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Global Policy Forum List-Serv
GPF List-Serv
March 6-10, 2000GPF List-Serv March 6-10
Greetings from Global Policy Forum!
Germany's giant Deutsche Bank announced its takeover of the Dresdner Bank this week, forming the world's largest and most powerful private financial institution. First to break the "giga" threshold, the new company will be worth an estimated $1.2 trillion in assets.
Just three years ago, Credit Suisse reigned as the world's largest financial institution with assets of $472 billion. The new German bank sets a scale that is more than twice as large. Its assets will be about two-thirds the gross domestic product of Germany, the world's third largest economy, or roughly the same size as the GDP of France.
The new giant will be twice as large as Citigroup, the largest US financial institution, which currently boasts assets of $669 billion. Deutsche Bank already has a substantial foothold in Citigroup's home turf. Last year, it acquired the New York-based Banker's Trust Company. Other acquisitions may be on the horizon, as the new company sells off its retail branches and concentrates on corporate and investment banking.
The Deutsche Bank deal will be overshadowed in 2002 by a planned merger of three huge Japanese banks -- the Industrial Bank of Japan, Fuji Bank and Dai-Ichi Kangyo -- creating a goliath worth $1.481 trillion in today's assets. Elsewhere, rumors abound of other bank and financial company mergers. Institutions are scrambling to eat or be eaten, positioning themselves in a Darwinian corporate environment where scale is shifting upward in every sector. In 1999, financial services held second place (after telecommunications) in global merger activity.
Many recent mergers join banks with insurance companies, brokerage firms, investment banks and other types of companies, forming a financial services conglomerate. In the United States, until recently, these different types of institutions were legally barred from merging and banks were geographically limited to a single city or county. The laws were written to restrict the undemocratic power of high finance and to protect against abuses that led to the Great Depression. In most countries now, including the US, such laws have been abolished, opening the way for virtually unlimited mergers and concentrated financial power. J.P. Morgan must be smiling in his grave.
Even manufacturing companies have moved into this supercharged sector. In its annual report, released this week, the General Electric Company of the US announced $345 billion in assets of its financial arm, producing over 40% of corporate profits - including credit cards and equipment finance in dozens of countries. Leases are far more profitable than lightbulbs these days.
The new financial mammoths plan to capture banking and securities markets of every country on the globe and they have campaigned relentlessly through the IMF and the WTO for open markets in financial services. This week, we obtained an invitation to a corporate seminar in Miami in May entitled "Latin American Custody, Clearing and Settlement." This event will assemble expert advisors to plan strategies for expansion into Latin American markets, to take over operations now in the hands of local institutions. It will concentrate particularly on services related to stocks and other traded securities. Boston banks have taken the lead in this market, but many other big international financial institutions are racing to grab a share.
As a German bank assumes first place in world finance, the German government has staked a claim to the most prestigious and powerful public post in this field - the Managing Directorship of the International Monetary Fund. The post is supposedly a European fief and a Frenchman has held it most of the time. Now, the Germans insist it is their turn. But the President of the United States torpedoed Chancellor Gerhard Schroeder's first candidate, Caio Koch-Weser, on very vague grounds that he was not of "sufficient stature." Schroeder has now proposed a second candidate, Horst Koehler, President of the European Bank for Reconstruction and Development. Once again, the US government has signaled that it is less than enthusiastic, bringing bitter comments from leaders in Berlin.
Michael Steiner, Schroeder's chief diplomatic adviser was quoted by the New York Times as saying: "We have discovered that the superpower sees its global role not only in the military area but also in setting the rules of globalization through the IMF." Steiner added: "The superpower in Washington grew stronger, but Europeans are also gaining consciousness of themselves and cannot share the view that the role of the IMF is simply to transport the philosophy of the superpower." These are very angry comments of a sort sometimes uttered by officials in Paris, but rare in the German capital. Apparently things are changing. "The fight with America," headlined the influential newspaper Die Zeit.
There are many sources for European grievance towards the United States - about trade, security policy, the UN, NATO, Kosovo, Iraq and more. In recent months, an explosive issue has been ECHELON, an electronic espionage system set up by the United States along with Britain, Canada, Australia and New Zealand. This vast system, using satellites and listening stations, monitors phone calls, faxes, emails and virtually every other signal. Though operational since the early years of the Cold War, investigative journalists have only just revealed its existence. A special report, submitted recently to the European Parliament, accuses the system of bugging the world's private citizens, corporations and governments, and of using this information for direct commercial advantage, giving an edge to firms like Boeing over their European rivals. No wonder the Europeans are alarmed, not least at the ethnic basis for this invidious Anglo-Saxon alliance.
We learned this week of another Anglo-Saxon plan, this one in the military domain. Notice arrived of a military exercise in a program called ABCA (American, British, Canadian, Australian) - New Zealand is also included - to "move collectively towards the standardization of military equipment, training, doctrine and procedures." ABCA holds biennial military exercises and this year's theme, entitled "FOCUS 2000," is a "peace support operation in a hypothetical African nation." The political-military game will take place at the Royal Military Academy at Sandhurst in Britain from 26 April to 2 May.
