Malaysia's left-wing political parties hoping to soar

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Left-wing parties hoping to soar

Analysis By Baradan Kuppusamy

Left-wing parties are making a comeback in a political environment dominated by both race-based and multi-racial parties all pushing the same democratic centralism political ideology.

PARTI Rakyat Malaysia, a small but tradition-rich party, is causing some consternation among top PKR leaders with its announcement this week that it will contest in three parliamentary constituencies held by PKR.

Its newly elected president Dr Rohana Ariffin said that the party, founded in 1955 by Ahmad Boestaman upon his release from ISA, would contest in the Balik Pulau, Selayang and Petaling Jaya Selatan constituencies in the forthcoming general election.

In an interview, she said PRM was against three-cornered fights but hoped to hold discussions with Pakatan Rakyat leader Datuk Seri Anwar Ibrahim and find an amicable solution.

“We are keen to contest in the three seats,” she told The Star, adding that Balik Pulau in Penang was a traditional PRM seat while Selayang was also a former seat with hardcore members and Petaling Jaya was where the party's headquarters was located.

“We have many supporters in the three constituencies,” she said. “We are only asking for three seats out of 222 in the country.”

Dr Rohana said if an Opposition government were to be elected in the next general election, their participation would be crucial because they would offer alternative views from within.

“Diversity should be promoted and encouraged and many contrasting views make up a good government unlike with Barisan Nasional where Umno's views dominate,” said the academician.



All well and good but PKR is in no mood to concede three of the best constituencies now held by party veterans just because PRM is asking for it, tradition-rich party or not.

The Selayang constituency is held by PKR treasurer William Leong, who did well in 2008 defeating his opponents in a three-cornered fight, including a PRM candidate Koh Su Yong, who polled about 2% of the votes.

Koh had stood in 2004 under a PKR banner and polled over 17,000 votes, losing nevertheless. His 2008 performance was lacklustre under PRM, a measure of what the right party can do for a candidate.

Although PRM has traditionally contested in Balik Pulau and never won, it believes it has a better chance now.

Currently, it is held by PKR newcomer Yusmadi Yusuf, who is very active in Balik Pulau as well as in Penang and in Parliament.

Petaling Jaya Selatan, on the other hand is held by Hee Loy Sian, who keeps a low profile.

PRM is hallowed in the left-wing history of the country, having been founded by Ahmad Boestaman and brought together all the Malay left in various organisations like KMM, API and other small groups.

The party was a member of the Socialist Front and contested in various municipal councils and in general election in the 1960s but the winning results were mixed.

It had to watch out for the Special Branch on one hand and convince the people to win elections on the other, making for difficult choices.

PRM survived the 1970s under Kassim Ahmad and after him, Datuk Kampu Radjoo, and finally came under the control of Dr Syed Husin Ali in the 1980s.

In 2003, he dissolved PRM and led its members into PKR but a small faction opposed the move and carried on under the PRM banner, which had a cow's head as the party symbol.

The breakaway faction was recognised by the Registrar of Societies and in the election for PRM office bearers held in Petaling Jaya last week, Dr Rohana, the acting president since 2010, was elected PRM president.

Another small, left-wing party, the Parti Sosialis Malaysia (PSM), is also having trouble with Pakatan Rakyat, especially DAP, over seat allocation.Image via Wikipedia

In 2008, it contested under the PKR banner in three seats and won one with its president Dr Nasir Hashim in Kota Damansara and Dr D. Jeyakumar in Sungei Siput Parliamentary seat but secretary-general S. Arutchelvam lost in the Semenyih state seat in Selangor.

The tussle with the DAP in 2008 was for the Jalong seat in Perak which the PSM wanted to contest because of years of grassroots work there.

In the end, they contested as an independent after negotiation with the DAP broke down. In the three-cornered fight that followed, PSM lost to DAP's Hew Yit Fong who, a year later, defected to Barisan Nasional together with two PKR assemblymen, giving away the state.

In retrospect, left-wing parties are making a comeback in a political environment dominated by both race-based and multi-racial parties all pushing the same democratic centralism political ideology.

They have no socialist trappings to speak off and only want to run a better government with the same foreign investment and development strategies.

The left parties are making a comeback in a big way overseas but without the violent themes of the past.
Their ideologies and policies would provide a fresh alternative to the dominant political parties on both sides of the divide here.

