Tuesday, December 30, 2003

(Update: Ireland was interviewed about this story on Democracy Now)

Here's a story to watch:

The Nation (Doug Ireland) is the first U.S. publication to follow up on Le Figaro's explosive revelations that Halliburton may be charged with bribery for activities in Nigeria that happened on Cheney's watch.

Halliburton self-reported this case to the SEC back in May, as required under the Foreign Corrupt Practices Act. It appears they may have tried to make a preemptive strike against any inquiries into Cheney's role:

"The payments were made in 2001 and 2002, Halliburton spokeswoman Zelma Branch told AFP's business ethics news service, AFX Global Ethics Monitor." ("Halliburton admits it paid Nigerian bribe," AFP, 5/9/03).

I.e. Halliburton claimed the bribes occurred AFTER Cheney left.

But that's not what the French prosecutor is saying. He's saying the scam extends back to the mid-1990s.

Moreover, the company's original story was that the bribes amounted to just $2.4 million (according to Ireland, Judge van Ruymbeke believes the secret "retrocommissions" may amount to as much as $180 million in bribes).

Halliburton also said the bribes were strictly the work of local employees (AFP: " "Based on the findings of the investigation we have terminated several employees," Halliburton said in the filing, adding that none of its senior officers was involved in the bribe.")

But the scheme appears far too complicated to have escaped the notice of someone in Houston, involving multiple layers of offshore bank accounts and subsidiaries.

The story should remind skeptics of the first stories that came out about Enron and how a brilliant CFO set up hundreds of offshore Special Purpose Entities to hide billions in debt. Clearly Fastow was involved, and he looked like quite a genius until it was revealed that banks like Citi had cooked up the deals and pitched them to Fastow. (The banks pitched these deals to other countries before Enron.)

In Corporate Crime (considered the classic on the topic) Clinard and Yeager point out that "many decisions regarding foreign bribery are made at the highest corporate levels. In other cases, the internal organization of transnational corporations seems to facilitate the use of bribery at lower levels. Top executives delegate responsibilities yet fail to follow them up, thus creating a general atmosphere in which corruption can exist and even flourish ... In this milieu, executives may issue a directive to exhort exmployees to obey the law, yet they may fail to determine the general level of compliance within the firm. Instead of closely watching the day-to-day activities of subordinates, top executives simply use such output measures as sales, market shares, or profit margins to evaluate foreign operations, all of which tend to put pressure on lower levels of management to use bribery."

"We are cooperating with the SEC in its review of the matter," Halliburton told AFP back in May.

Of course they are, just as the SEC is cooperating with Halliburton.

SEC/DOJ have joint responsibility for enforcement of the FCPA, which was first passed in the wake of Watergate. Which is one reason it doesn't get enforced very aggressively -- there's a kind of bureaucratic hot potato in these cases, which also require far more resources to pursue than most of the insider trading and accounting fraud cases that have received attention in recent years.

Although Justice Department officials will neither confirm nor deny that they are investigating specific cases, they do confirm that they are aware of reports that some of the same U.S. companies under investigation for accounting fraud and other alleged violations stemming from their domestic operations may have also bribed foreign officials to obtain business.

Xerox, for example, admitted in a July, 2002 filing with the SEC that “[I]n India, we have learned of certain improper payments made over a period of years in connection with sales to government customers by employees of our majority–owned subsidiary in that country. … We estimate the amount of such payments in 2000, the year the activity was stopped, to be approximately $600 to $700 thousand.”

Business Week also that the SEC is investigating whether Tyco subsidiary Earth Tech Venezuela may have used illegal means to win a $200 million contract to build an industrial water-treatment complex in Venezuela. ("The Tax Games Tyco Played," Business Week, July 1, 2002, pp 40 –41.)

Other recent cases:
* Accenture (formerly Arthur Andersen consulting) announced on 7/15 that it had violated the law during its Middle East operations. The company wouldn’t identify which business unit in what country was involved, and said it was conducting its own investigation. (Paul McDougall, Information Week, 7/15).
* Cardinal Health and Syncor. Cardinal Health’s 10-Q forms (for the quarterly period ending December 31st 2002 pp. 13 & 24, and period ending March 31st 2003 pp. 14 & 28) made mention of Syncor’s improper payments to Taiwanese foreign customers, in a scheme to artificially inflating the price of Syncor shares. A consolidated complaint was expected to be filed by May 2003. Shareholders of voted to support a merger in December, 2002 after news of the alleged scandal reduced the overall price tag.
* AES. According to company 10-Q forms (for the quarterly period ending June 30th 2002 p. 19, for the quarterly period ending September 30th 2002 p. 21 and for the quarterly period ended March 31st 2003, p.16), the U.S. Department of Justice is conducting an investigation into allegations that persons and/or entities involved with the Bujagali hydroelectric power project which the Company is developing in Uganda, have made or have agreed to make certain improper payments in violation of the Foreign Corrupt Practices Act. The Company is conducting its own internal investigation and is cooperating with the Department of Justice in this investigation.
* Bribery allegations against Enron extend around the world. In India, the company was accused of bribing government officials to gain the contract to build the Dabhol power plant and then sell power back to the government at grossly exorbitant prices. In the UK, the CEO of Enron subsidiary Wessex Water was indicted for taking $1.5 million in bribes, as part of a $1.77 billion sale of the company. According to the Wall Street Journal, “claims of corruption in Enron power or water projects have arisen over the years in many countries, including Ghana, Colombia, Bolivia, Panama, Nigeria and the Dominican Republic.” (See “Enron Criminal Probe Focuses On Alleged Corruption Abroad,” By John R. Wilke, Wall Street Journal, August 5, 2002)

SEC is unlikely to pursue these cases (whether or not your ex-CEO is the Vice President) because it endangers our relations with other governments and the image of American businesses in general. Until recently, the FCPA allowed U.S. corporations to claim a superior standard in business ethics. Enron and the other scandals kind of ruined that rap.

The Department of Justice has successfully prosecuted only about 40 cases since the law was passed in 1977. Not only are such cases tough to win, but corporate lobbyists have successfully weakened the law since its passage.

In March, the Senate Finance Committee issued a report on a bribery case that involved an Enron power project in Guatemala. The case was discovered by the IRS and referred directly to both SEC and DOJ. But the SEC and DOJ "failed to act on the non-tax criminal referral."

Think SEC will get tougher with Halliburton?

Recall that the SEC has yet to even settle with Halliburton for the accounting fraud that occurred on Cheney's watch.

Remember back in July 2002, before Cheney changed the subject to war against Iraq, how the President and Vice President's involvement in scandals at Halliburton and Harken were beginning to grab headlines on a daily basis?.

Perhaps the Dems should pull out that video where Cheney brags about how he got "over and above" the normal kind of accounting advice from Arthur Andersen.


Monday, December 29, 2003

Michael Moore ends Dude, Where's My Country? with two chapters that suggest two things we can do to begin to reverse the rightward tilt in the U.S.

First ("How to Talk to Your Conservative Brother-in-Law"�), progressives need to learn how to communicate their ideas within a culture that is deeply conservative. Second, we need to do all we can to throw Bush out of office.

These are important goals, but they aren't enough.

Ask yourself this painful question: What happens if we don't get rid of Bush? A lot of people will conclude that all is lost, and throw their hands up in cynicism and despair. (I know a lot of people in DC who have said, "If Bush wins, I'm out of here," which is exactly what Karl Rove and Grover Norquist want to hear!).

I agree with the anyone-but-Bush strategy in 2004. Even if Dean turns out to be a centrist and corporatist (I'm more a skeptic of Clark than Moore, because he's kind of an autocrat in style, and less a peacemaker than is assumed, as Matt Taibbi explained in a recent Nation piece), the fact that he's a Democrat means that at least he'd be a speedbump against the accelerating rightwing hegemony that we face if the Republicans get all three branches of government (no serious observer of Congress has suggested the Dems can take back the House or Senate, esp. since there are only a dozen or so races that will be competitive and with at least 6 Democratic Senators planning to retire).

If we face 4 more years of Bush, it WILL be depressing. So I agree it's important to try to put someone in the White House whose natural instinct will automatically be to veto any bill that Tom DeLay et al. is drafting in coordination with the huge conservative coalition that meets every Wednesday morning at Grover Norquist's offices. (See Jan/Feb issue of Mother Jones).

That said, I'm afraid of the pitiful despair that many on the left will sink into if Bush wins. The crisis we face is systemic and not just the consequence of letting a neocon cabal take over our foreign policy and letting hypocritical libertarians run our domestic political economy into the ground by professing to want to cut taxes in order to cut back on government, ignoring the fact that the biggest part of government is the bloated Pentagon budget (has Grover Norquist ever lobbied against Star Wars?).

The point is, if we hang too much hope on the anyone-but-Bush strategy, without thinking about what we can do to build our movement from the base, we reveal the poverty of our imagination as political organizers.

Michael Moore got one thing right -- we are a predominantly liberal-leaning country. 80 percent of us believe in universal health care and racial diversity on college campuses. "I'm telling you, this country is so commie-pinko-weirdo, its conservative party can never get more than 25 percent of its recurring voters to join it, while the vast majority of its citizens define themselves as either members of the liberal party, or worse ... independent or anarchist (the latter just simply refusing ever to vote!)"

