Barclays Bank leads global capitalism pack

Barclays Bank leads a core of 737 transnational companies (TNCs) that are holding the world’s economy at ransom, a study by three Swish economic researchers reveals.

A TNC, according to the Organisation of Economic Co-operation and Development (OECD) is a firm which ‘comprise companies and other entities established in more than one country and so linked that they may co-ordinate their operations in various ways’. 

The study titled The Network of Global Corporate Control done by Stefani Vitali, James Glattfelder and Stefano Battiston of the Swiss Federal Institute of Technology in Zurich released last year confirms the existence of a cartel driving global capitalism by its involvement in activities which undermine the global economy.

The 747 TNCs own or control, through shareholding, 80% of businesses while another core of 147 TNCs which the researchers call the ‘super entity’ owns or controls 40% of businesses.

Leading this super entity’s top 10 is Barclays Bank followed by Capital Group Companies Inc, FMR Corporation, AXA, State Street Corporation, JP Morgan Chase & Co, Legal & General Group plc, Vanguard Group Inc, UBS AG and Merrill Lynch & Co Inc.

This is the super entity to which the researchers say ‘control flows to a small tightly-knit core of financial institutions’.

“This core can be seen as an economic ‘super-entity’ that raises new important issues both for researchers and policy makers,” the researchers say in their abstract.

“The structure of the control network of transnational corporations affects global market competition and financial stability,” they point out.

The study shows the ‘architecture of the international ownership network, along with the computation of the control held by each global player’.

“We find that transnational corporations form a giant bow-tie structure and that a large portion of control flows to a small tightly-knit core of financial institutions,” they further say.

Vitali, Glattfelder and Battiston describe the bow-tie structure as one made up of ‘strongly connected component’ of TNCs which own ‘directly and/or indirectly shares in every other member’.

Such a structure is a means of ‘preventing take-overs, reducing transaction costs, risk sharing and increasing trust between groups of interest’.

The researchers also note that this structure ‘weakens market competition, reduces over-all employment and leads to excessive pricing’. 

Some of the companies are involved in illegal arms deals, food speculation to push up prices and, according to CorpWatch founder Joshua Karliner, ‘have become some of the most powerful economic and political entities in the world today’.

CorpWatch is an organisation which ‘investigates and exposes corporate violations of human rights, environmental crimes, fraud and corruption around the world’.

In his 1997 book, The Corporate Planet: Ecology and Politics in the Age of Globalization, Karliner says more than half TNCs come from just five nations: France, Germany, the Netherlands, Japan and the United States.  

“But,” he states, “despite their growing numbers, power is concentrated at the top. That accounts for one-quarter of the world’s productive assets.” 

Below are some of the activities the TNCs engage in:

·       Account for the world’s industrial capacity, technological knowledge, international financial transactions and power

·       They control mining, refine and distribute most of the world’s oil, gas, diesel and jet fuel

·       They built most of the world’s oil, gas, coal, hydroelectric and nuclear power plants

·       They extract most of the world’s minerals, manufacture and sell most of the world’s cars, aeroplanes, communications satellites, computers, home electronics, chemicals, medicines and biotechnology products. 

Transnational corporations hold 90% of all technology and product patents worldwide and are involved in 70% of world trade. More than 30% of this trade is ‘intra- firm’ which means it occurs between units of the same corporation

  

·       They harvest much of the world’s wood and make most of its paper

·       They grow many of the world’s major agricultural crops and process much of it

·       They work together with their governments to reorganize the world economic structures and balance of power through a series of intergovernmental trade and investment accords. The treats serve as frameworks for globalisation

·       They work to circumvent national government because most border and regulatory agencies are succumbing to the power and influence of TNCs. As a result, most TNCs are stateless and cannot be accountable to any government