Both Barisan Nasional, that is trying to win hearts and minds with its many 1Malaysia reforms, and Pakatan Rakyat - with its “me-rakyatkan” economy initiatives in Selangor - could well use another party with a socialist bend to speak for and champion the people.

The left-wing parties have important things to contribute to the debate on national issues like privatisation of healthcare, food security and even on the government service tax.

Their re-emergence on the political scene should be welcomed and encouraged as these left parties have dedicated leadership who will go the extra mile for the people.

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New thinking on human rights & cooperation

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New thinking on human rights

REFLECTING ON THE LAW By SHAD SALEEM FARUQI

Compliance with human rights by a country must be examined both as to domestic conduct as well as international conduct, and theory must always be read in the light of practice. 

HUMAN RIGHTS DAY is approaching and many organisations worldwide are putting forth their views on this noble, transcendental quest.

A few weeks ago, the Fourth Bei­­­-jing Forum on Human Rights enunciated a bold Third World perspective.

Last week, a Malaysian NGO co-sponsored The People’s Charter to Create a Nonviolent World.

Scholars at the Beijing Forum pointed out that human rights were not born in the crucible of any particular culture or civilisation.

All cultures, religions and regions have a concept of the sacredness of human life and of some common aspirations and needs.

There is universal acceptance that humans are entitled by birth to certain inalienable rights.

These rights do not depend on the charity or generosity of the state but are inherent in the human condition.

In the human rights discourse around the world, there are many commonalities, shared beliefs, core ideas and basic elements. These must be highlighted and honoured.

However, though the idea of human rights is universal, the substantive content of human rights may vary from society to society and from time to time.

As we move from the core of the doctrine to the fringes, cultural, religious, economic, political and historical differences become relevant.

Priorities begin to vary. Value pluralism manifests itself. Context begins to determine the content.

The ideal equality of nations and people requires that these diversities and differences be recognised and allowed to find expression.

The richness of the human rights discourse has manifested itself in the analysis of human rights into many conflicting or overlapping categories.

Among them are:

• > The first generation civil and political liberties. These are referred to as the “negative liberties” which thrive best if there is non-intervention by the state.

• > The second generation socio-economic rights or the “positive liberties” which require vigorous, affirmative action by the state to create the socio-economic conditions in which civil and political liberties may flower.

• > The third generation development rights.

• > Individual rights versus collective and communitarian rights.

There is universal agreement that the eradication of absolute poverty is necessary for the realisation of human dignity.

However, there is no universal agreement on the path to the goal of social amelioration.

To most Western observers, electoral democracy is the surest catalyst for the evolution of a regime of human rights.

Along with political democracy is the instrumentality of a free market economy.

Others feel political democracy and a free market economy do not always result in economic democracy and socio-economic justice. Various models of “social democracy” and “welfare state” are put forward as alternatives.

There are differences of opinion about whether the government alone should be responsible for supplying the welfare net or whether the family and the community must play a role to help their kith and kin.

Traditions and religion can be harnessed to involve the community in kinship welfare.

It is also agreed that without enforcement, human rights have no practical value. Rights without remedies are like lights that do not shine and fires that do not glow.

Traditional reliance on judicial remedies is inadequate because of the weaknesses of the judicial method and the unbearable expense for the development of Western style judicial institutions, hierarchies and methods.

Attention must therefore turn to development of remedies that are informal, inexpensive and expeditious.

There are many threats to human rights.

Among them are poverty and lack of human rights education. Along with state institutions, there are many private, religious and social centres of power that violate human rights.

Multi-national corporations often act like a state within a state.

The pervasiveness of Western global dominance in the economic, political, cultural, communication and educational fields is not always acknowledged.

Rating institutions like Moody’s exercise vast extra-territorial influence over a government’s economic policies.

Global institutions like the World Bank, the Security Council, the International Monetary Fund and the International Criminal Court consistently act to preserve the unfair advantages for the West.



Some aspects of globalisation, notably the patents regime and the selective way in which the war against terrorism is being waged, are deeply destructive of the rights of the peoples of Asia and Africa.

Realisation is growing that human rights are an evolutionary process.

New claims, demands and expectations are emerging.

The human rights theory must remain abreast of the felt necessities of the times.

We must be cognisant of the problems from environmental degradation, pollution of the rivers,de-forestration of traditional lands for “development” and the inequitable way in which the benefits and burdens of development are shared.

The problems of an ageing population and the right to privacy in an age of electronics call for attention.