The problem, therefore, is not that we've become such a conservative country. The problem is that the conservatives are better organized and, maybe, better organizers. Which I guess is the subtext for his chapter on talking with your brother-in-law. But seriously, ask yourself, what's the best organizing campaign going on in the country right now? The living wage campaigns? The sweatshop movements? The anti-war movement? The global justice activists and black bloc anarchists who hop from summit to summit with little connection to everyday community concerns?

Is the left by definition doomed to be left out? Or can we ever imagine the most subversive thing being taking over the instruments of power? (What kind of message would show people how to use government as an instrument of their collective self-interest?)

The left has nothing like Norquist in Washington. Bob Borosage's Campaign for America's Future holds an annual conference. And the Fair Taxes for All Coalition is pretty big. But nowhere near as sophisticated.

Face it, it's not just the corporate cash that gives Grover an advantage (though clearly that helps!).

An old friend who is a better organizer than I once reminded me of Alinsky's old adage that "you can't take the Chinese army on in hand-to-hand combat." The point is that we're not going to beat the right wing by playing the same game it does, but better, or by following a gameplan that mirrors the Powell memo. We should undestand the Right's strategy, but we just won't ever have as many Richard Mellon Scaife's wiling to fund left-wing think tanks to compete with Heritage (although it was nice to see the Center for American Progress get up and running in 2003). We have to figure out how to involve more people with less money.

In addition to Michael Moore's book (and a rereading of Populist-era history, which I'll get to some day), I read two things recently that suggest how impoverished our imagination as organizers has become.

First, there's an interesting interview with Bernard Cassen of ATTAC in the January, 2003 New Left Review. Second is a collection of essays recently published by the New Press about Lula and the Workers Party in Brazil.

ATTAC is a leader in the European civil resistance to neoliberalism and corporate globalization. Formed in the late 1990s to fight the Multilateral Agreement on Investment, they were also instrumental in organizing the first World Social Forum, in partnership with South American (especially Brazilian activists).


"...representation from Asia, Africa and even the United States was so weak. I personally made no particular effort to ensure a strong American presence, or to hinder it. But when the American NGOs, who had been informed just like all others throughout the world, arrived only in small numbers, I was not worried. Globalization is essentially an American-led process, and it was important that anti-globalization not be American-led as well. So in my view it was strategically vital that the Forum started along a Franco-Brazilian, and then more broadly Euro-Latin American axis, which the Americans were welcome to join once the ground was well prepared. Otherwise there was a risk that American NGOs would immediately dominate the proceedings." And why would anyone have faith in our ability as organizers, given what's been going on in our country?

There is much to consider in the interview in terms of perspective on the struggle we face. If we frame the battle around Bush, we shouldn't forget that in the real war we may not be able to win through electoral politics until the optimal conditions are created, until people are educated to understand what is at stake (i.e. have a certain level of political and economic literacy), until our communities are organized enough to withstand the misinformation the corporate media spreads and compensate for the crushing economic burdens of federal cutbacks in social services (in the U.S. just as they have come via structural adjustment in the poorer countries). Until we are able to overcome the issues that divide us (e.g. race) in order to build true grassroots networks and institutions to whom our candidates are accountable.


"Our [ATTAC's] fundamental aim, as I have often said, is to decontaminate people's minds. Our heads have been stuffed with neoliberalism, its virus is in our brain cells, and we need to detoxify them. We have to be able to start thinking freely again, which means believing that something can be done. For the overwhelming conviction at present is that, politically speaking, nothing can be done. That is why our slogan, "Another world is possible," amounts to something like a cultural revolution. It means that we are not condemned to neoliberalism, we can envisage other ways of living and organizing society than those we have at present."

Cassem and ATTAC understand that local organizing projects must somehow be networked to a global movement:

"A global constellation is coming into being that is beginning to think along the same lines, to share its strategic concepts, to link common problems together, to forge the chains of a new solidarity. All this is now moving with astonishing speed. There has just been an Asian Social Forum in India, an area with which we hitherto had virtually no contact. In Brazil, the government's agenda is set by all the problems identified at Porto Alegre. What will Lula do about the enormous debt that is crushing the country? He has said, of course, that Brazil will be meticulous in meeting its obligations. But will it actually be able to? I believe that a moment of truth is arriving in Argentina and Brazil."

Perhaps the closest equivalent we have to ATTAC's decentralized structure in the U.S. is the Cities for Peace network established by IPS and the National Priorities Project. Yet networks like this need to build upon an understanding of the links between war and economic policies whose pain is felt most acutely at the local level. The activists and political networks that pass resolutions against the war are the same ones that have supported a living wage and, in some cases, backed the World Bank bonds boycott. The problem is that the institutional interstices that allow for continuity and stability are lacking, so that the linkages between domestic economic policies like tax cuts and pressures on state and local budgets and foreign policy issues are weak. Part of that has to do with our two-party system. No party is committed to building the institutional infrastructure to respond to this crisis or even push an agenda the frames our understanding around these questions.

The U.S. left could learn not just from the ATTAC movement in Europe, but also from the Brazilian Labor Party's (PT) formation of a National Mass Movements Secretariat and National Forum of Democratic and Popular Organizations, which both promote links between the different parts of the social movement. (Where's the U.S. equivalent? The Democrats seem too ossified and anti-ideological to care, while the Greens are still too green to provide significant enough leadership. It's a shame that Ralph Nader didn't enter electoral politics much earlier and that Jesse Jackson's 1986 campaign left nothing like this kind of cross-issue, multicultural organizing infrastructure behind, because by now something significant might exist along these lines.)

Getting rid of Bush would be a salutary step, and an important one that people around the world would thank us for. But the crisis goes much deeper and our response must be based on a bigger vision. The election of Dean would probably result in political gridlock. A lot of blame would be thrown at Dean and liberals. Any compromises would at best be a step back to Clinton-era neoliberal politics. Yes, it could stall the right-wing's plans for more wars and the privatization of social security. And that's good. But, we could be facing a backlash -- and could only be biding time before a disgruntled electorate decides that at least the Republicans know how to get things done in Washington. To prevent right-wing populism, we face a significant organizing challenge.

With a ballooning budget deficit caused by a skyrocketing military budget and deep tax cuts for the rich and corporations, state and local governments are beginning to face painful budget decisions that will only get worse as federal social programs are cut further. Bush et al. would love to use the right (including its religious ideological shock troops) to channel the coming popular discontent into a populist right-wing movement. The left needs to beat them to the organizing punch.

There's an interesting example at the end of Lula and the Workers Party in Brazil by Sue Branford and Bernardo Kucinski. In the final chapter, Hilary Wainwright describes Porto Alegre's struggle to create a bottom-up approach to city government (especially through the participatory budget process).

Despite the election of Lula and the Worker's Party in 2002, Lula has continued to follow neoliberal policies dictated by the IMF, largely to avoid an immediate crisis. As a result, the federal government has strengthened central control over public spending and has cut the funds going back to the cities whose citizens pay the taxes. Funds going to local authorities were reduced from 17 percent of the revenue received in 1990 to 14 percent in 1999, and have been cut deeper since.

Porto Alegre, which depends on federal funds for its budget (like most cities in Brazil) has struggled to improve health, education, infrastructure and job creation. But its ability to do so is tied to national policies.“ thus the city that hosted the first two annual World Social Forums is under siege, part of the front line of a global economic and political war that we Americans are also facing at the local level. National governments the world over, many of them under the thumb of the IMF, have willingly cut back their capacity to meet the needs of the poor by cutting public spending and lowering taxes on the rich. While in the U.S. we face an increased reliance on the culture of "volunteerism" and religious charity (the logical alignment of corporate and right-wing ideological interests), in cities like Porto Alegre, the conscientious involvement of people in local decision-making builds a base of resistance to neoliberal program. (The government of Porto Alegre's willingness to host the World Social Forum reflected an understanding of these dimensions to the struggle and the need to link between and among communities directly).

When the urban planning process involves a conscientious effort to involve people in the workings of their own government (each year there are hearings in the budget process that are used as a way to prioritize community needs), there is a reduction in bureaucratic inefficiency and municipal corruption. This is a sharp contrast to what happens when corporate charity comes along and takes over different aspects of the "social economy," from childcare to recycling to schools. In Reclaiming America, Randy Shaw describes how neighborhood organizations in the U.S. (patronized by municipal distribution of corporate largesse) have been hollowed out as a driving force for participatory decision--making, becoming less able to stand up for the rights and needs of their communities. Wainwright suggests the same thing can happen in many parts of Brazil: "They will become in effect minnows keeping the water clean for the big fish." Instead, the Porto Alegre participatory budgeting process allows for challenges to corporate perks, and has led to significant concessions for infrastructure improvements and social improvements (e.g. training programs for young employees) that are the complete reverse of the kind of corporate welfare (e.g. TIF districts, tax breaks, etc.) typically given to the Wal-Marts and corporate developers.

Here in the U.S. the process of corporate control over the political process is so advanced that it's difficult for us to even perceive all this, and what the possible alternatives are. Constructing the kind of participatory mechanisms that are on display in Porto Alegre will be a long and difficult challenge. We've essentially become so colonized politically and psychologically that the first step is to recognize that there is such an alternative.

Thus our challenge goes way beyond the 2004 election. We shouldn't set ourselves up for despair if he wins. And face it, should Dean win, we'll still have to pressure him hard to give him the impetus to make the right decisions. Either way, the real task is assembling some sort of infrastructure through which we can begin to revitalize our democratic ideals.

