Nota del autor: Este artículo recuperado es la traducción al inglés de una contribución que hicimos Eduardo Gutiérrez y yo mismo en 2008, cuando ya eran patentes los signos de la crisis. Un artículo que iba destinado a ser expuesto en Mumbai, India en una Conferencia, a la que al final no pudimos asistir. Hay varios post sobre la materia en este blog, pero hemos considerado de interés difundir este material en inglés para aquellos que encuentran dificultades para leer en castellano. Mucho ha sucedido desde entonces. Pero resulta claro, que, en este artículo se aportan claves de interpretación que siguen vigentes. Ahora ni Gutiérrez ni yo trabajamos en el mismo lugar que entonces, ambos participamos en Podemos.

Daniel Albarracín & Eduardo Gutiérrez[1]
December, 2008. Madrid, Spain.


1.    Crisis? What crisis?

hen considering an analysis of the context of crisis, we cannot but recall that we are also in the midst of a crisis affecting civilization, the environment and society, as well as basic commodities (water, energy, food) in the framework of certain social relationships all of which define the current economic model.

In the countries of the North, we have been swamped by complacency, promising ourselves a providential future and denying the problems. In the last eight years, speaking of a crisis was seen as typical of madmen and Cassandras. Nonetheless, the contradictions seem now to be bursting and their size is a slap in the face to those still denying the obvious.

First of all, denial, then euphemisms, and now the sceptics are engaged in an exercise of escapism to hide the depth of the crisis; a crisis that, in peripheral countries, has been part of their lifestyle for some time now.

Some people are content to approach problems from the confirmation of their symptoms. To understand what is happening to capitalist civilization, it is necessary to understand the dynamic of its constitution. Crisis means change. If there is one thing that characterizes capitalism, it is its constant transformation. Crisis is inherent to capitalism, starting with the destruction of old social forms and passing through its accumulative waves as long- or short-lasting cycles.

What is happening is that this crisis entails several crises at the same time. Its scope refers, most immediately, to the saturation of certain veins on the market, which have reached the end of the trail, as seen in construction and the real estate market in some western countries. That mother lode represented a transitional opportunity that responded to a financial policy which, to shake off old crises such as the cycle that faded in 1998 with the dot.com bust, posited low real interest rates and the liberalization of the credit system. That situation, in turn, stemmed from an earlier crisis, the 1987 tequila crisis in Mexico, in which the circuits of international extortion through debt imploded. The periods of weak expansion that followed were always false starts, transitory relief, without resolving the underlying problems.

The circumstances are due to a periodic industrial crisis. On this occasion because of the saturation of several markets. Although that is not the main cause this time. Deep down, we find the tensions of the dynamic of accumulation with the presence of structural resistance against the increase in profitability. However, that too is not the whole story this time.

The profitability rate is understood as the ratio comparing the exploitation rate (the proportion by which capital extracts surplus value produced by the labour force) in connection with the organic composition (the proportion between investment in constant capital (fixed and working) and in variable capital (the funding used to employ the labour force))[2].

Indeed, the profitability rate, an indicator analyzed to report on the power of accumulation, has undergone an unusual trend. It sank in the 1970s, causing widespread damage in industry. The powers that be opted to hand over the baton to parameters of neo-liberal management that imposed a new economic policy. Once the political left and trade unions surrendered in the countries of the North in return for inclusion in institutionalized spaces with resources and became mere bit players, social and employment rights and the evolution of direct and indirect earnings have been subordinated in favour of the intensification of the extraction of relative capital gains. In the nineties, and not without severely impairing the social and employment conditions of most of the working classes in the North, and sacrificing the subsistence conditions of the peoples of the South, the profitability rates notably increased. At the start of this millennium, they were beginning to achieve the levels of the post-WWII decades. So, did this back up the theses of the analysts propounding the incorporation of a new long wave of expansion? Well, it doesn’t look like it.

The increase in the capital profit rate was already under way by inhibiting productive investment, rationalizing costs to the last cent, selecting only what would provide immediate short-term profitability. The demand-side crisis was not yet visible, despite the wage restraint, and trimming of labour rights was the norm. Consumption was on the up because working families (to obtain the income they needed for their integration into society) were making more members available in the workforce, reduced the amount of their free time and their freedom to enjoy it, and they mortgaged their finances, for example, in the purchase of a home.

The conditions for capitalist development had become as tense as they could and, if the fragile balance were to break, it would entail the collapse of the current economic and institutional system. In addition, the tensions of the cycles, in a context in which the turnover of capital was accelerating, could be temporarily transferred or diverted geographically or in time, but they could not be avoided. The central countries, such as USA, could divert their crises to other dependent countries for a time by playing with their currencies, their negotiating clout, thanks to their diplomatic and military hegemony. In the meantime, they accumulated the world’s largest foreign and public debt. Furthermore, the States, companies and families all got into debt in a context of unequalled credit permissiveness, thus postponing into the future the assumption of their present economic responsibilities.

The liberalization of the financial system has enabled high-risk initiatives, in a context of low real interest rates where the finance industry, to obtain profit masses with low financial margins, opted to grant loans to all and sundry. At the same time, the central banks surrendered their basic supervisory functions control and thus the cash co-efficients and mandatory reserves to deal with the repayment of deposits or to cope with capitalization problems in adverse situations practically disappeared. What is more, financial regulators made a strong wager in favour of the mobility of capital, removing taxation on their investments, failing to constrain or oversee their behaviour, and becoming totally permissive with the presence of tax-free areas such as the tax havens that restricted the efficacy and purpose of any regulatory rules, thus blackmailing the States to make any conditions on financial capital even more flexible.

In these conditions, many analysts have tried to explain the crisis as a mere liquidity crisis. In other words, as a problem of short-circuited credit, due to a problem with trust and the management of in-house treasury and liquidity funds.

Nonetheless, the liquidity crisis is simply the consequence of a solvency crisis of heretofore unknown proportions. Once most of the economic agents had driven their operational systems to the limit, problems just had to break out sooner or later. And they have blown up now. Things could not continue so long as regular income could meet the obligations to refund the commitments undertaken. It was enough for some markets to slow down, as the real estate market did, for the economy to collapse like a house of cards.

What mainly characterizes the current economic crisis is possibly a massive generalization of indebtedness. Technically speaking, large-scale financial leverage. Financial leverage is based on using debt in such a high proportion that they are able to multiply their own equity by a factor of several times, weakening its value as a guarantee. This practice allowed them to defer the explosion of many notably depleted and distorted mechanisms.

Well, this practice in some cases has gone even further. This would be the case of the proliferation of investment companies[3] (investment or hedge funds, venture capital[4], sovereign funds, pension funds, private capital funds) that, with the complicity, contributions and funding of banks, savings banks and insurance companies, were moving considerable volumes of capital to acquire stakeholdings in profitable companies (or to lend money at scandalously high rates), with levels of leverage several times higher than their equity[5]. This has led these funds to purchase (on the basis of loans far in excess of their equity) companies (such as Dinosol, El Árbol, TPI-Páginas Amarillas, Futura, Martinsa-Fadesa, UPS España, etc., to cite just Spanish examples) to which they have then transferred their debt by means of issue premiums, mergers, buyback of treasury shares, and other corporate transactions, and used the share purchased as collateral. They have devoted themselves to rationalizing the activity of those companies to unsuspected levels. A rationalization that has drifted into segmentation of the company into a mesh of auxiliary businesses through externalization and successive outsourcing (of the riskier or less profitable parts of the activity), the sale of parts of the company, shedding workers, intensification of the work pace and the extension of working hours, or by asset-stripping. This has imperilled the feasibility and, of course, the ability to keep up useful and high-quality production and hindered the dynamics of innovation or improvement. The purpose is to obtain liquidity fast to give more “shareholder value” (in the form of dividends) or “bondholder value” (through the payment of coupons for the loan contracted).

This new structure of capitalist development has, at least in the past ten years, imposed an extravagant dynamic. Until now, the profitability rate, the confirmation of the return obtained from the investment and the indicator mobilizing the surplus towards that investment, was the benchmark for the accumulation of capital. Nowadays, with the extension of privileges to capitalist investors and to the companies managing their funds or the protective legal framework for limited liability companies or corporations (bankruptcy laws, corporate law, etc.) the universe of corporate interests known previously has been profoundly altered by a shift in priorities. In effect, companies now no longer seek merely profit for its own sake but rather this is only an instrument to provide dividend or interest payments for shareholders or lenders (financial capital) whose behaviour is indifferent to the socially productive processes in and of themselves.

That is to say, a growing proportion of the profit rate to provide that “shareholder value”, or interest yield for bondholders, preventing the surplus from being reincorporated into the investment in the form of maintenance, productive expansion, or technological innovation. We find that there is not only pressure for an increase in the operating rate but also for moderation in the evolution of the organic composition of capital (E. Mandel, 1972). The productive capacity is trimmed with a view to making the productive core that remains after the purge of the areas with more or less volatile profitability is as profitable as possible in a short space of time. That surplus would simply be added to the accounts of a predatory class of adventurous financial capitalism.

In this context, the financial system begins to suffer the risks it had incurred. Default begins to rise[6]. Investment companies see how their payment obligations are putting them under pressure. Companies can no longer achieve the 20% returns demanded by lenders. More and more profitable and leading-edge companies like Ono with a majority of investment funds among their shareholders are obliged to earn more and more by shedding 1,300 people from their headcount.

Thus, an underlying crisis and a circumstantial crisis combine fatally with financialization of the economy[7].