In evaluating human rights, we must realise that human rights are not a destination but a continuing journey.

Nations must be judged by their direction and by their progress.

Theory must always be read in the light of practice.

Compliance with human rights by a country must be examined both as to domestic conduct as well as international conduct.

The Third World must not shy away from articulating its own concept or concepts of human rights.

The institutions, methods and procedures for the realisation of human rights in Asia, Africa and Latin America must reflect the priorities, peculiarities and existing resources of each country.

Third World countries must seek to banish the idea that human rights are incompatible with Eastern traditions.

They must articulate their problems, challenges and accomplishments. They must combat distortions and lies.

They must, if need be, reciprocate the “ranking exercises” of some Western nations that selectively evaluate the human rights record of Third World nations.

Throwing stones is a game two can play.

The significant link and occasional conflict between human rights and human dignity must be studied.

Human rights must go hand in hand with duties to the family, to the community, state and all humanity.

Shad Saleem Faruqi is Emeritus Professor of Law at UiTM and Visiting Professor at USM

New thinking on human rights cooperation

By Wang Qinghong, China.org.cn, March 16, 2011 

Western mainstream media and think tanks applauded the Chinese government's determination and efficiency in evacuating its citizens from Libya when civil strife recently broke out. This can be interpreted as an indirect and unintentional recognition of Chinese government's achievement in protecting the human rights of Chinese people by the West. This is significant, not only because it shows what kind of new efforts China has made for its people, but also because it triggers an inquiry into what kind of new thinking the West and China can adopt in their human rights dialogue.

Obviously, the first point for the West and China in their discussion of human rights should be both sides recognizing each other's progress rather than pointing out each other's problems. But if they only focus on each other's flaws, they then risk neglecting the successes and goodwill efforts of each other in protecting and improving human rights, which will hinder the buildup of mutual trust and cooperation. However, if both sides broaden their vision regarding each other's human rights achievements, they can deepen mutual understanding of relevant issues and find common ground for bilateral cooperation.

As for recognition, the West should pay more attention to the human rights implications of China's cancellation of the death penalty for 13 crimes and the regulation of "Demolition with Administrative Coercion" earlier this year. Correspondently, more China should offer more recognition of President Obama's recent efforts in improving American human rights in the areas of health care and education. This could substantially balance the negative atmosphere of human rights dialogues and eventually lead to more positive and constructive cooperation.

Secondly, both sides must not only eliminate Cold War mentalities, impatient and arrogant attitudes, biased and oversimplified judgments, and radical rhetoric, but also re-identify shared values and different preferences in the realm of human rights. To this end, they should understand each other's concepts of human rights within historical and cultural context, and should communicate with each other patiently and respectively.

The two international human rights treaties and other human rights agreements of the United Nations could serve as a good starting point for renewed dialogue. However, all human rights values and principles are built upon and evolve with the social, political, and economic development of societies. They have to be in turn codified as laws in accordance with cultural and historical specificities. For example, Western liberal traditions emphasize the equality and integrity of the rights of the individual, while Chinese Confucian traditions prioritize social stability and justice. Accordingly, although the notorious shooting incident by a political extremist in Arizona earlier this year was unanimously condemned by the American public, it is still difficult and extremely controversial to change the individual's right to possess firearms in the United States, which is protected by the Second Amendment to the US Constitution. On the contrary, it has been debated in recent years in China whether policemen should be equipped with guns routinely, due to the conflict between protecting the safety of individual policemen and the potential danger to public security. The strict gun control regulation in China reflects Chinese traditions of prioritizing collective human rights over individual human rights.

Thirdly, both sides should not only strengthen the dialogue about the connotations of human rights but also enhance cooperation and innovation in social management that aims to improve the real status of human rights.

Western societies mainly pursue protecting and enlarging human rights through checks and balances as well as by laws, while Chinese traditions emphasize enhancing social harmony and prosperity through promoting social fairness, responsibility, morality, and education.

Both sides can learn from each other if they maintain an open mind. In a recent speech, Chinese President Hu Jintao called for safeguarding the rights and interests of Chinese people and for improving their livelihood through strengthening China's social management mechanisms. And Premier Wen Jiabao's regular chats with the public via the Internet, which resembles US town hall meetings, shows the determination of Chinese leaders to improve human rights through social and political innovations and their ability to learn from Western experiences in social management.

