[] MULTINATIONAL MONITOR November 1988 VOLUME 9, NUMBER 11, NOVEMBER 1988 Japan: The Next Empire Editor-at-Large Ellen Hosmer Associate Editor Louis Nemeth Managing Editor John Richard Contributing Writers Diane Bartz, William Jackson, Russell Mokhiber, Allan Nairn, Sandy Smith, Samantha Sparks, John Summa, William Steif and Cathy Watson Staff Researchers Jessica Cowan, Jim Donahue U.N. Correspondent Josh Martin Production and Design Kathleen Glynn Business Manager Elizabeth Hax Circulation Manager Garth Bray Intern Ethan Buckler Multinational Monitor [ISSN 0197-4637] is published monthly by Essential Information, Inc., P.O. Box 19405, Washington, DC 20036. Telephone: (202) 387-8030. Second-class postage paid at Washington, DC POSTMASTER: Send address changes to Multinational Monitor Subscriptions, address as above. Behind the Lines Editorial The Responsibility of Power The Front Consumers Beat Insurers America's Garbage Boston Boycotts Shell Features Paradise Paved By Ellen Hosmer Noisy is the Night By Ellen Hosmer Aid, Incorporated By Ellen Hosmer Interview Of Prussians and Traders An Interview with Noam Chomsky Economics Japanese Banks and the Third World By Samantha Sparks Labor Labor Left Behind By Harriet Oaks Corporate Profile Killing Them Sweetly: Nestle By John Summa Names in the News Books Who Owns America? By William Jackson Resources ------------------------------------------------------------------------------ [] MULTINATIONAL MONITOR November 1988 VOLUME 9, NUMBER 11, NOVEMBER 1988 EDITORIAL THE RESPONSIBILITY OF POWER As JAPAN TAKES on an increasingly visible and important role in the world economy, its obligations to act within the constraints of internationally-accepted mores will mount; at the same time, its opportunities for advancing the common good will become more significant. The trick for Japan is to meet both challenges. Japan's potential is great, but its performance has been lacking. Too often in the past, Japan has allowed domestic economic and political factors to stain its international reputation. For example, Japan has failed to demonstrate that the primary goal of its foreign aid program is development, not economic gain for Japanese companies. As Ellen Hosmer notes in her article on aid in this issue, Japan has frequently "tied" development assistance to requirements that supplies be purchased only from Japanese companies. Some projects, furthermore, give the appearance of being designed solely for the benefit of Japanese companies, with little regard for their development potential, while others are actually detrimental to development. Adopting a less imperialist attitude on foreign aid would stifle criticisms and counter the impression that the country is neither prepared nor able to assume moral leadership in the industrialized world. Japan also needs to display a greater understanding of and concern for the environment. This should be easy for a nation blessed with exquisite natural beauty and a cultural heritage marked by a strong regard for unity between humanity and environment. In that context, it is difficult to imagine Japan's motivation in pushing ahead--in the face of intense public opposition--with its plan to raze more than 700 acres of forest in Ikego to provide housing for U.S. military personnel. (See story, p. 6.) The government's actions display a perplexing sense of priorities, and suggest that the country is still willing to subjugate its own interests to those of the United States. The same disturbing traits are apparent in the plan to build an airport at Miyakejima for U.S. Navy pilots to practice night landings. (See story, p. 9.) The citizens of the island, although initially supportive of the scheme, have since then made their opposition resoundingly known. Again, the government's refusal to back down or seek a compromise is worrisome. On another front, Japan will have to work hard to overcome the stigma of its record as a voracious consumer undaunted by the finite nature of the world's resources. The recalcitrance of the Japanese on commercial whaling is a particularly reprehensible example of how domestic considerations can undermine Japan's efforts to gain status in the world. Japan has for years flouted the International Whaling Commission ban on killing whales for anything but scientific purposes or local, indigenous consumption. Only two other countries--Iceland and Norway-- continue to hunt whales in violation of this ban. Continuing whale hunting in the face of mounting scientific and public criticism displays a callous disregard for international opinion. The same can be said of the country's appetite for endangered wildlife. Japanese per capita consumption of wildlife and wildlife products is the highest in the world. And Japanese trade in products made from endangered species, such as sea turtles, crocodile skin and snake skin, surpasses that of all other nations. If it is to succeed on the international front, Japan must come to terms, first and foremost, with its split political ideology. The imperial attitudes of pre-World War II are still present in much of the popular consciousness, while the democratic ideals of the post-war era have not yet permeated the government or reached its citizens in a meaningful way. Yet there are indications that Japan can meet the responsibilities that come with power. First, Japan used the occasion of the Toronto summit in June to announce a plan to provide financing to debt-ridden countries at a level equal to their loan payment obligations, effectively rolling over their debt. Japan has also declared its intention to dramatically increase its development assistance funds, a move befitting and acknowledging the country's new status. As it becomes more important economically, Japan should seek a greater role diplomatically. The country's perspective on international affairs, particularly military affairs, can be compelling in matters of war and peace. Japan can make a significant contribution to the world, but the process has to begin at home. ------------------------------------------------------------------------------ [] MULTINATIONAL MONITOR November 1988 VOLUME 9, NUMBER 11, NOVEMBER 1988 THE FRONT Consumers Beat Insurers CALIFORNIA VOTERS HANDED the insurance industry a major defeat on election day by passing Proposition 103, which mandates a 20 percent rate reduction from the November, 1987 rates for most property/casualty insurance. In addition to the rate rollbacks, Prop. 103 establishes strict insurance rate regulations and repeals the industry's protection from antitrust laws. The antitrust exemption, in effect at the federal level and in most states, has long been a source of contention for consumer advocates who claim insurance companies have taken advantage of the exemption and fixed prices at artificially high levels. Prop. 103 also established a consumer watchdog agency over the industry, and requires the state insurance commissioner, currently appointed by the governor, to be elected beginning in 1990. Prop. 103 was one of five insurance-related initiatives appearing on the ballot. Three of the four were industry proposals, including one to establish "no-fault" auto insurance and one to limit victims' attorneys' contingency fees arising from lawsuits. The third, sponsored by California Attorney General John Van de Kamp, was a less extensive overhaul of the industry's regulatory structure than Prop. 103. All but Prop. 103 failed to win the support of voters. "We win, they lose," Harvey Rosenfield, author of Prop. 103 and director of Voter Revolt, told reporters after the election results were in. "The voters are fed up" with skyrocketing insurance rates, he said. Prop. 103 won despite a massive campaign waged by the insurance industry to defeat it. The insurance industry spent over $70 million promoting alternative initiatives and attacking Prop. 103, compared to the $2.2 million raised by Voter Revolt. Consumer advocate Ralph Nader, who endorsed the ballot measure and spent time in California promoting it, said that Prop. 103's passage "sends a signal to the entire nation that citizens will no longer tolerate the insurance industry's special protections." Nader's endorsement of Prop. 103 was a crucial factor, because confusion among voters over the five initiatives was significant. According to Marjorie Berte, chairperson of Citizens for No-Fault, the insurance industry-funded organization promoting a competing proposition, "Every time Nader came to the West Coast," Prop. 103 "would pop up a few points [in public opinion polls] and it would take a million bucks in advertising to bring it back down." As part of their unprecedented $70 million campaign, the insurance industry conducted a last minute television advertising blitz, including ads suggesting that the measure would "encourage" drunk driving in the state. Both Nader and Candy Lightner, founder of Mothers Against Drunk Driving, disputed that claim. Said Lightner at a press conference the day before the election, "I am deeply disturbed by the insurance industry's . .. false advertising blitz, in which the insurance companies exploit the drunk driving issue.... [Prop. 103] will not encourage drunk driving in any way." Industry front groups also mailed out "voter guides" disguised as party slate cards, issuing "comprehensive recommendations" to voters on candidates and state, county and local ballot measures. One guide, entitled "California Democratic Voter Manual," endorsed Democratic candidates for president, vice- president, U.S. Senate, Congress and California's State Assembly, while pushing the propositions supported by the insurance industry. Only small print at the bottom of the card acknowledged that "This document was prepared by California Democratic Voter Manual, not an official political party organization." A similar slate card mailed to Republican voters featured Republican Governor George Deukmejian. On November 9, despite the industry onslaught, Proposition 103 was the law of the State of California. The insurance industry immediately closed ranks behind a common theme: the measure would bankrupt insurance companies doing business in California. "What concerns us now is the constitutional question of whether California can order insurers to commit economic suicide," said Lowell R. Beck, president of the National Association of Independent Insurers. "Requiring a business to sell its product at a loss is simply not realistic," said John Crosby of the insurer-funded No-Fault Campaign. "Proposition 103 [will] produce losses and a drain on our capital," a Traveler Corp. spokesman asserted. And rating agency Standard & Poors declared, "The near-term impact is clear: deterioration of the creditworthiness of many insurance companies." Nader termed the industry's protestations of financial pain and suffering "a lot of bull.... The 20 percent rate cut is a partial refund for the price gouging of the last four years." The industry response was fast and furious. Within two days, implementation of the provisions of Prop. 103 was enjoined pending a ruling by the California Supreme Court on industry lawsuits challenging the constitutionality of the measure. Traveler's Insurance refused to renew any of its 23,000 auto insurance policies and State Farm, the largest insurer in California, and Safeco have stopped writing new policies. State Farm has funnelled renewals through its Fire and Casualty division with 20-60 percent rate increases--a move the California insurance commissioner warns violates state law. The Court recently lifted the stay on all provisions of Prop. 103 except the rate rollback and the consumer watchdog group provision, allowing other provisions to go into effect immediately and promised a further ruling in February. ------------------------------------------------------------------------------ [] MULTINATIONAL MONITOR November 1988 VOLUME 9, NUMBER 11, NOVEMBER 1988 America's Garbage MOUNTING PILES OF garbage, shortages of landfills near cities and regulations which push up the cost of waste disposal have pushed U.S. industry and communities to look abroad for places to dump their waste. This has caused a furor in many sectors of Latin America, already indignant over the developed countries' domination of world primary product markets and widening income disparities between the two regions. Some international organizations have acted to prevent further waste exports. CARICOM, a 13-member economic association of English-speaking Caribbean countries, has come out in opposition to toxic waste imports by any Caribbean nation. Venezuela introduced domestic legislation making it illegal to bring hazardous waste into the country after a Milan, Italy waste disposal firm, Jelly Wax, dumped 2,200 tons of toxic waste in leaky, corroded barrels in Puerto Cabellow, Venezuela in April 1987. "It was deposited ... without proper permission or knowledge, and was not labelled properly," says Iraida Frias, an official at the Venezuelan Embassy in Washington. Four months later, after residents of the area began to complain of sores and a boy died after coming into contact with the barrels, Caracas demanded that the Italian firm retrieve the barrels. Jelly Wax arranged for the waste to be removed. Venezuela also proposed that the Nairobi-based U.N. Environmental Program draft a convention banning all waste exports. At a U.N. meeting in Geneva in early November, Washington opposed the convention, citing the need for free trade as its rationale. The subject is to be taken up again in another series of meetings in January. But cut-rate disposal costs and political heat at home will continue to provide incentives for U.S. firms to look south of the border. "It costs them from $250 to $300 per ton to dispose of wastes in the United States," says Wendy Grieder of the Environmental Protection Agency. By contrast, she notes, Guinea Bissau has contracted to accept wastes for $40 per ton. "Few of these countries have sophisticated laws or technical systems or the infrastructure to handle these wastes" properly, she adds. EPA Inspector General John Martin, testifying before Congress in July, noted that firms have shipped hundreds of tons of toxic materials abroad without notifying U.S. government officials whose job it is to ensure that the countries which accept the waste will dispose of it safely. "Our review of the agency's program to control the exports of hazardous waste showed that the program needed major improvements," he said. In 1980, 12 companies notified the EPA that they intended to export hazardous waste. By 1987, the number had grown to 465, and officials expect between 550 and 575 companies to engage in waste export in 1988. The California firms Pott Industries and Teixeria Farms International formed the Guyana Resource Company (GRC) to build an industrial waste incinerator in Guyana to incinerate the two companies' waste industrial oil and paint sludges. While the Guyanese government initially expressed interest in the facility, it rejected GRC's application to build the plant. The rejection sparked the firm's decision, announced November 21, to pull out of the country, abandoning its $250,000 investment in the scheme. An angry President Desmond Hoyte went