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November 25, 2013 - No. 137

Urgent Need to Stop Paying the Rich
and Uphold Workers' Rights

GM Bailout Proves U.S. and Canadian States Serve Narrow Private Interests



Urgent Need to Stop Paying the Rich and Uphold Workers' Rights
GM Bailout Proves U.S. and Canadian States Serve Narrow Private Interests

United Nations Framework Convention on Climate Change
Representatives of 132 Countries Walk Out in Disgust
Canada Leads the Way to Climate Disaster at COP19 (Excerpt) - Stephen Leahy, DeSmog Canada


Urgent Need to Stop Paying the Rich and Uphold Workers' Rights

GM Bailout Proves U.S. and Canadian States Serve Narrow Private Interests

Time for a new direction for the economy

The U.S. Treasury announced on November 21 that all remaining U.S. government-owned General Motors' stock would be sold by the end of this year. The sale will complete the U.S. government bailout of GM, which began in 2009 with $50 billion of public funds channelled to GM from the U.S. Treasury and another $10.6 billion from the public treasuries of Canada and Ontario. In return for the $60 billion, the three governments received new GM stock. The final sale of all U.S. Treasury-held GM shares on the New York Stock Exchange will fall around $10 billion short of its share of the bailout.

Canada and Ontario still hold most of their shares totalling 8 per cent of all outstanding shares. The share price would have to rise substantially for the two governments not to suffer a shortfall from the bailout.

The bailout of GM was part of the Troubled Asset Relief Program (TARP) created by the U.S. Congress during the economic crisis in the fall of 2008. The Canadian and Ontario governments joined the TARP program with bailouts of GM, Chrysler and certain financial and insurance enterprises.


Autoworkers protest against bailouts of auto monopolies at North American International Autoshow,
Detroit, January 8, 2012.

New GM's IPO

The U.S. Treasury received 912 million shares in exchange for the $50 billion bailout. In November of 2010, the Treasury organized an initial public offering (IPO) on the New York Stock Exchange where it sold 412 million of its GM shares for $33 per share totalling $13.596 billion. Very damning is that the Obama government gave many of the same enterprises, which had been accused or charged with financial malpractice leading to the 2008 crisis, the richly rewarded task to organize the GM IPO and have first access to purchase the stock. The usual suspects selected were Morgan Stanley, J.P. Morgan, Bank of America, Citicorp, Goldman Sachs, Barclays Capital, Credit Suisse and Deutsche Bank.

The IPO turned over the company to private interests at a nominal price and with little debt. The most crucial aspect however is that the new GM no longer held any social responsibility for contracted health care obligations to more than 340,000 GM retirees and their spouses. Obama had blackmailed autoworkers into accepting this concession with a threat of no bailout and complete collapse and loss of livelihoods if workers did not agree. Also, autoworkers had to accept a two-tier wage and benefits regime, which reduced wages to $14 for new hires and liquidated the defined-benefit pension plan. No alternative to a capital-centred bailout and workers' concessions was discussed or allowed to enter the public consciousness.

At the time, President Obama said the restructuring of GM would, "require the United Auto Workers to make further cuts in compensation and retiree health care benefits -- painful sacrifices on top of all that they have already done." The conception that workers should accept concessions to ensure future prosperity and that public resources be made available to private interests is deeply engrained in the capital-centred view, which must be challenged. The practice of paying-the-rich and demanding concessions from workers solves no economic problem. It concentrates wealth and power in fewer hands and impoverishes wider and wider sections of the working class generating greater insecurity. The fundamental problem of a socialized economy captured in the hands of competing private interests is left unresolved.

After the IPO, the remaining 500 million GM shares held by the U.S. treasury would have had to reach a price of around $73 per share to return the $50 billion in whole. However, during the current stock market bubble affecting mostly tech stocks, the new GM stock has only climbed to $38. At the time of the November 21 announcement of final liquidation of all stock by the year's end, the U.S. Treasury still held 31.1 million shares and said its total shortfall on the bailout would indeed be around $10 billion.


U.S. autoworkers protest government scheme to permit GM to absolve itself of obligations
to provide retirees with health care benefits so as to qualify for bailout funds.

Discussion Around the GM Bailout

Timothy Massad, the U.S. Treasury's Assistant Secretary for Financial Stability said that exiting the GM investment "is consistent with our dual goals of winding down TARP as soon as practicable and protecting taxpayer interests."

"Had we not acted to support the automotive industry, the cost to the country would have been substantial -- in terms of lost jobs, lost tax revenue, reduced economic production and other consequences," said U.S. Deputy Assistant Treasury Secretary Tim Bowler.

U.S. economic analysts and owners of GM stock were elated with the U.S. Treasury announcement. One of the restraints of government stock ownership was a prohibition on GM paying a dividend.

"The first step will probably be a dividend," said Michelle Krebs, an analyst at auto researcher Edmunds.com. "That will be a significant move toward normalcy as they become a truly publicly traded company. They'll also be able to pay executives more money, which has been a constant complaint."