·       They influence both domestic and foreign policies

The list of 50 top TNCs

1 Barclays Plc, Great Britain

2 Capital Group Companies Inc, US

3 FMR Corp, US

4 AXA, France

5 State Street Corporation, US

6 JP Morgan Chase & Co, US

7 Legal & General Group Plc, Great Britain

8 Vanguard Group, Inc., US

9 UBS AG China

10 Merrill Lynch & Co., Inc. US

11 Wellington Management Co. L.L.P, US

12 Deutsche Bank AG Germany

13 Franklin Resources, Inc., US

14 Credit Suisse Group, China

15 Walton Enterprises LLC, US

16 Bank of New York Mellon Corp., US

17 Natixis, France

18 Goldman Sachs Group, Inc., US

19 T. Roweprice Group, Inc., US

20 Legg Mason, Inc., US

21 Morgan Stanley, US

22 Mitsubishi UFJ Financial Group, Inc. Japan

23 Northern Trust Corporation, US

24 Société Générale, France

25 Bank OF America Corporation, US

26 Lloyds TSB Group plc, Great Britain

27 Invesco Plc, Great Britain

28 Allianzse, Germany

29 TIAA, US

30 Old Mutual Public Limited Company, Great Britain

31 Aviva plc, Great Britain

32 Schroders Plc, Great Britain

33 Dodge & Cox, US

34 Lehman Brothers Holdings, US

35 Sun Life Financial, Canada

36 Standard Life Plc, Great Britain

37 CNCE, France

38 Nomura Holdings, Inc, Japan

39 The Depository Trust Company, US

40 Massachusetts Mutual Life Insurance, US

41 Inggroep N.V.  Netherlands

42 Brandes Investment Partners, L.P, US

43 Unicredito Italiano, Spain

44 Deposit Insurance Corporation of Japan

45 Vereniging Aegon, Netherlands

46 BNP Paribas, France

47 Affiliated Managers Group, Inc, US

48 Resona Holdings, Inc, Japan

49 Capital Group International, Inc, US

50 China Petrochemical Group Co.  Canada

Sources: planetsave and helaxendria

Corruption Africa's worst silent enemy

The sub Saharan Africa, according to a report by the Global Financial Integrity (GFI), an organisation based in Washington DC for 2000-2009 released January 2011, loses an estimated US$0,276trillion in illicit cash outflows. Most of this is ill-gotten money from corrupt activities is stashed in western and European banks which use it for the development of their countries and to loan back to the continent. 

Two babies’ names – one a five-month old and another a one-month old – were recently found on payrolls in Nigeria.

The one month old baby’s name was on government’s payroll while the five-year old’s was on a municipality’s. Although the one-year old could hardly sit or talk, records showed that it had a diploma.

This is the extent to which corruption has gone not only in Africa but globally and the figures are staggering.

On one hand, in southern Africa alone US$40b is lost to corruption, according to World Bank while an available African Union study estimates that the continent loses US$140b annually. 

This, the report says is 25% of African countries’ combined income.

On the other hand, the African Development Bank estimates that 50% of tax revenue is lost to corruption and that lower income households spend an average 2-3% of their income on bribes while rich households spend an average of 0.9%.

The ADB also says the lost revenue is usually greater than some of the countries’ foreign debt with award-winning financial reporter and editor of Absolute Return, Michelle Celarier estimating that as much as $30 billion in aid for Africa has ended up in foreign bank accounts. 

“This amount is twice the annual gross domestic product (GDP) of Ghana, Kenya, and Uganda combined,” she writes in Euromoney. 

Global Financial Integrity (GFI) an organisation based in Washington DC in its report titled Illicit Financial Flows from Developing Countries: 2000-2009 and released January 2011 estimate that US$0,276trillion out of the US$1.26trillion cash outflows from developing countries is from Sub Saharan Africa.

The report shows that there was an increase in illicit cash outflows from US$1.06trillion in 2006 in 2008. From 2000 to 2008, annual averages of about US$725b to US$810b were recorded.

These figures do not cater for smuggling, mispricing and asset swaps. If these are factored in, the figures can be higher than this.

GFI director Raymond Baker says, “The amount of money that has been drained out of Africa - hundreds of billions decade after decade - is far in excess of the official development assistance going into African countries."

