This month's Bulletin

I believe in globalisation and free trade, but it only works if there is a balance. At the present time, virtually everyone of our famous Aussie icon brands has been sold overseas, and over $100 million per day leaves the country, rather than coming in...85% of the products consumers put into their supermarket trolley are either imported or made by foreign owned companies...

In the USA...80% of the products in a typical supermarket trolley are American owned and made... Under no circumstances would I ever sell one of my companies to a foreign buyer... Multinationals are so enormous and powerful that they can simply discount the small range of products we have and end up running us out of business. If they do that, it will be an important lesson to all Australians that we have lost control of our destiny.

Two big global economic forces are competing for the world's attention. The promise of a "new economy" underpinned by information and communication technologies is exciting policy makers... growing instability and uncertainty linked to globalisation has left them deeply worried about the impact of financial shocks on growth prospects; the experience of some of the most successful developing countries has shown just how virulent those forces can be.

So far the big winner has been the United States. On some accounts the spread of new technologies has already uplifted its growth potential. But financial crises in emerging markets have also helped to sustain rapid growth in the USA as capital was attracted to this safe haven and cheap imports helped keep the lid on inflation. The Mania for cross-border mergers and acquisitions has contributed to a larger world wide financial bubble in technology stocks, whose prices have been rising much faster than productivity even in the USA.

The task of adjustment to global economic imbalances is falling on monetary policy alone. This is a cause for concern. [UN Trade & Development Report 19.9.2000]

The US is draining the world of capital because investment returns there are perceived to be better than anywhere else. This is driving up the US dollar... The US deficit is huge, absorbing much of the surplus free capital of many other countries. Because the US is absorbing a disproportionate share of capital, other debtor countries who need it ( e.g. Australia and some in Europe) are seeing their countries suffer. Their currencies will fall until their assets are cheap enough to induce offshore investors back (or the return in the US drops). [St George Monthly Economic Outlook, October 2000]

This is the nickname of the hedge funds that swoop on struggling economies in the developing world buying up their debts at a discount and then suing the government for the full face value. One New York-based fund, Elliott Associates, has made over $130 million out of the practice over the past year. It bought the Peruvian debt for $20 million, and then forced the government to pay $65 million for it. The case has raised alarm bells in Latin America, where "the vultures travel in flocks and are already lining up their next victim". [ Charlotte Denny, Guardian Weekly, 26.11.00]

>The US Wealth Creating System Tight as a Drum

Paul Sheehan notes that in the US boom of the 1990s the crime rate fell, but the number of people in prison or on parole increased by 25%, to 5.7 million, a population larger than 36 of the 50 American States. The average new home now is 50% bigger than it was in 1970, although the average size of the US family has decreased. But the number of working homeless has increased.

The foundation of the economic boom for the educated class is the bull run of the US stock market, which saw the value of stocks held by the average holder double in the decade of the 90s. The economic edifice is now more tightly wound; so much wealth is held in stocks, hence vulnerable to market sentiment. General Electric's stock, for example, is valued at 46 times earnings - more than twice the historic price for a robust blue-chip company. [SMH 1.11.00]

General Electric took over Honeywell International, a merger worth $43 billion. Deutsche Bank bought the French Banque Worms. Barings is being absorbed by the Dutch firm ING. [Economist, 28.10.00]

It would be a grave mistake to dismiss the demonstrations against globalisation in various parts of the world recently, according to Pete Engardio writing in Business Week. They have helped to kick start a profound rethink among governments, mainstream economists, and corporations, he says, which is very necessary, because market liberalisation by itself, does not lift all boats, and in some cases has caused severe damage to poor nations. Also, multinationals have contributed to labour, environmental, and human rights abuses as they pursue profit around the globe.

He notes that Business Week sent over a dozen reporters around the world to witness the effects of global capitalism. Their conclusion was that there are many examples where reckless investment has done harm, but this could be eliminated with better government and corporate policy. The real question is why they are producing such wildly different results; the economies of East Asia, for example, have achieved rapid growth, but there has been little overall progress in much of the rest of the developing world.

