Banks; bigger than countries.

Click on the chart to see countries and banks (in yellow), in order of financial size.

If banks were countries ...

Among the world's largest, based on GDP and revenue, many financial companies are bigger than most of the world's countries. Beginning with the 57th largest country in the world, it's Fannie Mae with revenues greater than the 60 countries at the bottom of the list, combined. Bank of America is next followed by other familiar names.

Too big to fail or jail? Of course they are. They wield more influence than most of the world's governments and they are NOT there to serve any citizenry or national interest. They have no granted constitutional role in the countries where they play. They provide no goods or services.

Their business model is competitive, bottom line driven; take wealth and use it to make more wealth. They are willing to take money from anyone in any country regardless of the damage done. There are no policies of benefiting others. They recognize no higher good or greater purpose than their own financial success. And so far, no one is holding them reasonably accountable for their adverse impact on the world.

Mega-banks provide no significant social benefit; there is no correlation between size and performance. Mega-banks do, however, create significant systemic risk and, being profit driven, exert their influence in favor of increased autonomy and against regulatory oversight that might reign them in. When the inevitable crash came in '07, government had no choice but to bail them out for fear of a complete financial system collapse.

In the larger context of a world economy:

“Globalization is the result of powerful governments, especially that of the United States, pushing trade deals and other accords down the throats of the world’s people to make it easier for corporations and the wealthy to dominate the economies of nations around the world without having obligations to the peoples of those nations.” — Noam Chomsky

"The financial debacle has many causes and implications, but it would be wrong to underestimate systemic corruption."  ~Daniel Kaufmann, senior fellow at the Brookings Institution, formerly World Bank director of governance.

Feel free to inquire, to have an opinion, to fire the bank you've been using and join the credit union, write your congressman, ... and the white house, or join the movement to occupy wall street.   This sort of volatility is a precursor to change; we should consider investing ourselves in the process.  Perhaps we'll be the impetus that provokes change for better.

Are banks necessary?

No.  As individuals, we don't need them.  There are many alternatives for the typical household.  Credit unions, brokerage accounts, insurance accounts, and prepaid/reloadable credit cards are a few examples.

Are banks trustworthy?
Not particularly.  Banks are supposed to play by the rules, but that hasn't gone well.  Between 2009 and 2014, the largest U.S. banks paid $130 billion in fines, settlements, and criminal penalties for their illegal activities.  That was just for the times they cheated and got caught, of course.  Small, local banks are more reasonably managed.

Are banks keeping your money safe?
No, that's the government's FDIC.

Our first banks were small, local, and community focused.  They knew their customers.  They held money for folks in the form of deposits, and they loaned it back within the community.  Interest on deposits and more interest on loans is how they managed their costs, but that was and still is their purpose.  All the rest is questionable.

Most banks now are far removed from communities and from their customers.

Some folks these days would like to take their business elsewhere, perhaps for ethical reasons.  The big banks do all manner of things that cause people of conscience to prefer an alternative.

"Virtually all independent economists and financial experts agree that the economy cannot stabilize or recover unless the giant, insolvent banks are broken up (and 1, 1A,  2, and 3).  And the very size of the big banks is also warping our entire political system."  ... as in purchasing the legislation they need.  And size ... the larger banks are bigger than most countries.

A capitalist free market economy has much to commend it.  Big banks aren't included in the list.


The current generation has seen emphasis on insider plays, manipulation of the marketplace, and purchased regulation.  Every president and virtually every congressman has supported the financial industry and the wealthy at the expense of the citizenry.

The result is a national ponzi scheme.  It's wealth extraction from the top with the price tag at the bottom of the pyramid where most people live.  That's the U.S. economic model since '79.

Assets.  I'm sure that was supposed to be 'by assets'.

   Okay, maybe not.
Note the asset scale increments, five hundred thousand million,
then one million million, ... incredible wealth concentration.

A classic ponzi requires suckers to buy in, but today's version depends on government regulation to open our collective financial resources without our permission for use by the ponzi players.  It has been noted by leading economists that the financial industry now serves the few and provides nothing for the well being of the citizenry.

There are a number of factors suggesting change is coming.  For now, you can get along fine without any banks being part of the process.  The more difficult task is defending the nation.  Feel free to suggest to your representatives that you'd be quite happy if the big banks were disassembled and made to behave responsibly.