"The new freedom could allow GM's management to return capital to shareholders in early 2014," wrote Joseph Amaturo, an analyst at New York-based Buckingham Research Group, in a note to clients. "An 80 cents-a-share annual dividend is a possibility, which would be a payout of $1.2 billion a year."

"This board understands our shareholders are in here to get a decent return on their money," GM CEO Dan Akerson told analysts on an October conference call. "We understand what we're here for and one of them is to return money to our shareholders. And that will be a continuing theme not only this quarter, but the next year and the year after."

"If GM doesn't move quickly to return money to shareholders, either through a dividend or a share repurchase, the automaker may face activist investors trying to force the action," said Harry J. Wilson, founder of restructuring adviser Maeva Group LLC in Westchester, New York. Wilson was a member of the Obama auto task force that helped restructure GM.

"Our goal was never to make a profit," said an anonymous U.S. Treasury official quoted in the mass media. "It was to save the U.S. auto industry."

The Necessity for a New Direction for the Economy

The lowered claims of current and retired U.S. and Canadian autoworkers on the value they produce and stronger vehicle sales since the crisis have resulted in a GM cash balance of $32 billion as of this past September. To save the U.S. auto industry until its next collapse is equated with serving the narrow private interests of finance capital. Not one executive, expert or government official suggested using GM's $32 billion cash balance to make whole the autoworker pension funds, which are currently underfunded by $27 billion. Nor did they mention recognizing the rights of current and retired autoworkers and eliminating the two-tier wage system and bringing all wages up to an acceptable U.S. and Canadian standard. Nor did they insist on restoring the lost health care benefits for retirees. Nor did they say that at the very least the new GM should return all public money given to it in both the U.S. and Canada.

The refusal of executives, experts and government officials to use the GM cash surplus in the public interest and to uphold the rights of workers proves that state intervention in the economy is not to solve problems in the broad public interest and find a new direction for the economy that extricates it from recurring destructive crises. On the contrary, state intervention in the economy is to serve narrow private interests and above all else preserve the capitalist status quo and class privilege. They also deny that TARP and other continuing measures to pay-the-rich such as quantitative easing pouring money into the big financial enterprises, and the financing of one overseas war after another have bankrupted the U.S. government and starved social programs and public services of necessary investment funds.

The U.S. Treasury announcement to sell all its remaining GM stock gives the working class much to think about and discuss. Exposure of state monopoly capitalism and its use of political power to attack the working class and extort concessions to benefit the monopolies and its use of public funds to serve narrow private interests reveal the necessity for a pro-social alternative and a new direction for the economy and political affairs. The working class itself is responsible for charting a way forward for socialized humanity guided by its own human-centred agenda to guarantee the rights of the working class and the well-being of all, and to uphold in practice the broad public interest and the general interests of society.

(Next: Canadian Involvement in the GM Bailout)

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United Nations Framework Convention on Climate Change

Representatives of 132 Countries Walk Out in Disgust


Non-governmental participants in the UN climate change conference in Warsaw, Poland, join in walk-out of proceedings.

The United Nations held its 19th Conference of the Parties (COP 19) on its Framework Convention on Climate Change in Warsaw, Poland, from November 11 to 22. Discussions at the meeting highlight the contradictions between rich and poor countries; and big and small, as well as the attempts by governments of so-called developed countries in service of the monopolies to dictate global priorities to other countries and how to proceed with development and industrialization.

The tenor of the debate became increasingly fractious after the the U.S., Canada, the EU, Australia and other developed countries insisted that the question of who should pay compensation for extreme climate events be discussed only after 2015. The discussion culminated with talks about "loss and damage" relating to how countries should respond to climate impacts that are difficult or impossible to adapt to, such as Typhoon Haiyan. However, the refusal of the developed countries to negotiate in good faith led to a mass walkout of the G77+China, a grouping of 132 countries, on November 21, one day before the conference closed. Representatives from the G77+China bloc said they had been very flexible in order to reach an acceptable outcome, and up until the wee hours of the morning there was some progress in the negotiations, according to reports.

Scientist Saleemul Huq, whose work on loss and damage helped put the issue of compensation on the conference agenda, said, "Discussions were going well in a spirit of co-operation, but at the end of the session on loss and damage Australia put everything agreed into brackets, so the whole debate went to waste."

Australia was accused of not taking the negotiations seriously. "They wore T-shirts and gorged on snacks throughout the negotiation. That gives some indication of the manner they are behaving in," said a spokeswoman for Climate Action Network.

Philippines-based non-governmental organization IBON International attended the proceedings and reported that around 800 members of global civil society also participated in the walk-out. Wearing white shirts with signs that said, 'cop19 polluters talk, we walk,' and 'volveremos, we will be back,' the mass walkout included social movements, grassroots organizations, trade unions, women, youth, indigenous groups, and other non-governmental organizations (NGOs). The statement read at the press conference immediately preceding the walkout said that civil society was voluntarily withdrawing from the Warsaw climate talks and would instead focus on mobilizing people to push governments to take leadership for serious climate action.

