News and Features
On terrorism and the new democratic realism.
Last spring Richard Pollak asked in these pages, "Is GE Mightier Than the Hudson?" (May 28, 2001). Given the Environmental Protection Agency's December 4 decision to dredge the PCB-contaminated river, it is tempting to ring in the new year with a resounding No. Despite the company's multimillion-dollar blitz of lawyering, lobbying and PR, the Bush Administration, in the person of its EPA Administrator, Christine Todd Whitman, has come down squarely on the side of those in New York's historic Hudson River Valley who have been agitating for years to make GE clean up the lethal mess it created by dumping more than a million pounds of polychlorinated biphenyls in the river from the 1940s into the 1970s. This pollution has turned 200 miles of the Hudson, from just above Albany south to New York Harbor, into the biggest Superfund site in the nation; EPA law requires that GE pay the cost of removing the toxic chemicals, which the agency estimates at $460 million. More than once, the company has told its stockholders it can well afford this sum, as a multinational with a market value of some $500 billion surely can.
Still, it may be premature to pop the champagne corks. This past fall, fearing that Whitman might follow the lead of her Clinton Administration predecessor, Carol Browner, and endorse the cleanup, GE filed a federal suit attacking as unconstitutional a Superfund provision that allows the EPA, if the company refuses to dredge, to do the job itself and bill GE for three times the final cost plus penalties of $27,500 a day. GE has plenty of time (and cash) to pursue this and other maneuvers against dredging, which is needed to remove some 150,000 pounds of PCBs still in the Hudson. The EPA estimates it will take at least three years to work out the project's engineering and other details--e.g., what kind of equipment is needed, how much stirred-up sediment is acceptable and what landfills can safely handle the contaminated mud. Many residents along the banks of the river are divided--sometimes angrily--on these and several other issues. During the EPA's 127-day comment period in 2001 it received about thirty-eight boxes of letters and 35,000 e-mails, many spurred by GE's scare campaign--on billboards, in newspaper ads and on TV infomercials--warning that dredging will destroy the river.
The EPA has pledged that the public will have even more of a voice in the project's design decisions over the coming months--a welcome process but one that GE is likely to exploit with more propaganda. At its enviro-friendly-sounding website (hudsonwatch.com), for example, the company continues to insist, on no hard evidence, that the citizens of the Hudson River Valley oppose dredging "overwhelmingly." Some residents do resist dredging and the inevitable inconvenience it will bring to their communities, and not all have arrived at their view because of GE's PR tactics. But after almost two decades of review by the EPA, the burden of scientific evidence shows that the remaining PCBs, which cause cancer in laboratory animals and probably in humans, continue to poison the river a quarter-century after their use was banned and GE stopped dumping them.
The EPA's December 4 order could be the precedent that requires the company to clean up forty other sites where it has dumped PCBs. This would cost several billion dollars, a hit not so easy to reassure shareholders about. Even with GE master-builder Jack Welch retired and busy flogging his bestselling How-I-Did-It book, don't look for the company to roll over anytime soon.
Talk about rebuilding New York, and sooner or later someone will pipe up that out of crisis comes opportunity. It depends on where you stand. Right now what poor and working-class New Yorkers have got is crisis, and unless a force of historic proportion develops to shift the course of things, what will follow is more of the same.
Taking the crisis part first, it's well-known that New York has lost 95,000 jobs since September 11, less well-known that it lost 75,000 in the twelve months prior, and that even in boom times 1.5 million people, most of them with jobs, were turning to soup kitchens. Now those kitchens have had to turn people away for lack of food, and grassroots community agencies, to which for at least ten years government has outsourced a whole range of human services, are themselves against the wall. This past autumn Mayor Giuliani ordered every city department other than fire, police and the board of education to cut its budget by 15 percent, meaning nonprofit groups with city contracts took a similar cut. Governor Pataki froze state money at a cost to nonprofits of more than $200 million. Meanwhile, foundations warned they'd make fewer grants, smaller grants, their capital having been clobbered on the stock market. And in fashioning end-of-year appeals, every group strove to connect to 9/11, because that's the trigger for charitable giving. September 11 relief funds are bulging with $1.1 billion. There's so much cash available for grief counseling that the big charities are fairly begging to give it away, but for tackling the material sources of grief-as-everyday-life among people who can claim no direct link to the twin towers--that's trickier.
