Bulletin 206


30 October 2005
Grenoble, France

Dear Colleagues and Friends of CEIMSA,

From an historical perspective, World Capitalism is now entering a crisis more problematic than any it has undergone in its long and turbulent history. What new outlets can be found to maintain the rule of the private profit motive over human needs is anybody's guess....

Five hundred years ago, the European quest for commodities from Asia (known in the West as the "commercial revolution") led inevitably to a search for reduced transportation costs, via a sea route to India, but also to an aggressive search for new sources of precious metals to supplant the exhausted gold and silver mines of Western Europe, which had been heavily exploited for more than two centuries in order to purchase Asian commodities. The European fiscal crisis toward the end of the 15th century resulted in genocide for untold millions of indigenous peoples who inhabited the Americas. It also gave rise to an unprecedented accumulation of capital in the hands of Western European businessmen.

In the 18th century, the Industrial Revolution, which was mostly funded by profits from the slave trade and labor exploitation on the early sugar plantations in the Caribbean, gave birth to an expanded form of democracy in England and eventually in Western Europe. The social class of property owners could now oversee the passage of legislation which naturally corresponded to their economic interests. Meanwhile, new industrial technologies gave rise to "over production", which periodically led to unemployment and, at the same time, to an increased impetuous for imperialist expansion. The 19th century military conquests of Africa and Asia by the industrial nations gave rise to a second wave of genocide on these two continents, and more capital accumulation. . . .

Before the end of the 19th Century, corporate elites had gained monopoly control of production in every sector of the industrial economy, and by the turn of the century all levels of government were taken hostage by corporate interests. For nearly a century this control was largely compatible with traditional middle-class values --the sanctity of private property, individual rights, indirect democracy, etc., etc....

But as the end of the 20th century grew near, it became increasingly evident that individualism and democracy could no longer be counted as an asset to corporate interests. Corporate capitalism ("corporatism") came to be acknowledged as the political force ruling society. "Citizenship" gave way to "consumerism" and concepts such as  Security, Loyalty, Obedience, and just generally "getting along" came to displace traditional virtues like "honesty," "independence," and critical thinking. A new ethos for running the state-capitalist machine came into full view: the former concepts quickly became the guiding virtues of corporate society and bourgeois virtues vanished. In most cases today, it is simply Silence that rules --silence without debate. . . .

Out of this centuries-old matrix emerged Margaret Thatcher and Ronald Reagan in the late 1970s. If looked at from an economic viewpoint, the continuity is remarkable: Thatcherism and Reaganism are but moments in which western ruling classes simply did what they had to do in order to protect their interests. The problem, of course, is that most people living on our planet do not share these interests, and they do not benefit from the policies promoted by this small social class of owners of capital.

Given the new technologies in the communication industry (known as the "communication revolution") it appears that a new age of democracy is about to emerge into the light of day. It may take the form of a world-wide movement where no one can be excluded legitimately from public discussions on economic and political policy. This development presents serious problems for those elite who control, among other things, nuclear weapons. What they intend to do about this problem remains uncertain. . . .

Joining in our search for perspectives, the following four authors have written essays on the contemporary political economy in America :

A. is an article by James Quinnery discussing the general alarm that has been aroused by "the world's best kept secret", i.e. the recent anti-terrorist legislation in England that is now perceived as an assault on the very roots of Anglo-Saxon democratic traditions. By reversing King John's historic agreement at the signing of the Magna Carta in 1215, Tony Blair has suspended the right of habeas corpus and trial by jury. "Terrorist suspects" (a term as vague as you wish it to be) are now ferried off from England to countries which have long practiced methods of brutal torture. This rupture with English tradition has provoked the resignation of the leading British anti terrorist police chief, George Churchill Coleman, who headed Scotland Yard's anti terrorist squad. Upon announcing his resignation last week, Coleman warned that the Home Secretary, Charles Clarke, is "transforming Britain into a police state".

B. is an essay by David Martin, describing the historical significance of the "Reagan Revolution" up to today's constitutional crisis in the United States. It seems that even American businessmen are waking up to the fact that it was not "free enterprise" that "Reaganism" was protecting with his notorious "reforms," but rather wealth, privilege and power which had been increasingly threatened since the late 1960s by democratic movements for equality and justice.

C. is an article sent to us by Michael Albert, in which Girish Mishra of New Delhi, India
discusses "Criminal Capitalism." The author describes the fatal flaws in the contemporary Capitalist world system, which he finds incompatible with the (limited) democratic political structures that in the past have served to advance its cause (i.e. the private accumulation of capital). Today's political economy is best described as Corporatism, a system in which a small political and economic elite collaborate in order to retain their power at the cost of the vast majority. "Criminal Capitalism" has become the norm, not just on the periphery, but throughout the capitalist the world.

D. is an article by Jeff Cohen, founder of the media watch group FAIR. In this piece Cohen celebrates the current White House scandal and explains what we can expect from the mainstream media during this criminal investigation.

