Wealth Swapping

Chinese state sponsored Chinalco Corporation is in a three-way dance with international mining giant Rio Tinto and the democratic people of Australia, for ownership of vast chunks of Australia's rich mining resources. This battle, and countless others like it being played out around the globe, represents not just a story of debt, proxies, and profits, but a clash of western free markets and eastern state socialism. The Chinalco-Rio Tinto affair is symbolic of the cyclical passage of historic, strategic resources; from common hands, to those of free market western democracies, to international corporate oligarchies, and then finally, to those of authoritarian state collectivism... and common hands again.

The Magical Commodity Tour

In the beginning, nomadic tribes followed their food, clothing and shelter, until agrarian societies built permanent settlements in strategic locations, where all three could be relied upon in one place. Access to water irrigated crops and as trade advanced, moved people and goods cheaper and faster than walking used to. Trade routes were established along the most logical corridors, and settlements grew to service these. As basic minerals and ores grew in importance, locking down and defending these precious resources demanded further settlement and transportation. In this way, water, rich soil, and precious metals became the most valued and strategic of resources, and empires rose and fell around them.

The great cities of the world are all located at purposely chosen strategic locations to maximize (what was then) their best economic interests. Nations built out from these civil anchors; borders defined by points where people felt economic resources were worth the price of blood and treasure to defend. Great national wealth, power, and prestige accrued to those with the best control of resource and transport over time.

This remained true for the most part, until the dawn of our own era by which time nationalism, patriotism, and culture set national boundaries in place. Great, inviolate nations grew from the most basic and ancient features of geography. However, once industrialization had reached a fever pitch, and progress became measured by material accumulation and manufactured wealth, new resources once marginalized or ignored moved to the fore. Ores for bronze and then steel, coal and then oil for energy, and exotic minerals demanded by advancing technology all became as necessary for dominant civilizations as water, wheat, and soil once were.

Humankind had begun to rely on finite resources for its health, wealth, and longevity instead of the renewable variety that had carried them for 10,000 years. As their importance grew, natural, earth borne "commodities" of all kinds rose in both economic and geopolitical value. Having locked themselves into an irregular and improbable set of nations that coloured school globes like gaudy laundry, the nasty inconvenience of resources random distribution presented complex problems to western progress.

The spice trade rose as western prosperity demanded the luxury of exotic imports located oceans away in far off islands in India and Asia. Tens of thousands lost their lives in epic struggles to secure modern resources that were looted from sovereign peoples, and transported great distances at even greater expense and risk. Banking and insurance were both invented in part to finance this rape.

Untold millions in the new world died with western pursuit of gold and silver. Entire civilizations were destroyed and peoples exterminated to fill cargo holds of Spanish treasure fleets. In Africa, the people themselves became the commodity, a raw material used to grow and then export tobacco and sugar cane from the West Indies and America. Millions more died in the whole sale appropriation of not just sovereign lands, but human beings as well.

At Stalingrad, German armies desperate for oil from the Caucuses ran head long into Soviet Armies desperate to stop them. Literally millions died, an entire German army was obliterated, and a huge modern city laid waste in histories most gruesome battle.

In our own time China, her giant state owned company Chinalco, and its battle for Australian mining megalith Rio Tinto, are the contemporary result of this messy mismatch of nationhood, governance, and voracious consumption of depleting natural resources, all located frustratingly scattered across a privately held earth.

The Chinalco Challenge

The Aluminum Corporation of China - Chinalco - is one of those semi corporate goliaths China developed to accommodate the western corporate autocracy that dominates the earth in 2009. China, gifted as it was with a homogenous and long-standing cultural cohesion that can trace its roots back as far as thirty centuries, emerged into the western industrial world barren of the commodities necessary to fuel its incredible potential. Chinalco was built and designed to secure for China the raw materials it desperately needed to pull itself into the contemporary age - and beyond.

Rio Tinto, on the other hand, is a monstrous western resource extraction conglomerate that extends the free market disease which seeks to contain and control...free markets. Operating as a nation unto itself, Rio Tinto has become the third largest mining affair in history, claiming private imperialism over the earth's shared resources in ways the great imperial explorers of history once used to. Held in check only by democracies desperate to retain some form of old world sovereignty over the land, Rio Tinto and Chinalco are working in consort against other voracious private, western corporations. The prize being for China lawful access to foreign commodities, and guaranteed profits through supply controls for Rio Tinto shareholders.

