The Multinational Monitor

March 1995

Contract with Corporate America

Table of Contents


GOPAC’s Contract on America

by Gary Ruskin

Regulatory Roll Back

by Nancy Watzman

Tort Deform: Soft on Corporate Crime and Violence

by Joe Belluck


Behind the Lines

Editorial: A Living Wage

The Front


Talking Economic Sense

An Interview with Jeff Faux


Dupont: Spinning its Wheels in India

by Gary Cohen and Satinath Sarangi

Book Review

The War Against the Greens

Names in the News



Unocal Responds

I want to respond to your December 1994 cover story in which you categorize Unocal Corporation as one of the "worst corporations" of the year.

Unocal takes very seriously our obligation to conduct all operations in an ethical and responsible manner - wherever we operate. We strenuously object to the irresponsible, narrow reporting behind this story and think it is important to set the record straight.

We also have a policy of openly communicating with news media. Mr. Mokhiber has indicated to us that he attempted to contact Unocal for comment prior to publication. While that point is now moot, we’ve been unable to verify receipt of an inquiry from Multinational Monitor. Nevertheless, I can assure you that, as a matter of policy, we would have discussed these issues with any reporter in a timely and honest manner.

Specifically, I’d like to address the article’s numerous errors and false allegations about our activities in Myanmar (Burma ), Canada and California.


Allegation: Unocal plans to route the pipeline through "some of Burma’s most pristine tropical forests."

Fact: Wrong. Eighty-five percent of the pipeline will be offshore. The remaining 40-mile onshore portion of the pipeline located in Myanmar will cross mostly scrub vegetation and farm land. To keep our impact to a minimum, Unocal has retained some of the world’s leading rain forest experts to help us select the most environmentally responsible pipeline route through a 15-mile section of rain forest. These experts have already determined that this particular section in not "pristine." It had been lightly to heavily impacted by prior logging and hunting by the local inhabitants.

Allegation: There are reports of human rights abuses linked to our proposed pipeline.

Fact: Unocal would never tolerate human rights abuses in connection with any of our projects. We will not operate in any country where we cannot operate ethically and responsibly. Actually, construction of the Myanmar pipeline hasn’t even begun. But because we are concerned about these allegations, we are monitoring human rights issues very closely, both on our own and through discussions with international organizations including Amnesty International. Last year we conducted two fact-finding missions to Myanmar and found absolutely no evidence of human rights violations in connection with our project.

In the past few months, President Clinton has made several major foreign policy speeches recognizing the links between trade and fostering human rights and open societies. Today, the President, and others, acknowledge the strategic role of American business in helping bring about progressive change in developing nations. Based on Unocal’s 30 years of experience throughout the Southeast Asia region, we concur.

Foreign investment can be an impetus for positive change in developing nations. We’ve seen our presence improve the quality of life for thousands of local families and their communities in Thailand , Indonesia and the Philippines . Based on a 1990 exploration project in Myanmar, we anticipate that this project similarly will bring substantial benefit to the people of Myanmar. This includes well-paying jobs, improved access to high-quality health care and job skills training.

Allegation: Unocal is planning to build a pipeline in conjunction with Texaco .

Fact: Wrong. Our partners are Total, S.A. , the French oil company, which serves as the pipeline operator, and the Petroleum Authority of Thailand Exploration & Production Plc.


With regard to our Canadian operations and the Lubicon Indian tribe, let me state that the issue is far more complicated than the simplistic analysis the article provided. Here are the facts:

Unocal has had an oil production facility in northern Alberta since 1983. This is an extremely remote, isolated area approximately 250 miles north of Edmonton. There is a small Lubicon settlement about 11 miles from our plant. In February 1994, Unocal received approval from the Alberta Energy Resources Board (ERCB) to build and operate a small sour gas processing plant immediately next to our existing oil handling facility.

As required by the ERCB, we first discussed the proposed expansion with the Lubicons. Unocal representatives met with Lubicon leaders in August and November 1993. Unocal received letters (dated December 9, 1993 and January 19, 1994) signed by Lubicon Chief Bernard Ominayk which state the Lubicons will not oppose the proposed plant expansion and the new flowlines.

This summer, while the plant was under construction, Unocal was surprised to discover that the Lubicons had contacted the ERCB directly to suddenly protest the plant expansion. As a result, the ERCB decided to re-examine the issuance of permits for the new plant. An exhaustive public hearing took place for 11 days in November and December 1994, during which Unocal, the Lubicons and others testified at length.

Unocal made it very clear at the hearings that we would not have constructed the plant had we not believed we had the prior approval of the Lubicons. It was also made very clear at the hearings that the Lubicons’ real concern is their aboriginal land rights claim with the federal and provincial governments of Canada. Dating back to the 1930s, the Lubicons and the two governments have been struggling to resolve this complex dispute - an issue that has nothing to do with Unocal.

Allegation: The new sour gas facility will "emit hazardous pollutants into the air."

Fact: On the contrary, with electrification the new plant will eliminate existing emissions of nitrous oxides (now 1.3 tons/day) and carbon monoxide (now 0.1 tons/day). Sulfur emissions should be no more than 0.3 tons/day. Expected concentration of hydrogen sulfide gas entering the plant is only about 150 ppm (0.015 percent), as opposed to what might be thought of as a typical sour gas concentration of 25 percent hydrogen sulfide or more in plants that actually manufacture sulfur.

This information was presented at length as the ERCB hearings. It reflects the findings of two independent environmental consulting firms hired prior to construction to assess health and safety implications of the sour gas plant and its emissions. Their conclusion: the plant will have no adverse health or environmental impact on people, wildlife or vegetation in the region. To further ensure that the plant operates as safely and cleanly as possible, Unocal will be monitoring emissions at the plant site and we have offered to do so as well on Lubicon land.

Although the ERCB’s final decision is still pending, Unocal stands by its commitment to being a good neighbor to the Lubicons. We have offered to discuss job training, employment opportunities, technical assistance and other ways Unocal might be able to help them continue a more sustainable lifestyle.


In accepting full responsibility for the underground diluent leak at our Guadalupe oil field, we’ve launched a massive beach clean-up and remediation project. To date, we have removed over 6,000 barrels of diluent from the beach site, thereby eliminating a significant threat to the marine environment.

Since September, our beach clean-up effort has been operating 24 hours a day excavating, transporting and cleaning diluent-contaminated sand. This is being done in full cooperation with and under monitoring by 16 county, state and federal agencies, under a joint command with the U.S. Coast Guard, California Department of Fish & Game and Unocal.

Since the clean-up project began, it has been documented extensively by public agencies, independent consultants, local environmental organizations and the media. The County of San Luis Obispo and the California Coastal Commission retained two consulting firms to provide comprehensive daily monitoring of the clean-up effort. To address concerns of local environmental organizations, Unocal provided hazardous waste operations training for local environmentalists, who also have full access to the site.

We’ve also held four public meetings to inform the community about our efforts and respond to any concerns regarding our clean-up program. We maintain a toll-free bilingual information hotline and issue public updates to local media and government agencies. In addition, we continue to underwrite water safety monitoring efforts to ensure that the local water supply has not been affected.

We recognize that we made some serious mistakes at Guadalupe. Unocal’s president, John Imle, personally has apologized to the local community. We’ve pledged to continue working with regulatory and government agencies to deal with the contamination in the most appropriate and effective manner.

While our extensive clean-up efforts do not erase the fact that there was a large leakage at Guadalupe, they do demonstrate our sincere intentions to correct it and to prevent future occurrences.

We anticipate a February completion date for the beach clean-up effort. We’ll begin cleaning up the inland portions of the contamination once an Environmental Impact Report is prepared.

Multinational Monitor committed a serious disservice by distorting Unocal’s policies and activities. The public interest is best served by an honest examination of the facts. We are always ready to engage in that process.

Roger C. Beach,

Unocal Chief Executive Officer

Los Angeles, California

Russell Mokhiber Responds

Mr. Beach says that "we’ve been unable to verify receipt of an inquiry from Multinational Monitor."

On December 13, 1994, I called (213) 977-7601 and left a message for Mr. Barry Lane, Unocal Vice President for Public Affairs. Perhaps the person who took the message took down my name, instead of the Monitor’s name. Check your messages for "Mokhiber, Russell, Editor, Corporate Crime Reporter."

Sometimes when corporate public relations people see that a reporter is calling about their crimes, they enter a state of deep denial and decide they don’t want to call back.

Unocal is a corporate criminal. As we reported, the company was found guilty of environmental crimes. That is something that Mr. Beach does not acknowledge in his letter. Perhaps it was the fact that the Monitor highlighted the crimes of his company that led Mr. Beach to conclude that it was the Monitor that "committed a serious public disservice."

The thing about corporate crime is that it is often crime without shame. The point of the "Ten Worst Corporations" list is to bring a touch of shame back into the crime- prevention equation.

As for the Canada issue, we’re trying to get in touch with the Lubicons to update their side of the story. Stay tuned.

Mr. Beach denies our allegation that Unocal plans to route the planned gas pipeline through "some of Burma’s most pristine tropical forests."

In fact, Unocal and Total plan to carve a highway 200-feet in width through what Greenpeace International calls "one of the last intact large tropical forest areas in mainland Asia." Rainforest Action Network believes that road building is the single most destructive activity to a rainforest and its inhabitants because road building typically precipitates greater destruction than that wreaked by activities such as logging, mining and resettlement.

Mr. Beach says that Unocal "would never tolerate human rights abuses with any of our projects." Then why are you tolerating them in Burma?

Even the Wall Street Journal editorial page, the collective voice of corporate dictatorship and brutality around the world, for some unexplained reason cannot stomach the thuggery of Burma’s State Law and Order Restoration Council (SLORC), as the military dictatorship is known.

The Journal points out that when the Burmese voted in 1990, they rejected the military junta overwhelmingly and gave an 85 percent mandate to the National League for Democracy, the party of Nobel Peace Prize winner Aung San Suu Kyi.

The generals annulled the results and put Suu Kyi under house arrest.

"Burma is not at war with anybody except its own citizens," the Wall Street Journal exclaimed recently ("Petrodollars for SLORC," February 10, 1995). "Its 300,000- strong military is employed mainly to wage war against ethnic minorities and murder street protesters." An Amnesty International report just out says, "the villagers routinely dragooned as porters for the army are also used as human shields. By such means do Burma’s generals maintain their unpopular rule."

As the Journal points out, in 1988, "after shooting some 3,000 pro-democracy demonstrators, Burma’s military junta was down to its last $15 million."

"Now a new energy deal announced last week will top off its coffers to the tune of $400 million," the Journal reported.

As R. Strider reported recently ("Blood in the Pipeline," Multinational Monitor, January/February 1995), "in constructing the pipeline, Unocal has allied itself with a brutal and illegitimate government in its decades-long war against three ethnic groups, the Mon, the Karen, and the Tavoyan peoples."