Thursday, December 25, 2003

During the holiday season our better selves strive to feel compassion for others.

Scott Peck offers us some related words of wisdom in People of the Lie: The Hope for Healing Human Evil:

"At one point I defined evil as the exercise of political power -- that is, the imposition of one's will upon others by overt or covert coercion -- in order to avoid ... spiritual growth."

"I have learned these past years that evil -- whether it be demonic or human -- is suprisingly obedient to authority. Why this is I do not know. But I know that it is so."

"The spirit I witnessed at each exorcism was clearly, utterly, and totally dedicated to opposing human life and growth. ... When asked in one exorcism why it was the Antichrist, it answered, "Because Christ taught people to love each other." When further questioned as to why human love was distasteful, it replied, "I want people to work in business so that there will be war." "

"In the Road Less Traveled I defined mental health as an ongoing process of dedication to reality at all costs."

(Sounds much like Gandhi's definition of Satyagraha, doesn't it?)

"I think it is necessary that we should hate Satan as well as fear it. Yet, as with evil people, I think it is ultimately more to be pitied."

"It is characteristic of those who are evil to judge others as evil. Unable to acknowledge their own imperfection, they must explain away tyheir flaws by blaming others."

"Remember Saint Augustine's advice to hate the sin but love the sinner."

Friday, December 19, 2003

Buzzflash has a good interview with Jack Huberman, Author of The Bush-Hater's Handbook: A Guide to the Most Appalling Presidency of the Past 100 Years

Monday, December 15, 2003

Remember: Saddam was our man

March 14, 2003, Friday


A Tyrant 40 Years in the Making

By Roger Morris ( Op-Ed ) 980 words
SEATTLE -- On the brink of war, both supporters and critics of United States policy on Iraq agree on the origins, at least, of the haunted relations that have brought us to this pass: America's dealings with Saddam Hussein, justifiable or not, began some two decades ago with its shadowy, expedient support of his regime in the Iraq-Iran war of the 1980's.

Both sides are mistaken. Washington's policy traces an even longer, more shrouded and fateful history. Forty years ago, the Central Intelligence Agency, under President John F. Kennedy, conducted its own regime change in Baghdad, carried out in collaboration with Saddam Hussein.

The Iraqi leader seen as a grave threat in 1963 was Abdel Karim Kassem, a general who five years earlier had deposed the Western-allied Iraqi monarchy. Washington's role in the coup went unreported at the time and has been little noted since. America's anti-Kassem intrigue has been widely substantiated, however, in disclosures by the Senate Committee on Intelligence and in the work of journalists and historians like David Wise, an authority on the C.I.A.

From 1958 to 1960, despite Kassem's harsh repression, the Eisenhower administration abided him as a counter to Washington's Arab nemesis of the era, Gamal Abdel Nasser of Egypt -- much as Ronald Reagan and George H. W. Bush would aid Saddam Hussein in the 1980's against the common foe of Iran. By 1961, the Kassem regime had grown more assertive. Seeking new arms rivaling Israel's arsenal, threatening Western oil interests, resuming his country's old quarrel with Kuwait, talking openly of challenging the dominance of America in the Middle East -- all steps Saddam Hussein was to repeat in some form -- Kassem was regarded by Washington as a dangerous leader who must be removed.

In 1963 Britain and Israel backed American intervention in Iraq, while other United States allies -- chiefly France and Germany -- resisted. But without significant opposition within the government, Kennedy, like President Bush today, pressed on. In Cairo, Damascus, Tehran and Baghdad, American agents marshaled opponents of the Iraqi regime. Washington set up a base of operations in Kuwait, intercepting Iraqi communications and radioing orders to rebels. The United States armed Kurdish insurgents. The C.I.A.'s ''Health Alteration Committee,'' as it was tactfully called, sent Kassem a monogrammed, poisoned handkerchief, though the potentially lethal gift either failed to work or never reached its victim.

Then, on Feb. 8, 1963, the conspirators staged a coup in Baghdad. For a time the government held out, but eventually Kassem gave up, and after a swift trial was shot; his body was later shown on Baghdad television. Washington immediately befriended the successor regime. ''Almost certainly a gain for our side,'' Robert Komer, a National Security Council aide, wrote to Kennedy the day of the takeover.

As its instrument the C.I.A. had chosen the authoritarian and anti-Communist Baath Party, in 1963 still a relatively small political faction influential in the Iraqi Army. According to the former Baathist leader Hani Fkaiki, among party members colluding with the C.I.A. in 1962 and 1963 was Saddam Hussein, then a 25-year-old who had fled to Cairo after taking part in a failed assassination of Kassem in 1958.

According to Western scholars, as well as Iraqi refugees and a British human rights organization, the 1963 coup was accompanied by a bloodbath. Using lists of suspected Communists and other leftists provided by the C.I.A., the Baathists systematically murdered untold numbers of Iraq's educated elite -- killings in which Saddam Hussein himself is said to have participated. No one knows the exact toll, but accounts agree that the victims included hundreds of doctors, teachers, technicians, lawyers and other professionals as well as military and political figures.

The United States also sent arms to the new regime, weapons later used against the same Kurdish insurgents the United States had backed against Kassem and then abandoned. Soon, Western corporations like Mobil, Bechtel and British Petroleum were doing business with Baghdad -- for American firms, their first major involvement in Iraq.

But it wasn't long before there was infighting among Iraq's new rulers. In 1968, after yet another coup, the Baathist general Ahmed Hassan al-Bakr seized control, bringing to the threshold of power his kinsman, Saddam Hussein. Again, this coup, amid more factional violence, came with C.I.A. backing. Serving on the staff of the National Security Council under Lyndon Johnson and Richard Nixon in the late 1960's, I often heard C.I.A. officers -- including Archibald Roosevelt, grandson of Theodore Roosevelt and a ranking C.I.A. official for the Near East and Africa at the time -- speak openly about their close relations with the Iraqi Baathists.

This history is known to many in the Middle East and Europe, though few Americans are acquainted with it, much less understand it. Yet these interventions help explain why United States policy is viewed with some cynicism abroad. George W. Bush is not the first American president to seek regime change in Iraq. Mr. Bush and his advisers are following a familiar pattern.

The Kassem episode raises questions about the war at hand. In the last half century, regime change in Iraq has been accompanied by bloody reprisals. How fierce, then, may be the resistance of hundreds of officers, scientists and others identified with Saddam Hussein's long rule? Why should they believe America and its latest Iraqi clients will act more wisely, or less vengefully, now than in the past?

If a new war in Iraq seems fraught with danger and uncertainty, just wait for the peace.

Sunday, December 14, 2003

The Revolution Will Not Be Televised (movie)

If you get the chance to see this film -- probably the time an attempted coup has been documented from the inside -- do it. This is history, high drama, and political intrigue at its finest.

Irish documentarians Kim Bartley and Donnacha O'Briain were in Venezuela months before the coup began, making a movie about the country's lef-leaning president, Hugo Chavez, whose detractors (including the oiligarchy and the corporate media) paint him as a Castro-esque tyrant, and whose support comes from the 80% of the population that lives in or near poverty. Although they did make a film about Chavez, they unexpectedly found themselves in the heart of a coup d'etat.

The film is great for many reason, not just because the events are so unbelievable but because the filmmakers have so much access to events on the inside of the Presidential palace as the balance of power flip-flops. They caught just about every important development, and present the coup as it unfolds in a quick, tight and thorough manner.

The strategy of the coup-makers seemed to follow the traditional playbook set out in Luttwak's book (and CIA manuals). First, the 20% of the population that hate Chavez (the upper class and corporate technocrats) are mobilized to march on the Presidential palace. When they're close to confronting the thousands of Chavez supporters that defiantly defend Chavez by surrounding the Presidential palace, snipers start suddenly shooting down from high-rise balconies.

The corporate-owned media (4 of 5 channels) begin to tip the balance in favor of the crisis by repeatedly showing footage of Chavez supporters firing pistols at some unseen targets. (The insinuation being that they are the snipers, rather than firing back under fire -- one in four Venezolanos carries a pistol). The bias of the commerical media -- just like it was during the Iraq war -- is so blatant that it's clear that in times of crisis, the other side needs its own means of communication.

At this point, the elite military move in with tanks, surrounding the Palace and cutting off the state-owned news channel (the only one that Chavez and his supporters have to get their message out). After the military coup-leaders storm the palace, Chavez refused to resign, so they "arrest" him (essentially kidnap him, and remove him to an offshore island).

At this point, when all seems lost, interesting things begin to happen that restores one's faith in the people. Despite the coup-plotters' control of the media and the military and a vocal 20% of the population (and well wishers in Washington and their proxies sitting offshore), the vast majority of the people begin to protest en masse.

After his election in 1998, Chavez worked hard to build the strength of community-based organizations. These groups taught people how to read, and one of the key documents people became literate in is the country's Constitution. As a result, a groundswell of resistance to the illegal coup begins to grow in the slums, and come down from the hills like a mudslide.

Despite facing police violence, tens of thousands of people re-surrounded the Palace.

Next, the palace guard turn around and arrest the coup-plotters, the cabinet is brought back in from hiding, and the state TV station is brought back online as news comes in from military barracks all over the country that most of the military did not support the coup. Eventually, Chavez is brought back by helicopter. (Barranco, the illegitimate president, moved to Miami.)

