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Who Will Determine the Future of Capitalism?

Posted by Philip Mattera on March 13th, 2009

Amid the worst financial and economic crisis in decades, the U.S. business press tends to get caught up in the daily fluctuations of the stock market and, to a lesser extent, the monthly changes in the unemployment rate. By contrast, London’s Financial Times is looking at the big picture. It recently launched a series of articles under the rubric of The Future of Capitalism. In addition to soliciting varying views on this monumental question, the paper published a feature this week presuming to name the 50 people around the world who will “frame the way forward.”

Kicking off the series, the FT’s Martin Wolf was blunt in asserting that the ideology of unfettered markets promoted over the past three decades must now be judged a failure. Sounding like a traditional Marxist, Wolf writes that “the era of liberalisation [the European term for market fundamentalism] contained seeds of its own downfall” in the form of tendencies such as “frenetic financial innovation” and “bubbles in asset prices.”

An article in the series by Gillian Tett casually notes that “naked greed, lax regulation, excessively loose monetary policy, fraudulent borrowing and managerial failure all played a role” in bringing about the crisis. Richard Layard of the London School of Economics weighs in with a piece arguing that “we should stop the worship of money and create a more humane society where the quality of human experience is the criterion.” Did editorial copy intended for New Left Review mistakenly end up in the FT computers?

Wolf finished his initial article with the statement: “Where we end up, after this financial tornado, is for us to seek to determine.” Yet who is the “we” Wolf is referring to?

Following the damning critique of markets and poor government oversight, the last ones we should turn to for leadership are the powers that be. Yet that is exactly the group that dominates the list of those who, according to the editors of FT, will lead the way forward. The 50 movers and shakers include 14 politicians, starting with President Obama and Chinese Prime Minister Wen Jiabao; ten central bankers; three financial regulators; and four heads of multinational institutions such as the IMF and the WTO. Also included are six economists, including Paul Krugman and Obama advisor Paul Volcker, and three prominent investors, among them George Soros and Warren Buffett.

The list also finds room for three chief executives (the heads of Nissan, PepsiCo and Google) and, amazingly, the chiefs of four major banks: Goldman Sachs, JPMorgan Chase, HSBC and BNP Paribas. It even includes two talking heads: Arianna Huffington and Rush Limbaugh.

Except for Olivier Besancenot of France’s New Anticapitalist Party, who is included among the politicians in a way that seems a bit condescending, there is not a single person on the list directly involved in a movement to challenge corporate power or even to significantly alter the relationship between business and the rest of society. There is not a single labor leader, prominent environmental advocate or other leading activist. The editors at FT seem never to have heard of civil society.

Then again, the problem may not be thickheadedness among FT editors. Perhaps the voices for radical change have simply not been loud enough to earn a place on a list of those who will play a significant role in the shaping capitalism’s future. In fact, one of the articles in the FT series suggests that in Europe neither the Left nor the labor movement has taken a leadership role in responding to the crisis, even as spontaneous protests have erupted in numerous countries.

In the United States, where those forces are weaker, anger at the crisis has to a great extent been channeled into support for the Keynesian policies of the Obama Administration. That’s unavoidable in the short term, but it doesn’t address the need for fundamental alteration of economic institutions. If, as the Financial Times suggests, the future of capitalism is up for grabs, let’s make sure we all join the fray.

Originally posted at: http://dirtdiggersdigest.org/archives/341

Hemispheric Conference against Militarization Says No to Merida Initiative, U.S. Military Bases

Posted by Laura Carlsen on December 30th, 2008
Americas Policy Program, Center for International Policy

More than 800 representatives from organizations throughout the Americas made their way to the northern city of La Esperanza, Honduras to take a strong stand against the militarization of their nations and communities. Following three days of workshops, the participants read their final declaration in front of the gates of the U.S. Army Base at Palmerola, Honduras, just hours from the conference site. The first demand on the list was to close down this and all U.S. military bases in Latin America and the Caribbean. By the end of the demonstration, the walls of the base sported hundreds of spray-painted messages and demands that contrasted sharply with their prison-like austerity.

Palmerola, formally called the Soto Cano Air Base, brought back some very bad memories among the hundreds of Central American participants. The U.S. government installed the base in 1981 and used it to launch the illegal contra operations against the Nicaraguan government. The base was also used to airlift support to counterinsurgency operations in Guatemala and El Salvador and train U.S. forces in counterinsurgency techniques during the dirty wars that left over 100,000 dead, and is now used as a base for the U.S.-sponsored "war on drugs."

The demilitarization conference also called for an immediate halt to the recently launched "Merida Initiative," the Bush administration's new Trojan horse for remilitarization of the region. The resolution asserts that the measure "expands U.S. military intervention and contributes to the militarization of our countries" and representatives from the Central American nations and Mexico included in the military aid package committed to a process of monitoring the funds and defeating further appropriations.

The Merida Initiative was announced by President Bush as a "counter-narcotics, counter-terrorism, and border security" cooperation initiative in October 2007. The model extends the Bush administration's infamous national security strategy of 2002 to impose it as the U.S.-led security model for the hemisphere. The approach relies on huge defense contracts to U.S. corporations, and military and police deployment to deal with issues ranging from drug trafficking to illegal immigration and seeks to extend U.S. military hegemony in foreign lands. It has been proven in Colombia and other areas where it has been applied to have the effect of increasing violence, failing to decrease drug flows, and leading to extensive human rights violations.

Among the 14 resolutions of the conference, three others reject aspects of the Initiative: the repeal of anti-terrorist laws that criminalize social protest and are a direct result of U.S. pressure to impose the disastrous Bush counter-terrorism paradigm; the demand to replace the militarized "war on drugs" model with measures of citizen participation, community heath, etc.; and the demand for full respect for the rights of migrants.

Although on the surface, Latin America is experiencing a period of relative calm after the brutality of the military dictatorships and the dirty wars, grassroots movement leaders from all over the continent described a context of increasing aggression. The indigenous and farm organizations that occupy territories coveted by transnational corporations have become targets of forced displacement. Social movements that protest privatization and free trade agreements have been dubbed terrorists and attacked and imprisoned under new anti-terrorist laws that are a poor legal facade for outright repression. The use of the military troops in counter-narcotic activities has become commonplace and often hides other agendas of the powerful. Police forces have come to deal with youth as if being young itself were a crime.