World Governance

One World Government - it's now the likely future, according to economists.

Prophets of doom and their signs of the end! 

World governance today has taken an interesting turn.  It is a bit of a surprise for those who expected governments to grow closer together and merge into the prophesied one-world government, perhaps in collaboration with the UN.  That or some similar path has been described by doom-cryers over the years.

What few expected was the subordination of governments by big business.  Regulatory changes purchased by corporate influence in recent decades have spawned multi-national corporations and banks that are bigger and politically more powerful than countries.

Businesses we remember from years ago have been purchased whole or in part by other businesses.  Brand names we thought were competitors all belong to a single parent corporation.  Banks we thought were staid and reasonably sized are now financially larger than countries and more powerful as well.  Given standing by the Supreme Court, corporations exercise more power and leverage in Washington than any other influence group.  Similarly around the world, corporations have greater influence than governments on foreign trade policies.  The extraordinarily influential oil industry comes to mind for its part in regional conflicts in Africa and the Middle East.  The war in Iraq is acknowledged to have fought for Big Oil.  This century's trade agreements serve big business almost exclusively.  Of the world's 100 largest economies, 63 are countries, and 37 are corporations.

Network Diagram of Linear Granger-causality relationships that are statistically significant at the 5% level

among the monthly returns of the 25 largest (in terms of average AUM) banks, broker/dealers, insurers, and

hedge funds over January 1994 to December 1996. The type of institution causing the relationship is

indicated by color: green for broker/dealers, red for hedge funds, black for insurers, and blue for banks.

Granger-causality relationships are estimated including autoregressive terms and filtering out 

heteroskedasticity with a GARCH(1,1) model.

Corporate goals are profit and winning.  The corporate ethic is exclusively bottom-line.  The only ethical constraints on their activities are in regulations imposed by governments, all progressively weaker over recent decades.

The financial and insurance industries are even more interconnected than the manufacturing sectors.  The degree of overlapping investment and interdependence has increased explosively.

As regulatory constraints were removed, banking morphed and merged into investment groups, hedge funds, and currency exchanges.  Risks increased exponentially, and unethical practices emerged faster than governments and oversight agencies could contain them.  They gave us the Great Recession which cost trillions from the pockets of the people.  The finance industry professionals came out rather well with mega-bonuses in the same year that investors and the economy experienced giga- and tera-losses.  We haven't recovered yet, nor will most of the citizenry except for the wealthiest 10%.

Foolish parents allow their children to play on the cliff tops. The results are predictable and in this case, probably irreversible. The question for us is perhaps how we might make our way forward individually and as a nation as the changes become more intrusive.

The banking industry has been transformed in recent years, not only with the repeal of the Glass-Steagall Act in

1999, but also through financial innovations like securitization that have blurred the distinction between loans, bank

deposits, securities, and trading strategies.  The types of business relationships between these sectors have also changed,

with banks and insurers providing credit to hedge funds and also competing against them through their own

proprietary trading desks, and hedge funds using insurers to provide principal protection for their funds
while simultaneously competing with them by offering capital-market-intermediated insurance such as

catastrophe-linked bonds.

Prophets have spoken about events at the end of the age.  We're curious what they might have been shown that provoked the descriptions they've left for us.  What did they really see?  As the years pass, it perhaps becomes a bit clearer.  What's the good response on our part?

Ref: Econometric Measures of Connectedness and Systemic Risk in the Finance and Insurance Sectors
Ref: An Incredible Look At The Exploding Levels Of Financial Industry Interconnectedness

Thieves, small and big

Long ago a philosopher observed, "it is in the nature of man to hang the small thieves and to elect the big ones to public office."

If we go with the content offered by candidates, asking a citizen to vote thoughtfully this fall is like asking a physicist to do herpetology.  One, it's mostly irrelevant, and two, the choices are lizards.

