Who Rules the World?

A news item on budget day, commanding all of two column inches on an inside page of some of the national press, was of far greater importance than anything Mr Osborne had to say. It reported the completion of Glencore’s acquisition of Viterra, Canada’s largest grain handling company. Glencore has ways of making money as reported previously on this site (see http://www.gordonpearson.co.uk/28/glencore-and-their-ilk-are-screwing-the-world/). Briefly, they bet on the future price of a commodity in a market they can fix. They then fix the price and take the profit. The example given in the previous posting was Glencore’s bet on future wheat and corn prices. Despite Russian harvests in 2010 being threatened by drought, prices didn’t rise sufficiently for Glencore to profit, till Yuri Ognev, the relevant Glencore executive, “suggested” to Moscow they might be well advised to ban wheat exports. Two days later exports were banned and prices rose by 15%, enough for Glencore’s profit. That’s how Glencore works. An unfortunate bi-product of Glencore’s price rise would be added numbers starving to death in the Horn of Africa and elsewhere.

Glencore, the world’s largest commodity trader, listed in London but successfully avoiding UK taxes, is currently taking over its associate company Xstrata, one of the world’s largest mining and metals companies. Xstrata’s London IPO ten years ago established it from day one in the FTSE100. Its boast is that over the past decade it has grown faster than Amazon, largely by acquisition. It is now big enough to fix supply, and therefore prices, of strategic minerals such as nickel, zinc, platinum, chrome and copper and being highly influential in thermal and coking coal. Glencore with Xstrata will be able to create and exploit prices of all these commodities and more. And with Viterra on board they’ll be even more powerful in the grain markets, adding starvation to the millions already struggling for survival. The already weak and poor will pay for Glencore’s profitable growth. But they won’t be alone: we all will pay.

Glencore’s only problem will be judging how much profit they should take. If they overdo it, there might be a serious reaction. People might destroy the golden goose and Glencore along with it. Goldman Sachs has the same problem. Sometimes they go too far, but mostly they must be amazed at how much they can get away with. Dedication to free and open markets and small government, is taught and accepted across the business – finance – political complex in Anglo-American jurisdictions. Tax evasion, never mind avoidance, and criminality are not just commonplace, but seem to be mostly regarded as understandable, if not wholly acceptable.

The same monopolistic abuse is endemic in the audit industry, controlled by the big four cartel. Audit is openly compromised by manifest conflicts of interest. Their complacent dominance of the market was epitomised by the PwC Chairman’s recent boast that if an auditor was required to certify accounts as really true and fair, then they would cost a whole lot more than they do at present (see http://www.gordonpearson.co.uk/17/monopolistic-complacency-and-the-big-four/).

So much is badly wrong. Yet it is difficult to believe that the people at Glencore, Goldman, PwC and the rest, are of evil intent. There must be some other explanation. They must believe what is often referred to as neo-liberal economic theory, objections to which have been repeatedly raised on this site. The dogma may have seemed credible at one time, for example, when this generation of executives were doing their undergraduate degrees. But not any more.

The Glencores, Goldmans, PwCs and their ilk, supported by the simplistic neo-liberal idea, are rapidly moving into position as rulers of the world, dominating everything and everyone, already more powerful than democratically elected national or supra-national administration. This leads to a choice of alternative futures. On the one hand, more of the same will lead to destruction and depletion till there is nothing more of value for them to extract. On the other, recognition that democracy is preferable to the Glencore-Goldman-PwC tyranny, leading to the dogma being reversed, and real competition being re-established and protected, before it’s too late. ‘The Road to Co-operation’ offers some ideas.

But the really important thing about the announcement of Glencore’s acquisition of Viterra is the fact that it only made two column inches on an inside page. That’s how much it is seen to matter at this stage. It needs to get a headline on the front page, so that people are engaged in debate as to whether or not they wish Glencore et al to rule their world.

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