Where do we go from here?
Author: Atilio Borón*
Translated by Machetera, Scott Campbell, Christine Lewis Carroll and Manuel Talens
After September 11, 2001, George W. Bush declared “Infinite War” against terrorism, a war without end and one that would not be constrained by geography or time limits of any kind. This policy is not only wrong, but immoral, and failed: upon leaving the White House, his legacy was a world more violent and insecure than before. His administration also left as an inheritance a true economic and financial tsunami on a global scale: an “infinite crisis” whose reach defies our imagination. In the following pages, we would like to share some ideas about the current capitalist crisis, its probable “solutions” and the role that a renewed socialist option might play in the present juncture. Given time restrictions we’ll avoid unnecessary technical jargon and will try to express things plainly, yet without resorting to oversimplifications.
1. Let’s begin by characterizing this crisis in the negative form by saying what this crisis is not.
This matters because the media bombardment to which our societies are subjected presents economists and establishment publicists talking about a “financial crisis” or a “banking crisis.” Shortly before, it was not even that. It was said that we were experiencing a “sub-prime” mortgage crisis. This was a way of minimizing the crisis, of underestimating it, presenting it to the public as a relatively minor incident in the dynamics of the markets, and that in no way did it question the health and viability of capitalism as a supposed “natural way” of organizing economic life. The passing of time has demolished all these fallacies.
2. What kind of crisis is it then?
If we are just barely passing through its first phase and still “have not hit bottom,” it would not be rash to predict that we are facing a general crisis of the capitalist system as a whole, the first of a magnitude comparable to that which broke out in 1929, as well as the so-called “Long Depression” of 1873-1896. An integral, multifaceted crisis of civilization, whose duration, depth and geographic reach will prove to be of greater scope than those which preceded it. Immanuel Wallerstein recently declared that capitalism has entered into its terminal crisis: the situation is running out of control for the people who, until recently, held the reins of the system firmly in their hands, and no return to an equilibrium is possible or even foreseeable. Capitalism, according to this author, is approaching to its end amidst a Wagnerian finale.
3. The crisis became visible, impossible to conceal any longer, through the bursting of the bubble created as a result of the “sub-prime” mortgages, and later spread, rapidly, to Wall Street’s banks and institutions, finally stretching to all sectors as well as the worldwide economy. But the bubble, and its bursting, is a symptom; it’s like the fever that reveals the presence of a dangerous infection. It’s not so much the illness itself (although it might be argued that capitalism’s permanent tendency to create speculative bubbles is also a sign of its unhealthiness) as its external manifestation, one that at times takes on ridiculous and aberrant contours. For example: the March 2008 purchase of Bear Stearns by the gigantic investment bank, J.P. Morgan, for the ludicrous sum of $236 million. A week later, the price for Bear Stearns multiplied by five. A few months later, in September, in front of the passivity of the economic authorities, Lehman Brothers, one of the main investment banks in the United States, went bankrupt. Merrill Lynch, on of its competitors, was sold post-haste, to Bank of America, for $50 billion.
4. It is, therefore, a crisis that transcends by far, the financial or banking crises, and affects the real economy in every way. Furthermore, it’s a crisis that is spread by the global economy and goes beyond U.S. borders. All the attempts to conceal it from the public were in vain: it was much too big for that.
5. Its structural causes are well known: it’s a simultaneous crisis of overproduction and under-consumption, the periodic capital “purification” mechanism typical of capitalism. It’s not by chance that it emerged in the U.S., since for more than thirty years this country has lived artificially off external savings and credit, and these two things are neither infinite nor inexhaustible. Businesses indebted themselves beyond their possibilities to repay and this led them to undertake risky speculative operations. The State indebted itself irresponsibly and demagogically to launch not one, but two wars, not only without increasing taxes, but actually reducing them. Furthermore, individuals have been systematically pushed, by advertising, to indebt themselves in order to sustain exorbitant, irrational and wasteful levels of consumption.
A report by the United States Federal Reserve from August, 2007 already warned about the extreme indebtedness of U.S. households: between 1980 and 2006 it went from 58% of family income to almost 120%. According to Eric Toussaint, one of the world’s leading experts on this field, this inordinate indebtedness continued to grow in the last two years to amount to 140% of annual household income. In other words, during this period each household came to owe 40% more than its annual income. Meanwhile, by the end of 2008 the total indebtedness of the United States (that is, the sum of public debt, enterprises debt, and household debt) had reached 350% of the country’s Gross Domestic Product. It was only a matter of time until that spiral of unlimited indebtedness came to a catastrophic end. And that moment has arrived.
6. But to these structural causes must be added others which contributed to the outcome. The accelerated financialization of the economy and its corollary, the irresistible tendency toward forays into increasingly risky speculative operations. Capital believed it had discovered the “Fountain of Youth” in financial speculation: money generating more money, regardless of the value extracted from the exploitation of the workforce. Moreover, this marvelous discovery was fascinating for its speed: fabulous earnings could be achieved in a matter of days, or weeks at most, thanks to the opportunities granted by information technology to overcome any restriction on space and time. Financial markets deregulated on a planetary scale provided an incentive for the addiction of capital for profits, leading to the setting aside of any kind of scruples.
As Michel Collon recently recalled, Karl Marx was right when he wrote “Capital is as terrified of the absence of profit or a very small profit as nature is of a vacuum. With suitable profits, capital is awakened; with 10 percent, it can be used anywhere; with 20 percent, it becomes lively; with 50 percent, positively daring; with 100 percent, it will crush all human laws under its feet; and with 300 percent, there is no crime it is not willing to dare, even at the risk of the gallows.”
7. Other circumstances were favorable to the outbreak of the crisis.
Without a doubt, the neoliberal policies of deregulation and liberalization made it possible for the most powerful actors stalking the markets, the huge multinational oligopolies, to impose “the law of the jungle,” as Fidel put it in one of his reflections. Uncontrolled markets, or markets controlled by the passions and interests of the oligopolies that dominate them, had to end up producing a catastrophe like the present one. Samir Amin is correct to say that we are experiencing a crisis that was not produced by the class struggle of workers against the bourgeoisie but by the prolonged accumulation of capital’s own contradictions.
8. The first significant point of the current crisis: enormous destruction of capital on a global scale, a wild process that conventional economists sugarcoat and minimize, as did Joseph Schumpeter, characterizing it as the “creative destruction” of productive forces.
On Wall Street, this “creative destruction” led to a loss of nearly 50% of the corporate assets of the firms listed on the stock market. In Europe, the losses slightly exceeded that mark. Ergo: a company that used to be listed on the market with capital of $100 million is now worth $50 million! The recessive consequences of such capital destruction are easy to see: a decline in production, rise of unemployment, a collapse in prices, wages and aggregate demand. In other words, the vicious circle of economic depression returning to the world economy.
Let’s look at the diagnosis of one observer of the Wall Street panorama, Mike Stathis: “…the entire financial system is in the process of blowing up. Already there have been over $500 billion in bank losses, with over $1 trillion more to come. Over one dozen banks have failed, with hundreds on deck. A handful of large hedge funds have blown up, with hundreds more on the way. Already, over $1 trillion has been transferred from the Fed to the banking cartel. But I estimate another $1.5 trillion will be needed to maintain liquidity as banks de-leverage over the next few years.”
For Stathis, as for many others, what we are experiencing is the initial phase of a long depression, and the word recession, so insistently used recently, doesn’t even begin to capture the drama that the future holds for capitalism.
a. One example among many will be sufficient to illustrate this point: Citigroup’s common stock lost 90% of its value in 2008. During the last week of February it was trading on Wall Street at $1.95 per share. A report prepared by a financial consultant from India indicates that ten years ago, a single share of Citigroup would allow a person to treat his family to dinner at a good Indian restaurant in New York. At that time, February 19, 1999, a Citigroup share was valued at $54.19. Ten years later, February 21, 2009, the same share was worth barely $1.95 (of a devalued dollar!) and wouldn’t even have paid for a bowl of peanuts.
Examples of this sort abound. The unstoppable and completely unscrupulous speculation, made possible because of the complicity of U.S. monetary and economic bodies such as the Treasury, the Federal Reserve and the Securities and Exchange Commission (the regulatory body charged with supervising the stock market), among others, had already caused an even more pronounced crash in the shares of Enron, which with a value of $83 per share in January, 2001, fell to $0.67 per share a year later.
Criminal and fraudulent operations such as this, which relied on the approval of the large credit rating agencies, huge investment banks, the fiscal havens, and some of the world’s best-known accounting firms had been warming up for decades.
In recent times, Bernard Madoff’s huge swindle (which climbed to about $65 billion at the end of March 2009) shows that these kinds of operations are unthinkable without a wide and dense net of mafia protection which goes all the way to the highest economic and judicial authorities in the United States and, certainly, also involving the private mega- corporations which, in one way of the other, run the worldwide financial casino.
9. But this process of capital destruction is not neutral nor does it happen at random, considering that it will favor the largest and best organized oligopolies which will oust their rivals from the markets. The “Darwinian selection of the fittest” will clear the way for new mergers and business alliances, sending the weakest into bankruptcy and increasing the centralization and concentration of capital.
10. Second major point: Accelerated rise of unemployment.
In a recent article, Ignacio Ramonet put it in this way: the U.N.’s International Labor Organization (ILO) estimates that the number of unemployed worldwide (some 190 million in 2008) could increase by 51 million by the end of 2009. And remember that there will be 1.4 billion workers in poverty (those who earn just two Euros daily); 45% of the economically active population on the planet. In this same article, Ramonet reported that in the United States, the recession has already destroyed 3.6 million jobs, a previously unknown pace, half of which occurred during the last three months.
The unemployed total is already at 11.6 million. And gigantic firms such as Microsoft, Boeing, Caterpillar, Kodak, Pfizer, Macy’s, Starbucks, Home Depot, SprintNextel or Ford Motor are planning to lay off another 250,000 in 2009. In the European Union, the number of unemployed is at 17.5 million, 1.6 million more than a year ago. And for 2009, 3.5 million additional job losses are projected. In 2010, unemployment will escalate up to 10% of the active population.
South America, again according to the ILO, in 2009, show an increase of 2.4 million unemployed. While the Mercosur countries (Argentina, Brazil, Paraguay, Uruguay) as well as Venezuela, Bolivia and Ecuador may eventually be able to weather the storm or lessen its damages, some Central American and Caribbean countries as well as Mexico, Chile and Peru will be severely beaten by the crisis due to their close ties with the U.S. economy ironed out in the Free Trade Agreements signed with the White House.
11. Therefore, we face a crisis that affects all economic sectors: banking, industry, insurance, construction, agriculture, mining, etcetera, and which is spread throughout the entire international capitalist system. The “contagion” occurred first in the developed capitalist states and later spread rapidly throughout the periphery. The more linked these countries are with the dynamics of metropolitan capitalism the quicker the propagation of the crisis will be and the deeper and more damaging its effects.
12. The main mechanisms for the spread of the crisis are the production adjustments of the large multi-nationals, which dominate Latin American economies practically without any counterbalance. Decisions that are taken in their headquarters will affect the subsidiaries on the periphery and cause massive layoffs, interruptions in the payments chain, a drop in demand for raw materials, etcetera. In the already cited article, Ignacio Ramonet observes that “Greece has prohibited its banks from offering relief to their branches in the Balkan countries. The United States has decided to support Detroit’s Big Three (Chrysler, Ford, General Motors) but only to save the plants within the country. It will not help foreign multi-nationals (Toyota, Kia, Volkswagen, Volvo) with factories in its territory.
France and Sweden have announced that their aid will only go to their own automotive industries: it can only benefit factories located in their respective countries. The French Economic Minister, Christine Lagarde, said that this protectionism would be a “necessary evil in times of crisis.” The Spanish Minister of Industry, Miguel Sebastián, is urging “consumption of Spanish products.” And Barack Obama, we would add, is promoting “buy American!”
13. Other sources of the dissemination of the crisis throughout the periphery, are:
a. The fall in the prices of commodities exported by Latin American and Caribbean countries, with their recessive consequences and higher unemployment.
b. A drastic decline in remittances by Latin American and Caribbean emigrants in developed countries. In some cases, remittances are the most important source of hard currency income, surpassing that received from exports.
c. A return of emigrants, depressing the labor market even further, increasing unemployment, reducing salaries and suppressing consumption.
14. The current crisis shows even more disturbing facets than the two great depressions of the nineteenth and twentieth centuries:
a. First, it coincides with a deep crisis in the energy paradigm, based predominantly on the irrational and predatory use of fossil fuel, a finite and non-renewable resource, which makes its replacement imperative. The overlapping of this crisis with the general crisis of capitalism aggravates the situation, making it impossible to postpone any longer the beginning of a costly and difficult transition to an alternative energy paradigm based on renewable and non-fossil fuels. It will be an enormously expensive operation, and therefore, under normal conditions, an extremely difficult task; even more so now, when it is necessary to do so under such unfavorable conditions as the current crisis.
b. Second, this crisis coincides with the growing realization of the catastrophic scope of climate change. Facing this threat, which risks the very destiny of all life forms on planet earth, calls for significant adjustments in the economic structure that will dictate the obsolescence of certain huge businesses and facilitate the emergence of new kinds of productive units and firms. In other words: it will accelerate and deepen the inter-bourgeois conflict within the ruling classes of the imperialist system and State authorities will have to demonstrate extraordinary skill and will to achieve a solution to the ecological challenge.
c. Add to this, the food crisis, exacerbated by the growing tendency of capitalism to maintain an irrational pattern of consumption, which has led to the conversion of land suited for food production to the production of biofuels. The effects of this policy have already been seen in the huge price increases for certain basic items in the Latin American food basket, such as corn, provoking uncontrolled price increases for tortillas in Mexico and other countries.
15. But the crisis is only beginning:
Barack Obama acknowledged that we have not touched bottom yet, and that “perhaps the United States should choose a new president…” A lucid analyst of this crisis, Michael Klare, wrote recently that “If the present economic disaster turns into what President Barack Obama has referred to as a ‘lost decade’, the result could be a global landscape filled with economically-fueled upheavals.”