The Issues:  Important issues are complex and changing.  For example:

• Persistent poverty, economic inequality and immobility, explosive growth for the top 10% and stagnation for the bottom 90% for the last forty years.  Today, 20%+ of our children live in poverty, and it's been that way for a long time, but it doesn't have to be.
• Both liberals and conservatives know that terminating a pregnancy ends a child's life.  Improvements in in-utero observation and fetal monitoring have shown the well-developed child at mid-term and forced the recognition of deliberately ending that life.  Now we're stuck with having made it legal to end a child's life for the convenience of the mother among other perhaps more supportable and less selfish reasons.
• The supreme court is on the cusp of being redefined or permanently ensconced.  Conservative or liberal, it's on the ballot for us to decide.
• The economy is changing faster than economists can monitor and manage.  We crashed the world economy with the Great Recession, and we haven't quite done anything to ensure it doesn't happen again.  Banks bigger than countries got bailed out, fines were charged and paid to governments, and the citizenry bore the losses.  It came out of your pocket and mine and went into the pocket of the wealthiest 1%, and we didn't get so much as an apology or any reason to believe it's over.
• Social and political unrest are spreading around the world, in part at least because of the political and economic actions of western nations.  Violent extremism continues on the rise, but the root causes are unaddressed.  We see the top level response of shooting back at the bad guys as though they came up with their position for no reason.  We see little support for understanding and negotiation.
• The Trans-Pacific Partnership agreement is a major concern as part of our international relations with other economies.  The agreement is over 5,000 pages long and tediously complex.  Specific criticisms include detrimental impact on Japanese agriculture to the point of ending the national industry.  Unable to compete with foreign suppliers, farmers worry that they'll be put out of business.  It happened to Mexico as more than a million farms were closed by competition with North American corn producers. The list of specific concerns is long.
• ... and many more.

Trickle-down didn't.  Welfare wasn't.  Fanny and Freddie failed.  More than One Child got Left Behind; in fact, except for the children of the wealthy, most suffered loss.  The cheerleader who said, "WE CAN," couldn't, and now, neither can the rest of us.  Government sanctioned fiscal policy and partisan squabbling over the national debt crisis have tanked the economy twice in recent years while the financial sector (now the nation's largest industry) extracts hundreds of billions out of the economy.

Occupy Wall Street is just another round of citizens asking hard questions a bit more emphatically.  

There are no credible answers coming from either party, there are no reasonable responses to the fragile state of the global economy which their best efforts have given us, and there are no particularly believable leaders moving toward reasonable change.

Sound familiar?  Almost biblical?  I suspect that some (not all) of our current leaders are doing their best amidst the failures to serve the American people, yet their efforts seem to be more of the same.  The Republican alternative offers no more credible solution to our functional failures than does this administration.

The gap between rich and poor continues to widen, and the trend is now visible in the global marketplace.  Countries are in many cases prospering, but their increases are going exclusively to the wealthy few.  The trend includes the capitalist democracies.

The choices:  the candidates from among whom we must choose our leadership leave a lot to be desired.  They both suck, at least according to each other.  Each accuses the other of various disqualifying attributes, and they're perhaps mostly right.  As Douglas Adams pointed out, we must choose from among the lizards.  We all hate the lizards (as we should because they're despicable of course), but that's the choice we're given, and if we don't vote, the wrong lizard will get elected.

We're flawed not so much in intent, perhaps, as in structure.

To be fair, both sides have attempted good initiatives they hoped would serve well.  For example, social aid programs have in fact addressed some immediate problems and many folks in need were given a hand up out of poverty. The same programs (since more is better) have gone on to do more harm than anyone imagined was possible.

Personally, grass-roots-driven change appeals to me.  Not that it's likely to make the problems go away, of course, but if we choose, then we'll own the problems and perhaps be a bit more thoughtful about the process.

So, is it time to think about re-engaging our political process personally?  Kinda looks that way, doesn't it.  Heard anything meaningful from your representatives in Congress lately?  It's been strangely quiet there since the debt crisis screw up, if you ask me.

"Suppose you were an idiot.  And suppose you were a member of Congress ...  but I repeat myself."

~ from a letter fragment, 1891, Mark Twain 

They're not idiots, of course.  Arrogant, perhaps, 
hubristic, out of touch, and inappropriately 
influenced by money.
And polarized!

It's a little frightening, considering the government's attitude toward such, to discover that I am perhaps more of a dissident than a party acquiescent.  Not interested in being tasered or maced, but definitely had enough of disinformation (lies), market mismanagement (theft),  and patchwork solutions (rule by doodoohead fiat).

Lizards politicians play for position,

coming out on top is the intent.