Entire libraries may someday be devoted to the exponential collapse of the western capitalist dream; however, few books will be as important as those that detail the collision of national economics symbolized by the Chinalco-Rio deal of 2009. In the inevitable showdown between state controlled, "socialist" enterprise and the gaudy excess of unbridled free market corporations, the ensuing loss of control over sovereign western resources will do much to define the coming epoch.

Over the last sixty years, and especially at the zenith of American power and capitalism during the Bush administration, regulation and control over privately held corporations were swept away in an effort to keep the good times rolling. Rio Tinto was a beneficiary of this trend, building and consolidating through access to massive global wealth provided by American hedge funds, leveraging its considerable resource assets to acquire the financial weapons of mass construction it needed to do battle with other corporate nations.

When Rio captured the Aluminum Corporation of Canada (Alcan) two years ago, it did so at the top of markets that were screaming unsustainably upwards. When the collapse came while the ink had not dried on the deal, Rio found itself the proud owner of wide swaths of the planet suddenly worth little, and a debt load that had exploded by twenty times. Rio had lost the battle of the bulge. While regular folks fretted over details like food, clothing, and shelter, a million miles above them corporate warfare raged across the earth. Rival conglomerate BHP Billington attacked Rio in a hostile takeover bid worth 66 billion dollars, and to protect itself Rio looked for allies willing to share their wealth in defence of its corporate sovereignty.

This failure of western free markets and the collapse of earthly commodity values provided an opportunity a historically patient Chinese culture may have been waiting for. Marshalling the financial muscle only a coordinated, top down socialist nation can, the Chinese state began an aggressive attack on the shareholdings of western corporation states. Using the full heft of a 1.6 trillion dollar account balance surplus earned from the west, and direct control over its quasi-corporate armies, China set Chinalco off to bail out Rio to the maximum extent allowed by Australian law. Chinalco-Rio was a beachhead similar to dozens of others China was simultaneously undertaking around the globe. China was exploiting a fatal flaw in western corporatism, gaining control of national sovereign resources across the planet via the open back door provided by the wholesale leveraging of western, private property.

Everything Has a Price

It has not gone unspoken by the democratic representatives of the Australian people that should the deal be completed, Australians will lose ownership and control of much of the natural resources they thought were theirs. Australia is a wealthy and prosperous nation, and asked directly, no majority of Australians would ever consent to the surrender of great chunks of its earth for any price or reason. But Australia is a full member of the American free market system, and long ago passed control of its wealth from the hands of the people to those of international business. For reasons future generations will find puzzling, Australians - and the entire western world - embraced corporatization as the natural order of progress, and the end of history itself. Common property became private, private property became corporate, and corporate property is available always to the highest bidder.

Private property in the hands of corporate nations carries with it a Trojan horse that allows the oxymoron of authoritarian state control. Free market American consumption depends on the manufacturing prowess of China, to which it ships its wealth. Chinese manufacturing depends on state sponsored juggernauts like Chinalco to harness the earth's commodities in historic proportions, to feed domestic manufacturing - and the plastic American dream. Chinalco is designed to take advantage of the corporate legal and financial architecture built by the west to enclose the common resources of the planet, create scarcity, and maximize profits for corporate nation states.

American hedge funds provided the capital to allow corporations to remove natural resources from the hands of democratic citizens, and pass them to international corporate oligarchs. Automated for nothing but profit, these global companies make those once shared, national resources available to the highest bidder through free markets. With the collapse of those markets, and the meltdown in value of the underlying commodity assets, Corporations like Rio Tinto will voluntarily pass final ownership of critical strategic resources to antithetical socialist state regimes like China.

And once in China's hands, commodities will leave the realm of free market economics, and find far greater value in future as geopolitical reserves of power and influence. Held collectively by the state for the shared benefit of its people, China has completed a cycle by robbing the greedy rich west of its once shared resource security, and passing it to the common people of its own, sudden culture.

Aetius Romulous

Historian, Economist, Accountant, Writer, and blood sucking CEO.

Born at the wrong end of the Baby Boom Generation - too late to enjoy the ride, too early to have missed it, and stuck in the middle with the mess.

Aetius writes and blogs from his frozen perch atop the earth in Canada, spending the useful capital of a life not finished making sandwiches and fomenting revolution.

It's a living.

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