FINANCIAL IMPERIUM[1]

A. Khoshkish

Abstract:

In a study of the dynamics of global power, after a brief review of the relationship between the evolution of the means of communication and control and different forms of imperia -- from tribute-collecting, extractive and exploitive, to colonial and ideological empires -- the paper attempts to discern the impact of the coincidence of electronic revolution with the emergence of financial imperium, and their correlation. Will financial imperium create enough structures to maintain its power? Or, will financial imperium's inherent weaknesses of consumerism -- yet uneven distribution of wealth  -- and leveling of culture to the lowest common denominator, provide ammunition for more virulent power centers to emerge and exploit the electronic tools of control?

*      *      *

Definition and scope:  

Within the broad temporal and spatial treatment of power, the present essay proposes to study what I label financial imperium. 

By "imperium" I simply mean its original Latin connotation: A commanding position – from emperare:  to command.  While the concept of imperium is pervasive at all levels of power, in this essay we focus on the phenomenon from, so to speak, “above” – the historical concept of empires in global context.  It is, broadly speaking, a layer of exercise of power over closer-knit social, economic, political and cultural layers.  Those layers can include households, clans, tribes, ethnic groups, feudalities, city-states, nations, nation-states, each with different degrees of cohesion. 

"Financial" is the qualifying factor.  In general, the goal of an empire is gain – "fame and fortune."  But historically speaking, the locus of power of empires has resided in their political components, whose ambitions have not always been "cost effective," contributing to their ultimate demise.

More specifically, here I refer to the "financial" as a trait in the evolution of imperium in the last couple of centuries which now, propelled by the electronic revolution, has bloomed into a potentiality that could become a departure of cataclysmic proportions from the historic patterns of empires preceding it.

Imperium

 The future of man remains undetermined because it depends on him.
Henri Bergson

Those who cannot learn from history are doomed to repeat it.

 George Santayana

A discrepancy arises when these two often-quoted statements are juxtaposed.  The discrepancy is: would the forecast of the future behavior of those who study history have a narrower fork because those who study history would be less likely to repeat historic mistakes and, therefore, mistakes made in the past can be taken off the list of their possible behavior?  To reflect on the question in the context of the present essay, I propose to begin with my theory of time-series dysfunction of empires.

Time-series dysfunction of empires[2]

The statistical concept of “Time-series” holds that we need a series of a given event occurring in relatively connected intervals in order to be able to discern a pattern and draw conclusions from it.

 For instance, in terms of human social organization one could assume that an ethnicity preserves its past experiences as its mores and lores to shape its members’ identity or, modern nation-states inculcate their citizens with their national history and cultural heritage to enhance their sense of national belonging.  They draw on the time-series of their collective memory.  It seems, however, that in identifying with time-series, the human species has geographic and temporal limitations.  Beyond a certain distance, in time and space, human beings don’t relate to events and do not assimilate and internalize them as applicable experience.  Events in distant lands or what has happened a “long time ago” become anecdotal and historical, and not components of observed time-series from which lessons could be drawn.  That is what I call time-series dysfunction.  It is most flagrant in the case of empires. To a Westerner today the conquests of Gengiz Khan are “Chinese” and the Chinese Wall is a tourist attraction. 

The reason is that empires are few and far between, and in terms of time-series, one empire can consider the events and the evolution of another irrelevant to its own course. Yet, looking at history, one is struck by the similarities of emergence, growth, vigor, stagnation and decay of empires.  Paul Kennedy makes a convincing case of a pattern of military "over-stretch" of empires that contributes to their demise.[3]

To put the discourse in context we need a thumbnail sketch of the modus operandi of empires and their broad historic traits.

Overlapping modus operandi of Imperium

The intensity, depth and duration of control by different sorts of empires have depended on the capacity and vision of their power holders to use the available means of communication and control.

-  Physical Control: 

Efficient use of means of transportation, communication, coercion and control that have evolved from "mechanical" – from the sixth century B.C. Royal Road of Darius, the fourteenth century wind adjustable riggs of European ocean farers, compass, and cannons; to "electronic" since the nineteenth century – telegraphy, telephone, wireless, radar, nuclear bomb, outer space satellites, broad bands, and pilotless drones.

-  Psychological Impact:  

Persuading the tributaries of the empire’s superior force: through parade of might – threat of pillage, massacre and rape – to psychological inculcation through propaganda or faith – the superiority of Aryans over Dravidians, Islam over Kafirs, the white man’s burden, to "freedom."

To consolidate their power, empires have resorted to underlying socio-psychological religious or ideological fabrics. While some empires' original élan was actually propelled by religion such as Islamic or the Holy Roman Empires, others, realizing the need for a religious fabric to keep their empire together imported them, as did China (importing Buddhism from India) and Russia (Vladimir importing Orthodox Christianity from Constantinople.)       

An inherent characteristic of power in imperia is the dynamic relationship between the imperial power and those it controls within a spectrum with, at one end, those who acquiesce to the imperial power – at times, even being “proud” to be within it – and, at the other end, those who resist, resent and challenge it and often contribute to its downfall.

Evolution of Empires 

While one could discern variations in the historical evolution of empires, their broad characteristics overlap.  The following is a brief assortment of their salient traits.        

-Tribute-collecting imperium: 

The concept encompasses all exercise of power by one entity over another simply by manifestation of superior force for collection of tributes without necessarily direct exercise of control in the on-going internal political, economic, social or cultural affairs of the tributary.  It is the earliest and most guttural form of imperium.  It starts with one powerful entity --  clan, tribe, nation -- exacting payment from others.

-Feudal imperium: 

In feudality, whether in medieval Europe or China, while the relationship between the center of the empire and its vassals – kingdoms and principalities – may have been clanish or tribal of similar social patterns, the tribute was in essence the acknowledgement of a superior power and fear of consequences.  The pattern could apply to such present-day global networks as mafia or terrorist groups.

Under certain circumstances, whether tribute–collecting or other variations listed below, empires may also disburse.  Empires may finance their components and their periphery to serve as buffer zones or as an adversary to their adversaries: from the Persian Empire’s financing of the Israelites to build their Temple in Jerusalem in the sixth century B.C to create a friendly outpost on the Mediterranean shores of Mesopotamia,[4] to the American financing of the Mujahedeen and the Taliban against the Soviets in Afghanistan.  

-  Extracting imperium: 

The empire installs a presence and controls the tributary – governor, Satrap, Viceroy, Khedive, and Khan etc.–who interfere, to different degrees, in the local affairs of the domain they oversee.  Depending on the length and degree of involvement in the affairs of the domain, and the strength of the imperial metropolis, at times the overseers begin identifying more with their domain and usurp the power of the empire.  The scenario is more of the times of empires with less rapid and dynamic means of communication and central control.