so far as to call the firms' owners "unscrupulous" in an interview this fall. Belize also reportedly rejected the Pott/Teixeria plan in June. As part of its lobbying, GRC hired American Environmental Audit, a California firm, to prepare a report it could use to sell the program. The report portrayed the incineration facility as a boon for everyone involved, but critics remain unconvinced. "I'm skeptical of any plan which seeks to take advantage of lax environmental regulations," says Jonathan Puth, an aide to Rep. John Conyers, D-Mich. "The basic question is if it's so environmentally sound, why not do it closer to home?" In the last Congress, Conyers sponsored legislation banning the export of any waste or sludge to any country, except Canada or Mexico. The bill is being rewritten to stiffen the proposed regulations and include Canada and Mexico. Under the new version, Puth says, "It would be a lot more difficult to export waste, if not an outright ban, which we would prefer ..." Conyers, in introducing the original legislation, had much to say on the issue. "Exporting waste abroad is the export of irresponsibility," he said, "the implementation of the credo, 'Anywhere but my backyard.' "We can only cause resentment toward the United States as long as we continue to use the Third World as our garbage dump." A complementary bill introduced in the Senate would require all U.S. waste to be disposed of in compliance with U.S. environmental standards, regardless of the location of disposal. But even with stiffened regulations, corporations may still be able to find counterparts in developing countries to act as henchmen, some say. Haiti's bitter experience with Philadelphia's garbage provides one example. Paolino and Sons, a Philadelphia-based company, paid the Liberian-flagged ship Khian Sea to haul away 13,476 tons of toxic incinerator ash in August 1986. Samples of the ash showed it contained arsenic, barium, cadmium, cyanide, lead, mercury and two different types of dioxins in concentrations ranging from 0.184 to 4.7 parts per billion, according to the environmental group Greenpeace. But the captain of the vessel signed a cargo declaration identifying the load as "non-toxic, non-hazardous, non-flammable incinerator ash." A similar deal was tried in Honduras in March 1987. Amalgamated Shipping tried to sell toxic incinerator ash to the country as landfill for $22,000. The ash had originally been destined for dumping in the Bahamas, but the islands' government refused to allow the ship to unload in its territory. Similar proscriptions came from Bermuda, the Dominican Republic and Guinea Bissua A representative of Amalgamated Shipping told Honduran officials that the ash was "neither toxic nor dangerous, and is an excellent material for landfill in low-lying areas and swampy areas." The Honduran government, however, rejected the offer. -Diane K. Bartz ------------------------------------------------------------------------------ [] MULTINATIONAL MONITOR November 1988 VOLUME 9, NUMBER 11, NOVEMBER 1988 Boston Boycotts Shell BOSTON MAYOR Raymond Flynn has issued an executive order barring the City of Boston from purchasing products from Shell Oil until Royal Dutch/Shell, its parent company, leaves South Africa. (See MM, September 1988.) "The best place to hit businesses is in the pocketbook," said Flynn in announcing the executive order. "We have to be consistent in our human rights stand and send a direct message to the South African government that we do not support the system of apartheid." Flynn was joined at a press conference announcing the Boston boycott of Shell by Richard Trumka, president of the United Mine Workers of America, actor Ed Asner and Charles Laquidara, Boston's top-rated morning radio disk jockey. Trumka, who serves as co-chair of the National Labor Boycott Shell Committee, used the occasion to launch the Shell Boycott Media Campaign, which features radio public service announcements narrated by Asner, Jesse Jackson, actress Tyne Daly, singer Bonnie Raitt, musician Jackson Browne and artists from the rock groups Boston, Aerosmith and Heart, and other celebrities. The radio spots were premiered on Laquidara's morning show. Laquidara recently ran a three-month campaign called "Shell Shock" in which he asked listeners to boycott Shell products and mail in cut-up Shell credit cards. "Shell is the largest supplier of oil to the South African military," Laquidara noted. "South Africa doesn't have any natural oil resources, so Shell almost literally keeps the South African military running. That's why a boycott can be very effective." The city of Berkeley, California, also recently passed a resolution declaring it "Shell Free." The Shell Boycott was launched in January 1986 and is supported by nearly 100 national labor, church, civil rights and anti- apartheid organizations. The boycott is active in 14 countries around the world. (For more information, contact National Labor Boycott Shell Committee, c/o United Mine Workers of America, 900 15th Street, NW, Washington, DC 20005.) ------------------------------------------------------------------------------ [] MULTINATIONAL MONITOR November 1988 VOLUME 9, NUMBER 11, NOVEMBER 1988 F E A T U R E S PARADISE PAVED By Ellen Hosmer ZUSHI CITY, Japan--In the bustling over-populated Tokyo-Yokohama metropolitan area, what may be one of the most significant political battles in post World War II Japan is emerging. In an effort to accommodate the U.S. military, the Japanese government wants to build 854 housing units for around 4,000 U.S. military personnel in Zushi, a beautiful and wealthy coastal city an hour from Tokyo. The project, estimated to cost between 50 and 70 billion yen, would devastate a portion of a forest known as Ikego Hills that has grown undisturbed on the outskirts of the city for nearly half a century. The struggle to save the hills of Ikego has developed into much more than just a battle over a plot of trees; it has become an organized call for adherence to the democratic ideals promised by the country's constitution and a staging ground for a grassroots citizen movement. Ikego's Past At stake are nearly 290 hectares (717 acres) of land, one-sixth of the Zushi land area, that has been vacant since Japan conceded defeat in World War II and Gen. Douglas MacArthur began his six-year effort to transform the country. The hills were once farmed by local residents. When war broke out, the Japanese Imperial Navy expropriated the land for a munitions depot. After the war was over, the United States military took over the hills and has administered them since. Fenced and vacant, the territory began to slowly revert to the wild, broad-leafed forest it had been before either the war or the farmers had taken their toll on it. Under U.S. domain, the hills were seldom used--although local residents report that during both the Korean and Vietnamese wars the depot was a hotbed of activity. Meanwhile, the population in the area surrounding the hills exploded. The number of people in the Tokyo metropolitan area grew from 13 to 29 million between 1960 and 1980. The hills are an oasis of green in the otherwise concrete and steel of the metropolitan Tokyo area. The Ministry of Construction surveyed the area in the late 1970s and concluded that it should be part of a natural park. The first sign that the hills were to be changed came in October 1982 when workers moved into the area. Local residents, gathering along the fence that has long surrounded the hills, watched with apprehension as workers bored holes in the ground. Within a few days, the quiet town of Zushi was up in arms and those who had gathered together at the fence organized to change the fate of their woods. What developed was a sophisticated and effective citizens movement that, if successful, may reshape Japan's political system. Zushi residents, organized under the banner the Citizens' Association for the Protection of Nature and Children and various environmental, political and citizen groups, mounted a comprehensive opposition campaign. In the first years, petitions were circulated and alternatives investigated. In 1983, representatives with 47,000 signatures opposing the plan headed to Washington to lobby the U.S. administration. Zushi city also hosted an international environmental symposium. When the former mayor decided to accept the Ikego Hills military housing project in return for certain "kickbacks" to the community, the citizens organized a recall campaign in 1984. When the city council refused to veto the project, they successfully petitioned to recall all the members of the city council. For the next five years the Ikego issue would be the litmus test for Zushi politicians. The movement to fight the U.S. military housing project is made up mostly of women--housewives from Zushi with little previous experience in politics and even less in bucking the system. "The men go to work in Tokyo. They leave very early and come home late," says Michiko Suzuki, a city councilwoman in Zushi. "Women had to take the initiative because men don't live here;" they only sleep in Zushi. Suzuki says that before the issue surfaced, there was only one woman on the city council--now there are five. After the 1984 recall, Mayor Kiichiro Tomino was elected. An astronomer by training, he has devoted his office to fighting the Ikego hills housing project and testing Japan's post-war democracy. Tomino says Zushi is attempting the unprecedented. "The attention of the entire nation is focused on this city, where the relationship between local government and central government under the post-war constitution is being tested." At stake, he says, is Japan's democracy. "The basis for local autonomy lies in a people's government; government of the people by the people, for the people," says Tomino. But adequate information and active citizen participation is necessary to realize such a government. "Initially the movement was to protect the environment. Now, it's to protect self government," says Akiko Motoyasu, one of the organizers of the opposition campaign. "It's probably the first time in Japan's history [that a movement has] put self- government into practice." With 87 percent of Zushi's citizens behind him, the mayor is confident that he cannot lose. His optimism remains undaunted, mainly because of an article in the constitution which says that a law applicable to only "one local public entity, cannot be enacted by the Diet--the Japanese parliament--without the consent of the majority of the voters" in that area. Central to the debate is the issue of where the authority of the national government ends and the local government begins. Although the national government is required to consult with and gain acceptance for national decisions that affect local communities, the national government has never before had serious difficulty in garnering support for its proposals. Zushi City, with Tomino at its helm, changed all that. The Japanese government says that the election of a new mayor does not void the agreement that they entered into with the former mayor and city council. And the Defense Facilities Administration Agency (DFAA), the military office charged with overseeing Ikego, maintains it has made every effort to accommodate the concerns of local citizens. The number of housing units has been reduced from 1,000 to 854 and some of the townhouses have been converted to high rises to preserve the green. Under the DFAA plan, almost 30 percent of the hills will be used for the housing project. Of that, more than half will be cut and filled--the steep slopes will be levelled to fill in the valleys. Citizens say the national government had no right to make a unilateral decision which failed to take into consideration either the importance of the area environmentally or its importance to the local people. The forest is irreplaceable, says Dr. Teruyo Oba. And to bulldoze it for U.S. military housing, she says, would be like bulldozing New York's Central Park. Opponents stress that environmental considerations, rather than anti-military sentiments, shape their movement and that opposition to the housing project does not indicate a more general opposition to the U.S.-Japanese Security Treaty. U.S. Forces in Japan The decision to convert the hills of Ikego to a housing complex for U.S. military personnel was given the go ahead in 1982 after a meeting of the Japan-U.S. Joint Committee. Under the Japan-U.S. Security Treaty, Japan is mandated to contribute to its defense effort by supplying the infrastructure for U.S. forces. The lack of adequate housing, especially in the Tokyo-Yokohama area, for U.S. military personnel stationed in Japan has long been a controversial issue between the two countries. According to a U.S. Navy spokesperson, junior enlisted service men and women wait, on average, two years for military housing, field officers wait 12 to 14 months and junior officers wait 6 to 8 months. According to the U.S. Navy, there are some 850 people on the waiting list today. Together the U.S. Navy and Marine Corps need some 4,000 on-base housing units within the Kanto Plain but have only 2,400. The United States has complained loudly since the early 1970s about the shortage of housing. In 1973 the crew of the U.S.S. Midway was allowed to bring family members to Japan, further compounding an already serious problem. And the sharp rise of the yen only added to the difficulties of living off base. Comparable housing in West Germany is estimated to cost one fifth the amount of that in Japan. Since the military subsidies do not reflect the high cost of Japanese housing, many military personnel stationed in Japan look to military housing as the only affordable alternative. The shortage of housing, especially Western-style homes, some fear, may lead to a morale problem for U.S. forces stationed in Japan. To rectify the situation, the United States requested that new housing units be established immediately. The U.S. Navy claims it merely requisitioned additional housing, and left to the Japanese Defense Agency particularly the DFAA, the logistics of the plan. "Once the U.S. Government has made its needs known to the Japanese, the [Government of Japan] has complete responsibility for satisfying the requirement," noted Rear Admiral J.C. Doebler, of the Department of the Navy. But according to Hisayoshi Nishida, Director of the Planning Division of the Facilities Improvement and Relocation Project of the DFAA, that's just not how it went. He says that "due to the housing deficiency," the Japanese government was notified by the U.S. government that "they required 1,000 units in Ikego." U.S. Law vs. Japan Exactly who requested the Ikego site could develop into a hot political issue. If the United States requested the land, opponents can argue that U.S. environmental law--with its much more stringent environmental considerations--would apply. If the City of Zushi decides to sue, this would be a key issue, according to Japanese environmentalists. Under this strategy, opponents would argue that the U.S. National Environmental Policy Act (NEPA) of 1969 would apply. The act requires that "all agencies of the U.S. government shall include in every recommendation