In viewing the threats of militarization in their societies, participants use a broader definition than just the presence of army bases and troops. "Militarism," states the Campaign for Demilitarization of the Americas, is " the daily presence of the military logic in our society, in our economic forms, in our social links, and in the logic of gender domination and the supposed natural superiority of men over women." Using this concept, the conference covered the profound need to change the educational system and social norms, to work from within communities, as well as making demands for changes in the external conditions that affect them.

Despite days of testimonies that sometimes included tears and anger, delegates to the conference expressed hope above all else. Ecuador's new constitution and decision to kick out the U.S. army base at Manta was cited as proof of progress.

Both concrete plans for action and an encouraging consensus emerged: the breadth of the challenge can be overwhelming but the dream of lasting peace provides an irresistible light at the end of the tunnel.

The declaration concludes on this note: "... through these campaigns and actions on the grassroots level, organized within each nation and throughout the continent, we can reach a day not long from now when we fulfill the dream of living free of violence, exclusion, and war."

Originally posted on October 17, 2008. Read the full declaration:
http://americas.irc-online.org/am/5605

James Bond Takes on the Corporate Water Privateers

Posted by Jeff Conant on December 10th, 2008

Spoiler Alert!

Back in the good old days of the Cold War, everybody’s favorite secret agent, James Bond, fought villains like Dr. No, an evil scientist out to sabotage U.S. missile tests, and Mr. Big, a Soviet agent using pirate treasure to finance espionage in America. But as Bond’s friend Mathis tells him in Quantum of Solace, released this month, “When one is young, it’s easy to tell the difference between right and wrong. As one gets older, the villains and heroes get all mixed up.”

The reference is to a shady new Bond villain, agent of the Quantum organization – one Dominic Greene. In public, Greene is a leading environmentalist whose organization, Greene Planet, buys up large tracts of land for ecological preserves. But behind the scenes, Greene has another agenda. As he says to his co-conspirators, “This is the most valuable resource in the world and we need to control as much of it as we can.”

The film makes a number of plays on the assumption that the resource in question is oil – but oil is so…twentieth century.

By the time Bond has pursued Greene from Italy to Haiti, from Haiti to Austria, and crash-landed his plane in a sinkhole in the high, barren desert of Bolivia, we make the discovery that this vital resource is – surprise! – water.

Colluding with Greene is a cast of evil characters taken straight from the history books. We have General Medrano, the ex-dictator of Bolivia, to whom Greene says, “You want your country back? My organization can give it to you.” We have the U.S. Ambassador, myopically sticking to the familiar program: “Okay, we do nothing to stop a coup, and you give us a lease to any oil you find.” And we have the British foreign office, continually wrangling with M15, Bond’s spy agency. When Bond’s boss, M, tells him that Greene is not an environmentalist but a villain, the Foreign Minister says, “If we refused to do business with villains, we’d have almost no one to trade with.”  Ain’t it the truth.

The fact that Quantum of Solace makes water the villain’s object of greed, replacing oil, gold, diamonds, and mutually assured destruction, is telling of the point we’ve reached. More telling still is the fact that our villain’s cover has him acting as an environmentalist, the ultimate corporate greenwasher. The fact that the action winds up in Bolivia – the country where, in real life, both Bechtel and Suez have tried and failed to take control of community water resources during and shortly after the reign of former-dictator-turned-neoliberal President Hugo Banzer – brings the plot frighteningly close to reality. The privatization of water in Bolivia back in 2000, and the massive popular response that turned out rural water stewards and urban ratepayers to riot for months until the multinational transgressor was ousted, was the spark that set social movements worldwide on red alert. Since then, numerous private water companies have been refused contracts on the grounds that popular movements, and, increasingly, governments, recognize the need to treat water as a human right and a public good – not a commodity.

If only the water movement had a few organizers with the physique, the gadgets, and the, er, style of Bond.

While we have many great documentaries telling the story of the global water wars, including this year’s Flow and Blue Gold, one is forced to wonder if 007 does a greater service to the water movement than even our most highly talented documentarians. After all, who better than Hollywood to characterize the greenwashing corporate water profiteers as straight up evil, sans the need to justify the hyperbole?

Matieu Amalric, the actor who played Dominic Greene, wanted to wear make-up for the role, but director Marc Forster “wanted Greene not to look grotesque, but to symbolize the hidden evils in society.” Similarly, the original screenplay had Greene having some “hidden power.” But in the final cut, the director seems to have decided that corporate power was power enough.

One wonders if Dominic Greene – had he not died drinking motor oil to quench his thirst in the Bolivian desert – might give the keynote speech at the upcoming World Water Forum in Istanbul (WWF). After all, the World Water Council (WWC) that puts on the forum is presided over by Loïc Fauchon, a former executive at one of the French subsidiaries of Suez, the world’s largest private water corporation.

As we learn from the WWF website, “One of the benefits of joining the WWC is the Council's ability to influence decisions related to world water management that affect organizations, business, and communities.” Perhaps their secret meetings will also be attended by executives of the Worldwide Fund for Nature, whose recent partnership with Coca-Cola aims to help the global soft-drink giant become “the most efficient company in the world in terms of water use,” with “every drop of water it uses…returned to the earth or compensated for through conservation and recycling programs.” And, with this blending of fact and fiction, it would hardly be surprising to find Greene’s signature on the CEO Water Mandate, which has companies with such devastating environmental track records as Dow Chemical, Shell Oil, Unilever, and Nestlé pledging to “help address the water challenge faced by the world today.”

When M, Bond’s overweening boss at M15, finds out about Quantum, she demands, “What the hell is this organization, Bond? How can they be everywhere and we know nothing about them?”

Well, my darling M, the answer is simple: like transnational corporations, and like the large NGO’s that work with the private sector to reform its practices and green its reputation, and like the International Finance Institutions whose interests are increasingly endangering the United Nations’ mandate to defend and protect human rights, they can be everywhere because their particular form of villainy works best when hidden in plain sight.

Thankfully, the world’s water is safe, because, behind the scenes, secret agent 007 is on the job.

