This month's Bulletin

Worldwide inequality has been rising sharply under globalisation. It began in the US around 19870, but has been more dramatic in later years in Latin America, Central Europe, China, and Russia. New Zealand experienced the largest increases, Australia somewhat less. In Scandinavia inequalities have not increased much. The global trend in inequality was stable in the 1960s, slightly downward in the 1970s, and up sharply since 1981. The reason seems to be the almost violent financial regime change of the early 1980s - rising real interest rates, debt crises, and the triumph of private global finance.

The financial order of the past 28 years cannot deliver sustainable development world wide. Therefore it is necessary to rebuild an architecture of financial stabilisation and control... This is a tall order... but the alternative will be increasing political instability and human misery, from which the richer countries of the world will not forever remain immune. [ James K. Galbraith, University of Texas, in Sydney Morning Herald 26.7.01]

(*: This issue was published on the editor's 80th birthday)

The Way the President of the World Bank Sees It

A planet that is 6 billion growing to 8 billion people, where there is 20% having 80% of the wealth, where the developing world is increasing at an exponential rate, where the globe is becoming smaller, where there is no way to avoid issues by putting a world around yourself, whether you be a developed or a developing country, where there is a big difference between rich and poor... and where your children are going to grow up in a very different environment.

You cannot wait 25 years to find out... It's time now to really look these issues in the face and do something about them... I look forward to the day when, in terms of moral, intellectual, and spiritual leadership, Australia can be at the forefront in terms of making a better world. [James Wolfensohn, president of the World Bank, AFR 3.8.01]

Things Fall Apart: the Centre Cannot Hold

The US Federal Reserve chairman, Dr. Alan Greenspan, is waging the fight of his monetary policy making life to prevent the US from dragging down everyone else. The effort is looking more and more futile; after six interest rate cuts the world's largest economy continues to sink. For a US-centric global financial system, deterioration in the American economy spells trouble ahead. The sliding US economy is hurting Europe, Asia, and Latin America. Asia's traditional locomotive, Japan, is deteriorating again. Much of the US economy's trouble rests in the information technology capital spending area. Business spending on equipment and software has fallen by 14% - the biggest contraction since 1982. Corporate firings may well increase: US companies had their biggest drop of quarterly profits in ten years. [William Pesek, AFR 10.8.01]

Selling the People's Assets

During the 1990s Australia was one of the most enthusiastic privatising countries in the world, with over 50 Commonwealth government sales of major assets earning approximately $46 billion. Major assets sold were the Commonwealth Bank, several airports, rail and transport businesses.

The sale of public assets does not take into consideration the different agendas of private companies and governments. The primary aim of any company should be profit and the furthering of its business, while the primary aim of governments should be to act in the best interests of its constituents. Advocates of privatisation say public enterprises are more prone to political interference, but when these enterprises are sold, the system of rules and regulations that keeps checks on them disappears. By selling off their assets, governments also run the risk of sending the long term profits of those assets overseas. Western Australia's Westrail freight business was sold for $585 million to a joint venture between Wesfarmers and US based Genesee and Wyoming, Inc. Victoria's taxpayers have been the major losers in the privatisation of its major energy generator, Loy Yang B, which was sold to Mission Energy of the USA. The results have been job losses and power cuts and the right to go to the ombudsman. [Ausbuy Connection, Vol 8, No.2 Summer 2001]

The Right Wing Revolution

A recent paper shows that with the election of the Hawke-Keating governments in 1983, economic rationalism became dominant. The last 15 years of the 20th century were used to dismantle the economic institutions built up over the preceding 85. Import protection has now largely disappeared, as has the system of centralised wage fixing. Virtually all public utilities have been extensively reformed, corporatised, and often privatised. Immigration is kept low, fertility is declining, and an end to population growth is on the horizon.