The downside of global capitalism is the disruption of societies, from financial meltdown to practices by MNCs which would not be tolerated in the West. The global economy is pretty much still in the robber-baron age; if the flaws are not addressed,the backlash could grow. Joseph Stiglitz, former World Bank chief economist, now a vocal critic, says that the IMF push for capital market liberalisation was driven by financial market ideology. However, a serious discussion on globalisation has now begun. [AFR, 9.11.00]

Can we be certain that capitalism can be trusted to provide justice and understanding for all? ... Or mightn't it be a good idea to keep the trade union movement ticking over, just in case...we move into a world where the rich get richer and the poor get more numerous and more desperate... At the moment, 350 billionaires own more of the world's wealth than 3 billion of its poorer citizens. [Phillip Adam, Weekend Australian, 28.10.00]

The true meaning of internationalism for those on the Left-of-Centre is achieving international solidarity between the workers of the world. Internationalism does not mean surrendering to global capital or much of the globalisation rhetoric, much of which simply amounts to enshrining pro-capitalist, neo-liberal policies on a world scale. As social democrats we should be concerned instead with internationalising workers' power and people's democratic rights. The ALP needs to construct, develop and implement such an approach here if it is to possess a genuinely progressive economic policy; a social democratic philosophy which stands as a stark alternative to free-market liberalism so that voters in Australia can have some real choices again between the two major parties...

The difference is that unions do not believe that growth and internationalisation should be about a race to the bottom - a race that escalates the societal divide between rich and poor. Neither do we want to see the environment destroyed and we do not want our governments to lose sovereignty over the provision of essential services. Unions want a new set of global rules - rules where people matter and regulation recognises that people, not just capital, have fundamental rights.

This is the message taken to the business and government leaders involved in the World Economic Forum in Melbourne in September and it is one that we hope the ALP will heed. [Sharan Burrow, Arena 49, October-November 2000]

Increase productivity may make it possible for wages to rise faster than before without forcing employers to raise prices, but a relationship still exists among wages, labour costs, and consumer prices. We are certainly better off under the new set of relationships than we were before, but we would be wise to temper our enthusiasm with an awareness that the only thing that is permanent in economic affairs, is the unattainability of perfection. [Inwin Steizer, economics consultant to Rupert Murdoch, AFR 31.10.00]

As long as globalisation is synonymous with economic imperialism it is worthy of the most vociferous opposition. The alternative isn't necessarily protectionism, but a globalisation that does not cater exclusively to the extraordinarily rich. That may well be incompatible with the World Bank, the IMF and the World Trade Organisation. It is probably incompatible with capitalism... It would be nice to see newspapers balance their comment by combining condemnation of rash actions with acknowledgement of the violence on an incomparably large scale that is perpetrated on the world's poor, by their governments in tandem with the multinationals. [Mahir Ali, Sydney, letter in the Guardian Weekly 19.10.00]

The world's 200 largest corporations account for 28% of global activity, while employing less than one quarter of one per cent of the global workforce... Capitalism needs to be reformed to reduce the social alienation created by citizens and their politicians loosing control of communities, regions and national economies through globalisation. [Shann Turnbull, ERA Newsletter, Vol. 2, No. 15, Nov-Dec. 00]

The European Commission has filed a civil lawsuit in the USA against Philip Morris & Reynolds Tobacco, seeking damages for their involvement with organised crime in smuggling cigarettes into Europe. Officials believe billions of dollars are being lost in unpaid customs and tax revenue on illicit sales of US cigarettes. Faced with stagnant cigarette sales in the US, tobacco companies are aggressively expanding their overseas sales and marketing. [SMH 8.11.00]