"To put a pipeline through the lands of these peoples - areas never controlled before by the central government - will require Unocal and SLORC to crush these ethnic groups. The repression is being conducted by the Burmese and Thai armies."

Rainforest Action Network pointed out recently that "even while Unocal promises strict human rights standards from its Los Angeles headquarters, SLORC is busy conscripting Mon and Karen villagers into forced labor, specifically in building military facilities and infrastructure."

And SLORC has refused to allow an independent investigation of the human rights situation in the pipeline area.

"SLORC still wants to deal with Burma’s ethnic jigsaw, urban dissent and the regime’s palpable illegitimacy as military problems - not as evidence that it might be a good idea for the army to seek a political accommodation with the 43 million people who actually make up the country," the Journal proclaimed. "It’s clear the only development Burma’s generals have in mind is the kind that locks in their own brutal rule."

These are Unocal’s partners in commerce.

- Russell Mokhiber

Behind the Lines

Out of Burma

EDDIE BAUER , THE REDMOND, WASHINGTON-BASED outdoor clothing retailer and manufacturer, announced in February 1995 its complete withdrawal from Burma, including its garment factory that is 45 percent owned by the Burmese military junta.

In 1990, the Burmese military regime, known as the State Law and Order Restoration Council (SLORC), ignored election results that showed 82 percent support for the National League for Democracy, headed by Daw Aung San Suu Kyi. The military placed Suu Kyi under house arrest and has violently repressed those seeking democratic reform in Burma. In a recent mop up, SLORC wiped out indigenous rebels to make way for an oil pipeline [see Blood in the Pipeline," Multinational Monitor, January/February 1995 ].

Business operations in Burma are a lifeline to the cash-strapped SLORC regime. It has been estimated that 70 to 90 percent of the profits from oil development, for example, directly flow to the junta. Bauer is the latest of a growing number of companies that have pulled out of Burma in response to a call by human rights activists to divest from the country. In May 1992, Levi Strauss & Co. pulled its operations out of Burma. In March 1994, Amoco announced that it, too, would abandon Burma.

"After months of researching the situation, we deemed that the political climate and growing opposition to trade in Burma posed a potential threat to our future manufacturing opportunities," an Eddie Bauer statement said.

The Bauer decision is "a sign that the growing campaign for corporate withdrawal from Burma is clearly having an effect," says Simon Billenness, of the socially responsible money management firm Franklin Research & Development .

Hidden Pesticides

THE U.S. FOOD AND DRUG ADMINISTRATION (FDA) has underreported the routine use of illegal pesticides by fruit and vegetable growers, according to a February 1995 report by the Washington, D.C.-based Environmental Working Group.

The report, "Forbidden Fruit: Illegal Pesticides in the U.S. Food Supply," audited the results of 15,000 FDA tests and found 66 different illegal pesticides present in 42 fruits and vegetables that the FDA tested during 1992 and 1993. According to the report’s findings, U.S. citizens eat 2 billion pounds of produce contaminated with illegal pesticides each year.

The report determined that the actual rate of illegal pesticides on 42 heavily consumed fruits and vegetables is 76 percent higher than the rate reported by the FDA.

"A disturbing number of fruit and vegetable growers routinely break the law," says Richard Wiles, vice president of the Environmental Working Group and co-author of the report. "The public is simply not protected from illegal pesticides."

The group says the FDA lacks the legal authority, testing methods and lab resources to police the food supply for over 900 different pesticides and pesticide by- products. Under the law, the FDA cannot hold food shipments while they are being tested and cannot assess civil penalties against growers who violate the law.

The Environmental Working Group report contains useful suggestions as well as two shortcomings, a written FDA response says. The limitations are that "it overstates the incidence of illegal pesticide residues in domestic and imported foods, and it fails to represent accurately the effectiveness of FDA’s residue monitoring program," the agency release said. Specifically, the FDA said the report misinterpreted a slight "trace" or "blip" in FDA data that could represent a false positive as "intentional violations of U.S. pesticide tolerances."

What the FDA identified as "constructive recommendations" in the report include proposals to: control pesticide residues by checking "critical control points," as is practiced in the seafood industry; enhancing computer availability of EPA tolerance data; and improved FDA record keeping.

Alcan Project Scrapped

THE GOVERNMENT OF BRITISH COLUMBIA, CANADA , in January 1995, scrapped Montreal-based Alcan Aluminum ’s massive $1.3 billion addition to its Kemano hydroelectric project.

The half-built Kemano addition would have diverted water from the Nechako River in central British Columbia to add 285 megawatts of generating capacity to the existing Kemano hydro plant that was built in the 1950s. The prime user of the electricity would have been an Alcan smelter.

The project was approved in 1987, but the Canadian government granted Alcan an exemption from the required environmental assessment process in exchange for a fish- conservation program to be implemented by the company. The province has now permanently halted the project, however, concluding that it was economically unviable and would cause excessive harm to the Fraser River and its salmon population. "The project would’ve created a grand total of something like five jobs and threatened about 20,000 jobs tied to the commercial fishing industry in British Columbia," says David Boyd, a staff attorney with the Sierra Legal Defense Fund in Vancouver.

The project would have reduced the water level in the Nechako to 12 percent of its original flow. Area indigenous groups say the project would harm sensitive fisheries and the surrounding Native communities, already nearly wiped out by the first phase of the project. Cancellation of the project "was a cause of celebration by environmental, indigenous and fishing groups" in the province, Boyd says.

"We’re moving to protect our valuable salmon forever," British Columbia Premier Mike Harcourt told the media.

The decision drew a harsh response from the business community. "This is just one more signal that business is not wanted in British Columbia," Gary Livingstone, president of the British Columbia Mining Association, told the Montreal Gazette. "I don’t think Canadian and British Columbian people can afford these kinds of decisions." An Alcan statement said the company was "understandably disapointed."

- Aaron Freeman

Editorial: A Living Wage

Raise it. Peg it. Be done with it.

That’s a sound prescription for handling the minimum wage.

The U.S. minimum wage, now set at $4.25 an hour, is in one of its periodic free falls, as inflation erodes the real buying power effects of the last minimum wage increase of 1991.

The inflation-adjusted minimum wage has sunk to its lowest level since the 1950s, down from historic peaks in the 1960s and 1970s (when - during seven of those years - it exceeded $6 an hour in 1994 dollars).

For workers on the lowest rungs of the U.S. occupational hierarchy (disproportionately people of color and women), the stingy minimum wage means they and their families are unable to eke out a decent existence. The income of a full-time worker earning the minimum wage is more than $6,000 below the poverty line for a family of four. And it is adults, with families to support - not teenagers - who are the primary minimum-wage earners. Minimum wage workers account for 5.7 percent of the total workforce and adults make up 85 percent of those who make the minimum wage or less.

Belatedly, two years into his term, President Clinton has announced his support for an increase in the minimum wage. The administration has called for an increase to $4.70 in July 1995 and $5.15 in July 1996. Clinton’s got the right impulse, but he has set his sights much too low.

Raising the minimum wage to $7 an hour would help workers in the nation’s least desirable jobs, though even this wage would not raise a family of four above the 1994 poverty level of $15, 141. And pegging it to inflation would maintain a fair wage for those workers, who now see inflation eat away at their real income until political pressure mounts and Congress finally gets around to upping the minimum wage. Opponents of a minimum wage increase claim it actually hurts the people it is supposed to help. Employers won’t pay workers more than the value of what they produce, opponents say, and if the minimum wage goes up, then employers will eliminate low-wage jobs.

But this argument - which is actually an argument against any minimum wage, not just against minimum wage increases - is plain wrong.

Bumping up the minimum wage increases employment and strengthens the overall economy. Increases in the minimum wage boost low-wage earners’ buying power and demand for goods and services, thus fueling the economy. Increases in the minimum wage also encourage employers to invest more in equipment that enhances productivity, thus improving overall national economic efficiency.

Recent academic studies and historical experience confirm the salutary effect of raising the minimum wage. A survey of fast-food restaurants in Texas before and after the 1991 minimum wage increase by Lawrence Katz of Harvard and Alan Krueger of Princeton, for example, revealed that employment increased at those firms most affected by the minimum wage increase.

The main direct effect of a minimum wage increase is simple: it takes money from an employer who could pay more and still earn a profit and puts it into the pockets of the lowest wage workers. The employer may make a little less profit, but the employees get to live a little bit more comfortably.

Increases in the minimum wage exert upward pressure on workers making just above the minimum wage, thus raising the living standards of a substantial portion of the entire workforce.

A more plausible argument against calling for a substantial minimum wage increase and pegging the minimum wage to inflation is purely political. Such a proposal, it could be claimed, is a waste of time given a Republican-controlled Congress that has made clear its intent to punish rather than help the poor.

President Clinton expressed this cautious view in January, saying, "I have to create the conditions in which we can raise the minimum wage if I possibly can. I don’t want to waste a lot of time [in] strong posturing and undermining the chance that we can raise it." But this argument rests on a timid, static view of politics.

In fashioning his State of the Union address in January, President Clinton shunned advisers who urged him to launch a populist crusade with an attack on corporate welfare as its centerpiece. Such an attack, combined with strong advocacy of a substantially increased, fair minimum wage, could have infused the fizzling and increasingly directionless Clinton presidency with vigor and coherence.

That approach was too much for Treasury Secretary Robert Rubin and the pro- business voices around Clinton; they convinced him to steer away from an anti-corporate, populist appeal. Half a loaf is better than none, however. A strong, sustained push by the president for a substantial increase in the minimum wage would be overwhelmingly popular with the U.S. public, and could help shift the terms of contemporary political discourse and alter the present balance of political power.

Since Clinton said he did not want to undermine the chance of raising the minimum wage it has become clear that only "strong posturing" will give him any chance of raising the minimum wage at all. The time is now for the administration to exert bold leadership, for self-interested reasons if not for substantive ones.

The Front

Chasing Repression

THE MEXICAN GOVERNMENT should "eliminate the Zapatistas" to help restore investor confidence in Mexico , recommended a recent Chase Manhattan Bank report. The recommendation, contained in a Chase Emerging Markets Group political update distributed to the bank’s capital markets clients, was first reported in the Washington, D.C.-based newsletter Counterpunch.

The update opined that while the situation in the southern Mexico state of Chiapas "does not pose a fundamental threat to Mexican political stability, it is perceived to be so by many in the investment community." It recommended the "elimination" strategy in order "to demonstrate [the government’s] effective control of the national territory and of security policy." The report also stated that "it is difficult to imagine that the current environment will yield a peaceful solution."

The Zapatistas are a group of indigenous rebels in Chiapas who are demanding widespread social and democratic reforms. In early February 1995, the Mexican army moved troops into Chiapas to hunt down the movement’s leaders, sealing off the area to journalists. While the initiative failed to apprehend a single leader, Amnesty International, journalists and the Mexican government’s own Human Rights Commission reported widespread illegal arrests and torture by the military.