But the new regime has yet to pass one test. The rationalists won't have truly delivered on their promise until people go back to describing Australia as a workers' paradise. Creating a paradise for the rich is nothing to boast about. [Ross Gittins, Economics Editor, SMH 28.7.01]

Economic Rationalism's Double Cross

This comes in two steps. When the rationalists are looking at the reform of particular industries, they argue that it is inefficient for governments to intervene in markets for equity reasons. Much better for distributive concerns to be dealt with via the tax and transfer system, they say. When they turn to reforming taxation however, they start arguing for cuts in the higher rates of income tax because of their allegedly damaging effects on incentives.

Globalisation offers a close parallel. The people whose incomes benefited most from the opening up of our economy now argue that, unless we cut the top rate, they will rack off overseas. So, globalisation having widened the pre-tax gap between rich and poor, now requires us to re-jig the tax system in ways which widen rather than diminish the after-tax gap.

That's the line big business and its camp followers are trying to sell us... But with so many voters seeing themselves as losers from economic reform, no politician dares add insult to injury by cutting the top tax rate. [Ross Gittins, Economics Editor, SMH 30.7.01]

Who Knows Who Owns Australia?

No-one knows the full story of the ownership characteristics of businesses located in Australia... The vacuum is scandalous. Globalisation is the biggest debate in the world... In a crime against the interests of the Australian people, the Federal government has not undertaken the most basic research on the character and effects of globalisation.

Shortly after the Howard government was elected the Bureau of Statistics suggested a study identifying the foreign ownership characteristics of businesses located in Australia, involving a shareholder survey, and statistics on Australian-owned businesses operating abroad. The official reason for not going ahead was money - an estimated $1.2 million annually. [ Christopher Sheil, AFR 24.7.01]

Australia Now a Banana Republic?

Total external debt per head of population is US$16,300 in Australia. In Argentina it is US$3,900. Our total external debt is US$226 billion, Argentina's total external debt is US$144 billion. [Ausbuy Connections, Vol 8, No,.2, Summer 2001]

Morality Creeping In?

About 58% of people do not trust the present government, according to a survey of Roy Morgan Research. It shows a desire for more human-centred economics and business systems. "There is a great sea-change regarding ethics - across the board, every age group, every socio-economic group. People are saying "business shouldn't be praised for being ethical - it should be standard behaviour". [Stephen Long, AFR 21.7.01]

Profiteering Banks

A Reserve Bank report showed a 14% increase in bank income from fees, to $6.3 billion last year, with business paying about two thirds of all fees. The report is expected to renew pressure on the Howard government to clamp down on profiteering by banks, with community anger about banking behaviour likely to be a significant issue in the federal election this year. The Labor Party threatened to legislate to force banks to offer low-fee accounts if it wins later this year. Since 1997 fees have increased by 50%. [ John Breusch & Joyce Moullakis, AFR 20.7.01]

Banks are a licensed oligopoly effectively protected from collapse because no government will simply allow a bank to fail without some intervention. Nobody says banks should operate as charities. But their privileged domain, underwritten by the taxpayers who are also their customers, implies special obligations - presently unfulfilled - to play straight and fair. [Editorial, SMH 27.7.01]

The Millionaires' Factory

The Prime Minister likes to complain about the levels of pay going to the country's chief executives. He obviously hasn't seen the amount being pocketed each year by investment bankers. Second tier executives at Macquarie Bank earn three times the salary of the average CEO. Their wages and bonuses - which this year added up to between $2 million and $5 million - are commonplace in investment banking... That's why they call Macquarie the millionaires factory. [ Morgan Mellish, AFR 22.6.01]

AMP Referred to Regulator

The Australian Stock Exchange forced AMP to issue a shock earnings warning after threatening to suspend the company from trading. ASX officials are to refer the matter to the Australian Securities and Investments Commission. It shed over a billion dollars in capitalisation in a few days. Profit estimates are a 35% fall from the previous corresponding period. [Sharon Kemp, AFR 20.7.01

Expensive Musical Chairs?

