8 natural homemade insecticides: Save your garden without killing the Earth

yellow aphids

CC BY 2.0 Barbara Eckstein

These natural and DIY pesticides are effective at helping to rid your crops of harmful critters, but safe enough to keep from poisoning you and your family.

There’s nothing like having a home garden to make you begin to appreciate the trials and tribulations of the farmers who grow our food. Between weather, weeds, and insects, not to mention the challenges of soil fertility, it can be an incredibly humbling experience to try to put food on the table with a home garden – especially when adhering to organic protocols that don’t rely on quick, yet potentially harmful, solutions, such as herbicides, pesticides, and conventional fertilizers. We’ve written previously about homemade herbicides, which can help you get a handle on noxious or invasive weeds without as much labor as hand-weeding. This time around, we’re taking aim at insect pests, which have the potential to turn your formerly lush garden into their own insect all-you-can-eat buffet.

When it comes to keeping your crops healthy in the face of massive quantities of plant-munching insects, there are a number of approaches that can help turn the tide in favor of your own harvests. And while removing insects by hand is one time-tested method, it can also be incredibly challenging to do so, or can be too little too late. Another, far less time-intensive method of knocking back insect populations is by applying natural or homemade insecticides, which can reduce their numbers or eliminate them all together. Not all insects are harmful, so applying insecticides indiscriminately, especially harsh pesticides that affect even the beneficial insects, can have a detrimental effect on your local garden ecosystem.

[N.B.: Just because these are “natural” or homemade insecticides, that doesn’t imply that they couldn’t harm your soil, your garden, or your person. An insecticide is defined as “a substance used to kill insects,” and as such, they have the potential to “significantly alter ecosystems” and can be toxic to humans and other animals, so before going all out with any pesticide or insecticide, be sure to do your homework and choose the most effective, least harmful (to you and your garden) option.]

Natural and homemade insecticides

1. Oil spray insecticide

A homemade insecticide made from vegetable oil mixed with a mild soap (such as Dr. Bronner’s castile soap) can have a devastating effect on certain troublesome insects, such as aphids, mites, thrips, etc. To make a basic oil spray insecticide, mix 1 cup of vegetable oil with 1 tablespoon of soap (cover and shake thoroughly), and then when ready to apply, add 2 teaspoons of the oil spray mix with 1 quart of water, shake thoroughly, and spray directly on the surfaces of the plants which are being affected by the little pests. The oil coats the bodies of the insects, effectively suffocating them, as it blocks the pores through which they breathe.

2. Soap spray insecticide

A very similar homemade pesticide to the oil spray is a soap spray, which is also effective for controlling mites, aphids, whiteflies, beetles, and other hungry little insects. To make a basic soap spray insecticide, mix 1 1/2 teaspoons of a mild liquid soap (such as castile soap) with 1 quart of water, and spray the mixture directly on the infected surfaces of the plants. A soap spray insecticide works in a similar fashion as an oil spray pesticide, and can be applied as necessary (though it is always recommended to NOT apply it during the hot sunny part of the day, but rather in the evenings or early mornings).

3. Neem oil insecticide

An oil extracted from the seeds of the neem tree is a powerful natural insecticide, capable of disrupting the life cycle of insects at all stages (adult, larvae, and egg), making it a great resource for the organic gardener. Neem oil acts as a hormone disruptor and as an “antifeedant” for insects that feed on leaves and other plant parts. Neem oil is biodegradable and is nontoxic to pets, birds, fish, and other wildlife, and is effective against a variety of common garden insect pests, as well as being a natural fungicide that can combat powder mildew and other fungal infections on plants. It can be found at many garden stores or natural foods markets. To use neem oil as an insecticide, either follow the instructions on the bottle, or start out with a basic mixture of 2 teaspoons neem oil and 1 teaspoon of mild liquid soap shaken thoroughly with 1 quart of water, and then sprayed on the affected plant foilage. Neem oil can also be used preventatively by spraying the leaves of plants that are often ravaged by pests, before they’re actually infested.

4. Diatomaceous earth as a natural pesticide

This natural substance with a somewhat unwieldy name is made from a sedimentary rock created by fossilized algae (diatoms), and which is a rather abundant resource (diatomaceous earth is said to make up 26% of the earth’s crust by weight). Diatomaceous earth has a number of uses in and around the home, and acting as a natural insecticide is just one of them. This material works not by poisoning or smothering the insects, but instead by virtue of its abrasive qualities and its affinity for absorbing the lipids (a waxy substance) from insects’ exoskeleton, which then dehydrates them to death. Diatomaceous earth is often available at garden stores, although many times only in large bags, so if you’ve got a small yard, consider splitting it with a neighbor. To apply, simply dust the ground around your plants, or even sprinkle it on the foliage, where it will help control snails and slugs as well as other crawling insects. Due to its dried nature, in order to be an effective natural pesticide, diatomaceous earth needs to be reapplied after every rain.

5. Garlic insecticide spray

Garlic is well-known for its pungent aroma, which is delectable to some and yet repellent to others, and it is this strong scent that comes into play when used as a natural insecticide. Actually, it’s not really clear if garlic spray and chile spray (below) are actually insecticides or are more likely insect repellents, but either way, these common kitchen ingredients can be used to knock down, or even knock out, insect infestations in the garden. To make a basic garlic spray, take 2 whole bulbs (not just 2 cloves) and puree them in a blender or food processor with a small amount of water. quart of water. Let the mixture sit overnight, then strain it into a quart jar, adding 1/2 cup of vegetable oil (optional), 1 teaspoon of mild liquid soap, and enough water to fill the jar. To use this homemade insecticide, use 1 cup of mixture with 1 quart of water and spray liberally on infested plants.

6. Chile pepper insecticide spray

Similar to garlic spray, chile pepper spray is a great homemade natural insect repellent that can be used for a variety of different pests. Chile spray can be made from either fresh hot peppers or chile pepper powder. To make a basic chile spray from pepper powder, mix 1 tablespoon of chile powder with 1 quart of water and several drops of mild liquid soap. This mixture can be used full-strength on the leaves of affected plants. To make chile spray from fresh chile peppers, blend or puree 1/2 cup of peppers with 1 cup of water, then add 1 quart of water and bring to a boil. Let sit until cooled, then strain out the chile material, add several drops of liquid soap to it and spray as desired. [Caution: Hot chile peppers can be very potent on humans as well, so be sure to wear gloves when handling them, and keep any sprays made from them away from eyes, nose, and mouth.]

7. All-in-one homemade insecticide spray

From the folks at Rodale’s Organic Life comes this all-in-one DIY natural insecticide, which is said to be a combination of many different recipes submitted by readers. To make it, puree 1 bulb of garlic and 1 small onion, add 1 teaspoon of cayenne pepper powder and let steep for an hour. Strain the mixture and add 1 tablespoon of liquid soap and mix well. To apply this homemade insecticide, spray it full-strength onto both the upper surface of the leaves, as well as the undersides, and store the remainder in the refrigerator for up to a week if desired.

8. Tomato leaf as a natural insecticide

I have to admit that this one is new to me, but I’ve seen enough mentions of it now to warrant its inclusion here as a natural pesticide. Tomato plants are part of the nightshade family, and as such, contain alkaloids such as the aptly named “tomatine,” which can effectively control aphids and other insects. To make tomato leaf spray for a natural insecticide, chop 2 cups of fresh tomato leaves (which can be taken from the bottom part of the plant) into 1 quart of water, and let steep overnight. Strain out the plant material and spray onto plant foliage.

