The Criminal Company

The threat to the world’s liberty today comes from the monopolistic power of unregulated corporates. That is exercised mainly through banks such as Goldman Sachs and financial intermediaries and traders such as Glencore. A year ago the Financial Times ran a series of articles showing how Glencore fix commodity prices for their own profit and everyone else’s loss. The Russian wheat and corn harvest being threatened by drought, the FT reported how Glencore made speculative long term proprietary trades in wheat and corn. When wheat prices failed to rise sufficiently for a profit to be made over the period of Glencore’s trade, their man in Moscow ‘encouraged’ the Russians to ban wheat exports. That had the desired effect forcing prices up sufficiently to enable Glencore to close its earlier bets at a decent return. The obvious side effect of the price rise was that the struggling millions had to struggle that bit more. That’s the Glencore way of doing business. (See http://www.gordonpearson.co.uk/28/glencore-and-their-ilk-are-screwing-the-world/)

Glencore is currently in the throes of taking over of its associate company Xstrata, one of the world’s largest mining and metals companies. Xstrata is already big enough to fix supply, and therefore prices, of strategic minerals such as nickel, zinc, platinum, chrome and copper and is highly influential in thermal and coking coal. Using the Glencore business method, they will together be able to create and exploit prices of all these commodities and more. And with Viterra also acquired, they’ll be even more powerful in the grain markets, adding starvation to the millions already struggling for survival.

This highly successful business model produces the ludicrous executive pay packages to which people seem to have become inured. CEO Glasenberg, billionaire recipient a year ago from Glencore’s initial public offering, received a further £71m dividends this year from his Glencore shares which were part of his personal take from the IPO. Mick Davis, the Xstrata CEO will take a £29m “retention package” over three years when he becomes CEO of the combined group. This will be on top of his salary and the share bonus he will receive for the takeover. Amongst all this excess, the FT reported that Glencore has paid “almost no corporate taxes on its trading business for years, in spite of bumper profits.”

Monopolistic power so easily leads to predation regarded as of right. Glencore’s Lasenburg explaining to the Melbourne Mining Club’s London dinner, in the context of his own salary take: “If you want a good CEO you’re going to have to pay him.” Or in the monopolized audit industry, PricewaterhouseCooper chairman’s complacent message that if an auditor was required to certify the accounts as really true and fair, they would have to be paid a whole lot more. These examples suggest nothing more nor less, than a straightforward mobster culture, where the take has nothing to do with talent, effort or intelligence, simply to what with impunity can be taken.

The Office of Fair Trading, still has some residual powers after years of limitation. It can no longer refer cases to the Competition Commission where it appears monopolistic positions are being established. But it is still able to refer suspected abuses of monopolistic power. The Glencore way of doing business, as exampled by its reported fixing of the wheat grain market, is surely a clear example of abuse of monopolistic power and should be referred. And while the case is being considered by the Competition Commission, Glencore, like other suspected unfit entities, should be prevented from engagement in any further merger and acquisition activity.

The Glencore example is one of many. We have experienced more than thirty years of laissez faire deregulation, led by the Hayek/Friedman argument for small government, minimised flat rate taxes, and the determination of outcomes through the exercise of market forces. But those market forces are no longer competitive. Most markets are now at least partly dominated by monopolistic forces. Competition no longer rules; the public interest no longer seems to be of real account.

UK’s permissive governance regime is appreciated and exploited by the monopolists, market fixers and predators that ply their trade in London. But there are still fragments of law which could be mobilised to help redress the situation. Unless it has completely given up the ghost, the Office of Fair Trading should be required to play its part.

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