Francis McCollum Feeley
Professor of American Studies/
Director of Research
Université Stendhal-Grenoble III

from James Quinnery :
October 27, 2005
ZNet | Europe

The World's Best Kept Secret
by James Quinney

In 1943, as Britain was facing the threat of Nazi invasion, Winston Churchill wrote: "The power of the executive to cast a man in prison without formulating any charge known to the law and particularly to deny him the judgment of his peers is in the highest degree odious and is the foundation of all totalitarian government, whether Nazi or Communist." [1]

Recent Anti-terror legislation in the UK (such as the Bill on Civil Contingencies which the Guardian's editors called "the greatest threat to civil liberty that any parliament is ever likely to consider")[2] includes the right to detain people without charge and without access to legal council, thus, by Winston Churchill's standards, elevating the UK to the status of Nazi Germany or Stalinist Russia.
Perhaps Ian Macdonald, one of the government's own Special Advocates authorized to work on "terrorism related issues", was reminded of Churchill's comments when he said that the government's new Anti-terror laws are "an odious blot on our legal landscape". He said this as he handed in his resignation "for reasons of conscience" adding that his "role has been altered to provide a false legitimacy to indefinite detention without knowledge of the accusations being made and without any kind of criminal charge or trial." [3] He joins a host of other prominent critics such as the former leading anti terrorist police chief, George Churchill Coleman, who warned that the Home Secretary, Charles Clarke, is "transforming Britain into a police state'". George Churchill Coleman, who headed Scotland Yard's anti terrorist squad as they worked to counter the IRA during their mainland attacks in the late 1980s and early 1990s said Mr Clarke's proposals to extend powers to include, for example, the ability to place suspects under indefinite house arrest, were "not practical" and threatened to "further marginalise minority communities." He went on to say "I have a horrible feeling that we are sinking into a police state, and that's not good for anybody. We live in a democracy and we should police on those standards... I have serious worries and concerns about these ideas on both ethical and practical terms. You cannot lock people up just because someone says they are terrorists. Internment didn't work in Northern Ireland, it won't work now. You need evidence." [4]

"Terrorism jolts most people, but a few react by calmly seizing the opportunity to push long nurtured demands" reads the cover story in the August edition of Economist. However, the "few" they are referring to are not government Ministers, but the "notoriously militant RMT transport workers' union" who after the recent threat to the capital's transport system have "insisted on a flurry of opportunistic demands" such as "plans to reduce station staff be put on hold and extra guards be added to trains." It should be of no surprise that the business community's leading journal is reflexively anti-union to the point where even ideas that would seem quite rational must be vehemently rejected. However, what is interesting is that even the Economist concludes: "Of all the shocks caused by the bombings, none will endure as long as the measures that are put into place to stop them... In the aftermath of terrorist attacks, the extravagant use of... police powers might seem tolerable, or even desirable. In the long term, the consequences are more likely to prove otherwise." [5]

After September 11th, harsh, repressive forces have "reacted calmly by seizing the opportunity to push forward long nurtured demands" all over the world. In a recent interview, Boris Berzovsky (one of Russia's former oligarchs now in exile in London) commented that Russian president Vladimir Putin could have asked for many things in return for Russian cooperation in the war on terror but "Instead he said, 'Bush, please close your eyes while I crush Chechnya.'" [6]

Leading human rights groups have reported that "Russian forces have carried out indiscriminate attacks or direct attacks on civilians, which are grave breaches of international humanitarian law" but this has met with little concern from Russia's allies. Regrettably, this is just one example of many. Annual reports of the major human rights organizations provide ample testimony to this, as well as some indication that the system is pervasive, as states leading "the war on terror" continue to enact repressive legislation against their own populations. A spokesperson for Amnesty went on to say that "The 'war on terror' appeared more effective in eroding international human rights principles than in countering international 'terrorism.'" A more recent statement concluded that "Breaches in humanitarian law by an armed group can never justify a state's breaches of fundamental principles of human rights and humanitarian law it has solemnly sworn to uphold". This elementary principle was rejected by Charles Clarke, the Home Secretary when he "urged European politicians to put the fight against terrorism above concerns for civil liberties, declaring that the right not to be blown up was the greatest human right of all." [7]

Other consequences of new measures announced by the Prime Minister in the wake of the July bombings of London's transport network include deporting terrorism suspects to countries that are renowned for their human rights abuses. In the government's defence they have announced that agreements will be sought to make sure returnees would not be tortured, but it took a leading UN official to point out what the government must surely be aware of: "The fact that such assurances are sought shows in itself that the sending country perceives a serious risk of the deportee being subjected to torture or ill treatment upon arrival in the receiving country," he said. [8]