Make, use, and observe, then modify

Although there are many more natural pesticides available, such as Bt (a soil microbe toxic to certain insects), milky spore (also a microbe), nicotine (extracted as a tea from bulk tobacco), pyrethrum (derived from a variety of daisy), and iron phosphate (a natural mineral toxic to slugs and snails), the above natural and homemade insecticide recipes should give you a good starting point for creating your own version. Every organic gardener seems to have their own particular blend and ratio of ingredients, so by paying close attention to the effects of a specific recipe, it’s possible to modify it to best suit your own insect battles.

Just remember, killing off all of the insects in your garden is not the desired result here, as any healthy ecosystem requires an abundance of beneficial insects, microbes, and fungi, both in the soil and on the plants themselves, so introducing other predatory insects (ladybugs, praying mantis, etc.) or creating good habitat for them, as well as building soil fertility, can also be an effective pest management approach.


The Climate Case for the Four-Day Work Week

Photo: Getty

Jacinda Ardern has won a lot of rightful praise for New Zealand’s handling of the coronavirus pandemic. The nation has stood as an outlier with cases that have stayed low, and the country is beginning to reopen in what it hopes is a safe way. So maybe we should also be paying attention to what their ideas are for a recovery plan.

Last week, Ardern suggested switching to a four-day work week. Yes, the reasons she listed were largely focused on stimulating the New Zealand economy, particularly its hard-hit tourism sector. But a four-day work week—like the one Americans will enjoy this week thanks to Memorial Day—would do more than juice the economy and make workers happy. It could also help lower emissions and protect the climate.

Less work is a dream that’s been kicking around for awhile if you, like me, are a fan of things like “free time,” “chilling,” and “bettering oneself.” History is ripe with examples of workers and even companies pushing for fewer working hours. That includes economist John Maynard Keynes’ prediction of a 15-hour work week in 1930 and Kellogg’s shift to a 30-hour work week during the Great Depression. The U.S. Senate even went so far as to pass a bill codifying a 30-hour week in 1933 (the House never took it up).

With a similar economic crisis gripping the world today and Ardern putting the idea of a four-day week front and center as a possible recovery measure, it’s worth reconsidering just why it has potential to be such a good idea.

Giving people an extra day of time to do their own thing doesn’t seem to have the negative impact on work life that you might expect. There’s ample proof that even under a four-day week, productivity doesn’t drop (in fact, it can go up). Really, what’s standing between us and doing less work is a fetishization of putting in the time, rising inequality that keeps people struggling, and, as University of Iowa historian Benjamin Hunnicutt put it in a 2014 piece for Politico, “a failure of imagination.”

Ardern’s idea is pretty straightforward. Tourism accounts for 5.8 percent of New Zealand’s GDP, and the sector has basically come to a standstill. With coronavirus cases extremely low and the pandemic seemingly under control, cutting the work week by a day would mean folks can spend time traveling and helping the sector pick back up.

But even leaving out the coronavirus recovery part, the four-day work week would also set us on a pathway to a safer climate. A white paper published in 2006 made the case clearly: If the U.S. adopted European work hours, American carbon emissions in 2000 would have been 7 percent below its actual 1990 levels. That would have been enough for the U.S. to meet the targets set forth in the Kyoto Protocol, a 1997 climate treaty the country failed to ratify.

Working longer hours means heating and cooling offices, more electricity use, and more energy spent commuting. In places without public transit, that means more local air pollution as well. Reducing commuting could be a huge benefit in the U.S. in particular, where transportation accounts for the biggest chunk of carbon pollution. Prior to the pandemic, there was a relatively small portion of telecommuters in the U.S. Yet these 3.9 million people working from home reduced emissions as much as taking 600,000 cars off the road each year. The impact of more work-from-homers due to the pandemic is likely to have an even bigger impact.

The effects aren’t limited to work-related commutes and office energy use. A 2011 study found that longer hours worked are also associated with “energy-intensive consumptions and favor conspicuous expenditure and non-sustainable lifestyles.”

While the four-day work week could offer a way to reduce environmental harm, it’s not necessarily a slam dunk absent major government intervention. For one, there’s the state of the economy in the year of our Lord, 2020. In the U.S., in particular, there are huge issues around inequalitygig work, and private health care tied to employers and working a set number of hours.

David Rosnick, an economist at the Center for Economic and Policy Research who authored the 2006 white paper, told Earther that in the U.S., “there are serious problems with inequality once we impose effective policies toward hours reduction. Many of these low-end workers already scramble with unpredictable schedules and side-gigs to make up for short hours and even shorter incomes. At the higher end, there’s the question of employer-provided health coverage: Are employees going to have to cover an additional 20 percent of those costs?”

Rosnick also raised concerns that some employers would just end up asking employees to cram more hours into fewer days, and asked what it would mean for those who don’t work Monday through Friday. Cutting down to a four-day work week without wage and benefits protections isn’t going to fly. For Ardern’s plan to be equitable, let alone implemented elsewhere, everyone has to be taken care of.

The U.S. and elsewhere could also do a hell of a lot to improve access to low-carbon leisure, or else people could end up just burning through carbon in other ways, like cruising. In cities, that could mean opening streets (lots of them) to pedestrians and bikes and providing outdoor dining that can allow people to social distance while enjoying downtime. And for travel beyond city limits, it means building out affordable mass transit. None of this will be enough to completely stave off the climate crisis, but overlooking at as a solution would be a huge folly.

All of which is to say we need big structural changes to take place in order for working less to work. That may sound like a tall order, but then it’s worth stepping back to remember what we’re fighting for in the first place, something that’s easy to do in even the most normal of times when we’re all just trying to make ends meet.

“We’ve forgotten that the purpose of life is to be happy, and to pass that happiness on to future generations,” Hunnicutt wrote in Politico.

To have a chance at passing on the good life, we need to address the climate crisis. And the time to do it is now.


Brian Kahn,  Managing editor, Earther


We can’t go back to business-as-usual after the COVID-19 pandemic. That’s why we’re building a movement for a #JustRecoveryforAll  that puts people first.

Hundreds of organizations endorse the Principles of a Just Recovery.

As we continue to respond to the COVID-19 health crisis and prepare to rebuild, organizations across Canada want governments to know that we cannot go back to the way things were. For years, we have witnessed the results of chronic underinvestment and inaction in the face of the ongoing, pre-existing crises of colonialism, human rights abuses, social inequity, ecological degradation, and climate change. Now, the COVID-19 crisis is forcing governments and civil society alike to reckon with the inadequacies and inequities of our systems.

This moment is a reminder that the status quo can and must be disrupted. We are standing on the threshold between the old world and the next and we must choose to build the future we want.

As governments and institutions begin to make plans to “recover” from the COVID-19 emergency, civil society groups across Canada have come together to demand that these plans build the resilient future we need for all people and ecosystems. Recovery efforts must not take us backward; they must accelerate the transition towards a more healthy, sustainable, and equitable society.To do so, we have identified six Principles of a Just Recovery. These principles stretch us beyond immediate, emergency responses to consider how we might “build back better” so that our economy supports all people, instead of people working to support the economy. Instead of sacrificing people or the planet for short-term profits, these principles guide us to a society that prioritizes resilience and wellbeing. All recovery plans should meet these essential criteria in their design, implementation, and evaluation.



A Global Green New Deal: Into the Portal, Leave No one Behind

Arundhati Roy and Naomi Klein in a conversation moderated by Asad Rehman on how we move from crisis to justice and build a Global Green New Deal!

