-Caveat Lector-
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Annual Analysis of UN Report on Global Investments 2000
"Robber Baron" Era Is Back
Surge in Cross-border M&A�s Fuels Concentration of Corporate Power
PHOENIX, Jan. 19 - The �Robber Baron� era in the American history
reached
its apex some one hundred years ago. �The public be damned,� railed the
railroad tycoon, Cornelius Vanderbilt. But an alarmed Congress mounted
concerted efforts to reign in the unchecked power of large industrial
corporations that were shaking the United Stated of America right down
to
its constitutional roots. This led to Sherman and Clayton Acts, two
pieces
of antitrust legislation that are still the law of the land today. As
Bill
Gates and Microsoft found out last year.
But the menacing industrial Hydra has sprung new heads, especially in
the
waning decades of the 20th century. And there is as yet no Hercules in
sight who could slay that Hydra. Giant national corporations have
mutated
into even more awesome multinational or transnational behemoths. And
even
these terms are misnomers, since such companies actually operate on a
supranational basis. They lay down new laws or try to break through
existing ones. Just as the Greek philosopher Solon (c. 630-c. 555 BC)
noted 28 centuries ago.
So as we enter the Third Millennium, the world is now facing the same
nemesis America did a century ago. Only on a global, rather than a
national scale. The brute �might is right� and �money is might�
philosophy
is once again threatening Homo Sapiens� finer endeavors. �The public be
damned.� It�s just that instead of the industrial tycoons� driving the
trend, this time around, it is Wall Street that�s wagging everyone�s
tails,
transforming transnational corporations into mighty multinational
whips. And �M&A is the way!� �it is done (here�s a Wall Street slogan
by
Annex Research for Madison hucksters).
What makes all this possible, of course, is technology. Transnational
corporations (TNCs) are now able to disperse physical production around
the
globe in search of the lowest labor rates, and then integrate it
effectively thanks to falling transportation and telecommunication
costs.
In short, the physical factory has dropped down the food chain to a
commodity level and into the realm of a local economy. Thanks to
falling
transportation and telecommunication costs, the physical plant has been
supplanted (pun intended) by a Global Virtual Factory. The latter is
now
wrapped inside an Integrated Services offering, Which enables it to
deliver products with lightening speed to just about any customer
anywhere
around the world.
It�s an ideal world from a TNC perspective. It�s a potential nightmare
from a Homo Sapiens� vantage point. Because it may lead to a new form
of
slavery. And usury. Man�s enslavement by the Almighty Dollar.
All levers man has devised so far to control unchecked power are still
at
the local or national levels. Yet most of the corporate power is now
escaping through existing legal hatches into the free and open global
air
ABOVE and BEYOND the local legislators. Trying to put that genie back
into
the bottle is like catching air. The only way it might be done is by
creating a global political regime - the dreaded One World Government,
of
which the United Nations (UN), the European Union (EU), etc. are the
founding elements.
We say �dreaded� because the TNCs can influence and control such a
global
government more easily than a myriad of national or local legislative
bodies. After all, the UN, the EU, the WTO, the IMF, the World Bank,
etc.
ARE creations of the globalist bankers, such as Rockefellers,
Rothschilds,
etc. And these folks haven�t impressed the world as shiny examples of
civil liberties champions, have they?
Furthermore�
· Did you know that the U.S. tax authorities made income tax
�adjustments� in favor of the 156 American and 236 foreign-based TNCs to
the tune of $1.5 billion in 1994?
· Did you know that 61% of the American and 67% of the
foreign-based
TNCs PAID NO U.S. INCOME TAXES in 1995?
Which means that Vanderbilt�s infamous �the public be damned� comment
from
a century ago is slowly becoming a reality today.
Well, with that �cheery� preamble, let us now dig into the flesh of the
matter�
M&A Leads the Way!
Our annual analysis of the United Nations World Investment Report 2000
shows that cross-border mergers and acquisitions (M&As) are the drivers
behind the globalization trend. Their ultimate objective is
concentration
of market power in few but mighty hands. And with no such thing as a
global trustbuster in sight, Wall Street�s M&A push is well on its way
to
achieving that goal.
In 1999, for example, cross-border M&As accounted for $720 billion, or
90%
of the total foreign direct investment (FDI) outflows made by the global
TNCs ($800 billion). Or about 83% of the world�s total FDI inflows
($865
billion) during the same period.
The 1999 M&As are up more than seven-fold since 1987, roughly the start
of
the long-running Wall Street bull market. Back then, the global M&A
activities accounted for only $100 billion, according to the UNCTAD data
(the Geneva-based United Nations Conference on Trade and Development).
The global M&A activities in 1999 resulted in over 6,000 transactions,
yielding an average deal of about $120 million.
