This month's Bulletin

Two huge corporate failures have rocked Australia's business world in recent week... [The HIH and One.Tel collapses] are more than just isolated cases; a closer look offers troubling insight into the workings of business and government Down Under.

Considering the supposedly highly regulated nature of the insurance market, this raises lots of red flags about regulation of other financial institutions. Could the same fate befall a major Australian bank, for example? While Australia's standards of corporate governance are held up as a good example to its developing Asian neighbors, its regulatory regime has been tested this year and found lacking, especially when compared to norms of transparency in Europe or America. After the havoc caused by the recent collapses and the related government failures, Australia's economy desperately needs quick measures that will restore confidence. Before elections that are due by the end of the year, Prime Minister John Howard's challenge is to convince voters that he'll straighten it all out. [Editorial in The Asian Wall Street Journal 19. 6. 2001 cited in Australian Financial Review, 20. 6. 2001]

Rising Unemployment?

Economists expect the unemployment rate to inch higher in coming months, following the rise in May to 6.9%. They had expected it to remain steady, or even fall, but do not now think this will happen until early 2002. A pick-up in housing is expected to be a major source of new jobs. [Cherelle Murphy, AFR, 8. 6. 2001]

Sixes and Sevens?

Foreign ownership of Australian shares has increased six-fold over the past decade, to reach one fifth of the value of all listed Australian shares. Over the same period Australians have increased their holdings of foreign shares sevenfold... The financing of Australia's current account deficit has largely become the responsibility of bank and institutional lending. The director of economic research at Standards & Poor, Stephen Kirchner, said that to the extent that the financing of Australia's current account becomes more dependent on bank lending, it will tend to weaken the $A. [Bill McConnell, AFR, 8. 6. 2001]

Australian exporters were hurt, as they underestimated the extent of the decline in the $A last year. The currency fell more than 20% against the US dollar, exceeding the most bearish of forecasts. In April this year it fell to US 47.75, before stabilising. Hedging losses were high - $253 million for W.M.C., $208 million for BHP, and $75 million for MIM Holdings. [Cherelle Murphy, AFR, 8. 6. 2001]

Criminal Laws on Price Fixing?

Professor Allan Fels, the head of Australia's competition watchdog, wants a major overhaul of the trade practices law, including criminal sanctions for price-fixing, and market-sharing arrangements by big business. In a recent address to the Australian Law Reform Commission, he included arguments for imposing civil penalties in the consumer protection sections of the Trade Practices Act.

His proposals include criminal sanctions - with prison terms - for senior executives caught in unlawful price-fixing and market-sharing agreements, and an increase in fines for price-fixing - up to 10% of an offending company's sales revenue. These charges would apply only to large businesses. [Criminal penalties already apply in the USA, Canada, and Japan.] Fels refers to "blatant" cartel behaviour, involving domestic agreements and cross-border arrangements to fix prices and carve up markets. In Senate Committee hearings on estimates he argued for the provision on the misuse of market power to be strengthened to enable the regulator to take more cases and secure findings in the Federal Court. [Katharine Murphy, AFR, 9. 6. 2001]

Challenging Corporate Interests

Big business continued its feud with Professor Fels, warning him to abandon the push for more power to stamp out collusion. The chief executive of the Australian Chamber of Commerce and Industry, Mark Paterson, said business was concerned about Fels's call to increase the powers of the Australian Competition and Consumer Commission. He also blamed Fels for probably causing the recent economic slowdown because of the inflexibility of the ACCC.

[As noted in the previous paragraph, Professor Fels has called for changes to the trade practices law, which would bring significant fines and criminal sanctions for the most serious cases of collusion by big business] Mr. Paterson said business was apprehensive about the proposed changes, existing penalties were effective, and people were shamed already by the press releases.

