Corporate Colonialism

"Globalization of the economy is a new kind of corporate colonialism visited upon poor countries and the poor in rich countries." - Vandana Shiva - Environmental Activist from India

ECONOMIC GLOBALIZATION involves arguably the most fundamental re-design of the planet's political and economic arrangements since at least the Industrial Revolution. Yet the profound implications of these fundamental changes have barely been exposed to serious public scrutiny or debate. Despite the scale of the global reordering, neither our elected officials nor our educational institutions nor the mass media have made a credible effort to describe what is being formulated or to explain its root philosophies.

The occasional descriptions or predictions about the global economy that are found in the media usually come from the leading advocates and beneficiaries of this new order: corporate leaders, their allies in government, and a newly powerful centralized global trade bureaucracy. The visions they offer us are unfailingly positive, even utopian: Globalization will be a panacea for our ills.

Shockingly enough, the euphoria they express is based on their freedom to deploy, at a global level through the new global free-trade rules, and through deregulation and economic restructuring regimes large-scale versions of the economic theories, strategies and policies that have proven spectacularly unsuccessful over the past several decades wherever they've been applied. In fact, these are the very ideas that have brought us to the grim situation of the moment: the spreading disintegration of the social order and the increase of poverty, landlessness, homelessness, violence, alienation and, deep within the hearts of many people, extreme anxiety about the future. Equally important, these are the practices that have led us to the near breakdown of the natural world, as evidenced by such symptoms as global climate change, ozone depletion, massive species loss, and near maximum levels of air, soil and water pollution.

The collapse of the Soviet Union in 1990 was heralded as a landmark event in history; it was considered the wholesale rejection of a way of life and end of Communism. The post - WW2 world was dominated by the competition between the Capitalist free market led by the US and state intervention led by the Soviet Union. Francis Fukuyama considered one of the most important living public intellectuals considered the development of ideas to have ended in his ‘end of history' thesis as there was no meaningful debate left between Marxism and the market.

The Global credit crunch more then a year on shows no sign of slowing down and has now reached boiling point due to the number of banks that continue to collapse. Comparisons continue to be made with the great depression of the 1930's, as many of the conditions present in the current crisis were also present on the eve of the great depression.

Cookery school

Prior to the collapse of many of Wall streets titans in September 2008 various thinkers and free market ideologues continued to argue just as their free market ancestors did in the 1930's and against mounting evidence to the contrary, that time and nature would restore prosperity if governments refrained from manipulating the economy. Western governments have been forced to throw their Capitalist free market blueprint out of the window and intervene in the economy like never before. Over $5 trillion in total market capitalisation has been wiped out since October 2007, with over a trillion of this accounted for by the unravelling of Wall Street's financial titans.

Government bailouts total over $8.5 trillion, nearing a rivalry with US GDP

2008 is over, and we have survived it. Though for some of us, just barely.

2008 saw the greatest financial losses in generations, as $6.9 trillion poured from investors' coffers in the worst series of cascading disasters since the Great Depression.

The resulting panic was met with equally drastic action by the US Treasury and Federal Reserve bank. As pillars of the US economy toppled, the Fed government created an additional $8.5 trillion in currency liquidity and began handing out massive, low interest loans in hopes of stopping a chain reaction of failures.

This massive economic bloodletting threatens to rival the United States' GDP: a now-seemingly hapless $14 trillion.

James Bianco, president of Chicago-based Bianco Research Inc., told the Toronto Globe and Mail: "No one understands these numbers, and I include the Treasury Secretary [Henry Paulson] and the chairman of the Federal Reserve [Ben Bernanke]."

Increasingly, in 2008 the US is being said to have suffered a "financial 9/11."

Many blame the Republican party, namely the Bush administration, for letting it go this far.

The crisis, which grew dramatically in scope with the toppling en masse of shaky mortgages, resulted in credit markets freezing and widespread layoffs. From Dec. 2007 to Nov. 2008, 2.7 million Americans lost their jobs, raising the total number of unemployed to 10.3 million (6.7 percent), according to the US Department of Labor's November report on unemployment.

"The year began with many financial firms attempting to minimize losses tied to rising mortgage defaults and the deteriorating housing market," Forbes recalls. "Investment bank Bear Stearns Cos., which was heavily invested in bonds backed by troubled mortgages, was among the first to crack."

Sifting through the ashes, a Thursday report in the Washington Post tells the tale of the tape on Wall St.:

"The losses in 2008 were so broad and deep that every sector in the Standard & Poor's 500-stock index took a double-digit hit, and the financial sector lost more than half of its value. The Dow Jones industrial average, an index of 30 blue-chip stocks, and the S&P, a broader index watched by market professionals, were down 34 percent and 38 percent, respectively, their deepest losses since the 1930s. The tech-heavy Nasdaq composite index was down 41 percent, its worst year since the exchange was created in 1971."