Suncorp Metway acquired the AMP's GIO general insurance business in a $1.24 billion deal. Return on equity would be 14% in three years, the chief executive said. Through this transaction Suncorp Metway is also paying $135 million for AMP's half stake in two joint ventures with Automobile Clubs. [Kathy MacDermott,AFR 19.7.01]

Taxing Problems

Nick Petroulias, former tax official facing criminal charges, will call the Tax commissioner and other high ranking tax official as witnesses at his committal hearing. He is facing charges over his alleged involvement in the promotion of mass-marketed tax schemes. The list of witnesses includes 27 current and former Tax office staff, accountants, advisers, and Federal Police. [ Allessandro Fabro, AFR 28.7.01]

The New Tax-Avoidance Push

The Commissioner of Taxation wants tough new legislative penalties to attack the fees received by promoters of billions of dollars of mass-marketed tax schemes, but admits tax minimisation continues to flourish... He warned of new "customised" schemes being marketed to wealthy individuals by promoters who had gone underground following pressure from the Tax Office, and described the new tax-avoidance push as a real concern; about 60,000 investors have claimed deductions worth more than $4 billion. [Paul Cleary & Tony Walker, AFR 6.8.01]

A Dutch Treat?

James Hardie Industries has decided to transform itself into a Dutch-based company to maintain a global tax rate of 25-30%, instead of the 40-50% it now faces. [Ward O'Neill, AFR 28.7.01]

Polarisation of Wealth and Income in Australia?

According to the Australian Tax Office, only 4,862 people declared a taxable income of more than $500,000. The proportion of the rich and well off is estimated at 29%, and the poor constituted about 30%. The middle class has dropped from about 60% of the population to around 40%. This suggested polarisation of wealth and income. The proportion in the middle classes appears to have declined, but may increase as a result of increasing numbers enjoying superannuation. [Carmel Dwyer, AFR Magazine, August 2001]

The Lucky Country?

Australia's net foreign debt has reached a record $317 billion - equivalent to 48% of GDP. The Australian dollar reached a record low, and our interest rates are among the highest in the world. [Stephen Koukoulas, AFR, 5. 6. 2001]

Ripe for Plucking?

A surge in Australian takeover activity is set to intensify. The mining, telecommunications, and food and beverage sectors are in for a raft of consolidation. Small companies are ripe for picking in tough economic conditions. The low Australian dollar makes local firms more attractive to overseas predators... Last year 44 listed companies were targeted, the value of mergers and acquisition activity was $55 billion, and the average deal was $135 million. [Helen Matterson, The Australian, 2. 6. 2001]

Loss of Confidence in Sharemarket?

The chairman of the Shareholders' Association, Ted Rolfe, said recent corporate collapses had damaged confidence in the sharemarket. A survey by the ING-Melbourne Institute's quarterly report found only 11.4% of households intended to buy shares with spare money, down from 14.1% in June last year and 21.1% in September 1999. The director of the Institute, Don Harding said a large proportion of shareholders only had stocks in a very small number of companies. According to the Institute's survey, 31% of households owned shares directly, a figure which has remained constant over the past 3 years. [Matt Wade, SMH 16.6.01]

Private Investment Declines

The Bureau of Statistics survey of capital expenditure shows slower growth in business lending, with a third consecutive quarterly decline in private investment, and weak spending plans for next financial year. The senior economist at the National Australia Bank said that business investment remains weak, imports of capital equipment have been declining, and the growth of business credit was flat. [Paul Cleary and Joyce Moullakis, AFR, 1. 6. 2001]

Australia's Sex Trade

Two years ago the international flesh trade became the target of laws banning sexual slavery and servitude. The then Minister of Justice, Senator Amanda Vanstone, said police had reported intolerable growth in an "inhumane trade"... Today little seems to have changed. Immigration raids target and deport the prostitutes, leaving no witnesses. Not one prosecution has been launched under the new law. [Mark Forbes, SMH, 5. 6. 2001]

Massage Parlour Restricted

The Australian Stock Exchange has adopted tough new rules to stop fund managers and large investors manipulating trading activity. Following allegations of market manipulation the crackdown seeks to limit the ability of market players to artificially massaging closing share prices. [Bill McConnell, AFR 8.8.01]