Amid international condemnation, Mexican President Ernesto Zedillo, head of Mexico’s ruling Institutional Revolutionary Party (PRI), suspended the army’s offensive one week after commencing it. Subcomandante Marcos, military leader of the Zapatistas, accused Zedillo of initiating the offensive to please financial backers of President Bill Clinton’s peso bailout package. "The uprising has boosted the price of the Mexican Indian blood," Marcos told journalists on February 13. "Not long ago, it was valued at less than two chickens. Now it is the condition for the largest loan of ignominy in history."

The Chase update was written by Riordan Roett, Latin American Studies director at Johns Hopkins University. Roett worked with the bank while on sabbatical. Roett declined comment on the update, but the Counterpunch report noted that at a January 11 seminar for investors organized by the Washington, D.C.-based Center for Strategic and International Studies, Roett conceded that his war strategy might provoke negative repercussions internationally, but added that there are "always political costs in bold action."

Regarding 1995 elections to be held in the Mexican states of Jalisco, Guanajuato, Yucatan, Michoacan and Baja California, Roett wrote in the update, "The Zedillo administration will need to consider carefully whether or not to allow opposition victories if fairly won at the ballot box. To deny legitimate electoral victories by the opposition will be a serious setback in the president’s electoral strategy. But a failure to retain PRI control runs the risk of splitting the governing party." The first of these elections was held on February 12 in the central Mexican state of Jalisco, which includes Mexico’s second- largest city, Guadalajara. The conservative opposition National Action Party won those elections with an 18 percent margin over PRI.

The update has created a storm of controversy at Chase. A bank spokesperson says "the views expressed [in the update] did not and do not represent the policy of Chase Manhattan," but offered no further comment. Chase later said that Roett "no longer has a relationship with the bank."

"How can a business in the service sector, that provided this report to its clients as an integral part of its services to them, disavow something which was clearly its own product?" asks Harry Cleaver, an economist at the University of Texas at Austin. "This is twisting and turning to avoid corporate responsibility, scapegoating the worker whose report it was circulating."

Chase is one of the eight large, so-called money center banks in the United States that were hardest hit by Mexico’s last major debt crisis in 1982. Under a plan promoted by former U.S. Treasury Secretary Nicholas Brady, most large creditors of troubled Latin American nations agreed to reduce principal and interest payments and reschedule the remaining debt, relying in part on financing from the sale of special U.S. Treasury bonds known as Brady Bonds. The eight money center banks have been acting to decrease their debt exposure in Mexico since the last crisis, except for Citibank, which is pursuing a long-term strategy to penetrate the Mexican market. According to its latest 10- K report filed in February of 1994, for instance, Chase reduced its Brady Bond debt in 1993 from $1.2 billion to $505 million. But it still had a $1.4 billion exposure in Mexico, including $1.1 billion to the Mexican government.

As the bank’s 10-K report explains, such foreign debt is a considerable worry to Chase. "International extensions of credit require not only the normal credit risk analysis associated with the decision to extend financing to a particular customer, but also an assessment of country risk. Country risk arises from economic, social and political factors that might affect a borrower’s ability to repay . One of the major risk factors associated with cross-border credit exposures is the possibility that a country’s foreign exchange reserves may be insufficient or unavailable to permit timely repayment by borrowers even if the borrowers possess sufficient local currency."

The report goes on to say that Chase assesses country risk with a team of economists and political analysts, such as Roett. But both the banks and their regulators had made rosy projections for Mexico before the December peso devaluation. Chase’s 10- K notes that it stopped counting its Mexican debt as part of its risky "refinancing country portfolio" at the end of 1991 because the banking regulators’ Interagency Country Exposure Review Committee had upgraded Mexico’s debt status. Many bankers are particularly angry about the new debt crisis because it took them off guard, they had not taken adequate precautions and because Mexican officials had repeatedly promised them that they would not devalue.

- Aaron Freeman

Trashing Haiti

IN NOVEMBER 1988, the infamous cargo ship Khian Sea set anchor in Singapore with its hold empty. The ship’s two-year, half- way-round-the-world voyage focused world attention on the whether wealthy countries should be allowed to treat the Third World as a receptacle for hazardous wastes.

The Khian Sea saga began in 1986, when the city of Philadelphia contracted with the operators of the ship to dispose of 13,764 tons of toxic ash generated by the city’s garbage incinerator. The ship left Philadelphia in August, destined for the Bahamas . After the Bahamas refused to accept the ash, the ship wandered the Caribbean for more than a year searching for a dump site.

The Khian Sea voyage drew extensive international press attention to the issue of hazardous waste exports from industrialized countries to the Third World, where toxics are often disposed of without the knowledge or consent of local communities, and without the safeguards necessary to protect the health of nearby residents.

Such was the case in October 1987, when the Haitian Department of Commerce gave permission to the Khian Sea to import "fertilizer." When Haitian residents discovered the true nature of the cargo being dumped on a beach in Gonaives, Haiti, the Khian Sea operators fled under armed escort - but not before dumping 2,000 to 4,500 tons of ash. An October 1993 U.S. government investigation discovered that the remainder of the ash was dumped somewhere in the Indian Ocean.

An early-1995 chemical analysis of the ash by Greenpeace found "anomalously high levels" of cadmium, lead, copper and zinc. Haitian activists are now demanding that U.S. troops returning from Haiti bring back the ash that remains on Haitian soil.

"It is incredible that six years later, communities of Gonaives are still exposed to this toxic waste," says Father Daniel Roussiere, general secretary of Peace and Justice of the Gonaives Diocese. "This toxic ash must be returned to Philadelphia." Peace and Justice was the first of several Haitian organizations - including the Haiti Communications Project, the Federation for the Restoration of the National Environment and the Haitian Coalition for the Protection of the Environment and Alternative Development - to demand that the ash be sent back. They have been joined by the Mayors of Gonaives and Port-au-Prince, who also have demanded that the ash be sent home.

Around 1,000 tons of ash remain on the beach, although ocean and rainfall have washed away some of the waste. In 1989, roughly 1,000 tons of ash were removed to a containment site uphill from the beach. People living near the storage dump have reported that animals are dying from exposure to the toxic pile.

The Haitian activists issued a joint statement with Greenpeace in December 1994 to the Haitian government calling for "fair trade, not toxic trade." They recommend that Haiti ratify the Basel Convention, which, following a March 1994 agreement, bans the export of hazardous waste from industrialized to non-industrialized countries. They also are calling on the Haitian government to demand that the toxic ash "be returned to the United States, along with any hazardous waste generated by the American troops."

The Haitian government appears sympathetic to the activists’ demands. "Dumping on Haitian communities is an act of injustice," says Haiti’s Environment Minister Tony Verdier. "The Haitian government, in consultation with local organizations, will follow all the necessary steps to make Haiti a toxic trade-free country."

The U.S. government appears less receptive however. "If the U.S. administration is really serious about its commitment to ban waste trade and promote environmental justice, the U.S. troops should pick up the toxic ash from Gonaives and return it to Philadelphia," says Greenpeace’s Marcelo Furtado.

- Aaron Freeman


Gingrich GOPAC Patrons take out a Contract on America

by Gary Ruskin

Hoping to develop a "farm team" of promising Republican state and local officials who might advance some day to the Capitol Hill major leagues, then-Delaware Governor Pierre "Pete" S. DuPont IV founded a political organization called GOPAC in 1979. Republicans then held 36 percent of the seats in the House of Representatives. Today, Republican majorities control both houses of Congress and GOPAC is run by House Speaker Newt Gingrich.

GOPAC - the GOP Action Committee - raised some $17 million over the last 10 years and claims that half of the 136 Republican members of Congress elected since 1990 used GOPAC training and briefing materials. Last November, a rookie called up from the GOPAC farm team, Representative George Nethercutt, R-Washington, even defeated Gingrich’s predecessor, former Speaker Thomas Foley.

Despite GOPAC’s remarkable political muscle, Gingrich has veiled in secrecy the faces and bank accounts behind the PAC. When he assumed control of GOPAC in 1986, Gingrich instituted a new policy of donor confidentiality. Howard "Bo" Calloway, Chairman of GOPAC between 1987 and 1993, explained to the Los Angeles Times, "We’ve got some of the shyest people you’ve ever known who contribute to GOPAC."

Unmasking "shy" donors

In a GOPAC solicitation circulated prior to the November elections, Speaker Gingrich asked prospective contributors, "Will you help me draft the Republican legislative agenda for the 104th Congress?" Some donors may have interpreted this as an invitation to feather their nests at the public’s expense.

Facing strong public pressure for disclosure, Gingrich announced in November that, from then on, GOPAC donors would be made public. GOPAC made its first Gingrich-era disclosure recently.

The data the PAC made public was limited to contributions received since the November election, keeping millions of dollars in donations in the dark. Recently, the Multinational Monitor obtained a list of GOPAC donations covering 1985 through 1993. This list, along with the PAC’s recent disclosure, unmasks the identities of GOPAC’s wealthy patrons.

These sources reveal that many - though certainly not all - GOPAC donors come from the super-rich, right-wing fringe of U.S. politics. Though there are some donors from the pinnacle of Fortune 500 companies or major Wall Street investment banking firms, an unusual concentration of donors reflect locally or regionally based fortunes, many of them privately held corporations or firms. GOPAC appears to be especially attractive to Far Right individuals who have never adjusted to the government- business regulatory relationship of the post-World War II era. In many cases these donors or the companies they run are law breakers, repeat violators of regulatory standards, subjects of ongoing criminal and civil investigations and others with a special interest in seeing regulatory cops taken off the corporate beat.

Among GOPAC’s most generous donors are the following individuals:

Banana Republican

Carl Lindner, the largest post-election contributor, gave GOPAC $55,000 in 1994. Lindner is chair of the American Financial Corporation , a large financial holding company, and a former business partner of savings and loan pariah Charles Keating of "Keating Five" fame. Lindner has settled two sets of fraud charges with the Securities and Exchange Commission (SEC).

Lindner is also chairman and CEO of Chiquita Brands International, Inc. A pending lawsuit against Chiquita in Federal District Court in Houston alleges that Chiquita’s use of the pesticide DBCP sterilized 3,500 male banana workers in Costa Rica , Panama and the Philippines , according to Charles Siegal, a lawyer who represents the workers. A Chiquita spokesperson declined to comment because the case is before the courts.

Another GOPAC supporter heading a company with a record of contempt for labor and Third World people is James Richards, president of Southwire Co. , the world’s largest manufacturer of copper wire and cable. Richards gave $80,200 to GOPAC between 1986 and 1992. His father, Roy Richards, was the chair and largest shareholder of People’s Bank of Carrollton, Georgia, during Gingrich’s early years in Congress. At that time, the bank rolled over past-due Gingrich campaign loans over several years and bank officials personally loaned the campaign money that was never repaid, according to a story by Jeff Gerth and Stephen Labaton in the New York Times. Gingrich has been a loyal friend to this corporate patron. "Southwire automatically has my attention every morning," he told reporters in 1989.