Patriots understand the goal

is the well-being of those

whom they serve.
Any overlap between the two
is purely coincidental.

If you're a Republican because you think they're the conservative bunch, it's not really that simple anymore.  You'll perhaps want a better reason.

If you're a Democrat because you think they're the liberal, human rights oriented, environmentally sensitive bunch, they're not so easily defined now. You'll perhaps want to reexamine that position.

Simple debates on issues are perhaps informative, but promises are often shelved after the race.  What the parties actually do when they're in power is more revealing.  Both groups are more complex than their simple campaign slogans suggest.  Perhaps there's a different reality behind that façade.  

One candidate inadvertently admitted to having “both a public and a private position” on Wall Street reform ...

The historic differentiations in the two-party system have less effect on their performance in office than we might expect.  Many, perhaps most issues have succumbed to power plays and influence purchase.

Civilization's Odd Illusion

"Why are diamonds so valuable," she asked with genuine interest.

They're not.  They have industrial uses, perhaps, but no intrinsic value.  You can't use them for much except in trying to impress others. Billionaire De Beers chairman Nicky Oppenheimer once succinctly explained, “diamonds are intrinsically worthless, except for the deep psychological need they fill.”  So how does such imaginary value emerge in society?

Beginning with the simplest life issues - food and water, shelter and clothing, health and learning, and safety - neither diamonds nor gold or other 'precious' things have any practical use.

• In Spain, a fellow took me to the commons where he had a root cellar.  In it, he proudly showed me his prosperity, about ten bushels of potatoes he had grown and harvested all by himself that year.
• In Djibouti, a fellow cheerfully introduced me to his camels and goats, his family's valuables.  
• In Kenya, a Masai friend explained that goats were his extended family's reserves.  If need arises, they sell a goat.  If a year goes well, they buy a goat.

At the lowest economic echelon:  If the world lived at that self-sustainment level, crops and flocks would be valuable.  Craftsmanship would be marketable.  Fabrics and clothing, bread and produce would be traded, and folks would help each other.  Negotiated trades and a handshake would be the currency, and diamonds would still be worthless.

Second echelon: enter the middle-man; the one who buys and sells, who employs laborers and manufactures products.  Currencies emerge, whose value is perhaps just a promise, to enable transactions.

Third echelon: rule makers (rulers) rise above and impose control; the right to rule and tax people and property and productivity, all justified by the benefit of governance and employment and some protection.  Luxury (useless decor) emerges for the privileged.  Appearance and reputation become goals.  Currencies and financial instruments become useful repositories for their excess wealth.

In a few centuries, currencies and equivalents become an industry that shapes the world.  Confined to the rules of imaginary value, the focus of life is acquisition and accumulation of currencies.  And what do you do when you have more than you need?  You buy a bigger home, a cooler car, expensive clothes, a diamond ring .... and we're far down that imaginary road but completely unaware.

Real world and not-real world ...

There's progress for the fortunate.  Health and income stability improve.  Manual labor declines as mechanization sweeps through home and workplace.  Geographic mobility becomes normal.  Freedom to choose your path emerges through the years, although much is chosen for you based on the imaginary model of things.

For appearance and reputation, rarely used ....

It's revealing to see the priorities those in top positions follow now.  The decisions they make change the country and the world, and as they focus on territory or religion or trade, they'll affect the lives of millions.  When economic competition becomes the focus, that's where imaginary wealth does the most harm, and competition becomes just a continuation of previous wars.  Economic decisions are made for advantage, not for human benefit, and the devastating result at the lower end of the pyramid is deprivation and struggle as wealth is deliberately extracted from communities and countries.

... if you know who to ask ...

He offers a different value system

than the one we see here.

To Him, every person is valuable,

wealth is a crippler, and the

the first shall be ... last.

Curious why the oil industry fights so fervently against climate change?  The U.S. is now the world's largest oil producer and has the largest proven reserves (more than 200 billion barrels).  That's wealth worth defending despite the devastating cost, at least according to the near-term economics.  Much like the tobacco industry's defense, it fights for gain not human benefit.

Curious why the financial industry has fought so long against regulatory oversight?  Major banks and financial corporations are bigger than countries now, and wealth is their only goal, not human benefit.

There are real truths available despite all the imaginary.  There is a view, a perspective that's real-world based.  There are foundational principles, and there is inalienable value in each individual, but it's hard to see that from the upper echelons of worldly wealth, enclosed in civilization's illusion.

