The company is a ware merchant, which is a business that focuses on the trading of actual things such as grain, oil, copper, and so on. Most people would dismiss this as inconsequential; exchanging goods is perhaps the oldest type of commerce in the world. What made Glencore stand out, according to Kamahl, was that "when one business has this much power, through its size, and some argue even its conduct, there is a concern."
He broke it
down: at the time, Glencore owned 3% of the global oil market, 50% of the
global copper market, 60% of the global zinc market, and 9% of the global grain
market. "Think about the impact it may have on food expenses," Kamahl
warns, "the absolute necessities for so many people all over the
world." If controlling the food supply of entire countries isn't a crucial
sort of force, what is?
Glencore
and other product dealers like it are the main point of The World for sale:
Money, Power, and the Traders Who Barter the Earth's Resources, a new and
interesting book by Javier Blas and Jack Farchy. Blas and Farchy's argument is
straightforward: rather than being ordinary shippers, item brokers are
significant players in the modern global economic performers whose "power
over the evolution of the world's main assets has also made them great
political entertainers."
Nonetheless,
despite its enormous riches, effect, and key influence, this industry remains a
fairly mysterious force to the great majority, who are much less familiar with
its set of experiences, development, adaptation to changing business sectors
and innovation, and conventional approach. Blas and Farchy present an informed
and educational plunge into the subject of item swapping in a universe of
daring dealer travels, African despots, Swiss bankers, and the smooth yet
callous world producers who may yet comprehend the final fate of global
international relations.
THE WORLD
IS AVAILABLE FOR PURCHASE AT THE END OF THE SECOND WORLD WAR, when a time of
peace, along with devastating metropolitan centers and countries in need of
repair, paved the door for a hitherto unheard-of gold mine for natural
ingredients.
The reader
is acquainted with the pioneers of the cutting edge item exchanging business:
the Hamburg-born Theodor Weisser, who crossed the Soviet border (despite having
been a previous Soviet conflict detainee) looking for an arrangement to send
out Communist diesel and oil toward the West; and American John H. MacMillan,
who went from learning the family grain business (Cargill) on the floor of the
Minneapolis Chamber of Commerce to releasing America's grain on the world,
including the Communist Bloc; and Ludwig Jesselson, who fled Nazi Germany's
destructive mission against Jews in America and went from exchanging scrap in
New York to being the genuine primary architect of a tradition of item exchanging
organizations, including Glencore, that exists right up to the present day.
These three
guys devised the strategy and expert culture that has guided the ware merchants
for the past eighty years or so. The reader is taken on a tornado ride through
crucial business events. The Great Grain Robbery, for example, is repeated in
exquisite detail as the first occasion when the two legislatures and general
society were introduced to the significance of the product trading industry.
With crop shortages in 1971-2, the USSR despatched Nikolai Belousov, the head
of the Soviet grain trading firm, to the West with a single mission: to obtain
a food supply. Belousov met with John MacMillan's replacement at Cargill and
negotiated a deal to buy 2 million tonnes of grain the next year. Blas and
Farchy put it succinctly: "It looked, at that time, to be a reasonable
arrangement all around."
Not quite.
What Cargill didn't realize was that Belousov had previously met with
Continental Grain Company, completing a deal for $460 million in wheat and
staple food sources, a record for the period, and would thus close comparable
deals with item merchants Louis Dreyfus, Bunge Corporation, Cook Industries,
and André and Cie. Belousov created a tremendous coincidence for the business
divisions by inconspicuously making separate contracts with the goods dealers:
Each
swapping house felt it was separate from everyone other in cutting nothing to
laugh about with the Russians and was mostly unaware of how much others had
sold. When it became obvious how much Belousov had acquired, dealers admitted
that there would not be enough American grain to go around. Belouso acquired
around 20 million tonnes of grains and oilseeds from grain merchants. The
amount of the wheat purchases was unusual: 11.8 million tonnes - about 30
percent of the US wheat harvest. It was evident that the US would not have
enough grain to satisfy the combination of its domestic use, demand from
regular shippers, and further purchases from the Soviet Union.
With
contracts to fulfill, the ware merchants began purchasing, causing a food price
explosion: wheat prices skyrocketed the next year (causing a corresponding rise
in meat prices), while maize and soybean prices also skyrocketed. The public's
enthusiasm merely grew as more details emerged: the US government had little
awareness of such swapping deals until later, even less power to control such
arrangements, and, to top it all off, the Soviet purchases had been backed by the
lavish US send out credits. The American citizen had lost $300 million as a
result of the overall situation, not including how much customers paid for
increased food expenses.
Belousov,
the socialist, had effectively duped the greedy entrepreneurs. Did he, or
didn't he? Using their widespread data firm, the item merchants placed large
wagers on growing food costs. Cargill, for example, "made millions
accessible through speculative wagers." Despite losing $661,000 on the
Belousov deal, the corporation "reported an overall profit of $107.8
million in its 1972-73 fiscal year, up nearly 107 percent from the previous
year."
The
experience was instructive: enormous arrangements that may affect the pricing
of critical products, like food, were being directed by obscure groups, and
even the strong United States government could do nothing about it. The United
States Department of Agriculture and the International Energy Agency began
disseminating customary market interest gauges for global business sectors, and
these evaluations are critical for every market participant today. In any case,
the little world of ware trading stood out. That thought would emerge,
particularly during the next 10 years, because of the activities of one person:
Marc Rich.
Born to a
Jewish family in Belgium circa 1934, Marcell David Reich, like many other
dealers in Lugwig Jesselson's organization, Phillip Brothers, fled Europe as
the Nazis began their march to mainland rule. He began working at Phillip
Brothers' sorting department when he was nineteen years old. He was noticed for
his consistent effort ethic: he was "consistently arriving up first in the
first part of the day, greeting different youths with a snarky 'good evening'
when they walked in at 8:30 a.m." Rich's career got off after he correctly
predicted in 1954 that the cost of mercury would rise due to because mercury
was being used as a critical ingredient in batteries, particularly in military
equipment. He evolved into a daring newcomer.
A
globetrotter, traveling to Cuba to haggle with the then-newly formed Castro
government; traveling to India, the Netherlands, and South Africa to get more
arrangements; and, by 1964, was elevated to be the organization's office chief
in Madrid.
However, it
wasn't until 1970 that he began along the path that would lead to his
specialty: the oil trading company. According to Rich's biographer, Daniel
Ammann, the oligopoly of the [then-major international oil corporations] Seven
Sisters was breaking down. The globe now needed another method of transporting
oil from the producing countries to the consuming countries, so that is exactly
what I accomplished. I merely assumed that transferring oil despite the Seven
Sisters should be possible.
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