In his regular report, Alvaro Gil-Robles (the Council of Europe's Human Rights commissioner) did not fail to comment on this chasm between Britain's formal human rights protection and reality. He warned that "Against a background ... in which human rights are frequently construed as at best formal commitments and at worst cumbersome obstructions, it is perhaps worth emphasising that human rights are not a pick-and-mix assortment of luxury entitlements but the very foundation of democratic societies". His report went on to criticise a number of Britain's Anti-terror laws, noting that "Quite apart from the obvious flouting of the presumption of innocence, the review proceedings described can only be considered to be fair, independent and impartial with some difficulty". [9]
The Blair government has created an impressive arsenal of legislation with which to deal with political dissent, although it must be noted that much of this legislation follows on from reforms brought in by the previous Conservative government in their attempts to repeal the rights that were won in the 1960's, or as Tony Blair shamefully refers to it as marking "an end to the 1960s liberal, social consensus on law and order" as reported in the Guardian's Leader, which goes on to note in the same article that despite "the largest and most sustained fall in crime for over a century... we are still sending proportionately more people to prison than the most repressive foreign regimes: Burma, Saudi Arabia and China." [10] Meanwhile the charity Prison Reform Trust comments that "Prisons are the most shaming of all our public institutions. The United Kingdom has the highest imprisonment rate in the European Union at 141 per 100,000 of the population - in conditions which are frequently an affront to civilized values, and at great cost to the taxpayer. Yet the vast majority of our prisoners do not present a serious threat to life or limb. Their crimes are such that they can be more humanely economically and effectively dealt with in the community." The effects of the current system are also mentioned by the Prison Reform Trust: "On average, one prisoner commits suicide every four to five days." [11]
This is deemed by many to be an acceptable form of state action, serving the social function of population control and providing yet another stimulus to the economy. Security is a growing market for British corporations, both at home and overseas, as they are lured by the promise of large subsidies provided for by the tax-payer. An industry circular with the dubious title of "Business Continuity and Corporate Security" optimistically announces that now is the time to get in on the act: "Budgets for corporate security are increasing... This is your opportunity to get on the 2006 budget with major corporate decision-makers. Katrina and the London Tube events are game-changing circumstances that will increase budgets for 2006." [12]
The effect of these values are essentially that people no longer have any other rights than those you can buy on the market. The Journal of Law and Society in a 2001 article noted that since the 1980s "with increasing frequency individuals and corporations" have been "filing retaliatory lawsuits, usually claiming libel, against individuals and organizations whose lobbying campaigns, protests or demonstrations were perceived to threaten the filers' economic interests." These are often referred to as "'strategic lawsuits against public participation,' or SLAPPs..." The journal goes on to describe SLAPPs in more detail as: "private lawsuits filed against individuals or groups in response to political activities such as 'circulating a petition, writing a letter to the editor, testifying at a public hearing, reporting violations of law, lobbying for legislation, peacefully demonstrating, or otherwise attempting to influence government action.'" They also report that these cases are nearly always successful due to the fact that the "plaintiffs had considerably more resources to pursue their claims than were available to the targets of their law suits." [13]
This is very rarely reported because, as Greg Philo of the Glasgow University Media Unit observes, "Journalists work with routine assumptions about status and who has the 'legitimate' right to speak... Broadcasting does not stray far beyond such parameters to criticise or set any independent agendas, even if many of the population do not feel well informed or properly represented by such structures. The decisions which shape our lives and indeed the whole global economy are often made out of our sight. To challenge such structures of power and interest and to ask fundamental questions about the allocation of world resources would require an innovative and critical journalism and a truly independent broadcasting. But at present the parameters and agendas of media comment are set by the political and commercial structures which themselves stand so much in need of critical scrutiny." [14]
Further scrutiny was provided by Dr Des Freedman from Goldsmiths College in London, who reported recently that "UK media policy is dominated by a cosy cartel of politicians, government advisers and industry lobbyists."
The report was based on interviews with 40 leading media policy-makers and argues that "key decisions... are made by government insiders, often in concert with industry lobbyists and sometimes against the wishes of the public... This seems to be a process marked less by a commitment to meaningful forms of accountability than it is to ensuring the continuing influence of a restricted number of powerful stakeholders." [15]
Across most of the mainstream media, what we find is a flood of patriotism that assumes the government is identified with the population, the country and the culture and therefore criticism of these policies can be considered anti-British - another profoundly totalitarian ideal. Instead the Sun urges its readership in one recent editorial to "write to your MP demanding that this crazy [human rights] law is repealed." [16]
The journal Social Policy & Administration states that "Fewer than half the public have heard of the Universal Declaration of Human Rights" and only 58% have heard of the European Convention of Human Rights. Presumably even fewer know what it actually is. Amnesty International's Conor Foley and Keir Starmer go on to note that The Universal Declaration of Human Rights has been described as "the world's best kept secret" but it provides "the basis for an international system of protection by which the people of the world can hold their governments to account for their human rights records." [17]
As Karen Bartlett of Charter 88 observes. "Instead of heralding a new era in which rights are taken seriously, the Human Rights Act has languished as the kicking boy of everybody from the Daily Mail to Prince Charles in his letters to Ministers. The lamentable failure of most on the left to speak up on its behalf leaves the Act fated to be both toothless and vulnerable to demolition by a future government, even less likely to support it than the current one. Creating a separate Human Rights Commission would, it seems, simply cause Ministers too much inconvenience in the courts." [18]
Although the task of standing up to this renewed crack down on civil and human rights will not be easy, the matters at stake are crucially important. The leading science journal Nature observes: "The looming threat of environmental degradation poses a complex and confounding problem for all humanity. Yet, many governments, policy-makers and societal actors are unwilling or unable to make the changes necessary to prevent or lessen the destruction of our ecosystem... one doubts if those concerned with national security as a traditional great power endeavour will be easily swayed, particularly in the post-September 11 climate." [19] This is because, as the Journal of Development Economics points out, the "connection between environmental protection and civil and political rights is a close one. As a general rule, political and civil liberties are instrumentally powerful in protecting the environmental resource base," logically because "more democratic governments respond favourably to environmental demands by the populace." [20]
By comparative standards, we enjoy remarkable freedom in this country. We can choose to throw away this legacy of hard won rights or we can make use of it and build on it to create the basis for a functioning democratic culture. One in which the public can play an active role that goes beyond putting a cross in a box every few years.

