[1396] in peace2
America
daemon@ATHENA.MIT.EDU (Felix AuYeung)
Thu Jan 24 10:54:58 2002
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From: Felix AuYeung <FAuYeung@pittsburghfoodbank.org>
To: "'peace-list@mit.edu'" <peace-list@mit.edu>
Cc: "'hungerfellows2002@yahoogroups.com'"
<hungerfellows2002@yahoogroups.com>
Date: Thu, 24 Jan 2002 10:56:56 -0500
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America's Empire Rules an Unbalanced World
Robert Hunter Wade
International Herald Tribune
Thursday, January 3, 2002
http://www.iht.com/articles/43522.html
LONDON Suppose you are a modern-day Roman emperor, the leader of the most
powerful country in a world of sovereign states and international markets.
What sort of framework of international political economy arrangements do
you create so that without having to throw your weight around more than
occasionally, normal market forces bolster the economic preeminence of your
country, allow your citizens to consume far more than they themselves
produce, and keep challengers down?
.
You want autonomy to decide on your exchange rate and monetary policy in
response only to your own national objectives, while having other countries
depend on your support in managing their own economies. You want to be able
to engineer volatility and economic crises in the rest of the world in order
to hinder the growth of centers that might challenge your preeminence and in
order to allow your vulture funds periodically to buy up their assets at
fire-sale prices. You want intense competition between exporters in the rest
of the world that gives you an inflow of imports at constantly decreasing
prices relative to the price of your exports.
.
You want to invite the best brains in the rest of the world to come to your
universities, companies and research institutes. You befriend the middle
classes elsewhere and make sure they have good material reasons for
supporting the framework. You make it unlikely that elites and masses should
ever unite in nativistic reactions to your dominance or demand
"nationalistic" development policies that nurture competitors to your
industries.
.
What features do you hard-wire into the international political economy?
First, free capital mobility. Second, free trade (excepting imports that
threaten domestic industries important for your re-selection). Third,
international investment free from any discriminatory favoring of national
companies through protection, public procurement, public ownership or other
devices, with special emphasis on the freedom of your companies to get the
custom of national elites for the management of their financial assets,
their private education, health care, pensions, and the like.
.
Fourth, your currency as the main reserve currency. Fifth, no constraint on
your ability to create your currency at will (such as a dollar-gold link),
so that you can finance unlimited trade deficits with the rest of the world.
Sixth, international lending at variable interest rates denominated in your
currency, which means that borrowing countries in crisis have to repay you
more when their capacity to repay is less.
.
This combination allows your people to consume far more than they produce;
it periodically produces financial instability and crises in the rest of the
world, which hold back the crisis-affected countries and also cause other
governments to hold more of your currency and therefore help to finance your
deficits; and it allows your firms and your capital to enter and exit other
markets quickly. You also need, of course, a bail-out mechanism that
protects your creditors and displaces any losses from periodic panics onto
the citizens of the borrowing country.
.
To supervise the international framework you want international
organizations that look like cooperatives of member states and carry the
legitimacy of multilateralism, but are financed in a way that allows you to
control them.
.
A Machiavellian interpretation of the U.S. role in the world economy since
the end of the Bretton Woods regime around 1970? Certainly. In reality,
America's engineering of its dominance has at times been for the general
good, when it used its clout to "think for the world." But often its clout
has been used solely in the interests of its richest citizens and most
powerful corporations. This latter tendency has been dominant lately.
.
We see it in its new single-minded unilateralism in international relations,
much exacerbated by the mixture of rage at Sept. 11th and gung-ho jubilation
at "success" in Afghanistan. And we see it in what the United States is now
ramming through the international supervisory organizations.
.
The United States has engineered the World Trade Organization to commit
itself to negotiate a General Agreement on Trade in Services, which will
facilitate a global market in private health care, welfare, pensions,
education and water, supplied - naturally - by U.S. companies, and which
will undermine political support for universal access to social services in
developing countries.
.
And it has engineered the World Bank, through congressional conditions on
the replenishment of IDA, the soft-loan facility, to launch its biggest
refocusing in a decade - a "private sector development" agenda devoted to
the same end of accelerating the private (and nongovernmental) provision of
basic services on a commercial basis. The World Bank has made no evaluation
of its earlier efforts to support private participation in social sectors.
