This month's Bulletin

It is the vast global success of the American imperium... that, like its Roman predecessor, renders it so vulnerable. Can it really hope to be everywhere at once? Can it really prop up Israel, contain Iraq, appease Iran, intimidate Libya, bomb the Taliban back into the Stone Age, police the Balkans, deter the Chinese from invading Taiwan, build a space shield to ward off roque missiles, meet its obligations to South Korea, keep India and Pakistan from brawling with atomic bombs, cut off the drug traffic from Latin America, - can it do all this, and at the same time ward off recession and remain the motor of the world economy?

The collapse of the World Trade Center surely marks the end of the Antonine Age of American hegemony and the start of darker and more uncertain times.[Robert Harris in The Daily Telegraph, London 13.9.01, reported in AFR 14.9.01]

America Under Attack; Jetliners Turned into Guided Missiles

The date, 11 September 2001, will live in infamy. The audacious air assault on the political and financial capitals made a mockery of Fortress America and ended the illusion that its citizens can somehow float above the hatreds of the world. The thick clouds of smoke and dust billowing up from the spot where the World Trade Center once stood were eerily reminiscent of the photographs from the Japanese attack on Pearl Harbour - only the clouds were engulfing lower Manhattan, where hundreds of thousands of civilians live and work. With the kind of tactical precision that a trained commando unit could only dream of, a cell of terrorists had turned four jetliners into guided missiles and destroyed the most iconic symbol of American capitalism - the World Trade Center - while bombing and blackening the nerve centre of US military might, the Pentagon.[Evan Thomas, Newsweek 18.9.01]

Symbolic Towers

Professor Angus Gillespie, author of a book on the towers, said that: "Just as Big Ben is a symbol of London or the Eiffel Tower is a symbol of Paris, the twin towers in New York had become a symbol of Lower Manhattan, and by extension a symbol of Wall Street, and by [further] extension a symbol of American capitalism and hence of the American way of life". [SMH 14.9.0`1]

The World Has Changed

As this shattered and shuttered city, the heart of the global financial system, tries to pump its own lifeblood back into financial markets this week, the truth is that the world has changed completely. Do not expect to see Wall Street sharemarkets provide any realistic lead for follow-on markets around the world when trading resumes... Who will want to own stock in airlines now?... Who will want to own shares in investment banks and brokers?... Who will want to buy airline tickets? Or cars? The balance of opinion before the twin towers fell, was that both manufacturing and service sectors were slipping, limiting the economy's ability to stay afloat; that we were seeing a flagging in consumer sentiment - the last bulwark preventing the US economic downturn into a full blown recession. [Brian Hale in New York,SMH 17.9.01]

Financing Destruction

The only suspect named by the US President for the terrorist attacks on American capitalism is himself a capitalist, Osama bin Laden. The basis of his fortune was his inheritance from his father of a construction company which worked for the Saudi Arabian royal family... With the profits he financed terrorist cells in 36 countries involving 3000 activists around the world. [Peter Hartcher, AFR 17.9.01]

The Financial Universe Attacked

The financial services industry in New York is a huge industry that makes the city the centre of the financial universe. Until the attack on the World Trade Center, 40,000 people spent their working lives there, among them hundreds of Australians. The attack was not just an assault on an American icon, but a thrust deep into the heart of both America and global capitalism. [Brian Hale, SMH 15.9.01]

Global Economy on the Edge?

The dreadful events in New York and Washington are a blow to an already weakened US and global economy, sending shock waves through world financial markets which could reverberate for a long time. The risk is that this blow will fatally undermine business investor and consumer confidence in the US, plunging its economy into a recession and dragging the rest of the world with it. Macquarie Bank's economist in New York, Rory Robertson, observed that when economies are weak, they are vulnerable to shocks... The US economy had already stopped growing, and consumer and business confidence was already under great pressure... These events are a massive shock to the system. The world had changes. It is suddenly a more dangerous place. [Steve Burrell, SMH 13.9.01]

European Response

The British Prime Minister and the leaders of France, Germany, Russia, Italy and Belgium agreed that the attack was not only on America, but on the world, which "demands our complete and united condemnation, our determination to bring those responsible to justice". Banners appeared near the US Embassy in Berlin, pleading: "No revenge please. No World War III". Strategists also expressed concern that too strong a response would make it politically impossible to retain the support of moderate Arab leaders.[Lenore Taylor, AFR 14.9.01]