2.    Meaning of the phenomenon of financialization

The liberal discourse promised us a panorama of globalized financial markets that would make it easier to access third-world financial resources (Washington Consensus) and job opportunities, and even the emergence from poverty for everyone. The facts leave no room for doubt, the more developed states and economies are the ones gaining better finance in global financial markets (compare USA with China), and poverty is growing parallel to a wealth in ever fewer hands. Now the current crisis is shooting down any argument attempting to provide legitimacy for such an interpretation.

We are in a period of recurrent recessions that have been seen before (1973-1985, 1991-1994) and we are now going deeper into another, possibly even more intense in scope. Thus, since the 1990s, the exuberance of finance has coincided with a camouflaged crisis of the capitalist economy. A crisis that implies financial hypertrophy (J. Albarracín; 1994) and is a sign of the end of a systemic accumulation crisis taking place in the deceleration phase of the last long wave of accumulation (E. Mandel; 1972) inaugurated after World War II.

This hyperfinancialization of the economy, as in other periods in history (G. Arrigui, 1999), is a complex phase that coincides with the final manifestation of an underlying crisis whose origin can be traced at least to the 1973 crisis, when the difficulties for profitable investment entailed a change of priority for most capital. The consequences and effects of this are now becoming decidedly acute and at least an oligarchic fraction of capital is attempting to dig itself into a secure position prior to the new phase. A huge amount of capital that cannot find a sufficiently profitable return in traditional productive investment is now looking for it in “refuge assets” (as in the case of land previously, or now in various natural resources and raw materials, a source of lasting wealth), and is shifting into the different financial markets to capture and concentrate the rights over their ownership in search of new returns. Now attention has been placed on new and old markets for goods and services generating a profitable security even though the way these are obtained, produced and distributed may generate insecurity for the planet and society. In addition, the economic space attempting to evade or contravene the already lax legislation extends more and more and the use of accounting and auditing systems is losing credibility, at the same time as it crushes the minimum confidence required for large financial and business corporations.

The profitability rate has reduced its ability to encourage accumulation, investment and growth, as before, because it simply diverts a large part of the surplus to fill the chests of Financial Management. Thus, one speaks of a retained profit rate[8] (I Álvarez; 2007). This indicator refers to the percentage of the surplus net of interest and dividends paid, with respect to the capital invested.

Production, the basis for the generation of value, where the workforce is the determining factor, no longer wishes, thanks to the reigning ideological fetishism, to be represented as the source of wealth, even though it obviously is. Realization processes have subordinated and subjected the productive phases to their dominion. The scope of finance has been a primary economic space in the development of capitalism and particularly in the consolidation of the forms of economic power throughout history. First of all, capitalists did business with others’ “ability to assume debt”, introducing expectations and trust into the course of the economy. The terms of such trust were permanently being stretched for capitalists and shortened for the weakest or subordinates. In addition, by retaining the option to grant funding or not, managing the sluice gates of credit and liquidity, the financial oligarchy has managed to attract the others who needed them, generating dependency networks sometimes as intense as ownership networks. Nonetheless, the qualitative leap for finance arose with the new primacy of financial markets. They not only converted the securitization of shares, obligations and sundry other bonds (products derived from exchange-rate and interest-rate risks) into a financial hypertrophy phenomenon but implanted the criterion of their profitability (their value or return for “investors”) as evidence of the convalidation of the main economic decisions, bringing classical business profitability into question as a long-term focus.

Financial capital is the axis for the appropriation and concentration of value, rather than a factor for its generation. But it is not only a passive obstacle inhibiting investment; rather it is also actively engaging new business figures, giving rise to a new re-organization of the business perimeter (I Álvarez; 2007) and channelling of funds (investment companies and other similar instrumental figures), the nature of which must be unravelled, as well as how they operate, the permissive de-regulatory setting sheltering them, and their consequences in the world of business and economics in general.

The cornerstone for this dynamic ends up being shored up on the backs of the direct producers, mainly the working classes, who at the end of the day are the ones suffering the re-organizations, the increased vulnerability of living and working conditions, sub-contracting and outsourcing, precarious working conditions and job instability, the erosion of direct or indirect wage levels, or the impairment of health and welfare.

2.1. New business formats and capitalist production operating units

The change in and intensification of the role of finance in the capitalist dynamic is translated into a dynamic of capital concentration in which financial capital obtains priority and subordinates other kinds of capital in a chain of dependency. In particular, banks and insurance companies are the main agents and they use various instruments to constrain the course of the real economy. To diversify their capitals, they act as the promoters, or at least the aiders and abettors, for new financial vehicles offering high rates of profitability, pursued and attained with limited scruples, such as the various kinds of investment companies.

The unbridled goal of obtaining profits entails a deliberate containment of production to generate relative “scarcity” and so achieve profitability rates that are “optimal” in an individual logic but unsustainable for the productive and social fabric as a whole on which the all processes of accumulation rest. The achievement of unlimited potentials in the profitability of capital (“The sky is the limit!” announced Emilio Botín at the presentation of the results for the BSCH banking group in 2005)[9], as the primary goal, in the form of dividends, capital gains on stock markets and premiums from shares, bonds, etc. is also linked to a change in the so-called “business perimeter” and the usual corporate strategies. We can point out that the company, as an operational production unit and decision-maker is losing its own identity and autonomy, whether as an entrepreneur, investor or employer. On the other hand, they form an oligarchic core of capitalists, coming mainly from financial groups, who manage insurance funds, investment funds, or newly-earned fortunes, etc.; and the spread of networked companies (business holdings, corporate groups, networks for the sub-contracting of suppliers and distributors)[10], with intra-group hierarchies and accounting, who decide on whether or not to allow, and in the end determine, the main decisions and economic transactions.

One of the most notable transformations has been the decentralization and blurring of corporate responsibility with respect to various scopes in which they act and participate. The difficulty in identifying the triggers of actions, the so-called “externalities”, especially if they are negative, and the mere rhetoric of introducing criteria of corporate responsibility (in general, simple social or environmental marketing), originates a confusion that makes it impossible to determine who must answer for what. The underlying purpose is to increase profitability for the investor core and, to this end, business strategies are remodelled to strip away the least profitable areas, intensifying the productivity of labour in businesses with the highest revenue/cost ratio (“cash is king”, declare the Hedge Funds), thus diluting risks and responsibilities and inhibiting improvements and innovations (in processes or products).

Another effect is a proliferation of new business practices. For example, the management strategies practised by the new unregulated investment companies, among which Hedge Funds stand out, requiring cost rationalization strategies, externalization or destruction of employment without sufficient justification to managers of large productive companies.

And, in the same way, large corporations are widely adopting new procurement practices by means of financial leverage, up to limits that exceed what is reasonable, previously only attributed to the investment companies themselves, denaturalizing their productive purposes to back financial ones. It has been commonplace to focus attention on the new free investment vehicles (Hedge Funds, Private Equity, … investment companies in general), as segments of financial entities that, as they are outwith the regulations, have been highly active in the design of financial engineering operations and in the use of LBO (Leveraged Buy-Out) systems, i.e. Financial Leverage. Nonetheless, these business practices have not been limited to the use of these “vehicles of mass destruction” of real companies, as Investment Funds have been terms. In fact, we are convinced that, as in an “epidemic”, all business managers of the productive economy have suffered contagion. It should be considered that resorting to LBOs has intoxicated business models and not only those dominated by “financial hawks” but a majority of companies with a social basis, triggering the resource to debt, including also funding by the partners and investing owners in the form of “equity loans”, to inappropriate and unsustainable levels of “financial leverage”. Thus it can be understood that some analysts are currently speaking of “capitalism without capital”, i.e. “credit-based capitalism”, which places any company in a financial abyss from the very moment where the company owners and, at the same time, lenders not providing capital, decides to alter the terms and conditions for their “capital loans” to their companies. Therefore, it is not possible to refer to the analyses of the spread of LBO operations, to the institutions and investment groups making up the free investment funds and it is advisable to focus this situation on multiple business groups that have opted in favour of “financial leverage” operations or LBOs, to the detriment of inflows of “venture capital” to provide financial muscle and feasibility for real productive projects. Regrettably, western business fabric as a whole, and also family fabric, are suffering from an “overdose of financial leverage” that, in a credit crunch such as the one we are going through, may provoke a “tsunami” of insolvencies and closures in the productive economy.

Against the classic post-war productivist strategies, in the midst of the Keynesian period, measures were adopted for the “refocusing and rationalization of capital”, in which the productive system is not expanded, but rather only the most profitable areas are chosen to dilute the relationship with the least profitable areas. These practices consist in:

a)      Re-structuring. Cutbacks in areas or else their externalization. It is very frequent to see divestments and fragmentation of part of the productive process for its later sale. By this means, a less strategic part of the business is used either to generate co revenue or else to maintain a subsequent productive relationship, but with lower costs and risks that are removed from the company by outsourcing.
b)      The specialization of the company to obtain market leadership. Going beyond a specific innovation for greater efficiency or distinctiveness, this may take place simply through a merger with or acquisition of other competing companies to refocus most of the activity of a business unit in a company with market dominance. This strategy does not increase the overall productive capacity of a sector either, but merely implements a monopolistic strategy.
c)      In some cases, with even fewer scruples, the wager is based on directly milking the company’s assets or a particular characteristic of interest (high level of cash-flow) to turn the company itself into the source of revenue, even at the cost of its destruction. Short-term departures are planned, involving the acquisition of a majority of the company’s shares, using financial leverage, the debt for which is them passed on the company itself (with transactions such as consultancy fees, payment of issue premiums, etc.) to obtain speedy liquidity to cover the debts with the investing fund and place the goal of “giving shareholders value” even above any reasonable business profitability, stripping away business assets. This kind of practice, as yet without any regulations to curtail it, ends up threatening the lasting feasibility of the company and the jobs it offers. In these cases, some investment funds and venture capital firms that have been denounced by international trade union organizations (IUF, 2007).