There are a lot of lessons in this movie about the role of the media, how popular governments are paid back when they organize and educate their base of support, and how careful the U.S. government is to not to leave any fingerprints when it meddles in the affairs of other countries. (It's still left unclear if the coup was organized and orchestrated by the CIA, but there is lots of evidence suggesting U.S. involvement, particularly given the fact that the coup's plotters were seen going in and out of the U.S. embassy in Caracas in the months leading up to the coup. The New York Times reported that the National Endowment for Democracy (a CIA conduit in the past) funded groups opposed to Chavez. ("Of particular concern is $154,377 given by the endowment to the American Center for International Labor Solidarity, the international arm of the A.F.L.-C.I.O., to assist the main Venezuelan labor union in advancing labor rights." -- The Venzuelan unions led the anti-Chavez protests before the coup. And the Center for International Labor Solidarity is the successor to AIFLD, which was notorious for collaborating with the CIA in countries like Honduras and Guatemala, where death squads regularly targeted labor leaders in the 1980s.)

More on Venezuela and the film:
Gregory Wilpert's account from Venezuela
London Observer: coup plot linked to Bush
Mark Weisbrot: Bush still pushing for regime change in Venezuela
NYTimes Review of this movie.
Iran-Contra figure Otto Reich's role in the coup and demotion after it failed.

Friday, December 12, 2003

Note: Harvey’s sent me an email suggesting that I don't mention the book soon enough in this review.
I agree that we shouldn’t beat around the bush if we’re gonna beat Bush, but haven't change it much.

George W. Bush vs. The Superpower of Peace
By Harvey Wasserman and Bob Fitrakis
(Published by the Columbus, Ohio-based Free Press, www.freepress.org)

Even if it's more accurate to trace the neoconservatives' philosophy to its origins in Trotsky's belief in "permanent revolution," it's time someone took off the gloves and compared George W. Bush's radical agenda to previous right-wing revolutions, even and especially the Nazis. The problem, of course, is that anyone who dares to do so in polite company immediately gets tarred and feathered as a paranoid conspiracy theorist.

Of course, the same analysis is being put forth in more polite ways. The most accurate depiction of Bush's revolutionary agenda in the mainstream media are the adept and urbane columns of the New York Times' Paul Krugman:

"It has gradually become clear that something deeper than mere bad economic ideology is at work," Krugman explains in the introduction to The Great Unraveling, his collection of columns. "The bigger story is America's political sea change. ... It seems clear to me that one should regard America's right-wing movement -- which now in effect controls the administration, both houses of Congress, much of the judiciary, and a good slice of the media -- as a revolutionary power in Kissinger's sense. That is, it is a movement whose leaders do not accept the legitimacy of our current political system."

(Of course Indonesians, Chileans and Argentines know that "Kissinger" is synonymous for a kind of fascism, given his complicity with right-wing dictators in those countries and their genocidal campaigns.)

Krugman's deft, incisive prose ties the neocons' imperialist foreign policy agenda to Bush's brutal domestic agenda, with its rollback of civil liberties, tax cuts for the rich and skyrocketing deficit (which, if you understand Grover Norquist's plan, are being built up for strategic reasons, to serve as justification for future deep cuts in social programs like Head Start and, in the future, social security).

But if you're looking for something a little more blunt, pick up this new book by Harvey Wasserman and Bob Fitrakis who, dispensing with any polite courtesies, set to the task of undoing the trap door on the underbelly of the Trojan horse known as "compassionate conservatism," so that all the ugly truth about the Bush right-wing revolution comes spilling out in column after column.

These guys called it early on. On inaugural day, Wasserman wrote: "After the early skirmishes, and except for the easy battles, the Democrats will roll over for the Bush junta. Their money comes from the same corporations. They won't withstand a focused, massively financed right-wing juggernaut intent on substituting pure muscle for the lack of a popular mandate. That's the way they do it in the Third World. Who will stop them here?"

So far, no one, since there isn't much of an ideological counterweight to the far right in the U.S. right now. As a result, ever since 9/11, the Bush administration's ability to "shock and awe" has worked more effectively against congressional Democrats than it has in Baghdad.

Think of how astonishing it is that the Democratic leadership failed to make anything of the corporate scandals in the 2002 elections (Enron had 40 ex-execs and lobbyists embedded in the Bush administration; his own SEC whitewashed Bush's inside-trading history at Harken; remember the video that surfaced of Cheney praising the "above the normal" accounting advice he got from Arthur Anderson?). And how easily they rolled over for a series of tax cuts that benefit less than 10% or the public (as Steve Brouwer points out in the newly-released Robbing Us Blind, it's not "class warfare" when the 90 % of Americans who stand to lose never made it to the battlefield).

And, of course, there was the war:

"Naturally the common people don't want war; neither in Russia, nor in England, nor in America, nor in Germany. That is understood. But after all, it is the leaders of the country who determine policy, and it is always a simple matter to drag the people along, whether it is a democracy, or a fascist dictatorship, or a parliament, or a communist dictatorship. Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is to tell them they are being attacked, and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same in any country.“ -- Hermann Goering

Fitrakis and Wasserman aren't the only ones to compare the Bush league to the Nazis. Remember the German official who got canned after making the comparison at an obscure community meeting? Thom Hartmann has written similar pieces for Common Dreams. And on October 17, West Virginia Senator Robert Byrd, explicitly compared the Bush media operation to that run by Hermann Goering, mastermind of the Nazi putsch against the German people, on the floor of Congress.

For more conspiratorial-minded people, the Bush-Nazi connection is easy to see not just from his policies, but from family connections. (Krugman wisely avoids going there, but someone has to.) The same day that Byrd made his speech, for instance, AP published a story circulating around the web for some time that linked Bush's grandfather Prescott Bush to Adolf Hitler.

Wasserman and Fitrakis heap a bunch of provocative evidence onto all the other family skulls and bones. Just after 9/11, for example, Bush attended a New York Yankees game (soon after the 9/11 disaster), where he wore a fireman's jacket. Karl Rove, sitting in George Steinbrenner's box, likened the roar to "a Nazi rally."

A month after Byrd's speech, the son of an Austrian "brown shirt" -- Hitler's street muscle for the Anschluss (invasion of Austria) -- took over the governorship of California. Two weeks before Byrd's speech, ABC News broke the story of the 1975 interview in which Schwarzenegger was asked whom he admired: "I admire Hitler, for instance, because he came from being a little man with almost no formal education, up to power. I admire him for being such a good public speaker and for what he did with it."

It probably won't happen here. But before you finish this book, you start thinking that maybe it already is. Wasserman and Fitrakis' training as historians and activist roots give these essays a strong feel for the trajectory of events, which lends a certain power to the analogy.

I think some of the essays toward the end are much stronger than the beginning, and would advise readers to jump around. It's probably difficult for most readers to imagine why they begin part one with an essay on the Bush family's ties to Reverend Moon unless you remember the Reagan era, although I thought there were some very provocative things in there. (The New York Times noted in 1997 that Moon "has been reaching out to conservative Christians in this country in the last few years by emphasizing shared goals like support for sexual abstinence outside of marriage and opposition to homosexuality." Where's today's Wilhelm Reich to explain the function of sexual repression in the development of fascist societies?)

Perhaps it's just a matter of temperament, but it's often surprising that Fitrakis and Wasserman end so many of their columns on an optimistic note. (E.g. "Bush himself has handed an organized, focused and optimistic SuperPower of Peace the tools it needs to get stomping. So let's roll.") Because, as activists always say, Power never voluntarily concedes anything. Of course, it's good to be reminded that Bush didn't win the 2000 election, and a lot of people who voted for him now (including many in the military) will most likely not be voting for him next time.

A lot is riding on the outcome of the 2004 election. Despite some of the problems endemic to the Democratic party, and the instrumentalist forces driving history, at this point I would consider Dean's centrism an acceptable check on the juggernaut of fascism. The Republicans will use fear. And we should be afraid. Be very afraid. For very different reasons.

It could get very ugly (according to a friend of mine with a similarly pessimistic temperament, we could have four or five Floridas in 2004, because of a clause in the Help America Vote Act which established a category of "provisional" votes that would have to be counted in the event of a close election -- cast by voters who for some reason or another have a voting card but are not showing up on the precinct rolls -- hence the need for Ralph Reed's brownshirts).

It's true that "fascist" has been thrown around loosely, ineptly used to describe the Klan, manufacturers of napalm and nukes, and even al Qaeda (it's surprising to see such sloppy diction coming from people like Christopher Hitchens -- al Qaeda is largely a stateless network of terrorist fanatics, not a political party seeking to dominate a state, through which it seeks imperial expansion through military means, unless the argument is that their goal is to take over Saudi Arabia).

It's a lot easier to label foreign terrorists as fascists than a faction that controls your own government.

In his book on the topic, James D. Forman describes Fascism: "few Fascist groups have risen above the status of a minority party with a hysterical chip on its shoulder. Some, however, have obtained power within a national state, at which point the last democratic veneer has been rapidly abandoned. National solidarity has been asserted. Class differences have been denied and so-called misfits have been eliminated. Politically speaking, the individual has ceased to exist. The party has become the state, and the state has looked around for more enemies in order to fulfill its final objective. That final objective, of course, is imperialistic expansion..."