Fact Check - the Crash

The Great Recession wasn't all that great for most of us.  Which of the following facts are true?

• the stock market crashed (9/2008), 

  

  Continued into 2016 for most states; jobs recovered were,
  on average, less hours, pay, benefits than the ones lost.

• the auto industry was in chaos and bankruptcy (bailouts for Ford, GM, Chrysler), 
• the real estate market collapsed and home equity dropped, foreclosures rose immediately,
• the banks were collapsing ($4.6 trillion bailout)(The FDIC closed 465 failed banks in the five years following the crash compared with just 10 in the preceding five year period.), 
• unemployment was on its way to 10%, 
• retirement plans lost 25% on average, 
• oil went from $25 to $130+ per barrel, 
• As the recession effects circled the globe, hundreds of thousands of economically vulnerable folks were pushed below the survival line and died.

All true.  These were not momentary events, not hiccups in our daily routine.  These were long-path decision results, emplaced by political maneuvering and unbalanced influence.

“That economic wreckage can still be seen from coast to coast in unemployment, foreclosed and underwater homes, lost retirements and educations and so much more.” ~Dennis Kelleher, CEO of Better Markets

Update: The industry is not afraid to do it again.  They know no one goes to jail, and the government will bail them out.  Those we had to bail out because they were too big to fail, those are bigger now.  The total cost of the recession in the U.S. alone exceeds $22 TRILLION according to the Government Accountability Office (gao.gov) report.

It all happened from failure of government regulation and oversight of a known high-risk, unconstrained industry. Government fell prey to monied influence, and the bottom 90% of the world bore the extraordinary financial loss, lost years, and lost lives.

So, let's blame someone.  If we mark the spot of the crash, we might blame just President G. W. Bush. Things go farther back and farther afield, though.  So do we blame the Republicans or the Democrats, the President(s) or Congress? Check the timeline ...

1 • 1978, Supreme Court allows banks to export the usury laws of their home state nationwide and sets off a competitive wave of deregulation, resulting in the complete elimination of usury rate ceilings in South Dakota and Delaware, among others.
2• 1980, Depository Institutions Deregulation and Monetary Control Act – Legislation increases deposit insurance from $40,000 to $100,000, authorizes new authority to thrift institutions, and calls for the complete phase-out of interest rate ceilings on deposit accounts.
3• 1982, Garn-St. Germain Depository Institutions Act – Bill deregulates thrifts almost entirely, allowing commercial lending and providing for a new account to compete with money market mutual funds. This was a Reagan administration initiative that passed with strong bi-partisan support.
• 1987, FSLIC Insolvency – GAO declares the deposit insurance fund of the savings and loan industry to be insolvent as a result of mounting institutional failures.
4• 1989, Financial Institutions Reform and Recovery Act – Act abolishes the Federal Home Loan Bank Board and FSLIC, transferring them to OTS and the FDIC, respectively. The plan also creates the Resolution Trust Corporation to resolve failed thrifts.
5• 1994, Riegle-Neal Interstate Banking and Branching Efficiency Act – This bill eliminated previous restrictions on interstate banking and branching. It passed with broad bipartisan support.
6• 1996, Fed Reinterprets Glass-Steagall – Federal Reserve reinterprets the Glass-Steagall Act several times, eventually allowing bank holding companies to earn up to 25 percent of their revenues in investment banking.
• 1998, Citicorp-Travelers Merger – Citigroup, Inc. merges a commercial bank with an insurance company that owns an investment bank to form the world’s largest financial services company.
7• 1999, Gramm-Leach-Bliley Act – With support from Fed Chairman Greenspan, Treasury Secretary Rubin and his successor Lawrence Summers, the bill repeals the Glass-Steagall Act completely.
8• 2000, Commodity Futures Modernization Act – Passed with support from the Clinton Administration, including Treasury Secretary Lawrence Summers, and bi-partisan support in Congress. The bill prevented the Commodity Futures Trading Commission from regulating most over-the-counter derivative contracts, including credit default swaps.
• 2004, Voluntary Regulation – The SEC proposes a system of voluntary regulation under the Consolidated Supervised Entities program, allowing investment banks to hold less capital in reserve and increase leverage.
• 2007, Subprime Mortgage Crisis – Defaults on subprime loans send shockwaves throughout the secondary mortgage market and the entire financial system.
• December 2007, Term Auction Facility – Special liquidity facility of the Federal Reserve lends to depository institutions. Unlike lending through the discount window, there is no public disclosure on loans made through this facility.
• March 2008, Bear Stearns Collapse – The investment bank is sold to JP Morgan Chase with assistance from the Federal Reserve.
• March 2008, Primary Dealer Facilities – Special lending facilities open the discount window to investment banks, accepting a broad range of asset-backed securities as collateral.
• July 2008, Housing and Economic Recovery Act – Provides guarantees on new mortgages to subprime borrowers and authorizes a new federal agency, the FHFA, which eventually places Fannie Mae and Freddie Mac into conservatorship.
• September 2008, Lehman Brothers Collapse – Investment bank files for Chapter 11 bankruptcy.
• October 2008, Emergency Economic Stabilization Act – Bill authorizes the Treasury to establish the Troubled Asset Relief Program to purchase distressed mortgage-backed securities and inject capital into the nation’s banking system. Also increases deposit insurance from $100,000 to $250,000.
• Late 2008, Money Market Liquidity Facilities – Federal Reserve facilities created to facilitate the purchase of various money market instruments.
• March 2009, Public-Private Investment Program – Treasury Secretary Timothy Geithner introduces his plan to subsidize the purchase of toxic assets with government guarantees.