-  Exploiting imperium: 

Rather than outright extraction of the riches and resources of its domains, the exploiting empire invests in them to create infrastructures for more efficient exploitation.  It builds roads and railways and develops mines and processing facilities and in the process transfers know-how to its domains.  But the developments and transfers will be geared to the aims of the imperial metropolis and not to a coherent overall development of the dominions.

-  Colonial imperium: 

The imperial power sends "columns" from the metropolis to settle in its domains to provide opportunities for its own nationals and to better develop the domains. The dominions of colonial empires can become integral parts of the administrative structures of the empire.  As of the twentieth century, under the impulse of the two world wars, and the emergence of ideological fronts – U.S. pushing for "Open Doors," and later, USSR agitating for the liberation of colonial people – empires evolved into "commonwealths," where the imperial metropoli were given Mandates (by the League of Nations) and Trusteeships (under the United Nations' Charter) to emancipate their colonies towards self-rule and sovereignty.

In their drive to colonize other parts of the world, Western powers used different methods.  Besides the earlier methods of exploitation and conquest, such as those of the Spaniards in South America, in their encounters with more advanced civilizations, the Western powers combined the gunboat diplomacy with financial servitude.  In countries like China, Persia or Egypt, for example, Western governments offered loans to the rulers.  The rulers, generally authoritarian, autocratic and despotic, not always in a position to further exploit their own subjects, would accept loans from western powers, at first, magnanimously – some of them even believing that they could get away with not repaying it.  As their addiction to Western funds grew and the reality of the Western gun boats hit them, they were obliged to let Western powers manage their economy – control their customs, get railroad, canal or oil concessions, impose capitulation treaties, and eventually control the country.

That process had, within itself, the germs of its own demise, notably the transfer of the modern Western idea of nationalism to the non-Western cultures, rendering them more militant for independence. Also, the inherent flaws of exploitive colonial capitalism and imperialism triggered socialist ideas later enhanced by the presence of Soviet Union on the international scene.

 By extension the process of financial favors could apply to contemporary patterns of corruption of political powers as a tool of penetration by financial concerns.

-  Ideological imperium:  

Ideological imperium here refers to the more recent twentieth century confrontations of fascism, communism and capitalism.  While German, Italian and Japanese fascisms pursued anachronic goals of colonial supremacy and expansion, capitalist ideology was taking steps towards Western controlled financial empires, and communism was countering capitalism by preaching proletarian revolution with the ultimate goal of creating social justice in a classless world but, in the meantime, justifying the Russia-centered Soviet Block dominion.

In the aftermath of WWII, the confrontation of the two victorious ideological empires became more pronounced and turned into the "Cold War" between the Communist block led by USSR and the Free World – free enterprise cum democracy – led by the United States.

With the collapse of the Soviet Union, American style free market capitalism became the model to emulate and the stage was set for "globalization," with potentials of turning into  "Financial Imperium," particularly in the context of the contemporary electronic revolution.   

Financial imperium

Antecedents

Financial imperium relates to the evolution of Western capitalism over the centuries, but in particular since the nineteenth century.  John Atkinson Hobson, in his Imperialism: A Study, 1902, put his finger on the fact that the vehicle for Western imperialist expansion was the generation of funds for investment overseas. Rudolf Hilferding, in his Das Finanzkapital, 1912, pointed to the American 19^th century process of “watering” of capital as a way of multiplying capital by issuing shares – the process I shall call “churning”:[5] The exponential bloating of capital and credit through financial instruments that largely contributes to the propulsion of global financial imperium.  Lenin picked up Hobson's and Hilferding's observations in his Imperialism the Highest Stage of Capitalism, 1917.[6]

It is interesting to note the contemporaneous yet contrasting approaches of "materialist" Marxians such as Kautsky (who elaborated on Hilferding) and the "idealist" Weberians – Max Weber was elaborating his "Protestant Ethics" at about the same time.

The nineteenth century evolution of capitalism was the systematic expansion of capital based credit, the development of stock exchange and the valuation of enterprise on the basis of its present and future value perceived by the stock market rather than its tangible assets.  We need to briefly review the processes involved.

- Churning:  

IOUs (I owe you) have been part of human transactions ever since benches – banks – were set for exchanges on the Mediterranean shores by Phoenicians – not to speak of the hunter/gatherer advancing the surplus product of his/her labor to the neighbor.  A product is the result of natural dynamics.  In terms of human activities, it is the outcome of man's action on nature.  The product may be for consumption and have no leftovers. Where there is a surplus, the producer can save it for later consumption or exchange:  Capital is saved labor.  It may not be saved by the laborer but by the entrepreneur who remunerates the laborer for his/her subsistence and keeps, if he runs a profitable business, the plus value of the product. 

As we move on into our examination of finance, we have to retain the fact that at the base capital is “manu-facture” (manu = manual, facture = result,) i.e., production as a result of human action; even though, in capital market economy, manufacture becomes a function of finance.  We have to keep the distinction of movement of financial capital and manufacturing capital in mind because as we later move onto the discussion of the global dimensions of finance we have to be conscious of the fact that while financial capital can move around the world at the speed of the electrons, a manufacturing outfit cannot up and go as easily.    

In monetary terms, the saved labor – capital – can be "banked," for future consumption (checking account) or deposited for further use for production. The bank, against payment of interest to the depositor – representing the recognition of the use value of “deposited labor” – puts the saved labor (capital) to work by lending it out at a higher rate to secure its own survival, make some profit to grow – plus value  – and, cover possible defaults by borrowers. The borrower has to commit assets as collateral with the bank, usually estimated worth multiples of the loan. Thus, the bank now has the plus value of the collateral assets of the borrowers on its books that it can package – as it did with the cash deposits – and offer on the financial market place as Collateralized Debt Obligations (CDOs).  CDOs are relatively recent financial derivative "products."  

Financial institutions themselves are aware of the risks involved in these extreme churnings and “securitize” them among themselves through Credit Default Swaps (CDS.)  Recent crises, however, have demonstrated that CDS products can compound the risk if the credit components of the swaps fail massively, bringing down the whole edifice of free capital movement and inviting government intervention.[7]  I am leap frogging here for the sake of brevity and shall later mention some more classical transactions such as mortgage, installment credits or credit cards.

The solidity of banks' "products" depends on their underlying assets.  While there are standards for the evaluation of the creditworthiness of underlying assets, the dynamic nature of financial transactions (particularly in the electronic age -- with its potentials to provide Black Box risk models) leave much of the evaluation at the discretion and sense of risk of financial institutions, and the manner in which they package their "products" (the present subprime and credit crises are cases in point.)