16. It is extremely significant that faced with the optimism of various Latin American governments who claim that their economies are “shielded” so as to firmly resist the crisis, the occupant of the White House thinks that it is very possible that a true economic disaster may be triggered in the heart of the empire, causing the loss of a decade of growth and, eventually, the resignation of the American president.
a. The historical record supports this pessimism: in 1929, unemployment in the U.S. rose to 25% without stopping the fall of agricultural prices or of raw materials. But 10 years later, in spite of the radical policies set out by Franklin D. Roosevelt (the New Deal), unemployment continued at a very high level (17%) and the economy was unable to rise out of the depression. Only World War II put an end to that period. Why would it be any shorter now?
b. The 1873-1896 depression lasted 23 years! The factors that precipitated it were the collapse of Vienna’s stock market caused by the speculative bubble tied to the price of land in Paris and the big construction projects started in that city following the defeat of the French in the Franco-Prussian War and the bloody repression of the Paris Commune. The war reparations demanded from the French and the huge payments they owed to Germany contributed to creating the conditions for the crisis, as well as the land speculation that began in the United States after the Civil War related to the formation of great railway holdings, which created another bubble that burst in 1873.
c. Given this background, why would getting out of this crisis be a question of months, as some Wall Street publicists and “gurus” and their “echoers” on the periphery of the system predict?
17. We won’t get out of this crisis with a few G-20 or G-7 meetings.
Nor by appealing to the immense rescue packages handed out by the metropolitan capitalist governments to the corporations. If there is a test of their radical inability to resolve the crisis it is the response of the world’s major stock markets after each announcement or approval of a new rescue package: invariably the response of “the markets”, in reality, that of the oligopolies which control them at their whim, is negative, and stocks continue to fall. It is not enough, they say. We need more and more.
To be precise: to cope with the crisis we may need to socialize all the wealth produced on the planet and transfer it to our hands in order to preserve the integrity of our interests and the sanctity of our patrimony.
a. According to George Soros, “the real economy will suffer the secondary effects that are now gaining strength. At this moment in time, repairing the financial system will not stop a serious worldwide recession. Given that in these circumstances the U.S. consumer cannot be the driving force of the world economy, the U.S. government should stimulate demand.
As we are faced with the challenges of global warming and energy dependence, the next government should direct any stimulus plan to saving energy, to the development of alternative sources of energy and to the construction of a green infrastructure. This stimulus could become the new engine of the world economy.”
Nice words, but what degree of viability does such a proposal have, which attacks U.S. consumerism and the power of the big lobbies linked to the oil and automobile industries, while demanding the extraordinary broadening of the management and intervention capacities of the state and setting strict limits to the tyranny of the markets?
18. The crisis opens a long period of push and pull and negotiations to define the way to resolve it, who will benefit, and who will pay for it.
a. It serves to remember that in the 1929 crisis, the building of the Bretton Woods economic architecture and the setting up of the international financial system that were fundamental for post-war recovery demanded nearly a year of arduous negotiations that culminated in the conference which took place in that city of New Hampshire between July 1st and 22nd, 1944.
b. Those agreements, conceived in the Keynesian phase of capitalism, coincided with the stabilization of a new model of bourgeois hegemony that, as a product of the consequences of war and anti-fascist struggle had as a new and unexpected backdrop the strengthening of workers’ unions, leftist parties, and the expansion of the regulatory and interventionist capacities of states.
19. Is it reasonable to hope now for a similar outcome to this crisis?
Any prognosis in a volatile situation such as this is extremely risky, but to begin with, several differences exist between the respective global contexts of the three abovementioned crises.
a. In the first place, the USSR no longer exists; its mere presence and the threat its expansion towards the West represented was enough to tip the balance of negotiation in favor of the Left, popular sectors, trade unions, etc. If the European bourgeoisie agreed to negotiate and accept some gains of the workers, it was not solely due to the determination and strength they had shown for many years. The shadow cast by the USSR on those negotiations and commitments was of great importance.
b. At the present time, China occupies an incomparably more important role in the world economy than the USSR at the time, but without a parallel importance within world politics. The USSR in contrast, despite its economic weakness, was a tremendous military and political power. As a result of this, it was a first rate “player” in the main fields of international politics. China is an economic power, but with a limited military and political presence in world affairs, although it is just beginning a very cautious and gradual process of reaffirmation of its global interests.
c. In spite of these considerations, China could play a positive role in the economic reconstruction of peripheral countries. Also hit by the crisis, Beijing is progressively redirecting its enormous national energies towards the internal market. For many reasons that would be impossible to discuss here, it is a country that needs its economy to grow 8% yearly, stimulated either by world markets or its immense – and only partially developed – domestic market. If this shift is confirmed, China could keep its demand of many products from the Third World, such as nickel, copper, steel, oil, soy and other raw materials and food products.
d. In contrast, during the Great Depression of the 1930’s, the USSR had a very weak presence in world markets. It was practically autarchic and thus unable to play a significant role in the crisis, especially in economic matters. It could mobilize, though not without difficulty, the Communist Parties articulated in the Third International, but this was not sufficient. Today, it is a different matter with China: it will continue to play a very important role and, like Russia and India (though these two countries to a much lesser degree), it will have to buy abroad the raw materials and food it requires. The USSR could not play such a stimulating role during the Great Depression.
e. In the 1930’s, the “solution” to the crisis was protectionism and world war. Today, protectionism would encounter many obstacles due to the interrelatedness of large national oligopolies in the different areas of world capitalism.
The current formation of a world bourgeoisie, with roots in gigantic companies that despite their national status operate in numberless countries, makes the protectionist option in the developed world scarcely effective in North/North commerce and policies will tend –at least for the moment and not without tensions– to observe, albeit reluctantly, the parameters established by the WTO.
Protectionism would seem much more applicable –as will probably occur –against the global South. Under these circumstances, a world war driven by the “national bourgeoisies” of the developed world ready to fight each other for the supremacy of the markets is virtually impossible because they have been displaced by the rise and consolidation of an “imperial bourgeoisie” determined to dominate the world, which periodically meets in Davos to coordinate strategies and tactics, and to which a military confrontation would constitute an extraordinary absurdity.
But this does not mean that this “imperial bourgeoisie” would not support, as it has during the military adventures of the United States in Iraq and Afghanistan, other military operations on the periphery of the system to preserve the “capitalist global order” and to boost the profits of the United States “military industrial complex” and, indirectly, of the big oligopolies of other countries related in one way or another to the fate of the American corporate powers.
20. Will United States’ capitalism collapse?
The current situation is not comparable to the 1930’s. But apart from this, Lenin rightly observed that “Capitalism does not fall without a social force that makes it fall”. That social force today is not present in the societies of metropolitan capitalism, including the United States. Asked about this issue British Marxist historian Eric Hobsbawm recently declared that the left “is too weak in Europe. Or it is fragmented or, in some cases, it has disappeared. In Italy Rifondazione Comunista is weak and the other branches of the former PCI are in very bad shape. The United Left is disintegrating in Spain. Something still remains in Germany, and in France of the Communist Party.
But neither these forces nor much less the more extreme left, as the Trotskytes (not to mention the now disappeared more militant social democracy) are enough to respond to this crisis and its perils. The very weakness of the left increases the risks.”
Additionally, in the 1930’s there was a dispute for hegemony in the heart of the world imperialist system: the USA, UK, Germany, France and Japan settled this dispute on the military field during World War II. This battle is now over.
21. Today, hegemony and domination rest clearly in the hands of the USA.
a. The United States is the only guarantor of the capitalist system on a world scale. If the USA were to fall, it would unleash a domino effect that would cause the collapse of almost all metropolitan capitalist societies, not to speak of the consequences on the system’s periphery. If Washington were to see itself threatened by a popular insurgency, all capitalist states would rush to its rescue, because it is the last bastion of the system and the only one that, if necessary, can help the others providing political support, sending troops, financial assistance, ideological propaganda, etcetera.
b. The United States is an irreplaceable actor and the unquestionable center of the world imperialist system: the only country with more than 700 military bases, missions, and martial enclaves in some 120 countries, which constitute the capitalist system’s final reserve. If all other options of international control and discipline fail, force will appear in its entire splendor. Only the United States can deploy its troops and its war arsenal to maintain order on a planetary scale. It is, as Samuel Huntington once said, the “lonely sheriff”. And there is no other. This is the reason why it is irreplaceable.
c. It should also be remembered that this “shoring-up” of the imperialist center has the invaluable collaboration of its imperial partners, or its competitors in the economic realm and even the majority of Third World countries, which accumulate their reserves in U.S. dollars. However, neither China, Japan, South Korea or Russia –to mention the largest holders of dollars in the world– can liquidate their stock in that currency because it would be suicidal for their own interests. Of course, this is a consideration that should be made with great caution and always bearing in mind the evolution of the crisis.
d. Paradoxically enough, the behavior of the markets and investors throughout the world is strengthening the U.S. position: the crisis is deepening; the bailouts are demonstrating their insufficiency; the Dow Jones on Wall Street falls below the psychological barrier of 7,000 points –falling below its 1997 mark!– and despite this, people are seeking refuge in the dollar, with the prices of the euro and gold falling!
22. Fidel Castro, in “La Ley de la Selva” (The Law of the Jungle) said, “The current crisis and the brutal measures taken by the United States to save itself will bring more inflation, more devaluation of national currencies, more painful market losses, lower prices for export goods, and more unequal exchange. But they will also bring to the people of the world more knowledge of the truth, more awareness, more rebellion and more revolutions”.
But it is also necessary to be aware that this situation could also revert and give way to a crushing defeat on the people’s side. It would be naive to think that the die is cast for capitalism just because it is in crisis. Among the possibilities ahead of the current situation, one is a reactionary recasting of bourgeois order.
Mar 30, 2009
Mar 29, 2009
Tax havens batten down as the hurricane looms
Offshore financial centres from Jersey to the Cayman Islands are rallying to defend their privileges from a wave of international action against secrecy.
Nick Mathiason
The Observer, Sunday 29 March 2009
Home to 160 powerful US Congressmen, Rayburn House on Capitol Hill in Washington DC was the venue last Monday for a desperate resistance movement at its darkest hour.
In the basement of the sprawling whitewashed classical complex, 70 senior politicians and their advisers heard that prising open to increased scrutiny the secretive and corrupt world of tax havens - where trillions of dollars are stashed far from the reaches of the tax man - was akin to an evil Big Brother conspiracy that would smash civil liberties and hamper world economic growth.
It was organised by Dan Mitchell, co-founder of the right-wing Center for Freedom and Prosperity, and Richard Rahn, a senior fellow at influential libertarian Washington think-tank, the Cato Institute, a former board member of the Cayman Islands Monetary Authority and a regular Washington Post columnist. They told the high-powered audience that moves to force so-called secrecy jurisdictions to share information with tax authorities were "hypocritical", "racist" and would destroy "defenceless" island economies.
Mitchell, a high priest of light tax, small state libertarianism, argued that current moves to encourage information exchange between secretive tax havens and the international community would see unscrupulous government officials sell highly sensitive information about the world's richest companies and individuals to drug cartels and warlords. Tax transparency would lead to kidnapping and murder.
For Mitchell, this is familar territory. In 2001, when the Organisation for Economic Co-operation and Development, (OECD) the world's most powerful think-tank, was intent on stamping down on "harmful tax competition", his ferocious lobbying pulled off a stunning victory, persuading George W Bush to bring a halt to the OECD plan.
Eight years later, Mitchell is on the warpath again. "Tax competition leads to low tax rates and increased prosperity," he told the Observer from his office in Washington. "Sovereign entities have the right to secure tax privileges. Even if the US government does not like it."
His audience last Monday sat in rapt silence. But the world's power brokers don't appear to be listening with similar attentiveness.
President Obama, Chancellor Merkel, President Sarkozy and Prime Minister Brown are now all intent on shining a light into so-called secrecy jurisdictions. This week in London, leaders of the G20 will attempt to frame a response to the growing global economic crisis. Tax havens, whatever Mitchell and Rahn argue, have moved to centre stage.
These are desperate days for offshore financial centres. Never before have the world's most powerful countries united in their determination to expose the shadowy banking system that has mushroomed unchecked for the last 15 years. Lobbyists have been hired at huge cost to ensure that senior bankers and politicians from Cayman Islands, Switzerland and the Channel Islands meet and brief influential policymakers and congressmen. Jersey has hired London-based Aura Financial while the Cayman Islands retain Fleishman-Hillard.
Even so, in the last two months a surge of tax treaties have been signed by countries including Liechtenstein, Singapore, Switzerland, Austria, Andorra and Belgium in an effort to abide by global protocols. Last week, the Isle of Man, Jersey and Guernsey signed more agreements with France, Germany and Ireland.
Such has been the capitulation by tax havens that senior international regulators say more has been achieved in the last 13 weeks than in the previous 13 years put together. Even the usually cautious OECD, which sets standards for international tax policy, admits that automatic multilateral information exchange - the holy grail for investigators seeking transparency in tax - is now on the agenda. Jeffrey Owens, the head of tax at the OECD, said he would not allow countries to stall on the process.
But well-placed Washington sources say ambassadors of Caribbean countries are putting pressure particularly on black caucus Congressmen in a bid to ward off this gathering storm of intrusion. They are being requested to water down any legislation and international regulations affecting the likes of the Cayman Isles, Antigua and Bermuda.
It is a tactic that may work. In the US, it is understood a draft discussion paper from powerful Senate finance committee chairman Max Baucus on the Stop Tax Haven Abuse Act waters down key parts of the proposed legislation long backed by Obama.
The Caymans, singled out by Obama on the campaign trial for being home to Ugland House, where 18,857 shell companies were registered as of last year, is in a state of high alert. Although the target of criticism when John Kerry ran for president in 2004, scrutiny faded away after he failed to defeat Bush. So when Obama first turned his attention to the island's role in heaping more of the tax burden "on ordinary hard-working Americans", no one blinked.
Now, though, it is very much in the public eye. In the last two months, the Cayman government has hosted visits from the International Monetary Fund, which was checking that the island meets international standards, and Michael Foot, a one-time inspector of banks for the Central Bank of the Bahamas, whose review into UK-linked tax havens will be published next month.
The island's authorities are keen to play down the visits, suggesting they are routine. Kurt Tibbetts, leader of government business for the Cayman Islands, said: "The Cayman Islands was one of the first jurisdictions to commit to OECD standards for transparency and exchange of information in tax matters... [We] have and will continue to do all we can to receive equitable treatment, as by any rational analysis our financial services sector is transparent and co-operative. In particular, the 16 tax co-operation arrangements in fact represent over-compliance with the OECD benchmark of 12 such arrangements with OECD member states."
In Jersey, which during the leveraged boom became a world leader in securitisations and hosted Granite, the Northern Rock securitisation vehicle, the island's leaders are keen to push forward the media-friendly Geoff Cook. As Jersey Finance's chief executive he spends his life promoting the island as an offshore centre throughout the world.