There has been plenty of involvement on both sides of the aisle, and plenty of opportunity to correct the errors. Republicans have perhaps encouraged the laissez-faire policy of letting business run unfettered, but there were democrats in the process as well.  

Over-regulation does, in fact, inhibit successful business.  Ideally, a business will succeed or fail on its own in a competitive market, and it needn't have other constraints. That's fine for small businesses, perhaps.  But when corporations are bigger than countries, economic warfare emerges and actual civilian casualties escallate. 

Do we still face risks, unethical practices, and criminal behaviors in the finance industry?  Of course. Do we now have good governance to preclude another catastrophe?

Side note: through it all, HSBC bank was laundering money for Mexican drug cartels to the tune of $881 billion according to the Justice Department. The penalty for this criminal activity was $1.9 billion, a small fraction of their profits (and the New York Times laments that HSBC was too big to indict). HSBC was just one of many out-of-control organizations, yet nobody went to jail at a time when an unemployed person gets 10 years for robbing a minute mart. Barclays and Swiss UBS were among the banks identified in the Libor rate manipulation scandal. Wells Fargo was recently discovered to have opened millions of accounts without customer permission.  Deutsche Bank was later discovered to be a participant in the Libor scandal; they agreed to a combined US$2.5 billion in fines.  What kind of leadership do we need in business and government to rein in the unethical behavior and reduce the risk to our national economic health?

Histronomics - 402

Global Thinking

'Manifest Destiny' turns out to have been arrogance, racism, greed, and murder. 'Lebensraum' (room to live) was a poorly disguised land-grab by Germany.  Japan's expansion into China and through the Pacific was exclusively for ownership and control of the raw materials they needed for survival and the growth of their superior culture.

Colonial intrusion into Africa was equally devastating.  Between the upheavals of war, disease, and displacement, many white-on-white conflicts left half or more of the black population dead and the remainder disenfranchised. None of the colonial powers kept reasonable records of the dead blacks, just the whites.  Estimates of black African deaths vary widely between 12 and 60 million. The Bantu, Xhosa, Zulu, the Nama and Herero ... it was a hundred years before they would again have a voice in their own countries. 

Want a first-hand lecture on the subject? Ask a Masai today. Only now he can tell you the truth since Kenya's new constitution (2010) finally grants him the freedom to speak his mind without fear of being killed for criticizing those in power. Ask apartheid's victims, the millions of them over more than 200 years.

Was there any alternative for the nations faced with increasing population and limited resources? Was there another approach that didn't require the extermination or enslavement of native peoples? Of course. History gives us examples of merging cultures and populations. Some were more easily transitioned than others, but their successes are instructive.

Contemporary globalization is our current opportunity, yet to date, the 'sole purpose' is unchanged. The world financial institutions backed by their governments continue the colonial era's example. Wall Street is today's British Empire, German Reich, and Japanese conquest.