Wasserman and Fitrakis will no doubt be dismissed as cranks. And I have to say, to those who don't read much of this stuff, some of these essays involve a stream of associative logic that is pure latenight rant. But there's a lot here that can't easily be tossed aside. And I'm glad someone put it all down for the record.

What ultimately matters, as they suggest, is that "if the Bush administration objects to being compared with the Nazi elite, perhaps it should act less like it."

Thursday, December 11, 2003

Selling Out: How Corporate Money Buys Elections, Rams Through Legislation and Betrays Our Democracy
by Mark Green
Regan Books, October 2002

Yesterday's Supreme Court's decision may have put the cabosh on Mitch McConnell's attempt to derail the McCain-Feingold campaign finance reform law, but we still have a long way to go before corporate money isn't the determining factor in the outcome of so many key elections in the U.S.

Mark Green's Selling Out is an excellent primer for those who want to understand campaign finance reform and corporate influence in politics. An ex-Nader's Raider, Green is a prolific writer on government and politics. He was also the commissioner for consumer affairs in New York City before running a losing campaign for Mayor against billionaire Bloomberg. The millions that Bloomberg spent out of his personal fortune may not have been the only reason Green lost, but they were enough to make him dedicate a few months after the campaign to writing a new book that would awaken citizens to the dangers of letting their democracy drown in a cesspool of corporate cash.

It's unfortunate that it didn't get much attention when it was released. The book is well-researched and exposes many examples of corporate influence-peddling. It also squarely addresses many of the arguments made by the leading critics of campaign finance reform.

In the final chapter, Green holds up a few suggestions for what we should do next, now that McCain-Feingold is secure, including overturning Buckley v. Valeo so that state and local governments can put limits on campaign spending (and offer candidates a level playing field); public funding of elections (which has begun to work in some states) and access to free air time by all significant candidates.

Of course reclaiming our democracy is no simple task. And others would suggest that Green could have added that we also need to open up the debates to a broader range of candidates and make ballot access easier for third party candidates. It would also be nice if we had Instant Runoff Voting (like they will in San Francisco in November 2004). Some, including Jesse Jackson, Jr. have suggested that ultimately, we need to pass an amendment to the constitution giving us the right to vote. (Did you even know that you don't have a constitutionally guaranteed right to vote?).

Appearing on the Phil Donahue Show in 2002, Green suggested that if we don't take at least a few additional practical steps, pretty soon we will reach the point where only two types of candidates will be able to run for office: independently wealthy moguls like Bloomberg and Ross Perot who are the only ones able to afford the expense of running out of their own pockets, or corporate lackeys under the total control of the wealthy special interests who bankroll their campaigns.

For more on fair elections and corporate influence see
the Center for Voting and Democracy.
National Voting Rights Institute

Tuesday, December 09, 2003

Greg Palast has a new piece about Bush family consigliere James Baker's assignment to "restructure" Iraq's foreign debt (including the debts to Baker's other client, the Saudi government).

According to Palast:
"Just last week Baker said, "I fixed the election in Florida for George Bush." That was the substance of his remarks to an audience of Russian big wigs as reported to me by my somewhat astonished colleagues at BBC television."

The truth is often stranger than fiction (and Palast's reporting is often so full of hyperbole that it can appear to border on fiction if you don't have other sources to go to for verification). Still, Baker's new errand reminds me of the moment in Godfather, Part II when Michael says that Tom Hagen "only handles specific areas of the family business."

(The other areas of business are handled by ex-cons and neocons.)
Speaking of the "Vast Right-Wing Conspiracy":

The American Prospect ran an interesting item in September that indicates the neocons and their war profiteering allies have all of the bases covered (or at least the DLC):

In April 2001, the Prospect reported that the DLC's magazine, Blueprint, was single-handedly financed by Loral Space & Communications Chairman and CEO Bernard L. Schwartz. "I sought them out," Schwartz told the Prospect. "I like them because the DLC gives resonance to positions on issues that perhaps candidates cannot commit to." [Why is that? Because they are so brazenly corporatist that they would violate all standards of popular appeal?]

Recently the DLC and its magazine (still principally financed by Loral) have taken the lead in bashing Democrats who opposed the war in Iraq. Now it turns out that Loral, a satellite company, has business ties with some of the most controversial neoconservative foreign-policy thinkers in the Bush administration.

In January 2001, Schwartz, according to The New York Times, retained Richard Perle to represent Loral during its ongoing efforts to settle a 1997 finding by the Pentagon that Loral had improperly given sensitive missile technologies to China. Perle continued advocating for Loral even after being appointed chairman of the Pentagon's Defense Policy Board later that year. The board was one of the strongest advocates for the war in Iraq.

Other administration officials with ties to Loral include Undersecretary of Defense Douglas Feith, who lobbied Congress on behalf of Loral in 1998, and retired Lt. Gen. Jay Garner, briefly the civilian administrator in Iraq, who worked for Loral spin-off L-3 Communications. L-3 has been awarded U.S. government contracts in both Afghanistan and Iraq.

-- Talk about your networked battlefields!

According to Business Week, a good chunk of Loral is owned by Lockheed. BW reported back in March that Rumsfeld's high-tech war against Iraq was a major boost to Intelsat and others in the satellite industry, whose sagging fortunes had a lot to due with unused over-capacity. "The war in Iraq, in other words, could become far more than a shared battlefield for the military and the commercial space industry."

Monday, December 08, 2003

Partnoy’s Complaint

Infectious Greed:
How Deceit and Risk Corrupted the Financial Markets

by Frank Partnoy
New York: Times Books, 2003.

If you want to understand the murky world of derivatives trading or how Enron and the other corporate meltdowns of recent years relate to previous high-profile disasters (e.g. Barings Bank, Orange County and Long-Term Capital Management) this is the book to get. It will likely convince you that our financial system is still perilously susceptible to a giant meltdown, and that Sarbanes-Oxley did virtually nothing to prevent that inevitability.

Frank Partnoy, a law professor and former derivatives salesman, has written a convincing account of how the financial markets have created new levels of financial risk and complexity that have infected otherwise solid, industrial corporations, and burned ordinary investors.

In many ways, this is the most useful of Enron postmortems. It is certainly the most convincing explanation of how the recent corporate scandals relate to the labyrinthine developments of high finance over the past decade.

Building on his previous book, F.I.A.S.C.O., which was a personal account of his stint as a Wall Street derivatives salesman, Partnoy looks closely at the historical trajectory of derivatives trading, explaining how the recklessness and lack of regulation could threaten to bring down the entire financial system.

He begins by focusing on the traders who pioneered the wild West of Wall Street derivatives trading, including Bankers Trust’s Andy Krieger and other traders who introduced new financial instruments in the late 1980s. These traders were a new breed -- more MIT geek than the macho floor traders who dominated the trading floors in the late 1980s. They created impenetrable trading strategies that even a team of mathematicians and criminal psychologists – let alone other traders and federal prosecutors – could not decipher.

Derivatives are complex instruments (e.g. futures, options, swaps) whose value is derived from some underlying security. Most derivatives are traded “over the counter” – i.e. not on any regulated exchange. Although originally sold as a way to increase market “efficiencies,” the biggest attraction provided by derivatives is that they allow institutional investors and rogue traders to skirt restrictions on making large, risky investments. Thus, just as stock options twisted the culture of top corporate management by creating an incentive to cook the books so that they could cash out their options, derivatives allowed traders and lower-level employees driven by the prospect of huge year-end bonuses to take huge trading risks. In both cases there was little downside risk for the individuals involved: executives with options were not punished when the stock tanked (and many cashed out long before then), and traders are risking other people’s money.

The “infection” comes when the risk is spread around, to hundreds of industrial corporations and investment funds. The financial subsidiaries of major corporations, under pressure to deliver their own profit, became increasingly important as a profit center when they delivered. But top management often didn’t understand how those profits were made until it was too late. Meanwhile most directors didn’t even have a clue that their company was even trading derivatives, until someone had to explain why they were taking such a big hit. (As was the case at Proctor and Gamble in the early 1990s).

And because the risks were huge, the day of reckoning could come suddenly. Barings Bank, the oldest and one of the most prestigious banks in England, was brought down by huge trading losses created by an obscure back-office trader working out of their Indonesia office.

Joseph Jett, a trader at GE’s investment banking subsidiary Kidder Peabody, lost $350 million. As Jack Welch commented later, when Enron filed for bankruptcy, “We were lucky it was small enough. We sold it [Kidder Peabody] and got out. And got out alive. But it could have eaten us up if it were a bigger thing. This thing at Enron got bigger than the core business and it ate them up.” [Partnoy actually argues that Enron was different than GE and the others. The company’s derivatives trading operation made lots of money, even at the end, when it tried to use those profits to hide other losses on tech stocks and other unprofitable businesses. In fact, Enron offered retention bonuses to its derivatives traders when the company collapsed, and was able to sell its trading operation. Instead he blames the credit rating agencies and the rapid withdrawl of money by spooked investors for the company’s collapse, a theory that is in alignment with Skillings explanation.] Other companies like Freddie Mac have run into trouble by trying to spread their earnings from derivatives over a longer period of time (as a kind of insurance against downturns, and probably to hide the risk they were taking).

It doesn’t seem like anyone has learned anything from the early scandals, or (given the lack of interest in regulating derivatives now) after Enron. After fiascos at Long-Term Capital Management and Orange County created a brief setback in over-the-counter (unregulated) derivatives trading, it came back in force. It's safe to say that derivatives are probably very popular today.