Cook is adamant that Jersey is one of the best regulated jurisdictions in the world. "We are not a tax haven," he said. "We do not have banking secrecy, we are a co-operative, transparent, well-regulated centre. We are tested by outside organisations and we have been found not wanting. If anybody thinks otherwise let them name names, bring evidence and I will happily notify the authorities."
Though Cook admits that the island does not have a register of trusts, fund managers, he argues, know who the beneficiaries are. He concedes that in the seven years since the island signed a tax agreement with the US, Jersey has exchanged information with American investigators on just "five or six" cases.
Earlier this month, Switzerland ended centuries of bank secrecy by offering to enter into "bilateral" tax information exchange agreements with rich countries. The fallout has created huge problems for the ruling coalition led by Hans-Rudolf Merz.
Half the population saw the groundbreaking move as a humiliating capitulation to hypocritical bullying by the United States and Britain. They point out that the US continues to offer corporations high levels of secrecy in the state of Delaware while Britain's own tax havens of the Channel Islands and its overseas territories based in the Caribbean, plus the non-domicile tax laws allow the world's super-rich to legally evade taxes on the bulk of their income.
The other half believe the government should have acted earlier to avoid the embarrassment of Switzerland being frozen out of this week's crucial G20 meeting of talks to restore the world's economy. It was obvious to many that once the scandal broke that saw giant Swiss bank UBS become the centre of a hugely damaging tax evasion scandal in the US, life for Swiss wealth managers would never be the same again.
And so it has proved: Swiss banks have now instructed their top executives not to travel abroad for fear of being arrested in wide-ranging tax investigations in America and Europe. A Swiss journalist last week posed as a rich individual with €3m of tax-evaded income to invest, asking wealth managers in five banks to hide his windfall. Five years ago the stunt saw all the banks suggest concrete measures to ensure the cash pile stayed intact. Last week just one bank offered advice.
Swiss leaders are suggesting their concession ending bank secrecy will take years to implement and they will argue that the law should not be applied retrospectively so protecting the country's status as banker to the world's super-rich. Others argue they will only implement the measure if the US drops its legal action against UBS, which is calling for the bank details of up to 52,000 US citizens.
Influential commentators like Martin Wolf in the Financial Times and Avinash Persaud maintain that the agenda to clamp down on so called secrecy jurisdictions is a distraction. It is music to the ears of the leaders of Switzerland, Jersey and the Cayman Islands, who quote the pieces back almost verbatim denying their jurisdictions and financial sectors are remotely linked to the chaos that has gripped world markets for 18 months.
Yet senior officials at the OECD say most of the world's insurance firms, hedge funds and private equity houses are registered in jurisdictions where reporting requirements are minimal. And the global banking system has hundreds of thousands of subsidiaries based in offshore centres.
HSBC, in a disclosure to the Observer last month, revealed it has 2,008 legal subsidiaries around the world including in Liechtenstein, the Bahamas and Jersey.
And as countries sink trillions of dollars bailing out banks running up huge deficits in the process, Treasury ministers are mindful of the $11.5tn locked away in tax havens which could provide $250bn in taxable income.
As the prospect of increased supervision comes closer, the growing army of campaigning groups, churches and unions which have alighted on tax as the missing link in the poverty alleviation debate fear that proposals to increase information exchange will not go far enough. We will soon know whether Mitchell and his friends can keep the storm waters from lashing the world's tranquil financial havens.
Britain's record
Ten of the OECD's list of 35 tax havens are UK overseas territories or dependencies of the British crown.
Britain's crown dependencies consist of the Isle of Man, Jersey and Guernsey. All three are independently administered and do not form part of the UK. However, they are possessions of the British crown and not sovereign nations. They are treated as part of the UK for British nationality law, and the British government is responsible for their defence and international representation. The power to pass laws affecting the islands rests with their legislative assemblies.
Westminster retains the right to legislate for the islands against their will. Many key officials are also appointed by the British government. As a result, the exact nature of the relationship between the crown dependencies and the UK is hard to pinpoint.
The 14 British overseas territories are also under the sovereignty of the UK. The name came into being with the British Overseas Territories Act 2002, which granted UK citizenship to citizens of any of the territories, which include the British Virgin Islands, Cayman Islands and Gibraltar. The head of state is the Queen, who generally appoints a governor as her representative on the advice of the British government.
The governor deals mostly with foreign affairs and economic issues. UK sovereignty was recently demonstrated in relation to another overseas territory, the Turks and Caicos Islands. The British government revealed plans to take control of the islands, due to suspicion of systematic corruption following publication of an interim report by a commission of inquiry into the islands. The Foreign Office said parts of the islands' constitution would need to be suspended. Again, the British government has the constitutional right to amend or suspend the laws allowing much of the offshore tax business taking place.
Aziz Durrani
17 Sep 2008
David Cronin: Tax evasion has far-reaching consequences for the world's poor
Nick Mathiason
The Observer, Sunday 29 March 2009
Home to 160 powerful US Congressmen, Rayburn House on Capitol Hill in Washington DC was the venue last Monday for a desperate resistance movement at its darkest hour.
In the basement of the sprawling whitewashed classical complex, 70 senior politicians and their advisers heard that prising open to increased scrutiny the secretive and corrupt world of tax havens - where trillions of dollars are stashed far from the reaches of the tax man - was akin to an evil Big Brother conspiracy that would smash civil liberties and hamper world economic growth.
It was organised by Dan Mitchell, co-founder of the right-wing Center for Freedom and Prosperity, and Richard Rahn, a senior fellow at influential libertarian Washington think-tank, the Cato Institute, a former board member of the Cayman Islands Monetary Authority and a regular Washington Post columnist. They told the high-powered audience that moves to force so-called secrecy jurisdictions to share information with tax authorities were "hypocritical", "racist" and would destroy "defenceless" island economies.
Mitchell, a high priest of light tax, small state libertarianism, argued that current moves to encourage information exchange between secretive tax havens and the international community would see unscrupulous government officials sell highly sensitive information about the world's richest companies and individuals to drug cartels and warlords. Tax transparency would lead to kidnapping and murder.
For Mitchell, this is familar territory. In 2001, when the Organisation for Economic Co-operation and Development, (OECD) the world's most powerful think-tank, was intent on stamping down on "harmful tax competition", his ferocious lobbying pulled off a stunning victory, persuading George W Bush to bring a halt to the OECD plan.
Eight years later, Mitchell is on the warpath again. "Tax competition leads to low tax rates and increased prosperity," he told the Observer from his office in Washington. "Sovereign entities have the right to secure tax privileges. Even if the US government does not like it."
His audience last Monday sat in rapt silence. But the world's power brokers don't appear to be listening with similar attentiveness.
President Obama, Chancellor Merkel, President Sarkozy and Prime Minister Brown are now all intent on shining a light into so-called secrecy jurisdictions. This week in London, leaders of the G20 will attempt to frame a response to the growing global economic crisis. Tax havens, whatever Mitchell and Rahn argue, have moved to centre stage.
These are desperate days for offshore financial centres. Never before have the world's most powerful countries united in their determination to expose the shadowy banking system that has mushroomed unchecked for the last 15 years. Lobbyists have been hired at huge cost to ensure that senior bankers and politicians from Cayman Islands, Switzerland and the Channel Islands meet and brief influential policymakers and congressmen. Jersey has hired London-based Aura Financial while the Cayman Islands retain Fleishman-Hillard.
Even so, in the last two months a surge of tax treaties have been signed by countries including Liechtenstein, Singapore, Switzerland, Austria, Andorra and Belgium in an effort to abide by global protocols. Last week, the Isle of Man, Jersey and Guernsey signed more agreements with France, Germany and Ireland.
Such has been the capitulation by tax havens that senior international regulators say more has been achieved in the last 13 weeks than in the previous 13 years put together. Even the usually cautious OECD, which sets standards for international tax policy, admits that automatic multilateral information exchange - the holy grail for investigators seeking transparency in tax - is now on the agenda. Jeffrey Owens, the head of tax at the OECD, said he would not allow countries to stall on the process.
But well-placed Washington sources say ambassadors of Caribbean countries are putting pressure particularly on black caucus Congressmen in a bid to ward off this gathering storm of intrusion. They are being requested to water down any legislation and international regulations affecting the likes of the Cayman Isles, Antigua and Bermuda.
It is a tactic that may work. In the US, it is understood a draft discussion paper from powerful Senate finance committee chairman Max Baucus on the Stop Tax Haven Abuse Act waters down key parts of the proposed legislation long backed by Obama.
The Caymans, singled out by Obama on the campaign trial for being home to Ugland House, where 18,857 shell companies were registered as of last year, is in a state of high alert. Although the target of criticism when John Kerry ran for president in 2004, scrutiny faded away after he failed to defeat Bush. So when Obama first turned his attention to the island's role in heaping more of the tax burden "on ordinary hard-working Americans", no one blinked.
Now, though, it is very much in the public eye. In the last two months, the Cayman government has hosted visits from the International Monetary Fund, which was checking that the island meets international standards, and Michael Foot, a one-time inspector of banks for the Central Bank of the Bahamas, whose review into UK-linked tax havens will be published next month.
The island's authorities are keen to play down the visits, suggesting they are routine. Kurt Tibbetts, leader of government business for the Cayman Islands, said: "The Cayman Islands was one of the first jurisdictions to commit to OECD standards for transparency and exchange of information in tax matters... [We] have and will continue to do all we can to receive equitable treatment, as by any rational analysis our financial services sector is transparent and co-operative. In particular, the 16 tax co-operation arrangements in fact represent over-compliance with the OECD benchmark of 12 such arrangements with OECD member states."
In Jersey, which during the leveraged boom became a world leader in securitisations and hosted Granite, the Northern Rock securitisation vehicle, the island's leaders are keen to push forward the media-friendly Geoff Cook. As Jersey Finance's chief executive he spends his life promoting the island as an offshore centre throughout the world.
Cook is adamant that Jersey is one of the best regulated jurisdictions in the world. "We are not a tax haven," he said. "We do not have banking secrecy, we are a co-operative, transparent, well-regulated centre. We are tested by outside organisations and we have been found not wanting. If anybody thinks otherwise let them name names, bring evidence and I will happily notify the authorities."
Though Cook admits that the island does not have a register of trusts, fund managers, he argues, know who the beneficiaries are. He concedes that in the seven years since the island signed a tax agreement with the US, Jersey has exchanged information with American investigators on just "five or six" cases.
Earlier this month, Switzerland ended centuries of bank secrecy by offering to enter into "bilateral" tax information exchange agreements with rich countries. The fallout has created huge problems for the ruling coalition led by Hans-Rudolf Merz.
Half the population saw the groundbreaking move as a humiliating capitulation to hypocritical bullying by the United States and Britain. They point out that the US continues to offer corporations high levels of secrecy in the state of Delaware while Britain's own tax havens of the Channel Islands and its overseas territories based in the Caribbean, plus the non-domicile tax laws allow the world's super-rich to legally evade taxes on the bulk of their income.
The other half believe the government should have acted earlier to avoid the embarrassment of Switzerland being frozen out of this week's crucial G20 meeting of talks to restore the world's economy. It was obvious to many that once the scandal broke that saw giant Swiss bank UBS become the centre of a hugely damaging tax evasion scandal in the US, life for Swiss wealth managers would never be the same again.
And so it has proved: Swiss banks have now instructed their top executives not to travel abroad for fear of being arrested in wide-ranging tax investigations in America and Europe. A Swiss journalist last week posed as a rich individual with €3m of tax-evaded income to invest, asking wealth managers in five banks to hide his windfall. Five years ago the stunt saw all the banks suggest concrete measures to ensure the cash pile stayed intact. Last week just one bank offered advice.
Swiss leaders are suggesting their concession ending bank secrecy will take years to implement and they will argue that the law should not be applied retrospectively so protecting the country's status as banker to the world's super-rich. Others argue they will only implement the measure if the US drops its legal action against UBS, which is calling for the bank details of up to 52,000 US citizens.
Influential commentators like Martin Wolf in the Financial Times and Avinash Persaud maintain that the agenda to clamp down on so called secrecy jurisdictions is a distraction. It is music to the ears of the leaders of Switzerland, Jersey and the Cayman Islands, who quote the pieces back almost verbatim denying their jurisdictions and financial sectors are remotely linked to the chaos that has gripped world markets for 18 months.
Yet senior officials at the OECD say most of the world's insurance firms, hedge funds and private equity houses are registered in jurisdictions where reporting requirements are minimal. And the global banking system has hundreds of thousands of subsidiaries based in offshore centres.
HSBC, in a disclosure to the Observer last month, revealed it has 2,008 legal subsidiaries around the world including in Liechtenstein, the Bahamas and Jersey.
And as countries sink trillions of dollars bailing out banks running up huge deficits in the process, Treasury ministers are mindful of the $11.5tn locked away in tax havens which could provide $250bn in taxable income.
As the prospect of increased supervision comes closer, the growing army of campaigning groups, churches and unions which have alighted on tax as the missing link in the poverty alleviation debate fear that proposals to increase information exchange will not go far enough. We will soon know whether Mitchell and his friends can keep the storm waters from lashing the world's tranquil financial havens.
Britain's record
Ten of the OECD's list of 35 tax havens are UK overseas territories or dependencies of the British crown.
Britain's crown dependencies consist of the Isle of Man, Jersey and Guernsey. All three are independently administered and do not form part of the UK. However, they are possessions of the British crown and not sovereign nations. They are treated as part of the UK for British nationality law, and the British government is responsible for their defence and international representation. The power to pass laws affecting the islands rests with their legislative assemblies.
Westminster retains the right to legislate for the islands against their will. Many key officials are also appointed by the British government. As a result, the exact nature of the relationship between the crown dependencies and the UK is hard to pinpoint.
The 14 British overseas territories are also under the sovereignty of the UK. The name came into being with the British Overseas Territories Act 2002, which granted UK citizenship to citizens of any of the territories, which include the British Virgin Islands, Cayman Islands and Gibraltar. The head of state is the Queen, who generally appoints a governor as her representative on the advice of the British government.
The governor deals mostly with foreign affairs and economic issues. UK sovereignty was recently demonstrated in relation to another overseas territory, the Turks and Caicos Islands. The British government revealed plans to take control of the islands, due to suspicion of systematic corruption following publication of an interim report by a commission of inquiry into the islands. The Foreign Office said parts of the islands' constitution would need to be suspended. Again, the British government has the constitutional right to amend or suspend the laws allowing much of the offshore tax business taking place.
