Friday, November 22, 2002

Making a Killing in the Futures Market

Friday, 22 November 2002

How do you fund a popular uprising that nobody wants? Well, if you're fortunate enough to have access to natural resources which are in demand, the answer is very simple. It works in pretty much the same way as the heavily leveraged corporate take-overs of the 1980s (or should that be highly geared? Sometimes the language of corporate finance confuses me as much as the language of industrial relations).

What you do is sell some booty* futures**. In essence you sell exploitation rights on the natural resources you intend to seize control of, in exchange for the money (or weapons) you need to seize control. It's a much more effective form of insurrection financing than the traditional method of extorting funds from the population you are "liberating".

Of course you won't find booty listed on the Sydney Futures Exchange and for very good reason. Neither the sellers nor the buyers in this particular commodity market are too keen to have its existence made public. Michael L Ross, the author of the original paper, did a pretty good job in turning up four examples of the trade and he does an excellent job of examining the damage it does.

At the risk of damning Ross' paper with faint praise, the idea of booty futures is not exactly new - Joseph Conrad covered similar territory in his novel Nostromo, for example. What is new in Ross' treatment of the issue is that he has put the subject on the agenda of political science and economics and shown how market interventions in government can be just as damaging as government interventions in the market - if not more so. While his paper may not bring much comfort to those naifs who believe that every national liberation movement is necessarily acting on behalf of the liberated, there's not much joy in it either for those other naifs who believe that free markets are always and everywhere the best thing.

Of course, it's unlikely that any Australian entrepreneur has ever become involved in this grubby trade. True, Alan Bond did buy the Chilean Telephone company and all that's left of the Skase assets is a house in Majorca and a tiny corner of the Spanish judicial system, but these were abberations and, anyway, it's all in the past.

* - PDF file.

** - briefer account originally from the New Scientist of June 29 this year.

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