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World of Resistance Report: IMF, World Bank, Giant Consultants Admit The Storm Is Coming

World of Resistance Report: IMF, World Bank, Giant Consultants Admit The Storm Is Coming

By: Andrew Gavin Marshall

21 July 2014

Originally posted at Occupy.com

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Following Parts 123 and 4 of the World of Resistance Report, in this fifth installment I examine the warnings of social unrest and revolution emanating from the world’s major international financial institutions like the IMF and World Bank, as well as the world’s major consulting firms that provide strategic and investment advice to corporations, banks and investors around the world.

These two groups – financial institutions and the consultants that advise them – play key roles in the spread of institutionalized corporate and financial power, and as such, warnings from these groups about the threat posed by “social unrest” carry particular weight as they are geared toward a particular audience: the global oligarchy itself.

Organizations like the International Monetary Fund (IMF) and World Bank were responsible for forcing neoliberal economic “restructuring” on much of the developing world from the 1980s onwards, as the IMF and E.U. are currently imposing on Greece and large parts of Europe. The results have been and continue to be devastating for populations, while corporations and banks accumulate unprecedented wealth and power.

As IMF austerity programs spread across the globe, poverty followed, and so too did protests and rebellion. Between 1976 and 1992, there were 146 protests against IMF-sponsored programs in 39 different countries around the world, often resulting in violent state repression of the domestic populations (cited explicitly by Firoze Manji and Carl O’Coill in “The Missionary Position: NGOs and Development in Africa,” International Affairs, Vol. 78, No. 3, 2002).

These same programs by the IMF and World Bank facilitated the massive growth of slums, as the policies demanded by the organizations forced countries to undertake massive layoffs, privatization, deregulation, austerity and the liberalization of markets – amounting, ultimately, to a new system of social genocide. The new poor and displaced rural communities flocked to cities in search of work and hope for a better future, only to be herded into massive urban shantytowns and slums. Today roughly one in seven people on Earth, or over 1 billion, live in slums. (An excellent source on this is Mike Davis’s “Planet of Slums”.)

How the Big Institutions Have Operated

Joseph Stiglitz, the Nobel Prize-winning former chief economist at the World Bank, blew the whistle on the World Bank’s and IMF’s policies in countries around the world – an act for which he was ultimately fired. In an interview with Greg Palast for the Guardian in 2001, Stiglitz explained that the same four steps of market liberalization are applied to every country.

The first includes privatization of state-owned industries and assets. The second step is capital market liberalization, which “allows investment capital to flow in and out,” though as he put it, “the money often simply flows out.” As Stiglitz explained, speculative cash flows into countries, and when there are signs of trouble it flows out dramatically in a matter of days, at which point the IMF demands the countries raise interest rates as high as 30% to 80%, further wrecking the economy.

At this point comes step three, called “market-based pricing,” in which prices get raised on food, water and cooking gas, leading to what Stiglitz calls “Step-Three-and-a-Half: the IMF riot.” When a nation is “down and out, [the IMF] squeezes the last drop of blood out of them. They turn up the heat until, finally, the whole cauldron blows up.” This process is always anticipated by the IMF and World Bank, which have even noted in various internal documents that their programs for countries could be expected to spark “social unrest.”

And finally comes step four, “free trade,” meaning that highly protectionist trade rules go into effect under supervision of the World Bank and World Trade Organization.

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Expecting Riots

The term “IMF riots” was applied to dozens of nations around the world that experienced waves of protests in response to the IMF/World Bank programs of the 1980s and 1990s, which plunged them into crisis through austerity measures, privatization and deregulation all enforced under so-called “structural adjustment programs.”

As the Guardian noted in September of 2012, “the European governments are out-IMF-ing the IMF in its austerity drive so much that now the fund itself frequently issues the warning that Europe is going too far, too fast.” Thus, we saw “IMF riots” – protests against austerity and structural adjustment measures – erupting over the past three years in Greece, Spain, Portugal and elsewhere in the E.U.

An academic study published in August of 2011 by Jacopo Ponticelli and Hans-Joachim Voth examined the link between austerity and social unrest, analyzing 28 European countries between 1919 and 2009, and 11 Latin American countries since 1937. The researchers measured levels of social unrest looking at five major indicators: riots, anti-government protests, general strikes, political assassinations and attempted revolutions.

The verdict: The researchers found there was “a clear and positive statistical association between expenditure cuts and the level of unrest.” In other words, the more that austerity was imposed, the more unrest resulted. Spending cuts, they wrote, “create the risk of major social and political instability.”

The Eurozone has been referred to by some as “an unemployment torture chamber” due to the structural reforms to the labor market – enforced through bailout conditions – which were purportedly designed to make it easier for employers to hire and fire but, instead, “firing has utterly dominated the employers’ agendas,” according to the Globe and Mail. This has created a “lost generation” in which unemployment in the E.U. for youths between 16 and 24 amounts to roughly 25% – while in Italy it’s roughly 40% and for Greece and Spain it’s as high as 60%. Tom Rogers, an adviser to Ernst & Young, noted, “Youth joblessness at these levels risks permanently entrenched unemployment, lowering the rate of sustainable growth in the future.”

The head of the IMF, Dominique Strauss-Kahn, warned in 2008 that “social unrest may happen in many places, including advanced economies.” The head of the World Bank, Robert Zoellick, warned in 2009 that “If we do not take measures, there is a risk of a serious human and social crisis with very serious political implications.”

Additionally, in November of 2009, the IMF chief warned the premier British corporate lobbying group, the Confederation of British Industry (CBI), that if a second major bailout of the banks were to occur, democracy itself would be jeopardized. The “man on the street” would not accept further bailouts, Strauss-Kahn said, and “the political reaction will be very strong, putting some democracies at risk.”

Consulting in the Midst of a Crisis

Global consulting firms play a peculiar role in the global economic order. The consulting, or “strategy,” firms became commonplace in the 1960s onward, and were frequently seen as “home to some great minds in the corporate world,” hired by corporate, financial and other institutional clients to advise management on strategy and investments. The Financial Times referred to the industry as “a global behemoth, employing an estimated 3 million people and generating revenues of $300 billion a year,” with the industry’s “product” being “the knowledge vested in its people.”

According to an Oxford team of researchers, in 2011 consulting firms advised on more than $13 trillion of U.S. institutional money. Worldwide, consultants advised roughly $25 trillion worth of assets. Consulting advice was seen to be “highly influential” in the United States; yet despite the enormous power wielded by consultancy firms, the Oxford study found that the funds recommended to investors by consultants did not in the end perform better than other funds.

Still, the influence of giant consulting firms remains, although their reputations have taken some hits along the way. The world’s largest consulting firms at the end of 2013 were McKinsey & Company, Bain & Company, Boston Consulting Group, Booz & Company, PricewaterhouseCoopers, Oliver Wyman, Deloitte Consulting, The Parthenon Group, A.T. Kearney and Accenture. With these large firms advising even larger clients on strategy and investments, it’s worth examining some of the advice and perspectives published by these agencies.

For example, McKinsey & Company, the world’s largest global management consulting firm, published a report in 2012 (Dominic Barton, “Capitalism for the Long Term,” Autumn 2012) noting that in the previous few years the world had been witnessing “a dramatic acceleration in the shifting balance of power between the developed West and the emerging East, a rise in populist politics and social stresses in a number of countries, and significant strains on global governance systems.”

For corporate executives, “the most consequential outcome of the [economic] crisis is the challenge to capitalism itself.” And while “trust in business hit historically low levels more than a decade ago,” McKinsey warned, “the crisis and the surge in public antagonism it unleashed have exacerbated the friction between business and society,” adding to anxiety over rising income inequality and other factors.

Having interviewed over 400 business and government leaders around the world, the McKinsey report noted that “despite a certain amount of frustration on each side, the two groups share the belief that capitalism has been and can continue to be the greatest engine of prosperity ever devised.” However, the report warned, “there is growing concern that if the fundamental issues revealed in the crisis remain unaddressed and the system fails again, the social contract between the capitalist system and the citizenry may truly rupture, with unpredictable but severely damaging results.” McKinsey & Company thus called for “nothing less than a shift from… quarterly capitalism to what might be referred to as long-term capitalism.”

In another instance, KPMG, one of the world’s leading accountancy firms and professional service providers, published a report in 2013 examining a list of “megatrends” in the world leading up to the year 2030 (“Future State 2030: The Global Megatrends Shaping Governments,” KPMG International, 2013). One of the major trends it referred to was “the rise of the individual,” in which technological and educational advancements “have helped empower individuals like never before, leading to increased demands for transparency and participation in government and public decision-making.”

This process is “ushering in a new era in human history,” KPMG went on. With major social issues left unresolved such as growing inequality and access to education, services, employment and healthcare, “growing individual empowerment will present numerous challenges to government structures and processes, but if harnessed, could unleash significant economic development and social advancement.”

The report further warned that there were other major consequences with the “rise of the individual,” including “rising expectations” and increased “income inequality within countries leading to potential for greater social unrest.” The fact that populations are “increasingly connected” and “faster dissemination of information through social media accelerates action” posed other concerns. John Herhalt, a former partner at KPMG, was quoted in the report as saying, “Citizens are not just demanding technologically advanced interactions with government, but also asking for a new voice.”

Further, a 2013 survey of 1,300 CEOs from 68 countries by PricewaterhouseCoopers, another of the world’s largest consulting firms, reported general views shared by CEOs around the world (“Dealing With Disruption: Adapting to Survive and Thrive,” 16th Annual Global CEO Survey). When asked about the ability of firms to deal with the potential impact of disruptive scenarios, the vast majority (75%) of CEOs responded that their companies “would be negatively affected, with major social unrest being cause for the greatest concern.” This was perceived as a greater threat than an economic slowdown in China.

CEOs, noted the report, “know they’ll have to repair the bridges of trust between business and society,” as the global financial crisis and its aftermath “have badly damaged faith in institutions of every kind.” Due to the revolution in social media, it concluded, many new “stakeholders… have an unprecedented amount of clout.”

After in-depth analyses of documents, speeches and reports from the world’s major economic institutions – from international organizations like the World Bank and IMF to global consultancy firms like McKinsey & Company and PricewaterhouseCoopers; and from big banks like HSBC, JPMorgan Chase and UBS to oligarchic platforms like the World Economic Forum – three issues are prevalent in terms of assessing the fears and threats facing the global elite: 1) growing inequality, 2) decline of public trust in institutions of all kinds, and 3) the resulting social unrest.

It should be clear by now that as global inequality continues to rise, trust in institutions will continue to fall, and social unrest will explode in new and more dramatic ways than we have witnessed thus far. We truly are entering a World of Resistance.

Andrew Gavin Marshall is a researcher and writer based in Montreal, Canada. He is project manager of The People’s Book Project, chair of the geopolitics division of The Hampton Institute, research director for Occupy.com’s Global Power Project and World of Resistance (WoR) Report, and hosts a weekly podcast show with BoilingFrogsPost.

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World of Resistance Report: Financial Institutions Fear Global Revolution

World of Resistance Report: Financial Institutions Fear Global Revolution

By: Andrew Gavin Marshall

11 July 2014

Originally posted at Occupy.com

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In Part 1 of the WoR Report, I examined Zbigniew Brzezinski’s warnings to elites around the world of the “global political awakening” of humanity. In Part 2, I looked at the relationship between inequality and social instability, and in Part 3 I examined the World Economic Forum’s warnings of growing inequality and the “lost generation” of youth who pose the greatest threat to oligarchic interests around the world. In this fourth installment in the series, we turn to reports from top banks and financial institutions warning about the growing threats to their interests posed by an increasingly disenfranchised and impoverished population – manifested in protests, strikes and social unrest.