See Banks: Bigger than Countries, 

     The Adult Mind, and

Cities Without Citadels.

Some recommended reading:

Cultures Merging: A Historical and Economic

Critique of Culture

Eric L. Jones

A Biography of the Continent Africa

John Reader

Attempts to conclude the colonial era with acknowledgement by the responsible nations of their wrongdoing in Africa have had mixed results. European countries and America are, at government level, opposed. In 2001 there was an international conference on racism in South Africa. The African countries demanded an ‘apology’ for the slave trade, but European countries would only state that they ‘regret’ it. America and the European countries fear that an apology, an admission of guilt, would bring legal consequences and force the payment of reparations in some form.

The final wording of the conference’s declaration on slavery was agreed as follows: We acknowledge that slavery and slave trading, including the trans-Atlantic slave trade, were appalling tragedies in the history of humanity, not only because of their inherent barbarism, but also in terms of their magnitude, organised nature and especially their negation of the essence of victims.

The United States walked out of the conference before this declaration was agreed, over criticism of Israel.

The Rev. Jesse Jackson, an American leader and former Presidential candidate, was interviewed during the South Africa conference. He asked Britain to apologise for its role in the slave trade. He suggested that compensation or reparation should be paid to African countries in the form of reducing debts they owe to the West. 

Jackson said, "If you feel proud of [slavery and colonialism] then say that. But if one has a sincere desire to overcome the ravages of the past it doesn't take much to apologise and move towards some plan for restoration."

Dr Stephen Small of the University of Leicester said of the reparations movement, "The descendants of Africans and of Europeans view the legacy of the slave trade from different vantage points. Africans and their descendants realise that there is nothing that the West can ever do to make right the wrongs committed during slavery and colonialism. But they also insist that the West can begin to loosen the shackles of poverty and economic distress which continue to hold back Africans and Africa.  Only by tackling the unfairness of these systems can we begin together to create a more morally acceptable economic and political system within which the world’s entire population can prosper."

Herero survivors after an escape through
the Kalahari desert.

African prisoners chained up
by German soldiers, 1904.

In just one of the African conflicts, one-hundred thousand Herero were killed by German colonial forces. On 16 August 2004, 100 years later, the German government officially apologized for the atrocities. "We Germans accept our historic and moral responsibility and the guilt incurred by Germans at that time," said Heidemarie Wieczorek-Zeul, Germany's development aid minister. In addition, she admitted the massacres were equivalent to genocide.

2014 - an aside:  I sat in conference with two U.K representatives on improving maritime safety.  As we discussed potential technological solutions for the problems faced in Africa's Gulf of Guinea, one of them noted with a wry grin, "We have to be careful how our efforts are perceived by the coastal nations; we've made mistakes there in the past."  A hundred years afterward, lingering distrust still inhibits cooperation and progress.  

See Histronomics - 401 if you're interested.

Capitalism’s Grandfather

Like every ‘ism’, Capitalism emerged slowly over many decades. It came into an economy that had been controlled by Feudalism and then Mercantilism for centuries.

In the 12th century, Feudalism was the norm in Europe. Most workers were serfs for the landed nobles. Less than 5% of folks lived in towns, but things changed. By the late middle-ages, urbanization, production, and trade became more important giving rise to Mercantilism, i.e., trade between towns, between regions, and eventually between countries.

Mercantilism ran hand-in-hand with Colonialism as countries sought to increase their wealth and power through restricted trade and resource extraction. World trade routes and attempts to ensure exclusive access were fought over continuously, and wealth flowed to the top of the economic ladder.

Capitalism, emerging just in time for the Industrial Revolution, was best described by Adam Smith who clearly saw that the restrictive trade practices were impediments to development and change. He envisioned a free market, and it opened the world to capitalism.

Tycoons (and robber barons) amassed great wealth quickly, passing by the aristocracy as industries and productivity grew. Industrial Capitalism tended to benefit more levels of society than just the aristocratic class. Wages increased, helped greatly by the formation of unions. For the first time in history, common folks had the hope of becoming comfortably self-sufficient. A middle class was born, and economic growth began to lift more and more folks from the lower class into the dream.

Through deregulation beginning in the 80's, the financial sector became the key player in our economy.  Banks, now bigger than countries, rule a complex international financial system.  Some economists refer to the move from banks as money storage to the broader credit, exchange, and investment options as Financial Capitalism.

