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Dead ends, new beginnings--the industry's twenty-five-year crisis

The Africa trip of Treasury Secretary Paul O'Neill and Irish rock star
Bono produced a bumper harvest of photo ops and articles about aid to
Africa. Unfortunately, media coverage was mired in the perennial and
stale aid debate: Should we give more? Does it work?

If the O'Neill-Bono safari resulted in Washington finally paying more of
its proper share for global health, education and clean water, that
would be cause for applause. But any real change requires shifting the
terms of debate. Indeed, the term "aid" itself carries the patronizing
connotation of charity and a division of the world into "donors" and

At the late June meeting in Canada of the rich countries known as the
G8, aid to Africa will be high on the agenda. But behind the rhetoric,
there is little new money--as evidenced by the just-announced paltry sum
of US funding for AIDS--and even less new thinking. Despite the new
mantra of "partnership," the current aid system, in which agencies like
the World Bank and the US Treasury decide what is good for the poor,
reflects the system of global apartheid that is itself the problem.

There is an urgent need to pay for such global public needs as the
battles against AIDS and poverty by increasing the flow of real
resources from rich to poor. But the old rationales and the old aid
system will not do. Granted, some individuals and programs within that
system make real contributions. But they are undermined by the negative
effects of top-down aid and the policies imposed with it.

For a real partnership, the concept of "aid" should be replaced by a
common obligation to finance international public investment for common
needs. Rich countries should pay their fair share based on their
privileged place in the world economy. At the global level, just as
within societies, stacked economic rules unjustly reward some and punish
others, making compensatory public action essential. Reparations to
repair the damage from five centuries of exploitation, racism and
violence are long overdue. Even for those who dismiss such reasoning as
moralizing, the argument of self-interest should be enough. There will
be no security for the rich unless the fruits of the global economy are
shared more equitably.

As former World Bank official Joseph Stiglitz recently remarked in the
New York Review of Books, it is "a peculiar world, in which the
poor countries are in effect subsidizing the richest country, which
happens, at the same time, to be among the stingiest in giving
assistance in the world."

One prerequisite for new thinking about questions like "Does aid work?"
is a correct definition of the term itself. Funds from US Agency for
International Development, or the World Bank often go not for economic
development but to prop up clients, dispose of agricultural surpluses,
impose right-wing economic policies mislabeled "reform" or simply to
recycle old debts. Why should money transfers like these be counted as
aid? This kind of "aid" undermines development and promotes repression
and violence in poor countries.

Money aimed at reaching agreed development goals like health, education
and agricultural development could more accurately be called
"international public investment." Of course, such investment should be
monitored to make sure that it achieves results and is not mismanaged or
siphoned off by corrupt officials. But mechanisms to do this must break
with the vertical donor-recipient dichotomy. Monitoring should not be
monopolized by the US Treasury or the World Bank. Instead, the primary
responsibility should be lodged with vigilant elected representatives,
civil society and media in countries where the money is spent, aided by
greater transparency among the "development partners."

One well-established example of what is possible is the UN's Capital
Development Fund, which is highly rated for its effective support for
local public investment backed by participatory governance. Another is
the new Global Fund to Fight AIDS, Tuberculosis & Malaria, which has
already demonstrated the potential for opening up decision-making to
public scrutiny. Its governing board includes both "donor" and
"recipient" countries, as well as representatives of affected groups. A
lively online debate among activists feeds into the official

Funding for agencies like these is now by "voluntary" donor
contributions. This must change. Transfers from rich to poor should be
institutionalized within what should ultimately be a redistributive tax
system that functions across national boundaries, like payments within
the European Union.

There is no immediate prospect for applying such a system worldwide.
Activists can make a start, however, by setting up standards that rich
countries should meet. AIDS activists, for example, have calculated the
fair contribution each country should make to the Global AIDS Fund (see

Initiatives like the Global AIDS Fund show that alternatives are
possible. Procedures for defining objectives and reviewing results
should be built from the bottom up and opened up to democratic scrutiny.
Instead of abstract debates about whether "aid" works, rich countries
should come up with the money now for real needs. That's not "aid," it's
just a common-sense public investment.