Australian Response

Prime Minister Howard said Australia would assist the USA to hunt down the perpetrators of these devastating attacks, and pledged support of US military action if required. This was not just an assault on America, he said, but an assault on the way of life that we hold in common. He announced there would be a memorial service to those who died in the terrorist bombings, particularly Australian. [Katharine Murphy and Tony Walker, AFR 14.9.01] Nine Australians died in the terrorist attacks, but many more are unaccounted for - about 90, it is estimated - near the World Trade Center. Across the country thousands of Australians expressed their grief. Politicians and church and ethnic leaders called for calm as racist incidents against the Islamic community were reported in Brisbane, Perth, Sydney, and Melbourne.[ Fiona Buffini & Nina Field, AFR 14.9.01]

Casualties

Final casualty figures are not available from the attacks on the World Trade Center and the Pentagon. High initial estimates have been cut to about 190, but a much larger number probably perished in New York, with a particularly heavy toll on fire fighters and police, who tried to save the lives of others. The CIA is convinced that Osama bin Laden masterminded the attacks. They backed him when he fought in Afghanistan against Soviet forces, which came to the aid of the ruling junta in 1979.[Brian Toohey, Sun-Herald 16.9.01]

The Centre of World Finance Capital

The World Trade Center in Manhattan housed many of the world's biggest financial firms. The investment bank Morgan Stanley was the major tenant, with 3,500 staff occupying 25 floors. Other occupants included Citigroup, Credit Suisse First Boston, Deutsche Bank AG, and the Bank of America. Bond brokers such as Cantor Fitzgerald had offices there, and it also housed the world headquarters of Merrill Lynch. It was the centre of world finance capital, comprising two 110 story towers, four office buildings, and a hotel. The whole complex housed an estimated 40-50 thousand staff.[Luke Collins, of New York, in AFR 13.9.01]

Political Terrorism?

This is not just a terrorist attack; it is very much higher on the scale of political danger. US retaliation, if a government is an accomplice, could create major new political pressures. Oil could again become a major weapon in a confrontation between the Arab world and the West. Such an outcome is not the most likely outcome and financial markets have discounted it. But the Israeli-Palestinian conflagration continues to inflame Arab opinion, and may erode the political standing of the region's pro-Western governments. [Alan Mitchell, AFR 13.9.01]

Major Powers Rally for USA

NATO declared the alliance itself under attack, opening the way for Europeans to join a US military retaliation against the forces that struck New York and Washington in mid-September... The Group of Seven injected $US120 billion into their respective money markets, in defence of the global financial system... For many in the USA, the fury is so deep that it is blind and irrational. For most Americans, it is beyond the reach of civilised restraint. The Gallup Poll found that 66% of the US public favours armed action "even if it means that innocent people are killed". [Peter Hartcher, AFR 14.9.01]

Global Capitalism in a State of Suspended Animation

Global capitalism was heading for trouble before the attack on the World Trade Center and the Pentagon, as shown by the latest forecasts for global growth. World growth prospects were revised downwards in early September - the fourth successive month of such revision. The forecast now stands at 1.5%, compared with 2.8% in January. Equity investors in Europe have opted to put their money in pharmaceutical companies, banks, and telecommunication companies. This "safe-haven" investment binge began with heavy buying up of short-dated treasury securities in Europe and Australia, and triggered a rally of US investors. However, "all the predictions mean nothing until we see what happens to share prices in the US". [Tony Boyd, AFR 15.9.01]

The Violence of Globalisation

Globalisation is a violent system, imposed and maintained through use of violence. As trade is elevated above human needs, the insatiable appetite of global markets for resources is met by unleashing new wars over resources, as in the war over diamonds in Sierra Leone, and over oil in Nigeria... The transfer of people's resources to global corporations also makes states more militaristic as they arm themselves on behalf of commercial interests, and start wars against their own people. ...We will not live by rules that are robbing million of their lives and medicines, their seeds, plants and knowledge, their sustenance and dignity and their food. We will reweave the world as a place of sharing and caring, of peace and justice, not a market place where sharing and caring and giving protection are crimes, and peace and justice are unthinkable. We will shape new universals through solidarity, not hegemony... [Dr. Vandana Shiva, Director of the Research Foundation for Science, Technology & Ecology in New Delhi, in Oxfam Horizons, Vol 1, No.3, Melbourne, August 2001]

Backward Looking Bankers?