[1] Telegram by Churchill from Cairo, Egypt to Home Secretary Herbert Morrison (21 November 1943)
[2] The Guardian leader - June 20, 2003
[3] BBC News - December 20, 2004
[4] Britain 'sliding into police state' - Alan Travis, Clare Dyer and Michael White, The Guardian, January 28, 2005
[5] Terrorism - Learning to live with it - The Economist, July 28 2005
[6] Putin Is Wrong in Chechnya - NPQ, winter 2003
[7] The right not to be bombed outweighs liberties, says Clarke - David Rennie, The Telegraph, July 14 2005
[8] BBC News August 23, 2005
[9] Coucil of Europe rebukes UK on human rights - Simon Jeffery, The Guardian, June 8, 2005
[10] The Guardian leader - July 20, 2004
[11] http://www.prisonreformtrust.org.uk
[12] Private Eye, 1142
[13] Public Protests, Private Lawsuits, and the Market - Douglas W. Vick and Kevin Campbell, Jounral of Law and Society, Vol 28, 2, 2001
[14] Television, Politics and the New Right - Greg Philo, http://www.gla.ac.uk/departments/sociology/units/media/
[15] Media policy dominated by 'cosy cartel', says report - Dominic Timms, The Guardian, September 20, 2005
[16] The Sun, August 04, 2005
[17] Historical Significance of the Universal Declaration - Asbjrn Eide, International Social Science Journal, Vol 50, 158, 1998
[18] The Observer - October 27, 2002
[19] Small-minded government - Nature, Vol 437, 7056, 2005
[20] Democracy and environmental quality - Y. Hossein Farzin and Craig A. Bond, Journal of Development Economics, 2005
*Thanks to David Cromwell and David Edwards at Medialens

from David Martin :
October 26, 2005

What Reagan Started, Bush Is Finishing
by David Martin

In recent weeks, every mornings newspaper seems to carry another headline documenting the accelerating tailspin of George Bushs administration into disastrous fiasco. Political pundits may attribute the ongoing self-immolation of George Bush to the general ineptitude of the Mayberry Machiavellis with whom he has surrounded himself.

But there is another, more historically correct explanation for the current presidential unraveling: the disaster that is George Bush is the inevitable culmination of the revolution wrought by Ronald Reagan.

The Great Charlatan swept into office proclaiming that government was the problem. If only it got out of the way, the energy, creativity, and entrepreneurial spirit of the private sector would be unleashed and a golden economic age would dawn. A rising tide of affluence would lift all boats, and we would all sail off into a rosy sunset.

Now after eight years of the Gipper, four years of Bush I, eight years of Republican Lite under Clinton, and five years of Shrub, we see the truth of the Reagan Revolution. The gradual withering away of the welfare and regulatory state has not unleashed the American entrepreneurial spirit. Rather, it has set loose the predatory greed of the 19th century robber barons, the class cannibalism of Social Darwinism, and the winner-take-all rapacity of laissez faire capitalism.

The bright and shining morning in America that Reagan touted has turned into a cold, gray dusk as the sun rapidly sets on the American dream. In the 25 years since Reagan was sworn into office, the middle class is shrinking and the gap between wealthy and poor is reaching Grand Canyon proportions. During this period the average after-tax income of the lowest fifth of Americans has increased by 5%, the middle fifth by 15%, and the top fifth by 48%. The income of the top 1% of Americans, in contrast, has more than doubled, growing from $298,900 to $631,700, an increase of 111%.1

The trickle down promised by supply-side economists has diminished to a slow drip. The tax policies of George Bush have only exacerbated this problem. The combined effect of his tax cuts has been to reduce federal tax revenue to its lowest level as a share of the economy since 1950.2 The inevitable result is the return of Reaganesque tax deficits that Bill Clinton worked so hard to erase. George Bush is mortgaging our future, and the Chinese hold the note.