- Stock Exchange:  

The entrepreneur can use his/her own capital (savings) to start a business, borrow from a bank against assets (mortgage the house) or find a venture capitalist who finds the productive idea of the entrepreneur has potentials for growth.  Indeed, when the enterprise does grow and its potentials for further growth become publicly plausible, not only the banks and private investors will be inclined to advance funds to the enterprise but the enterprise may go public, i.e., offer shares of its enterprise on the stock market.

The value of the shares will be that of the present and future perceived potentials of the enterprise.  Thus, the initial public offering may be multiples of the actual book value of the enterprise.  That is what Hilferding identified as "watering" mentioned earlier.  The price of the shares on the stock exchange market will fluctuate with the investors’ perception of the company's earning potentials.

 A corporation, instead of borrowing from banks, may also issue its own corporate bonds with its ongoing business as their collateral.  When buying them, investors, just as banks, evaluate the creditworthiness of the company and the return on its bonds.  Governments and public institutions also issue bonds to cover their immediate financial needs.  Investors buy those bonds on the faith of the taxes that governments can collect and the revenue of future services the public institutions will provide. The attractiveness of these bonds is based on the assumed creditworthiness of governments and public institutions.  Their value fluctuates depending on how much refuge they provide for the investors against the vagaries of the financial markets.

This scenario does not encompass all the games -- futures, options, hedging ...etc., -- and the players in financial markets – mutual funds, pension funds, private equity, venture capital, hedge funds  ... etc. – but it does provide a sketch of how capital as saved labor is exponentially churned into credit to provide bloated capital for "virtual" structures for economic growth.  Thus, when the credit system is built on sound grounds – proper due diligence and wise policies of financial institutions – it allows the financial market to put at the disposal of entrepreneurs credit pools larger than the basic saved-labor deposited capital, permitting enterprises to create more jobs, more products and more capital. The solidity and potentials for expansion of the edifice depends on the coherence, health and growth of the labor/capital/credit complex.  It is essential for capitalism – and the society – to augment the saved labor and plus value bedrocks of the edifice.

But, where the structured products of the pyramid are based on flimsy assessment of risks and mismatched assets and liabilities the collapse of the edifice at the distressed point causes crisis.  The broader the distress at the lower base of the pyramid, the greater the crisis.  When, because of its unsound lending policies, Continental Illinois Bank in Chicago collapsed (1982-84,) the crisis was isolated enough to permit the government's regulatory agency FDIC (Federal Deposit Insurance Corp.) to intervene and prod other banks to chip in.[8] Savings and Loans crisis of the 1980s in the U.S. was more substantial and required government to create a new intervention mechanism.[9]  The 1997 South East Asia currency crisis that was mainly caused by international currency speculation required the intervention of international organizations.

The present credit and subprime crises’ magnitude is much greater because its structures were faulty at the base of the pyramid.  The mortgage loans were offered to a massive number of borrowers who could not generate enough “saved-labor” to pay back their loans.  And the scale of the loan distribution was international, with many Western banks jumping on the bandwagon in a herd instinct to maximize higher yields. The churning in the forward market dynamics produced excess liquidity that by the beginning of 2007, under pressure from private equity firms, banks began offering as "Covenant lite" -- loan packages that greatly reduced the terms borrowers had to meet.  The formulae, concocted by financial “product” innovators, could only be sustained in a total forward market dynamics and would collapse if any of the players’ unfounded creditworthiness judgements hit reality (Indeed, the crisis began by the default of New Century Financial, a mortgage bank in California,[10] and Northern Rock in the UK.)  The crisis threatens the very basic gains of free market capitalism over the past decades by forcing political structures to intervene in financial market mechanisms[11]  

In capitalist crises, political structures are also part to blame. Acting as the "executive committee for managing the common affairs of the whole bourgeoisie," yet having political instincts towards the masses, political powers' collusion with the financial sector is at best awkward and at times exacerbates the crises. Acting as arbiter between the public – the masses who put their saved labor in the bank and in a panic may run on the banks – and the banks that churn capital into credit, political structures try to correct the financial institutions’ churning exuberance surreptitiously without alarming the public. In doing so, the government lets the abscess fester, despite the fact that the financial sector sees the crisis coming.[12]

- Subsistence level of Economy: 

What Marx and Engels had missed in their scientific observation of capitalism was that, contrary to their assumption, bourgeois capitalism does not stop at using the means of production to the optimum level of profit and leave the laboring masses at a stagnant subsistence level. The logic of market economy and consumerism is that as the means of production reach their optimum, they are replicated and improved to increase production, seeking and creating new markets.  Beyond penetration into foreign markets, new socio-economic methods evolve for the distribution of wealth to bring up the proletariat’s subsistence level – purchasing power.  So, when textile mills became more efficient, clothing became available for larger numbers.  As mortar, cement, bricks, lumber and steel could be produced in abundance, housing became more accessible.  As cars were mass-produced they became more available.

Adjustments do not, of course, occur without social upheavals, which take different forms depending on the nature of the prevailing economic regimes and political cultures – whether through labor movements or “trickle down” market mechanisms.

The need to increase the subsistence level of the "proletariat" to consume the products had a hitch.  The worker is the potential consumer, but there is a gap.  Consumers are those who have the money to buy the products. The workers produce the goods, but at production time cannot always afford the goods. Trickle down economy by itself does not spread purchasing power exponentially and does not energize consumerism.

The dynamics of labor/capital/credit complex remedied the gap. WorkerS did not have to have cash to become a consumer. They were extended credit.  Workers did not need to save enough to pay the whole price of a house.  If creditworthy, with reasonable amount of savings, a steady job, enough income to pay installments and a good credit record, the worker could contract a mortgage on a house.  

The bourgeois worker is the class that owns a mortgaged home, a car or two on credit and eventually a credit card. As credit is popularized, the masses purchase and consume but do not own.  Financial institutions own the mortgages and the cars are sold on installments.  If the worker stops working and fails installments the banks repossess the goods. In addition to increasing the number of consumers, credit gives the workers a push and an incentive to work in order to enjoy the affluence, which they cannot otherwise afford.

The gap between production and the opportunity for the working class to become consumers could be large or small depending on the extent and expanse of the market.  In the classic national economy with a protectionist government, with mixed economy and socialist public policies, the gap may be closed earlier. But, as public policy, a country may postpone the process of social distribution of wealth permitting its enterprises to sell their products abroad to import capital, create more infrastructures and conquer new foreign markets.  That is what the Japanese (MITI public policy) and Koreans (through the encouragement of Chobols) did at the early stages to develop the industrial base of their economy.  Once the flow to other markets is saturated, the market development can be turned inwards – in four years, between 1988 –1992, car registration in Korea increased 300 percent.