Aziz Durrani
17 Sep 2008
David Cronin: Tax evasion has far-reaching consequences for the world's poor
Mar 27, 2009
Echelon - global survellance
A chain of secret interception facilities has been established around the world to tap into all the major components of the international telecommunications networks, backed up by a web of ships, planes and radar that ring the earth -- have established the greatest spy network in history. Its name is Echelon.
Originally devoted solely to monitoring the military and diplomatic communications of the Soviet Union and its East Bloc allies, today Echelon searches for hints of terrorist plots, drug-dealer's plans and political and diplomatic intelligence. But critics claim the system is also being used for crass commercial theft and a brutal invasion of privacy on a staggering scale.
Jean-Pierre Millet, a Parisian lawyer, has launched a class-action lawsuit against the governments of the United States and Britain, claiming the Echelon spy network has robbed European industries of some of their most cherished trade secrets and undercut their bargaining positions in trade deals.
Few foreign-affairs analysts are surprised by the sweep or appetite of electronic spies and they caution against taking Europe's angry protestations of dismay at face value.
"The EU hearings are a bit of a joke," says Wayne Madsen, a former NSA employee and senior fellow at the Washington-based Electronic Privacy Information Centre (EPIC). "It's going to be a bit like that scene in the movie Casablanca, where Inspector Renault declares: 'I'm shocked to find gambling in this establishment.' "
"The fact is the German Greens and the French Socialists and Gaullists can pull their hair out and say, 'This is terrible,' but their countries are involved in this stuff. The French have an extensive signals intelligence network of their own. I think what is going to happen is there will be a lot of wringing of hands and gnashing of teeth, but then business is going to go on as usual."
The Echelon system is simple in design. All members of the English-speaking alliance are part of the UKUSA intelligence alliance that has maintained ties since the Second World War.These states have positioned electronic-intercept stations and deep-space satellites to capture all satellite, microwave, cellular and fibre-optic communications traffic. The captured signals are then processed through a series of supercomputers, known as dictionaries, that are programmed to search each communication for targeted addresses, words, phrases or even individual voices.
Individual states in the UKUSA alliance are assigned responsibilities for monitoring different parts of the globe. Canada's main task used to be monitoring northern portions of the former Soviet Union and conducting sweeps of all communications traffic that could be picked up from our embassies around the world. In the post-Cold War era, a greater emphasis has been placed on monitoring satellite and radio and cellphone traffic originating from Central and South America, primarily in an effort to track drugs and thugs in the region. There is only one agency which, by virtue of its size and role within the alliance, will have access to the full potential of the ECHELON system (NSA) the agency that set it up.
Although the largest surveillance network is run by the US NSA, it is far from alone. Russia, China, France and other nations operate worldwide networks. Dozens of advanced nations use signal intelligence as a key source of information. Even smaller European nations such as Denmark, the Netherlands or Switzerland have recently constructed small, Echelon-like stations to obtain and process intelligence by eavesdropping on civil satellite communications.
"Most people just don't understand how pervasive government surveillance is," warns John Pike, a leading military analyst with the Washington-based American Federation of Scientists."If you place an international phone call, the odds that the [U.S.] National Security Agency are looking is very good. If it goes by oceanic fibre-optic cable, they are listening to it. If it goes by satellite, they are listening to it. If it is a radio broadcast or a cellphone conversation, in principle, they could listen to it. Frankly, they can get what they want."
The Americans dominate the UKUSA alliance, providing most of the computer expertise and frequently much of the personnel for global interception bases. The U.S. National Security Agency, headquartered in Fort Meade, Md., just outside Washington, has a global staff of 38,000 and a budget estimated at more than $3.6-billion (all dollar figures US unless otherwise specified). That's more than the FBI and the CIA combined. By comparison, Canada's communications-intelligence operations are conducted by the Communications Security Establishment (CSE), a branch of the National Defence Department. It has a staff of 890 people and an annual budget of $110-million (Cdn). The CSE's headquarters, nicknamed "The Farm," is the Sir Leonard Tilley Building on Heron Road in Ottawa, and its main communications intercept site is located on an old armed-forces radio base in Leitrim, just south of Ottawa.
The first component of the ECHELON network are stations specifically targeted on the international telecommunications satellites (Intelsats) used by the telephone companies of most countries. A ring of Intelsats is positioned around the world, stationary above the equator, each
serving as a relay station for tens of thousands of simultaneous phone calls, fax, and e-mail. Five UKUSA stations have been established to intercept the communications carried by the Intelsats.
serving as a relay station for tens of thousands of simultaneous phone calls, fax, and e-mail. Five UKUSA stations have been established to intercept the communications carried by the Intelsats.
The British GCHQ station is located at the top of high cliffs above the sea at Morwenstow in Cornwall. Satellite dishes beside sprawling operations buildings point toward Intelsats above the Atlantic, Europe, and, inclined almost to the horizon, the Indian Ocean. An NSA station
at Sugar Grove, located 250 kilometers southwest of Washington, DC, in the mountains of West Virginia, covers Atlantic Intelsats transmitting down toward North and South America. Another NSA station is in Washington State, 200 kilometers southwest of Seattle, inside the Army's Yakima Firing Center. Its satellite dishes point out toward the Pacific Intelsats and to the east.
The job of intercepting Pacific Intelsat communications that cannot be intercepted at Yakima went to New Zealand and Australia. Their South Pacific location helps to ensure global interception. New Zealand provides the station at Waihopai and Australia supplies the Geraldton station in West Australia (which targets both Pacific and Indian Ocean Intelsats).
In addition to the UKUSA stations targeting Intelsat satellites, there are another five or more stations homing in on Russian and other regional communications satellites. These stations are Menwith Hill in northern England; Shoal Bay, outside Darwin in northern Australia (which targets Indonesian satellites); Leitrim, just south of Ottawa in Canada (which appears to intercept Latin American satellites); Bad Aibling in Germany; and Misawa in northern Japan.
As in the United Kingdom, from 1945 onwards NSA and its predecessors had systematically obtained cable traffic from the offices of major cable companies - RCA Global, ITT World Communications and Western Union. Over time, the collection of copies of telegrams on paper was replaced by the delivery of magnetic tapes and eventually by direct connection of the monitoring centres to international communications circuits.
By the early 1970s, the laborious process of scanning paper printouts for names or terms appearing on the "watch lists" had begun to be replaced by automated computer systems. These computers performed a task essentially similar to the search engines of the internet. Prompted with a word, phrase or combination of words, they will identify all messages containing the desired words or phrases.
In the February, 2000 60 Minutes story, former spy Mike Frost made clear that Echelon monitored practically every conversation — no matter how seemingly innocent.
'A lady had been to a school play the night before, and her son was in the school play and she thought he did a——a lousy job. Next morning, she was talking on the telephone to her friend, and she said to her friend something like this, 'Oh, Danny really bombed last night,' just like that.
The computer spit that conversation out. The analyst that was looking at it was not too sure about what the conversation w——was referring to, so erring on the side of caution, he listed that lady and her phone number in the database as a possible terrorist.'
'This is not urban legend you're talking about. This actually happened?' Kroft asked.
'Factual. Absolutely fact. No legend here.'
Mike Frost spent 20 years as a spy for the CSE, the Canadian equivalent of the National Security Agency, and he is the only high-ranking former intelligence agent to speak publicly about the Echelon program.
Mr. FROST: Everything from--from data transfers to cell phones to portable phones to baby monitors to ATMs...
KROFT: Baby monitors?
Mr. FROST: Oh, yeah. Baby monitors give you a lot of intelligence.
KROFT: The Menwith Hill Station in the Yorkshire countryside of Northern England, even though on British soil, Menwith Hill is an American base operated by the National Security Agency. It's believed to be the largest spy station in the world.
KROFT: Inside each globe are huge dishes which intercept and download satellite
communications from around the world. The information is then sent on to NSA headquarters at Fort Meade, Maryland, where acres of supercomputers scan millions of transmissions word by word, looking for key phrases and, some say, specific voices that may be of major significance.
Mr. FROST: Everything is looked at. The entire take is looked at.
KROFT: The National Security Agency won't talk about those successes or even confirm that a program called Echelon exists.
KROFT: Back in the 1970s, the NSA was caught red-handed spying on anti-war protesters like Jane Fonda and Dr. Benjamin Spock, and it turns out they had been recording the conversations of civil rights leaders like Martin Luther King in the 1960s. When Congress found out, it drafted strict, new laws prohibiting the NSA from spying on Americans.
European Parliament: Temporary Committee on the ECHELON Interception System.
"On the existence of a global system for the interception of private and commercial communications (ECHELON interception system), (2001/2098(INI))" (pdf - 194 pages).
"On the existence of a global system for the interception of private and commercial communications (ECHELON interception system), (2001/2098(INI))" (pdf - 194 pages).
Death and Life of Great American Newspapers
By John Nichols & Robert W. McChesney
March 18, 2009
AVENGING ANGELS
Communities across America are suffering through a crisis that could leave a dramatically diminished version of democracy in its wake. It is not the economic meltdown, although the crisis is related to the broader day of reckoning that appears to have arrived. The crisis of which we speak involves more than mere economics. Journalism is collapsing, and with it comes the most serious threat in our lifetimes to self-government and the rule of law as it has been understood here in the United States.
After years of neglecting signs of trouble, elite opinion-makers have begun in recent months to recognize that things have gone horribly awry. Journals ranging from Time, The New Yorker, The Atlantic and The New Republic to the New York Times and the Los Angeles Times concur on the diagnosis: newspapers, as we have known them, are disintegrating and are possibly on the verge of extinction. Time's Walter Isaacson describes the situation as having "reached meltdown proportions" and concludes, "It is now possible to contemplate a time in the near future when major towns will no longer have a newspaper and when magazines and network news operations will employ no more than a handful of reporters." A newspaper industry that still employs roughly 50,000 journalists--the vast majority of the remaining practitioners of the craft--is teetering on the brink.
Blame has been laid first and foremost on the Internet, for luring away advertisers and readers, and on the economic meltdown, which has demolished revenues and hammered debt-laden media firms. But for all the ink spilled addressing the dire circumstance of the ink-stained wretch, the understanding of what we can do about the crisis has been woefully inadequate. Unless we rethink alternatives and reforms, the media will continue to flail until journalism is all but extinguished.
Let's begin with the crisis. In a nutshell, media corporations, after running journalism into the ground, have determined that news gathering and reporting are not profit-making propositions. So they're jumping ship. The country's great regional dailies--the Chicago Tribune, the Los Angeles Times, the Minneapolis Star Tribune, the Philadelphia Inquirer--are in bankruptcy. Denver's Rocky Mountain News recently closed down, ending daily newspaper competition in that city. The owners of the San Francisco Chronicle, reportedly losing $1 million a week, are threatening to shutter the paper, leaving a major city without a major daily newspaper. Big dailies in Seattle (the Times), Chicago (the Sun-Times) and Newark (the Star-Ledger) are reportedly near the point of folding, and smaller dailies like the Baltimore Examiner have already closed. The 101-year-old Christian Science Monitor, in recent years an essential source of international news and analysis, is folding its daily print edition. The Seattle Post-Intelligencer is scuttling its print edition and downsizing from a news staff of 165 to about twenty for its online-only incarnation. Whole newspaper chains--such as Lee Enterprises, the owner of large and medium-size publications that for decades have defined debates in Montana, Iowa and Wisconsin--are struggling as the value of stock shares falls below the price of a single daily paper. And the New York Times needed an emergency injection of hundreds of millions of dollars by Mexican billionaire Carlos Slim in order to stay afloat.
Those are the headlines. Arguably uglier is the death-by-small-cuts of newspapers that are still functioning. Layoffs of reporters and closings of bureaus mean that even if newspapers survive, they have precious few resources for actually doing journalism. Job cuts during the first months of this year--300 at the Los Angeles Times, 205 at the Miami Herald, 156 at the Atlanta Journal-Constitution, 150 at the Kansas City Star, 128 at the Sacramento Bee, 100 at the Providence Journal, 100 at the Hartford Courant, ninety at the San Diego Union-Tribune, thirty at the Wall Street Journal and on and on--suggest that this year will see far more positions eliminated than in 2008, when almost 16,000 were lost. Even Doonesbury's Rick Redfern has been laid off from his job at the Washington Post.
The toll is daunting. As former Washington Post executive editor Leonard Downie Jr. and Post associate editor Robert Kaiser have observed, "A great news organization is difficult to build and tragically easy to disassemble." That disassembling is now in full swing. As journalists are laid off and newspapers cut back or shut down, whole sectors of our civic life go dark. Newspapers that long ago closed their foreign bureaus and eliminated their crack investigative operations are shuttering at warp speed what remains of city hall, statehouse and Washington bureaus. The Cox chain, publisher of the Atlanta Journal-Constitution, the Austin American-Statesman and fifteen other papers, will padlock its DC bureau on April 1--a move that follows the closures of the respected Washington bureaus of Advance Publications (the Newark Star-Ledger, the Cleveland Plain Dealer and others); Copley Newspapers and its flagship San Diego Union-Tribune; as well as those of the once great regional dailies of Des Moines, Hartford, Houston, Pittsburgh, Salt Lake City, San Francisco and Toledo.
Mired in debt and facing massive losses, the managers of corporate newspaper firms seek to right the sinking ship by cutting costs, leading remaining newspaper readers to ask why they are bothering to pay for publications that are pale shadows of themselves. It is the daily newspaper death dance-cum- funeral march.
But it is not just newspapers that are in crisis; it is the institution of journalism itself. By any measure, journalism is missing from most commercial radio. TV news operations have become celebrity- and weather-obsessed "profit centers" rather than the journalistic icons of the Murrow and Cronkite eras. Cable channels "fill the gap" with numberless pundits and "business reporters," who got everything about the last decade wrong but now complain that the government doesn't know how to set things right. Cable news is defensible only because of the occasional newspaper reporter moonlighting as a talking head. But what happens when the last reporter stops collecting a newspaper paycheck and goes into PR or lobbying? She'll leave cable an empty vessel and take the public's right to know anything more than a rhetorical flourish with her.
The Internet and blogosphere, too, depend in large part on "old media" to do original journalism. Web links still refer readers mostly to stories that first appeared in print. Even in more optimistic scenarios, no one has a business model to sustain digital journalism beyond a small number of self-supporting services. The attempts of newspapers to shift their operations online have been commercial failures, as they trade old media dollars for new media pennies. We are enthusiastic about Wikipedia and the potential for collaborative efforts on the web; they can help democratize our media and politics. But they do not replace skilled journalists on the ground covering the events of the day and doing investigative reporting. Indeed, the Internet cannot achieve its revolutionary potential as a citizens' forum without such journalism.