Alan Kohler considers that internet hacking and espionage may pose a threat to the power bases of corporatism and intellectual property... Security and privacy are becoming harder to protect, as direct contact between individuals for the purpose of swapping files is taking off. The "democratisation" of the internet is proceeding apace. Hacking and espionage are easier... Maybe direct communication between PCs is a new form of capitalism, undermining the power bases of corporatism and intellectual property... but not producing anything like the central planning of... socialism. [Alan Kohler, AFR 31.10.00]

The US, the UK, and France - the West's three permanent members of the UN Security Council - account for 80% of the world's weapons sales, according to the Institute of Strategic Studies. The US alone accounts for 50%. Much of the weapon systems they supplied went to the Middle East, with Saudi Arabia being the largest buyer. Annual sales are now of the order of $53 billion. [Richard Norton-Taylor, in The Guardian Weekly, 26.10.00]

French students of economics at the prestigious École Normale Supérieure, France's premier institution of higher learning, circulated a petition protesting against an excessive mathematical formulation in economics. The students called for an end to the hegemony of classical theory in favour of a pluralism that will include other approaches. The French Minister of Education, Jack Lang (!) said he would study their appeal closely. The students' petition had 800 signatures, and the economists' petition, 147.

At the recent conference of the World Congress of Social Economics in the USA, participants spoke of the "stalinization" of the profession, with no sign of the critical mass needed to turn economics away from 19th century dogmas. History of economic thought courses are being targeted, to create a "history free environment", which cannot be challenged. But interest in the reform campaign launched in France is spreading; in Belgium a newspaper described neo-classical economics as "a quaint political ideology masquerading as a science". [Melinda Kane, of the Rensselaer Polytechnic Institute, in ERA Newsletter, Vol 2, No. 15, Nov-Dec 00]

A report from the Shanghai Stock Exchange alleges that fund managers have colluded to enhance the values of each other's portfolios. This activity is allegedly conducted in saunas, an old Mafia trick: naked men cannot carry recording devices or wires undetected. [Economist 21.10.00]

The World Bank has found that the 5,000 frequent flyers on its payroll made far more insurance claims than the rest of the staff. The claims were attributable to the demands of being constantly on the move: stress, anxiety, depression, and various psychological disorders. Its survey concluded that: "Business travel is a unique challenge to the health of employees which to date has not been studied extensively". It suggested that US companies were guilty of instilling a macho work culture that suited no-one but themselves. The US Federal Aviation Authority says that within 3 years all US airlines will have to install automatic external defillibrators. [E. King, AFR 8.11.00]

Airlines could be liable for large sums in compensation to passengers suffering flight-related blood clots. This warning follows the death of 28 year old Emma Christoffersen, who died at Heathrow Airport after a 20 hour flight from Australia. She became one of the youngest to die from deep venous thrombosis, caused by sitting in cramped positions for hours on end in a pressurised and dehydrating environment. Mainly associated with economy class, it has been dubbed "economy class syndrome". [Katharine Towers, AFR 25.10.00]

In the USA and Europe the growth of employment is mostly in the service industries, and is commercialising caring and household work. This is altering labour relations, the nature of care service, and the way the house is arranged; the home looks more like a hotel and the atmosphere becomes impersonal. This commercialisation of the sector is leading not only to unacceptable social relations, but also to progressive depersonalisation, which will be unfavourable for women especially. It is yet another example of how capitalism turns everything into a commodity to be bought and sold in the market place. [Dorien Pessers, reviewing André Gorz, Métamorphoses du travail, Quête du sens (1988), in the Netherlands Volkskrant 24.5.1994]

This dates back to deregulation in 1983, and coincided with the floating of the dollar. In 1984 restrictions on foreign owned non-bank financial institutions were lifted. By 1985 16 foreign banks were licensed, mainly American and British. By the mid-90s Merrill Lynch, Warburg and Morgan Stanley were joined by smaller "boutique players", as well as some of the larger accounting firms specialising in raising investment funds and organising floats. Profits blossomed and investment bankers flourished. The big four trading banks still dominate the "old economy" standbys, such as forex and derivatives, but all have more than a toe in the investment banking waters. [Colin Menzies, AFR 1.11.00]

