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.

Greece in the deadlock of the Troika’s Austerity Trap

Giorgos Argitis

On 27 November 2012, the Eurogroup reached a new “Greek deal” which once more discloses that there is no political will to address Greece’s debt crisis, as well as the country’s economic and social catastrophe. This fact increasingly makes Greeks think that the sovereign debt crisis incorporates significant geo-economic and geo-political interests at the expense of national sovereignty. Nonetheless, in the pure economic domain, there are two main aspects of the new agreement: first, the Troika’s condition that Greece has to adopt and apply a fiscal correction mechanism to “safeguard the achievement” of irrational and unrealistic fiscal growth and privatisation targets. This mechanism will institutionalise economic austerity and the impoverishment of Greek workers in the private and public sectors, and squeeze to zero the degrees of freedom for national economic policy-making.

The second aspect is the restructuring of creditors’ debt claims as a means for Greece to reduce its financing gap and borrowing needs. This decision, in conjunction with Greece’s public debt tender purchases, is hypothesised to bring Greece’s public debt back on a sustainable path by 2020-2022, which will facilitate the gradual return to market financing. The new agreement between Greece and the Troika is characterised by much fantasy, but little realism. The economic, social, and political environment in Greece remains fluid since uncertainty and lack of credibility continue to surround the course of economic policy-making in Greece and the Eurozone.

The global crisis, unemployment and HIV&AIDS: what role for public works programmes?

Francie Lund

South Africa faces a severe and seemingly intractable unemployment problem. The narrow or strictest definition of unemployment produces a rate of approximately 25 percent. This problem existed before the global financial crisis, and has been made worse by it. The government makes unrealistic promises about the numbers of jobs that it will create each year; each year these hopes are dashed.

Unemployment rates are highest amongst the poor and unskilled, higher for women, and higher in rural areas – and in all cases, the situation is worst for African and Coloured people. A 2008 survey showed that the relationship between unemployment and poverty is strong: 31 percent of households have no-one in employment, and the poverty incidence in these households is 81 percent (Leibbrandt et al 2010: 48, using data from the National Income Dynamics Survey – NIDS). Shockingly, more than half of the unemployed said that they had never worked before.