or report on ... a major federal action significantly affecting the quality of the human environment a detailed statement ... on the environmental impact of the proposed action [and] alternatives to the proposed action." The act further requires the recognition of "the worldwide and long-range character of environmental problems" and, that "where consistent with the foreign policy of the United States, [that it] lend appropriate support to initiatives, resolutions, and programs designed to maximize international cooperation in anticipating and preventing a decline in the quality of mankind's world environment." Thomas J. Graff of the Environmental Defense Fund says the key to NEPA is the importance of investigating alternatives. "These requirements would clearly be binding on the U.S. Navy were the actions being discussed here within the United States," said Graff in a speech to opponents. It must be an "action that is implemented or funded directly by the United States Government," something that is difficult for the housing opponents to prove. If the U.S. does not implement or fund the project, then it is not required to meet these criteria. Tom Milliken, director of TRAFFIC JAPAN, a World Wildlife- affiliated organization, says that a similar case in West Germany was decided against opponents because there was no overt U.S. involvement. But the Japanese case may be different because the United States has administered the hills for 50 years and the DFAA says the United States played a major role in deciding where the housing project was to be built, if not the only one. The DFAA's Nishida is emphatic about who made the decision to locate the housing project in Japan. "There was no suggestion from the government of Japan to use Ikego," he says. Rather, the impetus came from the United States. Options and Alternatives Although suing in U.S. courts to try to apply U.S. NEPA standards may be a last resort, opponents of the construction are exploring every avenue. In February, opposition groups travelled to Washington and several other U.S. cities to try to garner support for their efforts. Although citizens have stalled the project for more than six years now, the Japanese government says it has no intention of backing down. Says Nishida, "I know there are protests by citizens, however, at the government we're doing everything as scheduled." He says that by 1995, the hills of Ikego will be home to an unparalleled housing complex. With a sports complex complete with tennis courts, baseball and softball fields, and all the other amenities of home, it will do much to ease the housing crunch for U.S. military personnel in Japan. Earlier this year, the DFAA replaced the wire fence surrounding the complex with a 10-foot-high solid fence. "The levelling of the area we would like to initiate within this fiscal year--by the end of March, 1989," says Nishida. Behind the fence, bulldozers work through the day, amidst bright orange flags. It is an ominous sign for opponents, but one that is more a threat than a reality, says Tomino. He says the government is unwilling to force the project on such a unified opposition, so they hope to temper the opposition by making them realize the futility of it. They want opponents to feel it is too late, that work has already begun on the project. If that does not work, he says, they may begin chopping away at the constitutionally protected rights of the local government, a move that may have serious repercussions for Japan. "The Japanese government will be destroying the system of democracy," he says. For their part the Zushi citizens are concentrating on alternatives. Alternatives that, they say, have never been properly explored. There are at least a half dozen options that would avoid razing the hills of Ikego and still provide housing to U.S. troops within minutes of Yokosuka. Opponents note that several military housing projects in the immediate vicinity are being returned to local governments and that these would be much less costly both for the environment and the Japanese taxpayer than Ikego. In one area in particular, some 400 homes with wide streets and spacious lawns are reverting to the local government for civilian use. Another option would be to increase the number of housing units already on the bases in the Yoskosuka area. Opponents are not convinced that the U.S. military needs to be cut off from the locals in the first place. They say a NATO- style open housing situation may lessen tensions between foreign military personnel and local populations and encourage more give and take. Although local housing is expensive, opponents of Ikego say that if the government would spend only a small portion of the sum used to build the Ikego housing complex to give subsidies to military personnel living off the bases, these soldiers could afford local housing. At this point, however, there maybe too much at stake for the Japanese government to retreat. Opponents say that it may take the United States to break the deadlock. "The [Japanese] government doesn't want to lose face so they won't back down," says Uki Hatanaka a member of the opposition group Ikiiki Kaigi, a citizens' group opposed to the housing project. But Mshida of the DFAA is not optimistic. "We don't think the U.S. government will withdraw the plan, even if there is a strong protest from Zushi citizens," he says. The last line of defense against the project may be the city's right to approve any plans changing the course of the river which runs through the Ikego Hills. The DFAA needs to re-route the river and build a flood control basin in order to accommodate the housing, but the national government must have the approval of local government to interfere with rivers. Although the DFAA says it is going ahead with the work with or without the local government's consent, Zushi City can take the government to court on the issue. In July, another potential wrench was thrown into the DFAA's plans. According to Kanagawa Prefectural Cultural Assets Center, the remains of ancient dwellings and artifacts dating from 100 to 1,200 years old were recently found in Ikego. The Center is asking to pursue a more detailed study which could take two to three years. In the end, says Tomino, the movement against the construction is a tribute to American democracy. He says that during the occupation, the Japanese people learned much from the United States, but only now are the individual democratic principles that were granted being tested. In a system with few opportunities for citizen participation or oversight already in place, it will be a long, hard battle. It is a kind of coming of age for Japan, says Tomino. Those born during or after the occupation are much more willing to challenge the system. Although so far there have been few successes, it is inevitable that change will come to the top- down decision-making that has guided Japan since feudal times. Already the fight of the citizens of Zushi to preserve Ikego has inspired grassroots movements across the country. On the islands of Miyakejima and Ishigaki where residents are fighting against construction of airports in environmentally sensitive areas, and in areas throughout Japan where citizens are organizing against nuclear power plants, pollution and destructive development, many look to the fight of the Zushi housewives as an example to replicate. "It seems to be a new trend," says Naomi Kamei of Friends of the Earth Japan. "It's the first city to become involved on an environmental issue." Although the Japanese cultural bias argues against the success of these movements, says Milliken, "if just one of them can win, it's going to galvanize" the nation. Already, he says, "the system is on the defensive." "How long it will take for the system to yield and make amends it's hard to say," he says, but when it comes, Zushi will deserve much of the credit. "If Ikego could succeed it's the first foot in the door." ------------------------------------------------------------------------------ [] MULTINATIONAL MONITOR November 1988 VOLUME 9, NUMBER 11, NOVEMBER 1988 NOISY IS THE NIGHT By Ellen Hosmer MIYAKEJIMA, Japan--At 3:33 on the afternoon of October 3, 1983, the island villagers of Miyakejima felt the earth rumble. By the time the sky darkened, a few moments later, they knew that their island paradise, built on a volatile volcano, was in jeopardy. When the smoke cleared, 12 million tons of lava had spewed forth, 330 houses had simply disappeared under the fiery mass, and more than 800 people were left homeless. Nearly 700 hectares of farmland were paved over. A spring-fed lake, some 50 meters deep, vanished in a puff of steam, leaving a vacant crater in its place. The eruption changed forever the landscape of the tiny island, but today the islanders fear their way of life is being threatened by a force potentially more dangerous than the mighty volcano. "The future of Miyakejima is at stake," says village chief Haruo Terasawa. Only some 180 kilometers from Tokyo, Miyakejima is targeted as the site for a night-landing practice airfield for U.S. Navy planes. The issue has politicized the island and thrust its 4,000 citizens into a confrontation with the national government. Along the road encircling the island are hand-painted signs that tell of the dangers of night landing practice (NLP). "NLP is more dangerous than another eruption," warns one sign. "Keep the island where you wake up with the sound of the birds singing," advises another. "You don't know the power of the island man and woman," says still another. But slowly, the ruling Liberal Democratic Party (LDP) of Prime Minister Noboru Takeshita is beginning to realize just how powerful a force local groups can be in delaying, if not changing, national policy. Night landing practice by the U.S. Navy has long aroused bitter controversy in Japan. Residents near Atsugi Air Base in the Kanagawa Prefecture, just 50 kilometers from Tokyo, have complained about night landing practice since it began in the early 1980s. Atsugi Air Base has spawned dozens of demonstrations, petition campaigns and lawsuits. Residents claim the continuous deafening roar of the planes during night landing practice exercises makes life unbearable. They cite a litany of problems that NLP has produced, including hearing loss, miscarriages and a general disruption of their lives. The U.S. Navy uses night landing practice to train its pilots to land their jets at sea on aircraft carriers. Atsugi is used by pilots from the U.S. aircraft carrier Midway when it is docked at nearby Yokosuka Naval Station. To simulate actual conditions the runway is short and the landing strip dark. If the pilot does not perform a perfect landing, the pilot must immediately shoot back up into the air and repeat the landing. Both the U.S. Navy and the Japanese government agree that NLP in a densely populated area is not wise. In fact, the area around Atsugi is especially troublesome since the houses and streets of the nearby towns light up the landing strip. The United States has requested that another location be found almost since the NLP began in Japan. What was needed was an area that was flat, lightly populated and near Tokyo Bay. Miyakejima fit the bill almost perfectly. In the chaos following the 1983 volcanic eruption, the village council of Miyakejima voted 13 to 2 to accept a seemingly non- descript resolution calling for the construction of a larger airport that would be used jointly by the state and commercial companies, but which in essence asked the government to bring NLP to the island. To sweeten the deal, the Japanese government promised to throw in a 70 to 100 billion yen subsidy for the local government. The money would be used to build a town hall, a sea port and a golf course--projects designed to revitalize the island's stagnant economy. But when the islanders understood what they were going to have to give in return, they revolted against the village council members who had acted without their support. In February of 1984 the opponents of NLP on Miyakejima won 13 of the 14 council seats. More than three-fourths of the island's population signed a petition against the resolution asking the government to bring the NLP airport to the island. The airstrip would pave over 60 houses and 2 million square meters of parkland. Environmentalists all over the world have joined the islanders in their efforts to fight the plan. (balance of this article omitted here; unscannable) ------------------------------------------------------------------------------ [] MULTINATIONAL MONITOR November 1988 VOLUME 9, NUMBER 11, NOVEMBER 1988 AID, INCORPORATED The Real Beneficiaries of Japanese Foreign Assistance By Ellen Hosmer AT THE TORONTO SUMMIT in June, Japan crowned its emergence as a major international player. Meeting with the six Western industrial powers--the United States, West Germany, France, Britain, Italy and Canada--Prime Minister Noboru Takeshita promised to contribute to the world's economy in a way befitting a preeminent economic power. With great fanfare, Takeshita announced an ambitious program to increase his country's official development assistance (ODA) to $50 billion over the next five years, a figure that would double the country's contributions to Third World development. And he put the final touches on a $5.5 billion debt forgiveness plan for the least developed countries. Japan hopes to stifle growing criticisms from the international community and particularly the United States that it is not pulling its weight on the international scene. Rejecting the controversial route of spending more on defense or the costly route of working to lessen trade deficits, Japan hopes to bolster its image by bolstering its contributions to the developing world. Environmentalists, however, are already cautioning that increased aid from Japan may do more harm than good unless adequate safeguards are required of Japan's official development assistance. In fiscal year 1988, Japanese ODA will increase by roughly 40 percent, in dollar terms, to a figure near $10 billion. Although the increase is less impressive when measured in yen, the rise in the value of the yen as compared to the dollar has let Japan far outpace other donor nations. (ODA calculations are in U.S. dollars.) This year Japanese ODA is expected to finally exceed that of the United States. Under pressure to recycle still more of its trade surplus--$87 billion in 1987--to the lesser developed countries, the trend toward increasing ODA expenditures will most certainly continue. In recent years Japan's ODA has soared. By 1986, only the United States surpassed Japan in official aid. The United States gave $9.7 billion while Japan gave $5.6 billion. In fiscal year 1987, Japan spent $7.4 billion in ODA. Its share of ODA by 1986 had grown to 12 percent of total contributions, an impressive figure considering Japan only began giving aid in the 1960s. In fact, between 1977 and 1986, Japan's aid quadrupled, while U.S. ODA doubled. Despite these significant increases, Japan's ODA as a percentage of its GNP is still only 0.29 percent compared to the 0.36 percent average for all donor countries and a 0.7 percent U.N. target. As growth in the world's economy