Perhaps President Obama and American politicians could study the Chinese government's recent regulations in controlling real estate prices and inflation, increasing social welfare, and narrowing various socioeconomic gaps and could be inspired to enact reforms for financial, social security, and Medicare in the United States.

In addition, both sides should also upgrade previous exchanges and cooperation in governance and self-governance to a more detailed and pragmatic level. Both American and Chinese people deeply understand that their human rights have to be protected and improved through law and order and that a Cultural Revolution style "great democracy" will only jeopardize human rights and bring anarchy and chaos.

Furthermore, China and the United States should expand the range of participants in the human rights dialogue by promoting people-to-people exchanges and by following a new perspective of building up a "community of common interests" initiated by Chinese and American leaders and senior strategists. Although individuals have their own views on human rights that might contrast from what government officials, distinguished scholars, media, think tanks, and nongovernmental organizations have advocated, the more people-to-people exchanges, the deeper human rights communication at the grassroots level.

People-to-people exchanges could enhance the perspective of a "community of common interests" that could in turn strengthen the foundation for human rights cooperation. The international disaster relief for China's Wenchuan earthquake in 2008, the Chinese government's humanitarian withdrawal from Libya of more than 21,000 citizens from 12 countries, and the Chinese rescue efforts for the victims of the recent earthquakes in New Zealand and Japan have shown the strength and potential in protecting and improving human rights under the perspective of a "community of common interests."

The author is an Adjunct Fellow of the Pacific Forum of the Center for Strategic and International Studies (CSIS).

Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.

India's increasing troop may go nowhere

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By He Zude, Fang Wei (China Youth Daily)

India plans to recruit 100,000 soldiers over the next five years and send them to the China-India border areas to cement its military strength there, according to a report by the Times of India on Nov. 2. India's defense ministry has already approved a 13 billion-U.S. dollar military modernization plan.

The average growth rate of India's military spending has stood at 7 percent to 8 percent for more than a decade, and its military spending ranks ninth in the world. India is also the world's largest arms imports country. The spread of the "China threat" theory, the increase of troops to the disputed areas near the China-India border, and the display of a tough attitude toward China all aim to make a breakthrough in further increasing military spending.

Despite India’s huge military spending, its economic growth has recently been slow, with last year’s economic growth rate hitting a six-year low. It is very difficult to considerably increase military spending for military buildup amid the economic downturn, so India needs to first create a tense atmosphere and transfer domestic problems in hopes of securing more military spending.

India plans to recruit 100,000 soldiers over the next five years and send them to the China-India border areas to cement its military strength there, according to a report by the Times of India on Nov. 2. India's defense ministry has already approved a 13 billion-U.S. dollar military modernization plan.

India has continued to hold joint military drills with China's neighboring countries over a recent period, showing it evidently intends to contain China. Furthermore, India's move to send an additional 100,000 soldiers to the China-India border areas is consistent with its earlier actions aimed at containing China.

In addition, the United States needs to rely on India to restrict China. India needs to show its value to the United States by flexing its muscle toward China so that it could gain U.S. military support and help raise its international status. India's troop increase on the border between China and India is aimed at meeting the requirements of the United States and then getting support from the United States. However, will India realize its goal?



First, the action will tense the situation of the region and harm India's own interests. Increasing troops on the border area is always a sensitive move and it is especially sensitive to increase troops on a disputed border area.

Second, the action is completely not worthwhile. Currently, India has 40,000 troops in the disputed area, and if the further 100,000 is deployed, the total number of the troops will reach 140,000. In an era when precision-guided weapons are developing rapidly, everyone with common sense knows that concentrated troops could be eliminated easily. Meanwhile, 13 billion U.S. dollars is really a lot of money for India, and it is still unpredictable whether the future cost of maintenance will be guaranteed.

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The right to disagree

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Ceritalah by KARIM RASLAN

Societies need to be constantly reminded of the need to take stock of where they are headed and whether theirs is indeed the right path – thus the need for alternative views.

MARINA Mahathir and I are old friends.Image by MkML// via Flickr

Nonetheless, there have been times when I’ve totally disagreed with her, like all friends do.

However, even when we’ve held opposing views, I’ve always respected her straight-forwardness, courage and willingness to take a stand on matters of principle.

Whatever you think of her father (and I’m definitely not a fan) or indeed her own views on social and cultural matters, she remains unwavering in a country where the “lalang bending in the wind” is the best symbol to describe our political elite.