James Wolfensohn, president of the World Bank has been accused of abandoning its economic rigour for development fads, by Foreign Policy, the Washington based journal. It says he has not proved to be a good leader. Yet he has introduced praiseworthy reform, particularly in his willingness to talk to non-government organisations and civic groups. He has emphasised the need for countries to devise their own development programs, and pay more attention to the environment, and to gender. [Guardian Weekly 6.9.01] (Wolfensohn is Australian)

US Unemployment Highest in Four Years

American unemployment has jumped abruptly, hitting confidence, stock prices and the US dollar. Total employment fell by a million in August - the biggest monthly drop on record. Unemployment is now almost 7 million - 4.9%. Economists fear this will sap consumer confidence, which has been the main prop so far. [Peter Hartcher, AFR 10.9.01]

The Land of the Brave and the Free

The men and women of the USA work the longest hours in the industrialised world, according to a new study published on Labour Day weekend. Only South Koreans and Czechs put in more time that Americans. Hard working Americans on the minimum wage have to choose between eating or heating, healthcare or childcare, according to Holly Sklar, author of Raise the Floor: Wages & Policies that Work for All of Us. [Michael Ellison, in Guardian Weekly 6.7.01]

Victims of Progress in Cannibalistic Capitalism

Compared to their peers 30 years ago, America's 80 million white collar employees are working longer hours for the same pay and fewer benefits, at jobs that are markedly less secure, and for corporations that regard firing whole ranks of employees as a way to post paper gains, and so win Wall Street's favour. The long arm of the job has reached into employees' homes, their nights, their weekends and their holidays, as technology designed to make work less onerous has made it more pervasive. America's insecure white-collar workers are victims not of poverty but of progress. [Review of Jill Fraser's White Collar Sweatshop in Financial Review's Boss, Vol 2, 9 Sept 2001, by Jack Beatty, editor of Atlantic Monthly]

Recession on the Way in US

The American economy is buckling under the strain of massive job lay-offs, a procession of profit warnings and a consumer class that remains stunned in the headlights of the attack. Retail spending has nose-dived, travel plans have been scrapped, restaurants are empty and the biggest spending leisure class in the world is keeping its wallet in its pocket. The aviation industry has taken the brunt of the shock... the total number of jobs lost there is expected to reach 100,000... But sackings are not limited to airlines; Ford closed down a plant in Michigan, and major retailers plan to reduce staff; the tourist and entertainment industries are also affected. [Mark Riley, SMH 2.9.01]

High-tech Unemployment

Nearly 50,000 jobs are likely to be cut as financial services and high-tech companies bear the brunt of the global downturn - 20,000 at Hitachi, 19,000 at Toshiba, 6,000 from J.P. Morgan Chase. This is the worst slump experienced by the electronics sector.[Guardian Weekly 30.8.01]

Market Power

It has become fashionable of late to claim that we can buy our way out of trouble: that through the judicious use of shares and shopping we can force companies to change the way they trade. But it is surely not hard to see that consumer choice is an inadequate means of curbing corporate power... If market forces operate outside the market, then so must we. (emphasis added) [George Monbiot, Guardian Weekly 30.8.01]

Debt and the Chattering Classes

The international outlook is definitely worrying. The US accounts for over a quarter of the world's output, but is practically stagnant. Japan is slipping back into recession. The UK economy is blowing hot and cold, and some of the coldest parts are where the "chattering classes" hang out - the media, the city, and professions allied to the financial sector. Recruitment advertising has suffered the sharpest fall since the last recession, and the highly skilled part of the labour market is suffering the most. Pessimists warn that Britain is like the US --a robust consumer sector holding up a weak economy by getting itself into record debt. [Charlotte Denny, Guardian Weekly 6 Sept.01]