Reagan came into office promising to shrink government to keep it from stifling private initiative. He and his successors may not have been too successful in shrinking the size of the government, but they have certainly magnified its ineptitude. The government that once put a man on the moon now cannot deliver ice to the Gulf Coast.

The American military that conducted a multi-front war to defeat the formidable powers of Germany and Japan cannot subdue shadowy car bombers in Iraq or the remnants of the Taliban in Afghanistan. A military logistical system that was able to supply its armies across two oceans somehow cant coordinate the delivery of armored Humvees to troops stationed in Iraq or supply them with up to date bullet proof vests.

Privatization was another of Reagans sacred tenets. The theory was that privatizing services once provided by government would result in greater efficiencies at lower costs. The Iraq occupation was to be a textbook case for the miracle of privatization. First the American forces destroyed the Iraqi infrastructure (except for the oil industry), then the job of rebuilding was turned over to large, private, well-connected construction firms.

Two years after the American invasion the Iraqis have only intermittent electrical service and inadequate water supplies. But the construction firms did prove efficient in at least one area: ripping off the American taxpayer. Billions of dollars have disappeared into the black hole of Iraq reconstruction, and contract administrators can only shrug and mumble about difficult circumstances.

The Bush administration may have fumbled relief efforts in the immediate aftermath of Hurricane Katrina. But it was well prepared to apply the lessons of Iraq reconstruction to the rebuilding of the Gulf Coast. The Katrina clean up could have been one huge WPA project to help alleviate the widespread poverty so cruelly exposed by the monster storm. Instead George Bush rescinded wage and environmental regulations and turned the Gulf Coast into a free fire zone for crony capitalism.

The same well-connected, underperforming firms from Iraq were given the same no-bid, no oversight contracts in Louisiana and Mississippi. As a result, illegal immigrants are being paid at below minimum wage rates to do the work that should be done by displaced residents at Davis-Bacon wage rates. One can anticipate the importation of workers from Bangladesh, Nepal, and Pakistan as New Orleans displacees are shuttled from one government trailer park to another.

Politicians and their supporters love to wax romantic about the legacy they leave behind. Heres the Reagan/Bush legacy: failed wars, support of terrorists, environmental degradation, the income distribution of a banana republic, a credit rating a third world country would be ashamed of, falling health standards, the disappearance of guaranteed retirement pensions, and corporate malfeasance on an unprecedented scale.

George Bush loves to end his speeches with a request for God to bless the United States of America. What he really needs to ask is for God to save us.

Notes :

1 Figures taken from Congressional Budget Office report, Historical Effective Federal Tax Rates: 1979 to 2002, March 2005.

2 Center on Budget and Policy Priorities, Tax Returns, A Comprehensive Assessment of the Bush Administrations Record on Cutting Taxes, April 23, 2004.