Marina’s confidence and determination are all the more important right now.

Why? Well, Malaysian Muslims are entering into what I’d term a series of “Cultural Wars” over matters once thought too “sensitive” for open discussion, including race, religion and even sexuality.



Conservatives insist that all Malays and Muslims ought to subscribe to a single set of views on these issues.

This goes against contemporary realities.

Social media and widespread prosperity have made all Malaysians more self-aware.

There are now many competing Malay identities floating through our nation and Marina is the voice and public face of the most plural of these amorphous groups.

They play an important role via their advocacy for Malaysians who are too poor, disadvantaged and marginalised to defend themselves.

Indeed, unlike so many children of our elite, Marina has chosen to dedicate her life to public service.
Her work with the Malaysian AIDS Council and advocacy for women’s rights both in and outside the Muslim world speak for themselves.

What differentiates her from many Malay public figures is the fact that Marina has never shied away from the causes she believes in, even those that may be neither popular nor profitable in the country.

Her stubborn steadfastness represents the best tradition of public service and advocacy – a Malay who realises that “ketuanan Melayu” also carries responsibilities that transcends ethnicity or faith.

She deserves credit for taking on these challenges and remaining unflinching when under attack.

Indeed, she is truly her father’s daughter in this respect.

Still, she knows that the future will not be any easier for those on the “edges” of polite society (especially the GLBT – gay, lesbian, bisexual and transgender – community) and her stance here is especially important.

Moreover, in an increasingly open Malaysia, anyone who wants a slice of public space has to fight for a hearing because there are many competing identities.

What’s disheartening is when people in power or shapers of public opinion choose to vilify or attempt to silence dissenting voices like Marina.

As I’ve said earlier, it’s impossible for any society to be completely united on anything, be it politics or religion.

Read history and you’ll understand that such societies have never lasted for very long.

Uniformity breeds mediocrity, stagnancy and failure.

Dissent is not disloyalty and anyone who says so is merely trying to shore up their power.

We need alternative views because societies need to be constantly reminded of the need to take stock of where they are headed and whether this is indeed the right path.

Democracy isn’t the tyranny of the majority but the protection of the rights and interests of all groups, no matter how distasteful they may seem to the other.

Indeed, all labels, whether “liberal”, “moderate”, “conservative”, “religious” and “secular” are legitimate and deserve protection as well as respect as long as they likewise respect the rights of others.

All our platitudes about moderation or national transformation will be pointless if we cannot extend this very basic courtesy to each other.

This is what voices like Marina are advocating, not the overthrow of our social norms or faith.

They’re also reminding us that the world is changing politically, socially and economically.

Malaysia will be left behind if we keep insisting on remaining in a time warp in any of these categories.

It’s very sad that this simple fact has escaped many people, but one must be hopeful that good sense will prevail in the end.

In 1997, Marina published a compilation of her writings, entitled In Liberal Doses.

Besides her lively and engaging prose, what I found striking was the foreword that her father, then Prime Minister Mahathir Mohamad wrote for it.

Let me end by offering a quote from this piece, for what it’s worth:

“One is tempted to ask from where she acquired this sense of independence, this urge not to conform, to be critical and not just to cheer on those in power … I do not always agree with her views and vice-versa.
“But it would be a dull world if we always agreed with each other.”

So, Marina, I may well disagree with you but I’ll certainly be there to defend you despite, and indeed because of, our disagreements.

Is the U.S. Worsening as a Place to Start a Business?

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By Scott Shane, Contributor from Forbes

While the United States remains a great place to do business, it’s been slipping as a place to start a business, according to the World Bank’s annual “Doing Business” publication.

In 2012, the U.S. was the fourth best country in the world to do business in, coming in behind Singapore, Hong Kong and New Zealand.  That’s only slightly worse than we were five years ago before the Great Recession hit.

As a place to start a business, things aren’t as good.  It now costs twice as much to start a company as five years ago – 1.4 percent of per capita income versus 0.7 percent.

We are also slipping in how easy it is to start a business as compared to other nations.  As the chart below shows, we were fourth in this category in 2007.  This year we were number 13.

Source: Created from Data from the World Bank’s “Doing Business” reports, various



The World Bank measures 184 countries, so we don’t need to get out the worry beads yet.  Scoring worse than Macedonia, Georgia, Rwanda, Belarus, Saudi Arabia and Armenia might be embarrassing, but few entrepreneurs will choose those countries over the United States. And few American entrepreneurs are moving elsewhere to start companies.

