News and Features
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.
The AFL-CIO has opened its 24th Biennial Convention here in the glitzy neon heart of this very unionized Sin City, but Big Labor's mood is anything but frivolous.
Franklin Serrano, an economist at Federal University of Rio de Janeiro, recently lamented the large proportion of graduate students in economics who leave for the United States. "But there is something worse than them leaving. It's when they come back."
"Brain damage," he says, "is worse than brain drain."
Argentina is the latest Latin American economy to be mismanaged into a crisis by US-trained economists. Unemployment is above 17 percent, the economy is in its fourth year of recession and the country is now in the process of defaulting on its unpayable foreign debt. It's not easy being the poster child of neoliberalism.
Argentina's currency has been pegged to the US dollar since 1991. This worked for a while, but in the past few years the peso has become highly overvalued. Rather than devalue the currency, the country piled up mountains of debt to prop it up and watched its interest rates soar as investors demanded ever higher risk premiums. For comparison, imagine the United States borrowing $1.4 trillion (70 percent of our federal budget) in order to keep our own overvalued currency from falling.
This is not the first time in recent years that the IMF has burdened a country with billions of dollars of debt in order to prop up an overvalued currency. In 1998 it did the same thing in Brazil and Russia, with predictable results. In both cases the currency collapsed rather quickly in spite of the loans. And in both cases the economy responded positively to the devaluation, with Russia in 2000 registering its highest growth in two decades. The fund's argument in the case of Brazil and Russia was that if the currency was devalued, the result would be runaway inflation. But that never happened.
The IMF has also insisted on budget austerity for Argentina--which makes about as much sense during a recession as high interest rates. First in line for cuts have been state pensions, salaries, unemployment benefits and other social spending, insuring that the burden of "adjustment" will continue to fall, as it usually does, on those who can least afford it. And even the debt "restructuring"--i.e., default--now under way may not lead to economic recovery: If the currency remains fixed at a rate that investors still see as overvalued, the crisis will continue until it collapses.
Why does the IMF seem incapable of learning from repeated failures? The interest of foreign bondholders cannot be overlooked: The longer the fixed exchange rate holds, the smaller will be the losses of US lenders--even if the peso eventually collapses. But there has been a broader political concern as well: Argentina has done everything that Washington has told it to do, and the economy is a wreck. As a result the Bush Administration, despite its distaste for IMF "bailouts," was reluctant to be seen as abandoning the Argentine government. It kept pouring money in until it became clear that Argentina's debt could never be repaid.
The sacrifice of Argentina's economy for the sake of Washington's imperial interests and the interests of "emerging market" bondholders fits a pattern at the IMF, including some of the most high-profile interventions of recent years. In Russia and the transition economies, the first priority has been to execute a rapid, irreversible change to a market-driven society, regardless of the economic consequences. Russia lost half its national income in about five years of IMF-led transition, an economic decline never before seen in the absence of war or natural disaster. In Asia, the fund's desire to open these economies to US capital flows--in countries that because of their high savings rates had little need for foreign borrowing--caused a severe financial crisis in 1997-98. The fund then exploited the crisis to further open these economies, worsened it with exorbitantly high interest rates and fiscal austerity and convinced the governments of the region to guarantee the debt owed to foreign lenders.
The IMF is able to decide these major economic policies for dozens of countries because it sits atop a creditors' cartel, much like the OPEC oil cartel. Those who refuse to take the fund's "advice" find themselves ineligible for credit from the World Bank and other multilateral lenders--like the Inter-American Development Bank or G-7 governments--or even for private credit.
The fund's aid packages are generally reported approvingly in the press as "bailouts." But it is the bankers and bondholders, particularly foreign, who are being bailed out; the people, especially the poor, are tossed overboard. Over the longer term, the neoliberal program of the IMF and the World Bank--and their ability to enforce it--has contributed to a substantial decline in economic growth over the past twenty years throughout the vast majority of low- and middle-income countries. In Latin America, per capita GDP has grown a mere 6 percent over the past two decades, as compared with 75 percent in 1960-80.
As Latin America's economies grind to a halt, dragged down by the recession in the United States, the dismal reality of this long, failed economic experiment is sinking in. The reign of US-trained economists and their sponsors in Washington may be coming to an end.
The organizers of the Globalization and Resistance Conference, held at the City University of New York's Graduate Center on November 16 and 17, had a very bad stroke of luck.
No one will mistake the WTO agreement in Doha, launching a new round of global trade negotiations, as a victory for the people. The usual cast of characters, led by the biggest kid on the block, the United States, orchestrated a familiar drama of high peril--world cataclysm if the negotiations fail--and then congratulated themselves for achieving a comparatively modest agenda for going forward. Poorer peoples of the world did not win; neither did the millions of citizens from wealthier nations who have mobilized to oppose the advance of corporate domination. On one issue after another, those people were losers. What else?
Well, in fact, there was something new about this diplomatic dust-up. The big kids realized they had to make nice with the little kids. If you are among the protesters whom the Wall Street Journal unaffectionately calls "Luddite whackos," you may take a little credit for that. At Seattle, remember, one of the central themes raised by people in the streets was the terrible inequities visited upon developing nations by globalization and its dominant powers, the multinational corporations. The initial reaction from governing elites and their media camp followers was disbelief. What on earth are the rabble talking about? Don't they know that globalization lifts all boats, especially those of the poor? Two years later, those pious sermons have been dropped. The governors instead made confession and solicitude the themes of their speeches. It's true, they announced, the poor have been screwed, but we want to make it up to them. Thus, they claim, this new round will be devoted to "development" and correcting the economic injustices.
That's rhetorical blather, of course, and the poorer countries weren't deluded. Still, it is one more small banner of progress in the long and difficult march toward forcing real reform. The developing countries have gained some leverage for their independent views and sovereign aspirations--not a lot but some. They were assisted in this by those voices in the street.
A far more substantive advance is the great concession made by the United States and others when they accepted that public health in poor countries comes before the patent rights of Big Pharma. The monopolistic greed of the drug companies is so blatantly inhumane that one hardly needs to congratulate our trade officials for recognizing it. Given the spongy nature of these agreements, we cannot even yet be sure that the breakthrough is real. Still, this was another major objective of the grassroots movement, led by ACT UP and other activists who campaigned alongside the ministers from Africa, Asia and Latin America. If the pharmaceutical lobbyists maneuver to undo the achievement in the back room, they will be up against a still broader phalanx of ferocious protest from rich and poor nations alike. If the leaders of globalization slyly try to rescind their concession, the WTO's weakening legitimacy will sink further and faster.
Building power globally by uniting distant peoples who seem powerless is a long march, uphill all the way. But we knew that. The lesson from Doha is that zesty, conscientious and honest dialogues across the vast space of global differences can yield real results. With many more conversations and agitations, the vision of coalescing citizens will endure--vigorous, viable and someday capable of winning much larger victories.
How the right is using trade law to overturn American democracy.
A final declaration for the fourth WTO Ministerial Session was finally issued on November 14 after negotiations that extended well past the original deadline.
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