More recently, in November 1992, Southwire pled guilty to a "knowing failure to report the distribution of hazardous waste from baghouse filters" which filter lead and cadmium from copper smelter emissions. This hazardous waste was mixed with fertilizer, and illegally shipped to Bangladesh, where it was bought by farmers who spread it on their fields by hand [see Poison Fields," Multinational Monitor, April 1993 ].

Gingrich was asked at a recent news conference about accepting money from Southwire, a company with a long history of environmental and Occupational Safety and Health Administration violations. "I fully support the Federal Government prosecuting companies when they break the law," he said. "But I hardly think that given the complexity of our environmental and OSHA regulations that having been convicted of a violation turns one into a ‘criminal company,’ as you describe it. They are good citizens. They work very hard. They provide very good jobs for over 3,000 people."

A Southwire spokesperson recently told the New York Times that the company "understands, honors and is committed to complying with all existing laws and regulations."

Cracker Barrel bigots

Dan W. Evins, who gave $35,000 to GOPAC over a two-year period beginning in 1991, is the chair of a company that created unusual employee- and public-relations problems for itself. The Cracker Barrel Old Country Store Inc. restaurant chain issued a press release in the same year that Evins started donating to GOPAC saying that it would no longer employ people "whose sexual preferences fail to demonstrate normal heterosexual values which have been the foundation of families in our society." Cracker Barrel then fired at least 10 gay employees. A notice the company issued to one of them said, "This employee is being terminated due to violation of company policy. The employee is gay." Although Cracker Barrel rescinded its policy, the company reportedly has not rehired the fired workers.

Terry Kohler, the chief executive officer of Windway Capital Corporation, and his wife Mary contributed $715,547 to GOPAC since 1985. That includes a $237,000 contribution in 1990 that was accepted in spite of Gingrich’s pledge to set a $100,000 ceiling on GOPAC contributions. Terry Kohler is a three-time failed Republican candidate for political office who is best known for his foreign policy views. Returning from a trip to South Africa in 1988, Kohler said blacks there "have no sense of being less, of being a minority, of being downtrodden." Three years later, he had to apologize for commenting that it would be a "disaster" to extend the vote to black South Africans.

Antitrust insecurities

Another group of GOPAC contributors could use a little help with antitrust and securities laws and regulators. William Flowers and Amos McMullian are, respectively, the founder and president of Thomasville, Georgia-based Flowers Industries . Together they have contributed $83,592 to GOPAC since 1989.

Two federal grand juries subpoenaed records from Flowers Industries and four other large baking companies concerning "the possibility of anti-competitive practices in the bread industry," the Wall Street Journal reported on January 17, 1995. The investigation alleges bid-rigging to ensure well-leavened profits. A Flowers spokesperson told the Journal that the company "considers this activity to be normal antitrust compliance monitoring of the baking industry by the Justice Department."

J. Morton Davis, chief executive officer of the D.H. Blair & Co. investment bank, has contributed $20,000 to GOPAC since 1993. His investment bank has faced a staggering number of securities violations charges. In recent years, Blair has: paid at least three securities-related fines of $15,000 or more; settled three class action suits charging it with incomplete underwriting registration statements; and been censured by the National Association of Securities Dealers and by regulators in several states.

Joseph Allegra is a former president and Chief Executive Officer of T2 Medical Inc., which provides in-home intravenous medication. Allegra contributed $10,850 to GOPAC in 1992. That same year, the inspector general of the Department of Health and Human Services launched a federal grand jury investigation into T2 Medical practices. The company paid $500,000 to the federal government in 1994 to settle the charges of improper physician self-referral practices.

Kindred spirits

The rich history of legal scrapes that have haunted the careers of so many GOPAC funders provides insight into Gingrich’s perennial calls for "regulatory relief." In this light, the Contract with America’s deregulatory mantra can be seen as a shameless attempt by Gingrich and his recidivist clients to take the regulatory cops off of the corporate crime beat.

Those who have committed corporate crimes or peccadilloes may feel a special affinity with GOPAC and Gingrich. Both the PAC and its general chair are embroiled in money-related ethics disputes pending before the House Ethics Committee and the Federal Elections Committee (FEC).

Gingrich calls GOPAC "the most misunderstood institution in this city," arguing that it is "not a political action committee" but "an educational institution." That claim was rejected by the FEC in 1991, when it forced Gingrich to register GOPAC as a PAC. Such a PAC identity seems consistent with a recent GOPAC fundraising memo that boasts of helping to elect 41 of the 48 House Republican freshmen in the 103rd Congress. The FEC also ruled that GOPAC broke the law by failing to disclose over $500,000 in campaign contributions between 1989 and 1991. Last year, Gingrich’s own congressional campaign paid a $3,800 FEC fine for failing to disclose $30,000 in campaign contributions within legally set deadlines. Finally, an FEC suit pending in the U.S. District Court of the District of Columbia charges that GOPAC failed to register as a federal PAC and to disclose those who financially supported its efforts to influence federal elections from 1989 to 1991.

Representatives Patricia Schroeder, D-Colorado, and Cynthia McKinney, D- Georgia, filed an ethics complaint against Gingrich on February 23, 1994. The complaint alleges that Gingrich received a gift worth $150,000 to $200,000 from Glenn R. Jones of Jones Intercable Inc. Jones’s Mind Extension University, which reaches 26 million homes via cable television, will run 20 hours of Gingrich’s Renewing American Civilization television course, news accounts say.

A Jones spokesperson told a communications trade publication the ethics complaint is "misleading and inaccurate" because the company’s arrangement is with the college where Gingrich teaches. "We don’t charge any of our participating institutions any money to be on our network," the spokesperson said. Jones is trying to take over the Public Broadcasting System - whose funding Gingrich has vowed to slash.

When Gingrich requested House Ethics Committee permission to pursue his course in 1993, the committee gave him the green light - so long as he did not use congressional resources for course-related solicitations. In April 1994, however, Gingrich took to the House floor to plug the course, announcing a toll-free phone number for purchasing related audio and videotapes, a self-promotion that was recorded on C-SPAN television. House Minority Whip David Bonior, D-Michigan, filed an ethics complaint on March 8, 1994, charging that this violated a House rule against advertising on the House floor. C-SPAN "isn’t the Home Shopping Network," Bonior observed.

Gingrich’s opponent in last November’s elections, Ben Jones, filed another ethics complaint about Gingrich’s course that is pending before the House Ethics Committee, now called the Standards Committee. Jones charges that Gingrich solicited and employed tax-deductible contributions to fund Renewing American Civilization. The Jones complaint asserts that the course is an arm of GOPAC and violates tax laws prohibiting partisan uses of charitable contributions.

Ralph Nader and the Congressional Accountability Project filed another complaint against Gingrich on February 6, 1994. The complaint, pending before the Standards Committee, concerns GOPAC consultant Joseph Gaylord. Recent news reports suggest that Gaylord is doing official work in Gingrich’s congressional offices. If this is true, Gingrich is violating federal law and House ethics rules by privately financing his official activities. One GOP source told the National Journal that Gaylord "is the overseer of Newt’s world Joe helps to select his [House] staff and to fix the payroll."

When asked about his massive fund-raising machinery and influence-peddling allegations before the November elections, Gingrich had a classic response for the Los Angeles Times. "I raised so much money over the years, from so many different people that I don’t owe anyone," he said.

Perhaps the best tribute to the thoroughness of the GOPAC-Gingrich revolution, however, lies in its penetration of the Standards Committee which will determine whether Gingrich crossed any House ethics lines. Standards Committee member Porter Goss, R- Florida, gave $5,000 to GOPAC last year. Another committee member, Jim Bunning, R- Kentucky, accepted a $1,000 GOPAC campaign contribution in 1979. Even Standards Committee Chair Nancy Johnson, R-Connecticut, contributed $640 to the Gingrich campaign in 1993.


Regulatory Roll Back

by Nancy Watzman

Representative David McIntosh, R-Indiana, used to be much more bashful. As director of then-Vice President Dan Quayle’s Council on Competitiveness, he refused to testify before Congress when committees held hearings on the Council’s interference with the Clean Air Act, wetlands protection, drug safety and myriad other health, safety and environmental regulations. The Quayle Council became infamous for its secret meetings with business lobbyists, where McIntosh and his staff would help design strategies to gut regulations that industry loathed.

Now McIntosh is a first-term member of Congress, elected in Indiana with the backing of business and some well-known conservatives. Not many new members of Congress were supported by campaign donations from such conservative stars as C. Boyden Gray, White House counsel under President Bush and now president of the conservative group Citizens for a Sound Economy; William Kristol, who ran Quayle’s office; and Representatives Tom DeLay, R-Texas, and Chris Cox, R-California.

With his hands now on the levers of legislative power, McIntosh, now a high- profile member of the new crop of Republican representatives, is resuming work he began with the Quayle Council. A McIntosh-sponsored bill, which would impose a moratorium on rulemaking through June 30, 1995, retroactive to November 20, 1994, whizzed through the House on February 24, 1995. The bill passed on a 276-146 vote. Originally, the bill was retroactive to election day. But Republicans changed the date to win the vote of Representative Collin Peterson, D-Minnesota, according to Michael Weisskopf of the Washington Post. Peterson wanted to preserve a November 18, 1994 Agriculture Department rule that lifts a tax on malt barley, which is grown in his district. Regulations that did not make the cut include standards for nutritious school lunches, safe bicycle helmets and mammography exams.

A less-sweeping regulatory moratorium bill passed the Senate Government Affairs Committee March 9 on a straight party-line vote. The Senate version would allow the Clinton administration to exempt regulations that would prevent an imminent threat to public health and safety.

The moratorium McIntosh is sponsoring is just part of the Republicans’ grand plan to completely change the way that federal agencies regulate industries. "Where the Quayle Council attempted to gut health, safety and environmental regulations through the back door, the Republicans are striding right through the front door and trying to change the entire regulatory system," says Gary Bass, executive director of OMB Watch, a Washington, D.C.-based regulatory watchdog. Because it was housed in the executive branch, the Council could intervene in battles over specific regulations opposed by the business community, but the basic structures of federal rulemaking remained intact. Now, with Republican control of Congress, there is an opportunity to completely overhaul what regulatory agencies do.

The core of the Republican approach is the philosophy that federal regulation is a burden to business, plain and simple. Government action is undesirable and should be beaten back. The free market, under this vision, is the best regulator; if bicycle helmets do not shield heads effectively, people will stop buying them. If a new medicine does not work, nobody will take it. Even those businesses that do not ascribe to a pure, libertarian view tend to argue that federal regulations have spiraled out of control and the pendulum needs to swing back in the other direction. In contrast, environmental and consumer advocates continue to advocate government action when the market cannot be relied upon to ensure public safety.

Regulating the regulators

The greatest part of the Republican Contract with America challenge to federal agencies’ ability to protect the environment and public health lies in H.R. 9, the Job Creation and Wage Enhancement Act of 1995. This bill contains legislative prescriptions to revamp how federal agencies function, requiring them to comply with a battery of bureaucratic procedures before they can issue protective regulations. Supporters of H.R. 9 are not bashful about their intent. "If it’s acceptable to place a regulatory burden on the public, why not place it on the federal agencies?" asked Representative Greg Ganske, R-Iowa, at a recent hearing.