We knew our system was broken. But the Covid-19 pandemic has reinforced the cruelty of the global economy, and deepened the visceral injustices of our societies. Before the virus stuck, the effect of climate catastrophe and obscene inequality meant that millions were already living in multiple crises. Now, as the pandemic wreaks an untold impact, we know that it is those who are most vulnerable—whether from their inability to access healthcare, or because of their economic precarity—who bear the heaviest burden. In times of crisis, it is always the poorest, the most oppressed, and those under occupation, who are most affected. Our only recourse is to amplify the calls for justice ringing from every corner of the globe. The time to build the future we deserve is now, and international solidarity is the tool we need to begin its construction.


Join Arundhati Roy and Naomi Klein in a conversation moderated by Asad Rehman and hear how we can begin to build a global transformation.


How Car-Clogged Houston Could Be a Climate Policy Leader

Houston’s infamous lack of zoning could become a climate-policy asset as the sprawling Texas metropolis attempts to steer a more sustainable course.

April was supposed to be a big month for Houston city planning. America’s largest unzoned city was poised to host the American Planning Association’s national convention for the first time, bringing thousands of attendees to town. Walking tours were arranged; awkward cocktail mixers were scheduled.

Of course, with a global outbreak of the coronavirus, it wasn’t meant to be.

Undeterred, Houston quietly adopted the Bayou City’s first citywide climate action plan on the 50th anniversary of Earth Day. If city leaders can pull it off, America’s sprawling oil capital could end up teaching a lot to more traditionally green urban strongholds.

Houston is no stranger to the extreme weather events believed to be associated with climate change. In 2017, the city was slammed by Hurricane Harvey, resulting in over $120 billion in damage and 68 lost lives. In the aftermath, the city moved to expand stormwater management infrastructure and aggressively control floodplain development. The recently passed climate action plan takes a more proactive approach, setting out ways that Houston, which is one of the largest per capita greenhouse gas emitters among U.S. cities, can minimize its impact on the environment in the first place.

The plan includes plenty of mainstay climate-policy prescriptions, including calls to electrify the city’s fleet of vehicles, switch to renewable sources of energy, and improve energy efficiency in buildings. But then things become rather unique. The city’s first bicycle master plan, adopted in 2017, gets a lot of play, as does the MetroNEXT Moving Forward plan, a widely lauded $3.5 billion push to overhaul mass transit in the notoriously auto-oriented city. The emphasis on mobility makes sense, since nearly one-third of U.S. greenhouse gas emissions come from transportation, and Houston maintains one of the highest rates of automobile use in the country.

Toward this same end, one of the plan’s more innovative proposals calls on policymakers to eliminate minimum parking requirements by 2030. While Houston famously lacks zoning — meaning that it doesn’t segregate uses or restrict densities — it still enforces some conventional land-use regulations. These include minimum parking requirements, which mandate that developers build off-street parking for each project, regardless of actual demand. In Houston, this can mean up to two parking spaces for every apartment or four spaces for every thousand square feet of office space.

Thanks to the pioneering work of urban economist Donald Shoup, minimum parking requirements have lately come under fire from affordable housing activists and environmentalists. The former note that the construction of an underground parking garage can raise the cost of an apartment by as much as $34,000. The latter point out that mandating parking bakes in resource-intensive sprawl, foreclosing the possibility of a more urban, less car-dependent lifestyle.

Several cities — including Buffalo, Hartford and San Francisco — have already scrapped minimum parking requirements. And in 2019, Houston itself moved to increase the number of neighborhoods it exempts from minimum parking requirements, dubbed locally as the “market-based parking” area. But most neighborhoods along the city’s major new light rail lines remain subject to the requirements, potentially undercutting walkable infill development.

In pursuit of less driving and more energy efficiency, the plan also calls on policymakers to rally behind infill. With the proposed “Walkable Places Ordinance” and “Transit-Oriented Development Ordinance,” a blend of improved sidewalks and light design guidance could soon improve the pedestrian experience in Houston’s potentially walkable nodes, reducing the incentive to drive. With minimum parking requirements gone, small patches of walkable urbanism could soon take root among some of the Sun Belt’s most notorious sprawl.


Pollution: Birds ‘ingesting hundreds of bits of plastic a day’

Birds living on river banks are ingesting plastic at the rate of hundreds of tiny fragments a day, according to a new study.

The dipper feeds on river insects

Scientists say this is the first clear evidence that plastic pollutants in rivers are finding their way into wildlife and moving up the food chain.

Pieces of plastic 5mm or smaller (microplastics), including polyester, polypropylene and nylon, are known to pollute rivers.

The impacts on wildlife are unclear.

Researchers at Cardiff University looked at plastic pollutants found in a bird known as a dipper, which wades or dives into rivers in search of underwater insects.

“These iconic birds, the dippers, are ingesting hundreds of pieces of plastic every day,” said Prof Steve Ormerod of Cardiff University’s Water Research Institute. “They’re also feeding this material to their chicks.”

Previous research has shown that half of the insects in the rivers of south Wales contain microplastic fragments.

“The fact that so many river insects are contaminated makes it inevitable that fish, birds and other predators will pick up these polluted prey – but this is the first time that this type of transfer through food webs has been shown clearly in free-living river animals,” said co-researcher Dr Joseph D’Souza.

Image captionPlastic also accumulates in animals on beaches like this lugworm


The research team examined droppings and regurgitated pellets from dippers living near rivers running from the Brecon Beacons down to the Severn Estuary.

They found microplastic fragments in roughly half of 166 samples taken from adults and nestlings, at 14 of 15 sites studied, with the greatest concentrations in urban locations. Most were fibres from textiles or building materials.

Calculations suggest dippers are ingesting around 200 tiny fragments of plastic a day from the insects they consume.

Previous studies have shown that microplastics are present even in the depths of the ocean and are ending up in the bodies of living organisms, from seals to crabs to seabirds.

Rivers are a major route between land and sea for microplastics such as synthetic clothing fibres, tyre dust and other fragmenting plastic waste.

The research, published in the journal Global Change Biology, was carried out in collaboration with the Greenpeace Research Laboratories at the University of Exeter.



Protecting Argentina’s imperiled penguins from plastic waste

Plastics profit and environment neglected during pandemic

Alberta picked up $8 million tab for land rent left unpaid by oil and gas companies in 2019

Data obtained via a freedom of information request shows taxpayers are footing the bill for delinquent companies’ payments to private landowners, to the tune of nearly $30 million since 2010

Daryl Bennett, a farmer and director with landowner group Action Surface Rights, poses beside oil and gas infrastructure near Taber, Alta. Bennett says “companies have learned to game the system.” Photo: Theresa Tayler / The Narwhal

The Alberta government failed to recoup more than $8 million in land rents it paid to landowners on behalf of oil and gas companies last year, data obtained by The Narwhal via a freedom of information request reveals.

Industry paid back just $302,000, or less than four per cent of what was owed in 2019 — a continuation of a trend that has seen companies rack up nearly $30 million in rent debt to the government since 2010.

“If companies can’t afford to pay landowners to operate on private land, that’s a flashing red light that something is terribly wrong,” Regan Boychuk of the Alberta Liabilities Disclosure Project told The Narwhal.

“There’s no effort afoot to solve this problem,” he added.

Companies are supposed to pay rent to landowners when they drill a well on their land. If a company doesn’t pay, a landowner can apply to the Government of Alberta’s Surface Rights Board for compensation. The government is then tasked with recouping that money from delinquent oil and gas companies.

