SolidarityEconomy.net

.China, the US and Goldman Sachs

Hank Paulson’s appointment to be secretary of the Treasury is a major concession by the Bush White House to the globalist fraction of the US ruling class. Weakened by the debacle in Iraq, Bush needs to shore up support in elite circles. The President’s nationalists and unilateralist policies have been a blow to the transnational capitalists whose ideas and wishes dominated during the first Bush and Clinton administrations. The Treasury was a symbol of globalist hegemony run by Wall Street stars Robert Ruben and Lawrence Summers. Those were the days when Washington’s strategy focused on the IMF, WTO and World Bank rather than Iraq, Iran and North Korea.

As former head of Goldman Sachs, Paulson comes from the world’s biggest investment bank, and many say the most conservative. So in turning to Paulson, Bush brings to the Treasury an key figure in global finance as well as a blue-blood Republican. Paulson’s first move was a trip to China, meeting with top pro-market advocates from the Communist Party, local businessmen and President Hu Jintao. But rather than hammering the old White House line about unfair trade and exchange rates Paulson set the stage for a long-term strategic relationship.

Such an approach to US/Chinese relations reflects the strong desire of globalists to make China into a strategic partner. With almost 90 percent of the largest global transnationals deeply invested in China this is the only feasible road forward. But to the hawks and neo-conservatives in the Bush camp of US hegemonists such a policy is a major concession.

Their view of China as a “strategic competitor” or “strategic enemy” has now been put on the back burner. The White House can ill afford further bad relations with China with Iraq and Afghanistan in flames and N. Korea testing bombs and missile. Better to concede ground to the wishes of transnational capitalists and put this battle off for another day. Of course the roller coaster that Bush and the unilateralists are riding is speeding towards a brick wall. Its looks like the showdown with China may have to wait a good long time.

.Business and Investment

Global business relationships are sinking roots down to medium and small size firms. Engagement with foreign customers or suppliers was reported by 59 percent of firms with fewer than 50 employees, 70 percent of companies with under 250 workers, and 67 percent for those with up to 1,000 people. For the big corporations the figure stood at 87 percent.

Meanwhile US domestic and retail institutional investors are going abroad. For the year ending October 4, AMG Data Services reported from $124 billion in net flows into all US equity mutual funds a whopping $110B went overseas. For individual capitalists putting money into mutual funds $207.65B was sent offshore with only $46.49B staying inside the US. Looking over the first eight months of 2006, 87 percent of all equity funds were put into global investments. While overall, out of the $4,800B in equities held by US mutual funds 17 percent now sit with foreign companies. While relatively modest that figure has doubled since 2000.

.Transnationals take-over Infrastructure

A countries’ infrastructure has always been the key asset of the State’s economic base. Afterall what’s a government to build if not roads, airports, railroads, electrical grids and utilities. These structures have been part of a nation’s most basic ownership rights, the very skeleton around which a national economy is built. Not only do these things provide public sector jobs, they act as an important rational for the existence of the State itself.

Not so any more. Transnational infrastructure are hot deals soaring to a record $145B in a worldwide merger and acquisition boom. Toll roads, airports, water companies and electricity distribution are all up on the block. The US insurance group AIG has bought London’s City Airport for $1.4B, Grupo Ferrovial of Spain took over the UK airport operator BAA for $30B, another Spanish firm, Abertis, bought Italy’s toll roads from Autostrade for $28B, and Germany is about to sell the UK’s biggest water company to bidders from Qatar or Australia. What’s left for the State is a rapidly shrinking social service sector constantly under attack from neo-liberals.