Perhaps more telling about the rising significance of this Wall
Street-driven activity is the fact that M&As (both cross-border and
domestic) surged from 0.3% of the world GDP in 1980, to 8% in 1999. The
total number of the deals (24,000) increased by a compound interest rate
of
42% during the same period, reaching an aggregate value of $2.3 trillion
by
1999.
Two big waves of M&As are discernible. The first, a smaller one, was in
1988-1990. It was followed by another bigger wave which started in
1995,
and which is yet to crest. After a record 74% surge in 1998, the
cross-border M&As increased by 35% in 1999, for a 47% growth rate in
1996-1999.
Despite a large number of �megadeals� (109 over $1 billion in 1999) that
have taken place in the recent surge of M&As, the relative size of the
biggest transactions is modest when put in historical perspective. The
largest M&A deal to-date, Vodafone Air Touch�s acquisition of Mannessman
in
2000, valued at about $200 billion, is a scant one-third of the early
20th
century creation of US Steel, which would be worth about $600 billion in
today�s dollars.
At the last turn of the century, at the height of the �Robber Baron�
era,
the ratio of M&As to the U.S. GDP was about 10%. As you saw from the
above
stats, it is now about 8% of the global GDP.
So Wall Street is slipping while climbing�
Flies in the Ointment
There are also some other flies in Wall Street�s M&A ointment. As with
most top-down fads (as opposed to the bottom-up trends), many deals go
sour. How many?
�Half of all M&As do not live up to the performance expectations of
parent
firms, typically when measured in terms of shareholders value,�
according
to the UNCTAD report. But that doesn�t worry too much the top Wall
Street
deal makers who usually make out when the deal is done (see the �Top 10
M&A
Deal Makers� table on the next page).
Cross-border M&As can also be used to REDUCE competition in local
markets,
as the global oligopolists drive out the local competitors.
�Moreover, even in M&As that do go well, (an) efficient implementation
from
an investor�s point of view does not necessarily mean a favorable impact
on
the host country development� The main reason is that the commercial
objectives of the TNCs and the development objectives of host economies
do
not necessarily coincide.�
�Do not necessarily coincide?� How about calling a spade a spade: They
clash! Just check with the heads of the Southeast Asia countries that
were
savaged in 1997 (see �Wall Street�s Financial Terrorism,� this writer�s
global economic column published by the Chronicles magazine of Chicago
in
March 1998).
Globalism = Recolonization
More than three years later, even the UN scribes are agreeing with our
conclusion - that unchecked globalism can lead to recolonization of the
world. Here�s what the UNCTAD 2000 report concluded about the
�benefits�
of the TNC-led globalization:
�The areas of concern transcend the economic and reach into the social,
political and cultural realms. In �industries� like media and
entertainment, for example, M&A may seem to threaten national culture or
identity. More broadly, transfer of ownership from domestic to foreign
hands may be seen as eroding national sovereignty and amounting to
recolonization.�
�Recolonization� is precisely what occurred in Asia after the 1997
financial crisis, as the global bankers and TNCs bought up ravaged local
assets at �fire sale� prices.
ASIA. In South Korea, for example, one of the �Asian tigers� wounded by
the
1997 crises, acquisitions by foreign firms exceeded $9 billion in 1999,
making the country the biggest M&A takeover target in developing Asia.
Foreign takeovers in Southeast Asia nearly tripled in the post-crisis
period (1997-1999), reaching an annual average of $20 billion. This
compares to an average of only $7 billion during 1994-1996. Purchasers
from the U.S., U.K., Singapore, Netherlands and Switzerland - in that
order
- were the largest acquirers.
U.S. companies, for example, spent $5.8 billion during 1998-1999
acquiring
devalued assets in the five hardest-hit Southeast Asian countries
(Indonesia, the Philippines, Malaysia, Korea and Thailand). But prior
to
the financial crisis, which some say was deliberately engineered by Wall
Street, the same American TNCs spent only $344 million on the much more
expensive assets.
Similar ratios are discernible for the other top �vulture capitalists� -
from the U.K. ($3.2 billion vs. $461 million); Singapore ($2.5 billion
vs.
$1.1 billion), Netherlands ($1.8 billion vs. $400 million) and
Switzerland
($1.7 billion vs. $316 million).
Those economies are now humming again, but the profits are flowing into
Wall Street�s and TNC�s pockets, not those of the local businesses.
As for China, the country that has attracted a quarter of all direct
foreign investments made by the TNCs in the developing world during the
1990s ($285 billion), it finished the 20th century on a sour note. The
1999 investments, while still formidable at $40 billion, dropped from
the
year before by 8%. It was China�s first decline on record! And it came
at
a time when the country has been all but admitted to the WTO - a
�carrot�
the Chinese government has been eyeing for years.
LATIN AMERICA. Nor is just an Asian financial flu. Remember the
financial
crisis in Brazil, some two years ago? And how a former George Soros man
(Arminio Fraga) was installed as the Central Bank governor and put in
charge of the �turnaround?� (see �Brazil Central Bank�s Revolving Door�,
Feb. 1999).
