News and Features
In one of the most foolish and cruelly ironic urban public policy decisions in recent memory, New York Governor George Pataki and New York City Mayor Rudolph Giuliani are planning to shower a series of subsidies, expected to total more than $1 billion, on the high citadel of self-styled free-market global capitalism, the New York Stock Exchange.
In December the city entered into a letter of intent to assist the NYSE in constructing a new trading floor. The arrangement commits the city to acquire land for the new exchange building, and for the city and state to construct a new trading floor for the NYSE and to grant it tax and subsidized energy benefits. In exchange, the taxpayers receive $10 million in annual rent, which will never come close to reimbursing the city and state for their costs.
The sole purported rationale for this corporate welfare bonanza is to retain the NYSE in New York City. If one were to credit this claim, the gift of more than $1 billion for the purpose of retaining fewer than 6,000 jobs--while not even ostensibly creating new ones--would, even by the corrupt standards of job-retention- blackmail deals between corporations and politicians, set a high-water mark for casuistry. However, the deal is even worse than that description suggests. There is no chance that the stock exchange would leave New York City. When I went on the NYSE floor last year and asked veteran traders about the possibility of the exchange moving to New Jersey, they laughed as they dismissed it out of hand. In addition to the institutional identity and reputation of the stock exchange, its personal connections to Wall Street firms--committed to New York City by history, by the Manhattan residences of many of their principals and employees and by long-term office rental commitments, increasingly sealed by yet other city subsidies--preclude the possibility of a move across the Hudson to become the Hoboken Stock Exchange.
NYSE's New Jersey ploy is nothing more than a ruse for covering public officials using what Justice Louis Brandeis once called "other people's money." As is typical of such arrangements, the corporate-politician conspiracy to ramrod the deal is shrouded in secrecy and in contempt for democratic processes. The city refuses to make available to the public a copy of the letter of intent it signed with the NYSE to proceed with the deal. The architectural plans for the building complex--expected by preservation advocates to generate outrage--remain concealed. The governor forced legislation authorizing the deal to go forward on a super-expedited basis, leaving legislators virtually no time to review the bill. They proceeded to pass it unanimously. New York City Council members also have failed to object to the bill.
The Fourth Estate, perhaps inured to the issue by the steady drumbeat of announcements regarding New York City taxpayer subsidies for big business, has done a less than stellar job covering this boondoggle. The New York Times editorial page endorsed the scheme years ago, when it was first being floated. Recognizing "why some oppose on principle any concession to the blackmailing tactics of businesses that threaten to move unless they get public assistance," the Times concluded that New York had no choice but to succumb. "If New York City refuses to play this game, other, hungrier cities and states will take advantage of that passivity." Apparently, the corporate executives at The New York Times Co. found this argument persuasive. In February the Times and New York City completed their own corporate welfare deal--giving the Times $29 million in tax breaks and other incentives to maintain its offices in Times Square.
It would be hard to script a more brazen and shameless corporate giveaway than a billion-dollar donation to the emblem of global capitalism from a city where nearly one in three children lives in poverty, and public investment necessities go begging. But the final act of the NYSE drama has yet to play out: There is still time for the citizens of New York, and at least one of the candidates seeking to replace Giuliani when his term expires at the end of this year, to demand cancellation of this corrupt deal.
New York's City Council is about to open a promising new front in the global struggle against sweatshop exploitation--a city procurement ordinance that requires decent wages and factory conditions for the apparel workers who make uniforms for New York's finest. Mayor Giuliani huffily vetoed the measure, denouncing it as "socialist economics," but since the Council passed it 39 to 5, a veto override is expected. New York City spends up to $70 million a year on uniforms for police, firefighters, sanitation, park and other employees. The city is a customer with clout.
The new ordinance was drafted and promoted by UNITE (Union of Needletrades, Industrial and Textile Employees) with a unique feature--a global index for determining "nonpoverty" wage levels, country by country, based on objective economic data. The law would require any apparel manufacturer, domestic or foreign, to certify that its wages meet the standard--before the city will buy the company's goods. "The city should not spend its citizens' money in ways that shock the conscience of a vast majority," the Council report declared.