But remaining behind New Zealand, Australia, and Canada year after year should cause those in Washington to take notice.  Policies to bring more foreign entrepreneurs to the United States won’t work very well if those entrepreneurs find it easier and cheaper to start their businesses in countries like Australia and Canada.

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Lakshmi Mittal, the King of Steel, Trips Up

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ArcelorMittal, his steel colossus, is burdened by overcapacity and debt

A distress signal erected by workers protesting the closure of an ArcelorMittal blast furnace in northern France Jean-Christophe Verhaegen/AFP/Getty ImagesBy Stanley Reed and Thomas Biesheuvel

In 2006, Lakshmi Mittal became the King of Steel, though it wasn’t long before the crown grew heavy. Just two years after Mittal created the world’s largest steel company with his $41 billion takeover of Arcelor, the global financial crisis hit, dramatically curbing demand for the metal. Now, with operations concentrated in slow-growth Europe and the U.S., the future for his giant looks increasingly problematic. The latest sign of trouble: At the end of October, ArcelorMittal (MT) pulled out of a venture to buy Australia’s Macarthur Coal (MCC:AU), leaving its partner in the takeover, Peabody Energy (BTU), to pursue the $5.1 billion deal on its own.

Buying all sorts of steel-related assets, including coal mines, was until recently part of Mittal’s strategy to build a globe-straddling steel company. And for a while the strategy was working. The Arcelor acquisition was to have been the achievement of Mittal’s career. The new company, combining Mittal’s proven ability to wring efficiencies from aging steelworks with Arcelor’s state-of-the-art European technology, seemed poised to profit handsomely from a booming world economy.

Three years of weak steel demand have put downward pressure on earnings and profits at ArcelorMittal, which is heavily indebted after years of dealmaking. The company also has to contend with a steel glut: Chinese mills have more than doubled production since 2005 to a projected 733 million metric tons this year, according to U.K. steel consultant MEPS. ArcelorMittal has trimmed back output some 20 percent from the 116 million metric tons it produced in 2007. Its share of the global market has fallen from 9.5 percent in 2006 to 6.4 percent in 2010, according to data compiled by Bloomberg.

The stock is down some 50 percent from its 52-week high in February. And Mittal’s 40.9 percent stake in the company is now worth about $12 billion, down from $55 billion in 2008. Says Rochus Brauneiser, an analyst at Frankfurt brokerage Kepler Capital Markets: “We’re in a very dark market environment right now.”



Mittal, 61, one of the globe’s most prolific dealmakers over the past three decades, seems ever the cool hand. Wearing a blue suit with no tie at his office on London’s tree-filled Berkeley Square, Mittal shrugs off any notion that the marriage with Luxembourg-based Arcelor has been anything less than a success. “There has been no surprise or disappointment in the merger,” he says. “It has been a very positive experience.”

ArcelorMittal is forecast to report a profit of $3.7 billion this year, the highest in three years. Still, that’s far less than the company’s $10.4 billion profit in 2007. Analysts wonder if that record can ever be reprised. “Those days may be gone forever,” says Tony Taccone, a co-founder of First River Consulting in Pittsburgh. “The only way we return is if the economies of all major countries and regions fire on all cylinders at the same time.”

Just about everyone, including Chief Financial Officer Aditya Mittal, agrees with that assessment. “Prices have moved down in the fourth quarter,” Mittal’s 35 year-old son told reporters on Nov. 3. “Customers are not keen to build inventories.”

An anemic economy is exposing the weak links in Mittal’s empire. The plants acquired through the merger with Arcelor are concentrated in Western Europe, where operating costs are high. To keep steel prices from collapsing, Mittal is putting some of those plants on ice. Rather than cutting production across the board, the goal is to keep the best facilities such as those at Ghent in Belgium and at Dunkirk in France running at near full capacity while closing less competitive mills, reducing costs by $1 billion.

In the last two months, ArcelorMittal has announced it is idling plants in France, Germany, Luxembourg, Poland, and Spain. On Oct. 14 the company said it would permanently shut down its blast furnaces in Liège, Belgium, which employs 581 workers. Employees responded by barricading six Arcelor managers in their offices for 24 hours. The company says it will try to find new jobs for them. “What is happening now is not a surprise,” says former Arcelor Chief Executive Officer Guy Dollé. “Continental Europe plants have no future.”

