[NYTr] 3d World Finance: Private Equity, Pecuniary Logic & Enterprise Restructuring

[All the News That Doesn't Fit]

sent by Tiaz Tayoub - Aug 3, 2007

TWN Info Service on Finance and Development - Aug 3, 2007
http://www.twnside.org.sg

Third World Network

PRIVATE EQUITY, PECUNIARY LOGIC AND ENTERPRISE RESTRUCTURING

Long ignored outside the financial sector, private equity is now
attracting widespread attention. This has been fanned by recent news
items concerning some particularly large take-overs by private equity
firms and the enormous income and capital gains which can accrue to
their managers and principal shareholders, and which enable lifestyles
recalling the earlier gilded age of the late 19th-century United States.

Political interest has focused primarily on the loss of jobs in
enterprise restructuring following take-overs by private equity firms,
and on low rates of taxation of the remuneration of private equity
managers and investors. Broader issues are also coming under scrutiny.

The ambitions of private equity firms are increasingly directed at new
targets. These include sectors like banking and pharmaceuticals where
the value of firms is large and performance is not necessarily crying
out for restructuring. Moreover, as part of the globalization of
finance, private equity firms are raising their profile in Asia, a
development likely to stimulate the growth of an indigenous private
equity sector.

The following is an analysis of private equity firms and their role in
the international financial architecture by Andrew Cornford, former
UNCTAD senior economist and current Research Fellow at the Financial
Markets Centre in Geneva. It was published in the SUNS #6304, 31 July
2007 and SUNS #6305, 2 August 2007.

With best wishes

Martin Khor, TWN

                            ***

Private Equity, Pecuniary Logic and Enterprise Restructuring 

By Andrew Cornford

Long ignored outside the financial sector, private equity is now
attracting widespread attention. This has been fanned by recent news
items concerning some particularly large take-overs by private equity
firms and the enormous income and capital gains which can accrue to
their managers and principal shareholders, and which enable lifestyles
recalling the earlier gilded age of the late nineteenth-century United
States.

Political interest has focused primarily on the loss of jobs in
enterprise restructuring following take-overs by private equity firms,
and on low rates of taxation of the remuneration of private equity
managers and investors. Broader issues are also coming under scrutiny.

The International Organisation of Securities Commissions (IOSCO), a
body which fosters cooperation between different countries?

securities markets and regulators, has established a task force to
examine the implications of the increased role of private equity firms
in global mergers and acquisitions (M&A), where their share of activity
is now estimated to be as much as 20%.

The ambitions of private equity firms are increasingly directed at new
targets. These include sectors like banking and pharmaceuticals where
the value of firms is large and performance is not necessarily crying
out for restructuring. Moreover, as part of the globalization of
finance, private equity firms are raising their profile in Asia, a
development likely to stimulate the growth of an indigenous private
equity sector.

Character and History

Private equity is usually understood to cover the provision of medium-
and long-term financing to firms not quoted on public stock markets as
well as the financing of the equity tranches in buyouts of public
companies. Financing in private equity operations is in the form of
both equity and debt. The equity is typically provided by private
equity funds which raise their capital from funds of funds, pension and
investment funds, endowments and rich individuals.

The initial debt is provided by banks but typically, a substantial
share of this debt is subsequently distributed to other financial
institutions.

As a financing vehicle, private equity is most important in the United
States and the United Kingdom. In both countries, private equity shares
common historical origins with venture capital financing.

In the United States, what is now called private equity financing
developed features in the 1980s distinguishing it from venture capital.

This followed some propitious legislative initiatives such as lower
taxes on capital gains, relaxation of the Employee Retirement Income
Security Act (ERISA) rules which had previously prevented investment of
savings under this heading in high-risk ventures, and reduction in the
reporting requirements for firms conducting private equity management.

In the United Kingdom, for the first 30 years after 1945, the most
important source of venture capital was the Industrial and Commercial
Finance Corporation (ICFC) ? later renamed 3i ? established by the
government in response to the finding of the 1931 Macmillan Committee
(of which Keynes was a member) that there was a financing gap for small
and medium enterprises (SMEs).

Development of the private equity sector as it now exists followed the
relaxation in the 1981 Companies Act of restrictions on operations
which are typically part of company buy-outs, and the creation in 1982
of the Unlisted Securities Market which had less rigorous criteria than
the London Stock Exchange for admission and thus facilitated listings
for younger companies.