But data shows it is seldom successful.

Since 2010, Alberta oil and gas companies have racked up nearly $30 million in debt to the Alberta government in this way.

Data obtained through freedom of information requests shows only $638,000, or just over two per cent, has been recovered over that period.

Alberta unpaid land rents oil and gas wells

The total amount paid out by government to landowners on behalf of delinquent oil and gas companies has skyrocketed in recent years, increasing 1,183 per cent since 2010. Data: Surface Rights Board / FOIP request with Alberta Environment and Parks. Graph: Carol Linnitt / The Narwhal

Meanwhile, the amount paid out by the government for land rent on behalf of delinquent oil and gas companies has increased 1,183 per cent since 2010.

At the same time, the province’s Orphan Well Association has been loaned more than half a billion dollars in recent years and in April the struggling conventional oil and gas industry in Alberta has been handed $1 billion in grants from the federal government to plug and clean up inactive wells languishing on the landscape, to be administered by the provincial government.

The Government of Alberta is currently accepting applications for the second phase of the $1-billion grant package, with $100 million earmarked specifically for the cleanup of sites owned by companies for which taxpayers have had to pay their land rent. For accepted wells, the government will now also pay for 100 per cent of well plugging and cleanup.

“We have to start asking the question, ‘why can’t they pay basic bills?’ ” Boychuk said. “And that leads to some uncomfortable answers about the future of the industry.”

Unpaid land rents Alberta oil and gas wells chart

In 2019, less than four per cent of the more than $8.4 million paid out by government on behalf of delinquent oil and gas companies was recouped, leaving taxpayers to cover the rest of the bill. Data: Surface Rights Board / FOIP request with Alberta Environment and Parks. Graph: Carol Linnitt / The Narwhal

‘Gaming the system’

There are more than 336,000 oil and gas wells across Alberta, according to the provincial government. Many of them are on private land.

If a company fails to pay the annual rent they have agreed on, the landowner can apply for a “recovery of rentals” from the Surface Rights Board, as per the Surface Rights Act, and receive their compensation from Alberta’s general revenue fund. That’s taxpayer money.

The Narwhal reported last year that the tab for taxpayer money paying land rent on behalf of oil and gas companies was already $20 million. It’s now grown by close to $10 million, according to data provided to The Narwhal by the Surface Rights Board.

This is supposed to be a temporary fix, as the government is then meant to recoup taxpayers’ money by tracking down the company and collecting the funds.


Progressive International – the new offensive against imperialism of neo-liberal finance capital

Only a common international front can match the scale of our crises, reclaim our institutions, and defeat a rising authoritarian nationalism.

Progressives the world over — democrats, libertarians and the Left — look eagerly forward to the inaugural Summit of the Progressive International (PI) in Reykjavik, Iceland, hosted by the Prime Minister of Iceland and the Left-Green Movement in the September this year. The process began in the ending months of 2018 at a meeting between the US Senator Bernie Sanders, representing the Sanders Institute and former finance minister of Greece Yanis Varoufakis on behalf of the Democracy in Europe 25 (DiEM25), a pan-European, cross-border movement of democrats, in November 2018, setting out a seven-year time limit (2025) to save the European Union from what it called as ‘guilty deceit’, leading to disintegration of EU. The Sanders Institute endorsed the concept at a gathering in Burlington, Vermont in the same month where an array of activists, thinkers and politicians gathered to discuss pressing issues like climate change, workers rights, and health and perceived the concept of broadening the struggle.

The PI is steered by a 40-plus member interim council comprising inter alia Iceland’s Prime Minister Katriin Jakobsdottir, Latin American stalwarts such as the ex- Ecuadorean president Rafael Correa; former Brazilian presidential candidate Fernando Haddad; former Brazilian Foreign Minister Celso Amorim; Bolivian former Vice President Alvaro Garcia, linguistics scholar and a crusader against neo-liberal imperialism Noam Chomsky, Varoufakis authors like Naomi Klein and Arundhati Roy. The initiative has three pillars: the movement aimed to forge a global network; to develop a policy blueprint for a progressive international order; and the Wire which offers a wire service to the world’s progressive forces. Jakobsdóttir, Varoufakis, Nanjala Nyabola, Vanessa Nakate, and Renata Ávila will host the inaugural event of the PI.

The PI is obviously very different from the political parties-based Second and Third (or Communist International or Comintern ) Internationals or the like. Comintern, founded mainly under the initiative of V I Lenin, clamped 21 conditions for seeking affiliation with it. Today, no party will agree to submit to such dictatorial imposition. Consider two of the 21. (a) Every organization desiring to join the Communist International shall be bound systematically and regularly to remove from all the responsible posts in the labor movement (party organization, editorship, labor unions, parliamentary factions, cooperatives, municipalities, etc.) all reformists and followers of the “center,” and to have them replaced by Communists, even at the cost of replacing at the beginning “experienced” opportunists by rank-and-file workingmen. (b) Every party desirous of affiliating to the Third International should renounce not only avowed social patriotism but also the falsehood and the hypocrisy of social pacifism: It should systematically demonstrate to the workers that without a revolutionary overthrow of capitalism no international arbitration, no talk of disarmament, no democratic reorganization of the League of Nations will be capable of saving mankind from new imperialist wars”. Even official Marxist parties that were affiliates of Comintern or split-away-s thereof are unlikely to endorse such conditionalities.

It is likely that the rules of membership will be mainly endorsing the 2597 word DiEM25 manifesto (https://diem25.org/manifesto-long/) that made membership open to both individuals and organisations. “The EU will be democratised. Or it will disintegrate! A Manifesto for Democratising Europe”.

In the founding DiEM25made its total opposition to the Brussels bureaucracy (and its more than 10,000 lobbyists) that calls the shots. Terming the unelected ‘technocrats’ from other international and European institutions as a Troika that successfully demolished the cardinal principles, based on which the EU was created, DiEM25 made a blistering attack against the hit-squad inspectorates and the Troika. “ Political parties appealing to liberalism, democracy, freedom and solidarity to betray their most basic principles when in government. Governments that fuel cruel inequality by implementing self-defeating austerity

Media moguls who have turned fear-mongering into an art form, and a magnificent source of power and profit Corporations in cahoots with secretive public agencies investing in the same fear to promote secrecy and a culture of surveillance that bend public opinion to their will”.

Stepping up its anger against the DiEM 25 snapped fingers at the EU. “Alas, today, a common bureaucracy and a common currency divide European peoples that were beginning to unite despite our different languages and cultures. A confederacy of myopic politicians, economically naïve officials and financially incompetent ‘experts’ submit slavishly to the edicts of financial and industrial conglomerates, alienating Europeans and stirring up a dangerous anti-European backlash. Proud peoples are being turned against each other. Nationalism, extremism and racism are being re-awakened….Its purpose is to prevent Europeans from exercising democratic control over their money, finance, working conditions and environment. The price of this deceit is not merely the end of democracy but also poor economic policies”. :

Announcing the formation of PI, Varoufakis said, “…in the midst of the Covid-19 pandemic —the Progressive International launched with a mission to unite progressive forces in a common planetary front. Now, we are kicking off the P.I. Forum with its inaugural event featuring five members of the PI Council: Prime Minister of Iceland Katrín Jakobsdóttir; Ugandan climate activist Vanessa Nakate; Greek MP and DiEM25 co-founder Yanis Varoufakis; Guatemalan human rights & tech lawyer Renata Ávila; and writer and political analyst Nanjala Nyabola from Kenya. At this historic juncture, we face a clear choice — a choice that PI Council member Noam Chomsky has described as “Internationalism or Extinction.” Either we bind our local struggles at the planetary scale. Or we surrender to an authoritarian capitalism that is grinding our species to extinction” The new global unity initiative and its t firmly anti-imperialist mood imbibes in part the principles of the International Working Mens’ Association (the First International), in 1864, drafted by Karl Marx. “