A capitalist economy is unconcerned about fair dealing. Scruples are not included in the plan, and mutual benefit is not guaranteed as the market manages itself. Players must choose wisely or lose.

While wealth tends to flow to the top, the consumer is the essential part of the equation. Attempts along the way to improve the lot of the consumer have been controversial.  Although modern economics requires a consumer base able to buy, pure capitalism would let those at the bottom of the ladder just fall off and disappear. That’s the moral inadequacy of capitalism.

Political Capitalism, by the way, is just the rhetoric of governance that supports industrial and financial growth. While perhaps constrained by other principles like liberty and opportunity, governments are inordinately influenced by corporations and the wealthy elite along this evolutionary economic path.

Reagan 1981-89, G. Bush 1989-93, Clinton 1993-2001, G.W. Bush 2001-09, Obama 2009-17

In the last thirty years, we have seen modern capitalism turn away from the middle and lower classes while focusing primarily on national wealth and market dominance.

Despite shortcomings, most political theorists and economists argue that, at least for now, capitalism is the essential component of an efficient economy.  With few exceptions, governments around the world agree in some measure that capitalism is essential to economic progress and security. Even Russia and China.

Those same governments agree that more is required and each attempts to mitigate the downside of capitalism; some effectively, some not so much.

Capitalism isn't the gospel, by the way, just the current 'ism', and like its predecessors, it has flaws.  Each 'ism' attempts to fit a particular circumstance of population density, productivity, and resource allocation, and each 'ism' is left behind when a better solution is needed.  The likely fail point today, perhaps, is the rapidly accelerating inequality seen in larger economies.

So for now, we need capitalism, and we perhaps prefer limited federal government and a free market. Does that address all of today's issues adequately?  

Or are there emerging risks and costs that need our collective attention? 

The near future

Have large corporations always been considered untrustworthy? Actually, yes.

In 1816, Thomas Jefferson wrote, “I hope that we shall . . . crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial of strength, and bid defiance to the laws of our country.”

From Woodrow Wilson, “There was a time when corporations played a minor part in our business affairs, but now they play the chief part, and most men are the servants of corporations.”

Mitt Romney gave us, “Corporations are people, my friend . . . of course they are. Everything corporations earn ultimately goes to the people. Where do you think it goes? Whose pockets? Whose pockets? People’s pockets. Human beings my friend.”  For comparison, Senator Elizabeth Warren at the Democratic Convention in 2012 countered, “No, Governor Romney, corporations are not people. People have hearts. They have kids. They get jobs. They get sick. They thrive. They dance. They live. They love. And they die. That matters. That matters because we don’t run this country for corporations, we run it for people.”The last two decades have given us ample evidence of the influence big business has in our governments.  Regulatory changes 'purchased' by the finance industry gave us the Great Recession.  The Trans-Pacific Partnership is more of the same.On the Forbes list of America's most trustworthy corporations, there's not a single bank or finance entity.  No surprise there.
The issue, of course, is not the existence of incorporated businesses.  Small and local businesses are the backbone of the economy.  Our difficulties emerge from the extraordinary power inherent in the largest corporations.  They seem to become extractors of wealth and resource, thriving at the expense of employees and suppliers, and even regions, channeling benefits away from communities and across the country to the wealthy and fortunate few.  They exert inappropriate influence in both the marketplace and in government for their financial success rather than for the benefit of the nation or the citizens.  Of particular concern are finance and oil corporations, many of which are bigger than countries.
Of the world's 100 largest economies, 63 are countries and  37 are corporations.  Of those 37 corporations, most of them are oil companies or banks.  These are economic behemoths that are larger and more influential than most of the world's nations.   The 'economic convergence' theories defend big business citing the equivalent of international trickle-down promises.  It hasn't worked, and a significant number of developing countries have seen zero growth over decades while their resources and wealth are consumed by the international marketplace.  

In the absence of significant regulatory reform, eco & poly sci forecasts are for continuing transformation of national governance in favor of greater economic dominance, economic conquest and empire, if you will.  

Things will indeed change in the near future. Do you know how your vote affects the issue?  And your faith?

As individuals, we perhaps cannot solve the dilemma, but we can make a difference for others.