In November of 2011, Bob Diamond, the CEO of one of the world’s largest banks, Barclays, stated in a speech: “We’ve seen violent protests in Greece, public sector strikes across Europe, [and] anti-capitalist demonstrations that started on Wall Street have spread to other places around the world.” Diamond added: “Young people have been especially hit hard by high levels of unemployment. The threat of further social unrest remains if we don’t work together to generate stronger economic growth and more jobs.”

A March 2013 report by senior economic adviser George Magnus of UBS Investment Research, entitled “Social Unrest and Economic Stress: Europe’s Angst, and China’s Fear,” noted that “the wave of social unrest that rumbled across Europe between 2008 and 2011 has become less intense… [and] has come as a cause for relief in financial markets.” Yet, he wrote, the occasional upsurge in large-scale national and European-wide anti-austerity protests and strikes “signifies the deep malaise in the complex and fragile trust relationship between European citizens and their governments and institutions.” Since 2010, approximately 13 out of 19 E.U. governments had been voted out of office or had collapsed, indicating that “public anger… is far from dormant, and its expression is mostly unpredictable.”

Social unrest, added the UBS report, “is a systemic phenomenon” that is “highly uncertain, complex and ambiguous,” and which can lead “to the toppling of governments, or even political systems.” Social unrest across the E.U. “has been notable more for the public expression of lack of trust in the institutions of government, including in Brussels,” the headquarters of the European Union.

This “lull” in social unrest, warned Magnus, “is most likely deceptive.” The present problem in Europe “is the same” as the main problems in Europe of the 1930s – when mass poverty, unemployment and social unrest led to the rise of fascism. The underlying problem in both eras was “the inadequacy of mainstream, political channels to address rising public concern about the loss of economic security, social stability and, yes, cultural identity.”

Citing an OECD study, the bank report noted that “austerity has gone hand-in-hand with a variety of forms of social and political instability, and politically-motivated violence.” There have been “heightened levels of social unrest and shocks to the political system in Greece, Spain, Portugal and Italy… sometimes requiring the force of the state to suppress it.” These are especially important matters for banks to pay attention to, since the European debt crisis was caused primarily by the big banks – and the austerity and “structural reform” policies (along with the bailouts that accompanied them) were designed for the benefit of those banks as well. Thus, resistance to austerity and “reform” is, in effect, resistance to the bailouts for the big banks.

In May of 2013, JPMorgan Chase released a report, “The Euro Area Adjustment: About Halfway There,” which assessed “progress” in the European Union on the issue of austerity and structural reform. The “adjustment” of European society, claimed the report, was “about halfway done on average,” noting that the process would continue for much of the rest of the decade although it faced major challenges, including the development of “new institutions” in the E.U. and what the bank called “national legacy problems.” This vague term referred to “the constitutions and political settlements in the southern periphery [of the E.U.], put in place in the aftermath of the fall of fascism, [which] have a number of features which appear to be unsuited to further integration in the region.”

Just what does this mean? The bank explained that “fiscal austerity” was likely to be a major feature in the E.U. “for a very extended period.” However, if the European Monetary Union is to survive the coming decade, “deep seated political problems in the periphery… need to change.” But what precisely are these “deep seated problems”? The bank elaborated that many of the southern periphery states’ constitutions “tend to show a strong socialist influence,” referring to the fact that many constitutions guaranteed various social rights for populations, including labor, healthcare and educational and civil rights.

Further, the bank reported that many of these nations suffer from the following features: “Weak executives; weak central states relative to regions; constitutional protection of labor rights; consensus building systems… and the right to protest if unwelcome changes are made to the political status quo.” The translation: democracy itself is the problem. As such, JPMorgan noted, “the process of political reform has barely begun.” In other words, out with democracy and in with financial and corporate oligarchy.

The bank’s report also noted that there were a number of potential threats as the process of “political reform” advanced, including “the collapse of several reform minded governments in the European south,” a “collapse in support for the Euro or the E.U.,” the possibility of “an outright electoral victory for radical anti-European parties,” or perhaps even “the effective ungovernability of some Member States once social costs (particularly unemployment) pass a particular level.” JPMorgan Chase warned that while there wasn’t a current situation of “ungovernability” in E.U. states, the longer-term prospects were “hard to predict, and a more pronounced backlash to the current approach to crisis management cannot be excluded.”

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AXA, one of the world’s largest financial institutions and insurance companies, published a report in July of 2013 written by Manolis Davradakis, entitled “Emerging Unrest: Looking for a Pattern,” which expressed particular concerns and perspectives on the issue of social unrest. The report noted that emerging market economies “are currently experiencing a surge in political risk due to social unrest that is being fueled by reasons that differ from those that resulted in the Arab Spring.”

The “main cause” of unrest in emerging market nations was “the rise of the middle class,” as this portion of the population “realize that they continue to experience the same everyday problems as poorer population strata, namely a high crime rate, poor public services, and corruption.” The report cited examples of social unrest in Turkey and Brazil, warning that these countries could see their credit ratings cut if the social upheaval is “lasting.”

The AXA report referred to the multiple episodes of unrest across emerging market nations in the summer of 2013 as “riots,” stating that they had several points in common, namely that “they were sparked by a government decision affecting daily life” and that the protesters were “not affiliated with political parties or movements” but instead were “well educated members of the middle class.” These factors were reminiscent of the massive unrest that took place in the advanced economies during the 19th century when emerging middle classes were struggling “for better living standards and more representation in political governance.”

Beyond a certain point, warned AXA, “repressing mass demands for a more open society becomes costly and economically ineffective.” A government’s inability or lack of will “to acknowledge the people’s right to freedom of expression and a voice in decision-making is a source of social unrest.”

AXA devised a Poor Governance Index (PGI), analyzing seven key indicators that could lead to social unrest, and concluded that the potential for instability in the BRIC nations – Brazil, Russia, India and China – was quite high. It also cited increased potential for unrest in Egypt, Ukraine, Indonesia, South Africa, Tunisia and Turkey, warning that such unrest “may have implications for emerging market [credit] ratings.” It noted that several credit ratings agencies had already warned about the effects that “prolonged social unrest” could have on the ratings for Turkey and Brazil.

Going further, in July of 2013, Stephen D. King, chief economist of HSBC bank, warned that growing wealth gaps and increasing divisions between generations could result in youth uprisings similar to the Peasants Revolt of the Middle Ages. King commented: “I am intrigued at the moment that the youth are quite peaceful, and I wonder whether that might change. It is very difficult to predict but youth movements might become more focused on their own rights rather than the economy.”

In October of 2013, King wrote an op-ed for the New York Times in which he warned that as bad as things already were, “they are going to get much worse, for the United States and other advanced economies, in the years ahead,” writing that both sides of the North Atlantic region had “already succumbed to a Japan-style ‘lost decade’” in which “promises can no longer be met, mistrust spreads and markets malfunction.” King wrote that “facing the pain will not be easy,” especially as policy makers continue to “opt for the illusion” and “pray for a strong recovery… because the reality is too bleak to bear.”

The “bleak” reality is that these and other big banks and financial institutions have repeatedly collapsed the global economy and profited along the way, punishing entire societies and populations into poverty through a process of plundering and exploitation as governments feared the wrath of “financial markets.” The banks that are now bigger, more dangerous and more powerful than ever fear the growing discontent, unrest and resistance of populations – especially the youth. The world’s major financial institutions fear that the global economic system which they helped to create, and over which they rule, will ultimately come back to haunt them in the form of mass social unrest, potentially undermining their power and the system as a whole.

Andrew Gavin Marshall is a researcher and writer based in Montreal, Canada. He is project manager of The People’s Book Project, chair of the geopolitics division of The Hampton Institute, research director for Occupy.com’s Global Power Project and World of Resistance Report, and hosts a weekly podcast show with BoilingFrogsPost.

World of Resistance Report: Davos Class Jittery Amid Growing Warnings of Global Unrest

 World of Resistance Report: Davos Class Jittery Amid Growing Warnings of Global Unrest

By: Andrew Gavin Marshall

Originally posted on 4 July 2014 at Occupy.com

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In Part 1 of the WoR Report, I examined the “global political awakening” as articulated by arch-imperial strategist Zbigniew Brzezinski. In Part 2 published last week I took a more detailed look at the ways global inequality and injustice relate to the coming era of instability and social unrest. Here, in Part 3, I explore the warnings on inequality and revolt now coming from one of the premier institutions of the global oligarchy: the World Economic Forum.

As an annual gathering of thousands of leading financial, corporate, political and social oligarchs in Davos, Switzerland, the World Economic Forum (WEF) has taken a keen interest in recent years discussing the potential for social upheaval as a result of mass inequality and poverty. A WEF report released in November of 2013 warned that a “lost generation” of unemployed youth in Europe could potentially pull the Eurozone apart. One of the report’s authors, the CEO of Infosys, commented that “unless we address chronic joblessness we will see an escalation in social unrest,” noting that youth especially “need to be productively employed, or we will witness rising crime rates, stagnating economies and the deterioration of our social fabric.” The report added: “A generation that starts its career in complete hopelessness will be more prone to populist politics and will lack the fundamental skills that one develops early on in their career.”

In short, if the global ruling class – known affectionately as the Davos Class – doesn’t quickly find ways to accommodate the continent’s increasingly unemployed and “lost” youth, those people will potentially turn to “populist politics” of resistance that directly challenge the global political and economic order. For the individuals and interests represented at the World Social Forum, this poses a monumental and, increasingly, an existential threat.

The World Economic Forum’s Global Competitiveness Report for 2013-2014, entitled “Assessing the Sustainable Competitiveness of Nations,” noted that the global financial crisis and its aftermath “brought social tensions to light” as economic growth was not translated into positive benefits for much or most of the planet’s population. Citing the Arab Spring, growing unemployment in Western economies and increasing income inequality, there was growing recognition that dangerous upheaval could be on the way. The report noted: “Diminishing economic prospects, sometimes combined with demand for more political participation, have also sparked protests in several countries including, for example, the recent events in Brazil and Turkey.”

The WEF report wrote that “if economic benefits are perceived to be unevenly redistributed within a society,” this could frequently result in “riots or social discontent” such as the Arab Spring revolts, protests in Brazil, the Occupy Wall Street movement, and other recent examples. The report concluded that numerous nations were at especially high risk of social unrest, including China, Indonesia, Turkey, South Africa, Brazil, India, Peru and Russia, among others.

Phila Unemployment Project

In early 2014, the World Economic Forum released the 9th edition of its Global Risks report, published to inform the debate, discussion and planning of attendees and guests at the annual WEF meeting in Davos. The report was produced with the active cooperation of major universities and financial corporations, including Marsh & McLennan Companies, Swiss Re, Zurich Insurance Group, National University of Singapore, University of Oxford, and the University of Pennsylvania’s Wharton Risk Management and Decision Processes Center. It included a large survey conducted in an effort to assess the major perceived risks to the global order atop which the Davos Class sits.