The scenario of production/subsistence level circuitry played on the "national economy" stage.  Nation-states, identifiable with their economic frontiers, established laws, imposed taxes and raised protective tariffs to symbiotically connect capital, labor and government.  Even though, in pure capitalist terms, creating purchasing power by redistribution of wealth through equitable payment for labor, or taxation of the rich to increase the entitlement of the masses would handicap capital formation, enlightened governments did impose laws to improve the conditions of the masses.  National industries needed skilled workers and educated managers; so, governments structured and financed public education.  The market economy also saw to it that the workers are healthy enough to work and go to war to conquer new markets and sources of raw material for the national industry of the metropolis. The first worker protection insurance laws were promulgated by an archconservative: Bismarck.  And when tuberculosis hit the workers’ slums and became a danger to manpower supply, society and scientists paid attention.  Pasteur and Leister discovered means to combat the Koch virus.

Social welfare was particularly enhanced in the capitalist countries during the "Cold War," in order to dull Soviet block's socialist wedge. 

Transition to the present

As hinted to in our earlier review of empires, through the ages, there has been a financial dimension to imperium, particularly in Western consciousness:  From the Greeks[13] and Romans, Venetians and Genoans, the Hanseatic League, Spaniards in South America, Dutch, British and French overseas mercantile companies, to lending to non-Western potentates to lasso them into colonial orbits mentioned earlier.  More pertinent to the point here is the sustained effort by the capitalist camp during the Cold War to propagate liberal capitalism.

Right after the creation of the United Nations and its Specialized Agencies, the Soviet Union, by not joining IMF and the World Bank, left the financial field open and provided the West in general, and the U.S. in particular, with international financial institutions to monitor and globally promote market economy towards financial imperium.  Eventually, other Western financial institutions such as Club of Paris (Club of Ten) or Club of London (Club of 15) further supplemented that effort.  As countries approached these international financial institutions for assistance, they were prodded (through such mechanisms as "conditionality") to adopt liberal market regimes and privatize government run economies.  After the 1973 oil crisis and the ensuing petrodollar glut, in order to deal with the financial market surplus, Western governments, coaxed by the United States, encouraged developing countries to seek financing for their development projects at private financial institutions and banks.

With the collapse of the Soviet Union and the triumph of capitalism, social welfare programs in the West retracted to facilitate capital formation.  As market economy, in particular the American and Anglo-Saxon liberal capitalist versions, became the model to emulate, developing countries liberalized and deregulated their economies and reduced their social programs in favor of privatization.  Abandoning social programs permitted governments to reduce taxes on business to attract foreign capital for development.  As noted earlier, these were patterns that had been in the works for some time.

- Capital: 

Capitalism had won the battle, but had yet to win the war. Free enterprise now had the globe to roam in, at the speed of electronic age. Indeed, national frontiers, as economic domains for growth, had become too confining for global corporations – although often used for protection.  A look at the map of implantations of different global corporations around the globe shows the extent of the networks of power and control of financial imperium in a different light than the previous assortement of empires.  The sun may have never set on the British Empire, but now it is on HSBC that it never sets. 

Free enterprise now seeks the most advantageous combination of the basic components of the means of production, namely, capital, labor (including skills), management (including financial, executive and operational capacity and technological knowhow) and raw material, around the world.

Capital is the most fluid component of the means of production.  It draws on the other components to grow, and seeks the most favorable venue for that purpose.

- Tax havens

: are where corporations go to see to it that taxes scrape the least off their capital, income and profits.  The idea of reducing taxes in order to attract corporations is not new.  While taxes collected from each incorporated firm will be small, the number of the corporations attracted to the tax haven compensates, and the total taxes collected increase.  In the United States, the state of Delaware was a pioneer.[14] The competition among countries to reduce taxes is uneven and depends on their political culture and social structures. Political entities with strong social movements will have difficulty to reduce taxes. But by maintaining their social structures, if they are the right ones – such as education – they can become attractive to global corporations for the other means of production, notably, skills, technological know-how and management. Offshore services are a case in point.  Beyond tax advantages, other considerations such as facility of access to markets, avoidance of social demands and political intrusions in the home country incite global corporations to migrate.[15]  The “nationality” of the global corporation in terms of “domicile” is no longer necessarily the “mother country.”  Cayman Islands, with a population of 50,000 are home to over 70,000 companies and 7,000 funds.[16]

 - Sovereign Funds:

  As we saw, churning money is not rocket science – but churned money can buy rocket science.  In terms of globalization, financial centers like Singapore or Dubai have mastered the art – and, at least for now, seem to do it in sounder ways than the all out churning processes.

We noted earlier that during the colonial phase of imperialism, Western ideas of nationalism seeped into the non-Western consciousness and emerged as a political factor during the ideological imperium, contributing to the collapse of the colonial system.  As the third world nationalism emerged, nationalist governments attempted to cut the tentacles of capitalist imperialism by nationalizations, and colonial powers retaliated by sanctions and gunboat diplomacy.  But eventually, in the post-colonial atmosphere, Western powers and their financial institutions had to negotiate generous terms for the exploitation of global natural resources.  The 1973 oil crisis was the watershed and poured petrodollars, mentioned earlier, into the financial market.  

Capital market liberalizations in the areas of Western capitalist influence during the ideological confrontations also permitted non-Western economic centers that had educational and financial infrastructures but no glamorous natural resources to be exploited, to emerge as early outposts of financial imperium – such as the “Four Tigers”: Singapore, Malaysia, Hong Kong and South Korea.   

Non-Western powers that have now joined the financial imperium club no longer need to “nationalize.”  They simply buy out Western financial and industrial institutions.  In the present subprime crisis in Western financial system, as sovereign funds and non-Western corporations buy out Western economic muscles overseas, they also buy their way into the headquarters of Western capitalism.  Cases in point are Singapore sovereign fund buying into UBS, or Gulf States’ sovereign funds investing in Western financial and industrial enterprises.[17]

-  Speculation:

  In terms of churning, notably in relation to the global movement of capital, speculation needs its own particular mention.

I am using speculation in its generic sense.  In that sense, credit risk takings (subprime transactions, for example) are speculation, because financial institutions speculate that the forward dynamics of the market would keep going on to permit them to recover and expand their poorly collateralized loans.

Speculative capital is more of an abscess in an economy.  It is not a “bubble” – as it is often called – that can simply burst and leave little effect behind.  As an abscess, to follow the biological metaphor, it bloats the economic body and draws on it.