At the Good Old Lower East Side, a tenants' rights and neighborhood preservation organization, we are looking at a worst-case loss of $200,000 out of our $500,000 annual budget. Meanwhile, the work goes on--only now we worry because one of our organizers has had asthma attacks from the air downtown while at housing court, because a lot of people we work with are depressed and scared, because the supposed era of good feeling ushered in by the tragedy hasn't stopped landlord harassment or evictions, because gentrification steams forward in the Lower East Side, because low-income people never just have housing problems; they have employment problems and health problems and family problems and immigration problems, and all of those are getting worse. From our counterparts in other groups, in areas from children's rights to prisoners' rights, we hear the same story of too little money and too much need. Drug and alcohol abuse is up, domestic violence is up, homelessness is way up (30,000 adults and children in city shelters, an all-time high). In December some 30,000 New York City recipients of public assistance hit federal time limits for welfare; in 2002 19,000 more will lose their benefits, left to compete with 95,000 displaced workers for jobs and services that are barely there.
One has to be a keen shopper for silver linings to see opportunity in all this, but for the past months, in a variety of venues, groups like ours have been meeting with legal services agencies, immigrant groups, unions, community activists, progressive politicians, economic policy analysts and others to discuss a people's agenda for rebuilding. For years politicians have been pronouncing on the value of work; now the state's commitment to work, but also to a living, must be tested. And if there are to be tax incentives to private companies, there must be a return in jobs, environmental safety, an expanded economic infrastructure--transportation, housing, communications, health, education. People are asking, Can we think of rebuilding that enhances all of New York's boroughs? Can we look at those holes where the towers stood and boldly imagine a different city, a better city? And can we mobilize an army to fight for that vision?
Even in the best of times that would be difficult. Now there's recession, and unless some major revenue sources are tapped, State Senator Eric Schneiderman says, "we're looking at something that makes the New York fiscal crisis of the 1970s look like a picnic in Coney Island." Only a fraction of the $20 billion that Bush promised to the city in September has materialized. The state and city are both running many billions of dollars in deficits; when the governor and mayor come out with their budgets in January and February, they are likely to strike at every social program, the better to impress Washington with their resolve to shoot the wounded. Again, the nonprofit service contractors, which are small and diffuse but account for about 15 percent of the city's budget, will be an attractive target. So will the city's civilian work force, already shrunk by 20 percent since 1993.
Schneiderman, for one, is calling for a freeze on about $4 billion in state tax cuts scheduled to go into effect in 2002; for reinstatement of the city's commuter tax; for repeal of the Rockefeller drug laws, which, he says, would save the state hundreds of millions a year. There are other ideas, including exacting sacrifices from the top 10 percent of New York's population, who doubled their wealth in the boom, and from city property holders, whose average tax rate has been frozen for ten years. The point is for New York's social justice forces to be organized, ready to struggle for every dollar and demand every good. Some of the bigger unions are saying they might want to give Mayor Mike Bloomberg a "honeymoon." Some in the media are still flogging the idea that there's a "new" New York, more generous, more one-for-all. It's the same New York, just worse. Only the rich have opportunity by right. The rest of us have to fight for it.
Finally, a reporter had the temerity to question Bush on Friday regarding the ignominious collapse of Enron Corp. run by Kenneth L. Lay, a Bush family intimate and top campaign contributor.
It scarcely seems possible, but two of the staple items on the conversational menu of the left these past years might well be on the edge of disappearance, or at least a change in content. Mumia Abu-Jamal is no longer on death row. Pacifica's wars are amid final settlement. In both instances, it's a good advertisement for pertinacity.
China is taking away Mexico's jobs, as globalization enters a fateful new stage.
During the week of December 17, US freighters are expected to dock in Cuban ports and begin offloading a historic shipment of foodstuffs. In a deal worth up to $30 million, the Castro government has purchased wheat, corn, soybeans, rice and flour and is currently negotiating with Perdue and Tyson to buy chicken in order to replenish supplies destroyed by Hurricane Michelle. Paid for with cash, the sale marks the first major commercial transaction between the United States and Cuba since the Kennedy Administration imposed the US trade embargo forty years ago.