"Polluters and corporations dominated this conference with their empty talk, so we walked out in protest. Polluters talk, we walk," said Jagoda Munic, Chairperson of Friends of the Earth International.

"While people around the world are paying with their lives and livelihoods, and the risk of runaway climate change draws closer, we simply could not sit by this egregious inaction. Corporate profits should not come before peoples' lives," said Munic.

"People and communities around the world who are already implementing climate-safe, local energy systems are the real climate leaders. Together, we must now apply political pressure so that our governments follow these leaders instead of the corporate polluters," she added.

Tetet Lauron, reporting for IBON International writes, "[T]he Warsaw Climate Conference has seen the aggressive backtracking of developed countries such as Canada, Japan, the U.S., Australia and the EU on commitments to climate action and financing. Corporate sponsorship from big polluters, a high-level coal summit endorsed by Poland, the host government -- these were signs not just of the lack of commitment to transition to a sustainable future, but also of the growing corporate influence over the UNFCCC, which was denounced by civil society. [...]

"At this evening's stocktaking plenary [November 21], China expressed its solidarity with civil society for putting pressure on a process that is supposed to 'secure a livable future.' It further said that Warsaw should have been an important step, but has delivered nothing."

Philippines' Climate Change Minister Lucille Sering made an impassioned speech to the plenary, stressing that almost two decades after the UN climate change talks began, there is still lack of progress in developing global actions. "Every time we attend this conference, I am beginning to feel like we are negotiating on who is to live and who is to die. Would it be right for me to conclude that we failed miserably?" she said.

The conference concluded with little progress made. IBON International reports that, "As COP 19 wrapped up, indeed, compromise deals were reached on a pathway to a new global agreement supposedly to solve climate change, but not until after heated exchanges between negotiators from developed and developing countries on who should take more responsibility in cutting down emissions, and in providing financing to countries that have been suffering from the impacts of climate change.

"This deadlock was loosened somewhat, through a measly concession that asked countries for 'nationally determined contributions,' instead of 'commitments,' for reducing greenhouse gas emissions for the 2015 global climate agreement.

"Climate financing was another contentious issue, with rich countries yet making pledges to help developing countries cope with the impacts of extreme weather events, rising sea levels, desertification, and others. The United States was adamant in blocking substantive progress in climate financing, particularly on how developed countries will make good on their promise to scale up yearly contributions to USD100 billion by 2020. It has even succeeded in having private finance be counted in as climate finance commitments." A draft text merely urged developed nations to set "increasing levels" of aid, to be reviewed every two years, Xinhua reports.

Speaking on behalf of the G77+China, Fiji said, "There is absolutely nothing to write home about at the moment."

(Guardian, IBON International, Xinhua. Photos: Friends of the Earth, reclaimpower.net, Push Europe)

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Canada Leads the Way to Climate Disaster
at COP19 (Excerpt)

Canada has led the way to scuttle the UN climate talks here in Warsaw, Poland taking with it nearly all hope of keeping global warming to less than 2C say members of various international organizations.

Along with 190-plus nations, the Harper government signed an international agreement to keep carbon emissions below 2C at the UN climate talks in Cancun in 2011. And yet here at these very difficult climate talks to create a new treaty to protect the climate, the Canadian delegation considers the 2C target "aspirational" and not especially important according to sources.

The government's official COP 19 Qs and As webpage fails to mention the 2C target.

Canada has unilaterally walked away from it's international climate commitments including the Kyoto Protocol and the 2009 Copenhagen Accord said Bill Hare, director of Climate Analytics, a German climate science research organization.

Following Canada's lead, Japan abandoned its Copenhagen target last Friday [November 15]. Meanwhile, Australia under the Abbott government, has gutted its climate policies making it impossible to reach even its inadequate Copenhagen target Hare told DeSmog here in Warsaw.

The Harper government actually congratulated the Abbott government for doing this.

"These countries' promises and commitments are not worth the paper they're written on," said Hare.

This is creating a "very corrosive atmosphere" here. Why should any country trust Canada, Japan or Australia when these countries have no problem walking away from previous commitments he said.

"We're in a downward spiral that's pushing us on a path to 5C a temperature the planet has not seen in 55 million years," he said.

Even a future where the global average temperature is 4C higher means temperatures in southern Canada will be 10 to 12C hotter than the warmest days. Food production will collapse as well most nations says Alice Bows-Larkin, a climate scientist at the UK's Tyndall Climate Center.

"A 4C world must be avoided at all costs," Bows-Larkin said.

This bleak future can be avoided but countries like Canada must cut their carbon emissions 10 percent per year starting now she said.

Instead Canada's emissions are skyrocketing mainly because of the tar sands. Meanwhile the Harper government tells Canadians it takes climate change seriously and is acting. [...]

* Stephen Leahy is the 2012 co-winner of the Prince Albert/United Nations Global Prize for Climate Change reporting . A Canadian, Leahy is the senior science and environment correspondent at Inter Press Service News Agency (IPS) based in Rome. His work is also published in National Geographic, The Guardian (UK), New Scientist, Al Jazeera, Earth Island Journal and others.

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