Most Strikes Now Short and Limited

Strikes in Australia are at an all-time low. The latest ABS figures show that the number of working days lost due to disputes in the year to April was 380,000 - the lowest figure in 60 years ... With the shift to enterprise bargaining, most strikes are short and limited to particular enterprises and are responses to management policies such as downsizing or unilateral changes to working conditions, not union-driven grabs for pay. [Katherine Murphy, AFR 28.7.01]

Ideological War

The anti-globalisation protests are more an ideological war against what the G8 and other supra-national bodies symbolise - the exercise of economic and political power on a global scale, the dominance of the rich countries over the poor, and the supremacy of global capital over the individual and the nation state - than anything it actually does.[Steve Burrell, SMH 20.7.01]

Globalised Protests

Over the past two years, the globalisation debate has moved from academic discussion to front page news. From disruption and even violent protests in Seattle, Davos, Melbourne, Quebec and Gothenburg, to last weekend's riots in Genoa, anti-globalisation protesters have taken to the streets to voice their opposition to what they see as the dark side of the world's increasing economic integration.

Among their concerns is the fear that the world's nations are fast losing their "cultural DNA" - the unique elements of national identity and ways of life - in the face of globalisation's homogenising onslaught. [Stephen Klimczuk, a former director of the World Economic Forum in Geneva, in AFR 25.7.01]

French Response to Globalisation

To the French, globalisation smacks not just of unrestrained free markets and other supposedly "Anglo-Saxon" notions, but also of an American hegemonism that modern France, from Charles de Gaulle onward, has felt duty-bound to resist. The leader of France's small farmers, José Bové, has become a national hero whom no politician dares criticise. A recent poll found 12% of respondents ready to say they admired the USA; 46% were either critical of, or worried by it, and 75% wanted less American influence on economic and financial globalisation. The conventional wisdom is not that globalisation could, or should be prevented, but that it must be regulated. Edouard Balladur, a conservative prime minister said:

"What is the market? It is the law of the jungle, of nature. And what is civilisation? It is the struggle against nature".

President Chirac said, in relation to the summit of the European Group of Eight: "Our democracies, clearly, cannot be mere spectators of globalisation. They must tame it, accompany it, humanise it, civilise it.". [The Economist 4.8.01]

Academic Autocracy

The amalgamation of tertiary institutions in the late 1980s created a number of unequal universities all bargaining for diminishing resources. The universities assumed they needed to become corporate and this in turn, saw the creation of a new managerial class, and associated payments of generous packages and bonuses to chief executives. It introduced a need for image makers, disguising a university's shortcomings and promoting virtues, real and imagined.

Sydney University used to have a monthly meeting of the Academic Board, a virtual parliament for questioning, debating and voting on issues of governance. They included judgements about the introduction of courses, the distribution of resources for teaching and research, and responses to Federal government policies. Five years ago the functions of the Board were replaced by a committee structure with a monthly forum, which has turned out to be a talking shop with no power.

Another concern at Sydney is the extent to which the chancellor, vice-chancellor, and senior members of management can influence senate agendas by being unwilling to put matters of importance up for discussion. Those who construct agendas can influence decisions... The controversy surrounding Kramer presents an opportunity to build a culture of openness in which appropriate confidences would still be respected. [Professor Stuart Rees, SMH, 1. 6. 2001]

Australia: A Branch Office Economy?

The era of globalisation has been one of unprecedented global mergers, which seems likely to produce a situation in which many global industries are dominated by a handful of firms. The headquarters of these global enterprises are increasingly concentrated in a few global cities. Australia seems likely to be reduced to the role of "branch office economies" with no significant share in the market for corporate headquarters, and no share in the associated high-paying jobs and high employment supporting service industries... An appropriate response must consist of two main elements. First, Australia must seek to reduce its dependence on net inflows of foreign capital by increasing private and public savings. Second, the global financial "architecture" must be reformed in a way that reduces gross international flows of capital... It is also necessary to re-examine the debate over public ownership and privatisation... If an enterprise is too important to be allowed into foreign ownership, it is probably too important to be privatised in the first place. [John Quiggin, AFR, 1. 6. 2001]

Globalisation Not The Answer

Globalisation will not achieve the stability needed for unimpeded growth of productive forces and consumption. It will not mean orderly marketing, a fair pricing system and exchange rate stabilisation. Unemployment, job insecurity and a repressive state machine, are features of "anarchic" capitalism that inexorably moves towards its own demise.

