Category Archives: power elite

How the Shipping Industry Gets its Way: pollution from ships

Do not give the regulated power over the regulators, unless you want consumers to lose out and producers to game the system. ..That lesson has been learned in many places around the world. National regulators are increasingly independent of the firms they regulate. But international ones still have further to go—and none further than the specialised agencies of the United Nations, such as the International Maritime Organisation (IMO) for shipping where the interests of the shipping industry are upheld d in several ways. The first is the distribution of voting rights between countries. At the IMO, for example, Panama and Liberia, with populations of just 4m and 4.8m respectively, can automatically get seats on its decision-making body as they have the world’s biggest merchant fleets.

The second is the assignment of those voting rights by individual countries. Remarkably, many governments have handed voting rights to private-sector firms… At the IMO least 17 countries have assigned their voting rights to flag registries operated by private firms, reckons Transparency International, an anti-corruption group; that adds up to about a tenth of delegates. At an IMO environmental-committee meeting in 2017, almost a third of countries were represented, at least in part, by business interests.

The third way in which producer interests are protected is through a spectacular lack of transparency. The agenda of the IMO’s council in November 2018 in London is available only to those with a password. Journalists are forbidden to report what delegates say or how they vote. There are no rules on the suitability or conflict of interests of delegates. In 2014 St Lucia appointed a Saudi billionaire without previous shipping experience as its IMO representative; a court in London judged in 2016 that the appointment was obtained in order to gain diplomatic immunity against divorce proceedings. There are no limits on the amount of gifts that can be showered on representatives. Goodies put on top of desks at an IMO assembly meeting last year were so heavy that they broke 137 sets of headphones underneath.

Such swampiness matters. The IMO is responsible for limiting emissions from ships, which were excluded from the Paris climate deal.   Some countries are interested in reform. At the imo council meeting this week Australia proposed allowing journalists to report on its meetings as a first step. The Marshall Islands has taken back some of its votes from the private firm that runs its flag registry. But more radical change is needed. Countries should send civil servants, not private actors, as their representatives. The un’s rules on conflicts of interest should be imposed. And voting rights should be allocated with the interests of consumers in mind. These lessons have been widely absorbed within borders. They ought to cross them, too

Excerpts from UN Regulatory Bodies: Agency Problems, Economist, Nov. 24, 2018, at 15

The Internet Was Never Open

Rarely has a manifesto been so wrong. “A Declaration of the Independence of Cyberspace”, written 20 years ago by John Perry Barlow, a digital civil-libertarian, begins thus: “Governments of the Industrial World, you weary giants of flesh and steel, I come from Cyberspace, the new home of Mind. On behalf of the future, I ask you of the past to leave us alone. You are not welcome among us. You have no sovereignty where we gather.”

At the turn of the century, it seemed as though this techno-Utopian vision of the world could indeed be a reality. It didn’t last… Autocratic governments around the world…have invested in online-surveillance gear. Filtering systems restrict access: to porn in Britain, to Facebook and Google in China, to dissent in Russia.

Competing operating systems and networks offer inducements to keep their users within the fold, consolidating their power. Their algorithms personalise the web so that no two people get the same search results or social media feeds, betraying the idea of a digital commons. Five companies account for nearly two-thirds of revenue from advertising, the dominant business model of the web.

The open internet accounts for barely 20% of the entire web. The rest of it is hidden away in unsearchable “walled gardens” such as Facebook, whose algorithms are opaque, or on the “dark web”, a shady parallel world wide web. Data gathered from the activities of internet users are being concentrated in fewer hands. And big hands they are too. BCG, a consultancy, reckons that the internet will account for 5.3% of GDP of the world’s 20 big economies this year, or $4.2 trillion.

How did this come to pass? The simple reply is that the free, open, democratic internet dreamed up by the optimists of Silicon Valley was never more than a brief interlude. The more nuanced answer is that the open internet never really existed.

[T]e internet, it was developed “by the US military to serve US military purposes”… The decentralised, packet-based system of communication that forms the basis of the internet originated in America’s need to withstand a massive attack on its soil. Even the much-ballyhooed Silicon Valley model of venture capital as a way to place bets on risky new businesses has military origins.

