Tuesday, October 05, 2004

WHAT I'M READING: BLOOD BAKERS


The Blogger system has been a bit spotty in the last few days. I have a little back log of posts which I will be spreading out over the course of the next few days as I catch up. Starting with this one:



James Henry's book Blood Bankers depicts a series of richly detailed histories of political and economic corruption endemic in international finance. While Henry presents the stories as discrete episodes, from these histories a number of general observations can be drawn that contradict much conventional wisdom on global financial markets.

*Transnational networks of elite bankers, politicians and technocrats are indispensable to the operation of international finance under present conditions. Transactions in these markets are far from arm's-length, and thus allocation of resources tends to be driven by backroom deals between personal connections as opposed to an invisible hand. (This is perhaps to be expected: who would loan a billion dollars to someone known only at arm's-length?)

*Foreign lending often has a lot to do with the need of foreign lenders to continually find new opportunities for surplus capital (not to mention the personal greed and professional vanity of individual elites) rather than domestic demand for investment. As such, the lenders are at least as culpable for massive developing country sovereign debts.

*Money center banks are the indispensable backbone of international drug trafficking, terrorist financing, arms trafficking, human trafficking, and a slew of other seedy, illicit activities. It is more than that the banks turn a blind eye-they are willing co-conspirators.

*Citibank: Have you no shame?

*The power of foreign banks is underwritten by the use of state power (and sometimes state violence). No matter how debts are incurred, the broader population can be made to pay for it by state force. So long as states maintain this power, lending will continue. As a Citibank Vice Chairman said, “Who knows what political system works best? All we ask is, can they pay their bills?” (p.263). This relationship between the power of foreign banks and state power is mutually reinforcing: financial service and instruments provided by private banks also enable military power-both by financing acquisition of military goods and services and by financing political operations that favor right-wing leaders and movements.

*The centrality of US government intervention to financial markets (through the Fed, Treasury, and IMF) provides a powerful instrument of economic statecraft: the US government can induce private bank behavior to achieve its non-economic foreign policy goals.

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