The most important social and employment consequence, over and above the frequent fraud and avoidance of the trading and fiscal regulations, is the subordination of labour law to corporate law and therefore the detriment in the quality of working and employment conditions and, in this sense, the loss of efficacy in collective bargaining. Thus, the new business strategies not only represent a re-organization of inter-capitalist competition, or even a threat to the figure of “classical companies”, but above all a source of aggressions that appropriates and erodes the wage mass and the source of rights associated with it until now.

2.2. The proliferation of aggressive investment companies.

The extreme financialization currently presented by the capitalist economic world has achieved unbearable levels, not only in moral terms but also in “systemic” dimensions for the reproduction of the accumulation process of the capitalist economic world. In a perspective covering from the 1980s, using data from the most orthodox financial institutions (IMF, WB, OECD, …), the scenario gives cause for concern in the light of several dimensions of this explosion of financial aspects:

Þ    Foreign currency market. The daily volume of currency sales has grown from 80 billion dollars in 1980 to nothing less than 1,880 billion dollars a day in 2004.
Þ    Capital Market: Cross-border capital flows have grown from 2.26 trillion dollars in 1990 to 12.27 trillion in 2005, with the following characteristics:
o   In developed countries, these flows have gone from representing 3% to reach 17% of GDP between 1970 and 2000. Their growth has been much smaller among developing countries.
o   The net international issues of securities (shares and bonds) have gone from 304 billion dollars in 1986 (2% of the world’s GDP) to a total of 1.86 trillion in 2005 (4.9% of the world’s GDP).
o   In addition, “transactions” with securities and shares among the top six developed countries, in 1980, represented 10% of the GDP of these main countries. In 2003, the transactions represented more than 100% in Japan, 300% in USA and Canada, and 500% in Germany and France.
o   The assets managed by institutional investors (Insurance companies, Pension funds and Investment funds) in developed countries have gone from 13.8 trillion dollars in 1990 to 46.8 trillion in 2003 (this latter figure is far above the value of the world’s gross product).
Þ    Net international bank loans have gone from 1.88 trillion dollars in 1986 (around 12.4% of the world’s GDP) to 11.08 trillion in 2003 (30.3% of the world’s GDP).
Þ    Derivatives market. The value attained by the derivatives market (swaps, futures and options) was 7.9 trillion in 1991 and exceeded 355.5 trillion dollars in 2005.

The most aggressive protagonists of the financialization global capitalism is living, especially since 2000[11], are the investment companies in their most deregulated formulations: Hedge Funds (HF) have led the field in the explosion of “derivative assets” of all kinds but also, and it is necessary to insist on this point, sovereign funds, insurance companies, … all sheltered by financial hedging institutions. In other words, banks and other financial players, such as Savings Banks, that have provided designs, strategies, as well as, and this is the most important, the “financing” for these investment vehicles that have started to colonize not only transactions on securities and credits but also options on raw materials, foodstuffs, etc. (Mª García Santos; Spanish National Securities Market Commission (CNMV), 2005).

Investment companies have historically operated in an unregulated environment, outwith the western tax systems, thanks to their widespread location in countries that are tax havens (Mª García Santos; CNMV, 2005), and they have always been defined as private investment vehicles for large family fortunes or for institutional investors. In that deregulated setting, they may have multiple legal formats: separate ownership, or articulated holdings, in any case sited in “off-shore” locations to make it impossible for the state’s public and private authorities to have any visibility or awareness of the financial positions and status of these entities.

The dimension of the activities and positions of these investment companies is literally unknown in terms of public databases in any country in the world. The truth is that, as indicated by the financial institutions most closely related to the financial markets (CNMV, European Central Bank (ECB), Bank of Spain (BE), etc.), and which paradoxically have to use the only data available, which are all from private databases[12], and as admitted by different experts, all the information available underestimates the importance of the actions and positions of the Hedge Funds, but they coincide in pointing out that:

  • Since 1998, the number may have increased from about 6,000 to 8,000 (BE; CNMV, 2006).
  • It is estimated that they represent today at least 20% of the capital managed worldwide (ECB, 2006).
  • In the convertible bond market, the activity of HF exceeds 70% of the market (BE; CNMV, 2006).
  • It is estimated that their activity in the New York and London stock exchanges may account for between 30% and 50% of the daily trading.

In Spain, the Hedge Funds sector has been legally transposed as Collective Free Investment Institutions[13] and, in its most deregulated formulation, as SICAV (Variable Asset Collective Investment Institutions) of which our country had 3,250, managing a total asset value at the dates available (2007) of 360 billion euros. The professional association of tax Inspectors classifies these institutions as: “the only exception in which the Spanish Tax Office has not been able to regularize the tax situation of some which are subject to a 1% tax, that is to say 29 percentage points lower than normal by slipping it into the category of collective savings, in a clear example of financial groups capturing the political power producing the regulations.” The president of this association regretted that there was: “a tacit interest in avoiding sectors that are historically controlled by large family holdings, with evident connections with the political powers”[14] (I. Fadon, 2004).

Surveys have shown that the most aggressive strategies, the strapped asset strategy, have been the most profitable in the period 2000-2004 (13.5%), followed by securities from emerging markets and those referred to by CNMV analysts as “market events”. A euphemistic way of referring to such events as privatization processes promoted by liberal macro-financial recipes (Washington consensus) applied by the IMF and the World Bank in their aid programmes.

We are here facing typical examples of corporate predation. According to Mª García Santos (2005), 80% of deals with companies in crisis are due to Hedge Funds that have engaged in management behaviours aimed solely at “extracting”, by means of intra-holding financial engineering, the value from the companies acquired, without ploughing back in any financial resources (share capital, equity loans, etc.) that would allow a technological or productive leap forward and transition towards product ranges or activities that would be more sustainable over time.
In known cases, some of whose features can be seen in the final appendix to this contribution, due to the absence of regulation and additional vocation for opacity on the part of the players, the companies are segregated from institutionalized securities markets to avoid any minimal report on their management. The intervention of the investment fund in the companies acquired has been characterized by transferring debts (contracted by the investment fund for the acquisition), selling the maximum amount of assets, leaving the companies in a situation of decapitalization, after sucking off the reserve funds by an articulated network of partly-owned companies through transfer prices, crossover loans, calls to shareholders, repercussions of costs, ….

In short, it is the investment and venture capital funds that are the protagonists[15] of the most aggressive financialization behaviour, as well as of the speculations in the currency markets, affecting countries and economic areas in the whole planet, taking advantage of legal vacuums, choosing companies in certain sectors, territories and characteristics. Thus, it is possible to identify propitiatory company profiles:

ü  High percentage of cash-flow with respect to assets. Investment funds seek to have high liquidity to be able to meet immediately the debt contracted by the fund for the acquisition of the majority stake in the company. High turnover sectors such as retail shops, food service, hotels and catering, transport, etc. may be at risk of being acquired by this kind of fund.

ü  Not under the typical supervisory monitoring of companies listed on the Stock Market or easily de-listed. That is to say, a company that is not in the public eye and can allow less than transparent actions without great visual impact on the company or vis-à-vis the bodies exercising public or trade union oversight.

ü  Companies with a high potential for increasing their profitability. These would be companies with a not very high level of debt, medium-sized and, under good conditions, offering a considerable margin to increase their profitability by re-organization, increasing debt and rationalization practices.

Financialization is translated into a situation where a growing part of the capital opts, in a context of non-existent international regulation and particularly in tax havens[16], to place its capital in the most profitable economic solutions, minimizing the periods for the investment, organization and development of start-up, unprofitable or risky markets.

In a world economy in which financial assets imply a value several times greater than the transactions of goods and products generated annually, a “liquidity dictatorship” has been instituted by financial institution vis-à-vis their stockholdings (Hedge Funds, Industrial Corporations, …). In this context, the business activities that have been most harmed are those which require longer processes to come to fruition. A clear example of this “capital channelling” outwith productive and trading activities can be found in the situation of the global energy markets, where the “refining capacity” of the growing flow of oil extracted[17] finds no response in the decreasing investment made by the large oil companies for decades in refinery investments (AEI, 2005).

An analogous explanation can be found in the investment behaviours of the closest business entities, such as the Spanish electricity companies, which have ceased to invest in new generation or in R&D+I and in all kinds of new technologies (Durán, A; Gutiérrez, E; 2006), taking the guarantee for power supply to record lows, at the same time as surpluses and reserves were channelled to “catchword” sectors promising high yield (Iberdrola, Unión Fenosa, Endesa, … in telecommunications and TV or audio-visual media such as Media Park, a production wholesaler), into which hundreds of millions of euros were sunk, while they reduced their energy investments, provoking in passing a “supply-side limitation” that would inevitably tend towards an increase in the price of the KWh, i.e. in revenue, and the profitability of the activities, which inexorably declines in competition.

2.3. A State with different priorities: protecting economic power.

The financialization process is not only a phenomenon propitiated by a profitability crisis that has dragged on since the end of the 1970s, but is also fostered by the economic policy and the kind of State in the last thirty years, which has backed flexible regulation or even a deliberate de-regulation. In this period, we have witnessed a growing liberalization of the monetary policy (interest and exchange rates, reduction in the instruments and intensity of the intervention by central banks, liberalization of the movement of capitals, etc.) and the financial markets. In addition, the fiscal policy has encouraged the deviation of capital towards this financial sphere, in a context of mass securitization, beginning with the public deficit and public debt, the privatization of the public sectors, and the management of employer pension funds. In addition, indebtedness has been allowed to increase with the drive towards a dynamic of ostentation that constantly defers the payback of what is owed to some time in the future, in a paroxysm of irresponsibility. To some extent, we might say that the deregulated system is already “discounting the future” and we are wondering what serious consequences are looming over this.