from Girish Mishra :
October 26, 2005

Criminal Capitalism and Quixotic Devotee
by Girish Mishra

Raymond W. Baker knows of the working of world capitalist system in all its intricacies to the minutest details as he worked for almost four decades in Africa and South America as a prominent businessman. Later, he was associated with two prominent think-tanks of America, including the Brookings Institution.
The thesis, he has propounded in this book, is two fold: capitalism is rotten and badly stinking, yet it needs to be reformed, as there is no alternative to it. Baker, in his experience over a period of more than 40 years in more than 60 countries, has seen the freemarket system operate illicitly and corruptly and its impact on the lives of disadvantaged people on all six inhabited continents. He very candidly admits that The basic structure of our global economic system has fundamental flaws, and the accompanying risks are beginning to be evident to wealthy and impoverished alike.
When Baker, after finishing Harvard Business School and teaching a course in management at the University of New Hampshire, joined the business world in Nigeria, he was surprised to find that a lot of people invested their money in one place but reaped huge profits somewhere else through a complicated mechanism based on over- and under-invoicing and transfer pricing among other things. To quote Baker, It took me two or three years to realize that most foreign-owned companies were doing largely the same thing. And then it took another couple of years to learn that most wealthy Africans involved in foreign trade were illegally moving money abroad by the same means. As the decades rolled on and my activities spread to dozens of countries across the planet, I observed that countless forms of financial chicanery are prevalent in international business. Like an iceberg, the little that is visible is supported by vastly more hidden beneath the surface.
Baker has found the reputation of free-market system, even in the West, in the mud as it abounds in all kinds of frauds, scandals and illegalities. An assortment of frauds, thefts, corrupt practices, accounting irregularities, earning restatements, asset write downs, tax shenanigans, conflicts of interest, and other charges, probes, malpractices, and allegations have corroded the reputations of dozens of companies and sapped the net worth of untold numbers of shareholders and retirees. The list of financial institutions tarnished in the press reads like what should otherwise be the Whos Who of propriety: Citigroup, J. P. Morgan Chase, Bank of America, Bankers Trust, Bank of New York and some 55 more on the roster I maintain. The corporate rap sheet, ranging from spectacular failures to merely disgraced executives, includes Enron, WorldCom, Global Crossing, Halliburton, and nearly 100 more on my list. All Big 5 accounting firms have been tarred and feathered. The number of law firms taking heat is too long to recount.
It has been claimed time and again that uninterrupted operation of market forces globally will do away with all kinds of corruption and criminal activities, which are supposed to arise from government interventions and regulations and the emergence of monopolies. What has happened in practice is quite the opposite. Baker has come out with a damning indictment: Since the end of the Cold War, the opening years of the globalizing era have produced an explosion in the volume of illegitimate commercial and financial transactions. North American and European banking and investment institutions have been flooded with laundered and ill-gotten gains. Totaling trillions of dollars, most of these sums generated through secret arrangements between cooperating but distant private-sector entities. Lagging legal codes have proven inadequate to deal with the situation. Much of the subject is a taboo in business and government circles, yet this torrent of stolen, disguised, and hidden resources poses a major risk to state stability, corporate security, democracy, and free enterprise across the planet.
The major portion of the book is devoted to a discussion of dirty money, its various components, the mechanism by which it is generated, how the tax havens and Western financial institutions facilitate its generation and its laundering, and the way the U. S. and other governments, notwithstanding all their protestations abate it. Dirty Money has been defined as money that is illegally earned, illegally transferred, or illegally utilized. If it breaks laws in its origin, movement, or use, then it properly merits the label.
There are three main components of dirty money, namely, criminal, corrupt, and commercial. The criminal component comprises wide-ranging evil activities such as racketeering, smuggling of men as well as material goods, all kinds of fraud, counterfeiting of goods and currency notes, embezzlement, fraud, forgery, prostitution, piracy of all types and so on. It needs to be noted that most countries have banned proceeds of drug trafficking, bank fraud, and terrorism. The corrupt component has in its fold the yield of bribery and theft by foreign government officials. The commercial component is generally the result of tax-evasion and it does not find any place in official records.
According to Baker, What is most striking is that all three forms of dirty money criminal, corrupt, and commercialutilize basically the same subterfuges to roll through international channels: false documentation, dummy, corporations, shell banks, tax havens, offshore secrecy jurisdictions, mispricing, collusion, kickbacks, numbered accounts, wire transfers that disguise transactions, and more. Whether its moving drug money or tax-evading money, whether its a thug or tyrant or terrorist or corporate titan, all use the same bag of tricks. And the truth is, western business and banking sectors have developed and promoted the mechanisms for other countries for more than a century.
There are many ways to get rich while the government and the society do not know where the money comes from. One of them is under- and over-invoicing. This is a very old tactics resorted to in international trade, real estate deals, purchase of services, etc. that form part of international business transactions. To give an example, an Indian businessman may export textiles worth $10m but show in the invoice just $8m and understanding is reached before hand with the importer that he would remit to the exporter $8m and deposit the rest in some Swiss bank account or somewhere else after deducting his commission or service charges. Similarly, some Indian businessman  imports machinery and equipment worth $8m but bills, as per the secret understanding, for $10m. The Reserve Bank of India releases on the basis of the invoice a sum of $10m. The exporter takes $8m and the rest of the amount is deposited in the name of the Indian businessman or his nominee, after deducting the service charges. Thus India is defrauded to the extent of $4m in these two transactions taken together and dirty or black money to the tune of $4m is generated, which multiplies if ploughed back in business activities. So far as India is concerned, its government is deprived of foreign exchange to the tune of  $4m that could have been used for developmental purposes.
Baker has found that not only goods but services also can be mispriced or subject to over- and under-invoicing. Insurance is a regular candidate with premiums marked up to provide offshore kickbacks. Foreign advertising is another popular vehicle. Consulting contracts and advisory services are easy to load with kickbacks. Technical assistance agreements offer a regular outflow of money that can be shifted into offshore bank accounts. Similarly, royalties, patents, and licenses have become a recent favorite among skilled money shifters.
