The deregulation of the financial markets combined with the high speed trading made possible by increasingly sophisticated computers has radically changed world markets and expanded the power and reach of capitalist economics a hundred fold. Financial transactions can now occur at lightning speed, reacting in the flash of a news bulletin to events any where in the world, moving from one market to the next at the touch of a key. While there is clearly considerable advantage provided to all by the World Wide Web, the unfettered and instanteous movement of large sums of private capital through the financial markets can be used like a weapon of steath on developing nations and have far reaching political and social repercussions.
Ten years ago, when Malaysia's Prime Minister Mahathir Mohamad called out against the currency traders at the Asia Pacific Economic Cooperation (APEC) Forum in November of 1997, little was made of it in the media. Even though South Korea had just become the fourth APEC member to seek financial rescue since July, quivering world stock markets and the details of IMF restructuring package got more attention than the economic mechanisms that caused the problems in the first place. But Mr. Mohammad's accusation was right on. Currency speculators, like flocks of vultures, can descend upon wavering monetary systems, make their marginal profit, then depart at the touch of the keyboard when the bones are picked clean. The action is simply a dynamic of the currency market which is often based more on the schemes of investors than actual circumstances at play in the country under siege. Still it can crush a nation in a week.
The international money markets are dominated by stateless money–money that owes no allegiance to anything but itself. Maverick investors, large private financial institutions, and venture capitalists tour the world via electronic networking, abstractly playing margins in any market, in any country, across any boundaries, across any cultural divide. Individual speculators like George Soros or international financiers like Salomon Brothers or Goldman Sachs can corner a market when they move in a pack. This is what Malaysia's Prime Minister wanted addressed ten years ago. The problem still exists today and reveals yet another of the mechanisms of our capitalist system that can grind against mindful stewardship of our planet home.
Beginning in March of 1973 when President Nixon floated the dollar on the international market, and rapidly picking up speed in the years following, money management, particularly currency trading, has evolved from the firm's silent partner into the biggest name on the Street. Today we might see a daily trading volume at the New York Stock exchange of $25 billion. Global currency trading occurs at fifty times that volume. Why is this? Because, today, in the new age of money, capital is never allowed to rest. It must always move, always turn a margin, always gain a percent. And it can happen in the blink of an eye. Over and over.
When a loan is taken out, for example, by a university to build a new library, that money will be spent over a period of a year or two to finance the library's construction. While the payments are made month by month as work proceeds, the rest of the loan does not remain inactive in the bank. It is put to work through investments by the university to earn money, helping defray the construction costs. The point is money never rests. It is always invested and counter-invested. Whether in currency or stocks or commodities, margin after margin makes the money turn over. Though this new era of money management has given investors of all sizes new angles on the market, currency instabilities, caused by large scale go-go financiers, have impacted whole Third World economies in a decidedly detached and often detrimental manner.
To put this financial market evolution in perspective, more money is in action today than international central banks can leverage against. It's as though a sum of capital is more powerful than a nation. William Greider quantizes this in his book One World, Ready or Not:
"This epic shift of power was delineated in numbers from the McKinsey report on global capital: In 1983, five major central banks (the United States, Germany, Japan, Britain, and Switzerland) held $139 billion in foreign-exchange reserves versus an average daily turnover of $39 billion in the major foreign-exchange markets. In other words, the central bankers' combined firepower dwarfed the marketplace by more than 3 to 1. By 1986, the two were about even in size. By 1992, the balance of power was reversed. These major central banks had $276 billion in reserves against $623 billion in daily trading activity. The market traders now had the size advantage by more than 2 to 1."1
Today these figures are even further skewed. While there has long been distrust in the international banking community, because of its monopoly on the "creation" of money, at least the central banks were tied to democratic governments in some way or another, and they were beholden to public trust though often strained. Now their control has been undermined, and private interests squeeze dollars as they please. This deregulated financial market is decidedly cold-hearted, and in a world where social conscience is sorely lacking already, global management, as even Mr. Soros openly admits, is perversely swayed by private financiers. And currency trading is the worst of it. No commodities are exchanged, no comparative advantage in goods or merchandise is enabled, it is simply money buying and trading money.