Attempts to organize are squelched by a flying column of

Would it be too early to sense a sudden, uncovenanted shift against the corporate ethic, if ethic is the word? I can barely turn the page of a newspaper or magazine without striking across either some damaging admission, or at least some damage-control statement, from the boardroom classes.

The camera pans across the room
To see what she has made:
An omelette or a spring bouquet
Or just an inside trade.

"How many times can you say 'unbelievable'?" my wife asked the other
morning, as I was rattling the newspaper and again exclaiming over the
latest outrageous news from American capitalism. Maybe it was the story
about the CEO of Tyco International, a very wealthy and much admired
titan, being indicted for evading the New York State sales tax on his
art purchases. Perhaps it was the disclosure that the soaring market in
energy trading, a jewel of the new economy, was largely a fabrication
built on phony round-trip trades. Or the accusation that Perot Systems,
after designing California's deregulated energy-trading system, turned
around and showed the energy companies how to blow holes in it (and
generate those soaring electric bills for Californians).

It is unbelievable--what we've learned in the past six or eight
months about the financial system and corporate management. The
systematic deceit and imaginative greed--the sheer chintziness of
personal finagling for more loot--go well beyond the darkest hunches
harbored by resident skeptics like myself. Indeed, the Wall Street
system is now being flayed in the media almost daily by its own leading
tribunes. Listen to this summary of the scandals: "The failures of Wall
Street's compliance efforts are coming under intense scrutiny--part of a
growing awareness of how deeply flawed the US financial markets really
are. The watchdogs charged with keeping the financial world honest have
all lost credibility themselves: outside auditors who bend the rules to
please corporate clients, analysts who shape stock recommendations to
woo investment-banking customers and government regulators too timid or
overwhelmed to keep track of the frenzy." You might have read those
points in The Nation, but these words appeared on the front page
of the Wall Street Journal. A week later, another page-one
Journal story crisply explained the implications for global
investors: "Boasts about world-class corporate disclosure, bookkeeping
and regulation of American financial markets have become laughable in
the wake of Enron and Arthur Andersen scandals."

When radical critique becomes mainstream observation, change may be in
the air. In my view, this is a rare historical moment--conditions are
ripe for reforming and reordering the system, an opportunity unmatched
since World War II. How things really work is on the table, visible to
all in shocking detail, authoritatively documented by the torrent of
disclosures, with more to come. The libertarian ideology that colonized
economic affairs and politics during the past two decades (markets know
best, government is an obstacle, greed is good) has been pulled up
short. The conservative orthodoxy is vulnerable--actually breaking
down--because it has no good explanations for what we now understand to
be routine malpractice in business and finance. Political tinder is
spread all around the landscape, but who will strike the match?

The potential downside of this moment is also palpable and quite
ominous: Nothing will happen, nothing will change--nobody goes to jail,
no significant reforms are enacted. If so, the main result will be
confirmation of an already endemic public cynicism and the further
poisoning of American values. The revelations, instead of provoking a
sea change in political thinking, may be smothered by the alignments of
corporate-financial power, diverted into false reforms and complexified
to the point that media attention and public anger are exhausted. In
that event, the consequences for the country will be less obvious but
profoundly corrosive. The system would go forward in roughly the same
fashion (perhaps tarted up with public-relations rouge), and everyone
would understand that corruption is the system. In markets and in
the popular culture, the message would be: Forget that crap about
ethics--might as well take the low road, since that's how the big boys
get theirs.

The stakes are enormous, and it's much too early to predict the outcome.
But there's already abundant evidence that the business establishment
expects to ride out this storm and is working the usual political levers
to insure it. The politics resemble the S&L debacle in the late
1980s, when Congressional Republocrats put out lots of noise and smoke
but left the high-priced suits unruffled and stuck the public with the
bill. Our current galaxy of scandals is far more grave because it is
systemic. Anyone with courage among the Democratic presidential hopefuls
could seize this moment and reorder the agenda for 2004, but no one so
far has found the guts to break ranks with corporate power. Smoldering
public anger, however, may yet find a way to express itself, perhaps in
the fall elections, and rouse the reluctant politicians.