Professor Fels was recently awarded the Order of Australia, and at its presentation "for service to competition policy" said it was inevitable his job would attract criticism as it constantly challenged powerful corporate interests. He was honoured by the award, but said he was merely the "front person" for a dedicated staff of 450 people. [Richard Gluyas, The Australian, 11.6.01; and Katherine Murphy and Jane Boyle, AFR, 12. 6. 2001]

Honouring Fels allows the Government to appear interested in consumers, even if it often ignores them. [Editorial in AFR, 12. 6. 2001]

Footnote

In 1974, Lionel Murphy, Gough Whitlam's Attorney-General argued for tougher penalties to stamp out collusion. He was knocked flat by a lobbying effort from the top end of town, which was supremely organised and good at getting its way in Canberra.[Katherine Murphy, AFR, 15. 6. 2001]

Getting to the Bottom of a Collapse

The present system of handling busted companies is a shambles that benefits only lawyers and insolvency specialists. It works so badly that any alternative system could not be worse… Trevor Sykes suggests two reforms. The first would be to make it compulsory for liquidators, receivers, etc. to report publicly on the causes of the collapse… The second reform would be a major change in the present process of investigation and prosecution... This would be to give inspectors judicial powers, similar to those of a coroner at an inquest. Lawyers would scream about civil rights if this reform ever gets underway. But the people we are talking about here are businessmen who have run some of the largest companies in Australia, enriched themselves mightily... and can afford the best silk in the nation. They have enough defence available already. What we need is a bit more justice. [Trevor Sykes, AFR, 9. 6. 2001]

Silks' Purses

Some of Sydney's biggest law firms are set for a field day; involving Australia's two richest and most powerful families, One Tel is shaping up as a legal battle royal. The Packer family is understood to have retained its favourite firm, Gilbert & Tobin. Aggrieved co-investor News Corp has hooked up Allen Allen & Hemsley to watch out for its liability. Independent lawyer John Landerer is taking up the reins for Jodee Rich. [Lachlan Johnstone, AFR, 7. 6. 2001]

Creative Accounting

The Australian Securities and Investments Commission [ASIC] suspects that One Tel's founders, Bradley Keeling, Jodee Rich, and Mark Silbermann, may have allowed the group to trade while insolvent. It also suspects they made and presented false and misleading statements, failed to act in good faith, used their positions improperly, and potentially breached continuous-disclosure rules. [Christine Lacy and Annabel Hepworth, AFR, 15. 6. 2001]

What About the Workers?

John Howard was absolutely right when he joined the general call for One Tel's high flyers to give back their bonuses to finance what is due to the company's workers... ... The sentiment picks up on the public outrage that the rich and famous can get away with financial murder while workers struggle to get what's due to them when things go wrong. There is a growing feeling in the community that the salaries paid to many top executives are gross, as are the rewards and incentives... Why just bonuses as the PM seems to suggest? What about severance pay, or consultancy fees?... The Government... is determined to be seen to be acting quickly now... Whether it has bitten off more than it can chew will be seen when it produces the promised legislation. [Michelle Gratton, SMH, 5. 6. 2001]

Rorts and Rip-offs

The One.Tel collapse is a direct consequence of the policy of deregulation and the privatisation of Telstra, begun by the previous Labor government and continued by the Howard government. It is a story of corporate greed, corruption, insider deals, self-aggrandisement... and complete disregard of workers. The Guardian, 6. 6. 2001]

Manufacturing Still in Recession

Australian manufacturing remains in recession, with three consecutive quarters of "negative growth". GDP for manufacturers fell 3.9% over the past year. The two most depressed sectors are "textiles, clothing and footwear", and "food, beverages and tobacco". The more bullish sectors are "non-metallic minerals", and "printing, publishing and recorded media". Almost half the business executives surveyed expected sales to increase. Only agriculture and construction have fared worse than the factories. [Anthony Hughes, SMH, 2. 6. 2001]

You Can't Bank on it

Graham Hand, former deputy treasurer of the State Bank of NSW, says banks have been trying to replace tellers with machines for over ten years. Their motive is to save as much money as possible; customer satisfaction is not high on their agenda. Only about 5% of customers have anything to do with internet banking at the moment. Chris Connolly, director of the Financial Services Consumer Policy Centre, agrees, and says that banks deliberately priced bank transactions at a high level to drive people online. They have also been closing traditional forms of banking; since 1996, 1,750 branches have closed. One out of every four banks which existed in 1996 is now closed.

Yet according to a survey by Deloitte Research, consumers would still prefer more branches to internet banking. Consumers consider personal attention to be more important than convenience. Only 30% of people have access to the internet, and only 50% have a computer. The costs of getting internet banking for the first time are high because you have to buy a computer, get it installed, and learn how to use it. When you have, you have to pay added fees and charges for internet transactions. Other hurdles include the initial expense, having a disability, not being literate in English, and feeling uncomfortable with using new technology.