The irony is that the same businesses that have cried foul over the red tape they must confront in complying with regulatory protections of such things as air, food and drugs now demand reams of new paperwork. "Unfortunately, [the bill] not only emulates some of the most undesirable approaches used in our current regulatory system, but also creates seemingly endless analytic loops that could introduce additional inefficiency and delay in the rulemaking process," testified John H. Gibbons, director of the executive Office of Science and Technology Policy, before the House Committee on Science in early February.

Already, many environmental, health and safety statutes require agencies to do risk assessments and cost-benefit analyses before they issue regulations. The requirements are different in various statutes, tailored to the particular problem that is being addressed. There is also a requirement, by executive order, that agencies prepare a "risk impact analysis" for any rule that would impose annual costs on the economy of $100 million or more. H.R. 9, however, would override many of these requirements and require that, before an agency could take action at all, it comply with extensive, cost-benefit, peer- review analyses. The new requirements would place a heavy burden on the government to prove how the benefits of the protective action outweigh the costs to the economy and to demonstrate that the agency has chosen an efficient way to achieve a regulatory goal. Furthermore, the "peer reviews" would not exclude people who might have a monetary interest in the result. That means a pesticide company scientist, for example, could pass judgment on an Environmental Protection Agency (EPA) rule on pesticides.

Many of the requirements for analyses are extraordinarily vague, with the result that technical compliance could be unbearably difficult. For example, an agency would be required to make a statement, with each regulation on what "human risks are potentially posed" by the new rule itself, along with every possible regulatory alternative to it. "This requirement is wholly open ended: must the agency list all health risks each alternative could create, no matter how unlikely or remote these risks may be?" asked Gibbons in his testimony.

Cost-benefit and risk analyses mean different things in different contexts. A recent trend in academic and policy circles is to strive for more "rational" policymaking. Environmental policy critics, for example, have charged that the EPA does not sufficiently rely on comparative risk assessment to direct its regulatory efforts. Exposure to toxic chemicals may be dangerous, they concede, but if a person is more likely to die from naturally occurring radon in their home than from cancer caused by toxins, then regulatory efforts should be devoted to the radon problem first. They also charge that not enough is done to measure the cost of regulatory compliance. Maybe there is a health benefit to pesticide regulation, they say. But to what extent is that benefit weighed against corporate costs of complying with regulatory testing requirements and with the job losses that may result from increased regulation?

Sensible use of cost-benefit and risk-analysis techniques may lead to better policy. But environmental and other health and safety advocates argue that costs and benefits cannot always be calculated accurately. In the context of pesticide regulation, Lynn Goldman, assistant administrator of the EPA’s Office of Prevention, Pesticides and Toxic Substances, explained at a February 2 hearing of the House Commerce Health and Environment Subcommittee that, "Data are often not available for environmental exposures involving critical health and ecological effects. Developmental effects in children, reproductive effects in men and women, neurotoxic effects and ecological effects of many kinds that may be associated with pesticide use cannot be neatly fitted into rigid equations due to [a] lack of data and scientifically accepted techniques for extrapolation and quantitative assessment."

Just because the scientific community has not progressed to the point where it understands exactly how harmful pesticides or other substances are does not mean they are not harmful - nor that the government should not act to protect citizens. When scientists first experimented with radiation, for example, knowledge of its effects were minimal. It would not have been possible to conduct a "cost-benefit" analysis on the use of radioactive substances. Yet, people subjected to radiation got sick and many of them died.

Big business bonanza

Big industry groups backed H.R. 9 with a clever vengeance. In mid-December, the National American Wholesale Grocers’ Association and Representative DeLay announced a new group, Project Relief, to "coordinate efforts in the private sector to garner support for the specific element of the Contract with America that calls for a dramatic reform of the way the federal government develops regulations." The steering committee is a who’s who of large business trade associations and industry-funded think tanks. Project Relief is advertising a toll-free telephone number to field complaints about excessive government regulation.

"We feel the government should have regulations that serve the American people, not people serving regulations," says Bruce A. Gates, vice president of public affairs at the National American Wholesale Grocers Association, a Project Relief leader.

The National Association of Manufacturers and the Chamber of Commerce are members of Project Relief, as are the conservative Heritage Foundation, the Cato Institute and Citizens for a Sound Economy (CSE), home to several former Quayle Council staffers. CSE has won conservative kudos for its successful attacks on the Clinton administration’s ill-fated energy tax proposal and health plan. Among CSE’s tactics are media advertisements that target the home districts of key members of Congress - an expensive but effective form of political pressure. Such "manufactured" grassroots campaigns are powerful new tools with which the monied interests influence controversial policy debates.

Another new coalition supporting the Contract’s regulatory provisions is the Alliance for Reasonable Regulation, whose 22-page membership list contains hundreds of little-known businesses from Safety-Kleen Corporation to Ozark Wire Limited. Representing the Alliance at a recent congressional hearing, however, was a familiar face: Jerry J. Jasinowski, president of the National Association of Manufacturers, the heavy- hitting, big business trade association and a founding member of the Alliance.

Environmental and consumer groups, labor unions and other citizen organizations formed their own coalition to oppose H.R. 9, Citizens for Sensible Safeguards. But this poorly funded coalition has had trouble communicating its message on complex regulatory procedures. "We’ve been trying to get the word out about how extreme and absurd a lot of these [regulatory] proposals are," says Erik Olsen, an attorney at the Natural Resources Defense Council (NRDC). "Clearly there is very little support for these proposals once they’re explained to the public, but they’ve been tied up with a nice little bow and packaged and focus-grouped. But we have no money."

Greased lightning

H.R. 9 moved through the House of Representatives at a tremendous clip. The House Commerce Committee quickly passed Republican-backed amendments that would apply new cost-benefit requirements retroactively, subjecting current environmental laws to the possibility of repeal. "They proposed this language less than 48 hours before the markup that amends every law. There are no hearings, nothing. We have no idea about the impact of this new language," Olsen says. The House passed the regulatory provisions of H.R. 9 on March 3 on a 277-144 vote.

This deregulatory agenda also has been moving through the Senate, though not at the House’s breakneck speed. Clinton administration officials have groused about the measure, but it has not sparked a veto threat and some administration officials have hinted that they might be able to live with the Senate version.

Opponents hope the slower Senate pace will scrutiny of the sweeping, anti- regulatory agenda. If it passes, however, they are preparing for disaster. "It’s going to shut the government down," Olsen predicts. "What will happen is some big crisis and the EPA or some other agency will be paralyzed to do anything about it, and then there will be a public outcry. But in the meantime, a lot of people will be hurt."


Taking on the Environment

BURIED DEEP IN THE REPUBLICAN CONTRACT WITH AMERICA is a proposal that proponents say will protect property owners. Critics say that protection would come at the cost of more than 20 years of public health, safety, and environmental protection.

The Job Creation and Wage Enhancement Act, H.R. 9, was passed by the U.S. House of Representatives by a 277-141 vote on March 3, 1995. If enacted into law, it would radically restructure the way that public and private rights now are balanced in the United States, strengthening private power at the cost of the public good.

The Fifth Amendment to the U.S. Constitution says "no person shall be deprived of life, liberty, or property without due process of the law; nor shall private property be taken for public use without just compensation." Historically, the courts have ruled that if federal, state or local governments exercise their eminent domain powers to take someone’s land for a highway, building or park, they must pay the owner the property’s fair market value.

In the early twentieth century, the courts expanded takings law to cover instances in which government regulations effectively eliminated all the economic value of a property, a so-called "regulatory taking." Starting in the mid-1980s, the Supreme Court began to expand the regulatory taking doctrine further. The Court labeled as takings more incidental effects to private property from regulation, and required that compensation be paid to landowners for the diminished value of their land in more and more cases.

Former President Ronald Reagan’s administration sought to expand the definition of a regulatory taking to include any regulatory reduction in the use or value of land. Executive Order 12630 required all federal agencies to assess whether their regulatory actions were impacting property owners. The recent House vote is a culmination of a five- year effort to codify aspects of that executive order into law.

Takings provisions in H.R. 9 require the government to pay a property owner compensation for regulations that reduce the resale value of his or her land by 10 percent or more. This requirement is only fair, say advocates of the takings provisions. "Today, environmental regulations destroy property rights on an unprecedented scale," Roger Mazulla, an attorney with the corporate law firm of Akin, Gump, Strauss, Hauer & Feld, told the House Agriculture Committee in February 1995. "Regulations designed to protect coastal zone areas, wetlands and endangered species habitats, among others, leave many owners stripped of all but bare title to their property." Explained Calvin Ploof, Jr., chair of the National Association of Realtors, to the House Committee on Transportation and Infrastructure, "The cost of the benefits to the general public achieved by such regulation should be borne by the beneficiaries - the general public."

But critics respond that property owners should not be given the right to harm the public. "These bills will convert our system from one in which the polluter pays to one in which the public pays," says John Stanton of the National Conference of State Legislatures. "If the community wants clean water and clean air, they must pay polluters not to pollute. If we have to pay more to protect our community, then there will be less community protection."

Stanton’s concerns are echoed by Pat Byington, executive director of the Alabama Conservancy, a statewide nonprofit organization dedicated to helping landowners. "The environmental laws we have today, although not perfect, safeguard the property values of all citizens. One person’s property rights end where his neighbor’s begin. If we reinterpret takings law to say that each person can do whatever they want with their land, no matter who it might hurt, we all lose."

The states have become the front runners in the takings battle. Over 40 states have defeated similar kinds of takings bills in the last two years. Maryland Attorney General Ralph Tyler calls these bills "a radical, untested, and unwise way to block regulation and to raid the federal treasury. They appear to be designed to affirmatively discourage regulation."

Joni Bosh, vice president of the Sierra Club agrees. Bosh led the battle to overturn a takings bill in the state of Arizona in 1994. "Although our state is politically quite conservative, the citizens of Arizona rejected a state takings bill by referendum by a 60 to 40 percent vote margin because they knew it would block crucial health and environmental safeguards they wanted," Bosh says.

Concern over the future of health and safety laws brought Bill Klinefelter, legislative director of the AFL-CIO, into the takings battle. Klinefelter says that the federal government pushed corporate America to protect workers and the environment by setting health standards and forcing technology. "During the first Clean Air Act debate, the U.S. Congress set emissions standards and industry developed the technology to reach them," he says. "Industry said they couldn’t reach the standards but they did. Today we have better science and more information so we can tackle our environmental and health problems in more innovative ways. If these takings proposals go through, any regulation on industry can be claimed to be a taking and all our progress will stop."

The takings bill has yet to be acted upon in the Senate. The bill comes under the jurisdiction of Senator John Chafee, R-Rhode Island, chair of the Senate Environment Committee and a staunch opponent of takings bills. But the Senate has passed takings amendments in previous years and Republicans won a majority of the Senate in the 1994 elections.