Few people know that President Kennedy exempted food from the original US trade blockade. The Johnson Administration added foodstuffs to the embargo in February 1964 after the conservative senator from New York, Kenneth Keating, complained that Cuban efforts to purchase $2 million worth of lard--yes, lard--would have "a significant impact upon the foreign policy and international interests of the United States." According to declassified White House documents, National Security Adviser McGeorge Bundy's office asked the Department of Agriculture to provide an analysis of the "uses of lard" in hopes that some ominous strategic purpose could explain US actions. "Cuba could be expected to use 100 percent of any lard it gets for edible purposes," an aide reported back. "It would probably not be credible to take the line that we have decided to stop shipments of lard because it is not solely a food."
Since the end of the cold war, the embargo has proved a serious embarrassment for Washington. Instituted as part of a broad set of punitive measures designed to isolate the Castro regime, the trade sanctions have succeeded only in isolating the United States. Every year for the past decade the United Nations has voted overwhelmingly to condemn the US blockade; the last vote, on November 27, was a 167-to-3 defeat for the United States, with only the Marshall Islands and Israel supporting Washington and all fifteen members of the European Union voting against the United States. Our Western allies have been antagonized by the Helms-Burton bill, which tightened the embargo by penalizing friendly nations that freely trade with Cuba. Indeed, as Cuba has opened its economy to foreign investment and international trade, US corporations and agricultural interests have watched from the sidelines as competitors from Canada, Europe and Asia have built profitable business and commercial partnerships on the island.
US corporate interests, led by giant food conglomerates and rice, soy and wheat growers, have emerged as the principal lobbyists for lifting, at least partially, trade restrictions against Cuba. Once an executive order, the embargo was codified into law by the Helms-Burton bill. But legislators from agricultural states like Missouri, Iowa and Louisiana have progressively plowed into the political turf of the hard-line anti-Castro representatives from Florida; majorities in the Senate and House are moving closer to dispensing with this ineffective, counterproductive anachronism of the cold war.
Last year, on an amendment sponsored by Republican Representative George Nethercutt of Washington, Congress took the first substantive step to rescind the embargo, voting to lift the ban on commercial transactions with Cuba involving food and medicine. But a last-minute provision, inserted by the Republican leadership at the behest of a handful of Miami legislators, prohibited private financing of Cuban purchases. Angry at the punitive credit restrictions, the Castro government stated that it would "not spend a nickel" in the United States until the law was changed.
Cuba's deft decision to alter its rhetorical position and ask the Bush Administration to expedite this $30 million cold cash transaction in the wake of Hurricane Michelle may well contribute to reconsideration of those financing restrictions and indeed the embargo itself. Already, the Senate Agriculture Committee, chaired by Iowa Senator Tom Harkin, has voted to allow private bank and corporate financing. Analysts predict that US economic interests that want to continue such sales will eventually turn their attention to lifting restrictions on travel to the island, since American tourist dollars could provide Cuba with substantial currency to purchase US goods. "This creates momentum," according to Philip Peters, a Republican economic analyst at the Lexington Institute, who will lead a Congressional delegation to Cuba in January. "This re-energizes people who want to trade with Cuba."
"We have always been rather proud of the fact that 'we weren't trying to starve the Cuban people,'" an aide argued to McGeorge Bundy in an abortive effort to keep food from being added to the embargo. After thirty-seven years of trying, and failing, to do just that, restoring food sales has created the first major crack in the embargo. As the current of commerce begins to flow, that crack is likely to widen until the embargo collapses from its own outdated weight.
The September 11 attacks spread their pall over the AFL-CIO convention in early December as union representatives touchingly remembered the dead--including more than 700 union members--and honored the everyday heroism of workers like firefighters, ironworkers and nurses. But unions also confronted the political fallout of the terror attacks, which undermined major globalization protests, dampened a new antisweatshop campaign, chilled labor's crusade for immigration reform and gave Bush new clout, which he used to eke out a one-vote House passage of fast-track trade-promotion authority that labor strongly opposed. The attacks also deepened the recession, thus making collective bargaining tougher and shrinking union treasuries.
The low-key mood at the Las Vegas gathering obscured the determination of the labor movement to fight vigorously on its major campaigns, not simply to play defense or hunker down and hope as many unions did in the 1980s. Delegates thunderously pounded their tables in approval as AFL-CIO president John Sweeney condemned Bush and "his corporate backers [for] waging a vicious war on working families." Firefighters president Harold Schaitberger similarly warned politicians, "We don't want homilies. We want healthcare for every worker."