ArcelorMittal has also cut back production sharply in the U.S., which accounts for 24 percent of overall output and a slightly smaller share of sales. Mittal can’t count on demand from the so-called BRIC countries to offset weakness in Europe and North America. A planned $500 million plant expansion in Brazil has been put on hold, and progress on moving into India, Mittal says, “has not been what we expected.” Nor does he see an opportunity to expand in China, where the company has two joint ventures. Chinese producers, he warns, which make about half the world’s steel, can “export what they don’t sell [at home] at any price. They will always be a threat.”

For now the emphasis is on conserving cash and trimming debt. Mittal said he is even considering selling some $10 billion in noncore assets. Balking on the Macarthur Coal takeover is just more evidence that Mittal is hunkering down. He says the company shied away from the purchase when it became too expensive. Still, analysts see a shift in Mittal’s take-no-prisoners style of dealmaking. “They’ve always been acquirers of assets, and they’ve always held on,” says Anindya Mohinta, an analyst at Citigroup (C) in London.

Mittal insists his company is becoming stronger year by year, and he may be right. If the world economy does bounce back, Mittal will be better positioned than most to profit because he could quickly bring back idled capacity. “The direction is right,” he insists, “but it is being overshadowed by the bad economy.”

With Sonja Elmquist

Reed is a reporter-at-large for Bloomberg News and Bloomberg Businessweek. Biesheuvel is a reporter for Bloomberg News in London.

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Will the European Central Bank save the eurozone?

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By Laurence Knight Business reporter, BBC News

It wasn't supposed to be like this.

The European Central Bank was supposed to be the world's most independent central bank, beholden to nobody.

It has a clear, unambiguous mandate to pursue price stability, and ignore everything else.

Rescuing banks, rescuing over-indebted governments, demanding painful economic reforms - these things were supposed to be for the national governments to do.

The hard-nosed economists in Frankfurt were supposed to be above politics.

Yet now, it is looking increasingly obvious that the European Central Bank will have to rescue Italy from its debt crisis if the eurozone is to survive.

And other countries - Spain, perhaps even France - could well follow.

How did we get to this point?

Voodoo child 

Europe's governments have tried their best to contain the crisis without turning to the ECB for help.

When Greece went down in early 2010, Germany, France and the others clubbed together for the money to rescue it.

As Portugal and the Irish Republic looked increasingly shaky, they came up with a more worked-out solution - the European Financial Stability Facility (EFSF).



The eurozone's bailout fund has already been called on to save both countries, as well as to foot a second rescue package for Greece.

The guarantees from Berlin, Paris and the others that underpin the fund have been augmented once, to ensure that all 440bn (£342bn) euros can be lent out.

Now there is agreement to use financial voodoo to "leverage" the fund's resources to a further 1tn euros - about 3,000 euros per person in the eurozone.

But it looks like all the painful negotiations have been for nought.

Dead on arrival 

The specifics of exactly how the EFSF's firepower can be increased, without asking German taxpayers to cough up more money, have thus far eluded Europe's politicians.

 

Europe asked China to cough up the money that Germany would not, but without success

When a begging bowl was taken to China, it failed even to collect kind words, let alone the extra cash needed.

But even if they do succeed within the rapidly shrinking window of time available, a 1tn euros fund is probably still too small.

After taking account of all the EFSF's other existing obligations, it is not even enough to cover a single year's worth of Italy's debt repayments, as BBC editor Robert Peston has pointed out.

Moreover, the bailout fund looks to have failed before it has barely even got started.

Last week, the EFSF finally got away a postponed debt issuance to raise money for the Irish bailout.

But the surprisingly high interest rate it paid - one and three-quarter percentage points more than the German government - suggested that markets are sceptical about the government guarantees behind the fund.

Its head, Klaus Regling, admitted to the Financial Times this week that recent market turmoil was causing it trouble.

And markets have good reason to doubt.

After all, all the EFSF can do is transfer the debt burden from countries that cannot afford it to others that supposedly can.

But now markets are asking questions about whether those other countries - notably France - really can stump up their share of the collective bill.

Albatross 

From the beginning, the obvious solution to the crisis - as many economist have been loudly shouting - is for the ECB to weigh in.

As the central bank, it is the gatekeeper of the eurozone's money supply. So it can simply create out of thin air the cash that is needed to rescue Italy.

