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Kapoor: When progress is measured by how the things that are going wrong slow down, you have a problem

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PAUL JAY, SENIOR EDITOR, TRNN: Welcome back to The Real News Network. We’re in San Francisco with Sony Kapoor, and we’re discussing finance capital and the economic crisis and what’s going to happen next. Thanks for joining us. So if we read the business press, we’re told we’ve probably bottomed out and things are looking up. Even though when you look at the up of profit, it’s going up; and you look at the markets, they’re going up; but unemployment’s going up at the same time. So one wonders just what kind of recovery this is. And I guess that’s my question. What’s real about this so-called recovery? And what are we really looking for? Some people have been talking and still talking about ten years of hell, especially if you’re an ordinary person. What have you seen?

SONY KAPOOR, MANAGING DIRECTOR, RE-DEFINE: When the definition of things getting better becomes the rate of things getting worse slowing down, we’re in a very serious situation. And, of course, when you’re faced with pessimism, when you’re faced with economic disasters all around, you cling to any positive news that’s out there. And I think that’s what a lot of the recovery’s been about. All economic actors, be it governments, the stock markets, etc., everybody’s a little bit wary of all the—wary of, you know, all the trickle of bad news which is happening all the time.

JAY: Yeah, I keep hearing this talk about green shoots, but I’m always reminded green shoots are where worms live.

KAPOOR: That’s a good metaphor. And it’s not very clear to anybody that this is a sustainable recovery. It’s definitely not clear that we might not go into a double-dip recession, or that this kind of weak recovery, where some economic activity is recovering but the fundamentals (employment, etcetera) are not, might not continue for long time. To add to that is the big uncertainty of the debt burden, which has been going up very massively in economies around the world. It was—coming into the crisis, it was the households in the United States and the UK in particular which was heavily indebted, but the governments were okay. Now it’s the household and governments which are highly indebted. And that debt acts like an overhang: it’s going to cost a cast a dark shadow over growth for long time; it’s going to cast a dark shadow over consumption for a long time; it’s going to cast a dark shadow over recovery in house prices for a long time. And so those who say we are probably in for a hard ride for the next five to ten years are probably very right.

JAY: Some people are suggesting, as unemployment continues to go up—and I saw some statistics earlier today that’s talking about the official rate getting into double-digits. It could be 12, 13, 14. We’re told real unemployment’s already at 16 percent when you start taking into account people who have given up looking for work. So we could be talking into 20. If we’re talking that, is there any real solution other than some direct government jobs program? This kind of stimulus that’s has been happening, it hasn’t even reached the targets that they had hoped for, which I thought was to try to slow unemployment down. But it doesn’t seem to be having that kind of effect if we’re just going to look forward to these double-digit numbers.

KAPOOR: It’s a very tricky situation to be in, but if you look—if you want to feel slightly better, it might be useful to look across the pond and countries such as Spain, where the unemployment rate is close to 20 percent. Spain had a big real estate boom, lot of construction work, etcetera, all of which ground to a halt with the crisis. What’s different about a lot of European economies is that even when unemployment is high, there is a much stronger social security network in place, which means that those who are unemployed, for example, do not lose their health insurance, because there’s universal coverage. Those who are unemployed get minimal benefits from the state, which means they can continue to sustain themselves, they continue to spend some money into the economy, they continue to consume, which means that the bottom of the economy doesn’t fall out. It does mean there are more pressures on government finances, but there are automatic stabilizers in place which you do not have in the United States.

JAY: So we have a lot of our viewers, we know, have just lost their jobs. We’re getting e-mails all the time. You know, I just lost—some of our contributors who give us $5, $10 a month—and we appreciate that—have been e-mailing us, saying, “We can’t even sometimes to the $5, $10 bucks a month now because we’ve lost our job and we’re not sure we can even pay our rent this month.” So what do you say to them? What should ordinary people do now?

KAPOOR: Unfortunately, prepare for a long, hard ride. Try and be entrepreneurial. I’m sorry, but there’s really not much that an individual can do, apart from staying motivated, trying to do volunteer work, and trying to keep your skills level up, and try and stay in the game, because this is, unfortunately, going to last awhile. And it’s up to the rest of us who are still in the game, it’s up to the companies who have had lifelong work from these workers, it’s up to the government, it’s up to the financial institutions, all of whom are still in the game, who are part of the economy, to be not just looking in the short-term but casting their eyes to a five-, ten-year horizon, looking at the economic bottom line, and trying their utmost to keep the workers going. If it means taking salary cuts at the top for each CEO who takes a salary cut to the level of the workers, you can employ 500 workers. There needs to be an adjustment of the wage structures within companies in order to stop the economy’s bottom falling out.

JAY: So in terms of qualitative reforms, as you’re suggesting, can you see this happening unless the kind of people we’re talking about get into some kind of movement to demand these things? ‘Cause the pressure is not going to come from inside the Beltway.

KAPOOR: That’s very true. And what we’re seeing is, in fact, the pressure is mostly coming from the financial lobbies. I mean, it’s been rumored that financial lobby budgets have gone up by 500 percent. It’s also been heard that many crucial staff members in the congressional committees are leaving to take lucrative lobbying jobs. So it’s a serious problem. And any pressure that we can put from the other side would be an enormous help in getting the administration to actually deliver. Even if it means well, with the forces of, you know, these lobbyists against them, it’s a very difficult uphill task.

JAY: Well, this must be one of the reasons why there’s so much pressure against the EFCA bill, the Employee Free Choice Act. The growth of union numbers would create a body to counteract some of that kind of pressure. So if you can keep the unions weak, you keep the lobbying in balance.

KAPOOR: One of the reasons why in Europe you find universal health-care coverage, you find higher minimum wages, and you find better-negotiated deals, you know, with a fairer wage and better working hours, you have more holiday time, you have more time for working mothers, in Norway you have nine months maternity leave, etcetera, a very strong reason behind all of this is the stronger negotiating role played by the unions. If you let any one part of the capital or the government or the labor sector dominate, the economy becomes lopsided, as it has. There is a need for balance. These are critical elements of a healthy, functioning, dynamic society.

JAY: So get organized.

KAPOOR: Get organized.

JAY: Thanks for joining us.

KAPOOR: You’re most welcome.

JAY: And part of getting organized is don’t forget The Real News Network depends on you clicking the donate button, which is probably up here. And we need you, if you want to see more interviews like this, to contribute $5, $10. Of course, if you can do more, it would be appreciated. But one way or the other, if you want us to keep doing what we’re doing, we need your support. Thanks for joining us on The Real News Network.


Please note that TRNN transcripts are typed from a recording of the program; The Real News Network cannot guarantee their complete accuracy.

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Sony Kapoor is the Managing Director of Re-Define (Rethinking Development, Finance & Environment), an international Think Tank promoting financial system reform. A prominent expert on international finance and development, he started his career in investment banking and derivative trading. In 2003 he quit to work on reforming the financial system and promoting international development. Kapoor has been a leading advocate for debt cancellation, action against tax havens, and promoting innovative sources of financing. He is a key advisor to several governments, international agencies, political parties, unions, and NGOs on helping shape a more progressive society. Kapoor has worked in a policy advisory and strategy consulting capacity for international organizations such as the World Bank, UN, and UNDP, international NGOs such as Oxfam, and Christian Aid, financial institutions such as the Industrial Credit and Investment Corporation of India, and Lehman Brothers, and governments including that of Norway. He has studied at the prestigious Indian Institute of Technology, University of Delhi and the London School of Economics.