For now, the best hope seems to be that the bankers and business guys
will react to the fact that financial markets have been severely damaged
by the scandalous revelations, as have the high-flying moguls of
corporate America. Who can trust them? Who wants to pour more good money
after bad? In other words, this scandal stuff is bad for business,
especially bad for the faltering stock market. Henry Paulson Jr., chair
of Goldman Sachs, delivered that message recently in a sober speech
before the National Press Club and endorsed a number of useful reforms.
His remedies are insufficient (even the Journal editorial page
was happy to bless them) but are a fair start. A chorus of high-minded
anguish from elite circles might persuade Washington that this problem
does need fixing.

The scandals of Enron et al., unfortunately, must compete with another
story--the war on terrorism--that's more exciting, and threatening, than
dirty bookkeeping or the looted billions. The two crises are intertwined
in perverse ways. The smug triumphalism of Bush's unilateralist war
policy could be abruptly deflated by economic events--which probably
would be a good thing for world affairs, since Washington couldn't run
roughshod over others, but terrible for US prosperity. The financial
scandals have provided yet another chilling reason to be wary of the US
stock market, and if overseas investors decide to take their money home
in volume, the already declining dollar will fall sharply. Credit would
thus become suddenly scarce, since our debtor-nation economy relies
heavily on capital borrowed from abroad, and such a convergence would
trigger an ugly downdraft in the US economy. In that event, the
fashionable boastfulness about America, the only superpower, would
implode as swiftly as Enron's stock price.

Labor-backed politicians are being asked to return the favor in union fights.

Unions are gradually making fuller use of the Internet's capacities to
improve communication with their own staffs or members. But increasingly
they are also using the web to recruit new members or to establish
"virtual communities" of union supporters in arenas not yet amenable to
the standard collective-bargaining model.

Alliance@IBM ( is an example of an effective
Net-supported minority union, operating without a demonstrated pro-union
majority and without a collective-bargaining contract at a traditional
nonunion company. The alliance provides information and advice to
workers at IBM through the web. A similar effort at a partially
organized employer is WAGE ("Workers at GE,", which draws on contributions from fourteen cooperating
international unions. The Microsoft-inflected WashTech
( and the Australian IT Workers Alliance
( are open-source unions that are closer to
craft unions or occupational associations. Both are responsive to the
distinctive professional needs of these workers, such as access to a
variety of job experiences and additional formal education, and the
portability of high-level benefits when changing jobs.

The National Writers Union (, a UAW affiliate, is another
example of a union virtually created off the Net. It provides
information and advice--including extensive job postings--to members,
and it lobbies on their behalf, most spectacularly in the recent Supreme
Court decision it won on freelance worker copyright rights. But most of
its members work without a collectively bargained contract.

In Britain, UNISON (the largest union in the country) and the National
Union of Students have a website that tells student workers their rights
and gives them advice about how to deal with workplace problems
( It is a particularly engaging and practical
illustration of how concrete problems can be addressed through Net

Finally, for a more geographically defined labor community, take a look
at the website of the King County AFL-CIO (, the Seattle
central labor council that uses the Net to coordinate its own business,
bring community and labor groups together for discussion and common
action, post messages and general information to the broader community,
and otherwise create a "virtual" union hall with much of the spirit and
dense activity that used to be common in actual union halls in major

Let's create "open-source unions," and welcome millions into the


Can the protests go beyond calls for greater electoral transparency, to embrace a truly social democratic agenda?

October 1, 2014

Migrant domestic workers from Bangladesh enjoy little protection from their government, but they’re not alone.

October 1, 2014

Why are we setting diversity goals based on the 1980 census?

October 1, 2014

An increasingly technologized world makes life easier… for some people, anyway.

September 29, 2014

The de Blasio administration unveils an ambitious plan: reduce emissions and inequality at the same time.

September 24, 2014

Marriott made $626 million last year—but that doesn’t mean that if you don’t tip your hotel housekeeper, she’ll see any more of those profits.

September 24, 2014

From the beginning, the Koch brothers were exploiting troubles at VA hospitals to weaken Obamacare and attack Democrats.

September 23, 2014

After decades of entertaining the city, most jazz artists remain pension-less—but Justice for Jazz Artists wants to change that.

September 22, 2014

Eric on this week's concerts and Reed on how austerity hawks are in perpetual debt crisis mode, despite all evidence to the contrary.

September 22, 2014

The failure to protect workers is worsening an already dire public health crisis.

September 19, 2014