Evidently the two main personalities in shaping the PI are Varoufakis and Sanders- both known for their unequivocal commitment for liberty and progress. Varoufakis in his 21-page introduction to the Communist Manifesto, published in 2018, wrote “Liberty, happiness, autonomy, individuality, spirituality, self-guided development are ideals that Marx and Engels valued above everything else” Sanders in an unpublished essay, scheduled to have been published in an anthology on socialism, designed for today, on 1 May but postponed due to Covid 19 pandemic said: “his country. What I believe is that the American people deserve freedom — true freedom. Freedom is an often-used word but it’s time we took a hard look at what that word actually means. Ask yourself: what does it actually mean to be free?”


Naomi Klein: How big tech plans to profit from the pandemic

As the coronavirus continues to kill thousands each day, tech companies are seizing the opportunity to extend their reach and power.

Main image: Eric Schmidt, Google’s former executive chair, left, with the New York governor Andrew Cuomo. Photograph: Getty

For a few fleeting moments during the New York governor Andrew Cuomo’s daily coronavirus briefing on Wednesday 6 May, the sombre grimace that has filled our screens for weeks was briefly replaced by something resembling a smile.

“We are ready, we’re all-in,” the governor gushed. “We are New Yorkers, so we’re aggressive about it, we’re ambitious about it … We realise that change is not only imminent, but it can actually be a friend if done the right way.”

The inspiration for these uncharacteristically good vibes was a video visit from the former Google CEO Eric Schmidt, who joined the governor’s briefing to announce that he will be heading up a panel to reimagine New York state’s post-Covid reality, with an emphasis on permanently integrating technology into every aspect of civic life.

“The first priorities of what we’re trying to do,” Schmidt said, “are focused on telehealth, remote learning, and broadband … We need to look for solutions that can be presented now, and accelerated, and use technology to make things better.” Lest there be any doubt that the former Google chair’s goals were purely benevolent, his video background featured a framed pair of golden angel wings.

Just one day earlier, Cuomo had announced a similar partnership with the Bill and Melinda Gates Foundation to develop “a smarter education system”. Calling Gates a “visionary”, Cuomo said the pandemic has created “a moment in history when we can actually incorporate and advance [Gates’s] ideas … all these buildings, all these physical classrooms – why, with all the technology you have?” he asked, apparently rhetorically.

It has taken some time to gel, but something resembling a coherent pandemic shock doctrine is beginning to emerge. Call it the Screen New Deal. Far more hi-tech than anything we have seen during previous disasters, the future that is being rushed into being as the bodies still pile up treats our past weeks of physical isolation not as a painful necessity to save lives, but as a living laboratory for a permanent – and highly profitable – no-touch future.

Anuja Sonalker, the CEO of Steer Tech, a Maryland-based company selling self-parking technology, recently summed up the new virus-personalised pitch. “There has been a distinct warming up to humanless, contactless technology,” she said. “Humans are biohazards, machines are not.”

It’s a future in which our homes are never again exclusively personal spaces, but are also, via high-speed digital connectivity, our schools, our doctor’s offices, our gyms, and, if determined by the state, our jails. Of course, for many of us, those same homes were already turning into our never-off workplaces and our primary entertainment venues before the pandemic, and surveillance incarceration “in the community” was already booming. But in the future that is hastily being constructed, all of these trends are poised for a warp-speed acceleration.

This is a future in which, for the privileged, almost everything is home delivered, either virtually via streaming and cloud technology, or physically via driverless vehicle or drone, then screen “shared” on a mediated platform. It’s a future that employs far fewer teachers, doctors and drivers. It accepts no cash or credit cards (under guise of virus control), and has skeletal mass transit and far less live art. It’s a future that claims to be run on “artificial intelligence”, but is actually held together by tens of millions of anonymous workers tucked away in warehouses, data centres, content-moderation mills, electronic sweatshops, lithium mines, industrial farms, meat-processing plants and prisons, where they are left unprotected from disease and hyper-exploitation. It’s a future in which our every move, our every word, our every relationship is trackable, traceable and data-mineable by unprecedented collaborations between government and tech giants.

 Eric Schmidt, via video call, joins the media briefing given by the New York governor Andrew Cuomo on 6 May 2020. Photograph: Lev Radin/Pacific Press/Rex/Shutterstock


If all of this sounds familiar, it’s because, pre-Covid, this precise app-driven, gig-fuelled future was being sold to us in the name of friction-free convenience and personalisation. But many of us had concerns. About the security, quality and inequity of telehealth and online classrooms. About driverless cars mowing down pedestrians and drones smashing packages (and people). About location tracking and cash-free commerce obliterating our privacy and entrenching racial and gender discrimination. About unscrupulous social media platforms poisoning our information ecology and our kids’ mental health. About “smart cities” filled with sensors supplanting local government. About the good jobs these technologies wiped out. About the bad jobs they mass produced.

And most of all, we had concerns about the democracy-threatening wealth and power accumulated by a handful of tech companies that are masters of abdication – eschewing all responsibility for the wreckage left behind in the fields they now dominate, whether media, retail or transportation.

That was the ancient past, also known as February. Today, a great many of those well-founded concerns are being swept away by a tidal wave of panic, and this warmed-over dystopia is going through a rush-job rebranding. Now, against a harrowing backdrop of mass death, it is being sold to us on the dubious promise that these technologies are the only possible way to pandemic-proof our lives, the indispensable keys to keeping ourselves and our loved ones safe.

Thanks to Cuomo and his various billionaire partnerships (including one with Michael Bloomberg for testing and tracing), New York state is being positioned as the gleaming showroom for this grim future – but the ambitions reach far beyond the borders of any one state or country.

And at the dead centre of it all is Eric Schmidt.

Well before Americans understood the threat of Covid-19, Schmidt had been on an aggressive lobbying and public-relations campaign, pushing precisely the Black Mirror vision of society that Cuomo has just empowered him to build. At the heart of this vision is seamless integration of government with a handful of Silicon Valley giants – with public schools, hospitals, doctor’s offices, police and military all outsourcing (at a high cost) many of their core functions to private tech companies.

It’s a vision Schmidt has been advancing in his roles as chair of the Defense Innovation Board, which advises the US Department of Defense on increased use of artificial intelligence in the military, and as chair of the powerful National Security Commission on Artificial Intelligence, or NSCAI, which advises Congress on “advances in artificial intelligence, related machine learning developments and associated technologies”, with the goal of addressing “the national and economic security needs of the United States, including economic risk”. Both boards are crowded with powerful Silicon Valley CEOs and top executives from companies including Oracle, Amazon, Microsoft, Facebook and of course, Schmidt’s former colleagues at Google.

As chair, Schmidt – who still holds more than $5.3bn in shares of Alphabet (Google’s parent company), as well as large investments in other tech firms – has essentially been running a Washington-based shakedown on behalf of Silicon Valley. The main purpose of the two boards is to call for exponential increases in government spending on research into artificial intelligence and on tech-enabling infrastructure such as 5G – investments that would directly benefit the companies in which Schmidt and other members of these boards have extensive holdings.

