A Lesson from South Africa: Are Construction Cartels dramatically increasing Brazil's 2014 FIFA World Cup Infrastructure Costs?

André Furlan Meirinho

Paulo Capela

Eddie Cottle

Introduction

The 2008 report of the competition committee of the Organisation for Economic Co-operation and Development (OECD) into the construction sector found that, ‘Unfortunately the construction industry has tended to suffer from cartel activity, as shown by the spate of well-publicised recent matters around the world’. There were 19 countries included in this OECD roundtable from Europe, Asia, North America and notably South Africa that participated. South Africa presented its report on the massive cost overruns in relation to the 2010 FIFA World Cup stadiums which it, at the time, suspected of bid-rigging.[i]  

Through the collusive practice of bid rigging and excessive overpricing, construction companies extract or attain huge financial gains for themselves at the expense of workers and the tax payers of host countries. By implication this means the development goals that governments set themselves when hosting the World Cup are offset in part by massive transfers of wealth to private companies at the expense of job creation and income redistribution, thus stifling the economic multiplier that is intended. It is in this context that nationwide discontent emerged in Brazil involving over one million people.

A Marshall Plan for Europe

Michael Sommer

Proposal by the Confederation of German Trade Unions (DGB) for an economic stimulus, investment and development programme for Europe 

For historical reasons Germany has to be careful with giving advice to other countries. Even more so at the moment considering Germany’s dominant position within the European Union (EU). A ‘know-it-all’ manner is particularly problematic when the advice given is bad - the German government’s insistence on austerity measures as a response to the European crisis is not only unsuccessful in economic terms but socially unfair to a level that endangers democracy and the European integration process as a whole. This is a process for which Germany has a special historic responsibility. Despite some anti-European tendencies that have also evolved here and the media portraying the German population as being tired of rescue packages, the vast majority of the German population is in fact supportive of the Euro. This is a development that is remarkable but cannot be taken for granted. As German trade unionists we know from painful experience of the fascist destruction of the German trade union movement 80 years ago that an economic crisis that does not receive an adequate response has incalculable risks including political dislocations through to fascist dictatorship and war.

Zero Hunger: A Food Security Perspective for Brazil

Walter Belik

The debate on hunger in Brazil began in the early 1930s when Dr Josué de Castro, a famous physician and geographer, began his research on the health of workers in Recife, his hometown in the North-East of Brazil. Considering the labour conditions of these workers, Castro found out the sole reason for the particularly high absence and low productivity rates: hunger among the workers.
 

In 1946 Josué de Castro published his classic book “Geopolitics of Hunger”. The international reputation of this book helped him to be elected chairman of the Food and Agriculture Organisation (FAO) during the early 1950s. Josué de Castro participated in the Brazilian government for two decades, playing a central role in the implementation of the School Meals Program, subsidies for workers’ meals paid by employers and many other important programs to combat hunger in Brazil (L’abatte, 1988). Unfortunately, after the military coup in the mid-1960s he went into exile and eventually died in Europe.

After Brazil’s re-democratisation process, the subject of hunger re-emerged. In the mid-1980s the country was devastated by an inflation rate of more than 3000% per annum and poverty and lack of food was affecting everyone. Consequently, a huge campaign led by a sociologist Herbert “Betinho” de Souza was launched in Brazil, mobilising the population to collect and donate food to needy people.

Short-run stabilisation policies will not do: the case for a Keynesian New Deal at the European and global level

Eckhard Hein

The world economy is still struggling with its most severe crisis since the Great Depression of the late 1920s and 1930s. On the one hand, the present crisis began as a financial crisis which started with the collapse of the subprime mortgage market in the US in summer 2007, which then gained momentum with the breakdown of Lehman Brothers in September 2008 and reached another climax with the Euro crisis in early to mid 2010. On the other hand, the present crisis began as a real crisis well before the financial crisis, with an economic downswing in the US. The financial crisis and the real crisis reinforced each other, and the world economy was hit by a decline in real GDP in 2009 – something not seen for generations. Major regions in the world are only slowly recovering from this decline, in particular the Euro area, the UK and Japan. Furthermore, none of the economies which have been hit severely will have returned to the pre-crisis growth path by the end of 2010. Therefore, massive underutilisation of productive capacity, high unemployment and a downward pressure on wages will have to be tackled in the future.