So this is where we stand: much of local and state government, whole federal departments and agencies, American activities around the world, the world itself--vast areas of great public concern--are either neglected or on the verge of neglect. Politicians and administrators will work increasingly without independent scrutiny and without public accountability. We are entering historically uncharted territory in America, a country that from its founding has valued the press not merely as a watchdog but as the essential nurturer of an informed citizenry. The collapse of journalism and the democratic infrastructure it sustains is not a development that anyone, except perhaps corrupt politicians and the interests they serve, looks forward to. Such a crisis demands solutions equal to the task. So what are they?
Regrettably the loud discussion of the collapse of journalism has been far stronger in describing the symptoms than in providing remedies. With the frank acknowledgment that the old commercial system has failed and will not return, there has been a flurry of modest proposals to address the immodest crisis. These range from schemes to further consolidate news gathering at the local level to pleas for donations from news consumers and hopes that hard-pressed philanthropists and foundations will decide to go into the news business. And they range from ineffectual to improbable to undesirable. Walter Isaacson has proposed that newspapers come up with a plan to charge readers "micropayments" for online content. Even if such a system were practically possible, the last thing we should do is erect electronic walls that block the openness and democratic genius of the Internet.
Don't get us wrong. We are enthusiastic about many of the efforts to promote original journalism online, such as ProPublica, Talking Points Memo and the Huffington Post. We cheer on exciting local endeavors, such as MinnPost in the Twin Cities--a nonprofit, five-day-a-week online journal that covers Minnesota politics with support from major foundations, wealthy families and roughly 900 member-donors contributing $10 to $10,000. But even our friends at MinnPost acknowledge that their project is not filling the void in a metro area that still has two large, if struggling, daily newspapers. Just about every serious journalist involved in an online project will readily concede that even if these ventures pan out, we will still have a dreadfully undernourished journalism system with considerably less news gathering and reporting, especially at the local level.
For all their merits and flaws, these fixes are mere triage strategies. They are not cures; in fact, if there is a risk in them, it is that they might briefly discourage the needed reshaping of ownership models that are destined to fail.
The place to begin crafting solutions is with the understanding that the economic downturn did not cause the crisis in journalism; nor did the Internet. The economic collapse and Internet have greatly accentuated and accelerated a process that can be traced back to the 1970s, when corporate ownership and consolidation of newspapers took off. It was then that managers began to balance their books and to satisfy the demand from investors for ever-increasing returns by cutting journalists and shutting news bureaus. Go back and read a daily newspaper published in a medium-size American city in the 1960s, and you will be awed by the rich mix of international, national and local news coverage and by the frequency with which "outsiders"--civil rights campaigners, antiwar activists and consumer advocates like Ralph Nader--ended up on the front page.
As long ago as the late 1980s and early 1990s, prominent journalists and editors like Jim Squires were quitting the field in disgust at the contempt corporate management displayed toward journalism. Print advertising, which still accounts for the lion's share of newspaper revenue, declined gently as a percentage of all ad spending from 1950 to '90, as television grew in importance. Starting in 1990, well before the rise of the web as a competitor for ad dollars, newspaper ad revenues went into a sharp decline, from 26 percent of all media advertising that year to what will likely be around 10 percent this year.
Even before that decline, newspaper owners were choosing short-term profits over long-term viability. As far back as 1983, legendary reporter Ben Bagdikian warned publishers that if they continued to water down their journalism and replace it with (less expensive) fluff, they would undermine their raison d'être and fail to cultivate younger readers. But corporate newspaper owners abandoned any responsibility to maintain the franchise. When the Internet came along, newspapers were already heading due south.
We do not mean to suggest that '60s journalism was perfect or that we should aim to return there. Even then journalism suffered from a generally agreed-upon professional code that relied far too heavily on official sources to set the news agenda and decide the range of debate in our political culture. That weakness of journalism has been magnified in the era of corporate control, leaving us with a situation most commentators are loath to acknowledge: the quality of journalism in the United States today is dreadful.
Of course, there are still tremendous journalists doing outstanding work, but they battle a system increasingly pushing in the opposite direction. (That is why some of the most powerful statements about our current circumstances come in the form of books, like Naomi Klein's The Shock Doctrine; or documentaries, like Michael Moore's Bowling for Columbine; or beat reporting in magazines, like that of Jane Mayer and Seymour Hersh at The New Yorker.) The news media blew the coverage of the Iraq invasion, spoon-feeding us lies masquerading as fact-checked verities. They missed the past decade of corporate scandals. They cheered on the housing bubble and genuflected before the financial sector (and Gilded Age levels of wealth and inequality) as it blasted debt and speculation far beyond what the real economy could sustain.
Today they do almost no investigation into where the trillions of public dollars being spent by the Federal Reserve and Treasury are going but spare not a moment to update us on the "Octomom." They trade in trivia and reduce everything to spin, even matters of life and death.
No wonder young people find mainstream journalism uninviting; it would almost be more frightening if they embraced what passes for news today. Older Americans have been giving up on old media too, if not as rapidly and thoroughly as the young. If we are going to address the crisis in journalism, we have to come up with solutions that provide us with hard-hitting reporting that monitors people in power, that engages all our people, not just the classes attractive to advertisers, and that seeks to draw all Americans into public life. Going backward is not an option; nor is it desirable. The old corporate media system choked on its own excess. We should not seek to restore or re-create it. We have to move forward to a system that creates a journalism far superior to that of the recent past.
We can do exactly that--but only if we recognize and embrace the necessity of government intervention. Only government can implement policies and subsidies to provide an institutional framework for quality journalism. We understand that this is a controversial position. When French President Nicolas Sarkozy recently engineered a $765 million bailout of French newspapers, free marketeers rushed to the barricades to declare, "No, no, not in the land of the free press." Conventional wisdom says that the founders intended the press to be entirely independent of the state, to preserve the integrity of the press. Bree Nordenson notes that when she informed famed journalist Tom Rosenstiel that her visionary 2007 Columbia Journalism Review article concerned the ways government could support the press, Rosenstiel "responded brusquely, 'Well, I'm not a big fan of government support.' I explained that I just wanted to put the possibility on the table. 'Well, I'd take it off the table,' he said."
We are sympathetic to that position. As writers, we have been routinely critical of government--Democratic and Republican--over the past three decades and antagonistic to those in power. Policies that would allow politicians to exercise even the slightest control over the news are, in our view, not only frightening but unacceptable. Fortunately, the rude calculus that says government intervention equals government control is inaccurate and does not reflect our past or present, or what enlightened policies and subsidies could entail.
Our founders never thought that freedom of the press would belong only to those who could afford a press. They would have been horrified at the notion that journalism should be regarded as the private preserve of the Rupert Murdochs and John Malones. The founders would not have entertained, let alone accepted, the current equation that seems to say that if rich people determine there is no good money to be made in the news, then society cannot have news. Let's find a king and call it a day.
The founders regarded the establishment of a press system, the Fourth Estate, as the first duty of the state. Jefferson and Madison devoted considerable energy to explaining the necessity of the press to a vibrant democracy. The government implemented extraordinary postal subsidies for the distribution of newspapers. It also instituted massive newspaper subsidies through printing contracts and the paid publication of government notices, all with the intent of expanding the number and variety of newspapers. When Tocqueville visited the United States in the 1830s he was struck by the quantity and quality of newspapers and periodicals compared with France, Canada and Britain. It was not an accident. It had little to do with "free markets." It was the result of public policy.
Moreover, when the Supreme Court has taken up matters of freedom of the press, its majority opinions have argued strongly for the necessity of the press as the essential underpinning of our constitutional republic. First Amendment absolutist Hugo Black wrote that the "Amendment rests on the assumption that the widest possible dissemination of information from diverse and antagonistic sources is essential to the welfare of the public, that a free press is a condition of a free society." Black argued for the right and necessity of the government to counteract private monopolistic control over the media. More recently Justice Anthony Kennedy, a Reagan appointee, argued that "assuring the public has access to a multiplicity of information sources is a governmental purpose of the highest order."
But government support for the press is not merely a matter of history or legal interpretation. Complaints about a government role in fostering journalism invariably overlook the fact that our contemporary media system is anything but an independent "free market" institution. The government subsidies established by the founders did not end in the eighteenth--or even the nineteenth--century. Today the government doles out tens of billions of dollars in direct and indirect subsidies, including free and essentially permanent monopoly broadcast licenses, monopoly cable and satellite privileges, copyright protection and postal subsidies. (Indeed, this magazine has been working for the past few years with journals of the left and right to assure that those subsidies are available to all publications.) Because the subsidies mostly benefit the wealthy and powerful, they are rarely mentioned in the fictional account of an independent and feisty Fourth Estate. Both the rise and decline of commercial journalism can be attributed in part to government policies, which scrapped the regulations and ownership rules that had encouraged local broadcast journalism and allowed for lax regulation as well as tax deductions for advertising--policies that greatly increased news media revenues.
The truth is that government policies and subsidies already define our press system. The only question is whether they will be enlightened and democratic, as in the early Republic, or corrupt and corrosive to democracy, as has been the case in recent decades. The answer will be determined in coming years as part of what is certain to be a bruising battle: media companies and their lobbying groups will argue against the "heavy hand of government" while defending existing subsidies. They will propose more deregulation, hoping to capitalize on the crisis to remove the last barriers to print, broadcast and digital consolidation in local markets--creating media "company towns," where competition is eliminated, along with journalism jobs, in pursuit of better returns for investors. Enlightened elected officials, media unions and public interest and community groups that recognize the role of robust journalism are going to have to step up to argue for a real fix.
Fortunately, an increasing number of veteran journalists, scholars and activists are beginning to grasp the historical significance of the present moment and the central role of public policy. It was the late James Carey, decorated University of Illinois and Columbia journalism professor and no fan of government power, who saw this before almost anyone else, writing in 2002: "Alas, the press may have to rely upon a democratic state to create the conditions necessary for a democratic press to flourish and for journalists to be restored to their proper role as orchestrators of the conversation of a democratic culture."
We have to ask where we want to end up, after the reforms have been implemented. In our view we need to have competing independent newsrooms of well-paid journalists in every state and in every major community. This is not about newspapers or even broadcast media; it entails all media and accepts that we may be headed into an era when nearly all of our communication will be digital. Ideally this will be a pluralistic system, where there will be different institutional structures. Varieties of nonprofit media will have to play a much larger role, though not a monopolistic one.
We recognize and embrace the need for a system in which there will be a range of perspectives from left to right, alongside some media more intent on maintaining a less explicitly ideological stance. We must have a system that prohibits state censorship and that minimizes commercial control over journalistic values and pursuits. The right of any person to start his or her own medium, commercial or nonprofit, at any time is inviolable. From this foundation we can envision a thriving, digital citizen's journalism complementing and probably merging with professional journalism. What will the mix be? It would vary, with more not-for-profit and subsidized media in rural and low-income areas, more for-profit media in wealthier ones. The first order of any government intervention would be to assure that no state or region would be without quality local, state, national or international journalism.
We begin with the notion that journalism is a public good, that it has broad social benefits far beyond that between buyer and seller. Like all public goods, we need the resources to get it produced. This is the role of the state and public policy. It will require a subsidy and should be regarded as similar to the education system or the military in that regard. Only a nihilist would consider it sufficient to rely on profit-seeking commercial interests or philanthropy to educate our youth or defend the nation from attack. With the collapse of the commercial news system, the same logic applies. Just as there came a moment when policy-makers recognized the necessity of investing tax dollars to create a public education system to teach our children, so a moment has arrived at which we must recognize the need to invest tax dollars to create and maintain news gathering, reporting and writing with the purpose of informing all our citizens.
So, if we can accept the need for government intervention to save American journalism, what form should it take? In the near term, we need to think about an immediate journalism economic stimulus, to be revisited after three years, and we need to think big. Let's eliminate postal rates for periodicals that garner less than 20 percent of their revenues from advertising. This keeps alive all sorts of magazines and journals of opinion that are being devastated by distribution costs. It is these publications that often do investigative, cutting-edge, politically provocative journalism.
What should be done about the disconnect between young people and journalism? Have the government allocate funds so every middle school, high school and college has a well-funded student newspaper and a low-power FM radio station, all of them with substantial websites. We need to get young people accustomed to producing journalism and to appreciating what differentiates good journalism from the other stuff.
The essential component for the immediate stimulus should be an exponential expansion of funding for public and community broadcasting, with the requirement that most of the funds be used for journalism, especially at the local level, and that all programming be available for free online. Other democracies outspend the United States by whopping margins per capita on public media: Canada sixteen times more; Germany twenty times more; Japan forty-three times more; Britain sixty times more; Finland and Denmark seventy-five times more. These investments have produced dramatically more detailed and incisive international reporting, as well as programming to serve young people, women, linguistic and ethnic minorities and regions that might otherwise be neglected by for-profit media.
Perhaps in the past the paucity of public media in the United States could be justified by the enormous corporate media presence. But as the corporate sector shrivels we need something to replace it, and fast. Public and community broadcasters are in a position to be just that, and to keep alive the practice of news gathering in countless communities across the nation. Indeed, if a regional daily like the San Francisco Chronicle fails this year, why not try a federally funded experiment: maintain the newsroom as a digital extension of the local public broadcasting system?
Currently the government spends less than $450 million annually on public media. (To put matters in perspective, it spends several times that much on Pentagon public relations designed, among other things, to encourage favorable press coverage of the wars that the vast majority of Americans oppose.) Based on what other highly democratic and free countries do, the allocation from the government should be closer to $10 billion.
Mar 13, 2009
Ban and Bill (Clinton) In Haiti
Ban and Bill or Jack and Jill? In Haiti, It Depends on the Hill
March 11, 2009...12:24 pm
With great fanfare,the UN Secretary-General, Ban Ki-Moon, and former US president, Bill Clinton, paid a visit to Haiti this week. In light of the US intention to deport 30,000 Haitians currently living in the US back to Haiti, this high-powered duo should be viewed very suspiciously. It is tough to keep a straight face about a deportation order when you consider Haiti’s extreme poverty and hunger. But, Ban and Bill are in Haiti to put a pretty face on the country so that the order is executed without a hitch. Yet, even this kind of star quality cannot erase 200 years of the US’ predatory policies towards Haiti. Ban and Bill no doubt will pronounce Haiti “fit” for more hell, but the irony that they represent Haiti’s prime abusers –the United Nations and the United States — is inescapable.