The report noted that the “most interconnected” risks were fiscal crises, structural unemployment and underemployment, all of which link to “rising income inequality and political and social instability.” The young generation now coming of age globally, noted the WEF, “faces high unemployment and precarious job situations, hampering their efforts to build a future and raising the risk of social unrest.” This “lost generation” faces not only high unemployment and underemployment, but also major educational challenges since “traditional higher education is ever more expensive and its payoff more doubtful.”

Perceiving the innovations and skills of today’s generation which are enabling the growing foment, the Forum noted:

“In general, the mentality of this generation is realistic, adaptive and versatile. Smart technology and social media provide new ways to quickly connect, build communities, voice opinion and exert political pressure… [youth are] full of ambition to make the world a better place, yet feel disconnected from traditional politics and government – a combination which presents both a challenge and an opportunity in addressing global risks.”

The Global Risks 2014 report cited a global opinion survey on the “awareness, priorities and values of global youth,” which the authors refer to as “generation lost.” This generation, noted the survey, “think independently of this basic fallback system of the older generation – governments providing a safety net,” which “points to a wider distrust of authorities and institutions.” The “mindset” of today’s youth has been additionally shaped by the repercussions and apparent failures to deal with the global financial crisis, as well as increasing revelations about U.S. intelligence agencies engaging in massive digital spying. For a generation largely mobilized through social media, online spying has held particular relevance, as “the digital revolution gave them unprecedented access to knowledge and information worldwide.”

Protests and anti-austerity movements were able to “give voice to an increasing distrust in current socio-economic and political systems,” with youth making up significant portions of “the general disappointment felt in many nations with regional and global governance bodies such as the EU and the International Monetary Fund.” The youth “place less importance on traditionally organized political parties and leadership,” which creates a major “challenge for those in positions of authority in existing institutions” as they try “to find ways to engage the young generation,” adds the report.

According to the World Bank, more than 25% of the world’s youth, or some 300 million people, “have no productive work.” On top of this, “an unprecedented demographic ‘youth bulge’ is bringing more than 120 million new young people on to the job market each year, mostly in the developing world.” This fact “threatens to halt economic progress, creating a vicious cycle of less economic activity and more unemployment,” which “raises the risk of social unrest by creating a disaffected ‘lost generation’ who are vulnerable to being sucked into criminal or extremist movements.”

Noting that more than 1 billion people currently live in slums – a number that has been steadily increasing as income inequality rises – the report stated that “this growing population of urban poor is vulnerable to rising food prices and economic crises, posing significant risks of chronic social instability.” Growing income inequality is now being termed a “systemic risk,” according to the WEF. And in a stark admission from that institution representing the world’s major profiteers of global capitalism, the report acknowledged that globalization “has been associated with rising inequality between and within countries” and that “these factors render poor people and poor countries vulnerable to systemic risks.”

The four major “emerging market” BRIC nations of Brazil, Russia, India and China “now rank among the 10 largest economies worldwide.” But slow political reforms within these countries, coupled with external economic shocks (like financial crises caused by Western nations and their corporate institutions) could aggravate the “existing undertones of social unrest.” Within the BRIC nations and other emerging market economies, “popular discontent with the status quo is already apparent among rising middle classes, digitally connected youths and marginalized groups,” the report went on. Collectively, these groups “want better services (such as healthcare), infrastructure, employment and working conditions,” as well as “greater accountability of public officials, better protected civil liberties and more equitable judicial systems.” Further, a “greater public awareness of widespread corruption have sharpened popular complaints.”

Both Brazil and Turkey have made universal healthcare systems a constitutional obligation, which was a stated ambition of other emerging market nations such as India, Indonesia and South Africa. The failure to create these healthcare systems “may arouse social unrest,” warned the WEF. The World Economic Forum’s chief economist, Jennifer Blanke, stated: “The message from the Arab Spring, and from countries such as Brazil and South Africa is that people are not going to stand for it any more.” David Cole, the group chief risk officer of Swiss Re (one of the contributing companies to the WEF report) commented: “The members of generation lost are not lost because they have tuned out. They are highly tuned in. They are lost because they are being left out or they are deciding to leave.” http://www.theguardian.com/business/2014/jan/16/income-gap-biggest-risk-global-community-world-economic-forum

The World Economic Forum’s Risk report for 2014 was primarily concerned with “the breakdown of social structures” and “the decline of trust in institutions.” It warned of risks of “ideological polarization, extremism – in particular those of a religious or political nature – and intra-state conflicts such as civil wars.” All of these issues relate directly “to the future of the youth.”

It’s an interesting paradox for an organization to see the greatest threat to its ideological and social power being “the future of the youth” when it has already written off the present generation as “lost.” However, this is a view shared not only by the World Economic Forum but, increasingly, by other powerful institutions creating something of an echo chamber through the mainstream media. The head of the IMF has warned that youth unemployment in poor nations was “a kind of time bomb,” and the head of the International Labor Organization (ILO) warned in 2011 that the “world economy” was unable “to secure a future for all youth,” thus undermining “families, social cohesion and the credibility of policies.” While there was “already revolution in the air in some countries,” as reported in the Globe and Mail, the dual crises of unemployment and poverty were “fuel for the fire.”

In April of 2014, the World Economic Forum on Latin America reported that the primary challenge for the region was “to reduce inequality,” noting that between 70 and 90 million people in Latin America had entered what were referred to as the “consuming classes,” or “middle classes,” over the previous decade. However, Marcelo Cortes Neri, Brazil’s Minister of Strategic Affairs, explained, “When we talk about middle class we think of the U.S. middle class, with two cars and two dogs and a swimming pool. That is not Latin American middle class or the world middle class.”

He added that the emerging so-called “middle class” in Latin America and elsewhere “could become a problem for governance,” commenting: “They are the ones that put pressure for better levels of education and healthcare; they are the ones that go to the streets to demand rights.” Neri then posed the question: “How prepared is Latin America to have a robust middle class?” In particular, youth between the ages of 15 and 29 raised specific concerns for Latin America’s elite, with Neri warning: “This is the group I am most worried about. They have very high expectations and so the probability they will get frustrated is enormous.”

When one of the world’s most influential organizations representing the collective interests of the global oligarchy openly acknowledges that globalization has increased inequality, and in turn, that inequality is fueling social unrest around the world manifesting the greatest potential threat to those oligarchic interests, we can safely say we’re entering a new era of global instability and resistance.

Andrew Gavin Marshall is a researcher and writer based in Montreal, Canada. He is project manager of The People’s Book Project, chair of the geopolitics division of The Hampton Institute, research director for Occupy.com’s Global Power Project and World of Resistance Report, and host of a weekly podcast show with BoilingFrogsPost.

World of Resistance Report: Inequality, Injustice and the Coming Unrest

World of Resistance Report: Inequality, Injustice and the Coming Unrest

By: Andrew Gavin Marshall

Originally posted at Occupy.com

26 June 2014

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In Part 1 of the World of Resistance (WoR) Report, I examined today’s global order – or disorder – through the eyes of Zbigniew Brzezinski, a former U.S. National Security Adviser and long-time influential figure in foreign policy circles. Brzezinski articulated what he refers to as humanity’s “global political awakening,” spurred by access to education, technology and communications among much of the world’s population.

Brzezinski has written and spoken extensively to elites at American and Western think tanks and journals, warning that this awakening poses the “central challenge” for the U.S. and other powerful countries, explaining that “most people know what is generally going on… in the world, and are consciously aware of global iniquities, inequalities, lack of respect, exploitation.” Mankind, Brzezinski said in a 2010 speech, “is now politically awakened and stirring.”

But Brzezinski is hardly the only figure warning elites and elite institutions about the characteristics and challenges of an awakened humanity. The subject of inequality – raised to the central stage by the Occupy movement – has become a fundamental feature in the global social, political and economic discussion, as people become increasingly aware of the facts underlying the stark division between the haves and have nots. While inequality is both a source and a result of the concentration of power in the hands of a few, it also represents the greatest threat to those very same power structures and interests.

As many if not most of us are by now aware, the global state-capitalist system is run by a relatively small handful of powerful institutions, groups and individuals who collectively control the vast majority of planetary wealth and resources. Banks, corporations, family dynasties and international financiers like the IMF and World Bank form a highly interconnected, interdependent network we now think of as the global oligarchy.

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Thomas Pogge explained in the Georgia Journal of International and Comparative Law that in the 20 years following the end of the Cold War, there were roughly 360 million preventable poverty-related deaths – more than all of the deaths in all of the wars of the 20th century combined. By 2004, over 1 billion people remained “chronically undernourished” and nearly a billion lacked access to clean drinking water and shelter. Roughly 1.6 billion lacked access to electricity while 218 million children were working as cheap labour.

Pogge noted that almost half of humanity – roughly 3.5 billion people – lived on less than $2.50 a day, and that all of these people could be lifted out of poverty with an expenditure $500 billion, which is roughly two-thirds of the annual U.S. Pentagon budget.

Preceding the statistics that would get popularized with the Occupy movement, Pogge asserted that the top 1% owned approximately 40% of global wealth while the bottom 60% of humanity owned less than 2%. “We are now at the point where the world is easily rich enough in aggregate to abolish all poverty,” Pogge wrote. “We are simply choosing to prioritize other ends instead.”

Still today, every year, approximately 18 million people – half of whom are children under the age of five – die from poverty-related causes, all of which are preventable. Seen through this lens, poverty, and by definition, inequality, has become the greatest purveyor of violence, death and injustice on Earth.

Meanwhile, the international charity Oxfam noted that the 100 richest people in the world made a combined 2012 fortune of $240 billion – enough to lift the world’s poorest out of poverty four times over. In the previous 20 years, the world’s richest 1% increased their income by 60%, perpetuating a system of extreme wealth which is, according to an Oxfam executive, “economically inefficient, politically corrosive, socially divisive and environmentally destructive.”

Not only that, a former chief economist for McKinsey & Company published data in 2012 for the Tax Justice Network that reported the world’s super rich had hidden between $21 and $32 trillion in offshore tax havens – a trend that has been increasing in the past three decades to reveal that inequality is “much, much worse than official statistics show.”.

In early 2014, Oxfam released a report revealing that the world’s 85 richest individuals had a combined wealth equal to the collective wealth of the world’s poorest 3.5 billion people – approximately $1.7 trillion. Meanwhile, the world’s top 1% own roughly half the world’s wealth, at $110 trillion. Oxfam noted: “This massive concentration of economic resources in the hands of fewer people presents a significant threat to inclusive political and economic systems… inevitably heightening social tensions and increasing the risk of societal breakdown.”

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What Does All the Inequality Mean in Terms of Instability?

Where there is great inequality, there is great injustice and where there is great injustice, there is the inevitability of instability. This relationship, between inequality and instability, has not gone unnoticed by the world’s oligarchs and plutocratic institutions. The potential for “social unrest” has gotten especially high since the onset of the global financial and economic crisis that began in 2007 and 2008.

The head of the OECD warned in 2009 that the world’s leading economies would have to take quick action to resolve the global crisis or face a “fully blown social crisis with scarring effects on the vulnerable workers and low-income households.”

The major credit ratings agency Moody’s warned back in 2009 that the growing debts among nations would “test social cohesiveness” as investors demanded countries impose still more painful austerity measures, leading to growing “political and social tension” and “social unrest.” In February of that same year, the Director-General of the World Trade Organization (WTO) warned that following the economic crisis, many nations were “going to be confronted by unrest and inter-religious and inter-ethnic conflicts.”