Taxing financial transactions: the right thing to do when you owe $600bn a year and have lost control over global finance

Pierre Habbard

For those who had placed some hope in the G20 process to start re-regulating global finance the result, so far, has been utterly disappointing. Governments and central banks have been as eager to bail out the bankers and take on their ‘toxic assets’ as they have been reluctant to move decisively on financial regulation. At every G20 Summit since the first one in November 2008 in Washington, we have been told that a revamped and enhanced Financial Stability Board (including the IMF, the OECD, the BIS and other key financial organisations) would lead the way with concrete deliverables to bring the focus of global finance back to the real economy. We have seen instead a long series of reports on what-went-wrong and “high level” principles and “guidance”, but with no teeth when it comes to enforcement. If anything, these reports reveal the extent to which supervisory authorities are exposed to a “significant lack of information” on “where risks actually lie” (FSB & IMF 2009). They tell us that, two years into the crisis, the “current state of analysis limits the extent to which very precise guidance can be developed” (BIS, FSB & IMF 2009) and that “considerable work remains” (SSG 2009) in the areas of banks’ internal controls and regulatory infrastructure.

Riding Your Luck and Adopting the Right Policies: Why the Australian Economy is Rebounding Strongly

Bob Kyloh

The global economic crisis that commenced in 2008 has had devastating effects across rich and poor nations. But the impact on growth, employment and incomes has not been uniform across countries. Economic performance has depended critically on the policy response adopted by governments. Other authors writing for this Column have made a convincing case for an income led growth strategy in response to the recession. At least one country has clearly demonstrated the benefits of this approach.

Australia is often referred to as the “lucky country”. The recent economic performance of this resource rich nation has helped reinforce this notion. Indeed recent economic achievements down-under may be partly due to the good fortune of rebounding commodity prices and expanding Asian markets. But the terms of trade actually moved against Australia in the last eighteen months and net exports detracted significantly from economic growth in 2009. Economic recovery is actually the result of public policies that boosted the disposable incomes of low and middle income families when aggregate demand was plummeting.

Beyond “Stimulus” - Fiscal Policy after the Great Recession

(by Andrew Jackson)

As the communiqué from the Pittsburgh G20 summit put it, “it worked”. Unprecedented macro-economic stimulus in the form of ultra low interest rates and large government deficits has pulled the global economy back from the abyss, at least for now. But what comes next? Conventional economic wisdom is setting the stage for deep and damaging cuts to public expenditures if labour and the progressive left do not win the argument for public investment led growth and increased fiscal capacity.

Now is definitely not the time for a quick return to budget balance. Not only is the recovery very fragile, interest rates are likely to remain low. This means we can finance public expenditures which create jobs now while raising our productive potential and the future tax base. Debt incurred today to create a larger economy tomorrow is no burden on future generations.

Profits, banks, and the state: How to get investment going again

(by Engelbert Stockhammer)

The world is still experiencing the worst economic crisis since the 1930s. While the economic forecasts have brightened up recently, the overall picture is still gloomy. The collapse has been stopped, but the recovery is likely to be muted. This is for three reasons. First, US households, which have been the most dynamic source of demand in the past decade, are deeply in debt – and their houses, the biggest part of their wealth, are worth a lot less. Thus they are not likely to resume spending in the near future. Second, the banks are still in a lot of trouble. The big bank crash after Lehman Brothers has been avoided, but their balance sheets are still loaded with dubious assets and most make their money from trading, i.e. speculating, rather than from extending credit to businesses. It will be hard to get credit for a while. Thirdly, government expenditures that have prevented the meltdown are being rolled back. After the panic of late 2008, normalcy has returned to economic policy making. And in a neoliberal world it is considered normal that states have to balance their books, rather than help the economy or the poor. In short, while the worst is over, the bad is still to come. In particular, unemployment is still rising and will continue to do so.

Don’t waste the crisis: The case for sustained public investment and wage-led recovery policies

Frank Hoffer

Returning to the pre-crisis world after timely, targeted and temporary government interventions as advocated by the OECD and others is risky and a waste of public funds. Structural changes in income distribution, taxation and capital markets are needed to address the fundamental causes of the crisis and put social justice and decent work at the centre of a crisis response.

Root Causes of the Global Economic Crisis

In recent decades, wages and transfer incomes have not grown in line with productivity in most countries. In fact, institutional and legal capital and labour market changes, combined with aggressive, short-term profit-maximisation strategies enabled the owners of private enterprises and financial capital to appropriate most of society’s productivity gains. Moreover, threats of relocation or disinvestment resulted in labour market deregulation and casualisation of employment. Such global capital mobility led to the rise of tax havens, transfer pricing and tax competition, reducing the ability of governments to tax capital, thus driving down tax rates and regulation levels. Meanwhile, the high profit rate in the financial industry put pressure on the real economy to produce similar results for shareholders. Thus, the profits of the financial bubble economy became the benchmark for the real economy.