First in closed-door presentations to lawmakers, and later in public-facing opinion articles and interviews, the thrust of Schmidt’s argument has been that since the Chinese government is willing to spend limitless public money building the infrastructure of high-tech surveillance, while allowing Chinese tech companies such as Alibaba, Baidu and Huawei to pocket the profits from commercial applications, the US’s dominant position in the global economy is on the precipice of collapsing.

The Electronic Privacy Information Center (Epic) recently got access, through a freedom of information (FOI) request, to a presentation made by Schmidt’s NSCAI in May 2019. Its slides make a series of alarmist claims about how China’s relatively lax regulatory infrastructure and its bottomless appetite for surveillance are causing it to pull ahead of the US in a number of fields, including “AI for medical diagnosis”, autonomous vehicles, digital infrastructure, “smart cities”, ride-sharing and cashless commerce.

The reasons given for China’s competitive edge are myriad, ranging from the sheer volume of consumers who shop online; “the lack of legacy banking systems in China”, which has allowed it to leapfrog over cash and credit cards and unleash “a huge e-commerce and digital services market” using digital payments; and a severe doctor shortage, which has led the government to work closely with tech companies such as Tencent to use AI for “predictive” medicine. The slides note that in China, tech companies “have the authority to quickly clear regulatory barriers, while American initiatives are mired in HIPPA compliance and FDA approval”.

 A slide from the Chinese Tech Landscape Overview (NSCAI presentation) discussing surveillance. Photograph: NSCAI


More than any other factor, however, the NSCAI points to China’s willingness to embrace public-private partnerships in mass surveillance and data collection as a reason for its competitive edge. The presentation touts China’s “Explicit government support and involvement eg facial recognition deployment”. It argues that “surveillance is one of the ‘first-and-best customers’ for Al” and further, that “mass surveillance is a killer application for deep learning”.

A slide titled “State Datasets: Surveillance = Smart Cities” notes that China, along with Google’s main Chinese competitor, Alibaba, are racing ahead.

 A slide from the Chinese Tech Landscape Overview (NSCAI presentation) discussing surveillance. Photograph: NSCAI


This is notable because Google’s parent company, Alphabet, has been pushing this precise vision through its Sidewalk Labs division, choosing a large portion of Toronto’s waterfront as its “smart city” prototype. But the Toronto project was just shut down after two years of ceaseless controversy relating to the enormous amounts of personal data that Alphabet would collect, a lack of privacy protections, and questionable benefits for the city as a whole.

Five months after this presentation, in November, NSCAI issued an interim report to Congress further raising the alarm about the need for the US to match China’s adaptation of these controversial technologies. “We are in a strategic competition,” states the report, obtained via FOI by Epic. “AI will be at the centre. The future of our national security and economy are at stake.”

 Sidewalk Labs, an Alphabet affiliate, planned to build a neighbourhood ‘from the internet up’ on Toronto’s lakefront. But the project has been shut down after two years of controversy Photograph: AFP via Getty


By late February, Schmidt was taking his campaign to the public, perhaps understanding that the budget increases his board was calling for could not be approved without a great deal more buy-in. In a New York Times article headlined “I used to Run Google. Silicon Valley Could Lose to China”, Schmidt called for “unprecedented partnerships between government and industry” and, once again sounding the yellow peril alarm, wrote:

“AI will open new frontiers in everything from biotechnology to banking, and it is also a defense department priority … If current trends continue, China’s overall investments in research and development are expected to surpass those of the United States within 10 years, around the same time its economy is projected to become larger than ours.

Unless these trends change, in the 2030s we will be competing with a country that has a bigger economy, more research and development investments, better research, wider deployment of new technologies and stronger computing infrastructure … Ultimately, the Chinese are competing to become the world’s leading innovators, and the United States is not playing to win.”

The only solution, for Schmidt, was a gush of public money. Praising the White House for requesting a doubling of research funding in AI and quantum information science, he wrote: “We should plan to double funding in those fields again as we build institutional capacity in labs and research centres … At the same time, Congress should meet the president’s request for the highest level of defence R & D funding in over 70 years, and the defense department should capitalise on that resource surge to build breakthrough capabilities in AI, quantum, hypersonics and other priority technology areas.”

That was exactly two weeks before the coronavirus outbreak was declared a pandemic, and there was no mention that a goal of this vast, hi-tech expansion was to protect American health. Only that it was necessary to avoid being outcompeted by China. But, of course, that would soon change.

In the two months since, Schmidt has put these pre-existing demands – for massive public expenditures on high-tech research and infrastructure, for a slew of “public-private partnerships” in AI, and for the loosening of myriad privacy and safety protections – through an aggressive rebranding exercise. Now all of these measures (and more) are being sold to the public as our only possible hope of protecting ourselves from a novel virus that will be with us for years to come.

And the tech companies to which Schmidt has deep ties, and which populate the influential advisory boards he chairs, have all repositioned themselves as benevolent protectors of public health and munificent champions of “everyday hero” essential workers (many of whom, like delivery drivers, would lose their jobs if these companies get their way). Less than two weeks into New York state’s lockdown, Schmidt wrote an article for the Wall Street Journal that both set the new tone and made clear that Silicon Valley had every intention of leveraging the crisis for a permanent transformation.

“Like other Americans, technologists are trying to do their part to support the front-line pandemic response …

But every American should be asking where we want the nation to be when the Covid-19 pandemic is over. How could the emerging technologies being deployed in the current crisis propel us into a better future? … Companies like Amazon know how to supply and distribute efficiently. They will need to provide services and advice to government officials who lack the computing systems and expertise.

We should also accelerate the trend toward remote learning, which is being tested today as never before. Online, there is no requirement of proximity, which allows students to get instruction from the best teachers, no matter what school district they reside in …

The need for fast, large-scale experimentation will also accelerate the biotech revolution … Finally, the country is long overdue for a real digital infrastructure … If we are to build a future economy and education system based on tele-everything, we need a fully connected population and ultrafast infrastructure. The government must make a massive investment – perhaps as part of a stimulus package – to convert the nation’s digital infrastructure to cloud-based platforms and link them with a 5G network.”

Indeed, Schmidt has been relentless in pursuing this vision. Two weeks after that article appeared, he described the ad-hoc home schooling programming that teachers and families across the country had been forced to cobble together during this public health emergency as “a massive experiment in remote learning”.

The goal of this experiment, he said, was “trying to find out: how do kids learn remotely? And with that data we should be able to build better remote and distance learning tools which, when combined with the teacher … will help kids learn better.” During this same video call, hosted by the Economic Club of New York, Schmidt also called for more telehealth, more 5G, more digital commerce and the rest of the preexisting wish list. All in the name of fighting the virus.

His most telling comment, however, was this: “The benefit of these corporations, which we love to malign, in terms of the ability to communicate, the ability to deal with health, the ability to get information, is profound. Think about what your life would be like in America without Amazon.” He added that people should “be a little bit grateful that these companies got the capital, did the investment, built the tools that we’re using now, and have really helped us out”.

Schmidt’s words are a reminder that until very recently, public pushback against these companies was surging. Presidential candidates were openly discussing breaking up big tech. Amazon was forced to pull its plans for a New York headquarters because of fierce local opposition. Google’s Sidewalk Labs project was in perennial crisis, and Google workers were refusing to build surveillance tech with military applications.