Given how fast the takings legislation has been stitched together, it may have unintended consequences. With time to study the sweeping implications of this legislation, even conservative Senators may reconsider some of its most radical provisions.

After the House passed H.R. 9, Senator Patrick J. Leahy, D-Vermont, pointed out how another piece of legislation a House panel recently approved could prompt expensive takings challenges if both pieces of legislation end up being enacted.

A bill approved by the House Appropriations Committee would instruct the U.S. Forest Service to convert dead and diseased timber on its lands into six billion board feet of lumber over the next two years. The Congressional Research Service estimates that such a huge increase in lumber supplies will reduce prices, which Leahy says could prompt takings claims.

-Pam Goddard


"Job Creation" or Regulatory Decimation

LEGISLATIVE PRESCRIPTIONS IN H.R. 9, the Job Creation and Wage Enhancement Act, range from complex new bureaucratic requirements to focus-group-friendly provisions designed to give the package a deceptively populist appeal.

Risk-Assessment / Cost-Benefit Analysis requirements would impose much more demanding standards on the government. Its agencies would be required to assess data that may be nonexistent or difficult to collect and to subject their analyses to review by outside panels, whose members could be industry scientists.

Compliance Cost Caps would limit the amount that the private sector would have to spend to comply with federal rules and laws. Agencies would be required to reduce compliance costs by 6.5 percent a year until the total cost of laws and regulations amounted to no more than 5 percent of the gross domestic product. Congressional budget committees would impose a "regulatory budget" on authorizing committees. A committee could not pass a new law if the business compliance costs of that law would exceed a committee’s budget. Benefits of new laws, such as the money the economy would save by averting illnesses through a preventative health regulation, would not be credited to the budget.

The Regulatory Flexibility Act would amend existing laws to require agencies to consider any new regulation’s "indirect" impacts on small business (direct impacts are already considered). The act would require drafts of all proposed rules and regulatory-impact analyses to pass a Small Business Administration review.

The Paperwork Reduction Act requires agencies to go through new bureaucratic requirements before they could collect information from industry to use as a basis for new regulations. Since other aspects of H.R. 9 require agencies to consider additional risk-assessment and cost-benefit-analysis data, which would have to be collected from industry, this provision imposes a Catch-22 situation on regulatory agencies.

The Citizens’ Regulatory Bill of Rights would create an enforcement "bill of rights." These include the rights of regulated business officials to remain silent, to be informed of their right to a warrant, to be warned that their statements can be used against them, and their right to have an attorney or accountant present. This is a vast expansion of the Constitution’s Bill of Rights, which applies to people charged with a crime or who are the target of a grand jury investigation. In practical terms, it means that if government inspectors want to investigate a chicken processing plant for safety violations, they may need to secure a warrant first and to wait until the plant summons a lawyer or an accountant.

Whistleblower Protection provisions would allow businesses or people subject to government enforcement actions to sue agencies and agency employees for civil and punitive damages. This would have a chilling effect, inhibiting agencies and their staff from doing their jobs. Before a government official cited a factory for worker safety violations, he or she would have to consider whether or not to run the risk of being sued.



Tort Deform

Soft on Corporate Crime and Violence

by Joe Belluck

FLEXING THEIR NEWLY ENHANCED influence in the U.S. Congress, corporations are seeking an unprecedented reform of the U.S. civil justice system to restrict the legal rights of the victims of corporate violence and escape punishment for their wrongful acts.

Big and small businesses have joined forces in a sweeping drive to limit a vast array of civil litigation in the state and federal courts - including product liability, medical malpractice, civil rights and environmental litigation. Proposals they back would make it harder for victims to bring suits known as product liability cases against manufacturers of products that injured them, limit the size of the verdicts that juries could award and immunize many producers from suits. The proposals also would eradicate one of the most important U.S. checks on corporate power - the right of juries to award punitive damages in amounts that they believe will adequately punish a wrongdoer.

The business wish list for "legal deform" is known as the "Common Sense Legal Reform Act" in the Contract with America promoted by House Speaker Newt Gingrich and other Republicans. "Common sense" in the Contract includes enactment of "loser pays" laws, "reasonable limits" on punitive damages and product liability "reform." Taken together, these proposals would limit the ability of victims to seek redress for their injuries and would diminish the unpredictable nature of jury awards. Predictability would help businesses calculate when it is "rational" to choose to injure people because the expected litigation costs of an unsafe product come in under the cost of making a safe product.

Outrageous claims

Business lobbyists and their congressional allies have heaped together distorted anecdotes, inaccurate statistics and wild exaggerations in their efforts to make the case for undermining core precepts of the U.S. justice system. Those that want to dismantle this system argue that the United States is the victim of, in the Contract’s words, an "endless tide of litigation" that undercuts U.S. competitiveness.

The product liability litigation explosion is a myth. Tort suits (civil actions to recover for wrongful acts, injury or damages) comprise just 9 percent of all state court filings and product liability suits account for just 4 percent of tort cases, according to the Williamsburg, Virginia-based National Center for State Courts. Moreover, the number of non-asbestos product liability suits in the federal courts has declined almost 40 percent since 1985, reports University of Wisconsin law professor Marc Galanter.

Similarly, the claim that product liability suits undermine U.S. competitiveness is fatuous. The total cost of U.S. product liability lawsuits is equal to one-fifth of one percent of total retail sales, a recent study by the Arlington, Virginia-based National Insurance Consumer Organization found. The insurance companies of product manufacturers paid fewer than 56,000 people for product injuries over the past decade, the study revealed. The average payment in those claims was $3,767. Total product liability verdicts and settlements average less than $4.1 billion a year.

"According to a Rand Corporation study, only 10 percent of people who are injured ever use the tort system to seek compensation for their injuries," consumer advocate Ralph Nader says. "The problem is not one of too few claims but one of not enough claims, given the 90 percent or more of wrongfully injured persons who receive no compensation."

"As demonstrated by our country’s recent experiences with silicone breast implants, asbestos, the Dalkon shield, defective motor vehicles and medical devices, medical malpractice, toxics and hazardous pharmaceuticals and drunk-driving epidemics, Americans need more protection - not less," he adds.

The litigation explosion myth is just part of the tort deformers’ grab-bag of lies and distortions. Rather than carefully examine the merits of the reformers’ claims, however, the Republican House leadership rammed extensive tort deform legislation - contained in bills H.R. 10, H.R. 917, H.R. 956 and H.R. 988 - through the House floor in early March.

One way the tort deformers plan to limit the ability of injured parties to bring suit is through "loser pays" requirements. The so-called Attorney Accountability Act, H.R. 988, contains a "loser pays" provision for all federal diversity litigation - suits that are brought in federal court because the parties are citizens of different states. Under the bill’s loser-pays rule, a plaintiff who refused a settlement offer and later received less than the settlement offer at trial would be responsible for paying the defendant’s attorney fees. Similarly, a defendant would be required to pay a plaintiff’s attorney fees if the plaintiff received more at trial than the defendant’s settlement offer. The House passed this bill on March 7, 1995.

Loser-pays advocates tout it as a paragon of fairness and efficiency. "The beauty of the proposal is that [significant] savings will result from reduced litigation costs and reduced counsel fees in settled cases," claimed Michael Horwitz, a fellow at the business- backed Hudson Institute, at a February House Judiciary Committee hearing. "Under the proposal, no claimant rights will be abridged or reduced."

Evenhanded appearances notwithstanding, the bill would dramatically tilt the field in favor of corporate defendants. It is much easier for corporations with deep pockets to absorb the legal fees of their victims than it is for their victims to pay the cost of corporate legal teams. Under loser pays, corporate wrongdoers would be encouraged to offer low settlements and to reject higher counter-offers from plaintiffs. This is what happens under the loser-pays rule in England, according to University of Wisconsin law professor Herbert Kritzer. Kritzer told the House Judiciary Committee that " ‘repeat player’ defendants take advantage of the risk aversion of privately funded plaintiffs by engaging in what one writer describes as ‘hard bargaining;’ the defendants either refuse to make offers at all, or make offers considerably under the true value of the case."

If the loser-pays provision is enacted, many potential plaintiffs will be intimidated from bringing suit at all. Under the current contingency fee system, an injured party - regardless of his or her income - can file a suit with no up-front investment. Many plaintiff lawyers take cases on a contingency-fee basis, accepting a percentage of what they win for clients as their fee. But under the loser-pays system, if the plaintiff lost, he or she would be liable for a potentially staggering corporate legal bill. This would convert filing a lawsuit into a high-stakes gamble, deterring many injured parties from filing suit.

Corporate impunity

Several provisions of H.R. 956, the Product Liability Act, which the House approved March 10, 1995, protect corporate wrongdoers from suits by product injury victims.

The first prong of the push for wrongdoer protection is the elimination of joint and several liability. Under the joint and several liability principle, if multiple parties contribute to the injury of a victim, the victim can recover all of his or her damages from any of the wrongdoers, irrespective of the extent of any particular wrongdoer’s share of culpability for the injury.

Business lobbyists deride the joint and several liability concept as illogical. It does not make sense "to require someone who is only one percent at fault to pay 100 percent of damages for pain and suffering or other such non-economic compensatory losses," argues long-time tort reform advocate Victor Schwartz, a Crowell & Moring law partner and counsel to the Product Liability Coordinating Committee, a coalition that claims more than 800,000 business members, mostly small businesses. Schwartz told the House Commerce Committee in February 1995 that "it is intriguing to me to hear those who generally support the jury system magically ignore a jury finding that someone is, for example, 40 percent at fault, and argue that the person should pay 100 percent of damages when it comes to joint liability."

Joint and several liability rightfully puts victims first, counters Larry Stewart, president of the Association of Trial Lawyers of America (ATLA). "Joint and several liability says that we will first and foremost compensate the injured party who suffered their harm through no fault of their own," he says. "Joint and several liability then says that once that individual is compensated we will take them out of the system and then allow those defendants who have been found to have caused the harm to properly apportion damages amongst themselves." Eliminating this liability principle would force injured parties to absorb part of the cost of negligent or intentional harms when one or more of the wrongdoers cannot be located or lacks the assets to pay a jury verdict.

Businesses claim that they are awash in joint and several liability suits, but the facts suggest otherwise. A 1995 study of product liability cases by the State Bar of Wisconsin, for example, found that only 2.6 percent of product liability cases in that state involved joint and several liability.

Just as corporations despise giving juries carte blanche to determine how much to award in punitive damages for product liability, businesses hate joint and several liability because it throws off their ability to calculate the cost of damages that may arise from producing unsafe products. The fear that an unsafe product may subject them to unexpected damage suits through joint and several liability provides a strong incentive for corporations to manufacture safe products.