While supporting the war against terrorists, the AFL-CIO strongly attacked the Bush Administration's antiterrorism measures for threatening civil liberties with only one dissenting voice in the executive council. Union leaders showed little enthusiasm for the war despite their statements of support, and there were indications that labor would not uniformly, if at all, back extension of the war. "Catching and dealing with bin Laden and Al Qaeda is one thing," UNITE (clothing and textile workers) president Bruce Raynor said. "Waging war on lots of other countries is another."
While labor grieved, corporate America attacked workers with plant closings, layoffs and pursuit of legislative favors in Washington, Raynor said, but now unions must "be more aggressive than ever" in organizing and mobilizing public sentiment against the "deceit" and "hypocrisy" of big business and the White House. The minority of unions that have been organizing--with recent large-scale successes among workers ranging from janitors and homecare workers to graduate teaching assistants, nurses and engineers--plan to continue, even intensify, their organizing campaigns. "We don't believe the recession will have any substantive negative impact on organizing," argued Gerald McEntee, president of AFSCME, which since 1998 has doubled its spending on organizing and quadrupled newly organized public service workers to roughly 50,000 this year. The AFL-CIO now is concentrating on helping unions that haven't seriously pursued organizing opportunities in their industries. For example, the Teamsters, who have had few organizing successes recently, announced a new pact with longshore unions to organize 50,000 truckers at the nation's ports.
Most important, the AFL-CIO and affiliated unions are increasing the use of their growing political clout and community alliances to try to counteract employer opposition to unions, perhaps the most important obstacle to union growth. With the help of state labor federations and metropolitan central labor councils, and through their own collective bargaining, unions are winning agreements that require employers to be neutral during organizing drives and that prohibit use of public funds to fight unions. Also, labor is telling union-backed politicians that "they need to help us increase union density," explained AFL-CIO political director Steve Rosenthal, who recently honed labor's already sophisticated operations in New Jersey, getting 73 percent of union members to the polls, with 67 percent of those voting for the new, strongly prolabor governor, James McGreevy. It's in the interest of Democrats: With just 3,000 more union members in five key districts, Rosenthal calculated, the Democrats would now control the House of Representatives. Unions have also decided that they want to double--to 5,000--the current number of union members in elected office, creating what McEntee called "sort of our labor party." But union leaders put off a decision about how much money to give the AFL-CIO for politics as well as its other work until next February, reflecting union leaders' desire to be more involved in developing a focused, efficient plan for the federation.
The momentum for immigration reform evaporated on September 11, but union leaders were determined to renew their campaign early next year with a series of forums and a push to make sure that survivors of the terror attacks and families of victims are eligible for the same benefits, regardless of immigrant status. HERE (hotel workers) president John Wilhelm still hopes to make immigration reform a major issue in next year's elections.
Nobody was sanguine about the prospects for next year, with unemployment growing, state budgets shrinking and double-digit healthcare inflation, but Minnesota public employees successfully went out on strike shortly after the terror attacks, and Boston hotel workers recently won a strong contract on the brink of a walkout. Union leaders think that their members and the general public are quietly outraged at the greed and excess of corporations and the Bush Administration, even during a national security crisis. Mineworkers president Cecil Roberts joined Jesse Jackson in a call for labor to march on Washington in protest that gained warm applause. If Bush and the corporations want to wage war, as Sweeney said, they will find that the labor movement is better prepared than it has been in many years to engage the fight.
Enron is Whitewater in spades.
The rise and fall of Enron is an instant classic in the annals of capitalism because, in one calamitous stroke, it wipes out so many sanctified illusions that rule in the magic marketplace. Enron embodies Nobel-class hubris like that of the market sophisticates who brought Long-Term Capital Management to ruin in 1998. It also smells of the raw monopolistic greed common a century ago. An energy-trading company that Wall Street had valued at $80 billion ten months ago is now a penny stock. Meanwhile, California consumers and businesses are stuck with the ruinously inflated electricity prices that Enron rode to brief financial glory. The firm's gullible creditors include some of the best gilt-edged names in American banking--J.P. Morgan Chase, Citigroup--whose ancestral houses were big players during the first Gilded Age too. Unfortunately, then and now, these venerable financial institutions lured millions of innocents to the slaughter, unwitting shareholders who bought the exuberant promises.