Brzezinski himself said:, “There’s going to be growing conflict between the classes and if people are unemployed and really hurting, hell, there could even be riots.” And meanwhile, the top-ranking U.S. military official and Chairman of the Joint Chiefs of Staff, Admiral Mike Mullen, commented that the global financial crisis was a greater security concern to the U.S. than either of the massive ground wars in Iraq or Afghanistan. “It’s a global crisis,” he said, and “as that impacts security issues, or feeds greater instability, I think it will impact our national security in ways that we quite haven’t figured out yet.”

Mullen’s point was reiterated by U.S. intelligence director Dennis Blair, who warned Congress that the global crisis was “the primary near-term security concern” for the U.S., adding that “the longer it takes for the recovery to begin, the greater the likelihood of serious damage to U.S. strategic interests.” Blair noted that as a result of the crisis, roughly 25% of the world’s nations had already experienced “low-level instability such as government changes.” If the crisis persisted beyond two years, Blair noted, there was a potential for “regime-threatening instability.” U.S. intelligence analysts were also fearful of a “backlash against U.S. efforts to promote free markets because the crisis was triggered by the United States.”

In November of 2008, the U.S. Army War College produced a document warning that the U.S. military must be prepared for the possibility of a “violent strategic dislocation inside the United States,” possibly caused by an “unforeseen economic collapse” and/or a “purposeful domestic resistance” and the “loss of functioning of political and legal order.” Under “extreme circumstances,” the document warned, “this might include the use of military force against hostile groups inside the United States.”

In 2009, the British spy agency MI5, along with the British Ministry of Defence, were preparing for the potential of civil unrest to explode in Britain’s streets as a result of the economic crisis, [noting](http://www.express.co.uk/posts/view/86981/MI5-alert-on-bank-riot> that there was a possibility the state would deploy British troops in major cities.

A December 2009 article in The Economist warned that increased unemployment and poverty along with “exaggerated income inequalities” following the global economic crisis made for a “brew that foments unrest.” In October of 2011, the International Labour Organizationwarned in a major report that the jobs crisis resulting from the global economic crisis “threatens a wave of widespread social unrest engulfing both rich and poor countries,” and pointed out that 45 of the 118 countries studied already saw rising risks of unrest, notably in the E.U., Arab world and Asia.

In June of 2013, the same ILO warned that the risks of social unrest including “strikes, work stoppages, street protests and demonstrations,” had increased in most countries around the world since the economic crisis began in 2008. The risk was “highest among the E.U.-27 countries,” it noted, with an increase from 34% in 2006-2007 to 46% in 2011-2012. The most vulnerable nations in the E.U. were listed as Cyprus, Czech Republic, Greece, Italy, Portugal, Slovenia and Spain, a fact “likely due to the policy responses to the ongoing sovereign debt crisis and their impact on people’s lives and perceptions of well-being.”

The E.U.’s “bleak economic scenario has created a fragile social environment as fewer people see opportunities for obtaining a good job and improving their standard of living,” warned the ILO, and advanced economies were “going to suffer a lost decade of jobs growth.”

An October 2013 report by the International Federation of Red Cross and Red Crescent Societies warned that the long-term consequences of austerity policies imposed by E.U. governments “will be felt for decades even if the economy turns for the better in the near future.” The report noted: “We see quiet desperation spreading among Europeans, resulting in depression, resignation and loss of hope… Many from the middle class have spiraled down to poverty.”

The study further reported “that the rate at which unemployment figures have risen in the past 24 months alone is an indication that the crisis is deepening, with severe personal costs as a consequence, and possible unrest and extremism as a risk. Combined with increasing living costs, this is a dangerous combination.”

In November 2013, The Economist reported: “From anti-austerity movements to middle-class revolts, in rich countries and in poor, social unrest has been on the rise around the world.” While there are various triggers – from economic distress (Greece and Spain) to revolts against dictatorships (the Arab Spring) to the growing aspirations of middle class populations (Turkey and Brazil), “they share some underlying features,” the magazine reported. The common feature, it noted, “is the 2008-09 financial crisis and its aftermath,” and an especially important factor sparking unrest in recent years was “an erosion of trust in governments and institutions: a crisis of democracy.”

A sister company of The Economist, the Economist Intelligence Unit (EIU), measured the risk of social unrest in 150 countries around the world, with an emphasis on countries with institutional and political weaknesses. The EIU noted that “recent developments have indeed revealed a deep sense of popular dissatisfaction with political elites and institutions in many emerging markets.” Indeed, the decline in trust has been accelerating across the developed world since the 1970s. The fall of Communist East European regimes in 1989 eroded that trust further, and the process sped up once again with the onset of the global financial crisis.

According to EIU estimates, roughly 43% (or 65) of the countries studied were considered to be at “high” or “very high” risk of social unrest in 2014. A further 54 countries were considered to be at “medium risk” and the remaining 31 were considered “low” or “very low.” Comparing the results to a similar study published five years previously, an additional 19 countries have been added to the “high risk” category.

Among the countries considered a “very high risk” for social unrest in 2014 were Argentina, Bahrain, Bangladesh, Bosnia, Egypt, Greece, Lebanon, Nigeria, Syria, Uzbekistan, Venezuela, Yemen and Zimbabwe. Among the countries in the “high risk” category were Algeria, Brazil, Cambodia, China, Cyprus, Ethiopia, Guatemala, Haiti, Honduras, Iran, Jordan, Laos, Mexico, Morocco, Nicaragua, Pakistan, Peru, the Philippines, Portugal, South Africa, Spain, Tunisia, Turkmenistan, Turkey and Ukraine.

It doesn’t take demonstrators filling the streets to tell us that inequality breeds instability. While many factors combine under different circumstances to lead to “social unrest,” inequality is almost always a common feature. Injustice, poor governance, corruption, poverty, exploitation, repression and corrosive power structures all support and are supported by underlying conditions of inequality. And as inequality is no longer a local, national or regional phenomenon but a global one, so too is the “threat” of instability that the world’s elite financial, media and think-tank institutions are now so busy warning about. So long as inequality increases, so will instability. Resistance, and even revolution, are the new global reality.

Andrew Gavin Marshall is a researcher and writer based in Montreal, Canada. He is project manager of The People’s Book Project, chair of the geopolitics division of The Hampton Institute, research director for Occupy.com’s Global Power Project and the World of Resistance (WoR) Report, and hosts a weekly podcast show with BoilingFrogsPost.

 

When Fat Cats Meet In Munich: Welcoming the International Monetary Conference

When Fat Cats Meet In Munich: Welcoming the International Monetary Conference

By: Andrew Gavin Marshall

Originally posted at Occupy.com

2 June 2014

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In Part 1 of this series, I examined the history and early evolution of the annual meeting that takes place among world bankers and financial and monetary officials at the International Monetary Conference. Part 2 looked at the role of the IMC in the lead-up to the 1980s debt crisis.Part 3 examined the influence of the IMC throughout that decade’s debt crisis. This last installment – published just as the IMC prepares for its June 1-3 meeting at Hotel Bayerischer Hof in Munich, Germany – looks at what the IMC has done since the 1990s to maintain its status among the world’s most highly influential bodies in economic, financial and monetary affairs. Included is a rundown of bankers who run the IMC along with leaked documents from the 2013 meeting in Shanghai.

At the 1992 International Monetary Conference in Toronto, there was a general consensus among private bankers and public officials that, as a result of enormous over-lending to Latin America and developing countries throughout the previous debt-crisis decade, the task of financing “the transformation of the former Soviet Union to a market economy” could not be left to bank loans alone. Hilmar Kopper, the CEO of Deutsche Bank, told the conference attendees that commercial banks would only engage in large-scale financing if there were “government-guaranteed credits” and “an agreement on the old debt,” implying that the banks would essentially need the guarantee of a government bailout scheme if things got bad. Japan’s former vice minister of finance, Toyoo Gyohten, told the attendees that “public-sector agencies must cooperate with private banks, with the willingness to share the unavoidable risk.”

Canada’s finance minister, Don Mazankowski, told the bankers that “we are prepared to help” the former Soviet bloc countries so long as “they help themselves and get on the path to economic growth and prosperity.” His words implied that the Soviet countries must undertake similar austerity and structural adjustment packages imposed upon other countries through the 1980s debt crisis. The bankers stressed the same point, noting that “it would be difficult for governments to be generous with Russia until it established an economic recovery program approved by the International Monetary Fund.”

Throughout the 1990s, the IMC continued to be a significant forum for discussion among bankers and finance officials. Remarks made by Federal Reserve chairman Alan Greenspan and Hans Tietmeyer, the president of Germany’s Bundesbank (the Central Bank of Germany), at the 1995 meeting of the IMC led to a strengthening of the U.S. dollar and a weakening of the German mark in international currency markets.

IMC Influence in More Recent Years

In the early 21st century, the International Monetary Conference has remained relevant, as admitted during a 2001 press conference with the president of the European Central Bank, Willem F. Duisenberg. Duisenberg had been criticized by European media for not attending a recent Eurogroup meeting of finance ministers and central bankers from euro-currency countries, which had gathered in Brussels.

Duisenberg commented:

“I would like to point out that it has been a tradition since 1954 that the highlight of the annual International Monetary Conference, which is held in a different place every year, is the so-called Central Bankers’ Panel in which the central banks, or central bankers, of the three main currencies in the world participate. And I did so. It would have drawn more attention had I not been there, than had I been in Brussels… I can tell you that the next meeting of the International Monetary Conference will be … in Montreal [in 2002], and the year after it will be … in Berlin. On both occasions you can be sure, if it happens to coincide with the meeting of the Eurogroup, that the ECB will be represented in the Eurogroup by the Vice-President.

Indeed, as recently as the IMC’s 2013 meeting in Shanghai, we can see that the importance and relevance of the annual meeting has not diminished. Though the IMC has no publicly-accessible website, I managed to compile a rough list of leading officials and board members of the International Monetary Conference, drawing information from references on their official CVs and publicly-available biographies, as well as from leaked documents including a program overview of the 2013 conference.

Names to Know

The president and chairman of the International Monetary Conference is Baudouin Prot. Formerly CEO of BNP Paribas, one of France’s largest global banks, Prot is currently chairman of that bank as well as a current board member of Kering, Veolia Environment, Lafarge, Erbé SA and Pargesa Holding SA. He is a member of the International Advisory panel to the Monetary Authority of Singapore, the International Business Leaders’ Advisory Council to the Major of Shanghai, the European Financial Services Round Table, and is chairman of the European Banking Group.

The executive vice president of the IMC is Frank Keating, President and CEO of the American Bankers Association and former president and CEO of the American Council of Life Insurers (2003-2011). Keating is also the former governor of Oklahoma (1995-2003), a former official in the U.S. Department of Housing and Urban Development, and a former Assistant Secretary of the Treasury. Additionally he is a member of the board of directors of the National Archives Foundation, the Bipartisan Policy Center, the Jamestown Foundation, and he was a member of the Bipartisan Policy Center’s Debt Reduction Task Force in 2010.