Since the 1980s, private equity financing has become increasingly
identified with leveraged buyout (LBO) financing. By contrast, venture
capital financing refers to investments, mainly in the form of equity,
made in the start-up or early stages of a firm?s existence.

LBO firms engage in more complex and often much larger transactions
than venture capitalists, and their operations are less dependent on
equity financing.

As in the United Kingdom during the early period after World War II,
the function of providing finance for start-ups and enterprise
restructuring has historically not been limited to venture capital and
private equity on the contemporary model.

In the United States and the United Kingdom, these two vehicles now
complement the provision of ongoing lending to firms by commercial
banks and specialized financing institutions such as finance houses,
and of longer-term financing in the form of debt securities and equity
(as well as some forms of direct lending) by investment banks.

By contrast, elsewhere, long-term financing, including that for
start-ups and restructuring, has often been most importantly available
from universal banks, which, as their name suggests, provide a more
complete range of financial services than commercial banks, and from
development and industrial banks, whose lending is explicitly linked to
agricultural, rural or industrial development.

Institutions, Structures and Fees

The institutions which raise money for private equity investment and
manage the funds come in a number of sizes and organisational forms. At
one end of the spectrum are conglomerate firms with structures
consisting of partnerships, corporate entities, or both.

These include many of the earlier and best known firms such as Kohlberg
Kravis & Roberts (KKR) (with funds of US$16.6 billion), Blackstone
(US$15.6 billion), and Carlyle Partners (US$15 billion).

These conglomerate firms have been responsible for the industry?s
largest transactions. For a long time first place in this list belonged
to the buy-out by KKR in 1988 of the food and tobacco company, RJR
Nabisco, for US$30.2 billion. But in 2007, this deal has been exceeded
by the acquisition of the Texas Utility, TXU, for US$44.3 billion by
KKR and the Texas Pacific Group, of Equity Office Properties for
US$37.7 billion by Blackstone, and of HCA hospitals for US$32.2 billion
by KKR and Bain Capital.

In the conglomerate firms are to be found not only the industry?s best
known partnersmanagers but also other figures with high public
profiles. Carlyle is particularly notable on this front. Founded in
1987 and initially distinguishing itself with investments in ailing
airlines and companies hit by reductions in the Pentagon budget,
Carlyle has included amongst its senior managers, advisers and partners
James Baker, former United States Secretary of State, Frank Carlucci,
former United States Secretary of Defence, former US President George
Bush senior, former British Prime Minister John Major, and Lou
Gerstner, former chairman of IBM.

Elsewhere in the spectrum of private equity firms there are wholly or
partly owned subsidiaries of banks, offshoots of institutional
investors such as insurance companies and asset managers, corporations
with investments in start-up ventures in their own industries, and
syndicates of wealthy individuals.

Private equity firms, which usually have small staffs, rely on outside
advisers and asset managers for assistance in identifying potential
investments and for executing transactions. Under this heading, they
generate substantial revenues for investment banks (8% of their global
revenues in 2006) and for the corporate finance groups of accounting
firms.

The structures chosen for private equity groups (funds, managers and
investors) vary. They depend on the benefits and burdens of different
legal and tax regimes, and include a number of onshore and offshore
partnerships, investment trusts, and corporate vehicles.

At the core of a structure commonly chosen for larger private equity
firms and funds in the United Kingdom is a set of partnerships. One of
these is a General Partner, responsible for management, with unlimited
liability. The General Partner may be independent or, alternatively,
linked to another bank or institutional investor.

The partnerships with limited liability take no part in management,
their role being restricted to investment. Investors in a fund may
number more than 100 but are still few in comparison with those in a
traditional investment fund. A limited partnership is usually also set
up as a ?carry? vehicle which receives remuneration in the form
of ?carry interest? for the executives.

The fee structure in private equity includes a number of different
components. A priority share of profits of 1-2% of capital is paid to
the General Partner during the early years of investments, and a lower
percentage subsequently. Transaction fees may be paid to managers for
the identification and completion of transactions.

?Carried interest? is a performance fee paid to managers.

This is typically not paid until capital has been returned to, and a
hurdle rate of return has been achieved for, investors through the
limited partnerships. ?Carried interest? is typically about 20% of
capital gains but may be higher (as much as 40%) once the other
obligations have been met. This may represent a very high rate of
return on a manager?s investment which is often only a small percentage
of the firm?s total investment (and of which a significant share may
have been borrowed).

