New Internationalist

Facts

Issue 306

THE FACTS ON MONEY

Cooked, for their own benefit, by bankers, financiers and speculators,
the world's money system is more than ever a marker of inequality.

[image, unknown]
Other countries: Canada $19,280,
Australia $18,720, Britain $18,700,
Ireland $14,710, Aotearoa/NZ $14,340
1 DEEP DIVISIONS

The gap between rich and poor worlds is vast. In terms of GNP per person, a citizen of the richest country is 500 times better off than one from the poorest.

Top six working billionaires 2

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1 Bill Gates, US. Net worth: $51 billion. Owns 22% of Microsoft computer empire. Age: 42.

[image, unknown] 3 Philip F Anschutz, US. Net worth: $8.8 billion. Oil, gas, real estate, sports and high tech. Age: 58. [image, unknown] 6 Rupert Murdoch, US. Net worth: $5.3 billion. Media magnate. Age: 67.
[image, unknown] 2 Prince Alwaleed bin Talal bin Abdulaziz Alsaud, Saudi Arabia. Net worth: $13.3 billion. King's nephew and restless investor in Citicorp, News Corp, TWA, Euro Disney and others. Age: 41. [image, unknown] 4 Hasso Plattner, Germany. Net worth: $6.9 billion. Co-founder and owner of 23% of SAP computer software. Age: 54. [image, unknown] 5 Francois Pinault, France. Net worth: $6.6 billion. Owns 26% of retailer Pinault-Printemps-Redoute and others. Age: 61.

2 IN THE RED

The world's economic system is based on debt. Every country in the world is in the red, even the richest and most successful. Most of the money is owed to multinational banks and financial institutions.

Rich countries can ride high indebtedness if there is confidence and investment in their economies.

But poorer countries are crippled by their foreign debts. Some owe several times more than their total GNP.

[image, unknown] Biggest creditors

Apart from the World Bank the biggest lenders are commercial banks, which in most countries today bring 95% of all money into existence by making loans. 3

TOP BANKS ARE: 5
1 HSBC Holdings - London, Britain
2 Chase Manhattan Corp - New York, US
3 Crèdit Agricole Groupe - Paris France
4 Citicorp - New York, US
5 Bank of Tokyo-Mitsubishi - Tokyo, Japan

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Currency traders take stock at SIMEX, Singapore.
CHRIS STOWERS / PANOS PICTURES
3 COLOSSAL CAPITAL

Today the power of international finance - banks, pensions, trust funds, investment houses and hedge funds - is colossal, dwarfing even that of multinationals.

Currency: Between $800 billion and $1,000 billion is traded every day in the international currency markets alone. This is now equal to the international trade between stock markets around the world. 3

Funds: In the US the total pool of investment funds doubled between 1991 and 1994 to $2,000 billion. Pension funds comprised a third of all US corporate stocks and shares. 3

Banks: Giant mergers are turning banks into the world's most powerful corporations.
This year Citicorp and Travelers Group plan the biggest bank merger yet. Combined assets will top $700 billion, with 100 million customers in over 100 countries. 6

Other mega-mergers of the 1990s include:

Combined assets in $billions 6

Chemical Bank - Chase Manhattan     $300

Bank of America - Security Pacific     $192

NCNB - C&S/Sovran     $118

Wells Fargo - First Interstate     $107

[image, unknown] 4 HOT MONEY

Most investment in the world is now 'hot' - speculative and very short term. Three quarters of it comes and goes away again in a week or less. 7

Globalization has brought vast flows of speculative capital to emerging economies whose markets offered high interest rates.
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Over 75% of speculative capital has gone to just 10 emerging economies, led by China, Indonesia, Mexico, South Korea and Brazil. 8

The flow of private money into developing countries expanded from $34 billion in 1987 to $256 billion in 1997. 9

... COLD TURKEY

Sudden withdrawal of capital has severe social impacts. In South Korea unemployment is expected to hit 3 million by the end of 1998, as 10,000 workers lose their jobs each day. 8

Meanwhile, official aid from Western governments to the developing world has also declined. It was $37.3 billion in 1997 - a drop of 12% in real terms compared with 1996. 10

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Ån old woman counts up her roubles in inflation-ridden Russia.
H BRADNER / PANOS PICTURES
5 EVAPORATING VALUE

The value of money can drop overnight when currencies fall in relation to others. This can be provoked by large-scale currency speculation.

In 1997, the Malaysian, Filipino and South Korean currencies fell to record lows as a result of the Asian Crisis. But the Indonesian rupiah has been the worst hit, depreciating by 80% against the dollar while the Thai baht is worth about half of its pre-crisis value. Currency values in Mexico, Argentina and Brazil also fell as a result of the crisis. 8,9

Inflation occurs when the value of money falls in relation to the goods it can buy. [image, unknown]

Other countries: Australia 3.7, Aotearoa/ New Zealand 3.9, Ireland 2.5, Britain 5.1, Canada 2.9, US 3.2, Japan 1.4.

Sources:
1 World Bank, World Development Report 1997, New York.
2 Forbes, July 6 1998.
3 Michael Rowbotham, The Grip of Death (Jon Carpenter, 1998).
4 Jacques Gelinas, Freedom from Debt (Zed, 1998), quoting from World Bank and UNDP Human Development Report 1997.
5 The Banker, July 1998, London.
6 Edward S Herman, 'The threat from mergers' in Dollars and Sense, May /June 1998. Also Citicorp News, July, 1998.
7 Noam Chomsky, 'The poor always pay debts of the rich', Guardian Weekly, May 24, 1998.
8 Foreign Policy in Focus, Vol 3, No 5, April 1998, Interhemispheric Resource Centre, Albuquerque, US.
9 The Economist, 'Towards a new financial system', April 11, 1998.
10 Charlotte Denny, 'Asian backlash hits the poor', Guardian Weekly, April 5, 1998.

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