Speculative capital does, however, excite the body which assembles its energy to react to it.  In that sense, it energizes the economic body.  It raises its temperature; and when it leaves, it leaves the body weakened looking for corrective procedures.

When it roams globally, as returns diminish in one market, speculative capital moves out and leaves economic crisis behind; as it did in South East Asia in 1997.  But in the present globalization process, speculative capital also serves as catalyst, in that it creates upheavals resulting in new economic structures and the awareness that could eventually replace, and recombine with the existing traditional and archaic institutions.

The effect of this roaming abscess in the different economic bodies it attacks will depend on whether the modern institutions it generates—such as stock exchanges, new financial institutions, business corporations, industrial parks and plants—will compromise with existing, but not developed, sound economic structures such as, mining, industrial or agricultural structures – or will enhance non-productive patterns – such as corruption, usury or bazaar commerce.

Surely, there will always be a mix of these.  It is the dosage that will permit an economic body to swim or sink in the global economy after crises.  A dynamic economy that has absorbed and integrated the productive and managerial aspects of market economy and has not let international speculative capital hold its GDP hostage can regenerate. 

The economy which has succumbed to the paraphernalia of consumerism and addiction to financial capital markets without building its own social and economic infrastructures can fall prey to its own speculators and corrupt politicians.   It may evolve into a society with a small upper class living in luxury on top of poor masses and an unevenly developed economy – with the small exploitive class dealing in international financial markets aggravating the effects of speculative capital.  It may develop sectors of the economy that appeal to the global productive capital such as oil, raw materials, exportable agricultural products, or tourist islands for foreign clients without developing its own social infrastructures. Present globalization, with inadequate legal structures and obligations, creates situations where those in power in archaic economies can blackmail and drag global financial institutions into corrupt practices, which, if not efficiently dealt with, can creep into the developed economies. But it also provides opportunities for global finance to influence those who grab power in developing countries and maintain potentates palatable to its interests. 

In the long run speculative capital handicaps global trade and the dynamics of productive capital.  The instability created by speculative capital discourages long-term investment. 

-  Currency:

Speculation due to currency fluctuations needs particular mention.  Currency is the main vehicle for global speculation. The instantaneity of electronic transactions to take advantage of currency fluctuations, whether for carry trade or arbitrage – simultaneous purchasing and selling of the same item – is a major source of financial instability.

Among the economic consequences of ideological confrontations of the Cold War was the costly war in Vietnam that weakened America's finances to the point that Richard Nixon, no longer able to sustain the Breton Woods dollar standard, abandoned it, thus "commoditizing" currencies, making their speculation more accessible.

Today, only a fraction of global currency transactions cover the actual exchange of currencies for business needs. The rest is speculation, distorting the exchange value of currencies, and causing financial crises.  The 1997 South East Asia crisis was a case in point.

Speaking of "commoditization of currencies," we have to bear in mind that currencies are money!  Money is a means of exchange.  It is not a commodity with an inherent value.  It streamlines the cumbersome process of barter. The farmer who produces eggs, instead of exchanging them against the butcher's meat, the baker's bread, or the haberdasher's thread, receives coins and notes, which he can then exchange against what he needs.  Coins and notes are symbols representing money.  They are means of exchange as long as they are current – they "flow" – and permit transactions to become a fluid current: they are "currency."  As means of exchange within an economic entity, the currency is worth what it can buy. A coin of ancient Greece is not current today.  It is a numismatics commodity.  A banknote is a piece of paper, it is a "note" which needs a bank to respect it as an IOU document issued as a credit note guaranteed by its issuer.  In today’s global economic understanding, the issuers’ guarantee is backed by the issuing country’s economy. Based on a host of economic indicators, the exchange value of a currency in relation to other currencies indeed fluctuates but can be established on the basis of those indicators.  But it should not be pray to speculation, which it is.  To regulate currency exchange a few simple rules of free enterprise will suffice.  Here is a possible sketch inspired by controls practiced in certain economies:

With present electronic capacities, a daily index of foreign exchange based on data relating to the state of a currency’s economy such as purchasing power parity (PPP), foreign currency reserves, balance of trade, current account, national debt, GDP, etc. can compute its exchange rate. Today, international financial institutions have the capacity to collect data and generate indeces daily, if not hourly, to that effect.  The International Institute of Finance (IIF) has an elaborate index of vital economic data of different countries – so do other international financial institutions such as BIS, IMF, or OECD. The IIF country profiles, for example, could be broadened and used as a prototype for the computation of the daily weighted value of each currency in relation to other currencies and posted by the banks as the exchange rate for the currencies.  Banks would be held responsible to keep to the published index.  Such an index will not fluctuate greatly each day and will follow a mild slope corresponding to the changes in the closely monitored economic indeces of a country day by day – unless some catastrophic upheaval has a big impact on a particular currency – such as a big natural disaster or a political upheaval.

Instead of speculators and foreign exchange traders setting the rate of exchange, as is presently the case, the daily rate of exchange for each currency would be stabilized on the basis of the index and reported in concert by international financial institutions on the Internet. 

Businesses will be able to buy and sell foreign currencies for their trade transaction at the index price.  Calls and puts for futures and options for currencies will be allowed for businesses whose records show that they are legitimately hedging their risks in their planned policies. For example, a corporation which has production overseas and has to transfer funds to home country in the future for paying taxes or a company which has to buy raw material for its production or pay its workers in another country, should be able to buy futures options for the currency they will have to transfer.

Businesses that cannot show cause for trading in currency futures and options will, of course, also be able to freely buy or sell actual foreign currencies at the posted market exchange rate against cash-on-cash payment of the full value of the currencies.  Just no speculative currency futures and options gambling would be allowed beyond the gamblers’ actual assets.

- Commodity Speculation Revisited: 

The same rules should apply to commodities.  Businesses whose records show that they are actual producers or users of a given commodity should be able to buy and sell futures and options of the commodities that they expect to actually produce or need in a foreseeable future.  These are legitimate futures tradings in the sense that they anticipate production and creation of capital through accumulated labor.  They even make the market mechanism more efficient because enterprises that plan ahead can better compete on the market and pass on the benefits to the consumers.

Businesses that cannot show cause for transactions in commodities’ futures and options should not be allowed to engage in futures and options trades.  Of course, a business is free, if it has got the funds, to pay the full actual price of a commodity and store it in a warehouse if it believes that there will be a shortage of that commodity in the future – that is already gambling and hording and should be discouraged – but in the spirit of free trade it should not be prohibited. The U.S. Securities and Exchange Commission (SEC) does require self-regulatory organizations to broadly monitor the market, but not as a systematically structured policy.