Its new private sector development thrust, especially in the social sectors,
owes everything to intense U.S. pressure.
.
These power relations and exercises of statecraft are obscured in the
current talk about globalization. Far from being just a collapsing of
distance and widening of opportunities for all, the increasing mobility of
information, finance, goods and services frees the American government of
constraints while more tightly constraining everyone else. Globalization and
the global supervisory organizations enable the United States to harness the
rest of the world to its own rhythms and structure.
.
Of course these arrangements do not produce terrorism in any direct way. But
they are deeply implicated in the very slow economic growth in most of the
developing world since 1980, and in the wide and widening world income
inequality. (The average purchasing power of the bottom 10 percent of
Americans is higher than that of two-thirds of the rest of the world's
population.)
.
Slow economic growth and vast income disparities, when seen as such, breed
cohorts of partly educated young people who grow up in anger and despair.
Some try by legal or illegal means to migrate to the West; some join
militant ethnic or religious movements directed at each other and their own
rulers. But now the idea has spread among a few vengeful fundamentalists
that the United States should be attacked directly.
.
The United States and its allies can stamp out specific groups by force and
bribery. But in the longer run, the structural arrangements that replicate a
grossly unequal world have to be redesigned, as we did at the Bretton Woods
conference after World War II, so that markets working within the new
framework produce more equitable results. Historians looking back a century
from now will say that the time to have begun was now.
.
The writer, a professor of political economy at the London School of
Economics and author of "Governing the Market," contributed this comment to
the International Herald Tribune.
*****
this "u.s." empire is of course driven by u.s. multi-national corporations,
and we know how credible and moral they are: the loathing we have for enron
(which the indians have fought against for so long) is the same that
progressives have for a government controlled by money, the same that the
rest of the world has for the u.s.
*****
The American Problem Is Domination of Politics by Money
William Pfaff
International Herald Tribune
Thursday, January 24, 2002
http://www.iht.com/articles/45707.html
NEW YORK The case of Enron and its auditors may become spring 2002's
successor to the Monica Lewinsky case, but addressing the scandal fails to
address America's real problem, which is the domination of politics by
money.
.
The Enron affair is one more corporate-political scandal, more baroque than
usual in scope and ingenuity. However, nothing in the relationship of Enron
to the Bush administration or to government regulators has yet been found to
have been illegal. Enron simply provides another demonstration of the role
of corporate money in the American system. It is the system that is rotten.
.
The American political arena has been transformed from a system in which
contending opinions and interests competed more or less freely into one that
guarantees corporate domination of national economic and social policy, as
well as major corporate influence on foreign policy decisions.
.
Money has been in control since the Supreme Court interpreted campaign
spending and contributions to political candidates as forms of
constitutionally protected free speech. (This decision, Buckley v. Valeo,
occurred in 1976, and concerned spending in a congressional election.) The
natural outcome of that decision was to confer victory on most of those who
spend the most money on electoral campaigns, and to exclude most candidates
who are not supported by corporate or union interests. Those people who have
contributed campaign money typically obtain value for their money, since
victorious candidates want to be re-elected. That this would be the result
seems not to have been considered objectionable by the court's majority.
Corporations exist to make money for their investors and for the managers
who direct them. The other purposes that corporations serve, to produce
goods and give employment to workers, have in current business doctrine been
subordinated to the pursuit of maximum return on capital. So the Enron case
in itself is nothing to be surprised about. It is the biggest corporate
scandal yet, but only that; there will be more to follow.
.
Piquancy is added by the intimacy of the company with President George W.
Bush and so many members of his administration. Outrage is invoked by the
facts that the company paid no taxes in four of the five last years, and
that management's penultimate act was, effectively, to loot its employees'
pension fund.
.
The only surprise is that the board of directors would have suspended the
company's proclaimed code of ethics so as to permit maneuvers to keep debt
off the company's published accounts and mask its true condition from
investors. The board's conduct is a depressing comment on American society
today. The board was composed of an unexceptional body of business and
community notables, like most corporate boards. Its members included a
former government regulator, a former dean of the Stanford business school,
the dean of the University of Texas law school, the former president and the
president emeritus of the same university's cancer center (which benefited
from Enron philanthropy).
.