Graham Hand says most people aren't ready for it now, and the banks aren't either - since the beginning of this year three banks have seen their internet services crash, being out of action for several days, leaving online customers stranded. Bruce McCabe, analyst, says this is not good enough for the customers or the banks.[Dan Kaufman, SMH, 12. 6. 2001]

Banking on Debt

Australia's banks have been on a foreign borrowing binge in the past few years. Official figures show private sector financial corporations borrowed $33.57 billion last year alone. This was almost two thirds of Australia's total capital inflows, and took their net foreign debt to $217 billion. The banks are now responsible for almost three quarters of Australia's total net debt. The borrowing spree is part of a crucial shift in the way Australia finances its current account deficit, from inflows of foreign capital to reliance on debt. Rather than selling off the farm, we are back to mortgaging it. Net foreign debt is now 49% of GDP. Hedging of this debt by the banks has been a powerful force pushing down on the $A. If Australian borrowers want offshore lenders to accept more of this risk, either the interest rate must be higher, or the $A must fall. [Steve Burrell, SMH, 15. 6. 2001]

Money Power

Ben Chifley's experience in two depressions taught him the necessity of the government, rather than private banks, having control over the money supply. A member of the royal commission into the banking system, he interrogated banking officials about the role of their banks in precipitating and prolonging the Great Depression. Dissatisfied with their responses, he wrote a minority report calling for the banks to be nationalised... When he became Treasurer in the war years he pushed ahead with measures which would increase the government's control over the economy and the banking system. [David Day, (SMH, 13. 6. 2001) who is writing a biography of Chifley, to be published later this year]

What Shall it Profit a Man If...

The National Party leader, Mr. Anderson is worried that the nation is losing its soul through the worship of materialism rather than God. The electorate's cynicism and disillusion with public office holders was part and parcel of the drift from mainstream religions he said. "We have made gods of wealth and politics and expect them to meet our needs when in fact they can't". [Linda Doherty, SMH 15. 6. 2001]

The Selfish Society?

Rod Cameron, chief of the ANOP polling group, has watched the steady corrosion of party loyalties for 30 years. In the 1970s, he says, "70% of the population was basically committed to a party; in the 1980s it fell to 60%, in the nineties it fell below 50%, and God knows where it is now". However, politics is not the only institution to lose its core, he says. "In sport you see club allegiances falling; there is no loyalty between employees and corporations; unions have lost their core support; church membership is off; marriage partnerships are loosening... It all ends up with self - self absorption and interests only in your own family. [Financial Review Magazine, 26 May 01]

Oz Inc, Unlimited Liability?

Australia's annual gross domestic product has almost doubled over the 1990s, but the nation's net worth grew by only 13% over the same period. The main reason for the difference is the increasing reliance on foreign liabilities to generate national income. They are the fastest growing part of the national balance sheet. Liabilities to the world doubled to almost $700 billion. [Paul Cleary, AFR, 15. 6. 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]

Claptrap and Marxist Rubbish in the Museum

David Barnett, a Federal Government appointment to the council of the National Museum Council, has suggested that waterfront chief Chris Corrigan and mining boss Hugh Morgan should be included in the new museum to balance the "claptrap" and "Marxist rubbish" elsewhere in the institution. Five months before the museum opened Barnett wrote a 5-page memo to Tony Staley, its chairman. He said the labels were alarming; the exhibits invited ridicule and outrage. He also questioned the presentation on environmental protests, and the invasion of parliament house by "a trade union rabble".

Staley, a former federal president of the Liberal Party, referred the comments to historian Professor Graeme Davison, who concluded that with the exemption of a few errors of detail, the labels were based on sound scholarship. [Joyce Morgan, SMH, 5. 6. 2001]

Prisons - A Forced Growth Industry?

