STWR - Share The World's Resources

Since Brandt, there are two billion more people on Earth. Ecosystems from North to South are collapsing in real time. We see this in the millions made homeless in Bangladesh, the worst typhoon season on record in Japan, floods in Britain and the slaughtering of people of Darfur as the nomadic Janjaweed come looking for more fertile lands. In such a world, one would think that the need to share resources would be more important than ever.

Since Brandt, however, the Anglo American empire has privatised many of the Southern Hemisphere's resources, including, remarkably, the basics of life like water and seeds. Many who support the conclusions of the Brandt Report, that resources should be more equitably distributed between the North and South based on an appeal to humanity, justice and compassion now have the added hurdle of corporate profit and shareholder value to overcome.

So how do you unwind the corporate profit machine that keeps us from truly sharing resources? Clearly compassion alone over the last three decades has not worked. As ecosystems grow unstable and resource poverty spreads, violence seems to be an emerging trend.

I believe, however, that a more equitable system can be achieved at low cost, and without violence by 're-engineering' markets in ways that favor the South instead of the North.

Let me explain. It is assumed by advocates of the Brandt Report that markets have a monopoly position on greed and incivility, and that if you can unwind these monopoly positions by somehow making market 'agents' less greedy and more civil then a concurrent flowering of humane resource-sharing will follow in its wake.

This approach is noble, but futile in that monopoly positions in the market can be unwound a lot quicker and with incredible efficiency if the overall problem of wealth inequality were seen not in terms of the North not sharing its wealth with the South but rather in terms of the South not sharing its risks with the North.

I'm not talking about a semantic exercise, but a real life solution to a pressing problem; one that recognizes the source of the problem is centered in the mechanisms of finance, not, as many believe, in the policy making process of law makers. Understand that the lop sided nature of how the globe's resources are mis-allocated is engineered in the banking system by bankers and their wealthy clients creating their ability to spread the gap between North and South, rich and poor, is not with laws, but with financial products that not only make the job of aggregating wealth easier, but also do a great job in minimizing any risk attached to the wealth.

What we are ultimately talking about here is not wealth management, but risk management.

I'll give you two examples of financial engineering that demonstrate this point of risk vs. wealth. 'Program trading' is the technique of simultaneously buying a stock in one market at a low price while simultaneously selling the same stock at a higher price in another market. The Wall Street word for this is arbitrage and it takes many forms. You don't need to necessarily understand the mechanics of exactly how 'program trading' works, just understand that profits in this case are being 'engineered' and that these profits cost virtually nothing to manufacture and incur virtually zero risk. The price differences that I'm talking about are not big, and it only works if you have a lot of money to work with, and pay virtually zero commissions (as is the case for those with lots of money to begin with). Very quickly, when you begin to understand the profound implications of program trading you begin to understand that what is going on is that the entire financial landscape is being 'tilted' by those with the most capital in ways that favor them at everyone else's expense. The money made was not by 'making money' in the classic sense, but by shifting risk using financial engineering.

Another financial engineering technique used is called the 'carry trade.' This is another arbitrage exploitation where banks and their customers borrow money at 1% and invest it at 5%, thus pocketing 4% with zero risk. For every 1mn you borrow, you make $40,000 profit. Again, the system risk of the banking industry is increased, dripping cash into the accounts of the banks and their clients. They didn't 'make money' they transferred risk.

So, keeping financial engineering in mind and the question of how best to re-align the globe's resources to more equitably redistribute resources imagine this; all the world's NGO's (approximately 16,000 of them with combined operating budgets of approximately 1 trillion dollars) were to focus their non-buying power, i.e., a boycott - - not on the company that is believed to be the most socially irresponsible, but rather, on the company that is the most vulnerable to a boycott i.e., exposed to the risk.

The result would be that capital, the thing the Brandt Report is seeking to redistribute, would begin to move per the agenda of the activists along the fault lines of risk.

More precisely, if the globe's activists were to turn upside down the industrialists' notions of 'growth' and 'productivity' and see these things not as assets but as liabilities; turning the very numbers themselves upside down to create a new financial metric that only made sense to activists - a boycott vulnerability ratio in other words, - then reading the Wall Street Journal would offer daily clues about where to boycott next in the way that will cause the greatest shifts of capital in favor of activists.

Even more precisely, a common metric used by Wall Street to gauge so-called growth that can be co-opted by activists for them to gauge boycott vulnerability is what Wall Street calls, the PSR (Price Sales Ratio)

This measure tells investors the relationship between a company's stock price value and a company's sales. When the stock price is considerably higher than the sales, as is the case with Coca-Cola, investors rejoice; the company is 'growing' fast. But activists could look at the same number and conclude that the company is actually especially vulnerable, in terms of its stock price, to any loss of sales.

If activists wielding the boycott stick were to focus on boycotts that cause the most financial damage per their own interpretation of PSR and not waste time on boycotts where the PSR is low, financial engineering would have a new master; activists.

ExxonMobil for example has a PSR of about 1. It's not a good boycott (versus Coke which is 5) but activists love to boycott Exxon. They refuse to look at the numbers. They believe their passion will trump the numbers.

This may be so in the long run, but why wait a minute longer than we have to. Using PSR ratios to gauge boycotts is an instant way to empower activists to start to move money around the global finance channels per their agenda, not any company's agenda.

Once that money starts to move, there are ways to capture it and funnel it to places that need the money; the South for example could be the beneficiary of a fund that took advantage of a global PSR driven boycott campaign against Coke that moved the price of Coke's stock down. Betting on falling prices provide just as much economic reward as betting on rising
prices in the world of banking. As Coke's stock slid, and the bets against its stock price paid off, the profits could be channelled to the South. Of course now that they were, in effect, getting paid to boycott, the size of the boycott could only grow larger.

The losers in this scheme are the large companies whose stock is trading at very high multiples of sales. But isn't that what we're talking about to begin with? Where else do you think the money to fulfil the Brandt

Report objectives will come from? So why wait for the companies to volunteer? Why not motivate the world's have-nots to effect this economic change themselves by organizing their boycotts along strategic lines of PSR?