Most of the 14 directors were associated with institutions that had been
supported by company philanthropy, were Enron consultants, were connected
with companies owned by Enron or did business with Enron. The composition of
this board should have inspired doubt about its independence, but it
probably differs little from the boards of other politically well connected
companies. That so conventional a group of eminent people was willing to
waive the corporation's ethical code when it became an obstacle to the
company's ingenuity in avoiding taxes says worlds about corporate codes of
ethics.
.
The willingness of Arthur Andersen accountants and lawyers to cover their
tracks and shred documents is not that surprising. Questions have been posed
about the objectivity of the big accountancy partnerships ever since they
went into the consultancy business.
.
The scandal is only now acquiring legs, as the press closes in on the
administration's many connections with Kenneth Lay and his company. But what
really is important and scandalous is that the political system itself now
is under the dominant influence of business, mainly the very large
corporations and financial interests, to the disadvantage of other groups in
society with legitimate claims on government. This has happened before. It
happened in the period after the Civil War, when modern American capitalism
was being shaped, producing exploitation and abuses that provoked
"muckraking" reform journalism and the corporate regulation imposed under
the administrations of Theodore Roosevelt.
.
It happened after World War I, ending in the 1929 crash. New Deal regulation
of the securities markets and banking followed, resulting in the post-World
War II business model of "stakeholder" capitalism, where employee and
community interests were protected.
.
Today it may be doubted that a new reform is possible. The existing system
of unlimited political campaign spending is hated by politicians but suits
corporate business. So long as pharaonic sums are required for national
political campaigns, a reform majority will not be elected. If spending
money remains a form of protected speech, the American system will stay
blocked.
.
Los Angeles Times Syndicate.
*****
enron isn't the only corporation affecting u.s. politics. but it is the one
going down, the one grabbing headlines, the one that is now hip to bash.
people have been saying for years how corporations buy politics; if ever
there is a time, now would be it to reach to the mainstream and say
"look---this happens ALL the time and is continuing as we speak. it's time
to change the system."
*****
Enron made a sound investment in Washington
Company spread cash to open doors, change rules
By Jim Drinkard and Greg Farrell
USA TODAY
Thursday, January 24, 2002
http://www.usatoday.com/usatonline/20020124/3799465s.htm
WASHINGTON -- As Enron imploded last year, its cries for help from the Bush
administration went unheeded, leading many to conclude that the company's
heavy spending on politics and lobbying was just another bad investment.
But in reality, Enron's decade-long run as a Washington influence broker was
highly successful. The company's aggressive lobbying drove the deregulation
of markets for energy and other commodities that allowed it to escape
scrutiny and outdistance its rivals. Its dominant position in the new market
of energy trading helped it obscure the questionable investments and dubious
accounting that led to its death spiral.
''They got a lot for their money,'' says James Thurber, who teaches lobbying
at American University in Washington. ''Their influence over keeping things
off the public agenda was profound.''
Lobbying works best when carried out at the obscure margins of public
policy, where there is little public interest or understanding. Enron's
goals -- achieving a zone of freedom from regulation in the arcane areas of
commodities and futures-contract trading -- fit that rule perfectly.
Its plunge into bankruptcy court has Congress, the Justice Department, tort
lawyers, creditors and employees all demanding answers. As Congress opens a
long season of hearings today -- a day after Enron Chairman Kenneth Lay
resigned -- one question looms largest: Did Enron's ability to operate
outside the harsh regulatory spotlight that shines on Wall Street, stock
exchanges and commodity boards allow it to trip in the shadows of its own
unregulated marketplace?
Don't expect a quick answer. Investigators won't know the truth behind
Enron's collapse until they have sifted through all of the firm's internal
books and grilled the company's embattled senior executives. Until then,
Congress has to wrestle with an uncomfortable fact: Over the last decade,
Enron achieved much of what it wanted by getting members of Congress, the
White House and federal regulators to advance its agenda.
It didn't attain every goal. But Enron got enough favors from government to
allow it to create its own unregulated marketplace for the buying and
selling of energy futures contracts and a host of other products. The
company's message to the public, in a slick TV ad campaign touting its
innovative spirit, was ''Ask why.'' But its message to government overseers
often seemed to be ''Don't ask.''
Congress now will start asking hard questions, beginning with hearings today
before the Senate Governmental Affairs and House Energy and Commerce
committees. At least four more panels will hold hearings in the weeks ahead.