Confirmed board members of the International Monetary Conference include: Gordon Nixon, President and CEO of Royal Bank of Canada; William Downe, CEO of BMO Financial Group; Axel Weber, Chairman of UBS; Francisco Gonzalez, Chairman and CEO of BBVA; Robert E. Setubal, President and CEO of Itau Unibanco Banco SA; Richard Waugh, President and CEO of Scotiabank; Chanda Kochhar, Managing Director and CEO of ICICI Bank; Jacko Maree, senior banker at Standard Chartered; Andreas Triechl, Chairman and CEO of Erste Group Bank; and Walter B. Kielholz, the Chairman of Swiss Re.

Interestingly, there are no major American banks or bankers listed as current board members of the IMC, which is dominated by European and Canadian bankers. Further, there were three bankers whose CVs listed them as “members” of the IMC, but when I attempted to contact the IMC and the American Bankers Association to confirm whether they were board members – the IMC has roughly 15 board members, and I had only confirmed 12 of them – neither the ABA nor IMC replied to my multiple inquiries. The three bankers who were listed as “members” – and possible, though unconfirmed, board members – are Federico Ghizzoni, the CEO of UniCredit; Douglas Flint, the Chairman of HSBC (also chairman of the Institute of International Finance), and Ibrahim S. Dabdoub, the CEO of the National Bank of Kuwait.

Compiling the CVs of the 12 confirmed board members of the International Monetary Conference, we can see what other institutions are most represented among the membership:

Four members of the IMC board are also members of the Institute of International Finance, the leading global banking lobby group; four IMC board members are also members of the International Business Council of the World Economic Forum and the European Financial Services Round Table (EFR), a group of leading European bankers. And three IMC board members are also represented in the European Banking Group, created to advise the European Union on financial market “regulations,” as well as the Canadian Council of Chief Executives (CCCE), the leading corporate interest group in Canada.

Other organizations sharing leadership with two members of the IMC board are the International Advisory Panel of the Monetary Authority of Singapore, the International Business Leaders’ Advisory Council to the Major of Shanghai, and the International Advisory Committee of the Federal Reserve Bank of New York.

If we include the three bankers whose CVs listed them as “members” of the IMC, the cross-over representation of leadership in these institutions increases: the European Financial Services Round Table increases representation from four to six members of the IMC board, the European Banking Group from three to five members, the Institute of International Finance from four to five, and the International Business Leaders’ Advisory Council to the Mayor of Shanghai increases from two to three.

Leaked Details from Shanghai

Leaked documents from the 2013 IMC meeting in Shanghai show the planned program for the four-day conference held at the Four Seasons Hotel Shanghai in early June of 2013. Welcoming remarks were presented by the President and CEO of the American Bankers Association, Frank Keating, followed by opening remarks from the BNP Paribas chairman and president of the IMC, Baudouin Prot.

On Monday, June 3, speakers at the IMC included Han Zheng, a member of the Political Bureau of the CPC (Communist Party of China) Central Committee; Mario Draghi, President of the European Central Bank; Douglas Flint, Chairman of HSBC and Chairman of the Institute of International Finance (unconfirmed board member of the IMC); Jaime Caruana, General Manager of the Bank for International Settlements (BIS); Lord Adair Turner, former chairman of the Financial Services Authority in the UK and a Senior Fellow of the Institute for New Economic Thinking; and Janet Yellen, Vice Chair and Governor (now current Chair) of the Federal Reserve Board.

Other speakers at the 2013 International Monetary Conference included Axel A. Weber, Chairman of UBS; Niall Ferguson, the Lawrence A. Tisch Professor of History at Harvard University; Jacob A. Frenkel, Chairman of JPMorgan Chase International and Chairman of the Board of Trustees of the Group of Thirty (G30); Tharman Shanmugaratnam, Deputy Prime Minister and Minister for Finance in the Government of Singapore; Zhou Xiaochuan, Governor of the People’s Bank of China (China’s Central Bank); Jamie Dimon, Chairman and CEO of JPMorgan Chase; Jurgen Fitschen, co-Chairman of Deutsche Bank; John G. Strumpf, Chairman, President and CEO of Wells Fargo; Francisco Gonzalez, Chairman and CEO of BBVA; Sir Martin Sorrell, CEO of WPP; and Victor Yuan, Chairman and President of Horizon Research Consultancy Group.

Additional speakers at the conference included Jiang Jianqing, Chairman of the Industrial and Commercial Bank of China (ICBC); Stephen Bird, CEO for Asia Pacific at Citibank in Hong Kong; Michael Pettis, Professor of International Finance at the Guanghua School of Management at Peking University in Beijing; Peter Sands, Chief Executive of Standard Chartered; Shang Fulin, Chairman of the China Banking Regulatory Commission; Tian Guoli, Chairman of the Bank of China; and Andrew Sheng, President of the Fung Global Institute in Hong Kong.

The fact alone that this group of global financiers met with China’s leading bankers and top government officials within China points to the continuing relevance of the International Monetary Conference. What’s more, Janet Yellen, then a contender for the position of Chair of the Federal Reserve Board, attended the IMC meeting while sitting as Vice Chair of the Federal Reserve, and outlined her views on “what more should be done” to “make the global financial system more resilient.”

One of the key issues Yellen discussed in her speech to hundreds of global bankers assembled at the 2013 IMC was the concept of “too-big-to-fail” banks, what the regulatory agencies (and, notably, central banks) refer to as “systemically-important financial institutions,” or SIFIs. Yellen noted that there have been proposals for a “sweeping restructuring of the banking system,” including the possibility of the “resurrection of Glass-Steagall-style separation of commercial banking from investment banking and imposition of bank size limits.” However, Yellen reassured the financiers, “I am not persuaded that such blunt approaches would be the most efficient ways to address the too-big-to-fail problem.”

Indeed, systemic problems of the global monetary, financial and economic system will likely remain unresolved so long as forums like the International Monetary Conference are permitted to take place outside public scrutiny. Such meetings, where central bankers, regulators and leading financial policy makers meet in private with the world’s most influential bankers, only encourage consensus, closer cooperation and, ultimately, collusion between our so-called public officials and the bankers who profited off the financial and economic destruction which they themselves caused.

Andrew Gavin Marshall is a researcher and writer based in Montreal, Canada. He is project manager of The People’s Book Project, chair of the geopolitics division of The Hampton Institute, research director for Occupy.com’s Global Power Project and the World of Resistance (WoR) Report, and hosts a weekly podcast show with BoilingFrogsPost.

Globalization’s Game of Thrones, Part 2: Managing the Wealth of the World’s Dynasties

Globalization’s Game of Thrones, Part 2: Managing the Wealth of the World’s Dynasties

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By: Andrew Gavin Marshall

27 May 2014

In part 1 of this series (“Globalization’s Game of Thrones”) I examined the concept of corporate and financial dynasties holding significant power in the modern world. In this, part 2 of the series, I examine the realities of the ‘wealth management’ industry in being responsible for handling the wealth and investments of the world’s richest families, and the role of a unique institution dedicated to protecting and propagating dynastic wealth: the family office.

A Family Affair

In 2010, Forbes – a major financial publication which publishes an annual list of the world’s richest people – noted that the richest of the richest 400 Americans were members of prominent corporate and financial dynasties, with six of the top ten wealthiest Americans being heirs to prominent fortunes, as opposed to being ‘self-made’ billionaires. What’s more, since the financial crisis began in 2007 and 2008, the fortunes of these dynasties – and the other super-rich who made the Forbes list – had only increased in value.

Corporate America can frequently be seen as the emblem of the ‘self-made’ rich, a representation of a supposedly democratic, capitalist society, where firms are run by “professional managers” who received the right education and developed the appropriate talents to make successful companies. The reality, however, is that roughly a third of the Fortune 500 companies (that is, many of the world’s largest multinational corporations) are in fact “family businesses,” frequently run by family members, and often outperforming the “professionally managed” firms “by a surprisingly large margin,” noted the New York Times.

In other words, in the United States – the beacon of the ‘self-made’ millionaire – a huge percentage of the most successful companies are owned by family dynasties, and most of the richest individuals are heirs to these family dynasties. The picture that begins to emerge better reflects that of an aristocracy, rather than a democracy.

As the New York Times noted in 2010, “the increasing use of so-called dynasty trusts” was undermining the notion that America was a meritocracy (where people ‘rise through the ranks’ of society based upon merit instead of money, access or family lineage). Dynastic trusts allow super-rich families “to provide their heirs with money and property largely free from taxes and immune to the claims of creditors,” not only providing for children, but “for generations in perpetuity – truly creating an American aristocracy.” In laws that predate the formation of the United States as an independent nation, such family trusts were only able to limit the term of the existing trust to roughly 90 years, after which the property and wealth which was consolidated into the trust would be owned directly by the family members. However, in changes that were implemented through Congress in the mid-1980s and in state legislatures across the U.S. in the 1990s, the rules were amended – with the pressure of the banking lobby – to allow family trusts to exist “forever,” a quiet coup for the existing and emerging aristocratic American class.

Thus, the modern dynasty trust was officially sanctioned as a legal entity – a type of private family company – that would be responsible for handling the collective wealth – in money, property, land, art, equities (stocks), bonds (debt), etc. – of the entire family, for generation after generation. The focus is on long-term planning to maintain, protect and increase the wealth of the dynasty, and to hold it ‘in trust’ against the inevitable in-fighting that accompanies dynastic succession and generational differences. This would prevent – in theory – one generation or patriarch from mishandling and squandering the entire family fortune.

The legal structure of a family trust differs greatly from public corporations, in that their focus is not on maximizing short-term quarterly profits for shareholders, but in maintaining multi-generational wealth and prestige. Family trusts are increasingly used to manage the wealth of the world’s super-rich dynasties, alongside private banking institutions and other wealth management and consulting firms. There is an entire industry dedicated to the management of money, wealth and investments for the super-rich, and it is focused largely – and increasingly – on family dynasties.

Of Rockefellers and Rothschilds

One of the world’s most famous family trusts – the “family office” – is that of Rockefeller & Co., now known as Rockefeller Financial. It was founded in 1882 by the oil baron industrialist John D. Rockefeller as the ‘family office’ to manage the Rockefeller family’s investments and wealth. Roughly a century after it was founded, in the 1980s, Rockefeller & Co. began selling its ‘expertise’ to other rich families, and by the year 2008, the trust had roughly $28 billion under management for multiple clients.

When the CEO of Rockefeller & Co., James S. McDonald, shot himself in an alley behind a car dealership in 2009, the family looked for and found a successor in the former Undersecretary of State for Economic, Energy, and Agricultural Affairs for the Bush administration, Rueben Jeffery III, a former partner at Goldman Sachs. Jeffery was responsible for handling the family’s wealth throughout the global financial crisis, and by 2012, the assets under management by Rockefeller Financial had grown to $35 billion.

As of late 2012, Rockefeller & Co. had approximately 298 separate clients, providing them with “financial, trust, and tax advice.” The typical clients for Rockefeller & Co. are families with more than $30 million in investments, and the group charges new clients a minimum annual fee of $100,000. However, the family office has increasingly been attracting clients beyond other family dynasties, including major multinational corporations awash with cash in a world where nation states are flooded in debt. David Harris, the chief investment officer of Rockefeller Financial, explained in a 2012 interview with Barron’s (a magazine for the super-rich), that as the world’s nations were stuck in a debt crisis, triple-A rated multinational conglomerates represented “the new sovereigns” with “unprecedented” amounts of cash to be invested.