has slowed, Japan has increasingly taken up the slack in development aid. Notes Japan's Ministry of Foreign Affairs in its 1987 ODA annual report, "It has become increasingly difficult for the United States to maintain its former leadership role in the formulating and maintenance of the international order that it held by virtue of overwhelming predominance in the international economy." But Japan's increasing power on the international aid front worries environmentalists and development experts worldwide, who fear it is a role that the country is ill-prepared to play. Japan's forays into the role of international aid giver are marred by a history of questionable loans. Aid projects sponsored by Japan have frequently benefited the Japanese economy but done little to spark sound development abroad. When such loans did promote development, it was a byproduct of the economic benefits Japanese companies could obtain, says Yoichi Kuroda of the Tokyo-based Japan Tropical Forest Action Network (JATAN). "[The Japanese] don't have a strong environmental or even development background," says Fran Spivy-Weber, the National Audubon Society's director of international programs. "There's a lack of expertise." After years of trying to push through basic environmental criteria for World Bank, U.S. Agency for International Development (AID) and Inter-American Development Bank (IDB) loans and fighting environmentally or developmentally unsound loans, environmentalists say increases in Japan's ODA, especially in money not allocated to multilateral development agencies, could be a significant setback. International lenders are today more sensitive to environmental considerations but still often ignore environmental standards. But coming on the heels of major policy initiatives by multilateral development agencies to take the environment into consideration when implementing projects, Japanese intransigence in implementing even minimal environmental safeguards is cause for serious concern. "The official reaction of Japanese Government departments involved in ODA (except for the Environment Agency) has largely been to attempt to deny that environmental problems exist with regard to ODA projects, hide the fact that they exist, or deny any responsibility for them," notes a study on Japan's development assistance written by JATAN and Friends of the Earth Japan for the International Citizen's Conference on the World Bank, Environment and Indigenous People held in September. "Discussions in the [U.S.] Foreign Relations Committee in April revealed that, for the Greater Carrajas Development Program in Brazil, the recommendation in 1982 of the JICA [Japan International Cooperation Agency] Planning Department was that impact surveys should be done secretly so as to avoid international criticism." Loans, on the whole, were used to bolster the Japanese economy, paving the way for natural resources to flow into Japan, or ensuring that raw materials were available in the sums that the Japanese economy needed. Cases documented by groups like that of JATAN and Friends of the Earth Japan show the lack of even simple environmental or cultural safeguards in Japanese aid efforts and a complete disregard for a project's sustainability. Japan's loans to Malaysia demonstrate the glaring problems associated with Japanese foreign assistance, says Kuroda of JATAN. Japan depends on Malaysia for its tropical raw wood. Nearly 80 percent of the tropical timber harvested in the Malaysian state of Sarawak, the major supplier of tropical timber in the world, goes to Japan. It is in this state that Japanese ODA has caused the most bitterness. A small $1.5 million loan given by the JICA is demonstrative, says Kuorda. The loan was given to build a 41-meter wide, 28-kilometer long road in the Limbang area of Sarawak. The road cuts into lands where the Penan people, a nomadic Indian tribe, live. Although the indigenous people claim title to the land, logging companies have been able to establish logging operations there. In Limbang, the huge Japanese trading company C. Itoh & Co. and a local company have done the same. The local company in the joint venture is owned by James Wong, Sarawak's Minister of the Environment, notes Yoichi Kuroda of JATAN. JICA awarded the loan to build the road to C. Itoh and Wong. Although JICA has defended its decision, claiming that the road was indeed development assistance to the local people, an investigation by JATAN found otherwise. According to Kuroda, JlCA's claims that the road was to be used by local people to better their way of life were patently untrue. Contrary to JlCA's assertions that the road had made possible a new school and increased medical access, Kuroda found that the region's school had been there for nearly 30 years and medical visits continue to be made by helicopter. And the local people, with neither cars nor bikes and often no shoes, prefer to walk on the paths, says Kurodo. In addition, soil erosion stemming from deforestation is silting up the river, the Penan's main form of transportation. Although C. Itoh and Wong severed ties with the logging operations in the area after intense criticism, JICA refuses to back down. For the indigenous Penan people, the road and the logging that has come with it have been devastating. Already Sarawak has lost more than a third of its tropical rainforest and concessions have already been given for huge chunks of what remains. The Penan people in 1987 and 1988 blockaded many of the logging roads in the area, including JlCA's C. Itoh road, to call attention to the impact logging was having on their way of life. They say their traditional hunting grounds have been decimated, their lands have been deforested and their rivers have been polluted. Problem Projects Japan's Overseas Economic Cooperation Fund (OECF) and the Asian Development Bank have also financed environmentally unsound projects. Both played a major role in financing the construction of Batang Ai Dam in Sarawak, which devastated 20,000 acres of forest and displaced thousands of natives. The OECF, the country's "number one" official development assistance agency, disbursed $4.3 billion in 1987, and has funded dozens of similarly controversial projects. The OECF provides concessional loans to developing countries' governments, governmental institutions and corporations. Throughout the description of the loan projects in its annual report, OECF notes the importance of the projects to the economic development of Japan. There is the Paper and Pulp Development Project in Brazil that will "make a steady supply of pulp available to Japan and other countries," and the Saudi Arabia Methanol Project which "makes a supply of methanol available to Japan." More controversial are the Asahan Hydroelectric and Aluminum Project in North Sumatra, Indonesia and the Amazon Aluminum Project in Brazil. When in full operation, the Asahan project will generate 513 megawatts of electricity and some 225,000 tons of aluminum annually while the Amazon Aluminum project will produce 320,000 tons of aluminum and 800,000 tons of alumina annually. The OECF notes that the latter will do much to develop the region in the Amazon where bauxite is to be mined and that both will boost aluminum supplies available to Japan. But environmentalists say both projects are costly to the ecosystem in which they were built and to the indigenous populations of the regions. In both cases, however, Japan needed to produce cheap aluminum. The OECF is also involved in the Narmada River Dam project in India, which will flood thousands of acres of forest and displace some 70,000 people. (balance of this article omitted here; unscannable) ------------------------------------------------------------------------------ [] MULTINATIONAL MONITOR November 1988 VOLUME 9, NUMBER 11, NOVEMBER 1988 INTERVIEW OF PRUSSIANS AND TRADERS An Interview With Noam Chomsky Noam Chomsky is a professor of linguistics at the Massachusetts Institute of Technology Department of Linguistics and Philosophy. He is the author of numerous book and articles on linguistics, philosophy, intellectual history and contemporary issues. His works include Language and Mind; The Political Economy of Human Rights; Fateful Triangle: The U.S., Israel and the Palestinians; The Culture of Terrorism; and Manufacturing Consent: The Political Economy of the Mass Media. Chomsky is a Fellow of the American Academy of Arts and Sciences and a member of the National Academy of Science. MULTINATIONAL MONITOR: Businesses want to trade with the Soviet Union, with Libya, with many communist and socialist countries. Do you think, with the changes in technology and the creation of a genuine world market, that there may be the beginnings of a conflict between straight business interests and the traditional American foreign policy goals of controlling foreign countries? NOAM CHOMSKY: That is a conflict that goes back to the origins of imperialism. Take say, the early 1920s. There were plenty of businessmen who wanted to trade with the Russians, but the state blocked it. In the early 1950s, there was a major split in the business community about how to deal with China. There was a group that just wanted to open up trade and commercial interchange and so on, and there was another group that wanted to take a very harsh posture and to drive them into the hands of the Russians, and ultimately, overcome them. In fact, into the late 1960s, the State Department planners still had the idea that maybe we could break up China, we could restore the old order in China. This is the distinction between what Mike Klare once called the "Traders" and the "Prussians." Basically, you have the same goals, but there is a question as to whether to achieve the goals by economic power or whether to achieve them by violence.... It is a matter of tactics.... In the Middle East, for example, the goal has always been to maintain control over oil. Not because we need it, [but] because it is one of the ways we control our allies. By having control over the energy system, you have a big effect on the whole world system. So the question is, how do we do it? The two approaches are reflected very clearly in the split between [William] Rogers and [Henry] Kissinger around 1970. Rogers' position was that you do it by the method of the Traders, so he was, for example, in favor of a negotiated settlement of the Arab-Israeli conflict along the lines that had very broad support at the time. Kissinger, on the other hand, thought you do it by violence, so he wanted to maintain, in fact construct an Iranian, Israeli, Saudi Arabian alliance which would pretty much control the region by force.... With regard to every part of the world ... the goals are the same. You want to insure domination. The fact that those people will trade with you is not enough. Russia will trade with you but you can't control their economic decisions. That is the problem.... American corporations cannot control investment decisions in the Soviet Union. They are going to go their own way. They are independent of our domination. If they want to devote their resources to domestic consumption, they will do it. They are not going to devote them to export-oriented production because that is what we want. That is the problem down to tiny, little countries. Anywhere from the Soviet Union to Grenada, it is the same problem. MM: To what extent can the United States impose its will? CHOMSKY: In the late 1940s the world system was extremely unusual from a historical point of view. The United States literally had 50 percent of the world's wealth. There has never been a period in human history when one country had such overwhelming domination from an economic, political and military point of view. Well, that naturally had to erode and it has eroded and now the world system is considerably more complex. There are numerous centers of power, there are rising industrial countries such as Brazil, there [is] increasing independence among the raw materials producers all over the world and that means that new groupings of powers can [form], which can challenge the decisions made by the master of the world market and can begin to move in their own direction.... MM: But in what direction? Won't their choices be dictated by their own economic interests? CHOMSKY: 'Own economic interest' is a misleading term because countries don't have economic interests, groups inside of them do and those interests may differ. MM: Precisely, and ruling groups will be out to maximize their profits. CHOMSKY: Not necessarily. That assumes capitalist domination of every country. But suppose you get a government that does what the U.S. has always feared more than most anything at all-- directs resources to domestic development? Here we don't have to speculate. We can go back to high level, declassified documents, which are very explicit about this topic.... Take Latin America for example. As far as I know the most serious and important review of U.S.-Latin American policy was in 1954, right after the Guatemalan democracy was overthrown. NSC5432, which is U.S. policy with regard to Latin America, [is a] long comprehensive and detailed study [that] gives an analysis of what our general policy must be towards Latin America and is very clear and explicit. It says the primary concern is what they call "nationalistic regimes," which are responsive to the demands of the masses of the population for an improvement in their low living standards and for diversification of production. In contrast, we have to organize export-oriented production and integration into the world market, and not nationalism, not use of resources for domestic needs. They are not allowed to devote their resources to say, subsistence agriculture, but rather to export crops.... The way to do this [was for us] to take control of the Latin American military. Now at the time that meant fighting France and England, we had to eliminate French and British training missions which still existed in Latin America. They were of course our ... real competitors. [I]n the future ... the real enemies are going to be Europe, Japan and other functioning economies, not the Russians.... MM: What is the economic interest now in Central America? CHOMSKY: The economic interest is, first of all, resources and resource extraction. MM: But the resources to be extracted in Central America are minimal on a world scale. CHOMSKY: Yes, but that is not what counts. General Motors does not decide to give up its franchise in Tucson because that is a small percentage of its income. They fight to keep their franchise in Tucson and we fight to keep our franchise in Central America. They may not be right, but they think Central America and the Caribbean is a potential East Asia. The only [area] of the colonial world that has developed is the Japanese area and there is a reason for that. Imperial powers are brutal, but brutal in different ways. Japanese imperialism was very brutal but in a developmentalist way. So while we were robbing our colonies, Japan was building its colonies in the pre-second world war period and there was significant industrial development in Taiwan, Korea, and so on.... MM: What would be the harm in letting a country like Nicaragua go its own course? CHOMSKY: Here we come to another long standing concern of American planners which has never been abandoned.... That is the rational version of the domino theory. There are two versions of the domino theory. One of them is crazy. That is the version that is used to scare the public: 'They are going to land in San Francisco.' But there is also a rational version. And the rational version is that there could be a demonstration effect. If any country can fall into the hands of nationalist leaders who devote resources to their own populations, it could very well have a demonstration effect. It could be a virus that will infect the region and even beyond.... What was the concern about [Salvador] Allende? They are going to be able to get the copper. It is the virus of Allende. [It] will send the wrong message to Italy, not because Chile is going to conquer Italy, but because you have a big communist party there, you have a big workers' movement, which has never been destroyed despite many efforts, and if they see that there is a possibility of developing democratic socialism, it will inspire them to try the same thing. Before you know [it], the whole system [will] erode. ... What they care about is that you might begin to get what we have always feared, workers controlling industry, for example, and separation from the U.S.