of ordinary people WITHOUT the need for wage increases to appear in prices. Similarly, within limits provided by real economic growth, some new money could be spent into circulation by the government, stabilising the taxation effect on prices while at the same time providing those public services people want and are willing to pay for, such as "free" health and education.

The national dividend is finite. It may even be quite small to start with. But it is, in my view, the only way of universal distribution of wealth that avoids the justifiably unpopular and costly "tax and spend" route that has so many down-stream economic impacts across society.

Lowell Manning - Paraparaumu

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