What would be prohibited is speculation beyond a business’s actual means. That implies that a business cannot sell short what it hasn’t got.  It also implies that speculations should be limited to a business’s money in hand. 

-  Stocks and Bonds Speculation: 

Similar regulations should be considered for financial and stock exchange transaction.  The 1929 crisis arose because speculators played the market by putting down a fraction of the price of the stock and when the market collapsed they could not come up with the money to cover their obligations.  Laws have, to some extent, taken care of that now.  But the creation of futures and options on corporate stocks and bonds have created new hazards.

Corporate stocks are neither currencies nor commodities that a business would “need” at a future date.  Speculators who believe that a corporation is doing well can buy its stocks by paying for it in full.  Those who believe a corporation is heading in the wrong direction can dispose of the stocks they own in that company.  Futures and options for the stocks of corporations, where a speculator can, with a small fraction of the real value of a stock, call or put that stock, puts corporations at risk and warps the economy.  SEC did recently stop shorting of a list of financial institutions. Those rules should be generalized.  Speculators should gamble with their own money, not the future of a productive corporation and the labor of entrepreneurs.

These are simple capitalist laws, which would solidify the grounds for real competitive productive entrepreneurship.

- Subsistence Level at Globalization Level – Labor/Capital/Credit Complex:

The free global movement of capital has made the adjustment of the subsistence level, which we discussed earlier, patchier.  As long as there will be a market for the products around the world, the incentive to improve the subsistence level of those who produce the goods but cannot buy them can lapse. 

We noted that in the context of "nation-state" economy, with more or less social adjustments, subsistence level can eventually catch up with national productive realities. In the globalization process, the adjustment of subsistence level to production is open-ended and can hardly be realized at local or regional levels.  The Indonesian laborers may produce millions of shoes and western consumers offered millions of pairs of shoes while many Indonesians still go barefoot. 

As production moves to areas offering cheap labor, the subsistence level of the laborers in those areas does rise.  At the early stages, it rises in relation with their own level of development.  They will, for example, increase their food and clothing consumption.  If they are producing electronics, auto parts or toys for markets in the developed countries, they themselves will not be the consumers of their own products.  There will be changes in their local economy due to the increased demand in their basic needs, generating economic activities ancillary to global financial dynamics.

- Consumerism: 

Of course, as financial capital and manufacture move around the world, the relationship between production, wealth formation, and wealth distribution (elevation of subsistence level) in the developed economies is also dislocated and no longer functions as a more or less coherent complex in a relatively closed-circuit national economy.

As “national” capital migrates overseas to exploit the cheap labor and the less stringent fiscal and environmental constraints of underdeveloped economies, the smoke stack industries of developed economies are transformed into "service industries" and the “proletariat” of old metamorphose into “upper” and “lower” middle class depending on whether they are employed in high tech jobs or flipping hamburgers.  Few, engaged in financial imperium and churning money, become very rich.[18]

While the rich upper class becomes more cosmopolitan, the middle class, who keeps identifying with national frontiers, is tantalized by the glamor of the rich.  It is led to believe that it can also become very rich.  The world of this broad middle class is shaped by the media issue of its own aspirations – FT’s How to Spend It, American Express’ Departures, Wall Street Journal's WSJ. magazine or Le Grand Mag, to name a few, and the intensity of commercials keep the people salivating.  The regime is that of "consumerism": the lower stage of capitalism. 

The consumption attitudes of the middle class in developed economies will not change in synch with the relative loss of income. Nor will it be easy for the enterprises – that are now catering to the appetite of their national consumers by offering them goods produced abroad – to accept the retraction of their national market.  Through commercial advertising and credit facilities – with interest rates adjusted to payment failures and profit margins of financial corporations, the consumer driven economy keeps going.  But in the long run, something has got to give. 

In the process, the labor force in the developing countries becomes more affluent and tends towards consumerism.  There will be labor pressure for increase in wages, which could tempt the capital to migrate elsewhere.  By doing so, however, capital may leave behind a depressed market unless the local economy has developed, or is in a position to create, alternative economic activities – similar to attempts made in Western economies to turn depressed mining areas into tourist attractions.  The transition will not be easy and the global “locust” movement of capital, as Franz Müntefering called it,[19] can cause socio-political instability.  

Of course, from the vantage point of global finance, the point may be reached where the market – depending on the nature of the product, whether a luxury, or a necessity for the masses – reaches the saturation point, permitting the producers to aim at the optimum profit, supplying those who can afford their products at lucrative prices and ignoring those who cannot – you can sell only so many Ferrarries and Louis Vitton bags at exorbitant prices.  The constraint dictating the optimum will not necessarily be return on capital but the capacity and availability of the other components of the means of production – raw material, skilled labor, educated management – and environmental conditions, whether physical, ecological, political or social.

In the context of the cultural handicaps that the control of the media and entertainment by the global financial engenders – which we shall point out later – the trend towards bottom line profits and market efficiency will, at the upper end of the market, push the production of luxury goods towards the grotesque,[20] while limiting and directing the mass consumption, through heavy marketing, to the most profitable mass produced merchandises of mediocre quality.

- Consumer Confidence:

While the subsistence level of those in a developed economy may not be elevated by additional pay for their labor – because that would make the price of the product of their labor less competitive, chasing more capital and productive manufacturing away – in order to keep them consumers, their purchasing power may be enhanced by additional ways of extending credit to them. Thus, second mortgages and home equity loans are extended to homeowners with dubious creditworthiness, enticing them to consume beyond their means, taking us back to our earlier scenario of subprime crisis.

In its churning equations, capitalism has lost sight of the circular reality of subsistence level of economy. The market has got caught in its own twisted logic of consumerism.  Consumer confidence has become a mantra as if distinct from purchasing power. But you cannot play poker with someone who has no money.

Confidence comes with the availability of cash and credit and the perception of a rosy future of opportunities. It has the drawback that if the consumer spent and the opportunities – in terms of employment and income – did not materialize, defaults on credits, loans and mortgages would increase leading to the kind of crisis global finance is presently experiencing.

- Human Resources: Labor, Management, Skills and Know-how:

So far, we have been looking at the manipulated human factor in the context of capital market economy. Human factor, however, is also the manipulator of the whole process: The capitalist manipulates capital by investing it.

In scaling subsistence level of economy we made the distinction between different levels of labor. In weighing the value of different components of the means of production, global finance seeks unskilled labor to manipulate raw material, the skilled to manufacture its products, managers to run its business and executives to implement its plans and policies.