What is more significant, however, is that New York's initiative should reopen a path for local legislative activism on global issues. New York has created a model that city and state governments across the country can use to legislate their own procurement rules against sweatshop conditions. As of last year, the subject seemed closed. The Supreme Court nullified a Massachusetts law boycotting companies that do business with Burma, known for its brutal repression of workers and citizens. The Massachusetts statute was badly drawn and clearly suggested that Boston was trying to make foreign policy--power the Constitution gives to Washington. The New York ordinance has been cast to avoid those flaws, though it will certainly be challenged in court (Mayor Giuliani promised to lead the attack).
"The apparel industry has become a global factory where there are no standards," says Steven Weingarten, UNITE's director of industrial development. "This bill connects the customer with standards for decent conditions and a decent wage. The uniformed unions--police, firefighters and others--are very supportive. To wear uniforms made by people in sweatshop conditions is not what they want to stand for. There are 80,000 apparel workers in New York City, and it should at least stop rewarding the irresponsible manufacturers, both in the United States and abroad."
The principal mechanism for enforcement is disclosure. To complete a sale, a company must certify where the goods were made, including locations of subcontractors, and that it is producing as a "responsible manufacturer"--that is, complying with relevant wage, health, environmental and safety laws, not abusing or discriminating against employees and providing the nonpoverty wage determined by national economic context. If a company files a false report and violates the standards, it could be fined or barred from contracting with the city or sued for civil damages. The reporting system opens the door for citizens to submit facts, and the companies must permit independent monitoring of their factories if city officials request it.
Professor Mark Barenberg of Columbia Law School, chairman of the governing board of the Worker Rights Consortium, believes UNITE's draft legislation is immune to any accusation that New York City is poaching on federal territory, either the regulation of interstate commerce or the executive branch's exclusive domain of foreign relations. Among its flaws, Massachusetts' Burma law targeted a single country with the goal of forcing policy changes, and the boycott rule attempted to hold US corporations responsible for a foreign government's actions. In the New York legislation, the terms apply to any seller of apparel, regardless of location, and involve issues that are already accepted in state-local procurement laws (though not usually applied to foreign production). Under the interstate commerce clause, cities and states are forbidden to discriminate against other states by targeting their producers with anticompetitive restrictions. But, Barenberg explains, "when a city or state acts like a consumer--a market participant itself--it can discriminate in the ways any consumer does."
If a city decides its citizens are offended by abusive working conditions or exploitative wages by producers outside its jurisdiction, it cannot enact a law to stop them, but it can refuse to buy their goods. "It would be a radical act of the Supreme Court to overrule the 'market participant' doctrine and say states and cities may not choose to reject products from foreign countries because they don't want to buy from sweatshops," Barenberg observes.
Of course, the Rehnquist Supreme Court has demonstrated that it is fully capable of "radical acts" in pursuit of right-wing results. Among its various rationales, the Court might declare that while the New York ordinance alone does not damage constitutional balance, the prospect of scores or hundreds of communities enacting similar measures would be intolerable. In the meantime, however, widespread agitation from the grassroots is precisely what's needed to build a fire under the seat of government in Washington. That's how democracy was supposed to work--let the Supremes analyze that.
The grand ambition of the Rev. Al Sharpton.
Adrian Wilson can't make a lobbying trip to
Albany anytime soon: The New York State Department of Corrections
does not escort its prisoners to the state capital for teach-ins. But
his story--typical of the 22,000 nonviolent drug offenders in New
York's cellblocks on any given day--could serve as the centerpiece of
the campaign now under way for the long-overdue repeal of the
notoriously punitive Rockefeller drug laws. In 1983 Wilson, an
African-American, then 29, was arrested for drug possession--his
first offense--and prosecutors offered him a plea bargain that would
have required him to undergo electroshock treatments and eight
months' incarceration. Wilson chose instead to exercise his
constitutional right to a trial. Convicted of possessing four ounces
of cocaine, instead of eight months he faced a mandatory prison term
of fifteen years to life.