Partnoy lays much of the blame for the potential fallout upon regulators, especially the SEC. Probably most controversial are his criticisms of Arthur Levitt, who has been lauded for supporting specific reforms while at the SEC, including the FASB’s effort to expense options.

Levitt supported “tort reform” rollbacks that created a daisy chain of irresponsibility among those who are supposed to monitor all this risky behavior -- accountants, bankers and lawyers. Unfortunately, Partnoy does not explore the political details of how the Private Securities Litigation Reform Act came about, but he does criticize Levitt for supporting this law (which, interestingly, was the only one that passed over Clinton’s veto during his entire presidency) with speeches about how abusive litigation was imposing tremendous costs on issuers of securities.

Levitt also supported legislation such as the Commodity Futures Modernization Act in 2000, which exempted over-the-counter derivatives from regulation. (The act included a specific exception for energy derivatives, a provision strongly supported by Senator Phil Gramm, whose wife Wendy moved on to serve on Enron’s board of directors just weeks after she was successful in deregulating swaps while at the Commodity Futures Trading Commission. Phil Gramm left the Senate to join UBS, the Swiss bank that bought Enron’s derivatives trading operation.) Levitt somehow managed to skip over these episodes in his own mea ex-culpa, Take on the Street.

Partnoy also criticizes the SEC for going after simple accounting fraud cases (Waste Management, Cendant, Sunbeam), while failing to prosecute complex cases that involved the use of derivatives. Of course the overworked SEC enforcement division could not afford the years of effort and dozens of lawyers and staff (with its high turnover) that would be required to successfully mount a complex case against a major corporation. But Partnoy is right that by focusing on simple cases, the SEC sent a message that major corporations engaging in complex fraud are likely to avoid punishment.

It’s frightening when you realize that derivatives continue to grow in importance. “Regulatory arbitrage” – the increased use of derivatives to take advantage of the difference in legal rules among different jurisdictions – has also created the prospect of global market meltdowns as the transnational use of derivatives had tightened the connections among various markets.

Partnoy offers a number of suggestions to prevent that inevitability. But if he’s right, they will probably not be taken seriously until after the next major corporate financial crisis hits.

If you want to know more about derivatives, I also highly recommend the web site of the Derivatives Study Center.

Saturday, December 06, 2003

Danny Postel, who first brought to our attention the Straussian philosophical roots of today's neoconservative political revolution, as explored in his interview with Chadia Drury takes on ex-Thatcherite John Gray's peripathetic philosophizing in his brilliant review of Gray's two most recent books: Straw Dogs and Al Qaeda and What it Means to be Modern.


"For all of his insights into our geopolitical situation and his monitions about the perilous path we're on, when one reads the two books in tandem, the effect is one of moral numbness. If one follows the argument of Straw Dogs (as we can only assume Gray does), what difference does it make whether the human species avoids its collision course with doom? If we should look forward to a time "when humans have ceased to matter," as Gray exhorts us to do in Straw Dogs, what's the point of even considering the proposals he offers in Al Qaeda for fashioning a less calamitous future? How can the apocalyptic antihumanism of Straw Dogs be squared with the claim, in the concluding chapter of Al Qaeda, that "we need to think afresh about how regimes and ways of life that will always be different can come to coexist in peace"?"


"Gray's long and winding ideological road has thus taken him from free-market fanaticism to "center-left" anticapitalism and now to green antihumanism. This might seem a bizarre trajectory even in a postideological age. But there is, arguably, a method in Gray's madness, a pattern to his restless shifting of intellectual gears. It could have something to do with what his old friend Norman Barry calls Gray's "philosophical promiscuity." Barry, a fellow traveler of Gray's from the Thatcher years, told Lingua Franca magazine in 2001 that even in his days as an anarcho-capitalist, Gray "was always flitting from person to person, philosopher to philosopher.... He couldn't form a steady relationship with any thinker." "

"As far as he [Gray] has traveled, and as frequently as he has changed lanes, he's still conservative after all these years."

Perhaps the source of Gray's inconsistency is not just his voracious search for mentors and meaning, but the same problem that a lot of social and political philosophers face right now (apart from the Straussians and other neocons), particularly here in the U.S.: the lack of any seeming relevance to mainstream political debate. That's an uncomfortable position to be in for anyone who wants to be taken seriously.

Saturday, November 29, 2003

Perfectly Legal:
The Covert Campaign to Rig Our Tax System
to Benefit the Super Rich -- And Cheat Everybody Else

By David Cay Johnston

Leona Helmsley, the "Queen of Mean," wasn't afraid to express opinions shared by her more reticent confederates in the ongoing class war, including the belief that "only the little people pay taxes."

Indeed, despite Supreme Court Justice Learned Hand's dictum that "taxes are the price we pay for civilization," the royal "we" as he used it seems quaintly wishful (an unintended sleight of hand?) because, as is so often the case, when it comes to taxes, the wealthy abide by a much different set of rules than the rest of us.

"What surprised me more than anything," NYTimes investigative reporter David Cay Johnston concludes in Perfectly Legal, the best book published in recent memory about U.S. tax policy, "was the realization that our tax system now levies the poor, the middle class and even the upper middle class to subsidize the rich ... the majority of Americans are being duped into supplementing the incomes and extravagant lifestyles of the rich and powerful."

Tax policy is not an easy beat. Johnston has spent almost a decade cultivating contacts within the impenetrable IRS bureaucracy, slogging through the bewildering snarl of intricate provisions known as the U.S. tax code, and "following the money" a lot farther than Woodward and Bernstein ever had to.

Johston's solid research and flair for finding remarkable stories about the most artful of corporate and personal tax dodges has landed him a Pulitzer and a regular spot on the Times' front page, and his ability to elucidate the important outrages has engendered considerable trust, even among many within the corporate sector and its low-lying (but high-priced) tax experts in the accounting and legal professions (the introduction includes a plea to those kind enough to send him documents in unmarked packages to include an explanation of their importance).

In early 2002, Johnston blew the lid off corporate inversions -- transactions that dozens of multinationals have used to moved their headquarters offshore (on paper only) in order to avoid paying U.S. taxes on overseas income. This move, accomplished by opening a mailbox in a place like Bermuda, has saved companies like Tyco hundreds of millions of dollars each year. IRS consultant Jack Blum estimates that individuals and companies using offshore tax havens to escape U.S. taxes on overseas income cost U.S. taxpayers (who have to make up the difference) an estimated total of $70 billion per year. And this is just the tip of the iceberg: loopholes in the Sarbanes-Oxley act passed after Enron and WorldCom have made it easy for accounting firms (and other "aiders and abettors" of corporate crime, fraud and abuse, such as bankers and lawyers) to continue selling all kinds of tax shelter schemes to corporate and individual clients, as Senator Levin and the Committee on Government Reform revealed in recent hearings.

Johnston's coverage of Stanley Works' proposal to relocate its headquarters to Bermuda, coming on the heels of similar moves by Nabors, Ingersoll-Rand and over a dozen other large companies, ignited a strong reaction among shareholders, community members, workers and politicians who, together, managed to stir up enough public indignation to stop the deal. Johnston's reporting uncovered some remarkable information, including the fact that no one would profit from the move except top executives like CEO John Trani -- not even the shareholders, whose ability to bring derivative suits would be hurt in Bermuda, and who would take a capital gains tax hit when the company's stock was converted. (For an overview on corporate tax avoidance through offshore havens see "Sacrifice is for Suckers")

The conversion of corporate tax departments into new profit centers is exemplefied by the lengths to which many corporations go to game the tax system (described in this Business Week investigation ). Corporate tax lawyers and accountants are expected not merely to know how to help the company comply with the maze of intricate and overlapping provisions of the law, but develop new strategies for parking intellectual property offshore, intra-firm transfer pricing and a variety of other schemes that take advantage of specific provisions in the law (some of which they also draft and hand off to the company's lobbyists). As Lindy L. Paull, chief staffer for Congress's Joint Committee on Taxation put it, Enron's tax department "was converted into an Enron business unit, complete with annual revenue targets." Enron managed to avoid to avoid paying taxes four of the last five years before the company filed for bankruptcy.

As excessive as it was, Enron's behavior signalled a general business trend: Despite corporate complaints that the official U.S. income tax rate is among the highest in the world at 35 percent, the percentage of corporate profits (after all the deductions) that went to federal income taxes dropped from 26% in 1993 to 22% in 1998. Publisher Thomas F. Field described the downward trend in corporate taxation as a consequence of globalization in Tax Notes' 30th Anniversary Issue: "One obvious change in the international area is the near-universal reduction in corporate tax rates on a country-by-country basis and the ongoing competition between taxing jurisdictions to reduce their corporate rates further. ... A few years ago, at the first World Tax Conference sponsored by the Canadian Tax Foundation, a corporate tax panelist asked for a show of hands from the audience of tax professionals. He asked, "How many of you think there will be a significant corporate income tax in industrialized countries 10 years from now?" Only a few hands went up. "How many of you think there won't"? Almost all hands were in the air. That response is not a scientific survey, but it shows which way the wind is blowing."

Much more significant and damaging to the Treasury than the offshore corporate tax dodge has been the overall tax agenda that has been openly pushed through Congress since Bush and the "compassionate conservatives" came to town. The logrolling of tax cuts for corporations and the super-rich is the dream of right-wing activists like Grover Norquist who has been working in close coordination with the White House and Republican leaders in Congress to effect a 30-year plan whose only serious obstacle seems to be competing corporate interests.

