GLOBALISATION Who is it good for?

1. GLOBALISATION Who is it good for? A Brief Tour of the Global Economic Map PositiveMoney Sheffield Group Sarah Mirza www.positivemoney.org www.positivemoneysheffield.pbworks.com

2. AGENDA Players and Stakeholders Macroeconomics Free Trade Versus Protectionism TNC’s / MNC’s Case Study Investment Banking Cycle of Debt Discussion

3. “The global economic map is always in a state of ‘becoming’: It is never finished...there are complex processes of path dependencies at work.... Old geographies of production, distribution and consumption are continuously disrupted.” (Dicken P (2006) p32

4. GLOBAL MAP INVESTORS FINANCIAL MKTS CONTAINER SHIPPING TECHNOLOGY POPULATIONS WEF UN UNCTAD GATT WTO WORLD TRADE BLOCS TNC NATION STATES G+ G.C.S.O WORLD BANK IMF GOVERNMENTS

5. MACROECONOMICS • Large Scale Production • Economies of scale • Investment Process and Financial Markets • First mover advantage • Allocation of Finite Resources • Specialization • Comparative Advantage • Absolute Advantage • Zero Rate Marginal Cost

6. WORLD TRADE BLOCS APEC: CAIRNS GROUP: EU: NAFTA: CAFTA: OECD: OPEC: G20: MERCOSUR: SADC PROTECTIONISM VERSUS FREE TRADE Free Trade: when government put in place policies that allow producers from overseas nations to freely sell their goods in home country (promote trade). Protectionism: when government put in place policies to stop overseas producers freely selling goods in home country (restrict trade). Resurgence in Protectionism – Trading Blocs become more competitive and restrictive of each other. Prevent penetration from outside by increasing protectionists strategies.

7. DEPENDENCY THEORY Dependency theory developed in the 1950’s by the Director of the UN Economic Commission for Latin America, Raul Prebisch. In short, dependency theory attempts to explain the present underdeveloped state of many nations in the world by examining the patterns of interactions among nations and by arguing that inequality among nations is an intrinsic part of those interactions. Relationship is dynamic and tends to reinforce unequal patterns.

8. External forces are of singular importance to the economic activities within LEDC’s. MNC’s: TNC’s: International Commodity Markets: FDI: Technologies: Debt. All represent the capacity of MEDC’s to further their own economic growth at the expense of LEDC’s = Inequality Internal mkts. of LEDC is not large enough to support the economies of scale of MEDC Transformation of LEDC from primary product producers not always possible or desirable. 20% of world population controls 80% of world income, trade, investment and communication technology. 20% living in poverty control 1% of these

9. Caught in a Debt Trap

10. “The human costs of unfair trade are immense….were each (country) to increase their share of world exports by 1% the resulting gains in income could lift 128 million people out of poverty.” The trade barriers of LEDC to export to MEDC cost $100bn a year. Twice as much as they receive in Aid. Dicken (2006) p346

11. TRANSNATIONAL CORPORATIONS – TNC’s MULTINATIONAL COMPANIES – MNC’s Top 500 companies turnover is equivalent to one third World GDP The exports by foreign affiliates of TNC’s account for about a third of total world exports of goods and services and employ 77 million people LEDC’s countries need them for FDI but have little control TNC’s/MNC’s can avoid taxes by utilizing units in different countries. E.G. Credit Suisse fined $2 ½ Billion for “hiding money” to avoid tax. Amazon paid £4.3 Million taxes but sold £4.1 Billion in UK.

12. Case Study UK Company? TNC Merger of Swedish and UK Drugs company Many R&D in USA Employs 50,000 worldwide £63B turnover Only 6,700 in UK USA company? TNC Known as Asset Strippers Already reduced R&D jobs by 50,000 worldwide Failed to keep promises in past

13. What People Say Biggest takeover of a UK company by a foreign firm Government incentives on Lower Corporate Tax for intellectual property to keep Patents in UK. Cameron demands more assurances. Long term benefits of drugs outweighs short-term Nationalisim does not matter – UK Jobs protection not priority Golbalisation is a good thing. It brings prosperity and economic growth and valuable inward investment. Governments should not interfere in company decision making. It is up to the shareholders