''I'm hoping we'll see a national debate over what's best for consumers and
the American economy,'' says Glenn English, a former Democratic congressman
from Oklahoma who now heads the National Rural Electric Cooperative
Association. ''Is there a balance to be struck between regulation and the
free market?''
Even those predisposed against Enron are reluctant to blame deregulation for
the company's downfall. ''At the end, it's not going to be found that
trading in a deregulated world brought them down,'' says Neal Wolkoff,
executive vice president of the New York Mercantile Exchange, a highly
regulated energy commodity market that stood to lose business to Enron's
trading operations. ''Sometimes it's not a lack of rules, but a lack of
people following rules.''
How to buy influence
The story behind Enron's transformation from staid energy company to
America's seventh-largest corporation is a case study in how to use legally
available tools to buy political influence, then apply it to create new
market opportunities.
Starting in the mid-1980s, Lay realized that no matter how well his company
did at producing and transporting natural gas, there was more money to be
made buying and selling it as a commodity. By the early 1990s, he wasn't
alone. Several corporations -- including oil giants Exxon and Mobil as well
as J. P. Morgan and Chase Manhattan -- were clamoring to get into the energy
futures market.
In November 1992, some of those companies asked Wendy Gramm, chairwoman of
the Commodity Futures Trading Commission, to exempt energy derivative
contracts and related swaps from government oversight. Gramm acted quickly,
scheduling a vote on the rule for January 1993, days before the Clinton
administration would take over. Boosted by her support, the proposed rule
passed.
A Republican appointee and wife of Texas Republican Sen. Phil Gramm, she
stepped down when Democrat Bill Clinton took office. A few weeks later, Lay
asked Wendy Gramm to sit on Enron's board of directors and be a member of
its audit committee. She was initially paid in company stock, which she
cashed out for more than $200,000 in 1998. Since then, she has made $50,000
a year in director's salary, plus thousands more in attendance fees. She
lost another $686,000 in a deferred compensation fund when the company went
bust.
Despite the appearance of a trade-off, even Gramm's critics concede that the
commission's ruling was a smart move. The energy derivatives market was
growing rapidly, and there were worries that without an exemption, the
Chicago Board of Trade might sue anyone selling an energy derivative outside
of its centralized market.
''I think her motives and actions were forthright,'' says Richard Breeden, a
former chairman of the Securities and Exchange Commission who clashed with
Gramm on a variety of issues.
Enron's victory before Gramm's commission marked a significant step forward
in its transformation from an energy company into a trading company. It
envisioned a world where energy contracts for electric power, oil and gas
could be traded, swapped and sold just like stocks. But while gas and oil
were commodities that could be shipped and sold across the country,
electricity was another matter.
Regulatory victories
Enron lobbied Congress to deregulate the electricity market nationally, but
those efforts were doomed by strong opposition from regional utilities. So
Enron adopted a two-tiered approach to electricity deregulation: It lobbied
aggressively at the state level while getting the Federal Energy Regulatory
Commission to adopt rules that favored its interests.
The strategy began paying off in 1996 when federal energy regulators adopted
a new rule, Order 888. The rule forced reluctant local utilities to open
transmission lines to power being shipped from one state to another. In
effect, Order 888 turned the nation's electricity transmission grid into an
interstate highway system for energy.
With this infrastructure in place, Enron worked hard at the state level and
got California, Massachusetts, New York and Pennsylvania to deregulate their
electricity markets. When they did, Enron was at the center of a new market
for wholesale electric power. It bought power from generators across the
country and sold it to utilities in the deregulated states, using the newly
deregulated transmission grid.
In December 1999, Enron won another significant decision from federal
regulators: Order 2000. Under this order, the commission asked local
electric companies to join ''regional transmission organizations'' to
coordinate the flow of power from state to state. That led to a less
cumbersome system of electricity transmission, eliminating some of the
''tolls'' on the energy superhighway and making the trading of energy
contracts even easier.
The final step in Enron's transformation into an unregulated commodities
exchange was the Commodity Futures Modernization Act. This law, quietly
tacked onto a spending bill and passed Dec. 15, 2000, allowed Enron to
expand its online futures trading operations. As a result, Enron Online, a
commodity exchange run out of Enron's Houston headquarters, could compete
against the Chicago Board of Trade and the New York Mercantile Exchange
without submitting to the same level of oversight.