Something for GM

The second prong of the legislative hustle to protect corporate wrongdoers is the establishment of a 15-year statute of repose on all products, unless the product caused a chronic illness. This provision would completely bar lawsuits against certain products - such as DES, the anti-miscarriage drug that causes birth defects and cancer - that cause serious, though perhaps not chronic, illnesses that can take more than 15 years to appear.

Many businesses claim that they are unfairly subjected to suits for old products that met existing safety standards at the time they were built. "My company has been manufacturing machine tools for over 100 years," testified Charles Gilbert, president of Gilbert Machine Tool Co. in Cincinnati, Ohio, before the House Judiciary Committee in February 1995. "Many of these machines are still in use today. Although they were built decades ago to safety standards of their day and although they are likely to have passed through several owners - each of whom are likely to have made their own modifications to accommodate their needs - they are still the subject of over one-half of our industry’s lawsuits and all of my company’s lawsuits." Gilbert, who spoke on behalf of the Association for Manufacturing Technology, complained of the high legal costs of defending these suits. Yet he acknowledged that his company almost always wins the suits, many of which presumably lack merit.

The failure of non-meritorious suits to succeed and the lack of motive for plaintiffs or plaintiff attorneys to bring such suits suggests that something else may underlie the drive for a 15-year statute of repose. The fact that General Motors (GM) is a leading proponent of this provision suggests an explanation. GM knows the proposed 15-year repose would partially relieve it of liability for the pick-up trucks it built with explosively defective side- saddle gas tanks, some of which are now more than 15 years old. GM could have installed protective shields for as little as $23 per vehicle.

Buyer beware

Other provisions of the Republican tort deform bills that would shield wrongdoers include liability limits for those who sell dangerous and defective products. These provisions would weaken the laws of 46 states that currently hold retailers responsible when they sell dangerous products that injure or kill consumers.

The existing system is unfair because "a product seller is in most states treated in the same manner as the manufacturer of the product, even though it has no hand in designing or building the product it sells," testified James Anderson, Jr., a lobbyist for the National Association of Wholesaler-Distributors, before the House Commerce Committee. "Although a judgment may be obtained against the product seller, the seller almost never ultimately pays the judgment because he is not, in fact, responsible and is able to shift the cost of liability to those who are. Nonetheless, when he has been sued, he must defend in court with the attendant costs of such a defense."

ATLA’s Stewart disagrees. He says the liability of sellers of harmful products provides an important incentive for them to act responsibly. "Product sellers are a vital link in the chain that brings products to our citizens," he says, and they should "be held accountable."

Limiting seller liability would have sweeping consequences. It would, for example, immunize: taverns that serve alcohol to obviously intoxicated customers; gun dealers who sell guns to customers who are underage, intoxicated or felons; stores that make implied warranties that a product is suitable for children by selling their products to kids; and retailers that fail to convey known dangers about the products they sell. The House passed this provision in the flurry of tort deform legislation that it passed in the second week of March.

Blame the government

Another protection of corporate wrongdoers would exempt producers of drugs and medical devices from normal product liability rules. This provision would bar punitive damages if a dangerous drug or medical device had been approved by the Food and Drug Administration (FDA). Government approval of a product, manufacturers argue, signals that the producer acted with sufficient care and should not be subject to punitive damages.

This argument ignores U.S. regulatory history and the role manufacturers play in winning regulatory approval of products. First, the FDA has often failed to protect consumers in the past, approving, for example, the Copper-7 intrauterine device (IUD) and the Bjork-Shiley Heart Valve. Second, proposed exemptions for these products ignore the fact that drug makers in the U.S. regulatory system conduct their own scientific safety testing. FDA approval may not mean that a drug is safe, but that its manufacturer has withheld information from regulators.

Using the FDA as a cover for liability exemptions is particularly ironic since advocates of the exemption also are pushing Congress to weaken the FDA’s authority to issue and enforce drug and medical device regulations. Enactment of an FDA-linked exemption would be especially harmful for women, since they are the primary users of products that have prompted large numbers of medical device and drug lawsuits - including the Dalkon Shield, DES, Copper-7 IUD and silicone breast implants. The Product Liability Act the House passed on March 10 contained the FDA-exemption amendment and an amendment to cap punitive damages.

Damage control

The crown jewel of the corporate tort deform movement is a cap on punitive damages - the awards juries approve to punish those who injured a victim. The Product Liability Act limits punitive damage awards in product liability cases to the higher of $250,000 or three times the amount of economic damages. The bill would impose this cap on all civil actions in state and federal courts, including environmental, civil rights, drunk driving and commercial cases.

Corporations hate punitive damages because juries may issue a large punitive verdict in cases where corporate behavior is particularly egregious and especially because they are unpredictable. "We need reasonable predictability that will separate the bad from the good," business lobbyist Schwartz told the House Commerce Committee.

The unpredictability of punitive damages means corporations cannot write off the human costs of their profit-seeking activities by easily figuring them into their cost-benefit analyses. "It is only the indeterminable nature of punitive damages which makes it impossible for a cynical actor from making calculations weighing safety against the cost of compensating injuries," ATLA’s Stewart says. Thus, though punitive damages are rarely awarded, they exercise a powerful deterrent effect over corporate misbehavior. In the most comprehensive study of punitive damages ever conducted, Professor Michael Rustad of Suffolk University Law School in Boston, Massachusetts found that, between 1965 and 1990, only 355 punitive damages were awarded in state and federal product liability lawsuits - an average of 14 per year.

Contract with whom?

Perhaps the ultimate indictment of the Republican backers of tort deform legislation is how they are abandoning the purported principles of the Contract with America. Despite the fact that the Republicans have been claiming to advance states’ rights, their tort legislation would federalize some 200 years of state law in this area. The Conference of Chief Justices and the National Conference of State Legislators have vociferously opposed the tort reform legislation on these grounds. Similarly, despite Republican property rights rhetoric, tort deform would limit the ability of individuals whose property is damaged by defective products to recover losses.

Finally, notwithstanding their claims to work to empower individual citizens, the Republicans have not advanced legal reforms to protect consumers. For example, there is no provision in these bills that would bar the use of secrecy agreements in liability lawsuits; secrecy agreements hide the dangers of deadly products from consumers and waste time and money by forcing attorneys to duplicate earlier efforts.

Such contradictions, says Nader, "Reveal that the Republicans’ real contract is with corporate wrongdoers against American citizens, entrepreneurs and consumers."


No Coffee Breaks for McDonalds

The most widely circulated recent anecdote purportedly demonstrating that the tort system is out of control was the jury award of $2.9 million to a woman who was burned by coffee she bought at McDonald’s. The story has been the butt of jokes by the Tonight Show’s Jay Leno, but the facts suggest that justice was served.

Consumer advocate Ralph Nader described the relevant facts in testimony before the House Judiciary Committee in February 1995. What follows are excerpts of that testimony:

"In February 1992, while sitting in a non-moving car, 80 year-old Sheila Liebeck suffered third degree burns over six percent of her body, including her genital and groin areas, after the cup of coffee she was holding spilled into her lap. As a result, she was hospitalized for eight days and underwent skin grafting. Ms. Liebeck sought to settle her claim for a mere $20,000, but McDonald’s refused.

"During extensive discovery, Ms. Liebeck’s attorney discovered that more than 700 claims had been filed against McDonald’s by people burned by its coffee between 1982 and 1992. In addition, McDonald’s admitted that it kept its coffee at temperatures almost 40 degrees higher than most food establishments. The jury awarded Ms. Liebeck $200,000 in compensatory damages, which was reduced to $160,000 because the jury found Ms. Liebeck 20 percent at fault for the spill. The jury also awarded Ms.Liebeck $2.7 million in punitive damages, the equivalent of two days of McDonald’s coffee sales. The trial court subsequently reduced the punitive award to $480,000 - three times the compensatory damages.

"Notwithstanding the hysteria surrounding the McDonald’s coffee case, the facts demonstrate that punitive damage awards are not awarded arbitrarily or without just cause, and that awards are subject to review and reduction by trial judges."

- J.B.


Talking Economic Sense

An interview with Jeff Faux

Jeff Faux is president of the Economic Policy Institute in Washington, D.C. Prior to establishing EPI, he was co-director of the National Center for Economic Alternatives. He has worked as an economist for the U.S. Office of Economic Opportunity and the U.S. Departments of State, Commerce and Labor. Faux is the author of New Hope of the Inner City and a co-author of Rebuilding America and The Star- Spangled Hustle. He is writing a new book on prospects for the American economy in the twenty-first century.

Multinational Monitor: What would be the effect on the economy of adopting a balanced budget amendment?

Jeff Faux: The effect would be pretty grim. Since World War II, we had absorbed the Keynesian lesson that when private spending diminishes, you need the federal government to step in and deficit spend, in order to keep purchasing power up. As a result, in the 50 years since World War II, we haven’t had a depression. We’ll be back to where we were in the nineteenth century.

If this balanced budget amendment goes through, it’s going to make it virtually impossible for the automatic stabilizers to go into play in a recession. As unemployment rises and tax revenues decrease, the government will be forced by law to compensate for that loss of revenue by either raising taxes or cutting spending, which is exactly the opposite of what you need to do in an economic downturn. It’s a formula for turning recessions into depressions.

There are two other important points. First, this will put the economy at the mercy of the Federal Reserve Board . That is, since we will be abandoning fiscal policy as a way to deal with economic slow downs, all we will have is monetary policy, meaning lower interest rates. But the Federal Reserve Board has never been all that concerned with unemployment and keeping wages and purchasing power up. Its primary self-defined function is to be the guardian against inflation. So you have the institution that is normally reluctant to stimulate the economy become the institution upon which we depend for economic stimulus.

Second, given the fact that monetary policy takes nine to 18 months to affect the economy, we are going to have to wait too long for our only stimulus tool to have an effect. So the balanced budget amendment is really a formula for disaster.

MM: Is there any legitimate concern about the size of the budget deficit?

Faux: Sure. It’s better to have less debt than more debt. And the debt that we ran up in the 1980s, going from about $1 trillion to $4 trillion, is a burden on the economy.

But it’s a terrible mistake to be so obsessed with this deficit issue that it obscures the larger questions of how the economy grows and the need for investing in infrastructure and human capital in order to give our children the tools they need to compete and make it in the world.

The notion that somehow the most important thing we can do is to leave as little debt as possible to our children lacks common sense. Take two families, both of whom have a child graduating from high school. One family says to the child, "Well, we’d have to borrow the money to put you through college. But if we did that we’d end up with more debt to pay off and we wouldn’t be able to leave you as big an estate when we die. So we’re not going to put you through college."

The other family says, "We’ll go out and borrow money and put you through college because that’s the best thing for you." Most people would say the second family was more responsible to their children. To a significant degree, that’s the same thing that we’re talking about here. Most families go into debt. Anybody who has bought a house with a mortgage unbalances their budget in the sense that we calculate the federal accounts.