The Australian Competition and Consumer Commission (ACCC) has stepped up its attack on price collusion in the banking industry as it prepares to take a second major bank to court over interchange fees on credit cards. It alleged that National Australia Bank had engaged in price fixing in the credit card market. The acting Chairman, Allan Asher, said it would proceed with the case, and was also considering legal action against another big bank.[George Lekakis, AFR 30.10.00]

Three of Australia's biggest banks announced record profits; the four largest made over $9 billion in profit in the last financial year. Their leaders spoke of social responsibility and looking after shareholders and customers. Almost a billion came in from fees and charges. [Sean Aylmer, AFR 6.11.00]

The analyst for the Financial Services Consumer Policy Centre, Mr. K. Hajaj, said the high level of profitability showed there was no justification for banks to raise fees and cut services. Westpac's chief executive David Morgan, a former deputy secretary of the Federal Treasury, rejected calls for a social charter, but acknowledged the banks needed to respond more to criticism about fees and services. [SMH 4.11.00]

The Australian Securities and Investments Commission began investigations into sales practices in the ANZ Banking Group, and the National Australia Bank. Those into the former concerned allegations of product pushing and gaming by bank staff. Those in the latter concerned allegations that the bank's financial advisers received higher commissions for selling NAB products. The big four made $9 billion in net profits last financial year. [George Lekakis, AFR 8 and 9.11.00]

The managing director of Westpac, Dr. David Morgan, received a pay rise of $600,000 during the past year, taking his total pay to $2.44 million. Fellow executive, and finance director, Mr. Pat Handley, received $1.21 million. The chief executive of NAB's mortgage servicing arm in the USA, Mr. Joe Pickett, received $2.88 million for his services.[SMH 14.11.00]

The annual report of the Reserve Bank says that interchange fees in ATM and credit card networks are higher than can be explained by costs, causing Australia to have a higher cost retail payments system than necessary. The electronic system the banks control turns over $90 billion. ATM fees average $1.03 per transaction, but the cost is only 49 cents. The study also found that credit card issuers earned a 39% margin on costs, while merchant acquirers picked up fees equal to a 67% mark up on their costs. The four major banks said they were considering the report. [Matt Wade, SMH, 9.11.00]

According to the recent British Cruickshank report on banking, British customers are paying far too much for their banking services. Australian banks are making record profits as they charge fees for most services after deregulation. According to the British report, Canada and Australia are the most expensive countries in which to hold a bank account. Sherrill Nixon notes that the Commonwealth Bank reported a record profit of $2.7 billion in August, and then announced increased fees for standard personal account. Older people are the worst hit because many prefer over the counter transactions which are now far more expensive. [ SMH 1.11.00]

According to Roger Hogan, the nation's big four banks have formed an unprecedented joint venture to shore up the dominance of the wholesale financial market in the face of the global internet revolution. The ANZ Banking Group, the Commonwealth Bank, the National Australia Bank, and Westpac, announced plans to launch an internet portal "Aus Markets", to carry their online bond, fixed income, foreign exchange and derivative products and services. The head of capital markets at ANZ said that if the banks failed to collaborate online, they would lose the initiative.[AFR 6.11.00]

The current exchange rate depreciation will produce a lower rate of economic growth, according to Stephen Koukoulas. Growth is lowered because interest rate settings are higher than they would be otherwise. Higher interest rates lead to less consumption and lower investment. Overall growth and living standards are impaired. Also Australia's record high level of foreign debt will be more difficult to service and repay with a low Australian dollar; 35% of our foreign debt is in American dollars. Since 1997 the Australian dollar has fallen 36% against the US dollar, and 43% against the yen. The slide in our dollar means higher interest rates, lower levels of consumption and investment, and lower living standards than otherwise. [AFR 30.10.00]