The report further notes that the West and Central African regions bled cash most with Nigeria alone accounting for US$130b.

“Bribery, theft, kickbacks, and tax evasion were the greatest conduit for the illicit financial out flows from the major exporters of oil such as Nigeria,” Baker says adding that the stolen money goes to Western Institutions. 

Delegates to the Southern African Forum Against Corruption (SAFAC) who met in Windhoek, Namibia for its 9^th General Meeting this week expressed great concern with the slow pace governments were acting or not acting on corruption.

SAFAC is a Southern African Development Community’s protocol against corruption created in 2001 and has 18 states as its signatories.

Sadc was the first to create an anti-corruption organ before the United Nations’ Convention Against Corruption (UNCAC) and The African Union’s Convention on Preventing and Combating Corruption.

Dr Edward Hoseah, SAFAC chairperson during his speech at the Windhoek summit described corruption as ruthless to the poor.

“Corruption is ruthless to our people and particularly the poor who are most vulnerable to corruption,” he said.

Dr Hosea pointed out that the Sadc Protocol and its implementation is a litmus test for effective measures in the region.

“The willingness of our political masters to heighten and fast track the implementation of the Sadc Protocol is extremely fundamental to manage our citizens’ expectations. The fundamental question that each Sadc member has to answer is to what extent have Sadc members ratified and put the strategic interventions that addresses the daunting challenges that corruption imposes on the economy, political and social realities,” he said.

According to the 2010 Corruption Perceptions Index (CPI) Africa is the worst corrupt region in the world. At the bottom - number 178 – lies Somalia, Equatorial Guinea, Angola, Burundi and Chad. 

Regionally, none scored less than five with Botswana the supposedly corruption-free country at 5.8 out of a 10-point scale.

Apart from Botswana, Mauritius has 5.4; SA, 4.5; Namibia, 4.4; Lesotho, 3.5; Malawi, 3.4; Swaziland, 3.2; Zambia, 3; Mozambique, 2.7; Tanzania, 2.7; Madagascar, 2.6; Zimbabwe, 2.4; and the DRC, 2.

So far only SA’s Jacob Zuma has been decisive when dealing with corruption after he sacked Sicelo Shiceka, the local government minister, who allegedly spent R547000 (£43,000) of public money on visiting a convicted drug dealer girlfriend in prison in Switzerland. 

Gwen Mahlangu-Nkabinde, the public works minister, and Bheki Cele, the police chief, are accused of leasing a new police headquarters at a massively inflated price. 

Cele has been suspended on full pay pending the results of a public inquiry.

Other than SA, the rest who ratified the protocol on corruption either institutes commissions to look into corrupt activities and then when they get reports of the findings, they sit on them.

But most of the countries have either been running after small fish while letting big ones to swim away. A number of reports from state sponsored commissioned in corruptive activities are currently being sat on years after the conclusion of the investigations.

Such inaction has caused so much underdevelopment considering that corruption is a crime.

Jonathan Lucas, United Nations’ southern Africa Office on Drugs and Crime representative defined said corruption as ‘a crime against development, democracy, education, prosperity, public health and justice’.

Lucas notes that unchecked corruption prevents the world from reducing extreme poverty and averts child deaths.

“It will have a devastating effect on the attainment of the Millenium Developmental Goals (MDGs),” he told delegates during an International Anti-Corruption Day in Tshwane a year ago. “It is now seen by people across the world as a serious crime, a crime which weakens societies, ruins lives, and spurs underdevelopment." 

A research by Transparency International titled The Anti-Corruption Catalyst: Realising the MDGs by 2015 notes that corruption costs education, health and water.

Using data from 42 countries among them Kenya, Ghana and Liberia, the report says corruption is associated with low literacy rates and high maternal death rates while data from 51 other countries reveal that when and where bribery is rife, access to safe drinking water. 

“Corruption – whether petty, grand or political – exacts a high cost on development. Abuses in one sector do not spare the others from collateral damage,” the report observes.