If the ECB stood unambiguously behind Italy, by making an unlimited commitment to buy up the country's debts, then investors' worries about whether those debts can be repaid should evaporate.

 

Germany's interwar experience of hyperinflation makes price stability an emotive issue
 

Of course, printing money does not solve the longer-term problems that got Italy (and other southern Europeans) into their current pickle in the first place.

It does not cut Italian wages to more competitive levels. It does not make Italy's debts or overspending disappear. And it does not break the albatross-like stranglehold of vested business interests on much of the Italian economy.

But it will help. Because the longer the crisis goes on, the more that business confidence, consumer confidence and confidence in Europe's banks collapses, and therefore the more collateral damage is done to Europe's economy.

And a recession right now will make Italy's economic problems even harder to solve.

Cultural divide 

So why is the ECB so reluctant to intervene?

A large part of the reason is a cultural divide in Europe that dates back to the interwar period.

To state the obvious, Germany had a very different interwar experience to the rest of Europe.

Elsewhere in Europe, the lesson learned was that sticking to a "hard money" policy - in those days the promise that your currency was backed by gold held in the central bank's vault - can push your economy into a depression.

In Germany, in contrast, the lesson was that printing money to repay an excruciating debt burden leads to hyperinflation, which in turn leads to an angry political backlash that must never be repeated.

Germany's hard money approach - a strong Deutschmark coupled with disciplined government spending - served it well during its post-War Wirtschaftswunder.

So when the euro was founded, Germany insisted on complete independence for the ECB, as well as a "stability" pact of strict limits on government borrowing - until Germany itself later broke the rules with impunity.

German explanation 

The cultural divide lies behind much of Germany's reaction to the current crisis.

It explains Germany's insistence on government spending cuts for all - including itself - even though Keynesian economists say this is a sure-fire way of pushing the entire eurozone economy into a dangerous downward spiral.

It explains why Germans at the ECB opposed even the limited interventions by the central bank to buy up troubled Spanish and Italian debts - to the extent that two of the most senior Germans resigned in protest.

It explains their resistance to cutting interest rates to boost the eurozone economy, because they fear it would let the inflation genie out of the bottle.

 

Economists say Italy has failed to enact economic reforms that would hurt vested business interests
 

However, some economists argue that a higher inflation rate is actually exactly what is needed in the eurozone, in order to help Italian and other workers regain their competitive advantage against German workers.

Germans may well point out that when the euro was created over a decade ago, they were the ones whose wages were uncompetitively expensive.

They solved the problem through unpopular labour market reforms and years of stagnant wages. So why can southern Europeans not do the same now?

There are three reasons. First, Germany has a system of centralised wage negotiations unmatched by other countries, which made it much easier to negotiate with its unions what was in effect a national wage freeze.

Secondly, Germans are not homeowners. They mostly rent their properties. This means that, unlike in for example Spain, Germany has not experienced a mortgage debt-fuelled property bubble. When you have little debt, it is much easier to live with a stagnant income.

Thirdly, Germany actually benefited from the debt-fuelled boom in its southern European export markets. But in the current stagnant global economy, it is unlikely Germany - or anyone else - will return the favour and help southern Europeans export their way to recovery.

Playing chicken 

Nonetheless, the Germans have a point. While the ECB's role in solving the debt crisis is necessary, it is certainly not sufficient.

The Italians must play their part by getting their finances under control, and - far more importantly - by reforming their economy to make it more competitive and less under the sway of the kind of cosy business interests embodied by their outgoing prime minister.

That leaves the ECB and Italy in a dangerous game of chicken.

 

It has suited Mario Draghi to take a German line on his home country

The ECB doesn't want to budge until it is clear that Italy is serious about reform.

Nor does it want to dictate to Italy what reforms it must undertake - the ECB, after all, does not do politics. That is why the International Monetary Fund has now been called in, in an advisory capacity.

But any Italian government would be crazy to push through unpopular reforms unless it is assured that the ECB will ultimately come to its rescue.

In a game of chicken, the best tactic is to convince your opponent that you are crazy enough to risk a catastrophe.

So it has suited Mario Draghi - the ECB's new Italian head - to take a "German" line on no bailouts for Italy, and let the current Italian leg of the financial crisis ensue.

He needs to convince the Italians that they must blink first.

But if the Italians prove incapable of putting together a government with the nerve to do what is required, the question is will the ECB blink first?

Time will tell.

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