Well, not true. But countless people and organizations worldwide, from the Red Vida to the African Water Network, from the People’s Health Movement to the Reclaiming Public Water Network, are vigilant in the defense of the human right to water. With the recent placement of water warrior Father Miguel D’Escoto, a Nicaraguan liberation theologian, in the presidential seat at the UN General Assembly, and his selection of Maude Barlow as a senior advisor on water, we are witnessing a tidal change in the highest levels of international cooperation.

They may not have the brutal take-no-prisoners attitude or the classy cocktail swagger of Mister Bond, but they represent a lot of people, and they’re on the right side.

So, corporate evil-doers, and your greenwashing NGO henchmen, beware. The forces of good are on the loose.

Originally posted at Food & Water Watch:

http://www.foodandwaterwatch.org/blog/archive/2008/11/20/james-bond-takes-on-the-corporate-water-privateers/view

Getting Wall Street Pay Reform Right

Posted by Robert Weissman on September 30th, 2008

There's mounting talk on Capitol Hill that a Wall Street bailout will include some limits on executive compensation, as well as contradictory reports about whether a deal on controlling executive pay has already been reached.

Four days ago, such a move seemed very unlikely. But the pushback from Congress -- from both Democrats and Republicans -- has been surprisingly robust, thanks in considerable part to a surge of outrage from the public.

Will restrictions on CEO pay just be a symbolic retribution, as some have charged?

The answer is, it depends.

Meaningful limits not just on CEO pay, but also on the Wall Street bonus culture, could significantly affect the way the financial sector does business. Some CEO pay proposals, by contrast, would extract a pound of flesh from some executives but have little impact on incentive structures.

There are at least five reasons why it is important to address executive compensation as part of the bailout legislation.

First, there should be some penalty for executives who led their companies -- and the global financial system -- to the brink of ruin. You shouldn't be rewarded for failure. And while reducing pay packages to seven digits may feel really nasty given Wall Street's culture of preposterous excess, in the real world, a couple million bucks is still a lot of money to make in a year.

Second, if the public is going to subsidize Wall Street to the tune of hundreds of billions of dollars, the point is to keep the financial system going -- not to keep Wall Street going the way it was. Funneling public funds for exorbitant executive compensation would be a criminal appropriation of public funds.

Third, the Wall Street salary structure has helped set the standard for CEO pay across the economy, and helped establish a culture where executives consider outlandish pay packages the norm. This culture, in turn, has contributed to staggering wealth and income inequality, at great cost to the nation. We need, it might be said, an end to the culture of hyper-wealth.

Fourth, as Dean Baker of the Center for Economic and Policy Research says, the bailout package must be, to some extent, "punitive." If the financial firms and their executives do not have to give something up for the bailout, then there's no disincentive to engage in unreasonably risky behavior in the future. This is what is meant by "moral hazard."

If Wall Street says the financial system is on the brink of collapse, and the government must step in with what may be the biggest taxpayer bailout in history, says Baker, then Wall Street leaders have to show they mean it. If they are not willing to cut their pay for a few years to a couple of million dollars an annum, how serious do they really think the problem is?

Finally, and most importantly, financial sector compensation systems need to be changed so they don't incentivize risky, short-term behavior.

There are two ways to think about how the financial sector let itself develop such a huge exposure to a transparently bubble housing market. One is that the financial wizards actually believed all the hype they were spreading. They believed new financial instruments eliminated risk, or spread it so effectively that downside risks were minimal; and they believed the idea that something had fundamentally changed in the housing market, and skyrocketing home prices would never return to earth.

Another way to think about it is: Wall Street players knew they were speculating in a bubble economy. But the riches to be made while the bubble was growing were extraordinary. No one could know for sure when the bubble would pop. And Wall Street bonuses are paid on a yearly basis. If your firm does well, and you did well for the firm, you get an extravagant bonus. This is not an extra few thousand dollars to buy fancy Christmas gifts. Wall Street bonuses can be 10 or 20 times base salary, and commonly represent as much as four fifths of employees' pay. In this context, it makes sense to take huge risks. The payoffs from benefiting from a bubble are dramatic, and there's no reward for staying out.

Both of these explanations may be true to some degree, but the compensation incentives explanation is almost certainly a significant part of the story.

Different ideas about how to limit executive pay would address the multiple rationales for compensation reforms to varying degrees.

A two-year cap on executive salaries would help achieve the first four objectives, but by itself wouldn't get to the crucial issue of incentives.

One idea in particular to be wary of is "say on pay" proposals, which would afford shareholders the right to a non-binding vote on CEO pay compensation packages. These proposals would go some way to address the disconnect between executive and shareholder interests, reducing the ability of top executives to rely on crony boards of directors and conflicted compensation consultants to implement outrageous pay packages. But while they might increase executive accountability to shareholders, they wouldn't direct executives away from market-driven short-term decision making. Shareholders tend to be forgiving of outlandish salaries so long as they are making money, too, and -- worse -- they actually tend to have more of a short-term mentality than the executives. So "say on pay" is not a good way to address the multiple executive compensation-related goals that should be met in the bailout legislation.

The ideal provisions on executive compensation would set tough limits on top pay, but would also insist on long-term changes in the bonus culture for executives and traders. Not only should bonuses be more modest, they should be linked to long-term, not year-long, performance. That would completely change the incentive to knowingly participate in a financial bubble (or, more generously, take on excessive risk), because you would know that the eventual popping of the bubble would wipe out your bonus.

Four days ago, forcing Wall Street to change its incentive structure seemed pie in the sky. Today, thanks to the public uproar, it seems eminently achievable -- if Members of Congress seize the opportunity.

http://www.multinationalmonitor.org/editorsblog/index.php?/archives/98-Getting-Wall-Street-Pay-Reform-Right.html

Robert Weissman is managing director of the Multinational Monitor.

The Dangers in Outsourcing the Bailout

Posted by Philip Mattera on September 30th, 2008

Originally posted at Dirt Digger's Digest on September 23, 2008 -- A number of leading Democrats and Republicans expressed strong misgivings last Monday about the autocratic plan for bailing out Wall Street that Treasury Secretary Henry Paulson wants to ram through Congress. It remains to be seen whether this is mere posturing or serious opposition.