The inaction in this respect has had its sacrificial victims. When the profitability rates seemed to be recovering again, the crisis struck (a demand-side crisis with an increase in family debt, a crisis of fundamental sectors such as the construction industry to the detriment of employment, a crisis of general systemic liquidity, etc.), and the accumulation rates and investment rates stagnated. Recent governments have been supporting a line that is contrary to the necessary one, which would be a strong ploughback of profits for technological and productive renovation of companies, economies, consumption, and mobility of developed societies to achieve the recovery of the basic environmental balances within the planet’s ecological capacity. It is in this context that the mere proposal of a change of “productive model” added to the demands of trade unions fails to stand up as it does not bring into question the socio-political rules on which the economy operates. Without changing the rules giving rise to the financial hypertrophy (J. Albarracín; 1994), there cannot be a sustainable spiral of productive investment, necessary for a technological, environmental and social transition of the world economy favourable to the productive classes and the planet.

From the explicit platform that the so-called Washington Consensus represented to empower the inhibition of regulations on these activities, the proliferation of institutions and financial assets/derivatives has simply grown exponentially, not only in the absolute dimension of funds managed, but in terms of the relative size of business and productive activities (I. Álvarez; 2007). A strategy of increasing the value of capital which reached its paroxysm in 1998, when the US representatives on the Fiscal Policy Committee of the OECD imposed their theses on tax monitoring and lists of tax havens, binning all of the philosophy accumulated since the 1970s and giving way to a definition of “tax haven” based only on collaboration and transparency[18].

As many authors have decisively and illustratively stated, any minimal political intervention would necessarily involve demanding a level of information and transparency equivalent to that of any banking activity. To this end, it is necessary to have data not currently available (CNMV, 2005) and not likely to become available in the near future. In any case, it would be “analytical shortsightedness” to focus urgent regulations on investment companies as in Spain, for example, 95% of all those created are in the hands of Banks (65% of the total assets managed by Hedge Funds) and Savings Banks (30%).

The risk is being run that this issue could be avoided by Spain’s political powers by praising self-governance, with recommendations on prudent conduct (as Basel II only indicates). It would go against the opinion of the more specialized technical services at these “financial predators”, demanding consideration that: “The main problem stems from the fact that it is not possible to back self-regulation on the part of companies in this area” (CNMV, 2007). And despite such comments, the agreements reached at the G‑20 meeting last December continue to focus on recommendations and appeals for self-regulation of investment funds (Washington, 2008).

The way to confront this cataclysm has been State intervention to transfer the problem of the banks (which is not the sector most affected and is, in addition, one of the agents directly responsible for causing this situation) to the public accounts. It also proposes to support the vehicle manufacturing sector. Which sector will be next? Or else turn on the money-printing machine (USA). But the relief of liquidity does not resolve the formidable widespread solvency problem. It merely slots a private sector problem into the public budget. For this coming year, Spain’s budget, for example, will amount to 4% of the public deficit. It has been the crisis and not the social movements that have overthrown the EU Stability Pact. And there is not even any guarantee that it will be possible to place public debt in private markets.

So far. the different countries and the G‑20 have only discussed how to socialize losses[19]. Some are in favour of buying up assets (of more or less good quality), others of buying shares and sitting in a corner, without a word, “participating” in board meetings. The EU has suggested cutting taxes, and what will happen to the State’s social policies? Nationalizations are only considered to rescue the managers of the companies responsible for the situation. The powers that be have not made up their minds to socialize strategic sectors, intervene in markets, and plan fundamental aspects of the economy with criteria that re-establish a solvent allocation of resources, much less aim at satisfying social needs or guaranteeing environmental sustainability. The stock market has fallen much more deeply than in 1929 and, even though it only expresses a symptom of short- and medium-term expectations, we can be alert to a deeper crisis of capitalism than ever before.

We feel it is necessary to go further, because we believe the purpose of companies/businesses is not only, as has been the case in recent decades, the satisfaction of shareholders’ interests, but the continuity of a medium- and long-term strategic project. To this end, it is still essential to question certain aspects of the financial markets and the corporate governance of companies with the following kinds of regulation lines attacking the symptom and also responding to the syndrome:

v  To limit the political decision-making power of shareholders in the governance of companies they “invest” in without any intention of lasting efficiency, without any purpose other than “speculating” (buying to sell), with a presence in short-lasting ventures, or situations that lead to collisions between “obtaining shareholder value” and the feasibility or solvency of the businesses.

v  To improve the systems for registering shareholders, personalizing responsibility for the management of companies as employers and “entrepreneurs”, by means of a regulation of the “socio-economic function” of investment, determining the targets to be met by companies and their owners.

v  To recognize and enforce collective negotiation as statutory, and the role of workers’ trade unions with democratic backing, with regard to corporate governance, through mechanisms making co-governance feasible (from shared management to control of the workforce), especially in cases where there is a vacuum of “individuals with business or shareholder responsibility” with respect to the management of the productive entity.

v  To press for a change in the tax system by backing greater tax pressure for progressive direct taxation and particularly on the remuneration of the most speculative capital (free investment funds, etc.) that do not support re-investment, innovation and social or environmental responsibility; and backing the application of taxes so collected for research and development of an environmentally sustainable manufacturing and energy system.

v  The potential for sustainability and reproduction of productive capacities in the medium and longer term inexcusably involve a profound review of the taxation on distributed and withheld profits. It is necessary to further and explore “parafiscal” formulae such as “tax rates on revenue or results”, so as to allow a guaranteed continuous stable flow of re-investment aimed at renovation, expansion and substitution of processes and products, by means of investments in R&D+I.

v  Similarly, it is necessary to reflect on the level of obligatory provision of reserve funds in companies (i.e. re-investment of profits). Consideration of new requirements for “obligatory reserves”[20] to finance the investment efforts needed for the transition of energies, technologies and products in western companies is an inescapable requirement.

v  However, we cannot forget that, even after correction of the excesses (thus dispelling the systemic risks[21]) of this “financial crisis”, the problem will continue to lie in the contradictory bases of the development of capitalism, which continues to warrant probing, without a doubt.

2.4. The lack of focus on the left.

The political left has faced up to this kind of phenomenon, generally speaking, with something between ignorance and simplification, without referring to those who contributed support for compassive management of a neo-liberal policy. The economy has not ceased to play a central social and political role in our lives but, in view of the relative complexity, any attempts to understand it were abandoned. In this state of affairs, it has been very common to hear summary statements localizing the financial space as something ethereal, almost other-worldly. It has been said that capital, abandoning the low profitability of a real economy, was escaping into the world of finance. That “other place” was presented as a space for the interchange of roles without further ado, based on speculation, i.e. without explaining the origin of its fabulous earnings. With such little foundations, when the crisis arrived, many people sat back and contemplated the collapse that, they said, would only affect practitioners of speculative usury as if they were on the sidelines of our reality and would not sweep us along with them.

Well, that wasn’t the way of things. There is no such thing as a “financial other world”, it is always right here in this world. What happened in the financial sphere is that the de-regulation of this scope and the fluidity of its mobility allows financial capital to change activity more flexibly in search of greater profitability. In addition, flexible regulation has opened up certain voids that propitiate lawless fraud that may lead to the unjustified bankruptcy of socially useful and viable companies, or the dismantling of profitable firms. In short, if the financial sphere implodes, its liabilities will pull down the assets of the economy, to use an accounting metaphor.

On the left, there has been excessive reference to speculation (in real estate, finance, trading, etc.) as the cause of all the ills affecting us. Nonetheless, the reason for the “alterations in prices” (whether of homes, interest rates, or retail prices) cannot be attributed to the opportunistic gambling of intermediaries in an exchange, but to an authentic exercise of power. In effect, in “markets” (which are of course not equally free for all parties), there are players who can impose their conditions during negotiations. That is to say, if we denounce speculation, we lose focus and leave our understanding of what is going on devoid of content. What is more, we run the risk of leading people to think that, if it weren’t for opportunism and asymmetric information, the market would work correctly by itself. We would be forgetting that the problem is not the poor flow of the market, on its own, but the capitalist framework in which it takes place, with certain unequal social relations (between social classes, between productive units, etc.) based on a complex social system that do not precisely refer to an exchange but to a kind of domination by capital and the exploitation of labour.

3.    Crisis and transition towards a new systemic accumulation cycle?

The signal crisis (G Arrigui; 1999) expressed in 1970, rampant accumulation and subsequent financial hypertrophy are simply signs of a possible change in the course of the history of capitalism. Nothing allows us to foresee a single future scenario much less its features with any accuracy. There is no mechanical imperative in history and less any linearity. Nonetheless, the scope of the current crisis alerts us to a tension of gigantic proportions, the potential extremes of which deserve, at least, some consideration and discussion.

First of all, the profits rate in industrialized countries notably declined from the end of the 1960s, passed through a bloody crisis in the 1970s and the Keynesian policy was replaced by one with a neo-liberal orientation that privatized public and jointly-owned goods to allow a recovery from the 1990s that has been insufficient to restore the accumulation and growth to a scale comparable to the post-war period, much less inaugurate a new long wave of prosperity in a lasting spiral (J Albarracín, 1994). On the other hand, financial hypertrophy has implied at the same time a burden for the re-investment of the surplus as a driver for growing appropriation towards the mass of profits of the value generated by labour.

It could be thought, from now on, that the dynamic will be one of recurrent crises, short-lasting industrial cycles, ever deeper and more prolonged, and weaker recoveries lasting less and less. As “Schumpeter’s dream” (1942) (the heroism of the enterprising innovator) comes crashing down, it is possible for a part of the capital to have backed a nightmare: “creative” destruction[22], in its crudest version. However, such destruction does not seem to be going to occur without social or systemic costs for many other fractions of capital, and will only happen after the elimination of a large part of the productive capital and competition. On the other hand, such destruction could be defined as “appropriative” by the secure minorities of the dominant classes because, at the same time as competitors and manufacturing capacity is eliminated, hardly anything new or better is created.