In the 1980s the American military began to lose interest in the internet…. The time had come for the hackers and geeks who had been experimenting with early computers and phone lines.  Today they are the giants. Google, Apple, Facebook, Amazon and Microsoft—together with some telecoms operators—help set policy in Europe and America on everything from privacy rights and copyright law to child protection and national security. As these companies grow more powerful, the state is pushing back…

The other big risk is that the tension between states and companies resolves into a symbiotic relationship. A leaked e-mail shows a Google executive communicating with Hillary Clinton’s state department about an online tool that would be “important in encouraging more [Syrians] to defect and giving confidence to the opposition.”+++ If technology firms with global reach quietly promote the foreign-policy interests of one country, that can only increase suspicion and accelerate the fracturing of the web into regional internets….

Mr Malcomson describes the internet as a “global private marketplace built on a government platform, not unlike the global airport system”.

Excerpts from Evolution of the internet: Growing up, Economist, Mar. 26, 2016

+++The email said Google would be “partnering with Al Jazeera” who would take “primary ownership” of the tool, maintaining it and publicizing it in Syria.  It was eventually published by Al Jazeera in English and Arabic.

American Oligarchs

Warren Buffett, the 21st century’s best-known investor, extols firms that have a “moat” around them—a barrier that offers stability and pricing power.One way American firms have improved their moats in recent times is through creeping consolidation. The Economist has divided the economy into 900-odd sectors covered by America’s five-yearly economic census. Two-thirds of them became more concentrated between 1997 and 2012 (see charts 2 and 3). The weighted average share of the top four firms in each sector has risen from 26% to 32%…

These data make it possible to distinguish between sectors of the economy that are fragmented, concentrated or oligopolistic, and to look at how revenues have fared in each case. Revenues in fragmented industries—those in which the biggest four firms together control less than a third of the market—dropped from 72% of the total in 1997 to 58% in 2012. Concentrated industries, in which the top four firms control between a third and two-thirds of the market, have seen their share of revenues rise from 24% to 33%. And just under a tenth of the activity takes place in industries in which the top four firms control two-thirds or more of sales. This oligopolistic corner of the economy includes niche concerns—dog food, batteries and coffins—but also telecoms, pharmacies and credit cards.

The ability of big firms to influence and navigate an ever-expanding rule book may explain why the rate of small-company creation in America is close to its lowest mark since the 1970s … Small firms normally lack both the working capital needed to deal with red tape and long court cases, and the lobbying power that would bend rules to their purposes….

Another factor that may have made profits stickier is the growing clout of giant institutional shareholders such as BlackRock, State Street and Capital Group. Together they own 10-20% of most American companies, including ones that compete with each other. Claims that they rig things seem far-fetched, particularly since many of these funds are index trackers; their decisions as to what to buy and sell are made for them. But they may well set the tone, for example by demanding that chief executives remain disciplined about pricing and restraining investment in new capacity. The overall effect could mute competition.

The cable television industry has become more tightly controlled, and many Americans rely on a monopoly provider; prices have risen at twice the rate of inflation over the past five years. Consolidation in one of Mr Buffett’s favourite industries, railroads, has seen freight prices rise by 40% in real terms and returns on capital almost double since 2004. The proposed merger of Dow Chemical and DuPont, announced last December, illustrates the trend to concentration. //

Roughly another quarter of abnormal profits comes from the health-care industry, where a cohort of pharmaceutical and medical-equipment firms make aggregate returns on capital of 20-50%. The industry is riddled with special interests and is governed by patent rules that allow firms temporary monopolies on innovative new drugs and inventions. Much of health-care purchasing in America is ultimately controlled by insurance firms. Four of the largest, Anthem, Cigna, Aetna and Humana, are planning to merge into two larger firms.

The rest of the abnormal profits are to be found in the technology sector, where firms such as Google and Facebook enjoy market shares of 40% or more

But many of these arguments can be spun the other way. Alphabet, Facebook and Amazon are not being valued by investors as if they are high risk, but as if their market shares are sustainable and their network effects and accumulation of data will eventually allow them to reap monopoly-style profits. (Alphabet is now among the biggest lobbyists of any firm, spending $17m last year.)…

Perhaps antitrust regulators will act, forcing profits down. The relevant responsibilities are mostly divided between the Department of Justice (DoJ) and the Federal Trade Commission (FTC), although some …[But]Lots of important subjects are beyond their purview. They cannot consider whether the length and security of patents is excessive in an age when intellectual property is so important. They may not dwell deeply on whether the business model of large technology platforms such as Google has a long-term dependence on the monopoly rents that could come from its vast and irreproducible stash of data. They can only touch upon whether outlandishly large institutional shareholders with positions in almost all firms can implicitly guide them not to compete head on; or on why small firms seem to be struggling. Their purpose is to police illegal conduct, not reimagine the world. They lack scope.