Critics are focusing on vital issues such as cost and oversight, but a lot less attention is being paid to the mechanics of Paulson’s proposal – specifically, the question of who would carry out the federal government’s purchase of $700 billion in “troubled” securities from banks. As I noted in my post a week ago Sunday, the draft legislation circulated over the weekend includes a provision that seems to allow Treasury to contract out the process. Treasury then put out a fact sheet making it quite clear it intends to use private asset managers to manage and dispose of the assets it acquires, though the document does not specifically allude to the purchasing. Paulson himself referred to the use of “professional asset managers” during an appearance on one of the Sunday morning talk shows.

It amazes me that there is not more outrage over this aspect of the plan. Paulson seems to be leaving open the possibility that the same firms that are being bailed out could be hired to run the bailout. This would mean that institutions receiving a monumental giveaway of taxpayer money could turn around and earn yet more by acting as the government’s brokers. Aside from the unseemliness of this arrangement, this would be an egregious conflict of interest.

The alternative proposal floated by Senator Chris Dodd, which accepts Paulson’s language on contracting out, includes a section on conflict of interest. But rather than stating what the rules should be, the draft leaves it up to the Treasury Secretary to do so. There were reports last Monday night that Treasury would go along with the inclusion of a conflict-of-interest provision.

Paulson’s approach to the Big Bailout, particularly the insistence that there be no punitive measures for the banks, shows he is not the right party to oversee ethical issues. Paulson apparently can’t help himself. He still has the mindset of a man who spent more than 30 years working on Wall Street, at Goldman Sachs. He is a living example of the perils of the reverse revolving door: the appointment of a private-sector figure to a key policymaking position affecting his or her former industry.

The weak conflict-of-interest provisions Paulson is likely to impose would probably not address the inherent contradiction in having for-profit money managers running the bailout program. Even if Treasury chooses managers whose firms are not getting bailed out, there is still the danger that they will use their inside knowledge to benefit their non-governmental clients (and themselves) or will collude with buyers to the detriment of the public.

A Reuters story of last Monday reported that a leading contender for a federal money management role is Laurence Fink and his firm BlackRock, which was involved in managing the portfolio of Bear Stearns when that firm was sold to JPMorgan Chase as part of an earlier bailout. Last March, BlackRock, which is 49-percent owned by Merrill Lynch (now part of Bank of America), announced it was forming a venture to “acquire and restructure distressed residential mortgage loans.” Will Paulson see that as a conflict of interest – or more likely as a credential?

Letting financial firms that have profited from the mortgage crisis manage the bailout gives the impression that we are permanently in the grip of Big Money. To Paulson’s way of thinking, that’s not a problem, but it could make a bad plan much worse.

http://dirtdiggersdigest.org/archives/200

Dirt Diggers Digest is written by Philip Mattera, director of the Corporate Research Project, an affiliate of Good Jobs First.

Over the Counter Intelligence

Posted by Philip Mattera on June 13th, 2008

Tim Shorrock, a veteran investigative journalist and a longtime subscriber to the Dirt Diggers Digest, has just come out with a book called Spies for Hire: The Secret World of Intelligence Outsourcing. Shorrock describes how an activity that used to be handled by spooks on the federal payroll has been steadily transformed into a $50 billion Intelligence-Industrial Complex.

Thanks to the contracting scandals surrounding Halliburton and its former subsidiary Kellogg, Brown & Root, the public learned of the extent to which the Pentagon has turned over routine functions to private military companies. The outrageous behavior of Blackwater has highlighted the use of mercenaries to protect U.S. diplomats and other VIPs in Iraq.

Shorrock shines a light on another group of corporations that are carrying out a more sensitive function that most people have no idea is being handed over to the private sector. Careful readers of the revelations concerning abuses at the U.S.-run Abu Ghraib prison in Iraq would have learned that interrogators alleged to have abused detainees included civilians employed by a company called CACI. But that is only the tip of a lucrative iceberg, Shorrock shows.

For example, he writes, more than half the people working at the super-secret National Counterterrorism Center in Virginia are employees of companies such as Science Applications International Corporation (SAIC), BAE Systems and Lockheed Martin. The Center’s terrorist database is maintained by The Analysis Corporation, which subcontracted collection activities to CACI.

Since 9/11, Shorrock says, the Central Intelligence Agency has been spending 50-60 percent of its budget (or about $2.5 billion a year) on contractors—both individuals and companies. At the CIA and its sister spook agencies: “Tasks that are now outsourced include running spy networks out of embassies, intelligence analysis, signals intelligence (SIGINT) collection, covert operations, and the interrogation of enemy prisoners.”

Shorrock devotes an entire chapter to Booz Allen Hamilton, known to most people as a management consultant for large corporations but which pioneered the intelligence outsourcing industry (though it recently agreed to sell its federal business to the Carlyle Group). When Mike McConnell, a former Booz Allen executive, was named by President Bush as Director of National Intelligence, it was the first time, Shorrock notes, that a contractor was put in charge of the country’s entire spy apparatus.

Spies for Hire has much more to offer that cannot be adequately summarized here. I recommend that you read it in full. But let me let also note that profiles of some of the intelligence contractors discussed by Shorrock—such as CACI and ManTech International—can be found on the Crocodyl wiki to which I contribute. Also note that the updated edition of Jeremy Scahill’s valuable book Blackwater, recently issued in paperback, has a discussion (p.453 forward) on the mercenary company’s move into another form of privatized intelligence—a product called Total Intelligence Solutions that is designed to bring “CIA-style” services to Fortune 500 companies.

http://dirtdiggersdigest.org/archives/60

Dirt Diggers Digest is written by Philip Mattera, director of the Corporate Research Project, an affiliate of Good Jobs First.

See also feature articles by Tim Shorrock on CorpWatch.org:

Domestic Spying, Inc.

QinetiQ Goes Kinetic: Top Rumsfeld Aide Wins Contracts From Spy Office He Set Up 

Carlyle Group May Buy CIA Contractor: Booz Allen Hamilton

An Afternoon with L-3 Communications/Titan

Posted by Tonya Hennessey on April 30th, 2008


A funny thing happened on the way to exercising my presumed right, as a shareholder, to attend yesterday’s annual shareholder meeting of private military contractor L-3 Communications, held at the Ritz-Carlton Hotel in Manhattan’s financial district.