The combination of the different means of production through the ages has reflected the   economic culture of the place and the time – from the management and organization of labor to build the phraonic pyramids to different socio-economic regimes of “nation-states”: From slave labor to socialism, capitalism and their variations.  This is not the space that permits us to expand on the historic evolution of labor management.  What is pertinent to our discourse here is the immediate past human resources management in which the present financial imperium has evolved.

In different nation-state economic settings, whether free market, mixed economy or planned economy, the circuitry of production/consumption we discussed earlier influences or outright organizes the educational and training processes of the economy.  When Sputnik, produced in the planned economy of USSR, was launched into space, there was a surge of education and training in physics and exact sciences in the market economy of the United States as the government policy was geared to meet the challenge and called on private enterprise to provide the necessary tools for it. 

In the past few decades, together with economic evolutions, a transition has been taking place in the movement of human resources: from the movement of unskilled labor from underdeveloped to developed economies, to brain drain.  Before the advent of globalization, there already was a problem of brain drain as the trained and educated left the “nation-state” economy which had, in most cases, financed their formation for greener pastures where jobs and opportunities for further growth were available.[21]

Presently, capital, as it roams around the globe with more porous frontiers, can draw on the skills and expertise of those who have been formed in nation-state economies.  But as more and more nation-states gear their economies towards globalization and reduce taxes to attract global capital, public education programs are trimmed. Consequently, the financial sector has and will become more involved in training for its own needs.  The involvement of the financial sector will have different depths and breadths: from privatized educational institutions to subsidies and grants to higher education to do research and form experts and scientists in the fields of interest to the financial sectors’ concerned.  The involvement of global finance in training for specific goals can engender the danger of a reduction in the broad cultural base of education. 

Particularly in the light of the fact that global finance also tends to control more and more of the entertainment sector of the global economy.  In terms of market economy and bottom line considerations, global entertainment enterprises bring the level of understanding of complex cultural values and scientific knowledge to their lowest common denominator in order to exploit the broadest consumer market. 

While electronic revolution has dramatically increased the potentials for education and dissemination of culture, the control of the media by profit-oriented enterprises has reduced much of the educational and cultural contents to the superficial and the sensational. 

As subsistence level of economy adapts to new the means of production, "bread and circus" evolve into affordable cars, computers and video games; and shows on TV featuring millionaire athletes, top models and stand-up comedians – whose emergence points to the fact that the concepts of labor, skill and talent are subject to market interpretation (physical and verbal virtuosity become sought after commodities without the need for an intellectual baggage.)  This is not a value judgement but an observation of social realities as they evolve.

Of course, the process is not as simplistic as that.  Different cultures, depending on the depth of their traditional cultures and their disposition, succumb in different degrees to the onslaught of the new offerings.  American culture, with its inclination towards “progress” and change, is more prone to embrace the new trends than more traditional and controlled cultures.

The degradation of values has the potentials of a backlash where the increase in public exposure to the vulgar and the violent, and the deterioration of moral and ethical norms, could make some, particularly in more traditional cultures, sensitive to fundamentalist arguments.

- Raw Material:

Of the means of production, raw material is the least moveable.  Financial capital can own it and move it in financial markets, but engaging it as means of production falls squarely in the domain of “manufacturing” with all the spatial constraints that that entails: physical (access, scarcity), environmental (ecological), social (labor availability and disposition, ethnic and criminal – mafia – accommodations), political (concessions, laws, corruption).

In the earlier forms of empires, capital accessed raw material under the control of its metropolitan political state, or its protection. Today, global enterprises, while lobbying and prodding their “national” government to negotiate access to markets and raw material with other governments bilaterally or in international forums such as WTO, are much more actively involved with those who control access to natural resources. Despite international resolutions to fight corruption, the realities in the field bring free enterprise face to face with potentates, insurgents, Mafiosos and extortionists. 

Take the critical case of oil.  After the nationalizations of the 70's, to defuse potential crises in oil production, oil companies and their respective governments, realizing the obsolescence of gunboat diplomacy, in exchange for compensations and new concessions, recognized the national ownership of the oil resources by the countries sitting on them and entered in new partnerships with them.  Up to the oil crises of 1970s, major Western oil concerns — Exxon Mobil, BP, Royal Dutch Shell, Chevron, ConocoPhillips, Total of France and Eni of Italy —controlled more than half of the world’s oil production. Today they produce just 13 percent.  The ten largest petroleum reserves of the world are now controlled by state-owned companies like Russia’s Gazprom and Iran’s national oil company.[22]  

Above all, global finance cannot escape the handicaps of power politics and cannot choose the most efficient ways of access and extraction of natural resources.  Tracing oil pipelines is a case in point.  They are not traced on the map on the basis of geographic but geopolitical considerations. The more efficient transportation of a lot of central Asian and Caspian oil to global markets would have been through Afghanistan and Iran, but because of lack of friendly political controls in those areas political powers made oil companies build pipelines through Caucasus, with the geopolitical consequences that we have witnessed in Georgia. 

Lack of global standards and regulations on the extraction and depletion of the natural resources, such as mines, forests, and water; and the pollution caused by fuel and waste are major global concerns. International finance may be considered as a beneficiary of this lack of coherent global patterns for the management of global natural resources.  The reality, however, is that because the whole ownership of natural resources and the control of the processes for their access and use are subject to nation-states power politics, global finance is hamstrung in their geopolitical considerations.

There is surely a need for a review of global distribution of wealth and global management of natural resources.  National ownership of natural resources is counter to free enterprise.  It unjustly monopolizes the control of the natural resource by nation-state.  I have briefly advanced the idea of globalization of natural resources in my earlier essays.[23] The idea was more plausible – if ever – when I first formulated it than it is now with the growing consciousness of nation-states such as Russia to use their natural resources for power politics.

Globalization of natural resources is designed to render the exploitation of natural resources more efficient by auctioning it to the most reasonable and efficient bidder in a free enterprise format.  It aims at liberating the exploitation of natural resources from ethnic and national claims.  Indeed, some of the ethnic and international conflicts are motivated by the drive to control natural resources. Globalization of natural resources would reduce the allure of contested territories.

But to suggest globalization of natural resources and call on global finance to bid for their exploitation is putting the cart before the horse.