This reveals the most subtle and frightening aspect to the deregulation of the international money markets and, moreover, the central flaw in the capitalist system. When left to its own momentum, large pools of money beget more money. The financially advantaged not only gain in wealth, but gain in advantage with time. William Greider sums this up nicely with regard to the 1980s:
"Capitalism had this flaw: there was no natural stop valve to control its appetites. For individuals as well as for great institutions of finance, the natural ambition of capital was always to seek maximum return from wealth. There was nothing in the capitalist process that told investors when they were demanding too much from it, that their collective desires for net gain was undermining the system itself. In the absence of political or social controls, the decrees of church or government, the lenders naturally claimed as much as the marketplace would allow; they had no way to distinguish between their normal desire for profit and the destructiveness of greed."2
What we see in totalitarian countries around the world, what is increasingly happening in the United States, and what the mechanics of unfettered capitalism unavoidably creates is precipitous financial stratification. As the saying goes, the rich get richer and the poor get babies. This is as true for the individual as it is for industry. The big are the advantaged, and deregulation makes this manifest. Profit motives, vested interest, position, these are the fundamental forces at work behind the scenes at the economic level. One only needs to look into the history of the petroleum industry to understand that positions of power are usually way ahead in the game, both with influence and information. It has not been an accident that global warming has been neglected for thirty years. It has been financially leveraged.
Sadly, unfortunately, in our New World Order, money, and more and more stateless money, is king. Beholden only to the principals of huge international conglomerates, it has no other duty than to procreate. The bottom line dictates all decisions. Higher profits now, means a greater financial base for higher returns later–the interest on the interest on the interest on the interest on the credit money. The result is the huge snowballing effect of capitalization. We are seeing it now on Wall Street. The future seems brighter and brighter for the investor, but also more precarious and unfounded by circumstances at ground level. When compounding interest grows at rates faster than the economy produces new wealth, the system begins to disintegrate. Mr. Greider expands on this:
"The miracle of compound interest, celebrated for its power to stimulate new ventures and generate new wealth, contained a malevolent potential. The process could not function indefinitely if the creditors got most all of the rewards–the new wealth derived from their lending–and the enterprising borrowers got little or none. Interest rates set the terms on which the rewards of capitalism would be divided and interest was usurious when the borrower's rightful share of profit was confiscated by the lender. Capitalism could not long function in that condition. The creative powers of capital were reversed and the compounding interest became destructive. Instead of distributing the bounty widely, the rewards were steadily concentrated in fewer and fewer hands. The process might go on for a long time, but eventually it had to fail, either from social upheaval or economic exhaustion."3
The mounting expectations of the market, the momentum of the capitalist system, rolling over and over, without responsible consideration for natural limits (petroleum depletion, species extinction, atmospheric carbon dioxide concentrations) suspending in the future, propels itself to the edge of a deep chasm with no sign of slowing. Entwined in the Medusa arms of this ravenous octopus are its servants, the working class and the vanishing indigenous peoples of the Third World. The destiny of these innocent offenders is absolutely connected to those who run the show, who profit most, and who have the position and influence to change our course. The external factors of environmental quality and resource limitations are clear and obvious. Either a courageous hand must ease back on the throttle of capitalization, with consideration for all, or a clash of class and/or nature is inevitable.
No commentator on the subject of world food supplies or environmental repair, no matter how optimistic, offers hope for our most basic of securities without sacrifice on the part of "those-with" for "those-without." The forces and trends at play in the world today are on a collision course–selfish greed hell bent on the health of the biosphere. The last thirty years of international economics are horribly stained by the former. The positioned have strengthen position. The poor witness tougher times. Beyond all demographic speculation, topsoil loss, or water shortages, more than anything else, poor distribution of opportunity can be directly attributed to widening gaps in the distribution of wealth. "The ratio of income between the richest and poorest fifth of the population rose from about 30 to 1 in 1960, to 32 t0 1 in 1970, to 45 to 1 in 1980, to 59 to 1 in 1989."4 It surpasses 100 to 1 today. In light of this increasing financial stratification, globally and in individual nations, it is likely that class differences more than human numbers will shape the future.
And somewhere in the back of the minds of these corporate players and financiers, they must know this. There must be memory of this lesson from their history books. The ruling class needs to assuage the working masses. The work force is the strongest of all political entities. Let them sleep easy. They are not a particularly pleasant group when they become restless. Our present radical stratification of classes is a sure formula for disaster. The uprising of the working class spreads fast–like a prairie fire. More volatile than climate change. Less predictable than oil shortages. Social revolution is sudden justice.
For all the soft talk about environmental concern, the reality, displayed by our subsidy uses, trade agreements, and banking practices, is that world power brokers are more concerned with profit than right action. This, of course, is not a huge revelation. What is sad is that the mechanisms of the economic system, at every level, perversely sustain this concept of unlimited growth–at the cost of everyone and everything. Edward Abbey sums it up with naked clarity: "Growth for the sake of growing is the ideology of a cancer cell."