I was one of a group including a translator, Marwan Mawiri, who worked for a year and ½ for Titan, now an L-3 subsidiary, in Iraq. Marwan has witnessed first-hand numerous problems with the way interrogation and translation contracting is being handled in Iraq – a practice that may be putting at substantial risk the national security and lives of the Iraqi people, of U.S. and multinational troops, officials and contractors, and of the United States itself.

The problem is clear: inadequate and downright bad vetting and hiring practices for analysts, interrogators and linguists. Indeed, the U.S. military has recently cancelled Titan’s translation contract due to poor practices along with waste, fraud and abuse.

What is also crystal clear is that the war in Iraq can neither be won, effectively prosecuted, nor competently withdrawn from until these problems are solved and until proper oversight is in place.

If people hired to translate in critical battlefield and other situations are not even fluent in at least Arabic and English; if screeners monitoring the entry and exit of people to U.S. military bases at times have no more qualification and training than having been a baggage screener at a U.S. airline (see CorpWatch’s new report [note: updated December 2008] "Outsourcing Intelligence in Iraq":); if interrogators are not qualified, experienced and trained to the highest standards possible, how can we ensure that we avoid future travesties due to bad intelligence? Such as the bad intelligence around the supposed Iraqi weapons of mass destruction program (which was, of course, Bush/Cheney and neocon-driven, not L-3-driven), that got the U.S. into this war  in the first place? (And remember, even when U.S. soldiers start coming home from Iraq, large numbers of private contractors will stay, making proper oversight all the more crucial.)

It turned out that L-3’s management wasn’t so happy to see us, and that my co-worker, Pratap Chatterjee and I, were supposed to have received a certain admission ticket to attend the meeting. The same went for our companions from the Iraq Campaign 2008 – a major coalition to oppose the war, which is now taking on private military contractors as part of their broader campaign on the high cost U.S. taxpayers are paying for the war in Iraq – and Foreign Policy in Focus, who were holding proxies. Funny that.

Looking out at the Statue of Liberty from the hotel lobby downstairs, where we gathered to figure out how to proceed, I pondered the damage this war has done to the liberties of so many Iraqi people, and to so many U.S. liberties and values that I hold dear. Like respect for human rights, compliance with the Geneva Conventions around torture, appropriate security that is handled with skill and integrity. I wasn’t surprised that L-3/Titan didn’t want to hear our message; though I sincerely hope some of the shareholders, managers, directors, staff and  financial analysts do take the time to read our report and to talk to current and former contractors like Marwan. We didn’t go in malice.

We went in genuine concern over business operations that, while they may be earning a pretty profit for large shareholders, pose a genuine reputational risk to the company for future liability. And are causing harm on the ground, to real people. We challenge L-3 Communications to become a truly ethical leader in business practices, not just in products and sales. Surely the sixth-largest U.S.  defense industry company (according to their website) has the intelligence to recognize bad practices and the ability to change them for the better.

Or are we simply destined for years more, as Huffington Post blogger Charlie Cray put it, of companies and investors milking a “Baghdad Bubble as a result of the Bush administration's refusal to hold them accountable”?

As the meeting ended, and the muckety-mucks began leaving the Ritz-Carlton to be chauffered away in their Lincoln Town cars and limousines, we gave these decision makers another opportunity to take a copy of CorpWatch’s report, or even to talk to us directly. The vast majority kept their blinders on and marched resolutely past.

Suddenly we saw General Carl Vuono (ret.). Vuono is former chief of staff of the U.S. Army, and long-time president of private military consulting firm MPRI, which is now also an L-3 subsidiary. Pratap and Marwan rushed to try and speak  with him, while a reporter and cameraman from Al-Jazeera English filmed and stood at the ready for the general’s reply. The general didn’t want to talk, but you can see some of the footage on YouTube. You can also watch Pratap and Marwan describe their experiences on Democracy Now!, where they were interviewed live this morning.

Pratap gave the general a copy of “Outsourcing Intelligence In Iraq” – maybe he’ll decide to have one of his staffers give it a read. We’d love to talk, and welcome any dialogue with officials of L-3.

Stop the Walled Garden!

Posted by Ian Elwood on January 15th, 2008

Many of today's new dot-com corporations, like Facebook and LinkedIn, make money by building "walled gardens" and programs that cond­uct "data mining" to take advantage of casual users surfing the web who are signing up in their millions for the numerou­s popular "free" social network sites. ­(Facebook refuses to reveal its profits but is rumored to be worth $15 billion.)

(A walled garden refers to a media strategy that compels users to one stay on their service. Data mining is the practice of collecting large amounts of personal information on website users by the site itself.)

­While Apple's iPhone unabashedly locks users into using AT&T cell phone service, sometimes the strategies are more subtle. FaceBook, the popular social network site, restricts the functionality of their site so that it is easy to remain on facebook.com, while making external linking and emailing difficult. LinkedIn, another social network site, doesn't allow users to delete their profile without contacting customer service.

All of these tactics seek to make it easier for companies to collect information on individuals, with the sole purpose of creating consumer profiles for targeted advertising. The reason is simple: they make their money from the advertisers who will pay to get a captive audience (the kind they were once guaranteed on newspapers and TV) who might buy their products.

It is possible that these companies will soon sell their inventions for vast profits in the same way that YouTube and MySpace did, by taking advantage of ordinary people who would probably not pay for their services unless they were completely free. But activists say that the the Web has enormous potential to be a digital commons, if we assert our rights to use it for purposes other than buying and selling.

An activist group named Freespeech.org has put together a video that they are using to promote their "It's Our Web" campaign. The video, which spoofs the Transformers, is pretty entertaining, and manages to fit some complicated ideas about Internet user freedom into an accessible format. The underlying message of the video is a good one: the Internet is a medium that is best if it remains free. Restricting access to information is a taboo among Wikipedians, Slashdotters, bloggers and Gnubies alike because the free flow of information is what has driven the collective production responsible for the Web as we know it. ­­

Outsourcing Fear

Posted by Robert Young Pelton on October 2nd, 2007

Robert Young Pelton is the author of "Licensed to Kill: Hired Guns in the War on Terror " and the "Guide to the World's Most Dangerous Places." He is also co-founder of http://www.iraqslogger.com . This blog item is about his experiences attending the Congressional hearing into the Blackwater shootings in Iraq written on October 2nd, 2007.