It further notes that, according to seven-country study involving  Ghana, Madagascar, Morocco, Niger, Senegal, Sierra Leone and Uganda, a bribe asked for by a schoolmaster to enrol a family’s daughter in the ‘free’ elementary school means a girl’s education and opportunities may be irreversibly blocked. 

“When newly elected parliamentarians whose campaigns were supported by pharmaceutical companies pass policies that increase the local cost of needed drugs, sick people face a lack of treatment, which may lead to lost days of work and wages, and a cycle of poverty.”

But worst of all, a World Bank Africa Development Indicators 2010 report adds, is the quiet form of corruption which undermines public trust in government and the services it provides.

Quiet corruption is where civil servants fail to deliver service to the deserving poor thereby foiling progress and development.

“This form of corruption, smaller in monetary terms not usually involve powerful officials or large amounts of money, is particularly harmful for the poor. One example of this type of low-level corruption comes from Burkina Faso, ranked 98th in 2010’s CPI with a score of 3.8. 

“RENLAC, the Burkina Faso anti-corruption network, identified a primary school inspector who used to arrange for teachers posted to rural areas to be transferred back to cities if they paid her small sums of money, thus depriving the rural poor of much needed teachers.”

Most worrying is the fact that the illicit monies are sent to foreign banks where they are used to develop those nations. This means that if corruption is a crime, then the banks that keep stolen money are accomplices to crime against humanity.

For example, during a 1999 US Senate inquiry it was revealed that the out of Citibank’s 40,000 clients, 350 of them were senior foreign government officials or their relatives, together with President Omar Bongo of Gabon, who transferred US$100m through personal accounts in Citibank's New York branches.

The revelation show Bongo’s two private accounts all in the name of fictitious corporations as well as a special account to receive payments from oil companies which included alleged bribes or "donations" from the French government's oil company Elf-Aquitaine. 

It is no surprise that Citibank makes more than US$1m annually net profit from Bongo's accounts.

This revelation made Democratic US Senator Carl Levin Chairman Senate Committee on Armed Services to condemn the US saying, “America cannot have it both ways. We cannot condemn corruption abroad, be it officials taking bribes or looting their treasuries, and then tolerate American banks making fortunes off that corruption.”

Frank Vogl, TI co-founder says, “Those who take bribes must find safe international financial channels through which they can bank their ill-gotten gains. Those who provide the bribes may well assist the bribe takers to establish safe financial channels and launder the cash." 

Collectively, some African leaders have had up to US$20b deposited in Swiss banks with former Haitian President "Baby Doc" Duvalier stashing anything between US$300-900m in offshore banks, while Philippine President Marcos had well over US$2b in western banks. 

The introduction of private banking services and offshore financial centres is seen as major conduits and repositories for bribes and corrupt gains.

For example, other reports note that an estimated US$40b from poor and former communist economies finds its way into US or European banks every year, much of it illegitimately gained while some US$30b of western aid has ended up in Swiss bank accounts alone. 

With such protection and secrecy, greed people on the continent go out of their way to have babies on pay rolls.

Sanctions yes but the economy was battered

It’s true that Zimbabwe is besieged today and has been for years now. But it’s not true that we could not have, if we real wanted, set ourselves free.

Sanctions are real – targeted or not – but they are breakable. And Zimbabwe can and could have broken them. So it’s a myth that all our problems today are sanctions-made.

Maybe to understand this, one has to go back to as early as 1990s when the economy started but slowly to give in. 

It’s a fact that at independence in 1980, Zimbabwe spent a lot of money in health, education and various other sectors to bridge gaps created by an unfair and unjust system. 

Spending on education rose from Z$227,6m in 1979 to Z$628m in 1990 while health expenditure went up from Z$66,4m to Z$188,6m.

A huge public service sector, subsidies, the 10-year involvement in the Mozambican civil war from 1982 to 1992 and then subsequent drought years further debilitated the economy such that by mid 90s prices had become unstable. 