And while prominent family trusts have become increasingly attractive for other rich families and institutions to handle their wealth, they have also become attractive investments in and of themselves. One of Europe’s largest banks, the French conglomerate Société Générale (SocGen) purchased a 37% stake in Rockefeller & Co. in June of 2008. However, with the European debt crisis, the bank had to cut a great deal of its assets, and so in 2012 Rueben Jeffery III managed the sale of the 37% stake in the Rockefeller enterprise from SocGen to RIT Capital Partners, the investment arm of the London Rothschild family, one of the world’s most famous financial dynasties.

Barron’s magazine noted that the official union of these two major financial dynasties “should provide some valuable marketing opportunities” in such an uncertain economic and financial landscape, where “new wealth” from around the world would seek “to tap the joint expertise of these experienced families that have managed to keep their heads down and their assets intact over several generations and right through the upheavals of history.”

Early in 2012, the Rothschild family, with various banks and investment entities spread out across multiple European nations and family branches, was making a concerted effort to begin the process of “merging its French and British assets into a single entity,” aiming to secure “long-term control” over the family’s “international banking empire,” reported the Financial Times. The main goal of the merger was “to cement once and for all the family’s grip on the business,” giving the family a 57 percent share in the voting rights, thus protecting the merged entity from hostile takeovers. Thus, as the Rothschild banking dynasty was seeking to consolidate its own family interests across Europe, they were simultaneously looking to expand into the U.S. through the Rockefellers.

Thus, when Lord Jacob Rothschild – who managed the British Rothschild’s family trust, RIT Capital Partners – announced that RIT would be purchasing a 37% stake in Rockefeller Financial Services in May of 2012 for an “undisclosed sum,” it was announced as a “strategic partnership” that would allow the Rothschilds to gain “a much sought-after foothold in the US,” representing a “transatlantic union” that officially unites the two family patriarchs of David Rockefeller and Jacob Rothschild, “whose personal relationship spans five decades.”

At the time of the announcement, David Rockefeller, who was then 96-years-old, commented that, “Lord Rothschild and I have known each other for five decades. The connection between the two families is very strong.” Rockefeller & Co.’s CEO, Rueben Jeffery III, declared that, “there is a shared vision, at the conceptual and strategic level, that marrying the two names with particular products, services, geographic market opportunities, can and will have resonance. These are things we will want to act on as this partnership and overall relationship evolves.” In a world where families hold immense wealth and power, the official institutional union of two of the world’s most famous and recognizable dynastic names makes for an attractive investment for newer dynasties seeking propagation and preservation.

The Family Office

As the Financial Times noted in 2013, the “family office” for the world’s wealthy dynasties, which had “long been cloaked in a shroud of secrecy as rich families have sought to keep their personal fortunes private” has become more popular with “the explosion of wealth in the past few decades and dissatisfaction with the poor performance of portfolios handled by global private banks.” Still, many so-called “single family offices” continue to operate in secrecy, managing the wealth of a single dynasty, but the emergence of “multi-family offices” (MFOs) has become an increasing trend in the world of wealth management, handling the wealth and investments of multiple families.

The world’s largest private banks have specific “family office arms” which are dedicated to managing dynastic wealth, and these banks continue to dominate the overall market. Bloomberg Markets published a list of the top 50 MFOs in 2013, with HSBC Private Wealth Solutions topping the list, advising assets totaling $137.3 billion, with other banks appearing on the top ten list such as BNY Mellon Wealth Management, Pictet and UBS Global Family Office. Despite the fact that the family office arms of the world’s top private banks dominate the list, many of the oldest family offices made the list, such as Bessemer Trust and Rockefeller & Co. A top official at HSBC Private Bank was quoted by the Financial Times as saying: “Very wealthy families are becoming more and more globalized. It’s not just the fact that they are acquiring assets – like real estate – in several jurisdictions, but family members are scattered around the globe and need to be able to transact in those countries.” In effect, we are witnessing the era of the globalization of family dynasties.

Such a view is shared by Carol Pepper, a former financial adviser and portfolio manager at Rockefeller & Co. who established her own consulting firm – Pepper International – in 2001, specializing in advising families with more than $100 million in net worth. In a 2013 interview with Barron’s, Pepper explained that with the globalization of higher education – where the super-rich from around the world send their children to the same prominent academic institutions – as well as with the emergence of associations designed to bring wealthy families together, “the 19th century [is] coming back,” referring to the era of Robber Baron industrialists and co-operation between the major industrial and financial fortunes of the era. Pepper explained that in the present global environment, she was witnessing “a lot more exchange of ideas among wealthy families from different countries than there ever was before,” with such families increasingly investing in and with each other, noting that “inter-family transactions” had increased by 60% in the previous two years.

The globalization of family dynasties and the ‘return’ to the 19th century is an institutional phenomenon, facilitated by elite universities, business and family associations, international organizations, conferences and other organizations. Thus, regardless of geographic location, the world’s wealthiest families tend to send their children to one of a list of relatively few elite universities, such as Wharton, Harvard or the London School of Economics. At these and similar schools, noted Carol Pepper, the future heirs of family fortunes attain “both the know-how and the contacts for forging overseas collaborations between family businesses.”

So-called ‘non-profit’ associations like the International Family Office Association, the Family Business Network, and ESAFON, among others, are institutional representations of “intentional efforts by rich clans to rub shoulders with one another.” Instead of a rich family in one region hiring an outside firm to introduce them to a new market, they simply are able to reach out directly to the wealthy families within that market, and, as Pepper explained, their interests will be increasingly aligned and “hopefully you’ll all make money together.”

Instead of relying on banks as intermediaries between markets, rich families with more than $47 million to invest are pooling their wealth into the multi-family offices (MFOs). The Financial Times explained that such wealthy families were “crying out for something financial institutions have singularly failed to provide: a one-stop shop to manage both their business and personal interests.” Further, as banks have been coming under increased scrutiny since the financial crisis, “there is still a clandestine nature to the family-office world that will continue to attract clients.” Explaining this, the Financial Times appropriately quoted advice by the character Don Corleone from The Godfather, when he told his son: “Never tell anybody outside the family what you’re thinking.”

As the Wall Street Journal noted, family offices “are private firms that manage just about everything for the wealthiest families: tax planning, investment management, estate planning, philanthropy, art and wine collections – even the family vacation compound.” As such, regardless of where many family fortunes are made, the family office has come to represent the central institution of modern dynasties. And the growth of multi-family offices has been astounding, with the number increasing by 33% between 2008 and 2013, with more than 4,000 in the United States alone, the country with the highest number of wealthy families and individuals, including 5,000 households that have more than $100 million in assets. The Wall Street Journal noted: “You don’t have to be a Rockefeller to join a family office.” However, it does help to have hundreds of millions of dollars.

In 2012, the list of the largest multi-family offices were largely associated with major banks, including HSBC, BNY Mellon, UBS, Wells Fargo and Bank of America, but Rockefeller Financial maintained a prominent position as the 11th largest multi-family office (according to assets under advisement and number of families being served). And beyond the specific arm of the ‘multi-family office’ to the list of the top wealth management groups as a whole, private bank branches of some of the world’s most recognizable bank names dominated the list: Bank of America Global Wealth & Investment Management, Morgan Stanley Smith Barney, JPMorgan, Wells Fargo & Company, UBS Wealth Management, Fidelity, and Goldman Sachs, among others. However, after the top 19 wealth management companies in the world – all of which were arms of major global banking and financial services conglomerates – came number twenty on the list: Rockefeller Financial.

Indeed, things have never been better for the super-rich. A 2012 poll of 1,000 wealthy Americans by the Merrill Lynch Affluent Insights Survey revealed that 58% of respondents felt more financially secure in 2012 than they did the previous year. In 2013, U.S. Trust, the private banking arm of Bank of America, released a survey of 711 individuals with more than $3 million in investable assets, of whom 88% reported that they were more financially secure today than they were before the financial crisis in 2007. Further, the main goal for the super-rich in 2013 was reported to be “asset appreciation” as opposed to “extreme caution”, as the survey reported for 2012.

In 2013, Bloomberg Markets Magazine reported that the number of wealthy people in the world with more than $1 million in investable assets had increased by 9.2% over 2012, reaching a new record of 12 million individuals, and the assets by the rich increased by roughly 10%, reaching a combined total of roughly $46.2 trillion. With this growth in extreme wealth, the wealth management business is itself becoming a major growth industry, with independent firms competing against the big banks in a race to manage the spoils of the world’s super-rich.

And the world’s big banks want to get more of this investable wealth. For example, Goldman Sachs has boosted its private wealth management services. The number of partners at the bank working in asset management in 2010 represented 4.5% of the bank’s total partners, a number which grew to 12% by 2012. Tucker York, the head of private wealth management in the U.S. for Goldman Sachs, noted: “This is a relationship business, and long-term relationships matter… The focus for us is to have the right quality and caliber of people come into the business and stay in the business for a long, long time.”

The managing director and chief investment officer of Goldman Sachs’ private wealth management arm, Mossavar-Rahmani, told Barron’s in 2012: “This is the time to be a long-term investor… There are very few market participants in today’s environment who can truly be long-term investors. Who can really afford to be a long-term investor? The ultra-high-end client is the only one we could think of, because they generally have more money than their spending needs.” In addition, he noted, “their assets are multigenerational,” and, what’s more, “they are not accountable to anyone.”

In a world of immense inequality, with the super-rich controlling more wealth than the rest of humanity combined, the wealth management industry – and within it, the ‘family office’ – have become growth industries and increasingly important institutions. The whole process of globalization has facilitated not only the internationalization of financial markets, multinational corporations and the economies they dominate, but it has in turn facilitated the globalization of family dynasties themselves, whose wealth is largely based on control over corporate and financial assets and institutions.

In globalization’s ‘Game of Thrones’, the world’s super-rich families compete and cooperate for control not simply over nations, but entire regions and the world as a whole. As dynasties seek perpetuation, most people on this planet are concerned with survival. Whoever wins this ‘Game of Thrones,’ the people lose.

The research for this series has been undertaken as part of The People’s Book Project. For this – and similar – research to continue, please consider making a donation today:

Andrew Gavin Marshall is a researcher and writer based in Montreal, Canada. He is Project Manager of The People’s Book Project, chair of the Geopolitics Division of The Hampton Institute, research director for Occupy.com’s Global Power Project and the World of Resistance (WoR) Report, and hosts a weekly podcast show with BoilingFrogsPost.

Austerity Revisited: How Global Financiers Rigged the Bank Bailouts of the 1980s

Austerity Revisited: How Global Financiers Rigged the Bank Bailouts of the 1980s

By: Andrew Gavin Marshall

Originally posted at Occupy.com

20 May 2014

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In the first part of this Global Power Project series, I examined the origins and early evolution of the International Monetary Conference, an annual meeting (to be held June 1-3 in Munich) of several hundred of the world’s most influential bankers who gather in secrecy with the finance ministers, regulators and central bankers of the world’s most powerful nations. The second part looked at the role of the IMC in the lead-up to the 1980s debt crisis. Now, in Part 3, we examine the role the IMC played throughout that debt crisis which began in August of 1982.

At the 1982 International Monetary Conference, bankers noted that they had been cutting back extensively on loans to developing countries, with some leading bankers warning that the lending cut-backs could result in “aggravating the problems of countries already in economic difficulties and threatening to throw them into default” – which is exactly what happened a couple of months after that’s year’s conference.