Standing in line to get into Tuesday's hearing, I found myself in a strange position. In front of me, dark-suited and staid Blackwater executives stood waiting to show moral support for their boss, Erik Prince, while the colorful and animated Pink Ladies behind me ticked off reasons he and his industry should be feared.

The two extremes represent the bookends of public debate on the private security industry. The former military men who run Blackwater view their supporting role in the war on terror as both necessary and good, while human rights activists believe there is something deeply wrong with authorizing private citizens to kill other private citizens.

One of the women waiting in line asked me, "How can we find out what these people are doing?"  I suggested she could go to any neighborhood in Baghdad and just ask the locals.

Or better yet--spend a week driving through Baghdad in an unmarked car to see how often convoys blast through intersections, guns bristling from every door, pointed directly at you, giving you mere seconds to get out of the way before the bullets start flying. Feel your own pulse racing as you realize how easily you could have been killed if you'd had your radio a little louder, or hadn't noticed their approach, or hadn't swerved to a stop fast enough.

Companies like Blackwater wield a life-and-death power in Iraq, creating an arrogant misuse of force the United States has put into civilians hands.

I spent time in Sadr City and other areas interviewing the victims of Blackwater and other security companies. Terrified Iraqis, many who did not want to be identified or publicly quoted, told of sudden unexpected encounters with fast moving convoys of SUVs--then death, destruction, or permanent life change as family members were crushed, maimed, killed, or traumatized.

During the time I spent researching my book Licensed to Kill, I realized there were thousands of stories waiting to be heard about excessive force being used on civilians in the name of "security". Not surprisingly, many victims look to a militia to seek some revenge for the transgression in the form of an ambush or IED.

Security companies are reviled; the Iraqis that work for these companies have to cover their faces because they know militias or their neighbors will kill them and or their families.

Military commanders understand that a non-state actor on the battlefield is a wild card--whether death squad, militia or security company. Iraqis know that the undermanned military must rely on contractors to deliver 16 flavors of ice cream, frozen lobster and bullets to the war effort.

The normally timid State Dept, known more for issuing warnings and shutting down embassies when things get rough, has decided that its people must travel the mean streets of Baghdad rather than give in to intimidation. Security contractors are literally the grease that makes our forward-leaning foreign policy in Iraq work.

So when Prince pretends like he is defending the US--justifying violent acts by categorizing it as fighting bad guys--he does it with the support of the State Department, though to the direct detriment of the Iraqi civilians those actions terrify and kill.

When Prince testified that his people "acted appropriately at all times," it made me wonder how many killings he investigated from the Iraqi viewpoint. He has a blind spot towards the damage he causes if he thinks that firing a contractor who just murdered someone somehow fixes the problem. "Window or Aisle" instead of "guilty or not guilty" does not enforce any accountability

It is no coincidence that BW has been involved in shootouts with the Iraqi police. They too have seen the destructive force Blackwater has been authorized to unleash on their citizens. 

When Prince rattles off the various legal umbrellas he operates under, he conveniently ignores that none of his hired guns have been brought up on any charges for anything-despite clear incidents of malfeasance. Blackwater itself faces no ill consequence for deploying unstable men into the war zone.

"Anytime a contractor is abroad, he can be brought up on charges," is the equivalent of saying speeding is illegal while cars whip by at 80 mph without a cop in sight.

Blackwater is the personification of war as a business, violence as a service, and chaos as a product. Prince recognized the lack of sufficient available US troops and provided a privatized solution. He cannot be faulted for that.

Any corporate master would take the position, like Prince did in front of Congress Tuesday, that his people are perfect, his conduct perfect. 

Exposed deceit or corruption at most companies would lead to its own downfall. If it's a monster like Enron, it could conceivably flutter Wall Street for a few days.

But the conduct of companies like Blackwater directly impacts US strategic interests.

The obvious polarization of politicians addressing Prince during the hearing indicates that Republicans are willing to bless the use of lethal force by a private individual against the people they are trying to pacify, while Democrats have yet to quite capture what it is about the industry that makes people so nervous.

I say again: Go to Iraq. Talk to the people. Drive in an unmarked car.  When an armed convoy pushes you off the road with guns drawn, you'll understand the naked fear that Blackwater sells.

Meet the Wizard of Oz

Posted by Pratap Chatterjee on February 5th, 2007

Paul Bremer, the U.S. envoy who ran Iraq for over a year, will testify before the U.S. Congress on Tuesday, February 6th, 2007.  This rare opportunity to see what the man we call the Wizard of Oz is rare, so CorpWatch plans to attend. Why do we call him the "Wizard of Oz", you may ask? Well, for those of you who remember the children's book by L. Frank Baum, the man who ran the land of the Munchkins, was protected from his subjects by special soldiers in the Emerald City.

And "Imperial Life in the Emerald City" is the title of a simply incredible book, that every member of Congress and the public at large, should first read to understand why Iraq is such a mess today. Rajiv Chandrasekaran, the bureau chief of the Washington Post in Baghdad for almost two years, published an account of the so-called Green Zone, the six square miles that the new rulers of Iraq have lived in ever since they occupied the country in April 2003.

This books lays out in hilarious detail the adventures of Paul Bremer, protected by his private security detail from Blackwater, and two of the three other men who testify on Tuesday: Tim Carney and David Oliver.

Tim Carney has just been appointed by Condoleeza Rice to oversee U.S. reconstruction and development projects in the country. Chandrasekaran tells us that Carney, who was in charge of the ministry of industry and minerals, was also a big game hunter who has hunted elephants, cape buffalo, giraffes, warthogs and two species of zebra, but sadly had no experience in either industry or minerals. (He was however a personal friend and ex-deputy to Paul Wolfowitz) In "Emerald City" we learn about his disastrous attempts to privatize Iraq's industries.

David Oliver, was Bremer's budget chief in the Emerald City. He first drew up a plan to fix Iraq that would have cost $60 billion. Bremer asked him to cut it to $18 billion and Oliver obligingly slashed the budget to ribbons.