-dominated international market where the multinationals, which by now are much beyond the United States, do run the world market and their international institutions like the IMF and the World Bank control it and the big powers like us exercise violence when necessary and so on. That is, a complex integrated system functioning for the benefit of elite groups, economically powerful groups in our system, and in the major capitalist countries. And if this begins to erode there is a real problem.... Radical democracy in the United States is a threat to the conservative world order because it can spread. It can arouse the 'wrong ideas' among other people and pretty soon our system of power and privilege will collapse. That threat still exists and it will always exist. This idea is never abandoned because it is correct.... People often say, 'What do we care about Grenada?' You can't imagine a place in the world of less economic significance than Grenada. Nevertheless, as soon as [Maurice] Bishop took power, it caused hysteria in Washington. They had to destroy Grenada. It was true of Carter, it is true of Reagan. They immediately embargoed, cut off support, started running big military manuevers all over the region to try to drive them into the hands of the Russians and terrorize them and then finally invaded. What do they care about Grenada? It has 100,000 people and some nutmeg. But the point is the weaker a country is, the more insignificant it is, the more dangerous it is.... That is why you get this hysteria about places like Grenada or Laos in the 1960s and other tiny little specks of dust--because the demonstration effect is greater when the country is weaker. And that is very rational. MM: Does the increasing power of the world market mean that U.S. corporate interests will no longer have to be concerned about controlling countries politically? CHOMSKY: I don't think so. There is a force toward integration of the world market and so on. But there is a corresponding feature of that: namely, the diversification of the international system which allows groupings of powers to gain a capacity to pursue a different path that they didn't have previously. And that is very threatening to those who intend and expect to dominate the world system. There has been concern about this kind of autonomy for years. Since the late 1940s there has been a concern among the smarter planners, people like George Kennan, that eventually Japan would reconstitute itself as a dominant force. So for example, in the late 1940s when most U.S. planners were convinced on mainly racist grounds that Japan was never going to be able to export anything but toys, smarter people like Kennan, who had major power in shaping the post-war world, recognized that eventually they could be a real competitor and therefore we had to guarantee some method of control. The method he suggested, which was in fact followed, was to control their energy resources. So Japan was allowed to reindustrialize but not to develop petrochemical and refining industries and so on. And in fact, part of our concern for controlling Middle East oil has been to insure that that lever remains in our hands. But the trouble is that is not happening anymore. Japan is beginning to set up its own independence with the oil producers and Europe might do the same thing. Here the issue is quite complex.... Japan separated itself from the world market and pursued its own independent development and is the only what we call Third World colonial country to have industrialized.... MM: Isn't it possible though that at some point the market itself may start to provide the service of undermining popular movements without the need for more direct applications of force? CHOMSKY: I think you can find areas where it is happening in the United States itself. Through American history it has been necessary repeatedly to use violence to prevent democracy from developing.... Labor unions are one of the classic ways in which isolated people who lack individual resources can join together to enter the political system. And that had to be blocked. That is one of the reasons we have such a bloody labor history. After a while, the forces of the market took over. So, in the United States you don't need censorship. Censorship is carried out by corporate media who control through market forces and shape news in their own interest. MM: To what do you attribute the move by the socialist countries toward market organization internally and some limited opening up of their economies to the world market? CHOMSKY: These so-called socialist countries, which have absolutely nothing to do with socialism, these kind of state bureaucracies dominating them along the Leninist model, the exact antithesis of socialism, they are highly inefficient. They are inefficient in control of the public, they are inefficient in production and so on, and the market in fact is an efficient way of allocating resources. Markets don't have to be used for distributing benefits; that's where the problem started arising. But in determining things like resource allocation, a market is a rational system and so they will move toward those systems in the effort to increase the viability of their own elite groups. Now that is going to lead to internal tensions. Take, for example, the Soviet Union. One of the benefits that the working class has had from the limping Soviet economy is that they don't have to work very hard. But if you start introducing incentives and market forces you [have] to work and you have to suffer. That is why industrialization was such a brutal process in the West. And it is not so clear that the working classes will be willing to accept the requisite suffering for the hope of ultimate consumption. Certainly in the West it never happened very easily. It had to be done by force. And you can't predict what will happen there, whether they can do it by force, or whether they can bring it about without force. But industrialization has been a brutal process and I think those problems are going to arise very quickly as they shift to market techniques for allocating resources and making production decisions. MM: Politically, how important is the way the media is organized, the actual corporate structure--who owns the newspapers, how many newspapers there are in the given town, the way the TV networks are owned and regulated? CHOMSKY: It is very important. In the United States, you can't see it very much because ... we are much more advanced in the departure from meaningful democracy than other countries. But elsewhere, in rather similar societies, you can see it. England is not a terribly different kind of place than we are, but up until the 1960s, England had a very lively and effective labor press. The Daily Herald in England ... if I remember correctly [had] twice the subscriptions of the London Times, the Financial Times and the Guardian put together in the early 1960s, and in fact, the polls showed that it was more intensively read and more eagerly read by its subscribers, but it was a working class newspaper. It presented an alternative view of the world. Now it doesn't exist. The working class newspapers have become cheap tabloids, which are sex, sports, and so on, part of the decerebration of the masses. This [did not] happen by force. The police didn't come in and close them down. It happened by market pressures. Newspapers are corporations that sell a product, namely subscribers, to buyers, namely advertisers. So a newspaper or any journal is basically a corporation selling a product to other corporations. The way you sell them is by looking at the profile. If you want to have resources in this system, you are going to have to have advertiser support in capital. And that means for one thing you are going to have to adhere to their view of the world, but it also means that you are going to have to be oriented towards the wealthier readers with the normal advertising profiles that all of these guys run on. These factors are going to drive out an independent press. It happened in the United States a long time ago. It happened in England fairly recently and the effects are very striking.... When the Labour Party runs in England, it is just demolished by the entire information system. And that makes a difference. In part, this is based on the nature of the corporate media.... However, in my view, it wouldn't change very much even if they were more diversified.... MM: Why wouldn't it? CHOMSKY: Because the same social forces would essentially operate. If there were, say, two newspapers or three newspapers in Boston instead of one, there would probably not be that much difference. It is some difference, you lose something, but, I must say that I don't want to underestimate it. When you cross the borders you see a big difference. Every time I go to Canada, for example, which is a very similar country, or England, or Europe, there is access to national media, national television, the press, and so on. That is unimaginable in the United States. MM: You said that if the organization applied in the workplace in capitalism were applied in the political sphere it would be called fascist. What do you mean by that? CHOMSKY: If you go back to an early period, take even the ideals of the enlightenment that theoretically underlay the American revolution, they were concerned with certain general human values--the right of human beings to control their lives and their own work, and in fact, to control their creative work. So a leading idea of what we today call conservatism, the enlightenment thought was that if a person works under the command of others, what the person produces may be of value or even beautiful, but the person's life is a human disgrace, it is a form of slavery.The person is a machine [was] the way they put it. And the ideals of the enlightenment worked to let people be human, and human meant in control of the decisions that affect their own lives, in particular, in control of their workplace. These discussions were all [conducted] in a period prior to factories and prior to corporate capitalism, so they [were] directed against slavery and the feudal system and serfdom.... But the same ideas carry over to later developments and it means that if we are really serious about enlightenment ideals, we will try to turn the productive lives of people into a democratic system that they control and where they make the decisions and where they make them in community with others. That is socialism, not what we call socialism or what the Russians call socialism, but what it meant prior to the distortion that was introduced by the anti-socialist forces of the 20th Century, including capitalism and Marxism/Leninism, all of them very hostile to socialist ideals.... At the core of it is the central part of most human beings' lives, namely, their productive work and that means workers controlling industry. Just about any workplace, whether it is an office or a factory, or whatever, is a system where there is a flow of command that is centralized at the top and goes straight down to the bottom and there is nothing that goes in the other direction other than some symbols that are introduced to make people feel good sometimes. These are very traditional ideas. They have been forgotten. What I have just been saying would not have surprised the major thinkers of enlightenment, the people we now regard as classics. MM: There seems to be a convergence between the way the capitalist managers and the managers in the socialist countries organize the production in their factories. Is this because both have made the same ideological choice or both have personal or class interests in organizing it that way or is there also a tension with the needs of efficiency and production? CHOMSKY: There is no evidence that it has anything to do with efficiency, and even if it did have anything to with efficiency, it would be irrelevant.... The distribution of power and the course of history was such that those groups who could gain their power and privilege by exerting authority over the control of production did so. We have various forms of state capitalism in the West and various forms of military bureaucratic control in the East. They are all very much opposed to socialism. In fact, there has been a kind of hoax perpetrated on the world by the world's two leading propaganda systems since 1917. The two major propaganda systems in the world are the American one and all of its affiliates and the Soviet one. And they both like to pretend that what exists in the Soviet Union is socialism ... and they do it for opposite reasons. In the West we do it because we want to defame socialism by associating it with that dungeon over there. And in the East they want to do it by making their dungeon look a little better by associating it with the deservedly positive appeal that the moral values of socialism have to working people everywhere. MM: Where has real socialism or something approaching it actually been tried? CHOMSKY: It has been tried here and there, but it has usually been destroyed. In fact, it has often been destroyed by the joint activity of the Soviet Union and the United States.... Spain is a good example.... The western capitalist countries and the Soviet Union combined to destroy the popular revolution in Spain. That was the main commitment on all sides and it really wasn't until the large scale popular revolution had been wiped out.... that they fell to fighting among one another for the rest of the loot. And that's rather typical. The Soviet Union would certainly not tolerate any socialist development anywhere, nor would we. There [are] some similarities in the societies. They are both class structured and societies with a state management and a coordinator controlled industrial system. They obviously differ too. They don't have private control over