Archive for the ‘Banking and financial services’ Category

by Barnaby Philips

In Imperialism: the highest stage of capitalism, Lenin wrote that ‘the world has become divided into a handful of usurer states and a vast majority of debtor states’. Since formal decolonisation in the 1960s, his work has been dismissed as antiquated, even among sections of the radical Left. Now in 2017, with the capitalist system sinking into its deepest crisis since Lenin’s day, a new study into global trade has shown his analysis to be as relevant as ever. It revealed that between 1980 and 2012, the net outflows of capital from ‘developing and emerging’ oppressed countries being funnelled into ‘developed’ imperialist nations totalled $16.3 trillion. The truth about our ostensibly post-colonial world is that poor nations are still developing rich nations, the opposite of what we are so often told.

On 5 December 2016, the US-based Global Financial Integrity (GFI) and the Centre for Applied Research at the Norwegian School of Economics published the report Financial flows and tax havens: combining to limit the lives of billions of people.1 It found that in 2012, the last year of recorded data, ‘developing and emerging countries’ – in Central and South America, Africa, Eastern Europe, the Middle East and Asia – received a total of $1.3 trillion, including all aid, investment, and income, but that $3.3 trillion flowed out in the opposite direction to the ‘developed world’ – North America, Western Europe, Japan, South Korea and Australia.

These figures express the contemporary reality of imperialism: that a minority of oppressor nations, led by the US and Britain, plunder the rest of the world, oppressed nations, for profit and resources. As Lenin explained, the economic imperative behind this social relationship stems from the fact that capital exported from oppressor to oppressed nations is (more…)

Advertisements

This is the cover of the paperback edition which is being published on November 14 – ie 2 weeks time – by Historical Materialism

François Chesnais, Finance Capital Today: Corporations and Banks in the Lasting Global Slump, Brill, Leiden, 2016; reviewed by Tony Norfield

This book is well worth reading. It is written in a clear and accessible style and discusses key points about the limitations of capitalism and the role of contemporary finance. Perhaps its most important point is how the financial system has accumulated vast claims on the current and future output of the world economy – in the form of interest payments on loans and bonds, dividend payments on equities, etc.

These claims have outgrown the ability of the capitalist system to meet them, but government policy has so far managed to prevent a collapse of financial markets with zero interest rate policies, quantitative easing, huge deficits in government spending over taxation, and so forth. The result is an unresolved crisis, a ‘lasting global slump’, in which economic growth remains very weak and vast debts remain in place.

Distinguishing points

There are two related points in his approach to the world economy and finance that distinguish Chesnais from many other writers, and for which he deserves to be commended. Firstly, he states clearly that we are in a crisis of capitalism tout court (pp1-2), not a crisis of ‘financialised’ capitalism – the latter being one that could presumably be fixed if only the evil financiers were dealt with by a (capitalist) reforming government. Secondly, he takes ‘the world economy as the point of departure’ for his analysis, although that is ‘easier said than done’ (p11). While he shows the central role of the US, he avoids the wholly US-centred analysis common to radical critics of contemporary capitalism, and instead highlights how the other powers also play a key part in the imperial machine.

Finance Capital Today helps the reader’s understanding of the realities of contemporary global capitalism by providing a wealth of material evidence. It also helps one to clarify views about what is going on by discussing the theoretical context. In this review I will highlight the key points raised in the book and also discuss where I have a number of differences with Chesnais. These differences are sometimes merely of emphasis, or what may look like simply an alternative definition of a commonly used term. However, poor formulation of an argument can also lead to theoretical problems.

Origins of GFC

Chesnais begins by outlining the origins of the 2008 crisis, arguing that this had been postponed since 1998 by the growth of debt in the US and elsewhere, and by the surge of growth in China. In 2008, ‘the brutality of financial crisis was accounted for by the amount of fictitious capital accumulated and the degree of vulnerability of the credit system following securitisation’. The backdrop to the latest phase of crisis was also one that has made this crisis a (more…)

October 24, 2007: Merrill Lynch goes down

by Michael Roberts

It is exactly 10 years since the global financial crash began with the news that the French bank, BNP, had suspended its sub-prime mortgage funds because of “an evaporation of liquidity”.1

Within six months, credit tightened and inter-bank interest rates rocketed. Banks across the globe began to experience huge losses on the derivative funds set up to profit from the housing boom that had taken off in the US, but had started to falter. And the US and the world entered what was later called the great recession – the worst slump in world production and trade since the 1930s.

Ten years later, it is worth reminding ourselves of some of the lessons and implications of that economic earthquake.2 First, the official institutions and mainstream economists never saw (more…)

The paperback version of The City: London and the Global Power of Finance, is released today. This edition contains a sixteen-page Afterword on the following topics:

  • Brexit and imperial power
  • The City, Brexit and world developments
  • Immigration and nationalism
  • Trump and the US hegemon
  • Shifting tectonic plates

These develop and update points raised before.