- Accountability and Transparency:

In terms of control, accountability and transparency, our review of the evolution of global finance has left a lot to be desired.  The combination of privatization, liberalization and deregulation by governments and the "innovative products" for churning money by financial institutions have, in fact, handicapped the efficiency of free enterprise.  A case in point is the impunity of the flourishing criminal mafia style organizations that cover the whole area of illegal transactions, notably in traffic of arms, electronic theft and underground transfer of funds.[24] 

Despite the plethora of institutions, covenants and regulations, or probably because of their disparate overlappings and loopholes, global finance has lost its bearings. In the electronic age, global finance has traded its roots for antennae.  The transformation of roots into antennae has weakened the self-censorship and moral anchors of financial structures.  Bank of International Settlements' Basel Committee 1988 Capital Accord, and its follow-ups culminating in Basel II, for example, did not hinder the credit and subprime crises from happening.[25]

Or, the ongoing adoption of IFRS (International Financial Reporting Standards) by different countries' accounting systems, while it may standardize cross border transactions, may dismantle some countries' national regulatory structures. The change from rules-based GAAP (General Accepted Accounting Principles) which is applied and required for transactions with the United States, to principles-based IFRS, for example, could leave more wiggle room for financial transactions in a "snake oil dealers" economy.[26]  By snake oil dealers I actually mean a certain concept of market economy at its most social Darwinist state – caveat emptor. [27]  Either “nation states” have to streamline and add additional controls, or better, new international norms should be established to supplement IFRS to make national accounting and regulatory systems more harmonious and global movement of capital and financial transactions more accountable and transparent. [28]

*         *          *

Like all other games, competitive free enterprise and financial transactions have to have rules.   The players competing in the field, whether football, tennis or wrestling, have to abide by the rules of the game in the field and self-censor their personal behavior according to those rules. Self-censor may be good for those who can temper their ego, control their appetite for fame and fortune and abide by the standards of accountability and reason.  That not being always the case, clear rules and regulations have to be drawn up for global financial markets.

Looking at where global human dynamics is presently headed, with all its flaws and handicaps enumerated in this essay, financial imperium – even though not the ideal human rights and environmental-protection model – with adequate rules and regulations, could be a reasonable global pattern to promote.

The main reason and incentive to promote financial imperium as distinct from the on going power politics race is that the modus operandi of financial imperium cum electronic revolution is different in essence from “classical empires.”  The common trait of empires up to the conclusion of ideological Cold War has been that of the capacity to wield coercive power and politically control and facilitate the operations of their financial arms within their controlled domain.  Having grown beyond the confines of motherland's political control and protection, financial imperium players – industrial, commercial and financial institutions – penetrating markets worldwide, have to woo and not coerce the sources of their power: those who, by their labor, create products and capital – saved labor – and are also consumers. They have to seduce markets and consumers to put their money (capital as saved labor) in their institutions and buy their brands.  Granted, with the flaws of the circuitry of corruption, exploitation, reduction of educational standards to specific goals and lowering of cultural exposure of the masses to the lowest common denominator, that have to be addressed. 

POWER POLITICS SCENARIO

As in the aftermath of the Cold War capitalism emerged triumphant and American style free market capitalism propelled globalization – on the road to financial imperium – America herself remained in the military power play groove.  Under the impulse of military/industrial interest groups that had grown powerful under Ronald Reagan – and had contributed to the collapse of the Soviet Union by producing the weapons for the arms race – America opted for military might and is, as we speak, going down the road of other “classic empires” depicted by Paul Kennedy mentioned earlier.[29] 

After the collapse of USSR, George H. Bush was not only sensitive to the military/industrial cause, but also presided over an administration that designed the "primacy doctrine" aimed at maintaining the United States as the sole military super power.  George H. Bush could have reduced the costly military machine to a nimble intervention force for direct and concise action in defense of specific American national interests.  He could have used the “peace dividend” to promote the US financial power as a global engine of growth, spearheading and consciously initiating the age of financial imperium (turning the U.S. into a colossal Switzerland! (That is, before the Swiss banks – notably UBS and Crédit Suisse – adopted the American style snake oil dealer methods.)

Bill Clinton did make efforts towards strengthening economic and financial structures.  But he was more of a politician than a statesman; sensitive to pressure groups and handicapped by his own personal needs for gratification.  George W. Bush's administration had, at the start, some inklings towards a social Darwinist style financial imperium that overshadowed the influence of those who during George H. Bush presidency had concocted the primacy doctrine and had landed in George W. Bush's administration in control of the military machinery.[30]  The terrorists' attack of 9/11 changed all that and America fully embraced the "primacy doctrine," squarely gearing into a classic military power play mode.  Classic in the sense of pre-UN power politics – that of  "coalition of the willing" under American supremacy, hypocritically linking “freedom,” human rights and democracy with free enterprise, and claiming the right to subvert other regimes under that banner.   A posture that has dragged other powers into a dangerous old style power politics game scenario.

*       *        *

The world is thus at a crossroad between developing and structuring the foundations of a new age of financial imperium which, with proper overarching controls, may permit humanity to limp into some kind of peace and prosperity – granted, with wide discrepancies – or sink into the military/political power games, arms race, protectionism, and the use of economy for power politics – as Russia seems to be set to do – and with new players: China, India, Brazil, the Gulf oil magnets, with additional potentials for conflagrations and even nuclear holocaust.  Suffice it to look at the Nuclear Suppliers Group structure to realize how precarious global weapons controls are.[31]

It is this ominous danger of carving up geopolitical spheres of influence with potentials for conflict and a new arms race that makes one opt for promoting financial imperium, with all its warts, as a global blue print.  Financial imperium could contribute to the evolution of the world order from the old sovereign nation-state colonial and ideological empires to that of global economic structures and enterprises which, with adequate control mechanisms, would develop world economy to overarch, encompass and serve more efficiently regional autonomous entities with different political cultures.[32]

The counter-weight to financial imperium should not be nation-states power politics but global grass roots organization of communities, communes and cooperatives. It is at the base that the electronic age globalization is eroding human bonds of understanding and franternity.  But that is, unfortunately, no longer a mainstream intellectual theme.  It has been highjacked by religious fundamentalism, organizing at the base, offering health care and "education" indoctrinating fanaticism and intolerance.  In the electronic age of atomic bombs and internet, the combination of power politics and fundamentalism – Evangelists on the one side, Moslems on the other – can be lethal for the species.

CONCLUSION

The time is ripe for an international call for a world conference, on the scale of the United Nations 1946 San Francisco Conference, with broad participation of global actors, to notably:

• Streamline the maze, the varieties and the levels of organizations, practices, rules and regulations that presently confuse global economic and financial structures.
• Diffuse the power politics dynamics, negotiate global disarmament and control of arms production and traffic. Tighten Nuclear Non-Proliferation Treaty controls and coordinate and harmonize the activities of Nuclear Suppliers Groups to better monitor global nuclear programs and depoliticize peaceful uses of nuclear energy under strict global controls.
• Review peoples' rights to self-determination in the light of new developments in ethnic and cultural identities.
• Reformulate the standards for social and economic cooperation among cultures. 

A. Khoshkish
AKIM, Inc.
New York, August 2008