In this sense, it does not seem to be convincing to admit that the agents and subjects of the bourgeoisie are not foreseeing what is looming, that they are not diagnosing the situation intelligently, much less that they are simply doing without any strategy at all. It is certainly true that capitalist society leaves a lot of room for disorder, that the market is ripe for exuberance or strangling, producing imbalances in either case and more often than not counterproductive ones, that there are many groups among the bourgeoisie seeking interests that do not always converge, and that the fractions of capital may on occasions collide with each other.

In this line of thought, it seems that the agents of the bourgeoisie are unable to alter the inertia of capitalist development towards a systemic crisis and cyclical socio-economic degradation. But at least a part of them have a diagnosis and have kicked off a series of business and political measures and actions to secure their position in the face of the crisis and try to divert the costs of this phase, between slowdowns, paralysis and the depression, towards other social segments.

If the exuberance of the financial capital in the last twenty years is the result of a flight away from traditional industrial and commercial investments[23] with ever more doubtful and rampant yields and the exhaustion of the opportunities that augured “promising and technologically innovative” business areas (the dot.coms, for instance); or the emerging economic areas in Southern or Eastern countries; or the end of the real estate bubble and the refuge in land and housing, with a shorter run than expected, the dominant corporate and transnational capital has focused its liquidity on investing in very different activities.

In this respect, while “awaiting” the re-appearance, some day, of the conditions for a new long wave, with characteristics, as we mentioned, that do not seem to be present at the moment, a fraction of the bourgeoisie and the agents standing alongside it have decided to re-align their investments. The dominant capital thinks that the global de-regulated market is still good for another go and what we might call the “corporate transition” shows that the large economic and financial companies have been taking up positions for years to cope with the major investments of the so-called “geopolitics of scarcity”. The purpose of this strategy and its investments, also based on initiatives and undeniable political pressures, is to provide guarantees and secure its profitability in business areas sharing certain traits:

  • The demand for them is non-elastic and they are basic social needs. Within this, we could refer to essential natural goods (classic energies such as oil, raw materials such as water, or the food industry itself) or goods of a public nature so far handled by Nation States, whose role is now declining. The application of ownership titles to natural goods previously without any owner, or the privatizations of previously public or community goods respond to this tendency.

  • They are goods whose need may also be non-elastic depending on the manipulation and alteration of certain parameters. For example, health services or the health industry, private security, or the arms industry. In effect, fear and repression may “generate ghosts whose spectre is presented as a necessity” (as advertising has done by stimulating desire in the sphere of private consumption), as it is enough to stir up fear or invent dangers, illnesses or enemies for society to deem it appropriate to spend on this kind of good. This heading must also include the realm of crime: drugs trafficking, illegal arms sales, mafias, etc.[24] The level of institutionalization may be very different within this field.

  • To appropriate, with or without violence, and concentrate ownership of fundamental bases of production of the current cycle and a possible future accumulation cycle, with a view to securing their position in the face of crises. In fact, the end of the era of oil already has a very close horizon. And this constitutes a real opportunity to hoard all the reserves to push up the price of such an esteemed raw material, as well as to dominate the possible energy sources that could replace it, in order to mete out their incorporation into the markets with the greatest possible profitability. An early example of these movements by multinational corporate capital is the flooding of Brazil with investments in the ethanol farming industry, which received, just in 2006, foreign investments worth 6 billion dollars (GRAIN, 2007).

  • As always, energy is closely tied to the history of capitalism: The wager for nuclear energy buys time to increase the profitability of other alternative energies, costly today but some day attractive in the absence of any other option, with the ruling de-regulation of the world economy, that are being stockpiled and may turn out highly profitable to the dominant fraction of the transnational corporate bourgeoisie, and regrettable for the world’s population.

This monopolistic strategy is already being exercised in other fields by large transnational corporations, accompanied by strong pressure on public authorities and other political agents. The backing for, equally non-sustainable, biofuels by the large dominant capitalist corporations (energy companies, landowners and financial firms) is one of the most worrying. The community of farming experts has categorically stated that: “the hike in oil prices is generating an enormous new threat to the biological diversity of the Earth”, “as energy security declines, the world’s food security also deteriorates, in fact the world grain reserves (people talk about oil or gas reserves but not cereal stocks) in 2006 are at the lowest level for the last 24 years. When worldwide cereal production reached 1,967 million tonnes in 2006, just a year later in USA more than 80 million tonnes were transformed into fuel. In this state of affairs, in the medium term (3‑5 years), the choice will be between gasoline and food, if the migration of the large capitalist corporations towards biofuels progresses as it has already been doing in the last 5 years” (GRAIN, 2007).

The attitude shown by democratic Western governments is not up to the standard of the potential risks, particularly with respect to the second “green revolution”, being sold to us by the same ones who sold us the first one (Monsanto, Dupont, Bayer, Dow, …), now “generously” engaged in the “museification of information” on plant genetics, the first step towards their replacement designed by the transnational corporate engineering of the bioenergy multinationals. Power over a good that is already becoming scarce, namely drinking water, is also heading in this direction. The centralization of the food industry bringing into play the sovereignty of the population over a basic good also responds to all of this.

In short, the purpose of the large capitalist corporations is to take their businesses directly to the marrow of the basic goods and services of the world’s population, making a minimally civilized and worthwhile society unfeasible.

On the other hand, it seems that the systemic risks, of international scope, can only have a politically consistent response with a project for the civilization of the whole planet from a transnational level. But it is by no mere chance that the world’s privileged countries have taken charge of re-activating or updating (G8) the former institutions of the Washington Consensus to turn it into the club of the powers that be for discussion and decision-making (both by states and by the large private corporations of the most influential countries). That “world government” is not, however, the government of all, but government by a few of all the rest. And the world is currently carved out into blocks and regional areas competing with each other. It is also reasonable to predict strong tensions to establish any sustained line by this “worldwide authoritarian oligarchy”, without being able to rule out constant diplomatic conflicts, and a continuation of the world’s competitive economic struggle by other routes.

The transition in the midst of the financial signal crisis, as we have indicated, is already being explored and, in some areas of the world, has already built up some experience and cannot leave any social group unmoved because its effects will be visible in a few years and have consequences, sometimes devastating ones, today in many areas and populations (Iraq, Africa, Latin America, Iran, etc.). Similarly, the subordinate classes are in the eye of the storm, both as victims of the deterioration in their living conditions and as possible protagonists combating their exploitation and domination.

But, in the same way as the dominant classes pursue “solutions” to their problems, the dominated classes, with the various segments, will also offer resistance and build up alternatives. Nothing is yet written in history and it may still be pending possibly, with the skill of intelligence and wisdom, but also with effort and, unfortunately, the blood of many people. The tension in play is very great and we cannot tell in which direction it will go, as only its subjects can direct it.

Of course, in the absence of anti-systemic movements and an organized antagonistic subjectivity[25], this is a very likely scenario. The evolutionary structure of capitalism, under the hegemony of neo-liberalism, has propitiated the glimpse of a framework of scenarios with foreboding features.

However, at the same time as that framework might take place with the connivance or social inaction of the subordinated subjects, it is also impossible to affirm this without taking into account the possible strategies of the dominant classes. It seems hardly reasonable, in this respect, to think of a historic dynamic in which the social subjects let themselves be swept along by inertia.

For our part, it is possible to provide a grain of sand to alert to these issues and to contribute to giving food for thought for the international worker movement, first of all in the trade union organizations that we would like to take up this challenge. A challenge that must not only include relieving, redirecting or deferring the effects and solutions of this systemic risk, but also confronting the need, possibly for humankind and the planet in the medium and longer term, for a structural change that would eradicate a pernicious socio-economic and political system.