The Australian prison population has grown by 52% since 1990 - nearly four times as fast as the general population; rapid growth in imprisonment rates over the past decade is now costing taxpayers $230 million p.a. in extra spending. The reasons for the "boom" are complex, but it has been fed by the populist tough-on-crime policy. Of Australia's 98 prisons, 13 are now privately operated, all of them being set up in the past 10 years. About 16% of all prisoners are in private prisons - the highest percentage in the world. Seven new ones are planned in Victoria, NSW and the ACT. The imprisonment rate is increasing. In 1991 it was 116 per 100,000 people. This year the rate is 145. The average cost of keeping a prisoner in jail is about $56,000. Crime is a huge cost to the economy -$18 billion p.a., or about $1000 per head of population. The NSW Director of Public Prosecutions said that: "We should be focusing on maximising some or all of those opportunities that prevent crime in the first place, not perpetuating myths about the effectiveness of more police, ... heavier sentences, more prisons". [Geoffrey Barker, AFR, 13. 6. 2001]

Hidden Jobless?

The true unemployment rate is already about 10% according to some eminent economic researchers. A person doing one hour's paid work per week is not counted as unemployed in official statistics; neither are those under 25, because of the "youth allowance". According to Peter Brain and his colleagues at the National Institute of Economic and Industry Research, policy changes have seriously undermined the credibility of the ABS unemployment statistics. They calculate that the real unemployment rate was over 10% throughout the 1990s, and is now 9.9%. Dr Brain said "something stinks. The ABS has got a lot of explaining to do".

Morgan Research agrees; their research put the unemployment rate about 4% higher than the ABS. Peter Bradbury of the ABS's labour statistics branch, acknowledges that official figures may be misleading, and must be supplemented with measures revealing the level of underemployment. His estimate of the true rate is 13.9%; if underemployed part-timers are included the true rate would be even higher. This may help to explain why the government is facing likely electoral defeat, despite falls in official unemployment during much of its term in office. [Stephen Long, AFR, 15. 6. 2001]

Australia's Budget - Bribery Time

In an article with that title The Economist (26. 5. 2001) notes that the government is looking decidedly shaky. An explosive document, written by a top official in the Liberal Party, was leaked to the media. It described the government as "mean, tricky, and out of touch", and notes that it has never recovered from the introduction of a new tax system a year ago. Small businesses complained about the high costs of complying with it, and elderly Australians on fixed incomes felt left out of the prosperity being enjoyed by younger wage earners. Both groups have tended to support the Liberal Party previously.

Government the Nation's Biggest Advertiser

The most advertised product in Australia, with a monthly budget of $20 million, is the Howard government. It has now spent well over half a billion dollars since coming to office in 1996; most of it, according to Labor, on partisan promotion. Last year the government spent$145 million; this year it is likely to spend $120 million over the next six months. [Mike Seccombe, SMH 19.6.01]

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]

Doubts on Global Growth

The US Federal Reserve saw no growth in the nation's economic activity; in Japan the deteriorating corporate outlook prompted the government to call on the central bank to ease monetary policy. New signs of weakness in the USA heighten expectations of another cut in interest rates. The European central bank lowered its forecast for economic growth there to 2.2%. Growth in New Zealand is expected to fall from 2.3% to 1.7%.[Peter Hartcher & Andrew Cornell, AFR, 15. 6. 2001]

He Who Pays the Piper Calls the Tune

The current White House team has strong reservations about the principle of economic cooperation, and is determined to clip the wings of the IMF and the World Bank. Bush's treasurer, Paul O'Neill, makes no secret of the fact that he disagrees with the new priority given to the fight against poverty by Australian James Wolfensohn, president of the World Bank. His early retirement is being talked about... [ Babette Stern, Guardian Weekly, 14. 6. 2001]

The Alchemists of Wall Street

The stock analysts employed by investment banks are "on trial" for massive conflicts of interest as the market crashed. The problem was the breaching of the Chinese walls between the analysts and the investing public. The analysts are supposed to provide independent advice to this public, but are now on trial because they were advising investors to buy when they were selling, propping up the prices of worthless companies, issuing false bullish reports, and giving poor information on their personal holdings.[Pamela Williams, AFR, 16. 6. 2001]

The New Entente Cordial?