With a cover price of £10.99 and US$16.95 in the global book market, the paperback version of The City is currently available at the following prices:

Verso, £7.69

Amazon.co.uk, £9.98

Amazon.com, $11.52

An eBook is also available.

Do your own arbitrage!

by Tony Norfield

Apple Inc is the world’s largest company by market capitalisation, with a value of nearly $800bn on 19 May 2017. It does not produce most of the world’s smart phones, coming in a poor second behind Korea’s Samsung, and it is not that far ahead of China’s Huawei in terms of market share. Neither is it necessarily the biggest player in other consumer electronics markets. But so far it has managed to corner the premium section of these markets, managing to get enough loyalty from customers who will pay a lot more for a product that is not so different from the (much) cheaper ones that are not quite so ‘cool’.

That is principally why Apple, with fewer than 120,000 staff and itself producing very little of the final product that it sells to consumers, can be worth in capitalist markets so much more than Foxconn. Also known as Hon Hai Precision Industry Co, the latter Taiwan-based company is its main assembler, employing more than one million workers, and is currently valued at a relatively minuscule $60bn in terms of market capitalisation. In 2016, Apple’s operating income was $60bn compared to some $4bn at Foxconn, endorsing the market valuation ratio ($800/$60bn).

These points are another sign of the distortion of social value by imperialism, and another day I may write more about the social and economic mechanisms behind this. For now, though, I want to focus on the financial aspects of Apple’s business, mainly using information from its latest annual report.

Most radical, critical commentaries on Apple focus, reasonably enough, on how it uses cheap labour in Asia to boost its profits. What I want to deal with instead are the details in (more…)

Below is an article submitted to Redline by Alec Abbott written 18 April 2017

1. A quintessentially liberal cycle: from smugness to despair, from despair to hope and from hope to smugness

The initial blow

Trump’s election victory left the liberals reeling with shock and incomprehension. Detached from the poverty and discontent around them, and supremely confident in the Democratic Party’s electoral machine, they saw Hillary Clinton as unassailable. Her defeat did little to diminish their disdain for ordinary working people, or to improve their grasp of US realities.download

Rather than consider the socio-economic forces that brought Trump into office, the liberals focused almost exclusively on his personality, his egocentric greed for power, money and fame. Some went so far as to detect the sinister hand of Moscow at work. When asked how he viewed Trump’s relationship with Russia, Bernie Sanders, always hovering between radical liberalism and mild social-democracy, replied:

‘The American people are astounded that when you have an authoritarian like Putin who is moving Russia more and more towards an authoritarian society, President Trump has only positive things to say about this authoritarian figure. What hold does Russia have over the President? We know that Russian oligarchs lent Trump and his associates money. Does that have anything to do with Trump’s relationship with Russia?’ (CNN News, 30/3/2017)

From the start of the election campaign, liberals viewed Trump as an impulsive maverick, a right-wing bigot who has little regard for civilized norms of behaviour. Only by pandering to the worst prejudices of disaffected Americans, they maintained, would he succeed in capturing the presidency. The great unknown was how this relative new-comer to politics would behave once in office. Would he adapt his election pledges to political reality or would he pursue his outlandish agenda to the bitter end? That was the question on the minds of liberal commentators as Trump assumed the position of the 45th president of the US.

In no time at all the liberals gave vent to their despair. Maggie Lake, CNN commentator and political analyst, bewailed: ‘He hasn’t changed. There was the expectation that the office changes the man but we have not seen this with Donald Trump.’ (CNN News, 23/3/2017) Not long after, The Los Angeles Times, a prominent liberal organ, delivered the following lamentation:

‘Like millions of other Americans, we clung to a slim hope that the new president would turn out to be all noise and bluster, or that the people around him in the White House would act as a check on his worst instincts, or that he would be sobered and transformed by the awesome responsibilities of office. Instead … it is increasingly clear that those hopes were misplaced.’ (4/4/2017) (more…)

Tony Norfield will be giving a lecture next week at King’s College, London, on Wednesday 8 February.

The session is from 6pm to 8pm, and is part of a series of seminars at King’s on Contemporary Marxist Theory.

The seminars are open to the public, but arrive in time to get signed in if you want to attend.

Venue details:
342N Norfolk Building (entrance on Surrey St)
King’s College London, Strand, London WC2R 2LS

Summary:
This paper discusses how the financial system both expresses and reinforces the power of major countries. Developing Marx’s theory by examining bank credit creation, bond and equity markets, the paper shows how what Marx called the ‘law of value’ is modified by the evolution of finance. To understand imperialism today, one has to recognise how financial markets help the centralisation of ownership and control of the world economy. They are also an important way in which the US and the UK siphon off the world’s resources. The question of Brexit and the City of London is also discussed.