In short, democracy – inconvenient public engagement in the designing of critical institutions and public spaces – was turning out to be the single greatest obstacle to the vision Schmidt was advancing, first from his perch at the top of Google and Alphabet, and then as chair of two powerful boards advising US Congress and the Department of Defense. As the NSCAI documents reveal, this inconvenient exercise of power by members of the public and by tech workers inside these mega-firms has, from the perspective of men such as Schmidt and the Amazon CEO Jeff Bezos, maddeningly slowed down the AI arms race, keeping fleets of potentially deadly driverless cars and trucks off the roads, protecting private health records from becoming a weapon used by employers against workers, preventing urban spaces from being blanketing with facial recognition software, and much more.

Now, in the midst of the carnage of this ongoing pandemic, and the fear and uncertainty about the future it has brought, these companies clearly see their moment to sweep out all that democratic engagement. To have the same kind of power as their Chinese competitors, who have the luxury of functioning without being hampered by intrusions of either labour or civil rights.

 Schoolchildren walking below surveillance cameras in Akto in China’s Xinjiang region. Photograph: Greg Baker/AFP via Getty Images


All of this is moving very fast. The Australian government has contracted with Amazon to store the data for its controversial coronavirus tracking app. The Canadian government has contracted with Amazon to deliver medical equipment, raising questions about why it bypassed the public postal service. And in just a few short days in early May, Alphabet has spun up a new Sidewalk Labs initiative to remake urban infrastructure with $400m in seed capital. Josh Marcuse, the executive director of the Defense Innovation Board chaired by Schmidt, announced that he was leaving that job to work full-time at Google as head of strategy and innovation for global public sector, meaning that he will be helping Google to cash in on some of the many opportunities he and Schmidt have been busily creating with their lobbying.

To be clear, technology is most certainly a key part of how we must protect public health in the coming months and years. The question is: will that technology be subject to the disciplines of democracy and public oversight, or will it be rolled out in state-of-exception frenzy, without asking critical questions that will shape our lives for decades to come? Questions such as these, for instance: if we are indeed seeing how critical digital connectivity is in times of crisis, should these networks, and our data, really be in the hands of private players such as Google, Amazon and Apple? If public funds are paying for so much of it, should the public also own and control it? If the internet is essential for so much in our lives, as it clearly is, should it be treated as a nonprofit public utility?

And while there is no doubt that the ability to teleconference has been a lifeline in this period of lockdown, there are serious debates to be had about whether our more lasting protections are distinctly more human. Take education. Schmidt is right that overcrowded classrooms present a health risk, at least until we have a vaccine. So how about hiring double the number of teachers and cutting class size in half? How about making sure that every school has a nurse?

That would create much-needed jobs in a depression-level unemployment crisis, and give everyone in the learning environment more elbow room. If buildings are too crowded, how about dividing the day into shifts, and having more outdoor education, drawing on the plentiful research that shows that time in nature enhances children’s capacity to learn?

Introducing those kinds of changes would be hard, to be sure. But they are not nearly as risky as giving up on the tried-and-true technology of trained humans teaching younger humans face-to-face, in groups where they learn to socialise with one another to boot.

Upon learning of New York state’s new partnership with the Gates Foundation, Andy Pallotta, the president of the New York State United Teachers union, was quick to react: “If we want to reimagine education, let’s start with addressing the need for social workers, mental health counsellors, school nurses, enriching arts courses, advanced courses and smaller class sizes in school districts across the state,” he said. A coalition of parents’ groups also pointed out that if they had indeed been living an “experiment in remote learning” (as Schmidt put it), then the results were deeply worrying: “Since the schools were shut down in mid-March, our understanding of the profound deficiencies of screen-based instruction has only grown.”

In addition to the obvious class and race biases against children who lack internet access and home computers (problems that tech companies are eager to be paid to solve with massive tech buys), there are big questions about whether remote teaching can serve many kids with disabilities, as required by law. And there is no technological solution to the problem of learning in a home environment that is overcrowded and/or abusive.

The issue is not whether schools must change in the face of a highly contagious virus for which we have neither cure nor inoculation. Like every institution where humans gather in groups, they will change. The trouble, as always in these moments of collective shock, is the absence of public debate about what those changes should look like, and who they should benefit – private tech companies or students?

The same questions need to be asked about health. Avoiding doctor’s offices and hospitals during a pandemic makes good sense. But telehealth misses a huge amount. So we need to have an evidence-based debate about the pros and cons of spending scarce public resources on telehealth – rather than on more trained nurses, equipped with all the necessary protective equipment, who are able to make house calls to diagnose and treat patients in their homes. And, perhaps most urgently, we need to get the balance right between virus tracking apps, which, with the proper privacy protections, have a role to play, and the calls for a “community health corps” that would put millions of Americans to work, not only doing contact-tracing, but making sure that everyone has the material resources and support they need to quarantine safely.

 A teacher in Maryland, US, handing out computers to students for remote learning. Photograph: Win McNamee/Getty Images


In each case, we face real and hard choices between investing in humans and investing in technology. Because the brutal truth is that, as it stands, we are very unlikely to do both. The refusal to transfer anything like the needed resources to states and cities in successive federal bailouts means that the coronavirus health crisis is now slamming headlong into a manufactured austerity crisis. Public schools, universities, hospitals and transit are facing existential questions about their futures. If tech companies win their ferocious lobbying campaign for remote learning, telehealth, 5G and driverless vehicles – their Screen New Deal – there simply won’t be any money left over for urgent public priorities, never mind the Green New Deal that our planet urgently needs. On the contrary: the price tag for all the shiny gadgets will be mass teacher layoffs and hospital closures.

Tech provides us with powerful tools, but not every solution is technological. And the trouble with outsourcing key decisions about how to “reimagine” our states and cities to men such as Bill Gates and Schmidt is that they have spent their lives demonstrating the belief that there is no problem that technology cannot fix.

For them, and many others in Silicon Valley, the pandemic is a golden opportunity to receive not just the gratitude, but the deference and power that they feel has been unjustly denied. And Andrew Cuomo, by putting the former Google chair in charge of the body that will shape the state’s reopening, appears to have just given him something close to free rein.




What’s making the rich stupidly richer?

Some of the richest are getting richer during the worst global pandemic in more than 100 years. Photo by Shutterstock / SamaraHeisz5

Tobias Lütke is a Canadian business rock star who — with his owlish eyeglasses and golfer’s caps — resembles a Starbucks-mooching slacker. The young billionaire is CEO of Shopify Inc., the Ottawa-based e-commerce giant that recently surpassed RBC as Canada’s biggest company when measured by market capitalization (the total value of all of its publicly traded shares), which hit $121 billion earlier this month.

That’s because Shopify’s stock is selling for more than a staggering $1,000 a share — up from $367 only a year ago. And one reason the stock is soaring is because COVID-19 has given Shopify a shot in the arm: It sells e-commerce software that helps companies sell goods online — the sort of software bound to be popular when no one can visit local shops anymore.

But here’s the catch: Since it was founded in 2004, Shopify has never made a penny in profits. Instead, it’s lost hundreds of millions of dollars.

In 2019, despite sales surging 47 per cent over the previous year to $1.6 billion, Shopify posted a net loss of $124.8 million — up from a loss of $64.5 million in 2018. In short, the higher Shopify’s sales climb, the more money it loses.

Yet for Lütke, who owns 6.7 per cent of the company’s shares, his fortune — on paper, at least — just keeps on growing (he’s worth US$6.5 billion).

Welcome to the Twilight Zone world of the stock market, a place where the rich are getting richer — even during the worst global pandemic in more than 100 years.