4.    Financialization, organization and trade union action

The trade union forces are now paying, late and insufficient, attention to the phenomenon of the financialization of the economy as a key factor to understand and cope with the current crisis, even more serious than that of 1929. In recent years, we have witnessed organic consolidation, the better provision of resources and a certain institutionalization of the regulation of the working, social and, for some places, economic life of the most representative trade unions, at least in the countries of the North. Nonetheless, this greater weight of institutional influence has been accompanied by a displacement of their influence or real intervention with respect to central processes forming the backbone of the economy in central countries.
Trade unions have equipped themselves with technical organs capable of drawing up reports and constitute a consultative axis for governments, at the same time as they are a basic pillar for the regulation of the workspace, particularly with regard to collective bargaining, including in the agenda for discussion new aspects impacting the organization of work (health in the workplace, equality between men and women, training, etc.). However, they have also witnessed the displacement of the central role of collective bargaining through the re-organization of business groups, the transnationalization of the economy and the de-centralization of decision-making in the public and business sphere. The scope of business and company law is undermining many of the conquests achieved for employment law, as many regulations and resolutions are subordinated to the extremely wide margins for manoeuvre enjoyed by companies and, in particular, the prevalence of the “networked company” as a figure in which agreements with trade unions are permanently subordinated or diluted by spheres of decision left outwith their competence.
Transnational networked companies and the dissemination of work centres constitute the trends of the present time, with a network of definite economic flows but a blurred allocation of responsibility. Business chains, franchisees, holdings, etc. are the dominant theme of markets. This apparent fragmentation, effective with regard to the daily reality of workers and, in particular, their ability to negotiate, does not prevent a greater concentration of capital, that translates into new work individualization practices. These are basically weakening the classical structural force of the workers’ movement, as well as certain ideological slippage favourable to neo-liberalism and, as a result, its resources and way of life.
If trade unions wish to face up to the new economic and business reality, they have to propose actions in two complementary dimensions. First of all, explore in their discourse a new kind of participatory organization that responds to the new profile of the capitalist economy. The organic key should not be sectorial/territorial articulation but the wage relation as a central phenomenon (over and above formal aspects, this must include the hiring of economically-dependent “false” self-employed people; the informal economy; the unemployed; and giving special support to immigrants, young women, and people with precarious contracts), and the variable geometry concept of so-called transectorial and transnational “networked companies”. Workers change jobs and sectors more frequently, as well as changing “career paths” and their identification with a sector is more and more relative. Transversal co-ordination between sectors must be translated into collaboration for trade union action on the scale of concentrations at work centres and the workforce (industrial estates, shopping centres, leisure areas, office blocks and business parks), on the one hand; on the other, collaboration across the breadth of networked companies with substantial relationships must be another reference, especially because the key decisions are taken at that level. Perhaps it is a good idea to establish organs for co-ordination and intervention in the form of trade union sections covering an “economic district” or a “networked company”.
We should also take account of a new mobile profile of the working class. The generalization of a qualification of the “abstract training” type (mastery of codes and symbols for the handling of certain applications and computing languages and telematic tools) is due to a system of training and education aimed at mobilizing versatile and dynamic skills, but lacking the contents and perspective to build a critical, creative citizenry that is ethically responsible and globally aware. The widening of the base of occupations allowing a greater adaptation of an ever more versatile workforce to a greater range of positions (more than workers they would be “systems operators”) is another circumstance reducing the need to link a particular worker to an individual job, because they are already more interchangeable. At the same time, a greater flexibility in contract types and dismissals have contributed to an ever more fluid and wide-ranging circulation and mobility in the employment of the workforce.
A more co-ordinated organic structure would be required to give more general participation in the centralized taking of decisions in the most transnational way possible so as to allow adaptation (and not subordination) to local concerns and avoid de-focusing the actions. Local interests have to adopt an international perspective and co-ordination, as well as involving workers more and better. In addition, it does not seem to be acceptable for workers in companies with small staffs at their work centres, or for many other employee concepts such as economically-dependent self-employed individuals, to be bereft of any direct representation. It is necessary to promote work councils, either for “economic districts” or else for “business groups”, as the atomization by company or even by work centre weakens the possibility of decisive influence.
The trade union movement of the 21st century must train its members in subjects that have previously been somewhat alien, i.e. corporate and financial economics, business and company law, etc., apart from providing trade union training to adopt a more aware and combative attitude.
Yet it is also essential, with regard to collective bargaining and regulation, to rein in the problems and excesses of financialization, to press for economic regulation of all the business initiatives contravening the principle of sufficiency and economic viability (meeting medium-term costs) and long-lasting efficiency, justified by socially useful, environmentally sustainable investment, as well as to prevent by law the destruction of jobs in companies with profits.
Trade unions bear influence in different ways. In the absence of political actions of greater scope, in order to avoid, in particular, the most harmful effects of the “extreme practices” of the investment companies may begin with:
v  Demanding accounting transparency and greater information regarding internal processes of the companies (employment relations, mechanisms for technological innovation, power systems used, employment and investment plans, etc.) applicable to companies of any size, regardless of whether or not they are listed on the stock market.
v  Demanding corporate group accounting, listing the transactions of the internal market.
v  Agreeing on and classifying the responsibility of business owners, shareholders and employers, with subsidiarity and proportionality, vis-à-vis all existing stakeholders (workers, creditors, etc.). Establishing clauses determining greater personal responsibility of the owners of shares (reversing the concept of “shareholder anonymity”). Special emphasis on situations of mergers, take-overs and re-organization (externalization and job cuts) and fraudulent bankruptcies.
v  Requesting independent audits whenever there is a substantial change in the Board of Directors due to the arrival of new shareholders. Demanding a process of negotiation that maintains or improves the working conditions of the workforce, identifying the new employers and their links with the owners.
v  Improving the company’s financial and investment situation, before engaging in any job cuts. Backing re-placement and training before traumatic solutions.
v  Calling for the adoption of measures to prevent dismissals based on “financial” causes of reference shareholders, or re-financing of the debts of the owner’s business group, and aimed at raising dividends and yields, looking to the reaction of the stock markets and short-term interests.
v  Proposing to the public authorities that they should regulate the limits on the granting of dividends and issue premiums, or the fees for “fund managers”, as well as balance tax pressure with other sources of income, assuming they are not taxed more heavily.
v  Requesting from the public authorities a regulation of the world of finance and limits to the practices of investment companies, for example, demanding investment with a minimum stability over time to be able to influence the governance of companies, and complete transparency of their actions.
v  Stimulating and strengthening institutions (public prosecutors specializing in economic and business crimes, increased number of business courts, …) devoted to the monitoring, oversight and prosecution of businesses’ economic and financial activities in a context of multiple jurisdictions (mostly tax havens) in which transnational companies operate, especially new organizations, businesses and/or financial companies.
The structural situation described has generated sociological relationships and internal professional markets so as to detect “coalitions” of interests between the professional regulators and the managers or designers of investment fund products, in an evident co-habitation in the system between the groups of regulatory experts and executives from the banking bodies and the managers of investment companies, who often exchange their roles and influence on a regular basis (Andy Robinson, in La Vanguardia newspaper). The necessary regulation of these lacunae in insider trading and “vested-interest mafias” cannot be put off.
We might say that the financial metastasis afflicting the global economy, with the unleashed explosion of financial derivatives, futures, credits, differentials, currencies, raw materials, water, electricity, etc., not only threatens to regale us with many more financial frauds (Madoff) and growing risks of financial crises such as those borne by Mexico, South-East Asia, Russia, … but on these new occasions in a more decisive dimension, due to the economic size of the areas potentially affected: USA and the EU.
In general lines, the different governments at the head of western States have made a determined wager in favour of a line contrary to the regulation of the movement of capitals, as they have understood that these constitute an opportunity for progress more than a factor of disorder. They have opted to increase the attractions on offer at each site, rather than build the conditions for an increase in the investment rates and modernizing innovation. A systemic chaos of huge proportions such as the one now under way, albeit with the presence of a larger weight of political options committed to introducing guarantees and limits on certain dynamics of capital and the market, might encourage the regulation of some aspects of this kind of movement.
Trade union opinion at the international level is clear and holds that it not only harms workers in the companies acquired by hedge funds, but also threatens the whole of society by depressing, on the one hand, the tax revenue and, on the other, via financial engineering and leverage, transferring the costs of funding the acquisition onto the companies bought. Many of these companies hold concessions for public services (water, energy, health, education, security, …) and then reduce, after the acquisition, the investments necessary to ensure the level and maintenance in the medium and long term of the level of benefits. In this way, by impairing collective public services[26], they simultaneously generate evidence of deterioration of what is “public” by creating further liberal justifications and new appropriations of the collective in favour of the interests of the most ambitious private capital.
International trade union organizations, eternally aspiring to being social agents with contractual power in the global economy, and with the ITUC at their head, maintain, denounce and repeat very clear positions with respect to the activities of the private capital and speculative funds, which they consider to be archetypes of the “late-onset financialization” of the global economy and, above all, “basically a business model that is antagonistic with the idea of labour”[27].

We feel that everything indicated above requires a re-consideration of the strategies of the world of international trade unions and of every trade union organization in each country. We consider that, to be able to cope with the problems, it is first necessary to identify them and characterize them properly. We hope that we have contributed to this task. From now on, it is up to each and every one of us to set out shoulders to the wheel so as to belie the bad auguries. And, in our opinion, this cannot come through the hand of providence, but rather through an organized and intelligent collective effort determined to act with conviction.

5. APPENDIX. Some financial leverage operations in Spanish companies

In the last two years, we have witnessed the acquisition of Spanish companies by Investment Funds or business investors through “leveraged buy-out” (LBO)[28] operations, without any injection of capital funds to the companies acquired. The “victims” include the following, chosen for their economic, employment or financial importance[29]:

Telefónica Publicidad e Información, S.A. (TPI-Páginas Amarillas, S.A.)

Acquired in 2006 by the YELL GROUP PLC investment group, the European leader in the sector of telematic guides and advertising services through its instrumental company MIDORINA, S.L.U. The company is currently known as YELL Publicidad, S.L.

It was acquired by means of debt issued by the holding firm which, after merging with the “instrumental company”, transfers the debt incurred by the holding to the company bought. The process was articulated in operational terms by financial juggling of capital increases with issue premiums, weakly and insufficiently regulated by the current corporate legislation. It was a company that retained considerable equity by accumulation of undistributed reserves and was “ransacked” after the acquisition (by means of increases in its share capital with issue premiums and a merger with another satellite company) and left burdened with the credit initially requested by the Yell group for the acquisition of the TPI, S.A. company. The statements made by the group buying up 100% of TPI-Páginas Amarillas, S.A. are clear and explicit, as well as arrogant and shameless, in this regard:

”As a result, once the distribution of the issue premium has been effected, NewCo will owe Midorina the amount corresponding to the intra-group loan and will meet the payments of the principal and interest on the said loan from the cash flow generated in the ordinary course of its activity”

“On the other hand, the re-payment of the said intra-group loan will allow the Bidding Company (Midorina, S.L.U.) to proceed, in turn, with payment of the bank funding assumed as a result of the Previous OPA by Midorina and the present Bid, as indicated in section II.5 of the Leaflet”[30]

Supermercados DINOSOL, S.A.
This supermarket distribution chain belonging to the AHOLD company was acquired in 2006 by the PERMIRA Investment Fund[31] after its entire network in Spain was dismantled following problems of transparency and false accounting statements detected by the US authorities the previous year.