And so, like Jack and Jill, let’s go up the hill to see what lies on the other side. The US, upon Haiti’s declaration of independence from France in 1804, refused to recognize the new country and promptly coordinated a worldwide embargo against it. When the US finally recognized Haiti, it was not until 1862 and only because Lincoln was contemplating sending slaves from the US there. As World War I erupted, the US, under the guise of stopping German infiltration into the Caribbean, invaded Haiti in 1915 and occupied it until 1934. During those nineteen years, the US stole all the gold out of the Haitian treasury, enslaved Haitians into work gangs known as “corvees,” and slaughtered thousands in what is known as the “Cacos” wars.
Beginning in 1957, the US found a Haitian diamond in the rough — Francois Duvalier — otherwise known as Papa Doc Duvalier. Here was a leader who kept the people of Haiti in line via the vicious “Ton Ton Macoutes,” attaches who wielded machete terror wherever they roamed. But, Duvalier earned his keep even more by being the US’ anti-communist beacon in the Caribbean keeping tabs on socialist movements such as that in Cuba. Duvalier was rewarded handsomely by the US with loans from international lending institutions — unfortunately, a totally improversihed Haiti is paying back thoses loans to this day.
Finally, two US-inspired coups (1991 and 2004) lodged against the only Haitian leader that ever gave a damn about the people, Jean-Bertrand Aristide, sealed Haiti into perpetual poverty and dissolved its sovereignty. Approximately 10,000 UN peacekeepers were sent to Haiti in the wake of the second coup. Ostensibly, their mission was to bring peace and security to Haiti, but as Kevin Pina states in his documentary film, “Haiti: We Must Kill the Bandits,” their mission was to prop up the highly unpopular and illegal government installed by the US after Aristide’s departure. Pina maintains that had the UN not been in Haiti, the illegal government would have fallen in a week.
So Ban and Bill went up the hill in Haiti to apply band-aids to cover the scars, to cover the truth. No doubt the press releases will be cheerful and full of hope with pronouncements about Haiti’s readiness to welcome home 30,000 of its citizens. And, as has become customary,will be accompanied by the usual promises of more loans, yet nary a word about debt relief.
Ban and Bill went up the hill, but never saw Haiti — they could have accomplished their mission from their offices in New York.
March 11, 2009...12:24 pm
With great fanfare,the UN Secretary-General, Ban Ki-Moon, and former US president, Bill Clinton, paid a visit to Haiti this week. In light of the US intention to deport 30,000 Haitians currently living in the US back to Haiti, this high-powered duo should be viewed very suspiciously. It is tough to keep a straight face about a deportation order when you consider Haiti’s extreme poverty and hunger. But, Ban and Bill are in Haiti to put a pretty face on the country so that the order is executed without a hitch. Yet, even this kind of star quality cannot erase 200 years of the US’ predatory policies towards Haiti. Ban and Bill no doubt will pronounce Haiti “fit” for more hell, but the irony that they represent Haiti’s prime abusers –the United Nations and the United States — is inescapable.
And so, like Jack and Jill, let’s go up the hill to see what lies on the other side. The US, upon Haiti’s declaration of independence from France in 1804, refused to recognize the new country and promptly coordinated a worldwide embargo against it. When the US finally recognized Haiti, it was not until 1862 and only because Lincoln was contemplating sending slaves from the US there. As World War I erupted, the US, under the guise of stopping German infiltration into the Caribbean, invaded Haiti in 1915 and occupied it until 1934. During those nineteen years, the US stole all the gold out of the Haitian treasury, enslaved Haitians into work gangs known as “corvees,” and slaughtered thousands in what is known as the “Cacos” wars.
Beginning in 1957, the US found a Haitian diamond in the rough — Francois Duvalier — otherwise known as Papa Doc Duvalier. Here was a leader who kept the people of Haiti in line via the vicious “Ton Ton Macoutes,” attaches who wielded machete terror wherever they roamed. But, Duvalier earned his keep even more by being the US’ anti-communist beacon in the Caribbean keeping tabs on socialist movements such as that in Cuba. Duvalier was rewarded handsomely by the US with loans from international lending institutions — unfortunately, a totally improversihed Haiti is paying back thoses loans to this day.
Finally, two US-inspired coups (1991 and 2004) lodged against the only Haitian leader that ever gave a damn about the people, Jean-Bertrand Aristide, sealed Haiti into perpetual poverty and dissolved its sovereignty. Approximately 10,000 UN peacekeepers were sent to Haiti in the wake of the second coup. Ostensibly, their mission was to bring peace and security to Haiti, but as Kevin Pina states in his documentary film, “Haiti: We Must Kill the Bandits,” their mission was to prop up the highly unpopular and illegal government installed by the US after Aristide’s departure. Pina maintains that had the UN not been in Haiti, the illegal government would have fallen in a week.
So Ban and Bill went up the hill in Haiti to apply band-aids to cover the scars, to cover the truth. No doubt the press releases will be cheerful and full of hope with pronouncements about Haiti’s readiness to welcome home 30,000 of its citizens. And, as has become customary,will be accompanied by the usual promises of more loans, yet nary a word about debt relief.
Ban and Bill went up the hill, but never saw Haiti — they could have accomplished their mission from their offices in New York.
Blackwater's Own Private Africa
By Bruce Falconer and Daniel Schulman
Mon March 2, 2009 6:59 PM PST
"You give me money, I don't care who you are." It was late October, and Zimbabwe's defense attaché, a soft-spoken, thick-shouldered lieutenant colonel, was explaining his country's freewheeling approach to business in the banquet room of the Liaison hotel on Capitol Hill. Mingling around him were representatives from some of the world's best-known private security and military contracting firms, gathered to explore their prospects in the industry's next frontier: Africa. None betrayed any eagerness to do business with Robert Mugabe, notwithstanding assurances from the beaming attaché that Zimbabwe—"the second-largest economy in southern Africa"—remains strong despite 231 million percent annual inflation. But there were plenty of other avenues to explore, including a recent shake-up in the US military's command structure that seemed to promise new demand for firms like Blackwater (which recently changed its name to Xe), Triple Canopy, and DynCorp.
The guests, dressed in business attire and the odd military uniform, were gathered for the annual summit of the International Peace Operations Association (IPOA), a trade group. Industry reps had traveled from as far as Dubai and Malta to discuss this year's topic—the Pentagon's newly established US Africa Command, or AFRICOM—and to browse booths hawking everything from armored vehicles to high-risk insurance. Arrayed on a table in the back were piles of corporate literature, complete with pictures of Third World children and Western contractors delivering aid, a popular industry meme. Among the big-ticket attractions was a keynote address from William E. "Kip" Ward, the four-star general in charge of AFRICOM.
The event drew record attendance, and industry veterans were not surprised. "Everybody's always been interested in Africa," Chris Taylor, a former Blackwater executive and now a vice president at Ohio-based Mission Essential Personnel, explained over drinks in the hotel bar. "It represents a huge opportunity for business."
Africa is no stranger to armed security contractors; the industry in its modern incarnation was born when mercenary firms like Executive Outcomes and Sandline International fought for embattled African governments during the 1990s, allegedly in exchange for diamond and oil concessions. Since then, security contractors have gained broader acceptance. But serious concerns remain about the role they might play in their old stomping grounds.
"There is a crying, desperate need for some of the services that these people provide," said Alex Yearsley, the head of special projects at Global Witness, a London-based human rights group. "There's no question they can do it. It's a question of when you're going to have a questionable regime hiring these people to kick out indigenous communities or [gain access to] mining areas. That's when it gets problematic."
To companies seeking entrée to the continent, the military's new Africa command could provide a key foothold. To pursue its mission of security, diplomacy, and development, AFRICOM's outreach and partnership director, Paul Saxton, told a packed audience at the conference, the command plans to enlist the help of the private sector. "We're reaching out."
Reliance on contractors, though, could add to the controversy already engulfing AFRICOM, especially the fears that the military's forays into development work could blur the line between aid workers and soldiers or hired guns. Taylor, the former Blackwater executive, downplayed such concerns. AFRICOM, he says, will likely train "partner nations" to provide a secure environment for humanitarian projects. "It doesn't mean that a bunch of dudes with guns are going to show up with bags of rice."
Perhaps not, but critics have also accused the Pentagon of using africom as a fig leaf for broader geopolitical objectives; they view the command as little more than a strategic maneuver to counter China's pursuit of Africa's natural resources. "I want to see it succeed," said the security director of a well-known NGO who is nonetheless wary of AFRICOM's mission. "I want to see development that is focused on empowerment, not as some tactic for US interests. That's not development. That's manipulation."
Africans, too, have greeted the Pentagon's plans with suspicion. As US officials toured the continent in search of a location for the new command's headquarters, they met with so much opposition that they eventually decided to operate from Germany for the time being. This frosty reception should have come as no surprise, Eeben Barlow, the former South African soldier who founded Executive Outcomes, commented on his blog in November. "Looking at...US administrations' record in Africa, it is one long script of betrayal, destabilisation, political blackmail and even worse." African nations, he noted, "remain extremely reluctant and wary to allow the wolf to guard their sheep."
But AFRICOM's start-up problems have not dampened the enthusiasm of Barlow's cohorts in the security industry. They also see opportunities in other federal initiatives—such as a massive, and little-known, State Department contract, the Africa Peacekeeping Program. Worth some $1 billion over five years, it covers work in countries including Somalia, Sudan, and the Democratic Republic of Congo, everything from logistics support and construction to training and advising African troops, flying aerial surveillance missions, and improving coastal security. Triple Canopy and Blackwater are said to be among those that submitted proposals.
At the IPOA conference, we spoke with two Blackwater representatives, who during that morning's panel discussion had taken seats beside AFRICOM's Paul Saxton. With Somali pirates' seizure of a Ukrainian ship carrying 33 battle tanks fresh in the news, they told us, the company saw opportunity in the area of "maritime security." In mid-October, Blackwater had announced that its 183-foot, helipad-equipped ship, the McArthur, was standing by to assist shipping companies in the area. (After being contacted by at least 70 shipping and insurance firms interested in its anti-piracy services, Blackwater in December held three days of meetings in London with prospective clients.) But the core of Blackwater's ambition in Africa is to transition away from the high-profile "personal protection" work that has brought it so much opprobrium in Iraq and Afghanistan; to that end, its representatives told us, it has opened an office in Nairobi, Kenya, the better to go after opportunities to train African military and security forces.
If the sheer number of companies represented at the ipoa conference is any indication, Blackwater's envoys will run into plenty of their competitors—and that makes some observers uneasy. "You start bringing these people on the scene, they come in as trainers, but at the drop of a hat they can be other things," said the ngo security director. "They have skills, they have something to bring, but it's a double-edged sword, and it depends on which edge is being presented."
Mon March 2, 2009 6:59 PM PST
"You give me money, I don't care who you are." It was late October, and Zimbabwe's defense attaché, a soft-spoken, thick-shouldered lieutenant colonel, was explaining his country's freewheeling approach to business in the banquet room of the Liaison hotel on Capitol Hill. Mingling around him were representatives from some of the world's best-known private security and military contracting firms, gathered to explore their prospects in the industry's next frontier: Africa. None betrayed any eagerness to do business with Robert Mugabe, notwithstanding assurances from the beaming attaché that Zimbabwe—"the second-largest economy in southern Africa"—remains strong despite 231 million percent annual inflation. But there were plenty of other avenues to explore, including a recent shake-up in the US military's command structure that seemed to promise new demand for firms like Blackwater (which recently changed its name to Xe), Triple Canopy, and DynCorp.
The guests, dressed in business attire and the odd military uniform, were gathered for the annual summit of the International Peace Operations Association (IPOA), a trade group. Industry reps had traveled from as far as Dubai and Malta to discuss this year's topic—the Pentagon's newly established US Africa Command, or AFRICOM—and to browse booths hawking everything from armored vehicles to high-risk insurance. Arrayed on a table in the back were piles of corporate literature, complete with pictures of Third World children and Western contractors delivering aid, a popular industry meme. Among the big-ticket attractions was a keynote address from William E. "Kip" Ward, the four-star general in charge of AFRICOM.
The event drew record attendance, and industry veterans were not surprised. "Everybody's always been interested in Africa," Chris Taylor, a former Blackwater executive and now a vice president at Ohio-based Mission Essential Personnel, explained over drinks in the hotel bar. "It represents a huge opportunity for business."
Africa is no stranger to armed security contractors; the industry in its modern incarnation was born when mercenary firms like Executive Outcomes and Sandline International fought for embattled African governments during the 1990s, allegedly in exchange for diamond and oil concessions. Since then, security contractors have gained broader acceptance. But serious concerns remain about the role they might play in their old stomping grounds.
"There is a crying, desperate need for some of the services that these people provide," said Alex Yearsley, the head of special projects at Global Witness, a London-based human rights group. "There's no question they can do it. It's a question of when you're going to have a questionable regime hiring these people to kick out indigenous communities or [gain access to] mining areas. That's when it gets problematic."
To companies seeking entrée to the continent, the military's new Africa command could provide a key foothold. To pursue its mission of security, diplomacy, and development, AFRICOM's outreach and partnership director, Paul Saxton, told a packed audience at the conference, the command plans to enlist the help of the private sector. "We're reaching out."
Reliance on contractors, though, could add to the controversy already engulfing AFRICOM, especially the fears that the military's forays into development work could blur the line between aid workers and soldiers or hired guns. Taylor, the former Blackwater executive, downplayed such concerns. AFRICOM, he says, will likely train "partner nations" to provide a secure environment for humanitarian projects. "It doesn't mean that a bunch of dudes with guns are going to show up with bags of rice."
Perhaps not, but critics have also accused the Pentagon of using africom as a fig leaf for broader geopolitical objectives; they view the command as little more than a strategic maneuver to counter China's pursuit of Africa's natural resources. "I want to see it succeed," said the security director of a well-known NGO who is nonetheless wary of AFRICOM's mission. "I want to see development that is focused on empowerment, not as some tactic for US interests. That's not development. That's manipulation."
Africans, too, have greeted the Pentagon's plans with suspicion. As US officials toured the continent in search of a location for the new command's headquarters, they met with so much opposition that they eventually decided to operate from Germany for the time being. This frosty reception should have come as no surprise, Eeben Barlow, the former South African soldier who founded Executive Outcomes, commented on his blog in November. "Looking at...US administrations' record in Africa, it is one long script of betrayal, destabilisation, political blackmail and even worse." African nations, he noted, "remain extremely reluctant and wary to allow the wolf to guard their sheep."