Taxation

Devices which enable private equity structures to pay tax at low rates
have recently attracted special scrutiny in the United States and the
United Kingdom. These devices take full advantage of different private
equity structures, the possibilities of reducing taxes by shifting the
recording of taxable income and capital gains as between different
points of time and different parts of the firm, and the use of offshore
locations.

In the United States Congress, special attention has focused on the
treatment of the earnings of private equity managers as capital gains
rather than income which is subject to a higher rate of tax.

To its critics this practice is anomalous for remuneration which should
be classified as performance fees. At the time of writing the practice
is the target of bills introduced in the Senate by the Democratic
Senator Max Baucus and the Republican Senator Charles Grassley, and in
the House of Representatives by a number of Democrats.

The proposal of the latter would redefine much of the partnership
income currently taxed at the rate applying to long-term capital gains
as income accruing to a newly defined class, ?investment services
partnership (ISP) interests?. This would be treated as ordinary income
for tax purposes.

In the United Kingdom, the fiscal justice of current rules for private
equity was recently queried by Nicholas Ferguson, a leading figure of
the sector, who has pointed out that a cleaning lady or low-paid worker
could pay tax at a higher rate than a private equity executive. The
main focus of criticism here is the taxation of ?carried interest? as
capital gains on the basis of a 2003 memorandum of understanding
between the industry and the tax authorities. The capital gains can
then benefit from tax rules designed to encourage business start-ups.

These rules take the form of ?taper relief? which limits to 25% the
capital gains chargeable to tax on certain assets held for at least two
years, thus lowering the effective rate of tax from 40% to 10%.

Other tax rules favouring private equity apply to exchange-traded
Venture Capital Trusts invested in private equity funds which provide
tax relief on the initial investment, dividends and capital gains.

Buyouts, Restructuring and Exiting

The stages of typical private equity operations start with the initial
buyout, which may entail taking an exchange-traded company completely
private, followed by the restructuring of its operations and balance
sheet. Eventual exiting by the private equity investors takes place
through sale of the restructured company or other options.

As part of the decision to purchase a target enterprise, the private
equity firm looks at the usual factors which influence investments such
as the macroeconomic, political, commercial, legal and regulatory
environments in which the enterprise operates, and its actual and
potential competitive position. The existing management team will be
scrutinized to see whether it should be partially or wholly replaced.

Special attention will be paid to financial conditions since the costs
of different forms of debt and equity capital as well as ongoing levels
of M&A activity determine the price at which the enterprise can be
acquired as well as the cost of financing the purchase and of
subsequent restructuring of the enterprise?s balance sheet. Low
interest rates in major financial markets have in this way contributed
to the recent boom in private equity deals. Tighter credit conditions
would lead to a contraction.

The target enterprise?s cash flow (typically measured as earnings
before interest, taxes, depreciation and amortization) will be
attributed a key role in the decision since it determines the
enterprise?s ability to service debt including additional debt incurred
as part of the restructuring of its balance sheet by the private equity
firm.

Debt structures in private equity deals have become increasingly
complex, reflecting the possibilities provided by instruments such as
non-amortising (?bullet?) debt to adjust or postpone payments
obligations. Higher levels of debt and complex debt structures make
possible higher leverage and thus higher returns to shareholders, i.e.
the managers and investors of the private equity group. Private equity
investors expect eventually to exit from their investments.

The period of their commitment varies but an important influence is the
time period, typically about ten years, of the funds involved.

The main options for exiting are an initial public offering (IPO, i.e.
flotation of the enterprise on the stock market), a trade sale (to
another corporation), or a secondary sale (to another private equity
group or financial institution). Alternatively, the option chosen may
be to retain the investment but after paying off or reorganizing the
debt on the firm?s balance sheet, or to break up the firm and sell some
or all of the component parts separately.

As for the initial purchase and financing decision, conditions in
financial markets will exercise an important influence on the terms of
exiting. A booming stock market will make flotation attractive, and low
interest rates will facilitate trade sales.

Financial Regulation and Risks

Regulation of private equity groups does not follow a uniform pattern.