capital the way we do, but in many respects the systems are similar in their doctrinal systems. They are mainly similar in their belief that people have to be subordinated to higher authority. It is [a] different higher authority in the two cases but subordination is accepted on both sides. MM: You have said that totalitarian states have to control action but democracies have to control thought. Can you explain that distinction? CHOMSKY: Totalitarian states are really more behaviorists, since they have the means of power. [They] don't want to exercise violence because it is inefficient, but they want the threat to be there and to be visible. In a country like ours, where the state has very limited means of violence available to coerce the population, comparatively speaking, it is much more important to control what people think. And that is in fact why the United States developed so early such a sophisticated systems as the public relations industry and the highly ideological corporate media. That process is continuing, and its effects are very complex.... There is a real split developing between much of the population and the elites, including the liberal elites. There has undoubtedly been a right turn among elites, so you get what they call "neo-liberalism" and "neo-conservatism," which are dominant among elite groups. But the population has not moved in that direction. The population is moving in the opposite direction. MM: What will be the legacy of the so-called Reagan Revolution? CHOMSKY: In many ways, it has certain similarities to what was called the Hitler revolution. Putting aside atrocities and massacres and that sort of thing, just look at the mechanics of it. Hitler's revolution was Keynesian economics--pre-Keynes, of course--revitalizing the economy through military spending, which worked. It got Germany out of a huge depression, got people back to work, created affluence. They had restored faith in the grandeur and the glory of Germany, winning cheap victories over defenceless rivals, which gave people a big shot in the arm and aroused patriotism and restored what they called the traditional values--home, family, devotion and so on. That is all very familiar. In fact, these are the basic ingredients of what are today called, ludicrously, "conservatism" in the United States. You take the modern conservatives, the people around Reagan, guys that are straight out of Orwell. Any conservative would turn over in his grave to hear the way the word is used, but these are people who believe in a very powerful state. That is not at all surprising, that under Reagan you have all the phenomena of lunatic Keynesianism--massive expenditures, but expenditures not for productive purposes, but for consumption and waste. Military production, after all, is a waste production from an economic point of view.... So what you have is a very substantial increase in state expenditures. In fact, state expenditures [increased] under Reagan, relative to GNP, faster than in any peacetime period in history. The state intervenes massively in the economy, in the highly protected economy that they constructed. That is what the military is, a state-guaranteed market for high technology production. Looking at it institutionally, it is ...somewhere between lunatic Keynesianism and quasi-fascism--a big, powerful state creating a protected market, guaranteeing that the production that is done in advanced industry will have a market because the state will buy it.... From the point of view of the corporate manager, you couldn't imagine anything better. It is a gift, a gift from the public for research and development and for production in a period when you cannot sell things.... The Reaganites have pushed that to an extreme. ------------------------------------------------------------------------------ [] MULTINATIONAL MONITOR November 1988 VOLUME 9, NUMBER 11, NOVEMBER 1988 ECONOMICS JAPANESE BANKS AND THE THIRD WORLD By Samantha Sparks JUST AS JAPAN rose quickly to become a world economic power and Japanese goods now dominate major segments of the international market, Japanese commercial banks are rapidly outpacing the banking giants of the West. In recent years, Japanese banks have assumed a global role that includes the purchase of foreign commercial banks, many in the United States, and the development of a dynamic Euro-yen market. So far, though, their aggressive international stance has not included innovative action on Third World debt. Japanese banks and the Japanese government would like to do more to ease Latin America's debt burden, and they have the resources to do so, analysts say. But neither Tokyo's politicians nor its bankers, for all their wealth, are ready to take the mantle of international political leadership from the United States. Instead, Japan is seeking to increase its clout at the main international financial agencies, which it hopes will stimulate increased activity in the Third World. "Japan wants a larger role at the multilateral (agencies), and its money is the pre-condition for that role," notes Douglas Ostrom, an economist at the Japan Economic Institute (JEI) in Washington. Japan, the second most powerful member of the World Bank, is only the fifth biggest shareholder of the International Monetary Fund (IMF). Negotiations are underway to bring Tokyo to second place at the IMF. A debt plan proposed by Finance Minister Kiichi Miyazawa at the Toronto Economic Summit in June showed the importance of the multilateral agencies to Tokyo. The still-evolving scheme involved using the IMF to guarantee commercial bank loans. Says Barbara Stallings, professor of political science at the University of Wisconsin, "Whether the Japanese private sector gets more involved [in Latin America] depends on whether the Japanese government and the multilaterals are willing to step in with something to reassure them [about the risks that would accompany deeper involvement]. I think that'll be really crucial." One Japanese analyst in Washington agrees. "Even though the Japanese economy is large, the American economy is still much larger," he argues. "Without cooperation from the multilaterals and the U.S. and Europe, it would be very difficult for Japanese financial institutions to help solve the [debt] problem. If this cooperation is obtained, then Japanese banks will be willing to contribute something. Without that, they will be hesitant to lend, because of the risk." The View from the Top By any standard, the financial growth of Japanese banks is impressive. Seven of the world's 10 biggest banks by assets are Japanese. In the last five years, the assets of Japanese banks have grown by 80 percent in yen terms (200 percent in dollar terms); the banks now hold 35 percent of all cross-border assets. Their share of international loans has boomed, from 9.4 percent in 1981 to 23 percent in 1984 and 32 percent in 1986. Japanese banks outside Japan have over $1.2 trillion in their coffers--about double the amount held by U.S. banks abroad. Loans to Third World countries, particularly in Latin America and Asia, have been an important part of the Japanese banking boom. Japan's share of loans to Brazil, for example, rose from 13 percent to 20 percent between 1982 and 1987, and Japan now provides roughly 15 percent of all loans to Latin American countries. Japanese banks are the Third World's second biggest private creditor, and in 1985 for the first time surpassed the United States in its share of international banking business. The explosive growth of the banks is due to a combination of internal and external factors. First, Japanese banks are one main channel for the country's cash, with net foreign assets of nearly $300 billion in 1987. Meanwhile, the rise of the yen against most major currencies has made it comparatively cheaper for Japanese banks to operate and buy new operations abroad. Until recently, tight government regulation of interest rates gave Japanese banks cheap access to the huge pool of domestic savings. And their large total reserves, combined with relatively few non-performing loans and the strong yen, make Japanese banks very creditworthy, reducing the cost of borrowing. Second, Japanese regulators have permitted banks to maintain low capital-to-asset ratios, meaning they could make loans backed up by less cash than their European or U.S. competitors. (On average, Japanese banks have maintained a 3 percent ratio compared to 5 - 6 percent for Western banks.) This is partly because Japanese banks are cushioned by large "hidden reserves," mostly in the form of unrealized gains from stocks, which U.S. banks are not allowed to hold. Some analysts argue that new requirements from the Bank for International Settlements (BIS) on capital adequacy will dampen Japanese private bank loans to the Third World. The banks are expected to reduce the volume of loans--their assets--and raise cash, for example by issuing stock, to meet the BIS targets. According to one estimate, the banks will try to keep asset growth in the range of 7 to 8 percent a year, compared to growth of 10 to 12 percent in the past 10 years. Third World loans, already a low priority because of the debt crisis, are expected to slow even more as a result. "Loans to developing countries are likely to be put on hold," says Jon Choy, of the JEI in Washington. Third, Japanese banks, until very recently, have been under less pressure from their shareholders to make a profit than are their competitors in the United States and Europe. Japanese investors tend to focus on longer-term capital gains, which they put into tax-free funds, rather than short-term quarterly dividends. Without shareholder pressure, the banks have been able to pursue the short-term strategy of winning a bigger international market share, even at the expense of profits. Returns on assets for Japanese banks are low, at 0.2-0.3 percent, compared to 0.6 percent for U.S. and British banks. Fourth, Japan's commercial banks have gone overseas because of deregulation and dwindling demand in their domestic markets. Deregulation has increased both competition between banks and securities houses and the cost of retail banking. Rates being offered bank depositors are increasing, while tax incentives to save are down. Meanwhile, the amount of money that institutions are permitted to invest overseas has also increased, while most limits on Euro-yen banking and currency exposure were lifted in 1987. Domestic demand for loans is down due to the current weakness of the heavy industries. The strength and size of Japanese banks certainly gives them the potential to play an important role in the debt crisis of middle income nations, mostly in Latin America. However, analysts say at least two things will have to occur before Japan becomes more dominant in dealing with the major debtor countries. First, a mechanism to reduce the financial risk of a greater role is needed. "Japanese bankers told me they would go back in [to Latin America] if it looks like a good thing to do from a banking perspective, global role aside," says Barbara Stallings. "If Latin America starts growing again, they will go back in," she notes. And Japanese banks, secure in their wealth, see Latin America as a potentially profitable market that has become less competitive now that U.S. banks, in particular, are pulling out of the region. At the same time, the Miyazawa plan showed that, even without renewed economic growth in the debtor nations, Japan is more willing than the United States has been to consider using the World Bank and the International Monetary Fund (IMF) to sweeten the prospect of lending to Latin nations. "The Japanese government wants Japanese banks and corporations to invest more money in Latin America, because that's what the U.S. is pounding on them to do," says Stallings. "What the banks and corporations are saying is that you've got to come up with some kind of guarantee" before they will do so. But the fate of the Miyawaza plan--it sank into obscurity after the U.S. publicly disapproved--demonstrates the second obstacle to a bigger Japanese role: the banks need more time to adjust to the political implications of their new financial might. Stallings asked Japanese bankers early in 1988 what would prompt them to increase their ties to Latin America. Stallings said, "...they didn't want to give up East Asia [their traditional market] for Latin America." The banks were not used to the idea that they were big enough to have both. Nevertheless, she believes, "As they get more accustomed to their own power, they'll begin to look around." ------------------------------------------------------------------------------ [] MULTINATIONAL MONITOR November 1988 VOLUME 9, NUMBER 11, NOVEMBER 1988 LABOR LABOR LEFT BEHIND By Harriet Oaks Harriet Oaks is a freelance writer based in Boston. WHEN MAZDA DECIDED to locate its first U.S. auto plant in the town of Flat Rock, Michigan, it had to fight criticism from other Japanese auto producers that locating in UAW territory would produce future labor problems. The bulk of the Japanese plants, in places like Tennessee and Kentucky, are far from UAW strongholds. But the UAW has been more than supportive of both the Mazda plant and the labor changes that Mazda has pioneered in Flat Rock, says the company. "We found the UAW leadership quite enlightened about the need to change the confrontational atmosphere that had characterized their relationship with the other auto companies," Osaum Nobuto, president of the U.S. Mazda Motor Manufacturing Corporation, wrote in the Keidanren Review earlier this year. "The cooperative relationship we have established with the UAW has gained particular notice in Detroit." Although Japanese companies are anxious to see their unique management style implemented in overseas operations, workers have only to look at their Japanese counterparts to see the folly of blindly accepting the Japanese model. In Japan, the much vaunted Japanese labor-management cooperative spirit has meant significant sacrifices that Japanese workers have had to accept vis-a-vis their western counterparts. Japanese workers have failed to achieve labor rights that are standard fare throughout the developed world. The eight hour day is not the rule for most workers in Japan. Sick leave has yet to be written into law. Only a few industries, most notably banking and finance corporations, are talking of making the five-day work week a reality before 1990. The work week was only recently decreased from 48 to 46 hours, but many businesses were given exemptions. According to the Ministry of Labor, in 1986 Japanese workers worked 2,150 hours, while U.S. workers worked only 1,924 hours. Nearly 14 percent of all Japanese workers needed an hour or more to commute to and from work, compared to only 6 percent in the United States. Social security for Japan's elderly comes through saving and working. In fact, the Japanese worker--despite tremendous gains in the Japanese economy in the last several years--has seen few benefits. The living standard for Japanese workers is much lower than the living standard for U.S. workers even though per capita income is almost equal. Working Hours Working hours are perhaps the most controversial issue in