But AFRICOM's start-up problems have not dampened the enthusiasm of Barlow's cohorts in the security industry. They also see opportunities in other federal initiatives—such as a massive, and little-known, State Department contract, the Africa Peacekeeping Program. Worth some $1 billion over five years, it covers work in countries including Somalia, Sudan, and the Democratic Republic of Congo, everything from logistics support and construction to training and advising African troops, flying aerial surveillance missions, and improving coastal security. Triple Canopy and Blackwater are said to be among those that submitted proposals.
At the IPOA conference, we spoke with two Blackwater representatives, who during that morning's panel discussion had taken seats beside AFRICOM's Paul Saxton. With Somali pirates' seizure of a Ukrainian ship carrying 33 battle tanks fresh in the news, they told us, the company saw opportunity in the area of "maritime security." In mid-October, Blackwater had announced that its 183-foot, helipad-equipped ship, the McArthur, was standing by to assist shipping companies in the area. (After being contacted by at least 70 shipping and insurance firms interested in its anti-piracy services, Blackwater in December held three days of meetings in London with prospective clients.) But the core of Blackwater's ambition in Africa is to transition away from the high-profile "personal protection" work that has brought it so much opprobrium in Iraq and Afghanistan; to that end, its representatives told us, it has opened an office in Nairobi, Kenya, the better to go after opportunities to train African military and security forces.
If the sheer number of companies represented at the ipoa conference is any indication, Blackwater's envoys will run into plenty of their competitors—and that makes some observers uneasy. "You start bringing these people on the scene, they come in as trainers, but at the drop of a hat they can be other things," said the ngo security director. "They have skills, they have something to bring, but it's a double-edged sword, and it depends on which edge is being presented."
Ethanol's African Landgrab
By Adam Welz Thu March 12, 2009 12:14 PM PST
Massingir is an unremarkable town. The electricity supply here in rural Mozambique is erratic, clean water is hard to come by, and the hotels—well, calling them hotels is a little too polite. The town center is two ragged blocks of colorful bars, stores, and market stalls arranged along a reddish sandy furrow—the main street—with goods packaged in the smallest possible quantities to match the pinched cash flow of local buyers: individual quarts of fuel in old bottles, spoonfuls of soap powder in bright little packets, single cigarettes, microcans of tomato paste and sardines, all laid out in creative patterns to catch the eye. Babies doze in the shade while their mothers gossip, pausing on the way back from the unicef tent outside the shabby clinic; loose-limbed teenagers play rough games of pool under a thatched roof by the side of the road.
Hardcore nature nuts sometimes pass through Massingir; tourism has been picking up as word spreads of the giant Great Limpopo Transfrontier Park, a "peace park" that will merge the Mozambican wilderness of the nearby Limpopo National Park with South Africa's world-famous Kruger National Park (just across the border) and some adjacent Zimbabwean wildlands to make one of Africa's largest protected areas.
But I'm here for something bigger than elephants. This backwater is also the beachhead for an enormous project that promises to spend some $500 million, employ at least 2,000 people, and use nearly 75,000 acres of native woodland and savanna—an area five times the size of Manhattan—to grow sugarcane and produce ethanol for the growing global biofuel market. Known as ProCana, it's an endeavor that could not just transform Massingir, but also, via a mess of land claims and conflicting promises, put at risk the transnational park and other significant conservation projects.
ProCana is just the first in a long line of massive biofuel projects backed by investors ranging from local speculators to multinational corporations like BP. Some have asked the government—which legally owns all land here—for entire districts (the equivalent of US counties). Government officials told me that as of 2007, biofuel investors had applied for rights to use about 12 million acres, nearly one-seventh the country's 89 million acres of arable land; unofficial tallies are double that. The message is clear: This country, almost twice the size of California, is beckoning the plow. ProCana and its ilk are the vanguard of an underreported land revolution—a movement that could reshape vast terrains and the livelihoods of millions as international agribusiness sets its sights on the cheap soil of Africa.
i find the big man of ProCana, Izak Cornelis Holtzhausen—Corné to his friends—in an unexceptional '60s modernist office block in Maputo. A secretary shows me to a small boardroom with new furniture, extremely shiny parquet floors, and a promotional banner for a new coal mining area along the Zambezi River. Holtzhausen walks in, plants himself sideways at the table, and introduces himself with a charming smile; as we talk, his chubby fingers spin a tiny cell phone in unbalanced orbits on the table.
Holtzhausen is the Mozambique manager of the Central African Mining & Exploration Company (camec), which does what its name suggests and owns half of ProCana. He won't tell me who owns the other half ("Ask me next month"), and he doesn't want to talk about camec at all. There's been too much in the media about the company's allegedly corrupt mining deals in the Democratic Republic of the Congo and its connections with two notorious white Zimbabwean businessmen, Billy Rautenbach and John Bredenkamp, who were blacklisted by the US Treasury Department in November for their support of Zimbabwean despot Robert Mugabe. (Six months after our interview, a British Virgin Islands-based company named BioEnergy Africa, led by top camec officials, bought 94 percent of ProCana; Holtzhausen remains its head.)
An Afrikaner born and raised in South Africa (he served in the apartheid-era army and often uses Afrikaans in conversation), Holtzhausen has taken Mozambican citizenship and married a Mozambican woman of color. He believes in the place. Many Afrikaners, he says, ask him for business connections in Mozambique. "Most of them are scum. Absolute scum. They go on about the bad black government over there, and when they start using the k-word"—kaffir, the racist slur—"I just put the phone down on them. Afrikaners have caused a lot of trouble in Africa."
Mozambique is set to become a major biofuels producer, Holtzhausen assures me, and other agribusiness ventures are booming, too. (Among other things, he has a stake in the country's growing beef industry.) ProCana will process its cane in a Brazilian-built sugar-ethanol factory. It will lay miles of track to link the plant up with the national rail network. Eventually, trains will take about 9.5 million gallons of ethanol a month down to the Maputo harbor, where it will be pumped into tankers and shipped to Europe. Once the operation is up and running, ProCana will be printing money.
Yes, Holtzhausen acknowledges before I even ask, he's putting his plantation in the driest part of Mozambique—but he's investing a fortune in efficient drip irrigation. "You can't produce a green fuel and waste water," he says. Still, ProCana will use 108 billion gallons of water per year, supplied via canal from the nearby Massingir Dam. I've heard that this has downstream farmers worried, but Holtzhausen says those stories are pure fiction: "I'll give you a million bucks if you find me one of those farmers!" he brags, grinning broadly.
I've also heard that much of the area ProCana aims to plant had previously been slated to complete the development of the peace park, but that Holtzhausen levered it away, leaving the project in chaos. He laughs this off, too. I tell him of rumors that he got his land rights because powerful people had equity in the venture. (The story around Maputo is that Graça Machel, widow of Mozambique's first president and now wife of Nelson Mandela, is involved in ProCana—though verifying this is near impossible.) "No prominent people have invested in ProCana," he replies, after some thought. "But it will only be good for me if she did." Machel is a friend, he says. "I would be honored to have her as an investor." Another triumphant smile.
Despite Holtzhausen's disavowals, out in Massingir I discover that many of ProCana's 75,000 acres had indeed been slated rather precisely (and publicly) as part of planning for the Transfrontier Park. Some 29,000 people still live within Limpopo National Park's borders, and as many as 9,000 in the heart of the park are supposed to be relocated. After years of delicate negotiations, park authorities have arranged for the inner 9,000 to move to the valley of the Rio dos Elefantes, just downstream of Massingir Dam. They have—as Mozambican law requires—obtained permission from "receiving" communities to build houses for the newcomers and, very important, identified a sufficiently large grazing area for the new residents' livestock.
A ProCana map I've managed to obtain shows that the company's 75,000 acres cover this intended grazing zone. The same chunk of land has been promised to both the inner 9,000 and ProCana. How did this happen? I'll need a 4x4 and two interpreters (Shangaan to Portuguese, Portuguese to English) to find the answer.
a trip into the Rio dos Elefantes valley is a journey into a cliché of Africa: hardworking women in colorful cloth, relentlessly pecking chickens, and thin, lazy yellow-brown dogs scattered around circular grass-roofed huts. In most village centers a hand-carved flagpole carries a Mozambican flag (crossed hoe and Kalashnikov, nice bright colors). Take away the occasional T-shirt, radio, and cell phone, and the ever-present cheap plastic buckets and chairs, and you have something like the Mozambique of 500 years ago. Polygamy is common, many children and cattle are a sign of wealth, and the village leader and his elders are not to be crossed. Villagers build their homes near a river, plant crops in the fertile floodplain, and graze cattle in the nearby savanna; like about 70 percent of their compatriots, they rely on the land for their livelihood.
Mozambique was colonized by the Portuguese starting in the early 1500s; they set up vast plantations whose laborers were kept in line with brutal corporal punishment. In 1975, after Portugal's Carnation Revolution, Mozambique was chaotically catapulted into independence. The civil war that followed, one of the Cold War's many proxy conflicts, shattered the country's infrastructure and killed about a million people before petering out in 1992. To this day, bullet holes pockmark buildings, amputees beg along the roads, and crushing poverty saturates the country. During one of my trips to Mozambique early last year, riots broke out a day after a high-profile visit by the president of the World Bank, who had congratulated the country on its success in becoming "a major destination for foreign investment." Thousands took to the streets to protest skyrocketing prices; Mozambique's staple food, corn, had become vastly more expensive as the United States turned an increasing percentage of its crop into ethanol.
"It's important to remember that Mozambican independence was about liberating people and land," Diamantino Nhampossa, a land-rights activist, told me. Mozambique's constitution decrees that all land is owned by the state. Individuals and private companies can acquire rights to use parcels for 50-year periods, but the country's sweeping Land Law requires them to find out if any local people are already using the land and, if so, obtain their permission for any project. In theory, the law gives Mozambican peasants more power to determine their fate than their counterparts around the world. In practice, as I was to discover, the arm of the law has limited reach.
driving down to the Rio dos Elefantes from Massingir along a rough track, I pass a rust-flecked sign announcing a relocation area for a community from the Limpopo park. I stop in some villages along the land ProCana has claimed and, following protocol, ask to speak to the headman in each. Everywhere, I hear versions of the same story. Yes, people from the park are coming to live with us here, but we don't know when. Yes, ProCana is taking a lot of land, but we think there will be enough for the project, the people, and their cattle. In every village, I'm told that ProCana has promised a house for the headman and jobs for others, but written evidence of those promises is nowhere to be seen.
Villagers have conflicting stories about how much land ProCana is taking; some direct me to Ernesto Bandi Ngovene, traditionally the leading headman for the whole area. I find him reclining in the shade outside his home, barely able to move after a stroke. He has not been to the disputed land for a while, does not know how to read a map, and cannot say exactly how much land has been promised to the people from the park, or to ProCana.
One afternoon I run into a couple of village elders when their headman isn't around. They say that in the middle of their negotiations with the park, ProCana came along and took all the valley's headmen away for meetings. These were not held in front of the communities or elders, as is customary. Afterward, their headman told them that he'd signed a paper giving ProCana a large piece of the village's land. They have never seen this paper. They do not want to give away their land, but ProCana came with powerful people, and they are afraid. They have been told that they have rights under the Land Law, that they can say no to ProCana, but they do not have a copy of this law. Can I please send them one?
We drive in the 4x4 into ProCana's claim. The bush rustles and sings; birds are everywhere, and the savanna is filled with gray-barked and butterfly-leafed mopane trees, some of the biggest and oldest I have ever seen. A giant baobab, centuries old, provides a backdrop for a screaming flock of parrots, while a black-breasted snake eagle hovers overhead. Holtzhausen told me his environmental people found no trees of value here—charcoal burners, he said, cut them long ago. I'm not sure where those experts looked, because here, in the perfectly cadenced afternoon light, is paradise.
I ask the Limpopo park administrators in Massingir what they made of ProCana swiping the resettlement land from under their noses. They won't say much on the record except some boilerplate about it's being a fait accompli, about the resettlement's being delayed but not scuttled, and that ProCana's 2,000 jobs could be a good thing for the region. Other locals tell me ProCana made it very clear that it had the support of "important people," including President Armando Guebuza—a millionaire politician-businessman who has his fingers in many pies and flew to Massingir to officially open the project. Ominous rumors even link Nyimpine Chissano, the late gangster son of former president Joaquim Chissano, to ProCana.
I try numerous times, to no avail, to get formal government comment on ProCana and Mozambique's broader plans for biofuels. A few administrators do agree to talk—but only in secret. "ProCana were smart," one official with intimate knowledge of the Limpopo park relocation tells me. "They approached the leader of Chitar village"—the stroke-hobbled Ngovene—"first. They made sure he said yes to the project because they knew the other chiefs in the valley would follow."
Details of land rights in the Massingir area prove hard to find, but after many quiet meetings I get my hands on several credible maps. They tell a story of cascading land chaos following ProCana's arrival. The company's claim on the Limpopo park land has left park officials scrambling to identify another place for the relocatees' cattle. They've found one—but much of this land was previously identified as a game reserve, in which a US conservation group had already allocated hundreds of thousands of dollars. The reserve project has now collapsed, and South Africans, Americans, and Mozambican military officers are claiming fragments of it for private safari operations. On one map, a big chunk of land adjacent to ProCana's carries the legend "Emelia Machel"—apparently a relative of Graça Machel. Local people tell me the Machel family keeps cattle there.
The maps make it clear that much of the land around Massingir has been allocated to two, sometimes three, different people or entities. This is widespread in Mozambique; in practice, land is owned by those who have the most influence, or the money to fence or patrol it, no matter what the documents say. Foreign governments and donor agencies—which supply fully one-half the government's budget—generally won't get involved in land disputes, even if these conflicts cause projects funded by their own donors' or taxpayers' money to go up in smoke (or into Mercedes-Benzes and Hummers for the corrupt elite). They refuse to upset the government—which, as it happens, is busy handing out rights to a string of potentially lucrative gas, oil, and coal deposits.
Carlos Castel-Branco, a respected local economist, tells me that the primary function of politicians in Mozambique is to mediate between competing private interests, including their own. They lack both the political will and the administrative capacity, he says, to build a modern state. The current land rush—for biofuel plantations, export-oriented farms, and private hunting concessions—is the first stage in a war over land that Mozambique's fragile democratic and legal systems might not survive. "The government is not politically capable of stopping this process of land speculation. People feel that the dignity of the state and of themselves has been taken away. It's not hopeless, but it's going to be a big fight."