Two powerful Republicans from Texas, Reps. Dick Armey and Tom DeLay, were
instrumental in pushing the legislation through the House. DeLay's wife,
Christine, worked for a lobbying firm, Alexander Strategies, that Enron had
hired for up to $200,000 a year to push energy deregulation.
Along the way, Enron also won hundreds of millions of dollars in federal
subsidies to help finance its overseas investments.
From its base in the natural gas business, Enron had completely transformed
itself into a middleman in markets from electricity to water, broadband
capacity and newsprint. It even explored trying to break the railroad
monopoly by turning rail capacity into a commodity that could be brokered by
outside traders.
''They were a path-breaker when it came to the use of the futures markets
and derivatives,'' says Dan Reicher, a former assistant secretary of Energy
in the Clinton administration. ''It allowed them to take a traditional
industry and turn it into something different, finding new places to add
value and make money in what used to be fairly standard, boring
transactions.''
Enron also had success lobbying the Securities and Exchange Commission. In
1994, it received an exemption from the Public Utility Holding Company Act.
The Depression-era law was designed to prevent utilities from owning
multiple plants in one geographic area, allowing them to jack up rates.
As a power producer, Enron's plant holdings were small. But as a power
marketer, it was a force. It could buy enough energy-futures contracts in a
region to create a virtual monopoly. Nevertheless, the commission issued a
''no-action'' letter that allowed Enron to sidestep the law's anti-monopoly
provisions.
In 1997, Enron won an exemption from the Investment Company Act of 1940. The
exemption allowed Enron to treat foreign power plants as investments, which
let it leave debt from those power plants off its books. It is now known
that Enron created more than 3,000 limited partnerships and other entities,
many based offshore -- a revelation that led to the company's downward slide
last fall.
Spreading money around
In Washington, Enron threw money around in a way that helped gild its aura
of success.
Since 1989, it has spent $5.9 million on federal politics, including $3.5
million in unregulated ''soft money'' gifts to the national political
parties. The company's giving has favored Republicans, who share its
free-market ideology, a trend that intensified after the GOP won control of
the House and Senate in 1994. Over the past 12 years, 74% of Enron's
largesse has gone to Republicans.
The company was President Bush's largest benefactor, pumping $1 million into
his campaigns for Texas governor and president and his inaugural
celebrations. While the administration worked on a new energy policy last
year, Enron had six private meetings with policymakers and saw many of its
goals included in the final document. The White House won't say whether any
other interested party had as many contacts. Bush economic adviser Lawrence
Lindsey and Trade Representative Robert Zoellick are former Enron advisers.
Enron and Lay had worked hard to forge ties with previous administrations.
Lay played golf with Clinton, and one of Clinton's top advisers, Mack
McLarty, later joined Enron's board. Lay was also close to former president
George Bush and spent the night at the White House during his tenure.
Since 1996, Enron has spent more than $7 million to run its Washington
lobbying office and hire dozens of well-connected lobbyists. Among those who
have worked for the company are Marc Racicot, just named by Bush to head the
Republican Party, and former senator J. Bennett Johnston, a Louisiana
Democrat.
Beyond those traditional lobbying approaches, the company rarely passed up a
chance to do favors for the powerful who were the gatekeepers for its
deregulatory goals:
* Enron paid for fact-finding trips for members of Congress and their
staffs.
* Its name was ubiquitous at the 2000 Democratic and Republican national
conventions as a sponsor of parties for senior politicians. The company was
one of the secret sponsors of an opulent string of rail cars DeLay
maintained as a private getaway for lobbyists and House Republicans near the
GOP convention center in Philadelphia. It helped pay for an elaborate Mardi
Gras party on the back lot at Paramount Studios in Los Angeles for Sen. John
Breaux, D-La.
* Lay was a $250,000 sponsor of the GOP's fundraising gala in Washington in
April 2000. He also helped raise money for a literacy charity headed by
Barbara Bush, mother of the president.
Enron's spending didn't just help push changes the company wanted, says
American University's Thurber. It also bought the company safety from the
scrutiny of regulators and Congress.
''They had so much money that was flooding so many places,'' he says. ''That
helped them immensely in keeping off the agenda.''