A. W. Clausen, former CEO of Bank of America, spoke at the IMC in 1982 as then-president of the World Bank, and told the assembled bankers it was “an honour to be the first President of the World Bank to address the International Monetary Conference,” noting that, “themes of partnership and interdependence have repeatedly been at the center of our IMC meetings.” It was the subject Clausen wanted to address, “the tightening interdependence between the developed and the developing nations,” announcing “a new era of partnership between the World Bank and international commercial banks for helping the economies of the developing countries.”

Clausen told the bankers that “in order to develop a closer partnership with you, we intend to expand the International Finance Corporation [the investment arm of the World Bank] to explore the possibility of a multilateral insurance scheme for private investment, and to develop new mechanisms for attracting commercial bank co-financing.”

He also noted that the “fundamental objective of the World Bank” was “to help raise the standard of living of people, especially poor people, in the developing countries,” and argued that “people in developing countries will benefit from a closer partnership between the World Bank and international commercial banks.” Clausen was speaking roughly three months before Mexico announced its debt repayment problems, sparking the debt crisis, though he acknowledged that the developing world was experiencing a “balance-of-payments disequilibrium and debt-servicing difficulties.”

In addition, Clausen noted that the affiliate organization of the World Bank, the International Finance Corporation, had a special purpose which was “to encourage productive private enterprises in developing nations” whose loans do not have to be guaranteed by governments, and which can take equity (or shareholdings) in corporations. Clausen noted that together with the IMF and the General Agreement of Tariffs and Trade (GATT), the World Bank “has helped to build an interdependent global economy,” adding: “International commercial banking depends on the relatively integrated, dynamic, and peaceful world economy that these official institutions have nurtured.”

Thus, he suggested, “we should now develop the complementarity between the World Bank and international commercial banks into a closer relationship of collaboration,” and recommended “greater collaboration between [the] IFC and commercial banks,” which “has great potential for stimulating commercial investment in the developing countries.” All of the initiatives Clausen proposed revolved around the basic objective of increasing “the collaboration of the international banking community” with the World Bank, in order “to assist poor nations to better manage their economies through the establishment of economic policies that are conducive to economic growth and development” and thus “bringing them fully into the global economy.”

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The Debt Crisis

In the first full year of the international debt crisis that tore Latin America and other developing countries into financial ruin – with entire populations pushed overnight into poverty through austerity measures that were demanded by the IMF and the global banks, in return for additional loans and debt rescheduling – the more than 200 global bankers at the International Monetary Conference met in Belgium where they were “treated like royalty,” met at the airport by “special hostesses” and were then chauffeured in Mercedes limousines to the Hyatt Regency Hotel.

The bankers attended a cocktail party at the Palais d’Egmont and hosted the King of Belgium for an afternoon lunch. It was in this “fairy-tale atmosphere,” as the New York Times described it, that the world’s top bankers met with government officials and central bankers and enjoyed “the luxury of thinking about the grand problems of world finance, unfettered by the real world’s concerns.”

The bankers at the 1983 conference agreed that the major debtor countries, in particular Brazil and Mexico, would need time to reshape their economies, with estimates ranging from three to seven or eight years of austerity, and various “structural reforms” designed to enforce neoliberal economic policies upon those entire populations. James Wolfensohn, a former partner at Salomon Brothers who started his own consultancy (and later went on to become President of the World Bank), delivered a popular speech at the IMC recommending that there could be no one solution to the debt crisis, but that each country would have to be handled on a case-by-case basis.

The banker William S. Ogden, a former vice chairman of Chase Manhattan, presented another popular speech at the IMC in which he explained that what was needed to resolve the debt crisis was “sustained world economic growth, avoidance of protectionism, increased government aid to the third world and more disciplined economic policies among the developing countries.” In other words, harsh austerity measures.

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That very same year, Ogden was in the midst of creating a unique organization of international banks and bankers to represent their collective interests as a global community in the face of the debt crisis. That organization came to be known as the Institute of International Finance, itself the subject of a previous set of exposés in the Global Power Project.

At the 1984 meeting of the International Monetary Conference (IMC), a special meeting occurred among some of the top banks that held a large percentage of Mexico’s debt. They participated in a “closed meeting” with major central bankers and finance officials, including representatives of the IMF, who recommended that the banks lower their interest rates on loans to Mexico in order to reduce pressure on the country. Walter B. Wriston, chairman of Citicorp, who had previously opposed any concessions to the impoverished nations in crisis, at this point appeared willing to adhere to some reductions in interest rates for Mexico.

The closed meeting was also attended by Willard C. Butcher, Jr., the chairman of Chase Manhattan; John F. McGillicuddy, chairman of Manufacturers Hanover Trust Company; Lewis T. Preston, chairman of J.P. Morgan & Company; Walter V. Shipley, chairman of Chemical Bank; Wilfried Guth, managing director of Deutsche Bank; Guido R. Hanselmann, executive board member of Union Bank of Switzerland (UBS), and Sir Jeremy Morse, chairman of Lloyds Bank of London.

The following day, the international banks announced that they would agree to negotiate a long-term debt solution for Mexico. Included in the decision as well was the IMF managing director, Jacques de Larosiere; the chairman of the Federal Reserve, Paul Volcker; and a special representative of the banks, Citibank Vice Chairman William R. Rhodes, who announced the decision to negotiate on behalf of the banks and who was personally responsible for chairing multiple “bank advisory committees” that negotiated debt rescheduling with various countries in Latin America.

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Three years later, in 1987, Mexico was still caught in a painful crisis and the world’s bankers were still meeting for the IMC in luxurious surroundings, partaking in opulent social events to discuss the issue of world debt problems. The more than 200 bankers at the meeting expressed their frustration with the problems of the global monetary system, the instability of the floating exchange rate system, and currency crises. William Butcher, that year’s chairman of the IMC, warned that the global monetary system would not “correct itself” and instead the search for a new and more stable system “must be intensified.”

The most popular speech at the IMC that year was delivered by Japan’s vice minister of finance for international affairs, Toyoo Gyohten, who proposed the establishment of “some international mechanism” which would be responsible for managing international monetary crises, and would be required “to have at least several hundred billion dollars in order to influence the financial markets.”

At the next year’s meeting of the IMC, then-Chairman of the Federal Reserve, Alan Greenspan, spoke to the assembled bankers, explaining that further declines in the U.S. Dollar would not help American exports. His comments led to a rise in the Dollar, “greeted positively in the financial markets,” and stock and bond prices rose on Wall Street. The heads of the central banks of other major industrial nations, such as West Germany and Britain, were also present at the conference where collectively the central bankers “reiterated the need to keep inflation down as a way to continue worldwide economic growth” – a position met with great approval by the bankers present at the meeting.

At the 1989 meeting of the IMC, many of Mexico’s largest international lenders attended a special meeting after which they announced a $5.5 billion “aid” package (aka bailout) for Mexico in cooperation between Japanese banks, the IMF and the World Bank. But the so-called “aid packages” handed out by Western banks and international organizations to the crisis-hit developing nations were, in fact, bailouts for the major banks: the funds were given to the countries explicitly to pay the interest that they owed to the banks, while at the same time forcing those governments to implement strict austerity measures and other economic reforms.

William R. Rhodes, Citibank’s main official responsible for debt rescheduling agreements, was present at the meeting, which was also attended by Angel Gurria, the chief debt negotiator for Mexico. Rhodes stated that the meeting at the IMC “set the stage for rapid progress.” In the final part of the Global Power Project series on the International Monetary Conference, I examine the continued relevance of the IMC from 1989 to the present – including the bankers who composed its leadership, as well as a review of leaked documents pertaining to the 2013 meeting of the IMC in Shanghai.

Andrew Gavin Marshall is a 27-year-old researcher and writer based in Montreal, Canada. He is project manager of The People’s Book Project, chair of the geopolitics division of The Hampton Institute, research director for Occupy.com’s Global Power Project and the World of Resistance (WoR) Report, and hosts a weekly podcast show with BoilingFrogsPost.

How the International Monetary Conference Helped Fuel the 1980s Debt Crisis

How the International Monetary Conference Helped Fuel the 1980s Debt Crisis

By: Andrew Gavin Marshall

Originally posted at Occupy.com

14 May 2014

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Last week, in Part 1 of the Global Power Project’s investigations into the machinery behind the International Monetary Conference, I examined the history and evolution of the IMC from its founding by the American Bankers Association in 1954 to the global financial and monetary disruptions of the late 1970s.

The IMC, happening June 1-3 in Munich, brings together hundreds of top bankers with leading finance officials and central bankers from the world’s industrial powers to discuss major economic, financial and monetary issues of the day – and to form a consensus on policies for managing the world economic order. In part 2 of the series, I look at the role of the IMC in the lead-up to the 1980s debt crisis.

What Fueled the Debt Crisis?

The 1980s debt crisis erupted when Mexico announced in 1982 that it could no longer service its debts to Western, and primarily American, banks. This resulted in a crisis that quickly spread across Latin America, Africa and parts of Asia. The oil price rises of the 1970s had led to a surge in revenues for oil-producing nations, which had invested their surplus oil wealth in Western banks that then lent the money to poor, developing nations requiring oil in order to finance their industrialization.

Then, following the 1979 oil shocks, the Federal Reserve in the United States decided to dramatically increase interest rates. The result: interest payments on “third world” debts skyrocketed, ultimately forcing Mexico and other nations to seek bailouts in order to pay their interest to the world’s major banks.

At the 1980 International Monetary Conference meeting, two years before the debt crisis erupted, some of the world’s top bankers – particularly Wilfried Guth, the managing director of Deutsche Bank – warned that a “safety net” may be needed to bail out the major banks that lent money to the developing world. Chase Manhattan Chairman David Rockefeller, who also attended the meeting, agreed that such a “safety net” for the banks was “well worth considering.”

Other leading bankers warned that since the world’s major banks were big lenders to each other, there was “a danger that if one large institution were to fail, a chain reaction could be started that would topple other banks around the world.” (“A ‘Safety Net’ for Banks is Proposed,” New York Times, June 3, 1980).

An Exclusive Event

The June 1980 meeting of the IMC took place in New Orleans, to which The New York Times reported that “only the most elite of the world’s financiers are invited.” American participants at that year’s meeting included Treasury Secretary G. William Miller and Federal Reserve Board Chairman Paul A. Volcker, as well as the chairmen of America’s three largest banks: David Rockefeller (Chase Manhattan), A.W. Clausen (Bank of America) and Walter Wriston (Citibank). The New York Times noted that the IMC “has been a forum where the heavyweights of world finance often take off their gloves.” (“Bankers Meet in Discord,” New York Times, 2 June 1980).

The bankers who attended the conference to discuss issues of debt and poverty were greeted at the New Orleans airport by police officers who provided them with security and doubled as “porters and chauffeurs,” driving the bankers in unmarked police cars to their hotels. The IMC, which is presided over by a 15-member board that decides who gets invited to the yearly meetings, admits banks based upon their size and the scope of their international operations.

At this gathering, eight of the 15 board members were Americans, including Walter B. Wriston, chairman of Citibank; Willis W. Alexander, executive vice president of the American Bankers Association, and leading figures representing First National Bank of Chicago, Wells Fargo, Mellon Bank and Chemical Bank, among others (“The Talk of New Orleans: Agonies of World Banking,” New York Times, 8 June 1980).