No single moment in the history
of US criminal justice matches the destructive impact of the New York
legislature's 1973 session. That was when Governor Nelson Rockefeller
set the tone for a national wave of prison-packing schemes with the
drug laws that bear his name. As Wilson's case illustrates, the
Rockefeller drug laws combined two regressive criminal justice
policies into a new and potent brew: They prescribe imprisonment
rather than treatment for drug offenders, and they establish
mandatory minimum sentences and give the power to decide sentences to
the prosecutors, who choose charges, rather than to the judges
The outcome, repeated thousands of times
daily around the country: Nonviolent drug offenders like Wilson get
punished not in proportion to any presumed threat to society but for
daring to inconvenience prosecutors with a trial. With built-in
incentives for police and prosecutors to concentrate on low-level
users and with racial discrimination an inevitability, the
Rockefeller drug laws are the ancestor of just about every regressive
criminal justice policy since enacted--three-strikes laws, federal
sentencing guidelines and zero-tolerance police sweeps.
With the cost for imprisoning Rockefeller drug offenders
topping $710 million per year, Governor George Pataki has at last
proposed a package of reforms reducing minimum drug sentences and
expanding treatment. Assembly Democrats--many of whom have dodged the
issue for years until Pataki opened the door--have upped the ante,
proposing more sweeping discretion for judges and more money for drug
treatment. The Correctional Association of New York and a broad array
of activist, religious and legal-reform groups have launched a Drop
the Rock campaign (kicked off with a March 1 forum in Manhattan
co-sponsored by the Nation Institute), which on March 27 will bring
thousands to Albany for a day of teach-ins and citizen lobbying. Only
a handful of district attorneys, worried about losing their
sentencing leverage in plea bargains, are holding out for the
Rockefeller status quo.
So the question is not whether New York will reform but if reform will go far enough. Pataki's plan would not give judges any more discretion for Class B felonies, the most commonly charged drug offenses in New York, and would actually
increase some minimum sentences. Pataki would allow prosecutors to handpick the offenders tracked into treatment--a certain recipe for abuse and another usurpation of the proper authority of judges. Perhaps most important, Pataki has so far come nowhere near proposing a budget for drug treatment commensurate with the need. Drug-law reform without a commitment to drug treatment is a half-measure, similar to the 1980s deinstitutionalization of psychiatric patients
with no system of community mental healthcare in place.
New York, which for years styled itself as a pioneer in criminal justice
policy, is now playing catch-up to states like California, whose
voters last November overwhelmingly approved a treatment-over-prison
referendum for first- and second-time offenders, or Colorado and
Nevada, which have passed medical-marijuana measures. But the
Rockefeller laws are the founding charter of the failed war on drugs,
and their repeal would turn state reform tremors into an American
earthquake. In immediate impact on the lives of the poor and people
of color, and as a long-term shift in national priorities, there will
be no more important campaign this year. It's time to Drop the
When former Republican Governor Pete Wilson & Co. started the ball rolling on electric power deregulation in California, there were probably many results they didn't anticipate. Not least is a revival of social-democratic and populist politics in the Golden State.
The Left Coast may turn out to be just the left coast after all. Having gone into eclipse in the mid-nineties with the passage of the anti-immigrant Proposition 187 and the rise of deregulation fervor, and suffering through two years of disappointment under moderate Democratic Governor Gray Davis, progressives are again on the move, with even the preternaturally cautious Davis, a potential 2004 presidential contender, along for much of the ride.