Yes, there are a few knowledgeable public interest voices that have had some effect on tax policy, including Taxpayers for Common Sense and Bob McIntyre at Citizens for Tax Justice. Significant progressive grassroots education and activism is increasinly being organized by groups such as United for a Fair Economy and other members of the Fair Taxes for All coalition, but the movement still has a way to go before it's strong enough to halt the right-wing/corporate juggernaut that is already in full gear. It doesn't help that so many Democrats turn jelly-legged when accused of instigating "class warfare" when they deign to criticize Republicans for going on a virtual rampage.

(Johnston is no partisan -- he acknowledges that while the Republicans are more aggressive in cutting corporate taxes, Democrats are also culpable of hurting the poor and middle class by, among other things, letting the alternative minimum tax morph from a catchall for rich and aggressive tax avoiders into a levy on the middle class. "During Clinton's tenure as president, the share of income going to the top 400 more than doubled, from a half of 1 percent to 1.1 percent of all income. But the portion of income going to federal income taxes fell by 18 percent for the top 400, while rising for everyone else by 18 percent. Clearly, favoritism for the rich is bipartisan.")

With tax cuts for the rich and corporate class certain to cause ballooning deficits that can eventually be used as an easy excuse to crush social services and other programs used primarily by the poor and working class, the structural basis of societal cohesion faces significant stress, and a quasi-fascistic erosion of civil rights seems designed to ensure that any signs of social unrest will easily be quelled by a well-developed police and prison state (the part of the government that Grover and the Republicans always manage to avoid mentioning when talking how they want to "get it down to the size where we can drown it in the bathtub.") Meanwhile, the neocons are aways ready to divert us from drawing attention to how few of us benefit with their fear-driven and brazenly imperial foreign military escapades. Understand who pays (and doesn't pay) taxes and you see clearly how cynical and hypocritical all the usual prattle about patriotism truly is.

There is a lot of elegant debunking of right-wing propaganda in this book. Shortly after Bush took office, his Administration was joined by the American Farm Bureau in a campaign to kill the estate tax. "To keep farms in the family we are going to get rid of the death tax," Bush claimed. One problem discovered by reporters at the Times was that neither the Administration nor the Farm Bureau could identify any families who had actually lost their farms to the estate tax. All of the Iowa farmers they interviewed (most of them Republican Party members) had never even heard of anyone losing their farm due to the estate tax. Most had no illusions that its repeal was intended to benefit very wealthy Republicans (including Bush and Cheney) and their high-donor campaign supporters. Yet the grim fact that people like this passively accept the fact that they are being screwed by their own party suggests that they don't feel like they are being offered any viable alternative. That should be a wakeup call to any Democrats who continue to believe the DLC line about how the party needs to shy away from populist notions of economic justice.

Tax coda:

It would be enough to read Perfectly Legal if you're simply interested in arming yourself with the facts, but there is plenty of entertainment and potential intrigue here as well.

In the first chapter, Johnston introduces us to Jonathan Blattmachr of Milbank, Tweed, Hadley & McCloy, a firm that Johnston notes in passing has had longstanding ties to the CIA. (According to his biographer, former CIA director William J. Casey invented the gambit and the term "tax shelter." Casey used offshore corporations as conduits during Iran-Contra; he also used BCCI's Cayman Islands accounts to fund al Qaeda's activities in Afghanistan during the Cold War. Halliburton's use of a Cayman Islands subsidiary to conduct business in "axis of evil" member Iran suggests that the use of offshore tax havens to avoid any scrutiny of foreign policy strategies as complicated as a Mark Lombardi drawing may be a tradition that's very much alive).

Blattmachr is not well known outside the world of trusts and estates, but within the world of the rich (famous and not) he has a reputation for being able to navigate secret passages hidden in the tax code and see both "the whole and the holes in the whole." For instance, Blattmachr is the architect of such clever tax avoidance devices as the "accelerated charitable remainder trust," which Bill Gates used to reap $200 million in profits on Microsoft stock without paying the $56 million of capital gains taxes that federal law required at the time. (Perhaps his son's ability to game the system so blatantly is one reason why Bill Gates Sr., the father, has joined with United for a Fair Economy in their Responsible Wealth Project.)

Monday, November 24, 2003

Jeff Kaplan has a new article about the fight against corporate rights in Orion

"Corporate power, largely unimpeded by democratic processes, today affects municipalities across the country. But in the conservative farming communities of western Pennsylvania, where agribusiness corporations have obstructed local efforts to ban noxious corporate farming practices, the commercial feudalism [Alexis] de Tocqueville warned against has evoked a response that echoes the defiant spirit of the Declaration of Independence."

There are a few excellent books on this topic, including:

Gangs of America: The Rise of Corporate Power and the Disabling of Democracy by Ted Nace (note that you can download the entire book off the web site)

Unequal Protection: The Rise of Corporate Dominance and the Theft of Human Rights
by Thom Hartmann

and Defying Corporations, Defining Democracy
a collection of articles by POCLAD

Related information can be found at Reclaim Democracy and CELDF

Wednesday, November 19, 2003

Corporate Warriors:
The Rise of the Privatized Military Industry

By Peter Singer
Cornell University Press (2003)

It’s a rare day when you’ll find me giving props to anyone from the milquetoast Brookings Institute, but Peter Singer’s Corporate Warriors is both timely and comprehensive.

The growth of the global PMC industry has exploded in the past decade, when the U.S., government alone awarded over 3,000 contracts to private military firms. The 1,000 or so companies that define the corporate military industry currently rake in a total $100 billion per year for active operations in over 50 countries around the world, and the industry is expected to double in size to $200 billion by 2010.

“Accordingly, staggering economic gains have been made in investments in the PMF industry,” Singer reports. “In the 1990s, publicly traded companies in the field grew at roughly twice the rate of the Dow Jones industrial average.” The industry was protected from the ravages of the high-tech market crash by the response to the terrorist attacks of September 11. The value of mil-corp stocks like L-3 (which owns MPRI), for instance, have doubled since 9/11.

“The war on terrorism is the full employment act for these guys,” one Pentagon official commented. “A lot of people have said, ‘Ding, ding, ding, gravy train.’”

Yet the industry’s phenomenal growth started long before 9/11, and is attributable to a number of factors:

First, the military, like many businesses, has outsourced and downsized its permanent labor force in recent years, at a time when there has been an expansion of interventions and other contingency operations. Many argue that the U.S. military is overextended and under resourced. The high political costs make a draft virtually unthinkable (at least before the next election), so the Pentagon has increasingly used military support firms (who also conveniently provide lucrative jobs for ex-military personnel.)

A second factor has been a so-called RMA – Revolution in Military Affairs. Rather than developing and spreading technologies out in the broader market, the military is more often adopting technologies and business strategies developed by the private sector. Private contractors often develop new ways to meet new military requirements more rapidly than the military can meet them itself.

Third is the spread of the dubious doctrine that privatization results in economic efficiency. Privatization has been the mantra for a variety of government services (garbage, prisons, schools, social security), supported by Democrats and Republicans alike, with continuous pressure from the industries that stand to benefit.

Finally, of course, there's the lobbying these firms do in Washington to keep government contracts headed their way. In 2001, 10 private military companies spent more than $32 million on lobbying. DynCorp retained two lobbying firms that year to successfully block a bill that would have forced federal agencies to justify private contracts on cost-saving grounds. MPRI's parent company, L-3 Communications, had more than a dozen lobbyists working on its behalf, including Linda Daschle, wife of Senate Minority Leader Tom Daschle. in 2002, L-3 won $1.7 billion in DoD contracts.

During the first Bush Presidency, Dick Cheney gave Halliburton subsidiary KBR a contract to evaluate the privatization of certain military services. The company conveniently concluded that privatization would save money, and lo and behold, KBR somehow got the first contract -- the same contract (known as the LOGCAP) that was expanded to give the company a leading role in the reconstruction of Iraq. (Cheney must have learned a lot from his DOD experience. Recall that not only did he go to work for Halliburton after his stint at the Pentagon, but he headed the 2000 Bush campaign’s search for a running mate, in the end recommending himself as the best man for the job.)

A lack of basic accountability, and reports of cost over-runs (the GAO found that Halliburton charged the government some $86 per sheet of plywood during operations in Kosovo) suggest that claims for efficiency are unsubstantiated at best. If you want to run a government “like a business” (as our MBA president once claimed), then you probably don’t want to run it like Enron, with Anderson-like accounting. The efficiencies of privatization rest on the theory of a competitive market – which doesn’t apply to most military contracts. In addition, the design of the “cost-plus” contracts is inherently wasteful, delivering profits as a percentage of overall costs, thus creating incentives to jack up the cost).

There are three types of PMCs. The Provider firms, the Consultants, and the Support firms.

• PMCs most closely fit the stereotypical role of mercenaries. They provide technical combat services at the forefront of the battlespace, by engaging in actual fighting, either as line units or specialists (e.g., as combat pilots) and/or commanding and controlling field units. These “tip of the spear” operators, like Sandline, Executive Outcomes and Global Risk (which has 1,100 armed personnel in Iraq, including 100 from the Balkans, 500 from Fiji and 500 Nepalese Gurkas), have run combat operations in Angola, Sierra Leone, Papua New Guinea, Indonesia and elsewhere. “Although these firms deploy units that are often much smaller in manpower relative to their client’s adversaries, their effectiveness lies not in their size, but in their comprehensive training, experience, and overall skill at battlefield judgment, all in fundamentally short supply in the chaotic battlefields of the last decade.” More commonly, they serve as specialized “force multipliers” who act as “mini-generals” providing the expertise that is often lacking.