14. INVESTMENT BANKING = “Shadow Banking” Advice/Assist with Mergers and Acquisitions: Origination and Transfer of Exchange- Traded Securities: I.E. Company Shares: Corporate Bonds: Selling Rights to Receive Payments Contractually entitled to. Assumption that there is a “pool of cash between investments”. ALTERNATIVE TO MONEY CREATED BY BANKS “Overall, the finance sector has recycled negligible amounts of existing money into economic investment……..The money provided by investors effectively remains in the second-hand market chasing up prices.” (Hodgson 2013)

15. Public Side Equity Funds: Mutual Funds: Life Insurance Companies: Unit Trusts: Hedge Funds: Fixed Income Currencies and Commodities (FICC) Bonds: Derivatives: Futures Private Side : Information not in public domain. Supposed to be separate from Public Side to prevent Conflict of Interest. But Who Knows? Many have links to both sides. Insider Dealing complicated business and different rules apply across the world. Libor – Currency value fixing – 12/06/14 Osborne speech on setting rates preventing pre-traders setting their own

16. “Every effort has been made by the Federal Reserve Board to conceal its powers, but the truth is that the Federal Reserve System has usurped the Government. It controls everything in Congress and it controls all our foreign relations. It makes and creates Governments at will.” Louis T McFadden – Chair of the House Committee on Banking and Currency USA

17. Debt Cycle

18. UK Government Owes B of E £1.36 Trillion 80% of Active Output £70 Billion % interest by 2017 US Government owes $16 Trillion to Federal Reserve Bank 2/3 Globe heavily in debt. Have to pay IMF; World Bank; Commercial Banks Meanwhile – Conservative Estimates of offshore hidden holdings = $32 Trillion of tax avoidance or evasion £1,710,000,000 per day goes back to banks but only £565,000,000 comes out to Productive Economy (Malcolm Henry ‘Crazy Money’ 2013)

19. “I see in the near future a crisis approaching. It unnerves me and causes me to tremble for the safety of my country. The Money Power of the country will endeavour to prolong its reign by working upon the prejudices of the people until the wealth is aggregated in a few hands and the Republic is destroyed.” Abraham Lincoln 1863 National Banking Act “The few who understand the system will either be so interested from its profits or so dependent on its favors, that there will be no opposition from that class.” Rothschild Brothers

20. General Considerations New Economic Paradigm? Triple Bottom Lines ”Economics, Social and Environmental “ = C.S.R. for TNC’s 1987 Brundtland Report “Our Common Future” 2012 UNEP and General Assembly promoting CSR for Sustainable Development GCSO Debts can be cancelled OECD – pushing for transparency of offshore bank accounts

21. How will PM Reforms Affect Debt and Inequality? Money Creation Committee (MCC). Government creates money through B of E Money is issued Debt Free 4 Allows Government to spend on Public Services and Infrastructure 5 Restrains on over-exuberant growth 6 Two types of Bank Accounts a) Custodial or Transaction Account b) Investment Account

22. “It is difficult to predict how individuals will allocate funds between Investment and Transaction Accounts.” (Modernising Money Jackson and Dyson p37)

23. “The eyes of our citizens are not sufficiently open to the true cause of our distress: They ascribe them to everything but their true cause, the banking system; a system, which, if it could do good in any form, is yet so certain of leading to abuse to be utterly incompatible with the public safety or prosperity.” (President Thomas Jefferson 1743 - 1826)

24. Referencing Barker M (21.05.2014) “The rich have a right to privacy – their cash does not” I Paper Cohn T (2012) Global Political Economy 6th Ed. Pearson Dicken P (2006) Global Shift – Mapping the Changing Contours of the World Economy 5th Ed. Sage Publications Henry M (2013) Our Money – how to shrink government, boost business, eliminate poverty, and make the economy work properly for everyone QEI Projects Ltd Henry M (2013) Crazy Money – Video available through PM website Hodgson G (2013) Banking, Finance and Income Inequality Available through PMsite Musa A New Economic Slavery – Video Available through PM site Rowbotham M (1999) The Significance of Monetary Reform – The Disaster of Debt Based Economics Video available from PM site Smith R (2012) Should Economic Liberalisation Die a Natural Death in East Africa? Daily Nation