Most Californians now favor both a state takeover of the power grid and the establishment of a public power authority. Most don't believe there's a real power shortage and blame their utilities and the out-of-state power companies for manipulating the situation. Two-thirds oppose deregulation, and in a Los Angeles Times poll 60 percent opposed new nuclear power plants. Meanwhile, organized labor, consumer advocates and environmentalists are coming together to urge a dramatic expansion of public ownership of power and an end to the decades of private utility dominance in California politics that led to the debacle. "We're fighting to protect jobs, hold the line on the environment, protect against rate increases for fixed-income consumers and to keep the utilities out of bankruptcy to protect workers," says California Labor Federation chief Art Pulaski.
Coalitions have come and gone over the years, but shifts in political tectonics caused by the power crisis make this one's prospects far better. "The atmosphere is dramatically different," notes former State Senator Tom Hayden. "You can work for years hitting your head against the wall. Then crisis can lend clarity, making many things possible."
Even some Republicans are questioning the utilities' decision to shovel money from their nearly bankrupt operating companies into the safe havens of their holding companies. But that's as far as they'll go. It doesn't matter, though. Democrats control the governorship and both houses of the legislature, and although they needed Republican votes to pass emergency bills allowing the state to enter into long-term contracts to buy power and distribute it through the utilities, they don't need Republicans to enact more far-reaching measures.
Outside the political establishment, a populist consumer movement has been revitalized, with former Nader associate Harvey Rosenfield making credible threats of an omnibus energy initiative on next year's state ballot. Lost on few is the fact that the 30 percent of Californians with municipal power are in good shape. "I want a coherent plan to restore reliable and affordable electric power with a public power authority as its centerpiece," says Rosenfield, head of Ratepayer Revolt. "It would look a lot like Prop 103 [an insurance reform initiative he wrote in 1988], with re-regulation of the market and consolidation of duplicate agencies." He goes on to say, "If they pass a bailout, we'll reverse it at the ballot box."
Governor Davis, like others in the establishment, sees Rosenfield as a gadfly who finally finds himself in the right place at the right time. Davis believes he can head off an initiative by limiting rate increases through the election. That's far easier said than done, however, even with the state on the verge of entering into long-term electric power contracts. And no one wants to look like they're caving in to utilities' demands for a second bailout in five years (the first being the $28 billion they got as part of the 1996 deregulation package). So the debate has shifted--away from an earlier proposal of Davis and Assembly Speaker Bob Hertzberg to get stock options from the utilities in exchange for an infusion of state money and toward a proposal by State Senate President John Burton and State Treasurer Phil Angelides for a state takeover of hard assets and an ongoing role in the power business.
Davis and Hertzberg have been more solicitous of the utilities than Burton and Angelides, with Davis neglecting to mention the utilities' central role in crafting the disastrous deregulation in his tough-sounding State of the State address in January. Indeed, Davis opposed Rosenfield's unsuccessful 1998 anti-deregulation initiative, a move Hayden describes as "part of an overall shift of the Democratic Party to market ideology and deregulation to avoid the 'big government' image."
But as the crisis has worn on, the utilities have tried to push the blame onto the Davis administration, and Davis has moved closer to Angelides and Burton (brother of the late Congressman Phil Burton, whose most famous saying was, "The only way to deal with exploiters is to terrorize the bastards"). There's a very good reason for that. Public polls show widespread disdain for the utilities and their role in fomenting the crisis. Private research goes further, indicating that people are very open to sweeping government solutions. Says one Davis associate: "Even some people who don't like government have had enough. They want a sense of control. They think government can give them that, and the market's given them chaos." The coalition of consumer and environmental groups backing Rosenfield's initiative also supports Burton and Angelides's plans for a takeover of the power grid and a state power authority, as does organized labor.
While generally supportive, Davis's old boss, former Governor Jerry Brown, who pioneered conservation and renewable energy programs in his administration, sounded a note of caution. "We have to be careful about centralizing power in opposing the centralization of power," says Brown. "It requires a lot of thought to make sure that government doesn't merely replicate the same old patterns."
The price for a grid takeover remains unclear, as does the price of other efforts to stabilize the utilities. If any action looks more like a bailout than a buyout, Rosenfield's initiative, and Davis--still looking good in the polls--could be in trouble. This is especially true given future rate increases, which are assured. By next year (because a "temporary" increase in January will be permanent and a 10 percent reduction that was part of the dereg scheme expires) rates will be at least 20 percent higher than they were at the beginning of this year.