In the 2006 financial year, Supermercados DINOSOL, S.A. presented an extraordinarily worrying panorama of indebtedness or financial leverage index, shown in the table below, as a result of the “asset-stripping” actions (disposal of fixed assets, withdrawal of issue premiums, …) undertaken by the sole owner.
Supermercados DINOSOL, S.A.
In millions of euros
Mean employment.

Air transport company that filed for suspension of payments in September, 2008, due to financial problems. During 2007, the disagreements between the major reference shareholder, the Spanish investment fund CORPFIN CAPITAL, S.A., and the American investment fund HUTTON COLLINS & Company, which took over a majority stake in FUTURA, generated an immediate situation of financial insolvency (negative working capital) after the withdrawal of 80% of the accumulated equity, which the new investment fund (HUTTON COLLINS & Company) was not prepared to re-fund. The company is currently involved in legal proceedings for bankruptcy. At the end of 2007, the mean employment was 944 workers.

FUTURA Int. Airways, S.A.

000s of euros
Mean employment

Its financial leverage index (Assets/Equity) shot up from 4.6 to 15.0 after these transactions to “strip out” the resources (withdrawal of reserves, issue premiums, and buyback of shares by the company from private investors at prices without independent verification) imposed by the Spanish Investment Fund (CORPFIN Capital, S.A.) prior to the sale of its stock to the American investment fund.

Although the players who carried out an industry buy-out using financial leverage were not, in this case, “investment funds”, the truth is that the group of entrepreneurs involved (Fernando Martín and his wife) have behaved in exactly the same way, using external debt to acquire the FADESA company and then transfer this debt for the purchase of the construction and real estate company to the new company resulting from a takeover of the bought company, thus leaving the debt with MARTINSA-FADESA.

Last July, the company filed for suspension of payments with liabilities in the order of 6.5 billion euros and alleged assets of 10 billion euros, resulting from “non-market” appraisals of multiple real estate assets, specifically “land”, that undermined the reliability of these evaluations[32]. This is the largest case of “suspension of payments” in the history of Spain. The bankruptcy proceedings are still under way and it has so far sacked over 500 of the 860 workers on the company’s payroll prior to the legal proceedings. Of the 12,500 homes on its books, it only expects to finish 750.

UPS España, S.A.

The Spanish subsidiary of the Americano courier company has had such problems in the last three financial years that it would have been forced to close down the company in Spain pursuant to the requirements of the Spanish Public Limited Liability Companies Act (Ley de Sociedades Anónimas), which requires the management to pull the plug when the company accumulates losses in excess of 50% of its Share Capital. Nonetheless, the multinational has kept its subsidiary afloat through “Equity Loans” that can be called by the parent company and has burdened UPS España, S.A. with disproportionate financial costs at the same time as it has a financial situation showing unbearably high levels of financial leverage for its operating margins. Once again, this is a case of “infracapitalization” of business activities, decided by the investing parent company which, instead of providing resources in the form of capital to fund the business, opts to sustain its activities with “remunerated” loans.

UPS España, S.A.

In millions of euros
Mean employment

The corporate accounting engineering put in place over several financial years has been founded on the granting of equity loans (reimbursable and with remuneration for the holding company) that “count”, for corporate law purposes, as equity[33]. This excessive financial leverage with the parent company implies a stranglehold on the subsidiary whenever the owner-shareholder-lender decides to raise the interest rate on the said loan. This is what has happened to UPS España, S.A., which now has an unbearable burden of financial costs after the decision by the American holding firm and sole shareholder in the Spanish subsidiary to raise the interest rate by 2 percentage points over the rate that accrued in financial years prior to 2007.

Ono, S.A.
This is telecommunications company with its own network of telephone lines (only Telefónica, S.A., the former Spanish incumbent also has its own network), in other words with a telephone line structure covering close to 45,000 km. A business group that has reported fast positive economic results in this year (2008). Back in 2004, it was acquired by a group of Investment Funds that have since managed, by means of various “corporate finance manoeuvres”, to transfer the credit of more than 3,600 million euros they had asked for to acquire this company (previously known as AUNA).

ONO-Cableuropa Corporate Group
Millions of euros
Shareholder Equity Loan:
Mean employment

After a cutback in the employment levels in 2006 (approx. 700 layoffs), it has recently asked the employment authorities (Spain’s Ministry of Labour) to allow them to sack another 1,300 employees, despite presenting growing positive results in 2008. The reason for its request is none other than financial problems faced by its shareholders, pension funds that own Cableuropa, S.A.U. and all of the ONO group, and not problems with the returns from the telecommunications business which, as the figures show, are indisputably positive and rising.

The reference shareholders in ONO, a total of 11 investment funds, have not only transferred the “debt” acquired, they are also obliging ONO to subscribe issues of Preferential Bonds by satellites of these investment funds located in tax havens or territories with low tax rates (Ireland). These Preferential Bond issues are made at disproportionate interest rates (up to 8 percentage points above the normal reference rate: the Euribor) that would most likely be classified as usury, if the office of the prosecutor for tax and economic crimes were to be involved, as well as unfair actions by the shareholders vis-à-vis the company and interested third parties: clients, creditors and employees.

At the present time, the trade unions are pressuring the Spanish employment authorities (headed by the Government of the PSOE socialist party) to ensure the job cuts (1,300 dismissals) proposed by ONO are disallowed.

6. Bibliography

  • Albarracín, J. (1994) La economía de mercado, Trotta. Madrid.
  • Albarracín, J. and Montes P. (1996) "El capitalismo tardío: La interpretación de Ernest Mandel del capitalismo contemporáneo". Paper at the Seminar of the Ernest Mandel Study Centre. International Research and Training Institute in Amsterdam.
  • Albarracín, Jesús (1994b) in "Economía y ecología: los problemas políticos" Working Document.
·         Álvarez Peralta, Ignacio (2007) “Financiarización, Nuevas Estrategias Empresariales y Dinámica Salarial. El caso de Francia entre 1980-2006 Complutense University in Madrid. September, 2007
  • Arrigui, G. (1999) El largo siglo XX. Trotta.
·         Bacigalupo, Silvina; Sanchez-Vera, Javier. Ediciones Experiencia. (2005) Cuestiones prácticas en el ámbito de los delitos de Empresa”.
·         Birol, F. “Electricidad para todos. Perspectivas mundiales de inversión en la electricidad”. International Energy Agency. June, 2004. Report on investments in the world, 2004. The Shift towards Services. United Nations, 2004.
  • Bustelo, Pablo (2007) “Progreso y alcance de la globalización financiera: Un análisis empírico del periodo 1986-2004. ICE Economic Bulletin.
·         Calatrava, Enrique (2007) “El capital riesgo y los dividendos”. 1/5/07. Expansión newspaper.
·         International Trade Union Confederation. (2007) Cuando la casa siempre gana: Capital privado, fondos especulativos y el nuevo capitalismo de casino”. June, 2007.
  • Durán, A; Gutiérrez, E (2006) ”Tasas para fiscales e inversión en I+D. La experiencia del sistema eléctrico español”. January, 2006. Gaceta Sindical (Trade Union Gazette).
·         European Central Bank (ECB). “ECB Annual Report”. 2006
·         ECB. (2006) Hedge Funds: Developments and Policy Implications”. Monthly Bulletin. January, 2006.
·         Judicial School (2007). Delincuencia económica”. Estudios de Derecho Judicial, nº 93. General Council for the Judiciary (CGPJ).
·         Judicial School (2006). “Derecho penal económico”. Estudios de Derecho Judicial, nº 72. CGPJ.
·         Etxezarreta, Miren (co-ord.) (1991) La reestructuración del capitalismo en España. 1970-1990. Icaria. Barcelona.
·         Ferruz Agudo, Luís; Marco Sanjuán, Isabel; Muñoz Sánchez, Fernando. “La Industria de los Fondos de Inversión Libre en España”. INE Economic Bulletin, 2007
·         GRAIN (2007), Agrocombustibles: Síntomas de una próxima combustión globalizada.
·         Guerrero, Diego (ed.) (2000). “Macroeconomía y crisis mundial”. Trotta, Madrid.
·         Jiménez Villarejo, Carlos (2004) “¿Cómo puede controlarse por medio de la ley a las grandes empresas que actúan de forma global? ¿Cuál es el papel que puede representar el derecho internacional? ¿Qué más necesitamos?. Forum. Barcelona.
·         Losada López, Ramiro (2007) Activismo e ingeniería financiera: implicaciones para el gobierno de las empresas y sus accionistas”. CNMV. Monograph nº 25. September 2.
  • Mandel, Ernest (1986, first published 1980) Las ondas largas del desarrollo capitalista. Siglo XXI. Madrid.
  • Mandel, Ernest (1999, first published 1972) Late capitalism. Verso Classics edition. London.
·         Moreno Chamarro, I. (2005) Delitos societarios. Edit. Universitaria R. Areces.
·         OPIHE (Organización Profesional de Inspectores de Hacienda del Estado, Professional Organization of State Tax Inspectors). (2007) Fraude, Corrupción y Blanqueo de Capitales en España”. November, 2007.
·         OPIHE (2008). “Los Planes de Inspection de las SICAV”. January, 2008.
·         Ramonet, I. (2007) Nuevo Capitalismo”. Le Monde Diplomatique, 7.11.2007
  • Schumpeter, J. A. (1996, first published 1942) Capitalismo, Socialismo y Democracia. Tomo I, Barcelona.
·         UITA (2007) Guía de los trabajadores sobre las operaciones de adquisición del Capital Riesgo”. Geneva.
·         UNI.Global (2007) “Fondos de capital de inversión: Su importancia para los sindicatos”. Switzerland.