Well, Fraga seems to have done just that. He turned Brazilian assets
over
to his pals, the Wall Street bankers. Who, along with their TNC
clients,
pumped over $31 billion into the Brazilian economy in 1999, mostly
through
M&A takeovers of the local companies, and called it a �turnaround.�
This
followed $28.5 billion of foreign investments in 1998.
And suddenly, Brazil has leaped from a country plagued by a �financial
crisis� to the best �investment opportunity� in Latin America,
leapfrogging
even Mexico, a NAFTA country the largest recipient of foreign
investments
prior to 1996. In 1998-1999, Mexico received �only� $11 billion and $10
billion respectively.
In both Brazil and Argentina, the second most popular �investment
opportunity� in Latin America in recent years, the local government- and
bankers-pushed privatization has been the main driving force for the
M&A-type takeovers of the domestic economies by foreign companies.
As in the case of Asia, we are told that those economies are now humming
again. But what the media doesn�t usually tell us is that the profits
are
flowing into foreign, not local businessmen�s pockets.
In 1999, for example, Latin America received a record $90 billion in
foreign investments (read foreign takeovers of local enterprises). At
the
same time, however, the region posted a $56 billion current account
deficit. The latter figure represents the repatriation of dividends and
profits to the foreign owners.
So Latin America is a classic example of both a recolonization of the
world
by financial means, and of the �Wall Street Hoover� at work. On the one
hand, it�s sucking the manufacturing jobs out of the developed
countries�
economies and spewing them south of the border. On the other hand, it
is
sucking out the profits south of the border and bringing them back
home. Only to be as golden handcuffs for the next global �investment
opportunity,� a.k.a. Wall Street colony.
EASTERN EUROPE. Speaking of which, since the end of the Cold War,
Eastern
Europe has become one of the fastest growing �investment opportunities�
for
the TNCs. And as we predicted in 1996, it is gaining ground on the
former
TNC darlings in the Asia/Pacific region.
In 1999, foreign investments in Eastern Europe reached $21.4 billion,
for a
61% compound annual growth in the 1990s, by far the highest in the
world. Of course, they were practically zero at the end of the Cold
War.,
so this figures overstates the attraction a bit.
The West�s old favorites - Poland, Czech Republic Hungary - maintained
their relative positions among the top five recipients of foreign
investments, raking in $7.5 billion, $5.1 billion and $1.9 billion
respectively in 1999. But while the figure for the Czech Republic
represents a near doubling of the 1998 total ($2.7 billion), Hungary
experienced a modest decline, and a big drop-off from the record $4.5
billion it received in 1995.
Perhaps the biggest surprise is a sudden resurgence of investments in
Croatia, a tiny Balkans country that placed fifth and attracted $1.4
billion in 1999, up from only half a billion two years earlier. The
TNCs
also upped their stake in Bulgaria, another small Balkans country, but
by a
smaller amount (from $537 million in 1998 to $770 million in 1999).
Russia placed third among the Eastern European countries with $2.9
billion
of foreign investments in 1999, a small increase from the $2.8 billion
it
received in 1998. But on a per capita basis, the largest country in the
world, and by far the biggest economy of Eastern Europe continues to be
mostly spurned by western investors (see �Two Faces of Globalism: Yin
and
Yang, Princes and Paupers� Dec. 1998).
Why?
First, because despite the occasional diplomatic glad-handing by
Washington, Russia continues to be regarded as the Bogey No. 1 by the
New
World Order leaders. And what Washington wants, the TNCs do.
Second, Vladimir Putin, now president, and the man who has effectively
run
Russia since being appointed prime minister in August 1996, has been
acting
- surprise, surprise� by contrast to the Brazil or Argentina leaders,
for
example - in HIS country�s best interests. At the same time, Putin has
been skillfully courting the western bankers who have nearly $150
billion
at stake, including the (bad) loans to the now defunct Soviet Union (see
�Coopetition: Russia�s New Foreign Policy�).
Third, the best pickings are over. In the heydays for plundering
Russia�s
resources, during the eight-year reign of the quisling Yeltsin regime,
over
$500 billion of Russia�s assets had been transferred to the West,
whether
legally or surreptitiously, according to our Russian sources. By
contrast,
the West had invested less than $5 billion by the time Boris Yeltsin was
reelected as president in 1996.
So $5 billion in, $500 billion out� Perhaps that�s an extreme example of
the �benefits� of globalism. Yet it fits the patterns elsewhere around
the
world.
�Long live free trade!� �The public be damned!� The �Robber Baron� era
is
back. Only now on a global scale. Take cover.
-------------
----
TRUTH IN MEDIA
Phoenix, Arizona
e-mail: [EMAIL PROTECTED]
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