• Military Consulting Firms don’t operate in the battlefield, but provide consulting and training services integral to the operation and restructuring of the client’s armed forces. Examples include MPRI, Levdan and Vinnell – the PMC that was once owned by the Carlyle Group (See 11/15 entry below), and which lost at least nine employees in the bombing of its compound in Saudi Arabia in May.

• Support firms are skilled in supply chain management. This includes companies like Halliburton’s KBR, which maintain military bases, doing everything from laundry and food services to staging operations and equipment maintenance. In high-tech wars like the Gulf Wars, the maintenance of high-tech equipment is crucial.

As Singer suggested recently in a briefing on PMCs on the Hill, the corporate military industry is “totally unregulated.” Congressional notification doesn’t apply until a contract is worth $50 million or more (a requirement easily evaded by the chartering of extraterritorial subsidiaries or by breaking the contracts up into smaller increments). Often the only bureaucratic requirement is a simple export license from the State Department’s Office of Defense Transitions Assistance, which is usually easy to obtain and comes through a process protected from scrutiny. (State Department officials cannot provide information on PMF contracts due to the claimed need to protect proprietary information.)

Over twenty Private Military Corporations (PMCs) are currently operating in Iraq, training Iraq’s new police force (Dyncorp), protecting the oil pipelines from sabotage, and providing basic logistical support to the troops. We don’t know what most of these firms are actually doing or who hired them, in large part because most PMC contracts are even more obscure than the no-bid contracts that Henry Waxman has been doggedly objecting to.

We know even less about PMC activities elsewhere. Now and then there are news reports about “contract workers” killed in the southeastern mountains of Afghanistan, or about three unidentified contractors captured by the FARC in Columbia after their plane was shot down, but most stories are left untold.

Thus, the use of PMCs allows government agencies (particularly in the executive branch) to potentially skirt specific restrictions on the use of force, such as the Leahy Amendment.

There is also little evidence that the potential strategic consequences of privatizing critical military services on the battlefield are being addressed. For example, the points of interface between public forces and contracted forces can be places of “particular vulnerability that an adversary might exploit in the physical or electronic realm.” There have been reports of U.S. troops left in the lurch during the Iraq war when private contractors suddenly “changed their mind” and left, breaking a critical link in the supply chain. Contract personnel also cannot be shifted quickly to combat roles, so that there is no military buffer or insurance if the force requirements suddenly rise or there is a rapid change of conditions on the ground. Contractors can therefore be “rigid tools for a fluid environment,” according to Deborah Avant, author of “The Market of Force.” There have already been allegations of conflicts between active duty personnel and contractors over who is training forces on the ground.

The rights of contractors as potential prisoners of war is also unclear (a potential concern in places like Columbia, where the FARC is holding three Dyncorp employees hostage): contractors do not operate under a Code of Military Justice.

Meanwhile, there are few to no standards within the industry itself regarding who they hire (when firms are struggling to get people into the field, there is little incentive to screen personnel for their potential history of human rights violations – which has important implications for jobs such as the training of ex-Baathists to serve in the new Iraqi police force).

PMCs can suffer from a bad reputation, but that hasn’t stopped many of them from working for drug cartels, guerrilla groups and even groups linked to al-Qaeda (two firms -- Sakina and Transglobal -- have reportedly run jehadi training courses). It’s unlikely that the conservation groups that hired them to protect the White Rhino in Africa were able to conduct due diligence on a PMC firm that could in turn use this contract as a resume builder to provide legitimate cover for shadier operations.

There is also an obvious absence of any control over subcontracting and some PMCs are often incorporated offshore (in places like the Channel Islands) where their finances and ties are difficult to track. The UN has a special commissioner for mercenaries, but they are overwhelmed and essentially incapable of dealing with PMCs as a regulatory issue.

Nor does the U.S. set any contractor responsibility standards, as should be obvious considering that Dyncorp was awarded the same kind of contract in Iraq that they were awarded in the Balkans, where company employees were allegedly involved in sex trafficking. (When it came to light, Dyncorp fired the whistleblowers, not the personnel who allegedly committed the crime.)

There are also other potentially unforeseen consequences. According to Max Weber, one of the essential characteristics of a state is that it “successfully upholds a claim to the monopoly of the legitimate use of physical force in enforcement of its order,” the ultimate measure of sovereignty being the control over the means of internal and external violence. It has been assumed for some time that the exercise of power in the form of sheer military force has been largely the exclusive prerogative of governments. But that assumption may soon break down, complicating questions of sovereignty, so that “where state structures are weak, the result is a direct challenge to the local basis of sovereign authority, its ability to overwhelm all other challengers when it comes to violent force.”

It is not out of the range of possibility that we are entering an age, similar the early medieval period, “when highly expert military tasks … were often handled by hired specialists, rather than by regular soldiers.” With organized military resources available on the open market, power is more fungible than ever.

In the late 1990s PMCs tipped the balance in a number of wars. After experiencing early defeats in its war with neighboring Eritrea, Ethiopia hired Russian military experts to run its air defense, artillery, radar and electronic warfare. The firm Sukhoi sold Ethiopia a wing of Russian Su-27 fighter jets (equivalent to the U.S. F-15), including in the contract the services of over 250 pilots, mechanics, and ground personnel, who would fly and maintain the planes. In essence, Ethiopia was leasing its own small, but complete air force. The country also hired its own set of private Russian ex-generals, who played a strategic planning role. Ultimately, this revamped force crushed the Eritrean army quickly.

The potential for scenarios that are the stuff of science fiction is not unimaginable.
There could be a foreseeable circumstance where corporations hire the PMCs, or corporate conglomerates have their own PMC subsidiaries that pursue the company’s interests, apart from any nation-state.

“The one aspect that formerly limited the power of multinational corporations was their physical weakness, which kept them dependent on the local state and only able to operate in zones of relative stability. This security was provided by the state, meaning that their operations and even survival as a viable business were conditional on the local state carrying out its responsibilities. Today, this limit no longer necessarily holds true. PMFs possess a capacity for armed force that rivals and even surpasses local state functions. They can transfer this to their multinational corporate clients. Thus, multinational corporations and their allied private military firms now have the capability to engage in what they term “security-led investment,” in which the physical weakness of the local state is irrelevant to their business operations.”

The emergence of this new form of transnational firm is an obvious example where the expansion of global markets – globalization – has done anything but diminish the incentives for violent conflict (Thomas Friedman’s ludicrous theory, spelled out in the Lexus and the Olive Tree). “PMFs are a different type of company that, instead, relies on the very existence of conflict for profit.”(174).

PMCs could thus act as leaders in a newly evolving stage of corporate dominance, or as the UN special rapporteur put it, “the multinational neocolonialism of the twenty first century.” If Osama bin Laden and al Qaeda can take advantage of the weaknesses of Afghanistan’s government to build a base of operations accountable to no one, there is little that one can imagine can stop corporations from similarly colonizing their hosts. With extreme polarizations of wealth, it’s easy to imagine giant gated cities which protect rich outsiders from the demands of poorer locals (not unlike Vinnell’s compound in Riyadh).

“Conceptions of the international security environment exclusively based on the sole power of states miss out on some of the important changes that the privatized military industry portends,” Singer warns. “The result is that states in the current global system may be like dinosaurs toward the end of the Cretaceous period: powerful but cumbersome, certainly not superceded, but no longer the unchallenged masters of their environment.”

PMFs reject this thesis of a new type of corporate imperialism, says Singer, noting that they have generally been invited in by legitimate governments. But of course 19th century imperialism also often began when a weak ruler requested the original intervention.

It is also easy to envisage situations similar to the warfare that occurred between the various mercantile companies in the 1600s and 1700s, Corporate forces might again enter battle against each other (there are already many well-known examples of large-scale corporate espionage which likely represent only the tip of the iceberg).

“In fact,” Singer adds, “this scenario may already have occurred. Executive Outcomes is rumored to have engaged forces of Omega Support Ltd. in Angola. Violence among firms has also been reported in the DRC and Sierra Leone, often over competing mining claims.” (189) “An added danger of greater private power is the risk that empowered corporate actors themselves will become competitive not only with weak local states, but also to the national interests of other powers, including even their own home states.” (Imagine a plot similar to the movie “Seven Days in May,” where PMC officers, originally invited to serve in top Pentagon advisory roles, effectively take over the military leadership, and in turn unilaterally force the country into war. You might object that we've already sen that w/Richard Perle and neocon cabal.) “Examples of American-based arms manufacturers and technology firms that sold their goods to foreign enemies of the United States abound; nothing would seem to make PMFs, who have even less oversight on their services, any different.

We have already learned from Iran-Contra and BCCI that the locus of judgment on whether, when and how military operations are carried out can easily slip outside state control. In such circumstances, the state’s agent of action is no longer its national military, but instead a network of actors with little accountability or allegiance to any nation, respect for its laws or its citizens. Throw in unbridled profit motive and you have the potential for significant and unforeseen consequences.