Defenders of Shopify hope it will go into the black one day, the way Amazon did after racking up losses for years. Others say it will never happen. Starting in 2017, Andrew Left and Jan Barta, two short sellers (investors who bet on stocks falling rather than rising), produced reports arguing Shopify’s business model is fatally flawed. Their research said Shopify loses so many customers every year that it’s forced to spend enormous sums finding new ones — and that cost offsets any chance of it ever turning a profit. So far, Left and Barta have been right.

But while Shopify’s stock performance may defy logic, that’s merely an appetizer. In mid-March, when the full force of COVID-19 struck North America, the markets collapsed, with the Dow Jones index falling from 29,500 to 18,600 in just over a month — a staggering 37 per cent plummet.

Not for long, however. Almost immediately, the markets rebounded, rising by 32 per cent, even though mass layoffs and the shutdown of the global economy were in full swing, with real unemployment in the U.S. and Canada steaming north of 20 per cent — levels not seen since the Great Depression.

What’s going on?

“The market is very disconnected from the economy,” explains Mark Rosen, a principal with Rosen & Associates Ltd., a Toronto-based financial analysis firm. “It’s not really reflective of the economy.”

“Welcome to the Twilight Zone world of the stock market, a place where the rich are getting richer — even during the worst global pandemic in more than 100 years.”

Indeed, the notion that stock markets are a barometer of how an economy is performing is fallacious, as noted in a New York Times story in May headlined Repeat After Me: The Markets Are Not the Economy.

“The stock market looks increasingly divorced from economic reality,” noted Times markets reporter Matt Phillips. “The United States is on the brink of the worst economic collapse since the Hoover administration. Corporate profits have crumpled. More than a million Americans have contracted the coronavirus, and hundreds are dying each day. There is no turnaround in sight. Yet stocks keep climbing.”

“No, I don’t think markets are a particularly good descriptor of how regular people are doing,” agrees David Macdonald, senior economist with the Canadian Centre for Policy Alternatives (CCPA).

Angella MacEwen, senior economist at the Canadian Union of Public Employees, notes that one reason stock market dynamics have become increasingly divorced from economic realities is because leaders of corporations listed on the TSX, NYSE and other major world stock exchanges have engaged in lavish buy-back strategies aimed at boosting the value of their companies’ shares even when their companies may not be healthy. “We think this promotes very short-term thinking,” MacEwen says. “This is very hurtful to labour.”

It’s not just left-wing, pro-labour economists like Macdonald and MacEwen who worry about wizardly financial tactics aimed at juicing stock prices by detaching stock prices from traditional measures of real economic value.

Phillip Cross, who headed Statistics Canada until 2012 and has been described in the Globe and Mail as “Canada’s economist at large,” is also highly critical of the ongoing “financialization” of the Canadian economy by stock market insiders aiming to juice share prices at all costs. The big six chartered banks, with their vast stock market valuations and massive influence over financial policymakers and lawmakers, are by far the biggest players in this game, Cross observes, “and the banks always put themselves first.”

Canada’s big banks are engaging in the “financialization” of the economy. Photo by Bruce Livesey


There are other reasons why the stock market has risen from the dead so rapidly.

For starters, investors saw an opportunity to buy a lot of stock at bargain-basement prices with the hope of cashing out when the markets revive. “So it’s a speculation on the future value of the stock,” says Macdonald.

Secondly, with government bonds earning zero or even negative interest, the wealthy see stocks as the only place that could generate some returns, even if they are minimal.

And finally, the so-called FAANGs — Facebook, Amazon, Apple, Netflix and Google — are increasingly powerful forces on the markets, which are flourishing during the pandemic compared to companies not so rooted in the internet.

In short, some of the world’s most valuable companies are going to make enormous profits from everyone being quarantined at home.

All of which raises another reality — the rich are going to get even wealthier as a result of this crisis. After all, that’s what happened after the last one — the 2007-09 credit crisis. According to a study by University of California, Berkeley economist Emmanuel Saez, from 2009 to 2012, the top one percenters’ incomes grew by 31.4 per cent, while the bottom 99 percenters’ incomes grew a mere 0.4 per cent. And a Conference Board of Canada survey showed that corporate directors’ compensation jumped 33 per cent from 2008 to 2010.

Why are the rich going to prosper during the COVID-19 pandemic?

Gary Stevenson has an explanation. He’s a former trader who became a multimillionaire in his 20s working for Citibank in London from 2008 until 2014. Originally from a poor family in Ilford, Stevenson studied economics and math at the London School of Economics (LSE). After winning a competition run by Citibank — one of the world’s largest banks — he was offered a position on its interest rate trading team.

Stevenson’s job entailed selling loans based on where interest rates would be in the future. “So you may want to borrow money in a year’s time and you want to secure today the interest rate on that loan,” he explains. “In order to do that, you need to go to traders and say, ‘I want to borrow X amount of money and what interest would rate will you give me on that loan?’”

The traders would then try to guess what amount central banks would be setting interest rates at in the future. If they guessed correctly, they would profit accordingly.

By age 25, Stevenson was the most globally profitable trader at Citibank. And that’s because he ignored conventional economic wisdom, which said that as the global economy recovered from the credit crisis, central banks would raise interest rates to offset inflation. He realized this was not going to happen. And that’s because he saw that many leading economies — such as the U.K., Japan, Spain and Italy — were weak, debt-laden and burdened by chronically poor productivity. And he was right: Since 2008, central banks have kept interest rates hovering around one per cent.

Moreover, Stevenson realized that income inequality had led to the rich hoarding wealth while average workers were broke. “I came from quite a poor background, but traders mostly come from comfortable financial backgrounds,” he notes. “If you come from a poor, ordinary background, it’s quite clear why people are not spending: It’s because they literally don’t have any money … People are in debt … Ordinary people simply cannot spend more.”

Indeed, in Canada, real wages have remained stagnant for nearly 40 years while consumer debt has reached almost $2 trillion — or $73,000 per consumer.

Today, Stevenson says the rich are going to get even richer from COVID-19 for two reasons. For starters, governments have responded to the pandemic by handing out money to citizens so they can pay their bills. “(The money) is going to the poor people, but it’s not staying with the poor people,” he explains, noting that citizens must use the cash to pay for food, rent, mortgages and other essentials. That’s when the rich receive this money, because they own apartment buildings, food companies, e-commerce companies and banks.

Furthermore, the rich will have cut their personal spending, too, because of COVID-19. As a result, Stevenson says their wealth will grow.

But he also points out that the rich don’t use their wealth to invest back in the economy. Instead, they buy stocks, bonds and assets like property and gold. “This money will not cycle back through the system, pushing up wages; instead, it pushes up the prices of these assets,” says Stevenson.

Finally, Stevenson believes it’s difficult to imagine the global economy recovering anytime soon. “Most of the governments in the world are in a similar situation as millions of people in that they are spending more than their income and they’re running down their wealth. So they have no capacity to spend more and will probably have to cut their spending, as well,” he remarks.

“If governments are in debt and running their wealth down and the people are running their wealth down, assuming that the wealth of the world has somehow not collapsed, there has to be one group that is accumulating wealth very quickly. I think it is the rich … And unless income inequality is fixed, which I don’t think it will unless there’s significant political change, then this economic crisis is not a temporary economic crisis, but a permanent economic crisis.”

So while Tobias Lütke might be getting wealthy while running a money-losing Shopify, the rest of the population is being driven deeper into hock and despair. SOURCE