Chandrasekaran's book is easily the funniest in what is now a library of books on the U.S. in Iraq, although ultimately it tells a tragic tale. The stories he tells reveal an incompetent and ideological group of inexperienced people. He lets us know that the nickname for the first group of advisors - Office of Reconstruction and Humanitarian Assistance or ORHA - was the "Office of Really Hapless Americans" and that the organization that Bremer ran - the Coalition Provisional Authority or CPA - was also known as "Can't Produce Anything."

Some gems from his book:

  • An exchange between, Bernard Kerik, the New York cop who was put in charge of the Iraq police, in conversation with Robert Gifford, his predecessor, about a group of Iraqi judges who came to visit him.
"Bob, who are these people? Who the fuck are these people?"
"Oh, those are Iraqis"
"What are they doing here?"
"Bernie, that's the reason we are here.

  • John Agresto, the director of St John's College in Santa Fe, New Mexico, who was a friend of both Donald Rumsfeld and Dick Cheney's wife, was put in charge of Iraq's university system.

    He left the country after saying to Chandrasekaran what must be one of the most compelling confessions of failure by a Bush supporter: "I'm a neoconservative who has been mugged by reality."

And Chandrasekaran has a wonderful description of life inside the Emerald City aka the Green Zone, catered by Halliburton.

"You could dine at the cafetaria in the Republican palace for six months and never eat hummus, flatbread or a lamb kebab. The fare was always American, often with a southern flavor. A buffet featured grits, cornbread and a bottomless barrel of pork, sausage for breakfast, hot dogs for lunch, pork chops for dinner. There were bacon cheeseburgers, grilled bacon-and-cheese sandwiches and bacon omelets."

"Hundreds of Iraqi secretaries and translators who worked for the occupation authority had to eat in the dining hall. Most of them were Muslims, and many were offended by the presence of pork. But the Americans running the kitchen kept serving it. The cafeteria was all about meeting American needs for high-calorie, high-fat comfort food."


Chandrasekaran, who had first hand access to Paul Bremer, provides a delightful antidote to the more ponderous and self-important book by his chief subject: "My Year in Iraq" (Simon and Schuster, 2006).  Although it should be said that Bremer's book is an important insight into why the U.S. failed in Iraq, chronicling in minute detail how he worked to manipulate Iraq's politics by creating the Iraqi Governing Council.

But read Bremer's book only after you read Chandrasekaran, and another book that I also heartily recommend: "Babylon by Bus" (Penguin, 2006) by two young volunteers from the United States named Ray Lemoine and Jeff Neumann, who worked under Bremer, who were put in charge of non-governmental organizations in Iraq.

The book, which is a modern day equivalent of Jack Kerouac's "On the Road" consists of them boasting about their complete lack of qualifications for the job and the chaos that they took advantage of by getting stoned on Valium, drive around rip-roaring drunk, helped soldiers get illegal steroids. The book, which is alternately funny and horrifying, explains that they did what they thought was best under the circumstances but admitted freely that they had no idea what they were doing.

"Babylon by Bus" concludes with the person that they selected to take over their job being targeted and killed in June 2004 and an apology to the people of Iraq:

"(W)e apologize for the reckless, unplanned, understaffed, corrupt, and wasteful way in which our country occupied and failed at rebuilding your shattered nation. For every innocent (person) who was killed, tortured, or injured by our country, we extend our deepest sympathy."


Blood Money


But back to the hearing on February 7th, 2007, in Washington DC. The fourth man that will testify is also a staunch friend of the administration: Stuart Bowen. There the similarity between the four men ends, because Bowen is honest and competent, and has dedicated his last three years to uncovering fraud in Iraq.

To learn about his work you need to check out the website of the Special Inspector General for Iraq Reconstruction (SIGIR) although I dare say that you will find it rather dry reading, being composed of serious audit reports and project assessments.

If that does not draw your fancy, check out a sobering and well written book by T Christian Miller, titled "Blood Money" (Little, Brown 2006) that portrays Bowen, a former fund raiser for George Bush in Texas, as a man who is a mix of "professor, political junkie and prosecutor." And also read a series of articles by Ed Harriman of the London Review of Books, who has been following SIGIR's work in detail. Another journalist who has tracked the work of SIGIR practically daily is James Glanz of the New York Times.

Back to Miller. Some more gems from his excellent book, which members of Congress and the public really should read, to get an adequate picture of what went wrong in Iraq's reconstruction.

  • "A nation-building process crafted with the care of a sand castle."

  • "The rebuilding process was like an enormous bulldozer with a cinder block on the gas pedal, grinding blindly forward but accomplishing little." " Achievements were tallied like body counts: another 100 schools painted, another clinic opened, another 1000 Iraqis employed - statistics that said little about the reality on the ground. It was rebuilding without a foreman or blueprints"

(Miller is perhaps one of the best investigative journalists who has tracked infrastructure and corruption projects until the Los Angeles Times put him on the environment beat. His work is as relentless as Chandrasekaran's is humorous, although both do an excellent job of explaining why the U.S is failing so badly, with their intimate portraits of the real heart of the occupation.)

He interviews Douglas Feith, the under secretary of defense for policy, at his home in Washington about the infamous Halliburton no-bid contracts and Dick Cheney. He tracks down the failure of Halliburton to fix Iraq's oil fields and restore the natural gas supply, perhaps one of the few detailed accounts available in print on what has really happened to Iraq's main source of revenue.

Miller visits Parsons engineering at the company headquarters in Pasadena, California, and at the Green Zone in Baghdad, and tells how they botched the job of fixing Iraq's infrastructure. "Fear and confusion were better reasons than greed for explaining the way that the company acted the way it did." The company was "caught in a crossfire between customer satisfaction, profit and death."

The book tells the sad tale of Colonel Ted Westhusing, who reportedly committed suicide (a matter of some dispute) soon after discovering allegations of fraud by a Carlyle Group subsidiary that was training Iraqi commandos.

And lastly, but not least, it also has excellent descriptions of how David Oliver and Paul Bremer botched the plan for Iraq's reconstruction.

Our next posting, hopefully, will come from the inside the Throne Room, where Henry Waxman, playing the role of Dorothy Gale, will attempt to uncover the real story behind the Throne of the Wizard of Oz.

Tax Mercenaries

Posted by Brooke Shelby Biggs on August 21st, 2006

Paul Krugman today has an interesting take on yesterday's news that the I.R.S will be outsourcing the collection of back taxes to private debt collection agencies today.