I present a plausible nightmare scenario to ProCana's Corné Holtzhausen. His 75,000-acre farm/factory will have serious ecological impacts—lost wildlife habitat, greenhouse gases released as natural vegetation is destroyed, massive water consumption, fertilizer and pesticide pollution. On the greater scale of Africa, these might be considered small, but ProCana is not alone. What about the hundreds of other big investors who will rush in if he succeeds? Who will stop his beloved Mozambique, and much of the rest of the continent, from being turned into vast pesticide-and-fertilizer-soaked monocultures? He smiles, a great gotcha smile, and pauses. "People like you," he says. "People like you who wear cotton shirts that take 25,000 liters of water to make—you like to wear them, because they're comfortable. People like you who drive private cars and like to fly around the world in aeroplanes. The consumer. That's who determines what happens."
Massingir is an unremarkable town. The electricity supply here in rural Mozambique is erratic, clean water is hard to come by, and the hotels—well, calling them hotels is a little too polite. The town center is two ragged blocks of colorful bars, stores, and market stalls arranged along a reddish sandy furrow—the main street—with goods packaged in the smallest possible quantities to match the pinched cash flow of local buyers: individual quarts of fuel in old bottles, spoonfuls of soap powder in bright little packets, single cigarettes, microcans of tomato paste and sardines, all laid out in creative patterns to catch the eye. Babies doze in the shade while their mothers gossip, pausing on the way back from the unicef tent outside the shabby clinic; loose-limbed teenagers play rough games of pool under a thatched roof by the side of the road.
Hardcore nature nuts sometimes pass through Massingir; tourism has been picking up as word spreads of the giant Great Limpopo Transfrontier Park, a "peace park" that will merge the Mozambican wilderness of the nearby Limpopo National Park with South Africa's world-famous Kruger National Park (just across the border) and some adjacent Zimbabwean wildlands to make one of Africa's largest protected areas.
But I'm here for something bigger than elephants. This backwater is also the beachhead for an enormous project that promises to spend some $500 million, employ at least 2,000 people, and use nearly 75,000 acres of native woodland and savanna—an area five times the size of Manhattan—to grow sugarcane and produce ethanol for the growing global biofuel market. Known as ProCana, it's an endeavor that could not just transform Massingir, but also, via a mess of land claims and conflicting promises, put at risk the transnational park and other significant conservation projects.
ProCana is just the first in a long line of massive biofuel projects backed by investors ranging from local speculators to multinational corporations like BP. Some have asked the government—which legally owns all land here—for entire districts (the equivalent of US counties). Government officials told me that as of 2007, biofuel investors had applied for rights to use about 12 million acres, nearly one-seventh the country's 89 million acres of arable land; unofficial tallies are double that. The message is clear: This country, almost twice the size of California, is beckoning the plow. ProCana and its ilk are the vanguard of an underreported land revolution—a movement that could reshape vast terrains and the livelihoods of millions as international agribusiness sets its sights on the cheap soil of Africa.
i find the big man of ProCana, Izak Cornelis Holtzhausen—Corné to his friends—in an unexceptional '60s modernist office block in Maputo. A secretary shows me to a small boardroom with new furniture, extremely shiny parquet floors, and a promotional banner for a new coal mining area along the Zambezi River. Holtzhausen walks in, plants himself sideways at the table, and introduces himself with a charming smile; as we talk, his chubby fingers spin a tiny cell phone in unbalanced orbits on the table.
Holtzhausen is the Mozambique manager of the Central African Mining & Exploration Company (camec), which does what its name suggests and owns half of ProCana. He won't tell me who owns the other half ("Ask me next month"), and he doesn't want to talk about camec at all. There's been too much in the media about the company's allegedly corrupt mining deals in the Democratic Republic of the Congo and its connections with two notorious white Zimbabwean businessmen, Billy Rautenbach and John Bredenkamp, who were blacklisted by the US Treasury Department in November for their support of Zimbabwean despot Robert Mugabe. (Six months after our interview, a British Virgin Islands-based company named BioEnergy Africa, led by top camec officials, bought 94 percent of ProCana; Holtzhausen remains its head.)
An Afrikaner born and raised in South Africa (he served in the apartheid-era army and often uses Afrikaans in conversation), Holtzhausen has taken Mozambican citizenship and married a Mozambican woman of color. He believes in the place. Many Afrikaners, he says, ask him for business connections in Mozambique. "Most of them are scum. Absolute scum. They go on about the bad black government over there, and when they start using the k-word"—kaffir, the racist slur—"I just put the phone down on them. Afrikaners have caused a lot of trouble in Africa."
Mozambique is set to become a major biofuels producer, Holtzhausen assures me, and other agribusiness ventures are booming, too. (Among other things, he has a stake in the country's growing beef industry.) ProCana will process its cane in a Brazilian-built sugar-ethanol factory. It will lay miles of track to link the plant up with the national rail network. Eventually, trains will take about 9.5 million gallons of ethanol a month down to the Maputo harbor, where it will be pumped into tankers and shipped to Europe. Once the operation is up and running, ProCana will be printing money.
Yes, Holtzhausen acknowledges before I even ask, he's putting his plantation in the driest part of Mozambique—but he's investing a fortune in efficient drip irrigation. "You can't produce a green fuel and waste water," he says. Still, ProCana will use 108 billion gallons of water per year, supplied via canal from the nearby Massingir Dam. I've heard that this has downstream farmers worried, but Holtzhausen says those stories are pure fiction: "I'll give you a million bucks if you find me one of those farmers!" he brags, grinning broadly.
I've also heard that much of the area ProCana aims to plant had previously been slated to complete the development of the peace park, but that Holtzhausen levered it away, leaving the project in chaos. He laughs this off, too. I tell him of rumors that he got his land rights because powerful people had equity in the venture. (The story around Maputo is that Graça Machel, widow of Mozambique's first president and now wife of Nelson Mandela, is involved in ProCana—though verifying this is near impossible.) "No prominent people have invested in ProCana," he replies, after some thought. "But it will only be good for me if she did." Machel is a friend, he says. "I would be honored to have her as an investor." Another triumphant smile.
Despite Holtzhausen's disavowals, out in Massingir I discover that many of ProCana's 75,000 acres had indeed been slated rather precisely (and publicly) as part of planning for the Transfrontier Park. Some 29,000 people still live within Limpopo National Park's borders, and as many as 9,000 in the heart of the park are supposed to be relocated. After years of delicate negotiations, park authorities have arranged for the inner 9,000 to move to the valley of the Rio dos Elefantes, just downstream of Massingir Dam. They have—as Mozambican law requires—obtained permission from "receiving" communities to build houses for the newcomers and, very important, identified a sufficiently large grazing area for the new residents' livestock.
A ProCana map I've managed to obtain shows that the company's 75,000 acres cover this intended grazing zone. The same chunk of land has been promised to both the inner 9,000 and ProCana. How did this happen? I'll need a 4x4 and two interpreters (Shangaan to Portuguese, Portuguese to English) to find the answer.
a trip into the Rio dos Elefantes valley is a journey into a cliché of Africa: hardworking women in colorful cloth, relentlessly pecking chickens, and thin, lazy yellow-brown dogs scattered around circular grass-roofed huts. In most village centers a hand-carved flagpole carries a Mozambican flag (crossed hoe and Kalashnikov, nice bright colors). Take away the occasional T-shirt, radio, and cell phone, and the ever-present cheap plastic buckets and chairs, and you have something like the Mozambique of 500 years ago. Polygamy is common, many children and cattle are a sign of wealth, and the village leader and his elders are not to be crossed. Villagers build their homes near a river, plant crops in the fertile floodplain, and graze cattle in the nearby savanna; like about 70 percent of their compatriots, they rely on the land for their livelihood.
Mozambique was colonized by the Portuguese starting in the early 1500s; they set up vast plantations whose laborers were kept in line with brutal corporal punishment. In 1975, after Portugal's Carnation Revolution, Mozambique was chaotically catapulted into independence. The civil war that followed, one of the Cold War's many proxy conflicts, shattered the country's infrastructure and killed about a million people before petering out in 1992. To this day, bullet holes pockmark buildings, amputees beg along the roads, and crushing poverty saturates the country. During one of my trips to Mozambique early last year, riots broke out a day after a high-profile visit by the president of the World Bank, who had congratulated the country on its success in becoming "a major destination for foreign investment." Thousands took to the streets to protest skyrocketing prices; Mozambique's staple food, corn, had become vastly more expensive as the United States turned an increasing percentage of its crop into ethanol.
"It's important to remember that Mozambican independence was about liberating people and land," Diamantino Nhampossa, a land-rights activist, told me. Mozambique's constitution decrees that all land is owned by the state. Individuals and private companies can acquire rights to use parcels for 50-year periods, but the country's sweeping Land Law requires them to find out if any local people are already using the land and, if so, obtain their permission for any project. In theory, the law gives Mozambican peasants more power to determine their fate than their counterparts around the world. In practice, as I was to discover, the arm of the law has limited reach.
driving down to the Rio dos Elefantes from Massingir along a rough track, I pass a rust-flecked sign announcing a relocation area for a community from the Limpopo park. I stop in some villages along the land ProCana has claimed and, following protocol, ask to speak to the headman in each. Everywhere, I hear versions of the same story. Yes, people from the park are coming to live with us here, but we don't know when. Yes, ProCana is taking a lot of land, but we think there will be enough for the project, the people, and their cattle. In every village, I'm told that ProCana has promised a house for the headman and jobs for others, but written evidence of those promises is nowhere to be seen.
Villagers have conflicting stories about how much land ProCana is taking; some direct me to Ernesto Bandi Ngovene, traditionally the leading headman for the whole area. I find him reclining in the shade outside his home, barely able to move after a stroke. He has not been to the disputed land for a while, does not know how to read a map, and cannot say exactly how much land has been promised to the people from the park, or to ProCana.
One afternoon I run into a couple of village elders when their headman isn't around. They say that in the middle of their negotiations with the park, ProCana came along and took all the valley's headmen away for meetings. These were not held in front of the communities or elders, as is customary. Afterward, their headman told them that he'd signed a paper giving ProCana a large piece of the village's land. They have never seen this paper. They do not want to give away their land, but ProCana came with powerful people, and they are afraid. They have been told that they have rights under the Land Law, that they can say no to ProCana, but they do not have a copy of this law. Can I please send them one?
We drive in the 4x4 into ProCana's claim. The bush rustles and sings; birds are everywhere, and the savanna is filled with gray-barked and butterfly-leafed mopane trees, some of the biggest and oldest I have ever seen. A giant baobab, centuries old, provides a backdrop for a screaming flock of parrots, while a black-breasted snake eagle hovers overhead. Holtzhausen told me his environmental people found no trees of value here—charcoal burners, he said, cut them long ago. I'm not sure where those experts looked, because here, in the perfectly cadenced afternoon light, is paradise.
I ask the Limpopo park administrators in Massingir what they made of ProCana swiping the resettlement land from under their noses. They won't say much on the record except some boilerplate about it's being a fait accompli, about the resettlement's being delayed but not scuttled, and that ProCana's 2,000 jobs could be a good thing for the region. Other locals tell me ProCana made it very clear that it had the support of "important people," including President Armando Guebuza—a millionaire politician-businessman who has his fingers in many pies and flew to Massingir to officially open the project. Ominous rumors even link Nyimpine Chissano, the late gangster son of former president Joaquim Chissano, to ProCana.
I try numerous times, to no avail, to get formal government comment on ProCana and Mozambique's broader plans for biofuels. A few administrators do agree to talk—but only in secret. "ProCana were smart," one official with intimate knowledge of the Limpopo park relocation tells me. "They approached the leader of Chitar village"—the stroke-hobbled Ngovene—"first. They made sure he said yes to the project because they knew the other chiefs in the valley would follow."
Details of land rights in the Massingir area prove hard to find, but after many quiet meetings I get my hands on several credible maps. They tell a story of cascading land chaos following ProCana's arrival. The company's claim on the Limpopo park land has left park officials scrambling to identify another place for the relocatees' cattle. They've found one—but much of this land was previously identified as a game reserve, in which a US conservation group had already allocated hundreds of thousands of dollars. The reserve project has now collapsed, and South Africans, Americans, and Mozambican military officers are claiming fragments of it for private safari operations. On one map, a big chunk of land adjacent to ProCana's carries the legend "Emelia Machel"—apparently a relative of Graça Machel. Local people tell me the Machel family keeps cattle there.
The maps make it clear that much of the land around Massingir has been allocated to two, sometimes three, different people or entities. This is widespread in Mozambique; in practice, land is owned by those who have the most influence, or the money to fence or patrol it, no matter what the documents say. Foreign governments and donor agencies—which supply fully one-half the government's budget—generally won't get involved in land disputes, even if these conflicts cause projects funded by their own donors' or taxpayers' money to go up in smoke (or into Mercedes-Benzes and Hummers for the corrupt elite). They refuse to upset the government—which, as it happens, is busy handing out rights to a string of potentially lucrative gas, oil, and coal deposits.
Carlos Castel-Branco, a respected local economist, tells me that the primary function of politicians in Mozambique is to mediate between competing private interests, including their own. They lack both the political will and the administrative capacity, he says, to build a modern state. The current land rush—for biofuel plantations, export-oriented farms, and private hunting concessions—is the first stage in a war over land that Mozambique's fragile democratic and legal systems might not survive. "The government is not politically capable of stopping this process of land speculation. People feel that the dignity of the state and of themselves has been taken away. It's not hopeless, but it's going to be a big fight."
I present a plausible nightmare scenario to ProCana's Corné Holtzhausen. His 75,000-acre farm/factory will have serious ecological impacts—lost wildlife habitat, greenhouse gases released as natural vegetation is destroyed, massive water consumption, fertilizer and pesticide pollution. On the greater scale of Africa, these might be considered small, but ProCana is not alone. What about the hundreds of other big investors who will rush in if he succeeds? Who will stop his beloved Mozambique, and much of the rest of the continent, from being turned into vast pesticide-and-fertilizer-soaked monocultures? He smiles, a great gotcha smile, and pauses. "People like you," he says. "People like you who wear cotton shirts that take 25,000 liters of water to make—you like to wear them, because they're comfortable. People like you who drive private cars and like to fly around the world in aeroplanes. The consumer. That's who determines what happens."
Subscribe to:
Posts (Atom)