[1] Daniel Albarracín is an economist and sociologist from the Federal Studies Office of FECOHT-CC.OO. and Lecturer at the King Charles III University in Madrid. Eduardo Gutiérrez is an economist at the CC.OO. Interfederal Economic Office.
[2] To be correct, the profit rate is measured as:
PR = (capital gain / variable capital)/((constant capital/variable capital)+1)
[3] “The volume of transactions on the currency markets between 1990 and 2005, in terms of world GDP, has been multiplied by a factor of 3,5; the volume of transactions in public debt and derivatives (products that mitigate the risks of exchange rate and interest rate changes) by 4 and that of shares by 9”. (Álvarez, I.; 2007: 23).
[4]Guía de treinta minutos de los fondos de capital-inversión” (30-minute guide to investment capital funds), recently published by the global trade union UNI. 2008. Available at: www.uniglobal.org/privateequity.
[5] Up to 30 times their equity in Hedge Funds aimed at the purchase of “securities of companies in crisis”. Study into the Hedge Funds industry. Spanish National Securities Commission (CNMV). February, 2006.
[6] “Families owe a billion euros in mortgages and defaulting has trebled in a year to 2.5%. A report by ING points out that the system would collapse with more than 15% of defaulters. The chairman of Caixa Catalunya, Narcís Serra, has not discarded the possibility of 9% being reached in this crisis” Ramón Muñoz (23-11-08) “Cuando las cosas van de verdad mal” (When things really go wrong). El País newspaper.
[7] Gutiérrez, E. and Albarracín, D. (2008) “Financiarización y economía real: perspectivas de una crisis civilizatoria” (Financialization and the real economy: prospects for a crisis of civilization). Viento Sur. Issue number 100.
[8] Álvarez Peralta, Ignacio (2007) “Financiarización, Nuevas Estrategias Empresariales y Dinámica Salarial. El caso de Francia entre 1980-2006 (Financialization, new business strategies and wage dynamics). Complutense University in Madrid. September, 2007
[9] Together with Morgan Stanley, Goldman Sachs, Société Generale, …, the “Banco Santander” bank has been for some years one of the most active banking institutions in the commercialization of structured products and the promotion of SIMCAV. In other words, Investment Funds or Hedge Funds, that in Spain are legally known as Collective Free Investment Institutions. According to CNMV figures from the middle of 2007, the Banco Santander had created and funded in the order of 937 Hedge Funds with different activity profiles (Money Funds and especially SIMCAV), through which it manages a total of around 85.5 billion euros.
[10] Most of the business groups studied by the authors show clear signs of behaviour designed to help proliferate ghost companies, with a clear criminal intention to “mis-use legal personality”, aimed at blurring any social, environmental or employment liability through a network of interposed companies acting, from a productive, commercial and financial perspective, under the control of a co-ordinating centre, the parent company in the financial and business conglomerate.
[11] In 1998, the crisis of Long Term Capital Management (LTCM), the largest Hedge Fund in history, took place. Some CNMV experts are of the opinion that “… most of the recommendations made after the LTCM crisis are still pertinent” (ECB, 2006). Long Term Capital Management (LTCM), with a capital of $ 1.3 billion, groups together 80 investors (many of them banks that join to “re-sell” their part among the VIP clients, as the ante to join was $ 10 million). LTCM was going to be long-short style of hedge fund, in which they would look for correlated bonds that had dispersed and open long positions in one and short positions in the other, waiting for their return to mean values. This strategy was executed with a high level of leverage to increase their winnings: at times, the leverage of LTCM reached 100 to 1.
[12] The CNMV document entitled “Estudio sobre la Industria de Hedge Funds” (Study on the Hedge Funds Industry) states: “One of the main obstacles to achieving this is the scarcity of official data allowing a homogeneous global view of the industry, so the figures must be treated with caution” or “Although one of the characteristics of the industry is its scant or non-existent regulation”. These comments were published in February, 2006.
[13] Within the protection of the Regulations developing the Spanish Collective Investment Institutions Act (Law 35 dated November 4th, 2003), approved by Royal Decree 1,309/2005, which introduced an amendment to the original Act so that it is up to the CNMV to determine in the final analysis, with the added tax effect, who may constitute a SICAV, in an example of how the most corporate and voracious fraction of capitalism turns the screw once more to “trap” the regulator.
[14] Investors have to put up a minimum of 50,000 euros and show they have more than 1 years’ professional experience in their activities (Ferruz Agudo, Marco Sanjuán, and Muñoz Sánchez, 2007).
[15] Note nº5 above clarified that large merchant banks (Morgan Stanley, Goldman Sachs, Société Generale, Banco Santander, BBVA, … are the most active bank institutions in the implementation of Hedge Funds and in the design and offering of the structured products bought by HF clients. The Banco Santander has created 937 HF, especially SIMCAV, with a net worth of around 85.5 billion euros.
[16] In this respect, it overlooks a significant finding: over 80% of known tax havens fly the British flag.
[17] There are many analyses that highlight the fact that 2006 saw the achievement of “Pink-oil” (the record in history) for the volume of crude oil extracted on the planet. But this does not interfere in the slightest with the justification for the decreasing investment made by oil firms in their “refining capacity over the last three decades, explained by their deliberate strategy (“strategic behaviour”) to generate a restricted supply of fuels in an attempt to recover their declining profit levels, a phenomenon inevitably affecting every mature sector or activity.
[18] Please see the details in “Nueva posición de la OCDE en materia de paraísos fiscales” (New OECD position on tax havens). Doc. nº 1/2002, which states: “This position translates into:
1. The U.S.A. believes that the criterion of ring fencing has to disappear so, even when a country/jurisdiction complies with this criterion, it should not be treated as a tax haven.
2. The U.S.A. considers defensive measures against tax havens ought to be applied on the same terms as for OECD member states.
3. The U.S.A. is against the idea of a “blacklist” for tax havens”.
[19] Álvarez, I. and Medialdea, B. (2008) “Financiarización, crisis económica y socialización de pérdidas”. Viento Sur. Número 100.
[20] The fact is companies have to withhold profits in the form of reserve funds until these exceed 30% of the paid-up share capital.
[21] Possibility that there may be a series of related bankruptcies among financial institutions over a brief period of time, possibly triggered by a single event, but endangering the system as a whole: the financial system and the economy manufacturing goods and products.
[22] Schumpeter spoke of “creative destruction” of the market and its cycles, in order to allow the elimination of excess productive capacity, encourage innovation and the quest for new markets, and the re-establishment of profitability.
[23] The International Energy Agency (IEA) confirmed the leakage of investments by the dominant corporate capital, locating a large part of the current energy problem in the fact that: “… de-regulated power markets need more investment”, and posits that, over the next 30 years, the worldwide volume of investments necessary would be: “equivalent, in real terms, to almost three times the figures for the last thirty years” (IEA, 2004)
[24] “The international community cannot remain impassive over the hardening of the repression of transnational crimes exploiting locations with the most absolute impunity (tax havens) and performed through extremely complex procedures. Secondly, financial criminality refers mainly to Limited Liability Companies which are therefore established and act under the shield of formal legality. Acts subject to punishment are presented as legal acts performed in the normal course of the business activity under a formal guide that is extremely useful to mask the illegal behaviour”. Jiménez Villarejo, C.
[25] Antagonistic subjectivity is deemed to correspond to the aware collective organization that prepares the means to express itself and act publicly, forming an intellectually shared ideological perspective (aspiring to what Gramsci terms hegemony), and that is capable of adopting different forms of organization, co-ordination and ties, against the established system. This term has frequently been used in the Italian tradition of immaterialism (Negri) and is commonplace among the movements against global capitalism.
[26] On the effects these institutions, born out of the financial de-regulation-liberalization of the 1980s, are generating in private enterprise holding public service concessions, such as health services for the elderly, please refer to the article entitled “At Many Homes, More Profit and Less Nursing” in the September 23rd, 2007, issue of The New York Times.
[27] The text of the ITUC is outstanding for its depth and ambition, as is that by the IUF (International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers Associations), with very clear and explicit positions regarding the diagnosis and incorporated therapies. Please refer to the bibliography at the end.
[28] Financial Leverage in English is commonly “Leveraged Buy-Out” (LBO), referring to processes for the acquisition purchase of companies conducted with “recourse to lending” in other words with external debt and not with the resources of the investors provided by the purchasers of the companies. These debts are normally transferred to the companies so acquired by means of mergers, assignment via loans and other corporate procedures using the equity of the companies acquired.
[29] There is no Confederal Department of CC.OO. in charge of monitoring these transactions so these notes are not by any means exhaustive and arise out of the specific experience in giving advice and assistance to micro-companies from the C.S. Interfederal Office at CC.OO.
[30] From the Informative Leaflet by Midorina for its OPA to acquire 100% of the share capital of TPI-Páginas Amarillas, of which it already held 94% purchased from Telefónica years earlier. Through this OPA, it had the company de-listed from the stock exchange and was able to escape the questions and concerns of minority shareholders regarding its management of the TPI-Páginas Amarillas, S.A. company.
[31] The fund is really called PERMIRA EUROPE III and is managed by the company styled PERMIRA HOLDING LIMITED.
[32] The fact is that 3 months after the petition for insolvency, the owners of MARTINSA have been unable find any institution to give an up-to-date value for those assets (property, land, etc.).
[33] In accordance with certain requirements detailed in subsidiary provisions of the 2006 Public Budgets Act (Ley de Presupuestos Públicos), in other words without any effective public discussion in Parliament, “equity loans” are considered part of the Equity, but in a sole shareholder company (UPS España, S.A.), such requirements are unknown for the rest of the agents affected by trading relations with the company: creditors, clients and workers. These regulations have been improvised, are not transparent, and encourages the lack of “responsibility” by investors with regard to the business projects.

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