America and Europe are not only the main engine of the world's economy, but the main custodian of its liberal values. They have strong interests in common... neither party is usually strong enough on its own to carry the day. Experience shows that one without the other makes little headway, whereas the two together can be effective.[The Economist, 9. 6. 2001]

US Sees the Light

Corporate America is worried that the US has been missing too many chances to join free-trade agreements. It announced a vast lobbying effort to push the political system into a new era of worldwide opening. For the first time its main lobby groups will yield to the Left's insistence that global trade agreements should not deal only with trade, but should also take account of labour rights and the environment. This is a fundamental change in the American business and political landscape, and a "threshold moment" in the global debate about trade. The chairman of the new US Trade Coalition said: "We recognise that there are legitimate labour and environmental concerns that cannot be ignored - we have to engage in this discussion constructively". [Peter Hartcher, AFR, 12.6. 2001]

The Big Cabine?

"The giant multinational companies known as the `seven sisters' had a stranglehold over the oil trade right up to the 1970s when OPEC snatched control of pricing from the majors. Now in a new global climate of deregulated trade and investment the big companies are clawing their way back to power. The seven have become four: Exxon Mobil, BP Amoco, Royal Dutch Shell, and Chevron Texaco. They are amongst the most powerful influential corporations in the world... Big Oil is once again consolidating its power, helped mightily by those eager enforcers of global integration: the International Monetary Fund, the World Bank and the World Trade Organisation... Six of George Bush's cabinet represent the oil industry". [Wayne Ellwood, "Mired in Crude" in The New Internationalist, June 2001]

To Those that Have Shall Be Given... ?- I

The IMF has looked at all the possible explanations for the strength of the dollar against the Euro, and concluded that the likeliest cause is the flow of hot money out of Europe and into the US where there are better prospects for growth and profits... Net portfolio flows into US assets have increased, from $25 billion a year in the early 1990s, to $500 billion in 2000. Net flow into equities have risen twelve-fold over the last decade... It does not take a genius to deduce that this is a situation fraught with danger. The dollar has appreciated by 65% against the euro over the past six years - well in excess of any conceivable improvement in US productivity relative to Europe. [Larry Elliott, Guardian Weekly, 24.5.01]

To Those that Have Shall Be Given? -II

The Secretary-General of UNCTAD has noted that despite the sustained growth of foreign direct investment flows, they remained highly concentrated in a few regions and economies, with most going to the already advanced economies. The recent surge in this investment was based on a wave of cross-border mergers and acquisitions. This suggests that most developing countries are not benefiting from the possible contribution such foreign investment can make... Mergers and acquisitions do not add to the productive capacity of host countries but simply involve a transfer of ownership and control from domestic to foreign hands. [UN Report of the Commission on Investment, Technology and Related Financial Issues, Geneva, March 2001]

Money Left On Wall Street Tables

The heads of research at America's leading investment banks are now working together on a code of best practice for financial analysts. This is said to include severing the link between an analyst's pay and the revenue a bank earns on any deal he works on... Wall Street also faces congressional hearings about its conflicts of interest... There are also probes into accusations of wrongdoing in the underwriting business, and a host of class-action law suits on behalf of suffering investors. These investigations take in most of Wall street's leading firms... Their main focus is the terms on which underwriters allocated shared in IPOs (initial public offerings)... The chief concern is about what other clients did to get an outsize allocation. The potential revenues from cosy arrangements between Wall Street and its friends are enormous. Official underwriting revenues in 1999-2000 were $7.3 billion. But the so-called "money left on the table" (instant profits for clients) was $66 billion. [Economist 26. 5. 2001]

Unholy Smoke

A US jury ordered the tobacco company Philip Morris, to pay $US 3.8 billion to a 56 year old man dying from cancer. He claimed they lied for 40 years about the dangers of smoking. The jury, which deliberated for 9 days, also awarded damages of US$5.5 million. [AFR, 8. 6. 2001]

It's Not Cricket

The British anti-corruption investigator, Lord Condon, launched a scathing attack on the International Cricket Council, accusing it of naivety and a failure to tackle match-fixing. His interim report paints a devastating picture of a badly led sport riddled with accusations of corruption, drug taking, and violence. It says international games are still being fixed, and describes a climate of "silence, apathy, ignorance, and fear". [Vivek Chaudhary and Mike Selvey, Guardian Weekly, 6.6.01]

An investigation by a former senior British policeman into corruption in cricket found that it had started in England and spread worldwide. It now involved allegations of murder, kidnapping and drugs. [Economist, 26. 5. 2001]

Price Fixing Illegal in UK

In the UK directors of companies operating price-fixing cartels will face jail under a government crack-down on anti-competitive behaviour. As part of a drive to cut prices and improve productivity the new criminal offences will form the centrepiece of a shake-up of competition policy. The legislation will bring UK law into line with the US where directors face prison if they are found to be price-fixing.[Guardian Weekly, 21. 6. 2001]

Vive La France!