The U.S. and other Western governments claim that they have legally forbidden their companies to indulge in bribery in foreign lands, but this stipulation is very easily circumvented. Baker has found that the usual trick is to allow 20 per cent or so in place of usual 10 per cent commission to the agents to procure the business. Agents understand the purpose of this unusually high rate of commission and they leave no stone unturned to influence and bribe the decision-makers. They offer money and various kinds of other inducements on one pretext or the other. As is widely known, one American company, Enron, now defunct, gave money to certain people in India in the name of promoting education! Baker mentions a widely used trick: An expatriate lawyer in the MiddleEast does a thriving business representing arms manufacturers. He sets up billion-dollar weapons deals under two contracts, one for the main equipment and a second for support services such as training, maintenance, and software updates. The first contract with the government of the purchasing country is priced properly. The second contract is channeled through a joint-venture company in a Caribbean tax haven, owned by the arms manufacturer and by designated friends of the government officials in the buying country. While doing no work, these nominee partners share in the ventures deliberately bloated revenues, passing the funds along to their principals, the officials who are the real but silent partners. Even a reputed company like IBM entered into such an arrangement with an Argentine firm. Baker has the details of this shady deal.
The Indian governments scheme of offering subsidy to exporters has led to inflating the items entering export trade to corner as much subsidy as possible. Lots of exporters continue to get rich off their governments programs, so be alert to this money-making opportunity. This is one of the findings of Baker so far as India is concerned. It speaks volumes about the honesty of Indian businessmen and the media they control.
Another very useful trick is transfer pricing by multinational corporations who resort to the use of trade to shift money at will between parents, subsidiaries, and affiliates operating in dozens of countries. For many multinational corporations, exaggerated transfer pricing is standard procedure, a major part of global strategies to minimize taxes and maximize profits. Further, Intracompany trade across borders represents about 50 to 60 per cent of all cross border trade. I have never known a multinational, multibillion-dollar, multiproduct corporation that did not use fictitious transfer pricing in some part of its business to shift money between some of its entities.
Consulting contracts claims arising out of imaginary damages, warranty payments, countertrade deals, etc. are some of the other effective tricks to generate dirty money and fleece developing countries.
Another frequently used device is the formation of dummy or bogus companies. It is very simple, a reinvoicing company is formed that buys, changes prices, issues a new commercial invoice, and resells. This dummy company requires only a computer, a letterhead, and a bank account to come into play. Baker has given a number of concrete examples to illustrate the operation of dummy companies.
Dummy companies play a major role in disguising the source of dirty money and then help launder it. Baker has named a number of delightful places where you can situate and purchase your secret companies.  In all, they come to 63 jurisdictions providing varying degrees of incorporation concealment and protection from probing eyes. There are printed manuals that guide all the way. These dummy companies have a number of variations such as trusts, foundations, and so on. Offshore dummy companies are known as international business corporations (IBCs) or personal investment corporations (PICs). If we believe Baker, then the United States is encouraging havens and secrecy jurisdictions to keep up with the owners of IBCs and PICs and is trying to insist on mutual legal assistance and cooperation in specific tax and criminal matters. If you are interested in details, then Baker has them. In addition to all this, one can very easily fake the entire transactions without stirring out of your home!
What Baker says is beyond any dispute. To quote: Use of instruments in the dirty-money user kit carries a high price. The price is damage to the capitalist system. The price is bolstering international crime and terrorism. The price is deprivation for billions of people. The price is heightened risk to the shared security of a globalizing world.
Raymond W. Bakers study presents in great details how corruption industry has flourished over the years in Nigeria, Indonesia and Pakistan. It has led to worsening of poverty, limiting government tax revenues, curtailed expenditures on health and education, reduced economic growth, increased indebtedness and discouraged investments. The estimates of public funds looted by some of the corrupt rulers are mind- boggling. Suharto embezzled $15 to $35 billion while Marcos and Mobutu pilfered $5 to $10 billion and $$5 billion respectively. Sani Abacha of Nigeria stole $2 to $5 billion. Pinochet of Chile, who was once hailed as a great saviour of humanity from communism by the USA ate up public funds with the active help and connivance of the Washington-based Riggs Bank about which, to quote Baker, groveled before some of the dirtiest money on Earth.
Prestigious banks and financial institutions of the world actively helped all these plunderers of public funds. Take, for example, the case of Sani Abacha of Nigeria. His plunder was facilitated by some 100 banks all over the worldin the United States, England, the Channel Islands, France, Switzerland, Germany, Luxembourg, Liechtenstein, Austria, Dubai, Singapore, Hong Kong, Austria, Brazil, and elsewhere, with services allegedly performed by such institutions as Citibank, Barclays, Standard Chartered, HSBC, NatWest (now part of the Royal Bank of Scotland), ANZ Grindlays Bank, BNP Paribas, Cr t Agricole Indosuez, Credit Suisse (including Bank Hofmann and Bank Leu), Banque Baring Brothers, Banque du Gothard, Union Bancaire Priv   M. M. Warburg, Banque Edouard Constant, Deutsche Morgan Grenfell, J. Henry Schroder Bank, Picett & Cie, S. G. Ruegg Bank, Commerzbank, Bank of India, and many more. With a fortune estimated at $3 billion to $5 billion, a feeding frenzy arose to receive, shelter, and manage Abachas wealth.   
Criminal component of dirty money has its source largely in drug trafficking, mostly from Afghanistan, Colombia, Peru, etc. and in thuggery and racketeering in which terrorists as well as Mafia have a key role. So far as commercial component is concerned, one has to look at the modus operandi of multinational corporations and the state of affairs prevailing in the Soviet Union and the East European countries after the collapse of socialist regimes. Baker has the details in his book.
Baker, in the context of what happened on 9/11, asks: Was it just religious extremism that brought on the terrorists, power disparities, income imbalances, and social disaffections evident in their motivations?
Baker thinks that, in spite of all its rottenness, capitalism has no alternative and it can be reformed and rejuvenated to take the humanity forward. It is difficult to accept this proposition because it is nothing but pure and simple quixotic.
Before we conclude, let us draw the attention of our readers to a write-up in Guardian (October 25, 2005), which says that the Mayor of London is ready to welcome the robber barons fleeing from Russia after plundering it mercilessly. Obviously, capitalism feels at ease with criminals of all kind.
from Jeff Cohen :
28 October 2005