A new factor - technological change - sharpens the contradictions between labour and capital. Computers now replace human labour to an extent where the nexus between jobs and incomes is irretrievably broken for millions of people. Unless society is to collapse into anarchy, a battlefield for the survival of the fittest, the social wage will have to become a right, not a reward to be granted or taken away at whim. This is possible only if the profits achieved through automation are channeled into a social welfare system with the state acting as redistributive authority. [Vera Butler, Secretary of the Australian International Studies Association, in The Guardian, 18.7.01]

Mitsubishi Ultimatum to Howard

So ran the headline in the Sydney Morning Herald [4.8.01], referring to Mitsubishi's warning to the Prime Minister that it will jettison its struggling Australian subsidiary if it does not return to profit immediately. Mitsubishi is now controlled by its German partner, Daimler-Chrysler. [Michael Millet, Herald correspondent in Tokyo]

Biggest Fine in Australian Corporate History

Judge Cummins fined Esso $2 million for the disaster which killed two workers and shut down Victoria's gas supply for two weeks. He said it was not an accident, it was avoidable, and was all Esso's fault. He said:

Their cause was grievous, foreseeable, and avoidable.

The consequence was grievous, tragic, and avoidable.

To use the term "accident" denotes a lack of understanding of responsibility, and a lack of understanding of the cause

Outside the court Bill Mountford, chief executive of Workcover, said it was the biggest fine in an Australian health and safety case. It confirmed the community's view that a safe work place was a right, not a privilege. Esso makes $1 million a day out of Bass Strait. [Peter Gregory and Meaghan Shaw, SMH 31.7.01]

Beefing Things Up?

The beef industry's trajectory towards foreign domination is creating some strange marriage across party and class lines. In the past decade, meatworks have been shut down at Cairns, Mareeba, Mt. Isa, Mackay, Townsville, Roma, Maryborough, Bowen, Pentland and Toowoomba. This leaves the Queensland beef industry dominated by two "super" meatworks owned by two foreign owned beef giants - Australian Meat Holdings (a subsidiary of the US conglomerate Con Agra), and Nippon Meat Packers of Osaka, Japan.

These two companies own six feedlots, supplying their own branded product to the US, Japan and Korea. The Australian beef industry will end up eventually owned by foreign companies according to Tom Hannan, national secretary of the meat workers' union. [Paul Sheehan, SMH 21.7.01]

Physician, Heal Thyself

Reviewing The Enterprise University, by Simon Marginson and Mark Considine [Cambridge University Press, 2000] Paul James observes that `the book has the same ambiguous value as the words of the Vice-Chancellors". It is one of the best books written in Australia criticising the market-driven nature of the contemporary university, he thinks, yet it ends up being an apologia for market enterprise.

Three major trends are driving the transformation of the university. They are increasingly becoming corporations of rationalised flexible management and delivery of a `product' (once called teaching and research). They now have a shrinking core staff of high performers who `manage' the teaching rather than do it themselves.

Second, they are increasingly becoming institutions of intellectual training, rather than original thinking. Knowledge is increasingly being treated as intellectual property for commercial exploitation. Thirdly, they are becoming corporations of local and global extension, extending themselves as brand names in the education market.

The corporate university is so embedded in these problematic changes that a complete rethink of the ethos and governance of university education is necessary. But the very seriousness of the problem is indicated by the inability of these two fine scholars to come up with anything but banalities when it comes to a vision of an alternative.[Arena Magazine June-July 2001]

Academic Factories

Chief executives of the ten public universities in NSW are on an average salary package of $367.500. The University of Sydney tops the list with $700,000 for the Vice-Chancellor; for the University of Western Sydney the figure is $190,000 + allowances, bringing the total to $330,000. [Aban Contractor, SMH 22.6.01]

Bankrupt Universities

Five University vice-chancellors condemned the Federal government's treatment of higher education. They said its efforts to deal with the funding crisis facing universities were "small scale and a drop in a bucket". Professor Chubb, president of the Australian Vice-Chancellors' Committee, representing the chief executives of 38 universities, told a Senate inquiry that there had been a steady decline in the amount of public funding for higher education since 1983. Since 1996, when the Howard government came to office, the fall had been precipitous.