In France, the state's holdings remain enormous. It owns the post office, the rail system, the Paris airports, the nuclear industry, the aero-engine manufacturer, most of Air France, France Telecom and Thomson Multimedia; significant parts of Renault, the Bull computer company, Credit Lyonnais and much more. In all, the state has a majority stake in some 1,500 companies, and a minority in 1,300 others. So much for modern free-market capitalism. Yet free-marketeers sneer in vain. Most French people see the market as a jungle, to be feared if it cannot first be tamed by the state... Two-thirds of the nation believes the public services in general perform well - even the arrogant civil service. [Economist, 26.5.01]

Cry For Argentina

Argentina has been in deep recession for nearly three years, and is now suffering serious social unrest. The official unemployment rate is 15%; 7 million of its 37 million inhabitants are in extreme poverty. Whole sectors of industry have gone under as a result of competition from imports, smuggling, high lending rates, and an overvalued currency. The jobless protests at La Matanza, a town 20 km west of the capital, Buenos Aires, represents a new type of social struggle that is spreading across the country. There, 40% live below the poverty line, most of these being "the new poor", who were once middle class, but who have now lost out over the last decade, as a result of dwindling salaries and increasing unemployment. There, protestors have blocked railway lines and roads, as they have in other provinces. There is now a Children of the People movement, affiliated to the major trade union, demanding work for their parents, and schools for themselves, and another group of marchers asking for "bread and work". The privatisation of state-owned companies over the last decade has poured about $40 billion into state coffers, yet it has failed to reduce the foreign debt, which is now $170 billions. [Christine Legrand, -Guardian Weekly, 31. 5. 2001]

Coffee: Spilling the Beans

Coffee is facing the deepest crisis in a global commodity market since the depression of the 1930s. Two years ago it fetched almost $2 a kilogram. Today it fetches less than $1 a kilo, and prices are still falling. An estimated 20 million households depend on income from the sale of coffee. The collapse of the coffee economy threatens whole environmental and agricultural systems, but Nestlé, the world's largest coffee roaster had profits exceeding $1 billion last year. World production is increasing at twice the rate of consumption, leading to massive over-supply and accumulating stocks. Coffee exporting countries have done nothing to restrict supply, consequently they export more for less revenue... Credible supply management programs to stabilise prices at better levels are needed, but this is anathema to Western governments which spent most of the 1980s demolishing commodity agreements. Their "business as usual" attitude continues toleration of a system that creates profits for the few and mass poverty and social instability for millions. [Kevin Watkins, Guardian Weekly, 31. 5. 2001]

Saturation Capitalism

The true meaning of globalisation... is about the undebated imposition of the organising logic, the "anti-culture" of the market place into every corner of our lives, onto every culture on earth... When a handful of corporations dominates the world's information this is called having a "free press"... Eduardo Galeano sees this as "the dictatorship of the single word and the single image, much more devastating than that of the single party". Liberation of telecommunications in 1997 delivered control in nearly every country to global companies; as Noam Chomsky points out this raises some rather serious questions about meaningful democracy... This is saturation capitalism, where almost every aspect of our lives is "mediated" by commerce. This globalised world under a single market economy is incorporating every culture and every place within its expanding frontiers... Media companies are lobbying the WTO for a trade agreement that would spell the death of media regulation and public service broadcasting - including the ABC. [Katherine Ainger, co-editor of New Internationalist, in AFR, 1. 6. 2001]

Nation States Now Puppets?

There can be no doubt that the protests of Seattle, Prague, and now Gothenberg have opened up an important debate about how globalisation deepens inequality and concentrates power. The evidence for how seriously these questions are now being considered is everywhere from the World Bank and Davos to BP and Shell... The rationale that underlies much of the protest movement is that multinational corporations have become too powerful, and the nation state little more than a puppet to pursue their interests.[Madeleine Bunting, Guardian Weekly, 21.6.01]