Indeed, ?private equity? is unlikely to be defined as such in a
country?s regulatory regime. Within the group, activities and
constituent entities (fund management and the funds themselves) are
likely to be subject to regulation, though this will not necessarily be
as comprehensive or stringent as for traditional investment funds (as
illustrated by the exemption of the managers of private equity funds
from reporting requirements in the United States). Much of the
information available to regulators concerning subjects such as
leverage, group strategies, and investors in private equity is obtained
through supervision of creditors (banks) and of the pension funds which
invest in the sector.

As the share of industry in European countries controlled by private
equity groups has increased, so have demands for reducing the
opaqueness of their operations. These demands concern each of the major
parties, namely, the firms in private equity portfolios whose private
status exempts them from reporting requirements applying to
exchange-traded institutions, the Limited Partnership funds, and the
General Partners or investment managers.

Regulatory change would be likely to require concerted action by
European governments to avoid regime shopping by private equity groups.

However, a proposal for voluntary acceptance of greater transparency by
private equity groups has recently been made in a report by the United
Kingdom banker, Sir David Walker.

Private Equity, Corporate Governance and Emerging Markets

The prevailing view amongst European regulators over private equity is
that banks are not currently threatened by the levels of leverage, i.e.
of debt in relation to equity financing, of the private equity groups
to which they are exposed as creditors. This view is based not only on
the relevant numbers but also on features of the private equity sector
such as low levels of leverage of the Limited Partnership funds.

Regulators are nonetheless following closely the effects which
competition in the sector is exerting on leverage as part of the search
for higher returns[i].

The reigning sanguine view amongst regulators is tempered by unease due
to uncertainty about the ultimate ownership of economic risk in debt
markets and knock-on effects of problems in parts of the financial
markets.

This unease has been expressed by Jean-Claude Trichet, President of the
European Central Bank, as follows: ?The state of the fundamentals in
the credit markets, credit risk transfer (CRT) and unregulated
financial institutions can together be described as a
potential ?triangle of vulnerability? in that a shock at any corner of
this triangle could have implications for the other two. For instance,
a significant turn in the credit cycle could mean that credit
protection-sellers, such as hedge funds, could become unable to make
due payments to banks. Similarly, if widespread problems were to emerge
at hedge funds or private equity funds which are active in CRT markets,
this could even spark a downturn in the credit cycle?.[ii] 

Benefits of Private Equity

The benefits attributed by its apologists to private equity consist
primarily of restructuring of firms with favourable long-term effects
on employment, and of improved returns to shareholders. Taking firms
private through buyouts, it is maintained, facilitates the achievement
of these objectives since it enables management to focus on the longer
term free of the pressures to meet the short-term financial objectives
of shareholders which characterise publicly quoted companies. By
contrast, critics point to the dependence of improved returns at
companies in private equity portfolios on financial engineering in the
form of higher levels of leverage and on other cost cutting which
ignores the interests of stakeholders other than shareholders such as
companies? employees.

As with M&A activity more generally, the actual record is mixed.

Concerning the role of private equity between the 1980s and the
mid-1990s in the United Kingdom, the author of one of the few
systematic treatises on private equity has expressed the view that ?it
is no exaggeration to say that the private equity revolution has played
a key role in the dismantling and re-assembling of Britain?s industrial
base in the course of the 1980s and in the creation of the UK?s new
service-orientated economy?.[iii]

The success stories of this process involved businesses in several
different activities including food, engineering, newspapers, garden
equipment, railway carriages, and public houses. In addition to cash
flow capable of supporting additional debt, characteristics of firms
conducive to the eventual success of private equity investment included
a diversified customer base, an actually or potentially strong market
position, and an easily understood product.

Less successful cases and failures included retailing and consumer
products.

In the United States, KKR sold off over a number of years its interest
in RJR Nabisco, the target of its celebrated 1988 buyout, at a rate of
return widely considered not to have matched the risks involved.
Studies of the impact of the country?s LBO (leveraged buyout) financing
on employment, research and development, and capital spending indicate
an uneven record. The sometimes precarious position of firms involved
in LBOs was highlighted by the sequel of a 1989 study by KKR itself,
which included 13 firms from its own portfolio in its sample, and which
unsurprisingly highlighted LBOs?

benefits. Shortly after the release of the study, some of these firms
defaulted on their LBO debt.

Conflicts of Interest and Market Abuse

Private equity provides many opportunities for conflicts of interest.