The budget operated on a deficit and taxes became high. This drove public debt higher.

To recover lost economic growth, the government accepted the Enhanced Economic Structural Advancement Programme (Esap) in 1991. 

The programme that ended in 1995 meant that all subsidies had to go; public enterprises either be nationalised or privatized to enhance growth; streamline government by cutting down on expenditure.

Esap was supposed to be a short term programme that would first snuff out some jobs in order to create more. But it did not work. The privatisation or nationalization of PEs without better management led to further decline in productivity. Government did not reduce expenditure. No jobs were created. And deficit went further up. Instability chipped in.

A few black business people operating as advocates for black empowerment demanded their entitlements and government acknowledged them by giving contracts and concessional loans. 

This further put pressure on government forcing it to borrow domestically thereby causing even more instability. Consumer prices skyrocketed.

Under Esap, government was also forced to fall into heavy debt and international donors refused to write off the debts because the Zimbabwean government had failed to honour its part of the deal.

After the failure of Esap, government cooked up the Zimbabwe Programme for Economic and Social Transformation (Zimprest) in 1996. Zimprest was supposed to be implemented by government, business, labour and civil society through the National Consultative Forum (NECF).

Although Zimprest was promising in the first two years when growth reached 7%, the depreciation of the Z$ because of low tobacco and minerals’ prices hit the economy hard. This was followed by a disastrous 1997/ 98 rainfall season. Inflation took its toll and most industries did not perform as expected.

One major event that drove the economy onto to its knees was the ex-combatants’ payouts in 1997 when government was forced to fork out Z$4b as compensation to former freedom fighters.

Since the money had not been budgeted for, the Z$ lost with a record 72% against the US$ and the stock market crashed by 46% on 14 November 1997 signaling the economic meltdown that is still haunting the country today.

The payouts depleted foreign reserves which according to Kingdom Financial Holdings statistics at the time fell from US$760m early 1997 to US$255m by November of the same year. This exposed the local currency which at the time was worth US$1,315.

The Reserve Bank of Zimbabwe was also exposed because it meant that with such low foreign reserves, it could only underwrite imports for a month.

Government’s debt in 1997 was more than $60 billion and it was estimated that servicing the debt cost more than a billion a month. 

Servicing this debt ate into resources that could otherwise have been channeled towards education and health which started to decline.

In response to the crisis, the government increased bread, sugar, soft drinks, commuter fares, milk and mealie meal prices and the consumers rioted in protest.

As if that was not enough, Zimbabwe was sucked into the DRC civil war in 1998 resulting in the IMF and several other donors suspending financial assistance.

By 1999, it was clear that the economy was heading west. The final nail was the haphazard takeover of farms by ex-combatants as part of their demands. This drove agricultural input down.

With the birth of the Movement of Democratic Change (MDC) and political violence, economic sanctions – the Zimbabwe Democracy and Economic Recovery Act (Zidera) - were imposed in 2001 by the US. This meant no loan extensions, no credit guarantees and no debt reduction or cancellation.

The fact is that the sanctions came to haunt an already battered economy and in a bid to revive the economy, Gideon Gono was appointed the RBZ governor in 2003.

This is the man who could have saved Zimbabwe had all the money he gave out been utilised for the benefit of the nation at large. His policies are not in any way different from those of US president George Bush and his successor Barack Obama and indeed other government elsewhere.

The only difference is that Gono’s biggest enemy was corruption. Most of the people who received money, diesel or machinery from the central bank misused them.  Up to now, there has not been any audit to bring to book people who squandered the resources.

The other factor was that some Zanu-PF members thought they were entitled to enjoy the gifts from the reserve bank while the opposition stood by - criticising.

In an interview two years ago, Gono admitted that his programmes failed because of farm under-utilisation and disruptions; rampant corruption; indiscipline as well as lack of law and order.

So this sanctions beat is like repeating the same lie over and over again until we start believing it.

Maybe the start would be dealing with corruption.