Japan. In April, the government introduced an amendment to the Labor Standards Law proposing a 40 hour work week, but the bill "would allow employers to retain the present "48-hour week" or even a 54-hour week for three more years "in accordance with the scale and category of their business," according to the Concerned Labor of Japan Committee. No exact timetable was written into the proposed law for conversion to the 40-hour work week. And the bill gave employers tremendous flexibility in deciding when employees had to work these hours and days. The bill that was finally passed by the Diet set a 46-hour work week goal but allows employers to keep operating under the present 48-hour work week for another three years. It did, however, put caps on how flexible employers could be if they chose to operate under the flex-time provision: "working hours should not be extended more than 10 hours a day or 52 hours a week and one day-off should be given every week." While intervals "between days-off should not be longer than 12 days." By allowing employers to require workers to work longer during busy times and then cutting them back during slack times, the government hopes to cut the number of overtime hours clocked and make shorter hours less arduous for employers. Another clause added to the Labor Standards Law required that a "reduction of wages or other disadvantages should not be given to those who take annual paid leave in full." According to the Ministry of Labor only a little over half of all paid vacations are actually taken. Under the new law, the minimum number of paid leave days was increased from 6 to 10, but an employee can only take five days of paid leave at a time he or she picks; other paid leave must be approved by the employer. Although the changes in the law were an attempt to deal with both domestic and international concerns that Japan's workers are overworked, it offers little real improvement in working conditions. The new law "meets none of the international labor standards concerning working hours stipulated by the International Labor Organization (ILO) and spreads unfair working conditions among peoples," notes the Concerned Labor of Japan Committee. Japanese Unions Much of the problem with the Japanese labor movement stems from the way Japanese labor unions were established in post World War II Japan. Japanese labor unions, unlike those in the United States and Europe, are company specific, not industry wide. What this usually means, says Hiroshi Wakabayashi, director of the International Labor Movement Institute in Tokyo, is that the union works with the company to improve profitability. And if that means lower wages and longer working hours, the union often willingly complies. "The labor union of Japan is not the union of workers but the union of employers," says Wakabayashi. Ten years ago, he says, the unions were more genuinely on the side of the workers. The change in union outlook is reflected in union membership--27.6 percent of workers were unionized in 1987 compared to 34.4 percent in 1975. "Workers belonging to the enterprise feel they are a component to management," says Ryu Kazama professor of economics at Kantogakuin University in Yokohama City. The Japanese economy, he says, is dependent on these loyal workers and their willingness to accept lower living standards. At the annual spring offensive, the Japanese labor movement's bargaining campaign, unions settled for a 4.4 percent increase in wages for the year. A fairly dismal showing, especially since it followed a 1987 increase of only 3.5 percent--the lowest increase in three decades. Rengo, the largest trade union organization, even began calling the traditional "spring struggle" the "spring discussion" to better reflect the movement's new-found identity. The two-year old Rengo was lauded by The Japan Times for its willingness to recognize political realities. "Free from the yoke of leftist ideology and a strongly political orientation, Rengo has declared itself to be a national labor organization basically in the same boat as management." The union did demand wage increases in the spring offensive but the demands of 6 to 7 percent were far from what was needed to give Japanese workers parity with workers in the West according to Toitsu Rosokon, a new, radical labor organization. Toitsu Roso-kon is highly critical of Rengo and its plans to reshape the Japanese labor movement. In 1990 Sohyo, the General Council of Trade Unions of Japan, will disband and join with Rengo. Sohyo, with over 4 million members mostly in the public sector, will make Rengo a tremendously powerful force. So far, however, maintenance of the status quo seems to be Rengo's driving force. Akira Haruyama, secretary general of Toitu Roso-kon, says his 1.8 million strong organization is calling on workers throughout Japan to "oppose the right wing reorganization of the labor movement." Rengo, which already has over 5 million of the 12 million unionized workers under its umbrella, was founded after two other national labor organizations--Domei and Churitsu Roren-- were dissolved. Haruyama says Rengo follows the Domei line: antiworker. "[Rengol is turning [its] back on the working people," he says. As the Japanese economy has catapulted, Rengo and its predecessors have cautioned workers that competition is severe and that they must wait for increases in wages and benefits, he says. "The wage levels of Japanese workers are ranked 20th," he says. "If we compare purchasing power, the Japanese purchasing power is only 54 percent of U.S. workers." Haruyama says the growing disparity in the growth in the wages of Japanese workers and the growth in the Japanese economy is beginning to force workers to question company motives. ------------------------------------------------------------------------------ [] MULTINATIONAL MONITOR November 1988 VOLUME 9, NUMBER 11, NOVEMBER 1988 KILLING THEM SWEETLY By John Summa THE SWISS-BASED food giant Nestle has in recent years acquired several U.S. companies and launched an aggressive promotional strategy in an effort to capture a bigger share of the swiftly- expanding gourmet food market in the United States. But a consumer boycott against Nestle declared on October 4 may sour the company's plans to ride out the fine food growth curve. The Boycott's Back The multinational food company is again under fire for "dumping" its breast-milk substitute in maternity wards, clinics and hospitals in the Third World, a marketing practice which prompted a 1977 boycott against the firm by the Boston-based INFACT. The seven-year boycott developed into one of the largest battles ever waged against corporate power by citizen groups, with over 100 organizations in some 65 countries joining in. Despite Nestle's 1984 pledge to halt the exploitive marketing practices that prompted the boycott, critics charge the company is at it again, and a new boycott against the company has been launched, spearheaded this time by Action for Corporate Accountability (ACTION). "Nestle has failed to live up to the principles that its representatives pledged to support," says Douglas Johnson, national chair of ACTION. "Nestle acted without conscience when it knowingly sold sugar water mixed with chemicals as juice for babies [a reference to the actions of Nestle-owned Beech-Nut]. And, similarly without conscience, Nestle continues to dump supplies of infant formula onto hospitals for the purpose of inducing sales. Nestle uses this effective marketing device even where use of the product is dangerous, and in spite of the world's health authorities calling for its ban," Johnson adds. The company has conducted itself in accordance with what it views as imperatives of the marketplace, rather than complying with the code of marketing practices established by an international community of health officials, critics charge. Another group, the International Baby Food Action Network (IBFAN), which has been monitoring the industry since 1979, has found that in many Third World countries, the infant foods industry--which Nestle leads--"continues to deliver huge quantities of free supplies to hospitals." The companies, IBFAN notes, "claim it would be commercial suicide to stop donating supplies to hospitals: it is their most profitable means of product promotion and they compete viciously with each other for hospital business, at the sake of infant health." The 1981 international marketing code of breastmilk substitutes (which was passed by a vote of 118 to 1 by the United Nations, with only the United States voting against it) prohibits free samples or supplies if used as a sales inducement, promotion in hospitals, various forms of unscientific promotion to health workers and direct consumer promotion. Nestle violates all of these clauses, IBFAN charges. Nestle has also been criticized by the American Association of Pediatrics for undertaking direct consumer promotion of its new infant formulas released in the United States, called "Good Start H.A." and "Good Nature." The doctors have protested the moves because they say it discourages breast feeding. The new products are part of the company's first major foray into the profitable U.S. infant formula market, according to Nome Ghez, security analyst at Goldman Sachs in New York City. IBFAN charges that giving free supplies to hospitals discourages mothers from breast-feeding their newborn. "Donations of infant formula are extremely dangerous because samples of formula can 'hook' babies on the product," an IBFAN report explains. "Once bottle feeding starts, breastmilk begins to dry up. When the free sample is finished, the mother and her baby are dependent on the formula." IBFAN is comprised of over 100 organizations in 70 countries around the world. The group works to enhance the health of infants by promoting breastfeeding and appropriate weaning methods. IBFAN has not called for the outright banning of infant formulas, only a halt to deceptive and dangerous marketing of them. Nestle announced in July that it would stop providing promotional free supplies in Thailand, according to Tim Smith of the Interfaith Center on Corporate Responsibility (ICCR). The company, however, continues to practice its marketing schemes, in violation of the World Health Organization code of conduct, in Pakistan, India, Kenya, the Dominican Republic, the Philippines and other countries. Companies like Nestle "have the responsibility to participate in the process, the code of conduct [these companies] sat down and agreed to," says Smith. Nestle is reinterpreting the WHO code and drawing its own conclusions, Smith says. He also points out that Nestle does not dispense free formulas in Brazil because it has a monopoly there. "This clearly shows that the so-called 'donations' in other countries really serve as a form of sales inducement," Smith charges. Since there is no threat from competitors in Brazil, he says, Nestle does not need to "dump" what it calls "free supplies" and "donations" there. Nestle insists that health care facilities should bear responsibility for determining how supplies are dispensed to mothers. The company also says it offers supplies only after proper "request forms" are filled out by health officials at recipient institutions. But IBFAN counters that Nestle "distributes reams of highly promotional, unprofessional and unscientific literature and advertisements aimed at health workers" in order to generate the "request forms." Nancy Gaschott of ACTION says, "Physicians are regularly subjected to direct selling techniques by sales representatives who offer cash grants, equipment or sponsorship to conventions in return for access to the wards or exclusive rights to distribute formula through the hospital or medical establishment." The "request forms" merely "deflect criticism from [Nestle's] supplies program," Gaschott adds. "It is nothing more than industry's attempt to place the burden of responsibility on the health care system for a promotional practice it initiated for its own profits decades ago." IBFAN claims that the forms really function as sales receipts, signed by hospital staff upon delivery of the formula. In India, Nestle has aggressively promoted artificial feeding, according to Dr. R.K. Anand, a pediatrician from Bombay. "It is a habit difficult to break," he says, "even when we know it's wrong." Nestle and other companies' marketing practices have resulted in "more and more babies" being "displaced from their mother's breast by big business," Anand charges. In one Nestle ad, for instance, the layout depicts the image of a happy and healthy white baby reaching toward the sky. The sales pitch is that the "baby's health is within reach." The ad was used in the Philippines, where poverty and malnutrition are severe. The Philippines has adopted the WHO code, and it goes into effect in Brazil in December, 1988. To underscore how Nestle has flouted its 1984 agreement to encourage the enactment of the code around the world, Douglas Johnson of ACTION says the company has lobbied against its passage in Brazil and Europe, as well as undermined its impact in the Philippines. "Nestle continues to be a corporation which will go to any length for the sake of profit," says Johnson. Nestle says it will abide by regulations passed by governments in the Third World. But unilaterally ending promotional activities would be tantamount to "economic suicide," insists Thad Jackson, special issues director for Nestle. The issue is oversimplified by the promoters of breastfeeding, who, he says, are conducting the boycott. Jackson claims that Nestle is abiding by the WHO code it agreed to in 1984. "Within the framework of the code, we can give donations and low-price supplies," Jackson says. He points to article 6.6 of the code, which he says permits these activities. "That is simply not true," says Nancy Gaschott of ACTION. "The last sentence of the article says that donations or low-price sales should not be used as a sales inducement," and this, she says, is precisely Nestle's motive. She adds that donations can only be made in cases where infants need the formulas, such as in orphanages. "If Nestle were really interested in giving 'donations,'" she asks, "why aren't they supporting charities?" Gaschott notes that the World Health Assembly clarified article 6.6 in a 1986 resolution, which made clear that the small amounts needed by hospitals and maternity wards should be obtained through regular channels and not through "free supplies." Nestle's position on the resolution is that it does not apply to the company, despite demands for compliance from WHO's legal counsel, and UNICEF's insistence that the entire industry cease delivery of free supplies. Nestle has simply refused to abide, Gashcott says. "We tried to work with them, to have them develop a financial plan to phase out free supplies, but they would not yield. That is why we decided to put pressure on Nestle through a boycott." Nestle's Jackson says the company's position is backed by the Nestle Infant Formula Audit Commission. The commission was created in 1982 and is known informally as the Muskie Commission-after former Sen. Edmund Muskie, who heads it. It was set up by Nestle's public relations division