Some of these are similar to those found in other forms of fund
management such as potential conflicts between the manager?s (General
Partner?s) responsibilities to itself (owners and staff) and to
investors in the funds managed by the group. Others are more specific
to private equity. These include conflicts between the interests of
General Partners and investors in the group, on the one hand, and of
firms in their portfolios, on the other. The multiple roles of banks
vis-`-vis private equity, as creditors and as advisers to different
parties to deals, are also a potential source of conflicts of interest.

In the United States, there has been special attention to conflicts of
interest in management buyouts (MBOs). Managers are expected to
maximize the value of shareholders? investment in their company but
this role may conflict with their own interests when they make an offer
to the same shareholders to buy the company.

During the LBO boom of the 1980s in the United States, there was
extensive recourse to junk bonds (low-rated debt securities) as part of
the use of increased leverage during company restructurings.

Here, the potential conflict of interest was between the managers
responsible for the LBO and the holders of the junk bonds, on the one
hand, and holders of the pre-LBO bonds whose value was likely to
decrease in response to the greater risk in the company?s balance sheet
due to post-LBO restructuring, on the other.

The influence in practice of several of these potential conflicts of
interest is difficult to gauge. But the dangers are considered
sufficiently important by the United Kingdom Financial Services
Authority (FSA) to be the subject of frequent communications with banks
and private equity groups.

The flows of price-sensitive information within private equity groups,
between different groups, and between groups and banks create the
potential for market abuse in the form of insider transactions. Such
flows of price-sensitive information are not peculiar to participants
in private equity operations. Similar concerns have frequently been
raised in connection with hedge funds.

About a quarter of recent price-sensitive announcements by firms are
estimated by the FSA to have been preceded by movements in share prices
suggesting insider trading, and a similar survey in New York (conducted
by the New York Times) found a figure of about 40%. The FSA has rated
favourably the controls on leaks of price-sensitive information in the
larger private equity firms but clearly remains concerned about the
scale of the continuing potential for such leaks, given the industry?s
structure.

Primacy for Pecuniary Logic

Attempts to weigh the catalyst role of private equity in industrial
restructuring against the associated financial engineering and cost
cutting, which are often of more dubious value and driven by stark
pursuit of the profit motive, lead naturally to more general questions.

Deserving special attention here are the assumptions about corporate
governance associated with the private-equity model and the
appropriateness of private equity as a financing vehicle in countries
at different levels of development.

In a recent editorial, the Financial Times opined that the
globalization of finance, of which private equity has become an
important part, has the effect of establishing ?the globalization of
maximisation of shareholder value? as the pre-eminent standard of
corporate governance.

However, as the Financial Times also noted, this process is not without
dangers to the financial sector itself, since its continuation will
depend on its compatibility with perceptions of fair treatment on the
part of citizens in democratic nation states. This compatibility in
turn is likely to require a framework of global regulation which
includes cooperation among national fiscal authorities.[iv]

The main set of internationally agreed standards for corporate
governance is the OECD Principles of Corporate Governance. Originally
endorsed in 1999, the Principles are included in 12 financial standards
identified as essential to the soundness and stability of financial
systems and as having a key role in measures to strengthen the
so-called international financial architecture.

Observance of these standards is now a subject covered by the Financial
Sector Appraisal Programme (FSAP) of the IMF and the World Bank.

While devoting considerable space to shareholders? rights, the OECD
Principles also include as one of six basic standards the recognition,
and protection of the exercise, of the rights of an enterprise?s
other ?stakeholders?, a somewhat imprecise term which covers employees
and suppliers as well as investors and creditors. In the preamble, the
Principles state that there is no single model of good corporate
governance, and no attempt is made to weight the relative importance of
the interests of shareholders and other stakeholders. But the
Principles could not be interpreted as attributing an importance to the
interests of shareholders which overrides other considerations.

Emerging Markets and Other Developing Countries

Although the bulk of private equity investment is still in industrial
countries, private equity groups are showing increasing interest in
opportunities in the developing world. Unsurprisingly, the main focus
of attention is Asia, where emerging markets accounted for a
significant proportion of buyouts by private equity groups outside
Japan which amounted to US$33 billion in 2006. There has also been
private equity investment on a smaller scale in Latin America and even
in Africa.

In developing regions, the deals are typically smaller than in
industrialized countries, investments in African countries often
amounting to just a few million US dollars. Moreover, the distinction
between private equity, on the one hand, and venture capital and
finance for SMEs more generally, on the other, is less clear-cut.