The other Vice-Chancellors cited rising staff-student ratios, slowly degrading infra-structure, and low staff morale. Professor Chubb, who heads the Australian National University, said the switch from public to private funding had gone far enough, while students already paid fees equal to those charged by any public university in the USA. Australia is failing to keep pace with development in other OECD countries, he said. If we don't keep up, this country faces a bleak future. [Gerard Noonan & Aban Contractor, SMH 18.7.01]

Research Into Tobacco Industry

Professor Simon Chapman of Sydney University has been awarded $A1.5 million for research into the tobacco industry by the American National Institute of Health, to enable him to study the history of the tobacco industry since 1960. In particular, he said, he would be looking for evidence for and against the claim that tobacco companies knew cigarettes were addictive, at the same time as they were trying to design products to optimise the number of people dependent on them.[University of Sydney News, Vol. 33, No, 9, 1 June 2001]

Seeing the Light?

World Bank chief James Wolfensohn said that when he was an Australian student he used to demonstrate against foreign companies coming to Australia to "own the farm". On one occasion Sir William Slim, Governor-General, took him aside and said it was hard to move a foreign funded mine or factory, and Australia needed the jobs. Today Wolfensohn argues that about 3 billion people are benefiting from globalisation, but about 1 billion are not. [Greg Earl, AFR 2.8.01]

Australia an American Satellite?

Malaysia's official media denounced Australia as a satellite of the USA, saying that it shares the US ambition of seeing the Prime Minister replaced by a more "pliable" new leader. It said Australia was Washington's "most allied ally" and made no secret of its wish for an end to Dr. Mahathir's 20 years in power. [Mark Baker in Kuala Lumpur, in SMH 21.6.01]

Tiger Economies Tamed?

The Asian recession is the result of the global slump in demand for the information technology and other electronic equipment the region exports... With Japan in recession and the US slowing sharply, the post-crisis recoveries of the export dependent tiger economies have suddenly come to a halt. The most export-dependent economies have been the hardest hit. Singapore is already in recession. Taiwan and Malaysia are very close to it. For Australia, the Asian downturn is a potentially dangerous dimension to the weakness of the USA. [Editorial, AFR 19.7.01]

Recession in S.E.Asia?

John Quinlan of Morgan Stanley notes that non-Japan Asia is beset by its third export slump since 1994, which promises to be the most severe, because the US technology slump is more pronounced and protracted than anyone believed. Company forecasts are already being reduced around the region. So far Taiwan has suffered the most. [Leslie P. Norton, Barrons' Weekly in AFR 18.7.01]

US Growth Overestimated

The US Commerce Department has reduced previous estimates of productivity growth from five to four per cent, and corporate profits from 13.1% to 9.7% in the year 2000. The current rate of economic growth is 0.7%. [Jonathan Nicholson & Reuters, AFR 8.8.01]

Gloomy Outlook

America, the world's biggest economy, is no longer booming. In 1998 it was a powerful engine of growth helping the troubled East Asian economies to export their way out of difficulties. This year America has been dangerously close to recession. Industrial production has fallen for nine consecutive months - the longest decline since 1982... In Latin America default and the drying up of foreign finance could precipitated a revolt against liberal economic policies. The most serious risk of all is that this might be the first emerging market crisis to take place while the American economy is still spluttering, since the Latin American meltdown in 1982. [The Economist, 21.7.01]

American Economic Double-think?