The state's big utilities have ridden high, wide and handsome over California's political range for a century, so much so that their leaders felt free to junket off to England with their putative regulators to gain inspiration from Thatcherite deregulation. But that's over. It's a supreme irony that a scheme designed to further the dominance of radical capitalism would trigger its opposite. Just as Pete Wilson didn't foresee that his anti-immigrant Prop 187 would lead to overwhelming Latino support for Democratic candidates a few years later, he and the other Republican free-marketeers who started deregulation didn't foresee that their market nostrums would trigger a resurgence of public power and populism. But in yet another of the unintended consequences that mark the deregulation debacle, they have.
As George W. Bush so fuzzily put it, "The California crunch really is the result of not enough power-generating plants and then not enough power to power the power of generating plants." Whatever that means, his main responses to California's deregulation crisis have been to tout drilling in the Arctic National Wildlife Refuge (ANWR) and to bar federal intervention that would curb the profiteering by big generating companies.
Since a tiny percent of the nation's electricity is produced by burning oil, drilling in the refuge is irrelevant to the problem. But, of course, it's quite relevant to the big oil and gas companies' expectations of a payoff from this Administration, in which they had invested millions in campaign contributions. They're salivating for exploration on hitherto off-limits federal lands with ANWR as the opening wedge. Bush plays along by fanning fears of power crises nationwide to overcome the pro-environment sentiment among voters. (Recent polls show that two-thirds of Americans favor a ban on drilling in the wildlife refuge.)
As for withholding federal intervention, that's simply the old-time deregulation religion preached by conservative pundits who blame the failure to deregulate fully for the California crunch. Actually, California's deregulation bill was drafted by the power companies, which made hefty contributions to grease its way through the legislature. Seeking to recapture from consumers the costs of their bad investments in nuclear plants, the utilities devised the very freeze on consumer rates on which they now blame the current crisis, and which they are trying to overturn in the courts. They also agreed to divest themselves of much of their generating capacity, leaving them vulnerable to the market manipulations of independent power producers--including their own parent companies, which are reaping huge profits from this contrived crisis. Those same parent companies are using their "near bankrupt" utilities to launder more than $20 billion in the stranded-cost bailouts that prompted the crisis in the first place.
Clearly, more bailouts for utilities and unleashing Big Oil to ravage the wilds are not the solutions to California's--or the nation's--power problems, especially when there is a native California solution at hand: municipal ownership and conservation. The model is the Sacramento Municipal Utility District, which, after closing down its one nuclear reactor in 1989, held prices steady, invested heavily in wind and solar power and promoted energy efficiency through programs like subsidized buyouts of old, energy-guzzling home refrigerators.
Unfortunately, Governor Gray Davis and the California legislature have chosen to ignore the lesson of Sacramento and to "solve" the crisis by throwing more billions in public money at the utilities. Davis should be using public money and eminent domain to buy the assets of these rogue utilities out of bankruptcy and turn them over to direct public control. A statewide network of public-owned, democratically run municipal utilities would work just fine.
Municipal ownership like Sacramento's is now being urgently considered by San Francisco and other beleaguered California cities. Rather than catering to his energy "adviser" Ken Lay of Enron (who injected $500,000 into Bush campaign coffers, making him the largest single contributor in the last election cycle) and the rest of the oil and gas companies, Bush should recognize that the wind and sun provide more than enough "power to power the power of generating plants" and that power is rightfully owned and most efficiently operated by the public itself.
Tommy Thompson's track record as governor of Wisconsin bodes poorly for his tenure as head of the Department of Health and Human Services.
The Bush Administration is relying on falsehoods when making its case for opening up Alaska to drilling.
Greed led to miscalculation, which led to brownouts and soaring rates.
For downsized workers in Bloomington, it's time to start thinking globally.
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