"It was beyond most people's comprehension that such a thing could happen," Marc Pado, chief market strategist at Cantor Fitzgerald, told the Financial Times. "No one thought the short-term could be this destructive."

For the year, America's financial sector took at 57 percent drop, said the Times.

The one bright spot, for consumers anyway, was the worldwide decrease in demand for crude oil, causing dramatic decrease in oil prices at the pump. On July 17, consumers paid the highest national average ever at $4.14 per gallon, but by Jan. 1, 2009 that figure had slid to just $1.61 per gallon, according to AAA.

And oil is expected to get cheaper in 2009.

In years past, market speculation inflated prices, said Joe Petrowski, CEO of Massachusetts-based Gulf Oil. Now that the prices are deflated, speculators may 'overshoot' and actually drive the consumer cost down further.

His statements came shortly before Merrill Lynch & Co. predicted oil prices will plunge to $25 a barrel in the coming year if the global recession begins heavily affecting China.

"With the economy expected to sour further during the first half of the year and poor corporate earnings likely to pile up as businesses account for the losses from the financial crisis and housing downturn, a stock market recovery will be bumpy," economic analysts told the Washington Post.

Hold on tight, America.

For the first time, the International Energy Agency has produced a date for peak oil. And it’s not reassuring

Global Credit Crunch and wider implications

Questions & Answers

1. What is the financial crisis termed the ‘credit crunch'? What are the potential implications of the financial crisis for the economy?

The credit crunch crisis is the term given to the crisis which led to banks to stop lending to each other creating a freeze on the financial markets, leading to the collapse of Northern Rock, as one example. There are a number of implications as various aspects of the economy are directly or indirectly linked to the crisis:

• • Both the US and the Britain have witnessed debt driven growth other the last decade, this is now coming to an abrupt end.
• • In Britain the economy is worth £1.3 trillion whilst consumer debt is £1.4 trillion
• • The easy availability of credit drove the housing bubble, now the main engine for that - debt is running out of fuel.

2. What are the main causes of the financial crisis?

There are a number of causes which caused the crisis some a result of other factors and some more important then others:

• • The lending of money to high risk customers, with very little chance of them being able to meet the obligations i.e. sub-prime loans.
• • Banks then turning such debt into ‘tradable commodities,' CDO's, MBS's etc. i.e. debt became a product that was brought and sold.
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Injury and globalization

Ian Roberts

If business had to pay the full social and environmental cost of transport there would be less enthusiasm for transnational trade.

SOME YEARS AGO, there was a TV advert for The Guardian newspaper, which became an advertising classic. It showed a young man, short hair, tattoo, drain-pipe trousers and bovver boots, pelting towards an old man ambling his way down the street. When the lout catches up, he grabs the old man and flings him down, clearly a vicious unprovoked assault. But then the camera moves back to show the whole picture. A pile of bricks, fallen from a crane, is about to flatten the old guy. The viewers were wrong. The 'lout' was saving his life. We need the whole picture in order to really know what is going on.

World Health Day this year has been dedicated to the prevention of road traffic injuries. But to prevent injury we need to understand its causes and this also requires that we look at the whole picture. The macro-economic determinants of injury are not evident at the site of injury and are never captured by injury surveillance systems. Nevertheless, they have a huge effect on the injury incidence rate. Of these, the neo-liberal trade policies that are being championed by the governments of the economically powerful nations are likely to be the most important.

How out-of-control speculation is destroying real wealth

The capitalist economy has a potentially fatal ignorance of two subjects. One is the nature of money. The other is the nature of life. This ignorance leads us to trade away life for money, which is a bad bargain indeed.

The real nature of money is obscured by the vocabulary of finance, which is doublespeak. We use the term "investors" for speculators, whose gambling destabilizes global financial markets. We use the terms "money," "capital," "assets," and "wealth" interchangeably--leaving no simple means to differentiate money from real wealth. Money is a number. Real wealth is in food, fertile land, buildings, or other things that sustain us. Lacking language to see this difference, we accept the speculators' claim to "create wealth," when they expropriate it.

If in the 1980s we witnessed capitalism's triumph over communism, in the new millennium we may witness capitalism's triumph over life. For in the vocabulary of capitalism, the destruction of life to make money is progress.

When a defender of global capitalism asks, "What is your alternative? We've seen that central planning doesn't work," one can respond, "Adam Smith had a good idea. I favor a real market economy not centrally planned by governments or corporations." The vital distinction here is between the market economy Adam Smith had in mind, and the capitalist economy, which he would have abhorred.