Effects Will Be Felt Worldwide

The US economy is 28% of global GDP... It is a shock that will be heard around the world. American consumer spending underpins two thirds of the nation's output, and had already begun to falter. "These tragic events are unique and unprecedented and we cannot foresee their consequences", said Ms Fosler, chief economist of the Conference Board. [Brian Hale, SMH22.9.01]

Australia

The chief economist at the Commonwealth Bank, Bruce Freeland, says the situation will exacerbate the current vulnerabilities in the Australian economy. There will be weaker export growth and a decrease in consumer confidence and spending. [Business Review Weekly 20.9.01]

Bear Market Predicted

George Soros, the billionaire financier, has predicted a drawn-out emerging-markets crisis. He said the fallout from the terrorist attacks in New York and Washington would force the US Reserve Bank to cut interest rates. "We are on the verge of a new emerging -markets crisis", he said, - "a Long drawn out bear market". [Anne Hyland, AFR 21.9.01]

Banking Becomes a Dangerous Profession

The International Monetary Fund and the World Bank announced that they would cancel their annual meetings because of safety concerns. This is the first time this has ever happened.[Anne Hyland, AFR 21.9.01

Australia's four big banks are owed $1.28 billion by the two failed companies, Pasminco and Ansett. [ Anthony Hughes, SMH 21.9.01]

The Debate on Globalisation is being televised Next Month

The anti-globalisation movement will accuse the Bretton Woods twins - the World Bank and the IMF; they will repeat their mantra that globalisation is good for the poor. The protestors have already forced the Bank and the IMF to reduce annual meetings from two weeks to two days. The protestors can win hearts and minds because they can tell stories about communities which have suffered because of lower trade barriers... While the bank and the IMF assume markets work roughly in a competitive fashion, the protestors see the vast disparities of power between rich and poor. What works in a textbook can be very different in practice. (emphasis added) [Charlotte Denny, Guardian Weekly 30.8.01]

Dragging the Chain?

The Australian economy, which was travelling poorly into the middle of 2001, is likely to suffer very badly as 2001 draws to a close. The national accounts showed that GDP grew at an annual rate of 1.4%; the US grew at 1.3%, and the Eurozone at 1.7%. In the year to June Australian domestic demand grew by only 0.3%. Private business investment fell. [Stephen Koukoulas, AFR 15.9.01]

The Part-time Economy

The July jobs data for Australia showed a dramatic slump in full-time employment over the year. Employment fell for the third consecutive month... This is not a new phenomenon; part-time employment has grown from 16% of the work force in 1980 to 27% now. [Economic Issues, 10 Sept.01, Commonwealth Research]

Work - For the End is Near!

A new study shows that long hours impoverish a larger life. Based on interviews with workers, it shows how long hours create a vicious cycle. The more time people spend at work, the more their personal lives are eroded. Australians work among the longest hours in the OECD - an average of 41.4 hours. This is three hours more than a decade ago. Half a million working parents told the Australian Bureau of Statistics they wanted to work shorter hours. France adopted a 35 hour week last year - 60% of workers felt their daily life had improved as a result. [Adele Horin, SMH 8.9.01]

Chance it with Ansett?

Of all the corporate collapses in Australia this year, that of Ansett Airlines will prove the most damaging. Thousands of jobs appear to be lost, and a wide range of services are threatened... It is doubtful whether Ansett can keep operating for long in its current state of financial limbo... The whole framework of Australian aviation policy has broken down. The central assumption of two evenly matched incumbents... will not be valid for the foreseeable future. Airport privatisation is also entangled in the mess - it will probably have to be delayed... If airlines are too important to be owned by foreigners, they should be kept in public ownership... To keep a satisfactory outcome... an entirely new regulatory regime will need to be built. [John Quiggin, AFR 14.9.01]

The Biggest Mass Sacking in Australian Corporate History

Ansett's grounding caused the cancellation of 700 flights and the loss of over 16,000 jobs. The Australian Securities and Investment Commission launched an inquiry into whether Ansett's bosses had traded whilst insolvent. The Board of Air New Zealand said it had documents to prove that the Prime Minister and the Transport Minister were told ten weeks ago that the airline was losing $2.6 million a day. [Darren Goodsir and Linda Doherty, SMH 15.9.01]