An important share of investments in the private-equity funds in
developing countries outside Asia is accounted for by public- sector
development finance organizations such as the World Bank.

Private equity transactions in developing countries must be compatible
not only with local rules applying to different kinds of financing and
financial institutions but also with the regimes for FDI and other
private equity investment. These regimes frequently prescribe the
permissible proportions of foreign ownership of domestic companies to
percentages well short of full ownership and thus prevent the 100%
buyouts characteristic of much private equity investment in major
industrial countries.

The scope for private equity investment is also likely to be reduced in
Asian countries by family ownership of major firms. The level of
development of local financial markets can be expected to weigh heavily
in a private equity group?s decision concerning an investment in an
emerging market since it will have a major influence on the terms of
eventual exiting in the form of the price realized through an IPO or
trade sale.

Controls over and careful vetting of inflows of private equity
investment are appropriate in developing countries. They reduce the
scope for exploitation by private equity groups of the underpricing of
the stock of companies due to the underdeveloped state of local
financial markets as well as of other anomalies in these markets due to
weaknesses in supervisory or accounting regimes. Moreover, they make
possible checking of private equity investments for their consistency
with national industrial or development policy.

The conflicts to which private equity investment can give rise are
exemplified by the recent controversy in South Korea over the
investment of Lone Star, a United States private equity firm, in the
Korea Exchange Bank (KEB). Here, the issues were whether Lone Star had
manipulated KEB?s financial data in order to reduce the price of its
investment, and whether Lone Star was a ?financial?

firm. If it did not qualify as a ?financial firm?, Lone Star did not
have the right to a stake exceeding four percent of a Korean financial
firm.

There are several indications of Asian countries? interest in the
development of their own indigenous private equity sectors. South Korea
already has such a sector. China has recently made changes to its legal
framework expected to boost development of local private equity groups.

India, recipient of the largest inflow of private equity investment
amongst developing Asian economies so far in 2007, may well follow suit.

Indigenous private equity groups from these countries are unlikely to
limit their ambitions to their local markets.

Future cross-border investment of private equity groups of both
industrial and emerging-market countries is likely to take place in an
environment of tighter control of both FDI and foreign portfolio equity
investment. Until recently, pressure for changes in foreign investment
regimes came mostly from industrial countries and targeted restrictions
in emerging markets and other developing countries.

This now seems to be changing, with new restrictions under
consideration in industrial countries. A source of concern in these
countries is the huge resources (as much as US$2,500 billion)
potentially at the disposal of sovereign wealth funds controlled by the
state in China, Russia and the Middle East. Large investments by such
funds, it is argued, could lead to distortions in the economic
behaviour of recipient firms in industrial countries and to forms of
dependence capable of exerting unwanted pressures on national policies.

In the United States, takeovers by foreign companies will also face
tighter scrutiny owing to new rules designed to avoid the transfer of
sensitive technologies and to maintain national control over the
management of infrastructure such as ports.

The more restrictive regimes for foreign investment likely to issue
from the changed climate are not directed at private equity as such.

Nevertheless, more restrictive regimes in industrial countries are not
likely to be accompanied by substantial additional liberalization of
features of the regimes in emerging markets which currently limit the
growth of investment by foreign private equity groups.

Eventual access to markets in industrial countries for private equity
groups from emerging markets may become more difficult with the result
that the cross-border ambitions of these groups may focus to a greater
extent on opportunities in other developing countries.

End Notes

[i] European Central Bank (2007), ?Large Banks and Private
Equity-Sponsored Leveraged Buyouts in the EU??, April 2007; Financial
Services Authority (2006), ?Private Equity: A Discussion Of Risk And
Regulatory Engagement?, Discussion Paper 06/6, November 2006, chs 3 and
4.

[ii] Intervention by Jean-Claude Trichet at the International Monetary
Conference Central Bankers Panel.

Frankfurt am Main, 5 June 2007.

[iii] Peter Temple (1999), Private Equity Examining the New
Conglomerates of European Business, London: John Wiley, p. 8.

[iv] Financial Times, ?Why Finance Will Not Be Unfettered?, Financial
Times, 25 June 2007.

[Andrew Cornford is currently a Research Fellow at the Financial
Markets Centre in Geneva. He was previously a senior economist with the
United Nations Conference on Trade and Development (UNCTAD). This
article was specially written for the South-North Development Monitor
(SUNS) and the Third World Network.]