Mike Nahan of Melbourne's Institute of Public Affairs said: "There is only room for one global city in Australia... Melbourne is no longer competitive and is going through a period of adjustment". According to Ray Evans, what differentiates Sydney from Melbourne is the dominant religious force - in Sydney the politically active Catholic machine embodied in Labor's Right, and in Melbourne "the Presbyterian church was the Liberal Party at prayer, and Bob Menzies was its bishop". [AFR Magazine, 11.11.00]

The Australian Taxation Office has singled out tax avoidance by members of the legal, accounting and medical professions as a major concern. Barristers topped the list for using insolvency to avoid their tax obligations. These professions had five times the national average tax debt. High-wealth individuals can go into bankruptcy to avoid their tax obligations. Also, companies are again making use of tax havens to minimise tax; Singapore, Hong Kong, the Netherlands and Switzerland are the most popular tax havens. [Paul Cleary, AFR 3.11.00]

An Independent Commission Against Corruption report said the 29 officials of the NSW Government's Road and Traffic Authority were involved in removing original engine numbers from stolen vehicles and replacing them with new ones. This "re-birthing" involved about 100 prestige cars. About 140,000 vehicles are stolen annually in Australia - worth about a billion dollars. [Lisa Allen, AFR 9.11.00]

Millionaire property developers Bruno & Rino Grollo concealed a $25 million profit from the building of Australia's tallest tower, according to prosecutor Lionel Robberds in the Victorian Supreme Court. He said they used a series of dishonest book entries to do so. [AFR 31.10.00]

Approvals for the construction of new houses continue to fall; the index is now down by 46% since January. The chief economist of the Master Builders' Association, Wilhelm Harnisch, said further falls in approvals are likely, although the decline should now be less severe. [Matt Wade, SMH 2.11.00]

More than three quarters of the Federal Cabinet went to exclusive private schools according to a Sydney Morning Herald survey. Only 3 attended a government school. In Labor's Shadow Cabinet, 18 went to government schools, 9 went to Catholic schools, and 2 went to private schools. Almost 70% of children go to government schools, about 20% attend Catholic schools, and the remainder attend other non-government schools.[ Gerard Noonan, Education Editor, SMH 8.11.00]

"We live at a time when all cultural institutions which rely substantially on public funding are doing it rough. Belonging as I do to a university where an atmosphere of demoralisation now runs deep, I do not find it difficult to understand the climate of fear and insecurity which seems to have gripped so many staff members at the ABC. It is an institution infinitely more important to the life of this country than any particular university. It is no secret that at present... it is staring real financial crisis in the face... The ABC is as much about community news and local councils etc as it is about politics and ideas... In its broad humanising impact...we owe far more to the ABC than we commonly understand. The longer I live the more I have learnt to care for it and to fear what right-wing ideologues and penny pinching governments might, between them, soon allow us to lose". [Robert Mann, professor of politics, La Trobe University, SMH, 6.11.00]

According to the UN Intergovernmental Panel on climate change, human pollution, mainly from fossil fuels, has added substantially to global warming in the last 50 years, and the earth is likely to get hotter than previously predicted. Five years ago the Panel predicted that average temperatures would rise by 3 degrees C (6.3F); today it envisages a 6 degree C rise. The Panel concluded that the burning of fossil fuels and the emission of man-made chemicals is the main cause. If the emissions are not curtailed the temperature could rise higher and faster. Evidence of increased warming has been found in retreating glaciers, thinning polar sea ice, increased precipitation and the big rise in weather related natural disasters. Most emissions of carbon dioxide are from rich countries: the USA is responsible for 23%, the UK 3%,[which latter is equal to that from all of Africa.] [John Vidal, Guardian Weekly, 2.11.00]

POSTCRIPT

Gathering Clouds

* Dun & Bradstreet survey reveal business confidence falling faster than the lead-up to the 1990/91 recession.

* National Australia Bank survey shows business conditions deteriorating further last month.

* Westpac survey shows consumer confidence falling sharply in November.[SMH 16.11.00]