Nowhere has the alternative approach been articulated. It would aim to unleash a burst of competition to shake up the comfortable incumbents of America Inc. It would involve a serious effort to remove the red tape and occupational-licensing schemes that strangle small businesses and deter new entrants. It would examine a loosening of the rules that give too much protection to some intellectual-property rights. It would involve more active, albeit cruder, antitrust actions. It would start a more serious conversation about whether it makes sense to have most of the country’s data in the hands of a few very large firms. It would revisit the entire issue of corporate lobbying, which has become a key mechanism by which incumbent firms protect themselves.

Excerpts from Too Much of a Good Thing, Economist, Mar. 26, 2016, at 23

Military Bunkers for the Rich

Deep in the Swiss Alps, next to an old airstrip suitable for landing Gulfstream and Falcon jets, is a vast bunker that holds what may be one of the world’s largest stashes of gold. The entrance, protected by a guard in a bulletproof vest, is a small metal door set into a granite mountain face at the end of a narrow country lane. Behind two farther doors sits a 3.5-ton metal portal that opens only after a code is entered and an iris scan and a facial-recognition screen are performed. A maze of tunnels once used by Swiss armed forces lies within.

The owner of this gold vault wants to remain anonymous for fear of compromising security, and he worries that even disclosing the name of his company might lead thieves his way…

Demand for gold storage has risen since the 2008 financial crisis. Many of the wealthy see owning gold as a hedge against the insecurity of banks and a reasonable investment at a time when markets are volatile and bank accounts and low-risk bonds pay almost no yield. It may also be a way to avoid the increasing scrutiny of tax authorities. In high-profile cases, U.S., French, and German prosecutors have gone after citizens of those countries with undeclared Swiss bank accounts.

Swiss storage operations such as these don’t have the same obligation that Swiss banks do to report suspicious transactions to federal regulators. Americans aren’t required under the U.S. Foreign Account Tax Compliance Act to declare gold stored outside financial institutions.
Of the roughly 1,000 former military bunkers still in existence across Switzerland, a few hundred have been sold in recent years, and about 10 are now storage sites holding gold as well as computer data, according to the Swiss defense department.

Few match the opulence of the airstrip setup, whose owner claims to run the largest store of gold for private clients—and the seventh-largest gold vault in the world. Near the runway sits the VIP lounge and a pair of luxurious apartments for clients. The walls of the apartments are lined with aged wood from Polish barns. South African quartzite was chosen for the floors to match the faded gray timber, and the amenities—bathroom mirror, TV screens—can retract into the ceiling, counter, or wall. The owner offers a place for clients to sleep and eat, because “many do not want to leave a paper trail of credit card receipts and passports” at hotels and restaurants…

Some miles away, Dolf Wipfli, the founder and chief executive officer of a different company, Swiss Data Safe, is one of the few operators willing to be interviewed about his business. The gold Swiss Data Safe stores for clients is kept in a mountainside bunker outside the hamlet of Amsteg.

Excerpts from Secret Alpine Gold Vaults Are the New Swiss Bank Accounts, Bloomberg, Sept. 30, 2016

Fleas in the Barn: a Joseph Kabila et al. story

Inongo is the provincial capital of the Mai-Ndombe Province, a 13-million-hectare area located some 650 km northeast of Kinshasa, Demoractic Republic of Conglo, DRC.

The forests of Mai-Ndombe… are rich in rare and precious woods (red wood, black wood, blue wood, tola, kambala, lifake, among others). It is also home to about 7,500 bonobos, an endangered primate…The forests constitute a vital platform providing livelihoods for some 73,000 indigenous individuals, mostly Batwa (Pygmies), who live here alongside the province’s 1.8 million population, many of whom with no secure land rights.  Recent studies also have revealed that the province – and indeed the forests – boasts significant reserves of diamond of precious metals nickel, copper, oil and coal, and vast quantities of uranium lying deep inside the Lake Mai-Ndombe.

In an effort to save these precious forests, the World Bank in 2016 approved DRC’s REDD+ programmes aimed at reducing greenhouse gas emissions and fight forest’s deforestation and degradation, which it would fund to the tune of 90 million dollars annually.  The projects, which are currently estimated at 20, have since transformed the Mai-Ndombe Province into a testing ground for international climate schemes. And as part of the projects, indigenous and other local people caring for the forests and depending on them for their livelihoods were supposed to be rewarded for their efforts.