The US military uses many venues for political-military training and theorizing. This week, we received an announcement of a "round table" being organized at the US Marine Corps War College at Quantico, Virginia, said to address "Military Operations Other Than War," known in military jargon as" MOOTW." The round table will discuss "establishing and running a CMOC [Civilian-Military Operations Center] or CIMIC [Civilian-Military Cooperation]" - similar concepts to the ones being explored at the program at Harvard's Kennedy School, as we announced last week.
We also received news of a training exercise for a "peacekeeping operation," to be held on August 13 - 25 in Tegucigalpa, Honduras, and sponsored by US Southern Command (SOUTHCOM). According to the announcement, a number of Central American and Caribbean nations will send contingents to participate. SOUTHCOM furnishes "simulation expertise and equipment." The United Nations also will send a team of experts from the Department of Peacekeeping Affairs and a high-level role player who plays the Special Representative of the Secretary General. A number of NGOs participate as well. SOUTHCOM, we may recall, is parent of the notorious School of the Americas, grooming ground of Latin American military dictators - rather unsavory company for the United Nations.
With the next PrepCom of the International Criminal Court soon to begin at the UN, insult was added to injury recently as the British government released General Augusto Pinochet of Chile. The former dictator returned to Santiago from London, where he had been held under house arrest, pending extradition for crimes against humanity.. British Home Secretary Jack Straw released Pinochet, on grounds that the general was mentally and physically unfit to stand trial. Although Pinochet faced charges of torture, disappearances, kidnapping and other high crimes, Straw insisted that Pinochet's failing health required his release on "humanitarian grounds."
Photos of Pinochet leaving Britain show him slouched in a wheelchair, pushed by two attendants, looking thoroughly decrepit. But later photos, taken after his arrival in the Chilean capital, showed a very different story. Dressed immaculately in a blue suit, white shirt and violet tie, his wheelchair out of sight, the general made no effort to hide his good health. Chilean television commentators expressed surprise at how fit he seemed. According to eyewitnesses, he walked unassisted from the international jet to a waiting helicopter. Though carrying a cane, he scarcely used it and at one point lifted it vigorously to acknowledge greetings from well-wishers. His examination in a Chilean military hospital, scheduled to last at least a day, ended predictably quickly.
Pinochet's coup, in September 1973, led to a radical restructuring of the Chilean economy, engineered by a group of free-market fundamentalists from the University of Chicago called the "Chicago Boys." A World Bank study later concluded admiringly that trend-setting economic changes like pension privatization could only have been introduced under a dictatorship like Pinochet's. It was, in effect, the beginning of neoliberalism, before globalization trends forced even democratically-elected governments to take the same course.
We have been keenly interested in the critique of neoliberalism by Joseph Stiglitz, former Senior Vice President and Chief Economist of the World Bank. As soon as he left the Bank at the end of February, his speeches disappeared from the Bank's official web site. So we were glad to learn that he was in town last week on March 8 at Columbia University's School of Journalism to participate in a panel on "The Real Risks of Lending to Russia." At the panel, which included a senior IMF staffer, Stiglitz sharply criticized the Fund for its August 1999 bailout loan to Russia of $5 billion, saying that by then everyone knew that previous loans had mostly been "pocketed by the oligarchs" and transferred out of the country into private overseas accounts. Though the IMF loan was not in marked bills, he quipped, an equal amount of money was known to have left the country practically on the following day, leaving ordinary Russians with another $5 billion loan to pay off. Stiglitz went on to deliver his classic critique of the damage that IMF structural adjustment did to the Russian economy. Another panelist, Michael McFaul, Senior Associate at the Carnegie Endowment for International Peace, chastised the IMF for pretending to be an apolitical international organization when it obviously represents US national interests.
Impoverished Russians will scarcely be encouraged to learn that the World Bank Senior Vice President knew all along about the theft of the IMF loans. But they certainly will cheer the news that Russian chickens are coming home to roost in Cambridge Massachusetts. Harvard University has announced that it is dismantling the notorious Harvard Institute for International Development, home base for Prof. Jeffrey Sachs and other engineers of Yeltsin-style Russian privatization. With a budget of $35 million and 184 employees, the HIID was an independent fiefdom within Harvard, beyond the control of any faculty or department. After a 1997 imbroglio in Russia led to serious charges of conflict of interest and private enrichment, the Institute came under investigation by the US Department of Justice. Rumors have also circulated that the University's endowment managers took advantage of inside information to profit handsomely from Russian investments. All this deeply embarrassed the University and damaged its public image as intellectual and moral fountainhead of the republic. After the requisite reviews and , the administration decided that the Institute would have to go.
Among the many postings on the GPF site this week, readers may be especially interested to see an original paper by our friend Charles Tanzer of Columbia's School of International and Public Affairs on "The Asian Crisis and the Search for a New Global Financial Architecture," a paper Harvard economist Kwesi Botchwey delivered at the recent UNCTAD conference on "Financing for Development" and an important summary of the international legal texts relating to sanctions, prepared by the Peace Action International Office.