A revision of US gross domestic product and profits casts doubts on the "miracle economy". The rewriting of US economic data highlights a deterioration of fundamentals over the past few years, showing significant pressure on companies in the world's largest sharemarket. According to Morgan Stanley, US companies have endured their most intense profit squeeze since 1978-80. The revision of data shows a halving of corporate profitability... The fiddling of statistics has undermined the concept of the "miracle economy". [Robert Guy, AFR 3.8.01]

Effect on Australia

This process of US weakening is spreading via the transmission mechanism of trade, and represents the greatest threat to Australia's growth outlook, causing our currency to fall on world markets, as the Australian dollar is sold off. [Steve Burrell, SMH 3.8.01]

Floating, Broking and Cheating

An investigation of US broking houses has confirmed what many have suspected for years - analysts always issue positive research findings on companies their firms are floating. A survey by the US Securities and Exchange Commission has uncovered a litany of poor practices and serious conflicts of interests between analysts, companies and banking colleagues. The survey found analysts pocketing millions by trading stocks in a manner contrary to their public recommendations to investors. Merrill Lynch and Credit Suisse Boston have introduced reforms to make their research appear more independent. [Luke Collins, AFR 2.8.01]

World Recession?

Will Hutton thinks the world economy is on a knife edge. "We have had a lucky 10 years, but our luck is running out. Until now, events have occurred in a manageable sequence, but now are happening simultaneously, when world institutions are at their feeblest, and American leadership is at its most empty headed and self seeking... The next 12 months will provide the greatest test the world has had since the 1974 oil crisis".

The trouble is that for 30 years the US has worked tirelessly to create a world system that suits its interest, but without simultaneously creating robust international institutions for its management. That would have demanded a surrender of sovereignty that the US simply could not and would not contemplate. The system was already creaking in the last years of the Clinton presidency; Americans had ceased to save, and the US ability... to underwrite the rest of the world's prosperity was reaching its limits... The US is about to plunge into recession, taking the rest of the world with it, and with no internationally agreed mechanisms to manage the consequences... [Guardian Weekly 19.7.01]

Dark economic clouds are gathering across Europe; the British economy grew at its lowest level since 1998, and this is true of most of the rest of Europe. Global firms are announcing major job cuts. [AFR 30.7.01]

Recovery in the rest of the world would require a V shaped recovery in the USA, of which there is no sign. [Brian Hale, SMH 30.7.01]

Global Slowdown of Finance Capital

An earthquake is rocking the investment banking worlds of New York, London and Zurich, and the local industry is feeling the aftershocks. One of the longest bull runs in sharemarket history is at an end, record levels of global mergers and acquisitions are on the wane, and the tremors are beginning to be felt in Australia.

Global firms are already reducing their head count in Australia, warns Steve Harker, managing director of Morgan Stanley. He said the research functions of most banks are outdated: "the market has been built around excessive maintenance research which clients simply will no longer pay for". [Brett Clegg, AFR 1.8.01]

How Much Longer?

A slowing world economy puts question marks over how long the Australian economy can defy the trend. Aluminium and copper demand were down 20% and 15% in the first six months of the year. Fund managers question just how long the government can boost the building sector by pump priming... Governments in Singapore, Malaysia and Thailand have all announced fiscal boosts to offset massive falls in exports... The Japanese stockmarket is trading at a 16 year low... Warnings have come from key companies such as Telstra, AMP, Qantas and Lend Lease. [AFR 3.8.01]

Rio Tinto Warns of Downturn

The world's biggest mining company gave a gloomy assessment of the global economy, warning the outlook is deteriorating because of low demand for metals in the US, Europe, and Japan. The chairman said there had been an extraordinarily severe downturn in demand for aluminium and copper. The year 2001 could be the first year since the 1990s when we may see the global consumption of non-ferrous metals decline. China was the only exemption. [Ian Howarth, AFR 3.8.01]

Fixing the Fixers

The UK's Trade and Industry Minister, Patricia Hewitt, has confirmed that executives in Britain found to be price fixing, or rigging bids for public tenders, could face jail. Transnational companies are increasingly running into the complexities of having to deal with 60 different national competitive regions around the world... "The threat of a criminal conviction and the possibility of a prison sentence means the individuals are likely to think very carefully before engaging in cartels... The OECD estimates cartels cost the US economy billions of dollars a year".[Lenore Taylor, AFR 2.8.01]