Weaponsgate is a Media Scandal

by Jeff Cohen

I admit it: I'm gleeful about the White House scandal, as indictments appear imminent.  These last days have been some of the happiest since Team Bush seized power 57 months ago.  It couldn't happen to a more reckless bunch of bullies-- who launched one of the most disastrous wars in history.
It's traditional in elite punditry to grouse about how such a scandal hurts our country or our image abroad.  I take a different view: If the White House is demoralized and paralyzed, our country and world can breathe easier. 

But there's a special reason this scandal is so personally satisfying to me as a media critic.  It's because elite journalism is on trial.  Powerful journalists are playing the role usually played in these scandals by besieged White House operatives.  They're in the witness dock.  It's a New York Times reporter who is failing to recall key facts...mysteriously locating misplaced documents...being leaned on to synchronize alibis. 

Elite journalism is at the center of Weaponsgate, and it can't extricate itself from the scandal.  Because, at its core, Weaponsgate (or, if you're in a hurry, "Wargate") is about how the White House and media institutions jointly sold a war based on deception -- and how the White House turned to these media institutions to neutralize a war critic who challenged the deception.

When the Nixon White House went after war critic Dan Ellsberg, it turned to former CIA guys, specialists in break-ins.  When the Bush White House went after war critic Joe Wilson (and his wife), it turned to journalists like Bob Novak and Judy Miller.

Today, elite journalists can't pretend to be on the outside looking in at a scandal that doesn't involve them.  This scandal is about them -- it's about White House-media cronyism, about journalists on the top rung of the phone trees of Karl Rove and Scooter Libby, two of the dirtiest smear artists in Washington history.  It's no accident Rove and Libby didn't turn to Helen Thomas or Seymour Hersh about Joe Wilson.  They turned to journalists they could count on -- at news outlets that had dutifully promoted so many pre-war lies 

In the past, elite journalists were up to their neck in scandals -- but they were deft about writing themselves out of the story.  That can't happen in this scandal involving the origins of the Iraq War.

It did happen in the scandal at the origins of the Vietnam War: the Tonkin Gulf hoax.  In pursuit of his long-held strategy, President Johnson went on national TV in August 1964 to announce a momentous escalation of the war: air strikes against North Vietnam in response to an "unprovoked attack" on a U.S. destroyer in the Gulf of Tonkin.

But there'd been no such attack on the U.S.  Johnson's ploy succeeded because major news media reported official lies as absolute truth.  The next day's headline in the Washington Post spoke of North Vietnam's "New Aggression." The New York Times reported of U.S. "retaliatory action" and editorialized in support of Johnson and his "somber facts."

When the truth on Tonkin came out years later, blame focused on the White House, not the media.  In 1998, my colleague Norman Solomon interviewed former Washington Post reporter Murrey Marder, who'd written much of the paper's credulous Tonkin coverage.  He expressed deep regret.  Asked if the Post ever retracted its Tonkin reporting, Marder said: "I can assure you that there was never any retraction."  He added: "If you were making a retraction, you'd have to make a retraction of virtually everyone's entire coverage of the Vietnam War."

Around the same time as the Tonkin hoax, another national scandal was occurring: the FBI was waging a vicious campaign to "neutralize" Martin Luther King, Jr.  In its efforts to Commie-bait King and expose his extramarital affairs, the Bureau sought the help of powerful journalists, who were shown photos, tapes and bedroom transcripts derived from FBI voyeurism.  Dozens of reporters, editors and publishers knew the Bureau was tracking King day and night, but none blew the whistle.  (To journalists, J. Edgar Hoover was apparently an even more imposing figure than Karl Rove.)

When the FBI's anti-King operation became public years later, journalists largely avoided scrutiny of their own role.  But in the words of black novelist John A. Williams, they'd been the FBI's "silent partners."

Decades have passed since the scandals of Vietnam and J. Edgar Hoover.  But the cozy relationships between the elites of media and government persist -- to the point where we can't tell today whether officials are journalists' sources, or vice versa.  In the current scandal, thankfully, it's impossible for mainstream media to pretend the scandal doesn't involve them. 


P.S. Friday's Wall Street Journal reports that the special prosecutor may charge White House officials "with leaking garden-variety classified information" under the vaguely-worded, rarely-used 1917 Espionage Act prohibiting disclosure of "national defense" information.  If so, glee could turn to gloom.  Since too much is classified, such a prosecution would chill legitimate whistle-blowers, not the Roves and Libbys.

Jeff Cohen (www.jeffcohen.org) is founder of the media watch group FAIR (www.fair.org).

Francis McCollum Feeley
Professor of American Studies/
Director of Research
Université Grenoble III
Grenoble, France