"It’s an awful idea. Privatizing tax collection will cost far more than hiring additional I.R.S. agents, raise less revenue and pose obvious risks of abuse. But what’s really amazing is the extent to which this plan is a retreat from modern principles of government. I used to say that conservatives want to take us back to the 1920’s, but the Bush administration seemingly wants to go back to the 16th century.

And privatized tax collection is only part of the great march backward."

Creating a profit incentive for debt agencies to go after taxpayers is just another step – in concert with wiretapping, for example – in institutionalizing the corporate-government war on the individual. And in handing over "public good" duties to corporations, to whom the very concept of public good runs counter to the profit motive at the center of their identity. Of course the biggest tax cheats in America are corporations and millionaires with abusive tax shelters and the means to exploit every loophole available to them. Will the collection agencies turn on their fellow corporations?

Krugman notes what CorpWatch has been tracking for years: that we are already outsourcing the dirty bits of war to private security contractors (or "mercenaries"), seriously considering privatizing Social Security, handing contracts out for public infrastructure and utilities, and otherwise privatizing some of the most basic responsibilities of government.

But the potential for abuse is staggering. Imagine the collection agencies that win these contracts - certainly, in keeping with the pattern established in federal contracting in Iraq, Afghanistan and the American Gulf Coast. They will be overwhelmingly those that have been profligate in their financial support of the campaigns that won their new bosses office in Washington. So is it much of a stretch to imagine that those same agencies might single out of aggressive collection those individuals and organizations who criticize and challenge the same administration?




Saving Money by Dumping Kids!

Posted by Brooke Shelby Biggs on April 18th, 2006

Accenture, that former consulting arm of the scandal-plagued Arthur Andersen, won a contract last year to operate a call center in Texas to direct children and families to publicly available social services.

Today's story in the Houston Chronicle says "lawmakers once were told the project would save the state $646 million over five years." I guess they should have asked how before privatizing this aspect of their public services.

Turns out accenture is saving the state money by rejecting claims from families attempting to access the state's Children's Health Insurance Progam. The number of kids covered has plunged from 500,000 to 300,000.

I don't think Jonathan swift himself could come up with a more fail-safe modest proposal for saving money.

Do Private Contractors Do Better Work?

Posted by Brooke Shelby Biggs on January 23rd, 2006

Categorically no, if we're to take a lesson from a recent experiment in Fresno, California. Fresno's City Council conducted a year-long competition pitting private contractors against city public works crews to see who did a better job paving their assigned roads in the municipality.

The city crew and two contractors were each given five neighborhoods to pave. The city crew finished its work in September - ahead of schedule and on budget. One private contractor had finished only 20% of its work by September and had its contract terminated. The other contractor hadn't even started paving one of its neighborhoods, and instead asked the city for $750,000 to complete the work.

The mayor still says the competition is too close to call (!). Some council members saw the competition as a waste of money, and illustrative of how city contracts need closer consideration and accountability.

"Awarding these contracts out, the administration is playing Russian roulette with taxpayer money, and it's been a costly, very expensive experiment," said Councilman Henry T. Perea.

Privatizing Public Health in Massachusetts

Posted by CorpWatch on January 10th, 2006

Letting corporations clean up after other corporations sometimes leaves a bigger mess. At least, that is what Public Employees for Environmental Responsibility (PEER) in Massachusetts are saying today.

Massachusetts has outsourced its toxic clean-up responsilibities to private contractors, who have failed spectacularly in repeated state audits. (Most other states assign clean-up to public agencies.) Some of the findings in a review of Massachusetts state records:

Three out of every four private clean-ups failed to pass state audits

• Nearly one in ten were so deficient that they were completely invalidated and retracted.

Nearly three-out of four (71%) of private clean-ups will require some sort of follow-up work, such as retesting or additional soil removal

PEER says clean-up failure rates have almost doubled during Governor Mitt Romney's reign.


Bechtel Fox in the Nuclear Henhouse

Posted by Brooke Shelby Biggs on December 22nd, 2005

The news today that the federal government had awarded the Los Alamos National Laboratory to the UC-Bechtel team should give us all pause.

After all, as CorpWatch noted when Bechtel was amassing huge no-bid contracts to rebuild Iraq (see "Profiting From Destruction"), the company's record with nukes is not exactly sparkling:

San Onofre, California, has a 950-ton radioactive problem: a nuclear reactor built by Bechtel that nobody wants. The unit was shut down over a decade ago in 1992 by its owners, Southern California Edison, who preferred not to spend $125 million in required safety upgrades.

The only place that will accept the reactor is a dump in South Carolina but railway officials refused to transport the cargo across the country. The next suggestion was to ship it via the Panama Canal but the canal operators said no. So did the government of Chile when the power plant owners asked for permission to take it around the Cape of Good Hope.

The only option left is to ship it all the way around the world, although even that is looking unlikely as harbor officials in Charleston, South Carolina, are already suggesting that they may deny the reactor entry. Edison officials are currently desperately looking for a port that might accept the toxic cargo before the dump shuts its doors in 2008. [...]

The local environmental costs continue to mount every day as the plant sucks in huge quantities of plankton, fish and even seals with the water to cool the reactors. It is destroying miles of kelp on the seabed by discharging water that is 25 degrees Fahrenheit warmer than ocean temperature, according to Mark Massara, director of the Sierra Club's coastal program. [...]

Several former employees at the plant who have developed cancer have also sued Bechtel and plant owner Southern California Edison for exposure to radiation. It's a story that has become depressingly familiar for dozens of communities living downwind from nuclear plants that are seeing alarming increases in cancer.

Bechtel was also the contractor responsible for the biggest construction boondoggle in American history: Boston's Big Dig. Errors by Bechtel in planning and execution lead to massive cost overruns. As the Boston Globe observed at the time, "Yet, even as Bechtel's errors helped drive up the Big Dig's cost, the company never paid for any of its mistakes. Instead, it profited."

Is this really the kind of company we want watching over the most sensitive and dangerous of projects?

While the award of the Los Alamos contract to UC and Bechtel surprised some, the company's long record of coziness with those in high government places even outpaces its rival for the contract, Lockheed Martin (which was to partner with the University of Texas to run the lab).