Though official sessions of the meeting were closed to the press, in briefings afterward the bankers warned that some developing nations were having increasing difficulty paying interest on their debts to the big banks – and that although the situation had not yet reached crisis proportions, they were wary of what was to come. David Rockefeller declared an urgency “for official organizations, such as the International Monetary Fund, to increase their lending to oil-consuming countries,” and suggested that “private banks and the international institutions should work more closely together.”

Likewise, Wilfried Guth of Deutsche Bank presented a 35-page paper in which he stated that the global financial system was “fairly under control for 1980,” but warned that “critical developments are feared for 1981 and later” when many developing nations “will find it extremely difficult to raise the money they need to pay for oil and other essential imports, including food.” Powerful bankers and monetary officials at the conference widely supported Guth’s paper and presentation, with David Rockefeller warning that international loans given by commercial banks had already surpassed $1 trillion.

The global bankers noted that the underlying issue was “the huge transfer of wealth from the oil-consuming nations to the oil-producing nations,” and warned that “economic stability can be achieved only if the oil-consuming countries accept declines in their living standards” and “an indefinite recession” (“Oil Payment Worries Grow,” New York Times, 7 June 1980).

Meanwhile, the most popular person at the conference that year was a specially-invited guest named Milton Friedman, the University of Chicago economist known for his promotion of neoliberal economic orthodoxy. As the New York Times noted, “It seemed that just about everyone wanted to sit at Mr. Friedman’s lunch and dinner tables.” Friedman had been invited to the IMC to preside over a debate on nothing less than “how monetary policy should be designed and implemented.”

The 1980 IMC meeting seemed to bear formal fruition when Ronald Reagan assumed the presidency in January of 1981, as his new economic policies won “praise from at least one important foreign group – bankers.” The New York Times noted that the several hundred of the world’s top financiers from the IMC meeting “expressed understanding and support of even the most controversial of American monetary policies – the record interest rates that have strengthened the dollar and battered most foreign currencies as a result.”

It was the very same interest rate hikes that led to highly-indebted poor countries finding themselves unable to pay the increased interest on their loans – which pushed them into bankruptcy and the need for bailouts. But for global bankers, there was nothing but praise. Sir Jeremy Morse, chairman of Lloyds Bank of London one of those in attendance at the IMC, stated that, “In general, most people feel that high interest rates are appropriate to the inflationary position of the Western world, and are appropriate to the United States position.”

The only issue of bankers’ “irritation” with the Reagan administration, it seemed, was the fact that incoming Treasury Secretary Donald T. Regan – the Chairman and CEO of Merrill Lynch from 1971 to 1980 – had cancelled his trip to the IMC at the last minute. As many at the conference noted, it was “tradition” to have “a formal address by a senior American economic official.” The President of Wachovia, John G. Medlin Jr., commented, “I think he should have come … I don’t think he understood the importance of this group.”

In the absence of Regan, the responsibility of explaining official American economic policies fell to Federal Reserve Chairman Paul Volcker, himself a former official at Chase Manhattan where he had worked for David Rockefeller. Volcker stood up to the challenge and “was a great success among the bankers [at the IMC], many of whom expressed support for him.”

In the next installment of this series investigating the International Monetary Conference, I examine the role of the IMC throughout the 1980s debt crisis and its position as an important, influential forum that helped to articulate and definitively shape consensus around neoliberal Western economic policy.

Andrew Gavin Marshall is a 26-year-old researcher and writer based in Montreal, Canada. He is project manager of The People’s Book Project, chair of the geopolitics division of The Hampton Institute, research director for Occupy.com’s Global Power Project and the World of Resistance (WoR) Report, and hosts a

EXCLUSIVE: Leaked Documents from Secretive Meeting of Global Bankers at the 2013 International Monetary Conference (IMC)

EXCLUSIVE: Leaked Documents from Secretive Meeting of Global Bankers at the 2013 International Monetary Conference (IMC)

By: Andrew Gavin Marshall

6 March 2014

The International Monetary Conference (IMC) is an annual gathering of roughly 200 of the world’s most influential bankers who meet in private with some of the leading finance ministers, regulators and central bankers of the industrial world. The meetings have been ongoing from 1954 until present-day, and have been influential forums for discussion, establishment of consensus, and the articulation and formation of policy related to global economic, financial and monetary issues.

The following document which I obtained is the program for the 2013 IMC meeting which took place in Shanghai, including the list of events and speakers at the annual gathering. Among the participants and speakers at the June 2013 International Monetary Conference (IMC) are some of the world’s most influential private bankers, including: Baudouin Prot (Chairman of BNP Paribas), Douglas Flint (Chairman of HSBC), Axel Weber (Chairman of UBS), Jacob A. Frenkel (Chairman of JPMorgan Chase International), Jamie Dimon (Chairman and CEO of JPMorgan Chase), Jürgen Fitschen (Co-Chairman of Deutsche Bank), John G. Stumpf (Chairman and CEO of Wells Fargo), Francisco Gonzalez (Chairman and CEO of BBVA), and Peter Sands (Chief Executive of Standard Chatered.

Since the IMC took place in Shanghai, it also drew some notable names from the elite within China, including: Hen Zheng (Member of the Political Bureau of the Communist Party of China – CPC – Central Committee and Secretary of the CPC Shanghai Municipal Committee), Jiang Jianqing (Chairman of the Industrial and Commercial Bank of China), Shang Fulin (Chairman of the China Banking Regulatory Commission), Tian Guoli (Chairman of the Bank of China), and Zhou Xiaochuan (Governor of the People’s Bank of China, China’s central bank).

Zhao Xiaochuan was not the only central banker present at the meeting, however. Also present were: Mario Draghi (President of the European Central Bank), Jaime Caruana (General Manager of the Bank for International Settlements), and Janet Yellen, who was then the Vice Chair of the Federal Reserve Board, now the Chair of the Federal Reserve System.

Download the full program here: International Monetary Conference 2013 Program

 

New matrimonial property laws a slippery slope to reserve land for sale

New matrimonial property laws a slippery slope to reserve land for sale

By Josh Grummett

Originally posted at APTN on 24 January 2014

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Laws that protect Canadian couples in the event of a breakup were extended to First Nation communities last month when the Matrimonial Real Property Act (MRPA) came into effect. But critics say it’s just another move toward dismantling First Nation communities.

In pushing this bill to become law, Aboriginal Affairs Minister Bernard Valcourt said, “It is unacceptable in this day and age that people living on reserve are not afforded the same rights and protections as those living off reserve.”

“It’s all just optics. It makes white people feel good about themselves,” said activist and Aboriginal lawyer, Joan Jack.

And she says it’s a slippery slope from the MRPA to privatizing reserve land.

“It’s not about giving people rights, it’s about money. Because there’s no money coming from the federal government for housing for infrastructure. So therefore they need to turn everything into (private) lands so people can borrow money from the bank, build a house, build a driveway and the government doesn’t have to pay for anything,” Jack said. “It’s about assimilation.”

The Harper government began the push towards the MRPA back in 2007. Taking the issue one step further (PDF) was the free-market advocacy think-tank, the Fraser Institute.

“When the Fraser institute recommends matrimonial property rights what they’re saying — and they do go steps further in advocating private property in general on reserves and other Aboriginal lands — they frame it in the sense that this is about empowering Indigenous communities, helping them come into the modern democratic market-driven society,” says Andrew Gavin Marshall, an activist/writer/researcher based in Montreal who manages The People’s Book Project examining institutions and ideas of power.

Note: To view the full APTN Investigates Video – ‘Unholy Matrimony’ – click here.

It’s no coincidence that the Conservative government and the Fraser Institute are interested in property issues on reserves, he says, nor is he surprised that the Fraser Institute’s spokeswoman on Aboriginal issues, Ravina Bains, used to be the director of policy for Aboriginal Affairs Canada under the Harper government.

Author and Simon Fraser University professor Don Gutstein has spent decades scrutinizing the interconnectivity of government, the media, think-tanks and big business. Like Marshall, he questions the motivations of both the Harper government and Fraser Institute when it comes to their property rights advocacy.

“Their mission is to turn everything into markets, and there are obstacles to markets. One obstacle is Aboriginal governance where there’s collective ownership. That has to be gotten rid of — eliminated. So that’s one of the projects they are involved with is to work gradually to undermine band structure and turning reserves into private land that can then be bought and sold by anybody,” Gutstein says.

That the mainstream media runs with the Fraser Institute’s research and doesn’t question why the think-tank is interested in on-reserve property rights, is his biggest beef.

“This is what bugs me about the media: if you’ve gone to journalism school, one of the first things you learn is to follow the money. And they’ve never done that… they report (the research) as news, as if it’s factual, and gradually those ideas become entrenched in the general public or a significant enough portion of the public that it becomes the new reality.”

If you follow the money, you find some deep pockets fund the Fraser Institute. For example, the Aurea Foundation (PDF) it’s the private foundation of Peter Munk, head of Barrick Gold. A gold mining company, one could argue, might be interested in reserve land being privatized so it can be sold. They’re a proud supporter of the Fraser institute. Adding substance to Gutstein’s assertion that media and big business and right-wing think-tanks are too cozy: well-known national affairs columnist Andrew Coyne sits on the board of the Aurea Foundation and has been criticized for citing research done by think-tanks that Aurea has funded, without disclosing his personal connection to the foundation.

Then there are the Koch brothers, of the controversial U.S.-based Koch Industries which makes billions in petroleum, chemicals, energy, and gas sectors, to name a few. U.S. tax records showthey also donate generously to the Fraser Institute.

But who else foots the bill for operations and research at Canadian think-tanks is largely a mystery because they’re not required by Revenue Canada to disclose who donates the cash, only how much is donated.

“To their great discredit, none of these think-tanks give of a list of their funders,” Gutstein says. “That should be a requirement. Transparency would be beneficial to everyone so we could understand what the agenda was.”

Fraser Institute president Niels Veldhuis told APTN Investigates the lack of disclosure is just good business.

“Our competitors who want to emulate us, if they got a hold of our supporters we’ve spent 38 years building, they’d contact every one of them and try to get money from them,” Veldhuis says.

He scoffs at the suggestion that corporations and rich individuals give to the think tank in exchange for research that benefits their business interests.

“Donors give us money because they like the work we have done in the past. They’re not involved in the questions we ask, they have no involvement in our research and in fact our donors see our research at the same time the media sees our research.”

Maybe the donors don’t, but Marshall points out the board of directors of these free-market advocacy think tanks are stacked with people who come from the same business backgrounds as the donors.

“You’re not going to be against that which your power is based,” Marshall says. “If you want to expand and protect your power you’re not going to be undermining it through everything you own.”

Regardless of whether or not big business is funding research as a way to get a foot in the door of reserves across Canada, or if the federal government is in on this private property push, Joan Jack says the Matrimonial Real Property Act won’t help vulnerable Aboriginal women and children as claimed.

“On paper it makes (the government) look really good but when a woman is getting thrown out of her house — whether she’s a band member or not — she’s getting thrown out of her house and she’s going to need RCMP protection, you’re going to need a lawyer and in most communities those services aren’t available to women, period,” she said.

“It’s insulting and it makes me sad that the Canadian government thinks all they have to do is make things look good on paper. Meanwhile they wonder why we’re still killing ourselves.”

Under the MRPA, First Nations can devise their own laws to deal with issues like who gets the house in the event of a breakup, so long as it’s within the guidelines of the MRPA. Federal rules apply as a default.

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