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Global Policy Forum List-Serv
GPF List-Serv
January 31 - February 4, 2000Greetings from Global Policy Forum!
The week saw yet another record breaking international corporate merger. This time, UK-based Vodafone swallowed German-based Mannesmann. The deal joining these two giants in the wireless communications field totaled an astounding $183 billion, breaking the record set by the merger of communications titans AOL and Time Warner just a few weeks earlier. The sum involved in the Vodafone-Mannesmann deal topped the total for all 5,474 cross-border mergers recorded in 1994!
Thanks to our friend Michael Renner, we have posted further merger data on the GPF site this week. His twenty-year data series, adjusted for inflation, shows the rise of mergers generally and cross-border mergers in particular. After fifteen years of almost uninterrupted growth in merger activity, we see a dramatic rise in both series, starting in 1995. Cross-border mergers rise five-fold in just five years, to over $1.1 trillion, while merger activity of all kinds rises seven-fold to nearly $3.4 trillion. The year 2000 is off at an even more blistering pace, with four huge mergers in the first six weeks, amounting alone to nearly half a trillion dollars.
Mergers are driven by the new scale of global production, but a stock market boom provides the necessary environment. We noticed that in November and December, a sharp rise in margin buying helped push the market on its upward spiral. Margin debt (a kind of borrowing to buy more shares) jumped by more than 10% in each month, as investors scrambled to get credit so that they could climb on the market bandwagon. According to the New York Times, margin debt grew from $140 billion in 1998 to $229 billion in 1999, a situation many sober observers think is very risky indeed.
Meanwhile, New York City and New York State put their own public funds into the market, closing a deal with the New York Stock Exchange to subsidize the Exchange's new headquarters and trading floors on Wall Street -- in the amount of $640 million. The sum will consist of tax breaks, low-cost electricity and direct payments towards construction of the huge project, setting a new record for local public largesse to the private sector. "This is certainly a high-risk investment for both the city and the state," said one commentator. "They're placing a bet on the continued vitality of the trading floor when all the technological forces are leading to . . . electronic trading systems."
Mergers and bull markets make for increasingly powerful corporate clout when the world's decisions are taken. Proving the point, corporate movers-and-shakers gathered in Davos, Switzerland, during the week with the world's foremost politicians, cultural figures, media barons and other personalities, for the annual meeting of the World Economic Forum. Over two thousand global executives and power brokers, linked together during the rest of the year by a special twenty-four-hour video-conference network, assembled in the posh ski resort town to take stock of the world and plan for the future. Many of the speeches and private conversations centered on a fear of "Seattle" -- that somehow the public would demand a voice in global economic and political issues and insist on new laws and regulations.
Among the participants were US President Bill Clinton who urged his audience to keep the faith but "listen to the little people" and Prime Minister Tony Blair of the UK who voiced his concern that governments had not explained the virtues of globalization vigorously enough. Blair also called for steps to deregulate the European labor market -- to remove social and job protections from EU workers -- a sorry spectacle for the leader of a party historically based in the trade union movement.
Some discordant voices could be heard. Hedge fund czar George Soros admitted that "we flopped it" in the economic reconstruction of Russia, UN chief Kofi Anan spoke of vast global inequalities, while Third World Network leader Martin Khor offered a harsh critique of neoliberalism. Meantime, several thousand protesters blocked traffic, picketed, and told media interviewers that they would be back again soon. Next at the spring meetings of the Bretton Woods Institutions in Washington. Look for lots of Davos information on the GPF site this week.
Far from Davos, we journeyed to another snowy venue last week -- the Canadian capital of Ottawa -- to participate in a very different kind of event. The Canadian government and the United Nations Association of Canada convened a conference to consider Canadian policy in the UN Security Council. A group of diplomats, academics and NGO leaders considered how Canada might proceed as a middle-sized power, in the shadow of the big neighbor to the South, and with just eleven months left in a two-year elected Council term. Canada's strong commitment to the UN and its imaginative use of its Council seat were very much in evidence. Participants welcomed the new initiatives of the Council in peacekeeping (originally a Canadian "invention"), but they expressed concern that the United States may simply fail to pay its peacekeeping assessments, plunging the UN into another, even deeper crisis.
We noticed that throughout the Canadian capital the US dollar can be freely spent. So we asked for more information during a break in the conference proceedings, recalling the recent conversion by Ecuador to the US dollar. We were told that the US dollar circulates widely throughout Canada and that Canadians often maintain US dollar accounts to ease their travel and other spending. When we asked about the situation in Latin America and the Caribbean, we were told that the US dollar has a growing role in the region. In Mexico, it seems, the US dollar functions as a parallel currency in most urban areas, while in Argentina the US dollar is so common that many shops post prices in both pesos and dollars.
Money and money-making provide the key to sanctions policy, which continues to be a subject of hot debate at the UN and in the international community more broadly. In the US, a citizen campaign with heavy support from religious groups challenges the Iraq sanctions. This week, GPF sanctions coordinators Yuko Suzuki has posted a useful array of articles on the sanctions debate -- on Iraq, Afghanistan, Cuba and other cases. Two of the postings were brought to our attention by Professor Richard Garfield of the Columbia University School of Nursing, who has written important studies on the humanitarian impact of sanctions, especially on health and health care systems.
Correction: In last week's ListServ we referred to $100 bills arriving at Kennedy Airport for transport to Moscow "fresh from the US Mint." We appreciate a correction from a reader who alerted us to the fact that the US Mint does not print paper currency. It only produces coins. Paper currency is produced by the US Bureau of Printing and Engraving. Thanks!
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