and has been funded exclusively by the company since then. Despite the identity of its sole benefactor, Jackson maintains that the committee is "totally independent." The commission is currently conducting two studies in the Third World, Jackson says. A study in Mexico focuses on "feeding practices," while one in Thailand is assigned with determining the impact of the company's cessation of free supply distribution there. While Jackson would not say more about the studies, critics feel that the Thailand report will look into the degree to which other companies will replace Nestle as supplier of infant formulas, and attempt to demonstrate that Nestle's unilateral withdrawal hurts the company but does nothing to benefit infants there. At a November 1988 news conference, the commission absolved Nestle of any wrongdoing, and tried to disparage the work of ACTION. The commission released a "Report on the Infant Formula Controversy," which it claims is based on "regional fact-finding missions in Asia, Africa and Central America," as well as "investigations of individual countries in these regions." But ACTION charges that the commission has "conducted no formal on- sight monitoring of Nestle's marketing practices since early 1984." The report parrots the company position, ACTION claims, concluding that "excessive quantities" of formula are not distributed to hospitals, that "request forms" are properly used, and that article 6.6 of the WHO code permits distribution of free supplies. Staking Out America's Sweet Tooth The person at Nestle who will be feeling the heat from the boycott is Helmut Maucher, Nestle's managing director. Described by Fortune magazine as "a guilt-free man who loses no sleep over smoking and health," Maucher hopes to stake out a sizeable chunk of the growing chocolate market, particularly premium chocolate. The boycott, however, will make this difficult, and negative publicity may provide a boost to Nestle competitors. (The 1977-84 boycott cost the company as much as $5.8 million in lost revenue, according to boycott organizers.) As part of its bid for the U.S. gourmet chocolate market, Nestle has introduced a foil-wrapped chocolate candy with royal settings on the label to evoke the firm's European origins. The "Chocolate Collection of Henri Nestle" is even being marketed directly to the public in the company's own, newly-created retail outlets, an idea based on its retail prototype at Disneyland. To reach wider audiences with their products, the company has plunged into the burgeoning home video market. Nestle's Alpine White chocolate candy bar will be seen on every copy of the "Dirty Dancing" video, which industry experts estimate will be seen in roughly 52 million U.S. households. Connecticut-based Vestron, which distributes the "Dirty Dancing" video, acknowledged that similar deals are in the works with Nestle. Coffee, Tea and a Monopoly: Nestle Shops Around Nestle Food Corp. purchased Carnation in 1984, at that time the largest non-oil merger in U.S. corporate history. Sales reportedly jumped some 35 percent in 1985 with the purchase of the U.S. food conglomerate. The Office of Fair Trading, a body of the British government, recommended that the U.S. government intervene to prevent near monopolies in certain products as a result of the merger. The Carnation deal, which cost Nestle $3 billion, gives the company a foothold in the $1.5 billion U.S. baby-formula market. It also increased the number of manufacturing plants for existing product lines, such as dairy products. Nestle has also taken over Britain's Rowntree and Italy's Buitoni both involved in food processing and marketing. Worldwide sales of infant formula now top $4 billion annually, with Nestle making about half of these. American Home Products, also a target of the ACTION boycott, and Nestle are the two biggest sellers of infant formulas in the Third World. Nestle's total worldwide sales for fiscal 1988 reached $25.8 billion, with profits of $1.2 billion. According to industry analysts, Nestle's net margin grew at a spectacular 4.4 percent between 1981 and 1986. Total assets amounted to $16 billion in 1986, and net income jumped 13.2 percent during the 1981-1986 period. Sales rose more than 11 percent in 1984 and 35 percent in 1985. Managing director Maucher began a "no-holds barred battle" for the decaffeinated coffee market in 1985. Its desire for an increased share of the market led to ads in which Nestle claimed to use an exclusive decaffeination process, patented in Switzerland, to produce Nescafe brand coffee. Complaints to the national advertising division of the Better Business Bureau resulted in the ads being dropped. Ads promoting Nestle's Taster's Choice, a product on the ACTION boycott list, claimed, inaccurately, that it was the only decaffeinated coffee naturally processed. At the end of 1986, Nescafe had a 2.1 percent share of the decaffeinated coffee market in the United States, while Taster's Choice had a 6.2 percent share. In the coffee market as a whole, however, Nestle had a 26.8 percent share in 1986, putting them in second place behind General Foods (42.6 percent) and ahead of Proctor & Gamble (19.5 percent). The company has spent more than $300 million annually in recent years promoting, among other products, Carnation Coffee-Mate non-dairy creamer, Nestle's Crunch, Nestle Toll House Cookies, Nescafe, Stouffer's frozen dinners, Alpine White Chocolates and Beech-Nut Baby Foods. The company has been streamlined by Maucher, who took the helm in 1981. In addition to making sales promotion his primary thrust, Maucher has sought to eliminate inefficient and counter- productive management practices, a move which has pleased Nestle stockholders. But when Maucher began to change the company's capital structure to help finance the purchase of Carnation, some Swiss stockholders objected. Plans to buy back Unilac, Inc., based in Panama, provoked a veritable stockholder revolt. Some even claimed that the company was violating the terms of the offering documents for a deal critics said would be a windfall for the purchasers of the certificates at the expense of Swiss equity holders. Nestle recently granted foreigners shareholder privileges that had been previously reserved for Swiss stock owners, including voting rights. In spite of the Swiss financial community's reputation for eschewing deep foreign entanglements, there is a begrudging acceptance of the need for Nestle to become less reclusive. Nestle has been a pioneer of multinational business practices, and continues to be. Infant formula was the company's first product, invented by founder Henri Nestle in the latter part of the 19th century. In order to grow, Nestle had to convince the public that breastfeeding was inferior to the breast milk substitute; then, as now, the company strong-armed the public through heavy use of commercial ads and marketing gimmicks. Strong sales of Nestle products were also helped by wars and expanding global operations. But Henri Nestle would later sell his company to a group of Swiss capitalists. After a fierce struggle against the U.S.-controlled, but Swiss-based Anglo- Swiss Condensed Milk Company, controlled by American Charles Page, the two companies merged in 1878. World War I doubled Nestle's capacity and following the war Nestle began to penetrate the Third World. The company's success in Brazil convinced the owners that operations in the less developed world could be profitable. The second World War also proved a boon to company growth. "World War II put instant coffee on the map," writes Milton Moskowitz in The Global Marketplace, "and by the end of the conflict, Nestle had on its hands a worldwide coffee business." Nescafe is a ubiquitous symbol of Nestle's global enterprises. Nestle today is ranked among the 25 largest multinational corporations, producing and selling more food than any other enterprise. Ninety-seven percent of its sales are outside its Swiss borders. Nestle has been at the forefront of the intra-European transnationalization of companies, a process also being propelled by the pending Common Market economic unification. Mergers within Europe (and between Europe and the United States) have increased and are expected to continue. In the wave of mergers and buyouts, some Swiss shareholders have expressed fear that Nestle is becoming an "American-style acquisition company." While such a development is an unsettling prospect for the Swiss, deeper Nestle involvement with U.S. companies and the North American market, as well as a potential increase in U .S. holders of Nestle stock, may provide the baby formula campaign with new sources of leverage against the company. One such source might be labor unions representing Nestle workers. The International Union of Food and Allied Workers Associations (IUF), which represents many Nestle workers, did not endorse the last boycott and has yet to take any position on the new one. But Joy Ann Grune, North American regional secretary for the IUF, says the union "will consult with the boycott people in order to determine what position to take." Grune says the IUF's international Nestle Labor Council has taken solidarity actions in the past, such as the boycott against Coke for its involvement in union repression in Guatemala. (See MM, May 1988.) Nestle boycott activists are also expected to seek help from the anti-apartheid movement. The company maintains 10 plants in South Africa. According to Nestle's Thad Jackson, the company feels it can make a bigger contribution to the black majority by staying in the country. Nestle has always been effective at public relations, despite its two run-ins with the boycott activists. Its creation of the Muskie Commission was innovative and effective in bringing an end to the first boycott. It brought quick results, and was a public relations success. Less savory tactics were also used, including red-baiting. (An article disparaging the boycott activists was published in Fortune magazine.) Nestle also knows who its friends are in political circles: 95 percent of its PAC contributions went to Republicans in the 1986 election cycle. Judging by its recent moves, it appears Nestle is again prepared to employ whatever tactics it deems necessary to convince the public that its infant formula promotions are the result of its concern for infant health and not merely the actions of a corporate giant greedy for higher profits. ------------------------------------------------------------------------------ [] MULTINATIONAL MONITOR November 1988 VOLUME 9, NUMBER 11, NOVEMBER 1988 BOOKS WHO OWNS AMERICA? Buying into America: How Foreign Money is Changing the Face of Our Nation by Martin and Susan Tolchin (Times Books, 1988) 281 pp., $19.75 Reviewed by William Jackson BUYING INTO AMERICA by Martin and Susan Tolchin presents a collection of essays on the nature and implications of foreign acquisitions of U.S. businesses and other inroads made by foreign investors in the U.S. economy. These varied accounts-- essentially well-written and well-researched--warn that the U.S. economy is on the auction block, and that the consequences of foreign ownership are not yet understood or felt. The essays by themselves do not present a clear case on which to base conclusions, and the Tolchins rightly refrain from making a case against all foreign investment. But they provide much evidence to justify close scrutiny of the bargains being struck at the local, state and federal levels of government with foreign investors. What is best about the Tolchins' approach--that the essays are based on specific events and the circumstances surrounding them- -can also be seen as a limitation. This structure does not easily lend itself to discerning patterns among the cases presented, or to an inclusive interpretation. A startling discovery presented by the Tolchins concerns the distance to which city and state officials go in attempting to lure foreign investors to their areas. Several chapters are devoted to the "state experience," in which the authors detail the incentives used by states to attract foreign businesses, the demands made by these investors and the records of specific purchases. The Tolchins report that, according to the Congressional Research Service, for every dollar of state funding there was a "foreign direct investment of $667" or that "$60 in state funding would suffice to attract $40,000 in foreign capital, or enough to create one new industrial job." Given this, it is not hard to understand the wave of state and city activity set in motion to attract foreign investment. "By 1986, twenty-nine states had sixty-five field offices throughout the world. Of these, twenty-five states had offices in Asia, twenty-two of them in Tokyo. Illinois runs three offices in Asia--Tokyo, Hong Kong and Shenyang, in China. In all, there are twenty-seven Asia branch offices and twenty-nine in Europe. Three states have field offices in Canada, two in Mexico, one in Brazil, and Ohio plans to open an office in Africa. Investment and export activity takes place at these overseas locations, with a wide disparity among the states in the amounts of money allotted for each activity." The deals struck by state and city officials include far more than just the purchase price. For instance, the Tolchins tell us that negotiations with Volkswagen over the establishment of a VW Rabbit plant in Pennsylvania resulted in the following concessions: a $40 million loan repayable in 30 years to purchase and build an unfinished former Chrysler plant at an average 4 percent interest rate--but only 1.75 percent for the first 20 years; a $20 million bond issue for a road link between the plant and the state highway; a $10 million state bond issue for a railway spur linking the plant with a main line; a $6 million loan from the Pennsylvania state employees pension fund for 15 years at 8.5 percent; a $3.8 million training program for Volkswagen workers, funded by the federal government but acquired through state efforts; a five-year county property tax abatement worth $200,000; and state designation of the plant site as a foreign trade subzone, bringing down the duty on finished cars to 3 percent. The Tolchins report that the total value of this "incentive" package was, at first appraisal, $51.7 million, 19.6 percent of the full cost of the plant. By the time the returns were in, the figure was $90 million. The Tolchins also examine the peculiar role that labor unions find themselves in when dealing with new foreign investors and new foreign management. It would appear that companies such as Komatsu Ltd., which established a truck plant in Tennessee, actively sought out a "good business climate," which to the company meant no labor unions. Once the plant was in operation, Komatsu fought to keep unions out by threatening to close it and to lay off temporary workers who had previously indicated support for a union. It is no wonder that so many foreign companies have gone to southern states, where organized labor is weakest, rather than northeastern, industrial states and no wonder, as the Tolchins explain, that state and city officials play down the power of local labor unions to their visitors. (last page omitted here; unscannable) .