However, Marine Gauthier, a Paris-based expert who authored a report on the sorry state of the Mai-Ndombe forest, seems to have found serious flaws in these ambitious programmes.  The report, released a few days before the International Day of Forests on March 21, 2018 by the Rights and Resources’ Initiative (RRI), cited weak recognition of communities’ land rights, and recommended that key prerequisites should be addressed before any other REDD+ funds are invested.  In the interim, it said, REDD+ investments should be put on hold…..

Under the DRC’s 2014 Forest Code, indigenous people and local communities have the legal right to own forest covering an area of up to 50,000 hectares.Thirteen communities in the territories of Mushie and Bolobo in the Mai-Ndombe province have since asked for formal title of a total of 65,308 hectares of land, reports said, adding that only 300 hectares have been legally recognised for each community – a total of only 3,900 hectares.

Pretoria-based Donnenfeld added: “My guess is that the government is more interested in selling these resources to multinationals than it in seeing it benefit the community….Gauthier pointed out that…“REDD+ opens the door to more land-grabbing by external stakeholders appealed…. Local communities’ land rights should be recognised through existing legal possibilities such as local community forest concessions so that they can keep protecting the forest, hence achieving REDD+ objectives.”

Excerpts from DR Congo’s Mai-Ndombe Forest ‘Savaged’ As Landless Communities Struggle,  IPS, Apr. 17, 2018

Returning Stolen Money: the Nigerian Saga (2002-2018)

Nigeria and Switzerland signed a memorandum of understanding on March 26, 2018 to pave the way for the return of illegally acquired assets…Switzerland said in December 2017 that it would return to Nigeria around $321 million in assets seized from the family of former military ruler Sani Abacha via a deal signed with the World Bank…[T]he memorandum of understanding was ratified between Nigeria, Switzerland and the International Development Association, (IDA), the World Bank’s fund for the world’s poorest countries.

Excerpt from Nigeria and Switzerland sign agreement to return stolen assets, Reuters, Mar. 26, 2018

Secret Trade Deals – Role of Wikileaks

On August 11, 2015 WikiLeaks has launched a campaign to crowd-source a €100,000 reward for Europe’s most wanted secret: the Transatlantic Trade and Investment Partnership (TTIP).

Starting pledges have already been made by a number of high profile activists and luminaries from Europe and the United States….Since it began to face opposition from BRICS countries at the World Trade Organisation, US policy has been to push through a triad of international “trade agreements” outside of the WTO framework, aimed at radically restructuring the economies of negotiating countries, and cutting out the rising economies of Brazil, Russia, India, China and South Africa (BRICS).

The three treaties, the “Three Big T’s”, aim to create a new international legal regime that will allow transnational corporations to bypass domestic courts, evade environmental protections, police the internet on behalf of the content industry, limit the availability of affordable generic medicines, and drastically curtail each country’s legislative sovereignty.  Two of these super-secret trade deals have already been published in large part by WikiLeaks – the Transpacific Partnership Agreement (TPP) and the Trade in Services Agreement (TISA) – defeating unprecedented efforts by negotiating governments to keep them under wraps.

But for Europeans the most significant of these agreements remains shrouded in almost complete secrecy. The Transatlantic Trade and Investment Partnership (TTIP), which is currently under negotiation between the US and the European Union, remains closely guarded by negotiators and big corporations have been given privileged access. The public cannot read it.

Today WikiLeaks is taking steps to ensure that Europeans can finally read the monster trade deal, which has been dubbed an “economic NATO” by former US Secretary of State Hillary Clinton.  Using the new WikiLeaks pledge system everyone can help raise the bounty for Europe’s most wanted leak. The system was deployed in June to raise a $100,000 bounty for the TTIP’s sister-treaty for the Pacific Rim, the TPP.

The pledge system has been hailed by the New York Times as “a great disrupter”, which gives “millions of citizens… the ability to debate a major piece of public policy,” and which “may be the best shot we have at transforming the [treaty negotiation] process from a back-room deal to an open debate.”

WikiLeaks founder Julian Assange said,

“The secrecy of the TTIP casts a shadow on the future of European democracy. Under this cover, special interests are running wild, much as we saw with the recent financial siege against the people of Greece. The TTIP affects the life of every European and draws Europe into long term conflict with Asia. The time for its secrecy to end is now.”

Excerpts from WikiLeaks goes after hyper-secret Euro-American trade pact