In this case, the lambs include Enron's own employees (thousands of whom are abruptly out of work) because top management cleverly prohibited their 401(k) accounts from selling Enron's plummeting stock while the big boys were dumping theirs. If the financial losses to banks are severe enough--we don't yet know the full truth--then US taxpayers may be burned too, their money used once again to rescue delinquent financiers from their just deserts in the name of "saving the system." Nobody ever said capitalism was pretty.
Markets are imperfectible human artifacts and always subject to gross error, not to mention high-stakes fraud, because the transactions are always the work of human beings. Computerization and esoteric mathematical formulations do not change that humble fact; neither does the Internet. This same lesson was learned from great pain and loss in the early twentieth century and led eventually to the political understanding that markets without governors and regulators will repeatedly throw off disastrous consequences--extreme price swings, occasional busts and clever larcenies--so stabilizing rules and limits were imposed. That knowledge was pushed aside by the modern era's deregulation.
Enron was a massive experiment in e-commerce--a commodity-trading firm that used the Internet to connect distant buyers and sellers of everything from electricity and natural gas, steel and newsprint to pollution credits and financial derivatives hedging against interest rates or the weather. If you check out Enron Online, you will see the hubris still on display, despite the bankruptcy. "Why Enron?" the company's website asks. "We have strong skills in risk intermediation and good systems to control risk.... We have successfully sourced capital for all potential investments." As it turns out, these are the very qualities that were missing, the "new economy" conceits that brought it down. Enron's siren song was plausible enough (if you left out the human folly and greed). Deregulation, combined with Internet trading, exposed the old-line utilities to fierce, continuous price competition, the firm explained, forcing them to eliminate inefficiencies or get out. Consumers would win from the lower wholesale prices; so would producers of "soft energy" alternatives, like wind or solar. Enron would preside like a wise monarch.
But while Enron promised to scrutinize the soundness of buyers and sellers, nobody was scrutinizing the trader king. The middleman is unregulated in this brave new world. When Enron management made a series of outrageous and self-interested off-the-books deals to raise capital, its auditor, Arthur Andersen, gave approval. The credit-rating agencies remained mute. Enron's bankers were busy touting the stock as on its way to the moon. Enron and chairman Kenneth Lay, meanwhile, pumped nearly $2 million into the election of George W. Bush, who returned the favor by letting Enron pick federal regulatory appointments. Lay and his agents were all over Vice President Cheney's secretive energy task force, and White House economic adviser Lawrence Lindsey received $50,000 last year as an Enron "adviser."
The disaster of California's blackouts and soaring electric bills was a prima facie case of monopoly price-gouging--artificial scarcity induced by utilities simultaneously shutting down electricity generation for "repairs"--that cries out for criminal investigation. Collusion has not yet been proved nor Enron's involvement, as far as I know, but the firm profited spectacularly. While California groaned, Enron's share price more than doubled. Enron then used its new glamour status to leverage still more debt, expanding its reach worldwide and opening more trading tables--financing it all in ways even savvy analysts couldn't understand. It was the classic behavior of unfettered freebooters, and it ended in the familiar way.
What did we learn? First, wholesale deregulation has a vicious downside for ordinary citizens and is open to gross manipulation. Second, as Floyd Norris of the New York Times pointed out, Enron is essentially not an energy company but a financial institution that trades various financial instruments, utterly free of regulating limits. Like a bank, it must raise huge capital flows to maintain liquidity to underwrite the transactions, but unlike a bank or a financial market, it operates without oversight. Third, nearly every party to this debacle--Enron itself, its auditor, the bankers and brokerages--is guilty of profound conflicts of interest. They do not tell the truth to retail customers like small-scale investors for fear of offending their big investment clients. Enron, it seems, didn't tell the truth to its bankers either, and they didn't ask.
As we learn more, the fall of Enron may be seen as the logical result of repealing the Glass-Steagall Act, which prohibited commercial banks from merging with investment houses. The remedial agenda would start with the reregulation of banking and finance, in order to restore a milieu of prudence and honest dealings at the heart of capitalism. Other sectors should follow: energy, telecommunications and airlines, for starters.
It would be comforting to think this event will turn politics around and put a little spine in our legislators. Certainly many state governments have learned from California's pain. But don't count on Washington. Even after Enron's meltdown, leading Democrats continue to shill for more deregulation, aware that their money patrons will be most upset if they reopen fundamental scrutiny of how wealth is created in the magic market. Elite opinion leaders will probably stick with the laissez-faire dogma, as it continues to fall apart, until the bloody losses lap over their shoes too.