Defects of Competition Policy

The collapse of Ansett illustrates the defects of competition policy, which is the foundation stone of the economic policies of both our major political parties. Economic rationalists claim that competition forces prices down and increases efficiency by cutting costs to the bone. The world does not work that way; the more ferocious the competition, the more likely one of the competitors will buckle. When there are only two players in the market, the assets of the weaker one are liable to be worth very little after it falls. The winning player will usually have the better assets and not need any more. Hence the paradox that an airline can be operating normally one day, but be valueless the next. This is a logical outcome of competition policy. We need to accept that in some industries monopoly is inevitable, and that the role of the Australian Competition and Consumer Commission is to be a prices justification tribunal, policing monopoly's pricing power. [Trevor Sykes, AFR 15.9.01]

Profits Falling: the End is Near?

Real corporate growth in Australia is among the worst in the world, according to Toni O'Loughlin, citing figures released by the Australian Bureau of Statistics. They show that corporate Australia's profits shrank, contracting 0.9%, making the latest 12 month run the worst since 1995. Gloomy profit results are also forecast in the USA, where the stock market plunged on weak earnings figures overnight.[SMH 8.9.01]

Bank Exposes Itself

National Australia Bank shares fell sharply on fears that it had a major exposure to the financially crippled Air New Zealand- Ansett Group, whose latest annual loss is estimated at $NZ200 million. [Mark Todd and Jeni Porter, SMH 12.9.01] [In its early years the sobriquet was "Chance it with Ansett"!]

A Blind Corner?

The first study of the corner shop industry shows that many are closing because of mounting paper work, higher costs, greater competition, and reduced profits. Nearly half of the shop owners surveyed said the GST was cutting profits and shrinking incomes. [Juan-Carlo Tomas, SMH 10.9.01]

Offline Personal Computers

A survey of Sydney-siders by Dr. M. Ranjibar of the University of Western Sydney found that teenagers are getting hooked on online distractions such as chat rooms at the cost of outdoor activities. He found regular PC users spend 2_ hours a week less with their families than non-computer users. The Graduate School of management at Macquarie University found that one in five e-mails is of no interest to the recipient. Also, unnecessary personal e-mails pose an increasing problem in the work environment.[Greg Callahan in The Weekend Australian Magazine 8.9.01]

Hedging and Ditching

It is not generally known that Australia can lay claim to being the birthplace of the hedge fund. Its "father", Alfred Winslow Jones, was born in Melbourne in 1901, the son of an American father; he returned to the USA with his family when he was four. He took a doctorate in sociology, and became an associate editor of Fortune magazine. He found that by using a system of selling shares he thought overvalued, and buying those he thought undervalued, he could reduce market risks. It worked, and in 1996 the Jones Hedge Fund outperformed the best mutual funds by 44%. The success of the Fund made Jones a rich "Australian"; he used hedging and leveraging a speculative tools for conservative purposes. [James Walker, AFR 12.9.01]

Consolidation of the World Media

There has been a spate of mergers and acquisitions among global media buying groups, following consolidation among owners that were encouraging media buying deals across their brand portfolios. The world is now dominated by six behemoths: AOL Time Warner, Disney, Bertelsmann, Viacom, News Corporation, and Vivendi Universal. [Rochelle Burbury, AFR 11.9.01]

Physician Heal Thyself!

What is urgently needed, within medicine and beyond, is an effective pool of independent researchers working in the public interest rather than to agenda set by those promoting commercial products. [Ray Moynihan, AFR 8.9.01]

Church Irrelevant: Grog and Sex Winning?

Christianity is close to being "vanquished" in Britain and no longer influences people's lives, according to the leader of the Roman Catholic Church there. Cardinal Murphy-O'Connor said that Britain's christians - particularly the Catholics - had to adapt to an alien culture. He said christianity had become almost irrelevant to people's lives and moral decisions. People now turned to consumerism, New Age practices, or the pleasure of alcohol, drugs, and recreational sex rather than to God. [SMH 7.9.01]

Good Socialists All?

The British Labour Government squeezed spending on education to the lowest share of national income since the 1960s. It is now 4.5% of gross domestic product - the lowest for 40 years. [Steward, Denny & Woodward, in The Guardian Weekly 6.9.01]