Germany Revamps Corporate Rules

The Chancellor is doing this to shore up the defences of boardrooms to takeover battles, and boosting the protection of the country's new burgeoning share owning class. This will head off unwelcome takeovers, such as the recent takeover of a big company by Anglo-American Vodafone. [Andrew McCathie, AFR 18.7.01]

The Californian Public Power Movement

"Electricity is too essential to be left to the market... It is a critical, life-giving resource, not a commodity". So says Medea Benjamin of Global Exchange, a San Francisco-based group best know for opposing globalisation. She is leading a grass roots movement to put the whole country's electricity industry under municipal control. Anti-market forces have been fuelled by a botched deregulation of the state's power sector five years ago, that led to soaring prices, near-bankrupts utilities, and blackouts. The state government has now stepped in to buy wholesale power on behalf of its utilities.[The Economist 21.7.01]

A Grotesque International Economic Order?

In a letter to the Guardian Weekly (26.7.01) Alison Katz of Switzerland, emphasises that there is resistance to a "grotesque international economic order" by a movement for social justice, for national economies directed towards the meeting of basic needs rather than profit for shareholders, and for self-determination of nation states through democratic process. It is against the overwhelming concentration of power and wealth in the hands of non-elected international organisations such as the WTO, World Bank and IMF that represent the interests of transnational corporations.

Money Laundering and Bird Droppings

Russia, the Philippines and the Pacific island of Nauru have been warned to take urgent steps to prevent their banking systems from being used to launder money for organised crime. The Paris based agency -Financial Action Task Force (FATF) - supported by 29 governments, accused the three of recycling hundreds of billions of US dollars a year of "dirty" money.

FATF, part of the OECD, issued a "black" list of countries which had not taken adequate steps to fight money laundering. Still on the list are Russia, the Philippines, Nauru, the Cook Islands, Dominica, Israel, Lebanon, the Marshall Islands, St. Kitts and St. Vincent, and the Grenadines. The list is the fruit of ten years work of FATF. Recent estimates of the amount of illicit cash channeled through bogus bank accounts by organised crime have been as high as $US 1.5 trillion. In recent years the money launderers have switched from the Caribbean to smaller Pacific countries, especially Nauru. It has 10,000 inhabitants, one main road, no industry - and 400 banks! Nauru is a 20 square kilometre lump of coral covered with fossilised bird droppings, but the supply is running out. So the island has changed itself into the world's premier banking regime designed for criminals. For $US 35,000 anyone can set up a bank registered in Nauru. The whole process can be done over the Internet. [Jon Henley, The Guardian, reprinted in SMH 25.6.01]

Financial Deregulation Fuels Crime

A new report suggests crime costs Australia an estimated $25 billion annually. The financial deregulation policies of the past two years have provided opportunities for organised crime to flourish. De-regulation has made it easier for criminals to conceal their activities, according to the National Crime Authority. Crime related costs are equivalent to about 4% of GDP - or $635 billion. The growth of global electronic banking and the decline in financial intermediaries, has also helped to avoid law enforcement methods.

"Devolution and diversification in the financial sector have created an environment where organised crime is in effect concealed within the increased complexities and volume of transactions that now occur".

The NCA chairman, Gary Crooke, said there were many areas of concern in fighting organised crime, including drug trafficking, fraud, and tax evasion. The proliferation of offshore tax havens has made it hard for regulators to detect money laundering, which is increasingly done by professionals. [Annabel Hepworth, AFR 9.8.01]

Increasing Unemployment in Australia

A record monthly slump in full-time employment in July and more signs of prolonged weakness in the USA triggered the sharpest one day fall in interest rates in three years. There was also a 79,000 fall in full-time employment. Full-time jobs have contracted by 149,000 in the past four months, highlighting the downturn in the construction and hospitality sectors... Uncertainty about the economy had contributed to the fall in full time jobs and the increase of part-time ones. [Paul Cleary, Corinne Lim, Annabel Hepworth and Cherelle Murphy in AFR 10.8.01]