The federal government doesn’t have any capital accounts. If it puts up the money for a bridge that’s going to last 50 years, all of that money is slapped against the current budget. That makes no sense. If we had a capital budget, then there would be a good case to be made for balancing the operating budget, and having a capital budget for borrowing for long-term projects. But we don’t have a capital budget, so a simple-minded obsession with the deficit distorts our ability to invest in the future and to stabilize the economy.

MM: How do you account for the obsession? Why is there such support for a balanced budget?

Faux: I think it is due to the remarkable ideological organizing success of the conservative part of our political world and the timidity of the liberals, and particularly the Democratic Party. The deficit itself is more symbolic than real in the voter’s mind. Despite the fact that the Republicans ballooned the deficit during the 1980s and despite the fact that Clinton - whatever else you might think about him - actually has done some of the hard work that conservatives say needs to be done to reduce the deficit, an overwhelming majority of voters think that Republicans are more fiscally responsible than Democrats. That tells you that there’s something going on in the voters’ minds other than an analysis of the budget numbers from the Office of Management and Budget.

That something else is the steady drumbeat of propaganda against the government, against government spending, and the lack of spine on the part of the side that is inevitably identified with the use of government to solve public problems.

Over the last several decades, liberals, accepting the premise that the American people are ideologically conservative and operationally liberal, conceded the principle of the effectiveness of government action to conservatives, and focused instead on bringing home the bacon to individual special interests in terms of programs. Having acquiesced on the principle for so long, the Democrats and the liberals really were quite helpless against the anti-government onslaught in the 1994 elections.

MM: Are there substantial economic interests underlying the campaign for a balanced budget, or is it basically just a politically driven move?

Faux: Oh, sure, economic interests underlie most of this stuff. Financial capital rules in America today. Both the Republican and the Democratic parties have essentially become wards of Wall Street. What we see these days is a sophisticated version of a very simple proposition: lenders will do anything to keep the dollar and prices stable while creditors benefit from a little inflation. To their own long range disadvantage, the bond markets are obsessed with this idea of a fiscal conservatism, and I think that’s where a lot of the pressure for a balanced budget comes from. You look at the Clinton operation, and there really is virtually nobody there who can stand up to the Wall Street view of the world. In the long run, I think that if the balanced budget amendment passes in the states, you’re going to see some negative reactions in the financial markets. But right now they’re not worried about the year 2002, they just care about what’s going to happen in the markets in the next half hour.

MM: What kind of stimulus or investment strategy would you ideally like to see enacted?

Faux: I would like to see a capital budget, focused on investments in physical and human infrastructure and separate from an operating budget. I would capitalize an investment trust which would finance a 10- or 15-year catch up spending program with a tax stream that would last maybe 30 to 40 years. A capital investment program designed to rebuild our cities, and create meaningful jobs and career ladders and upper mobility in the inner city and to convert a lot of our military technology into civilian projects would be the centerpiece of an economic program that I would adopt.

On the matter of conversion, by the way, I think that the failure of this administration to have a serious conversion program is part of what explains the movement now to add more money to the defense budget. The Cold War is over, but by 1999, we’ll be spending as much in real terms on defense as we were spending in the mid- 1970s. This is madness, and a complete waste of resources.

MM: What would adopting a conversion strategy actually mean in practice?

Faux: It would mean making some national commitments, especially in the area of transportation and environmental technology. These are two areas where you don’t get too much of an argument that the government has an important role to play. The broad-brush answer is you’d set some national goals and you’d be willing to give contracts to current defense contractors that were interested. If they weren’t, you would be willing to give long-term contracts to companies formed out of the people and some of the resources that are currently used in defense. This sounds radical, but it is the way many technologies have been developed.

In 1919, British Marconi made a bid for the subsidiaries of General Electric that had patents for long-term radio transmission, which was the big technology of that era. The Woodrow Wilson cabinet said, "No way. We’re going to develop this ourselves." They called in Westinghouse , GE, AT& T and some other companies. Because none of those companies were willing to develop it, the government formed a new corporation to take the patents and the Navy Department put some equity money into it, and they began to work on developing the technology. A few years later, they renamed the enterprise the Radio Corporation of America. That’s how RCA was started. So there’s lots of precedent for that kind of thing.

The end of the Cold War was such a historic moment that this kind of program could have been sold as something that was extraordinary. You could make the argument that these technologies, people and production systems were national assets: when we need them for defense we ought to apply them to defense. If we need them to build electric trains, we ought to apply them to that. Some people will say that that’s inefficient. But it’s a hell of a lot more efficient for those people to be out there figuring out how to make bullet trains at perhaps a higher price than someone would like to pay than it is to have all of those people now spending their time making missiles that nobody is going to use - I hope.

MM: Why isn’t there more support in the manufacturing sector for the kind of ideas you are outlining?

Faux: I think there are several reasons. One, a lot of these manufacturing companies have become less manufacturing companies and more financial companies. They also have become more multinational and have lost their interest in the economic development of the United States. Two, the defense people need to be led. They don’t know anything about new markets and doing something in some other industry. There’s a whole culture that’s built on Uncle Sam, and Uncle Sam’s got to lead.

MM: Shifting gears, how serious a problem is capital flight for the economy and economic policy?

Faux: It’s more serious than it used to be, obviously, with the creation of a global financial system. Anybody, no matter what their politics, has to pay more attention to financial markets and the so-called judgments of the global financial world than they had to 30 years ago.

Saying that, however, I think it has been exaggerated on several levels. First, while the United States is engaged in more international trade than it used to be, roughly 90 percent of what is made in America is sold in America. So we’re really still largely dependent upon our domestic economy.

Second, there’s a lot of myth and mystique about the markets themselves. I think a lot of central banks and international policymakers hide behind the imagery of the markets telling us to do this or that. I’m convinced, for example, that there are not too many people on Wall Street who, when they look at the price of a 30-year bond, are really thinking about what the inflation rate’s going to be 20 or 30 years from now. Mostly what they’re thinking about is what Federal Reserve Board Chairman Alan Greenspan is going to do next week.

Third, the markets are manipulated all the time. The line between these volatile mysterious financial markets and real people making decisions in governments to take advantage of markets, either personally or for other reasons, is pretty thin. I’m convinced now that, while the devaluation was inevitable, the run on the peso was precipitated by Mexican high rollers who are very close to the ruling party and who got a whiff that the peso was going to be devalued. They bailed out, and that then triggered the bailout, which, of course, was done in the name of the free market.

Fourth, failure to make the distinction between speculative capital and capital that goes to invest in real goods and services gets us into a lot of confusion. We end up trying to tax capital less and put more of a burden on labor to save more so that there will be enough investment. But a lot of that investment just gets put into the black hole of speculation. For example, investment in Mexico disappeared when the stock market collapsed and the peso devalued. Most of that stuff was just speculative paper. The real investment in plants around the border actually will do quite well.

MM: What about corporate flight and the effect of international competition?

Faux: The question of international competition is very real. There are two international parts to what’s driving wages down in this country. One is real competition, especially from low-wage countries, but from others as well. And the other is the threat of competition, whereby the game of chicken is played by labor and management, where the management says you’ve got to take this cutback, otherwise we’re moving to Mexico .

Labor has to make a decision on how real that threat is. But, with the North American Free Trade Agreement and the availability of cheap labor in Mexico, you don’t have to be a Ph.D. in economics to figure out that if Mexican productivity is 80 to 100 percent of U.S. levels, and getting closer all the time, and wages are 10 to 15 percent, then there’s some incentive for going South.

People have this notion that, well, we’re really just talking about unskilled labor. First of all, the economist’s notion of unskilled labor is usually anybody who hasn’t graduated from college. That makes up 75 percent of the labor force. But, second, you can get computer programmers in India as competent as they are here and you can pay one-fifth of the price for them. You can get them in Russia . So, it is a real problem and, in the absence of any kind of international labor regulation, it’s going to continue to be a problem.

MM: Do you believe that developing international labor and other standards is the best way to address the problems posed by international competition?

Faux: You’ve got to face some hard choices here. You can’t participate fully in the global economy and not have institutions that regulate that economy. Sovereignty has got to be sacrificed. Ask yourself some simple questions: If we’re in a global economy, where is the central bank of the global economy? Where is the Securities and Exchange Commission? Where is the Occupational Safety and Health Administration for the global economy? At some level that seems absurd, but the logic of a global market is that you either have those things and you get a stable marketplace with some hope that you’ll have rising living standards all around, or you’re into some nineteenth century version of the marketplace with a lot of volatility, a lot of exploitation and a lot of suppression of wages.

I think that a sensible, progressive answer to this issue is to insist on trade being strongly linked to verifiable and enforceable labor rights and standards. While we can’t force anybody else to adhere to these standards, we can refuse to trade with them if they don’t. I’m not so sure that that’s off the political horizon. I think that, if properly framed, this whole issue has got a lot of political bite.

The other point is that you got to have international institutions. The problem, of course, is what happens to not only sovereignty but to democracy? Those are hard problems. There’s a lot of honest struggling going on about that in Europe now and I think that’s the place where the future’s happening, at least the future that I would like to see.

MM: What are your views on more protectionist sorts of approaches?

Faux: I’m pretty pragmatic on that. I think that you trade when the conditions are right. You don’t trade when the conditions are wrong. In the latter case, I would be protectionist. I’m not afraid of that idea.

In a country like Mexico, it’s official government policy to keep wages rising at half the rate of inflation, which means you’ve got a permanent real wage decline in Mexico. That condemns at least a big chunk of the American labor force to a similar permanent wage decline. That makes no sense, and if the only thing available to stop that is something that people call protectionist, then so be it.

But I don’t think that the vision is either we seal up the borders or we leave ourselves open to the absurd practices of the past couple of decades. The intelligent approach is that you have standards, you have reciprocity and you don’t stop the process of negotiation because somebody gets up in Mexico and says, "You can’t trample on our sovereignty." When the Mexican upper classes’ economic interests are at issue, there never seems to be any problem of sovereignty. They give themselves over to Wall Street in a minute. But if someone suggests that you ought to have a decent minimum wage, you suddenly hear a lot of nonsense about imperialism.

MM: You identified the ways in which international competition is driving down or at least stagnating real wages. What are some of the other factors that account for the dismal U.S. wage performance of the last 20 years?

Faux: It’s a related package. Many economists talk about the productivity decline. If you look at the tradable goods sectors, there actually hasn’t been that much productivity decline. In those sectors, it turns out the median wage has not been tracking increases in productivity for the first time since we’ve been calculating these numbers. That suggests that productivity benefits are being shared less and less with workers and they’re going to other costs, to lower prices or to profits. One of the things in back of that is that the bargaining position of unions and workers has been weakened. That is partly because of a very aggressive effort by employers to undercut and eventually destroy unions, and partly because of the shift from manufacturing to services. There are some other causes, like the lower value of the real minimum wage.

MM: Do you view concentrated corporate power as an economic problem?

Faux: There’s an interesting shift going on in the power of corporations. Old line corporations are downsizing and you get these newer virtual corporations that are leaner and meaner are becoming more important in the economy. Leaner, meaner and less unionized. That’s a challenge in several ways. It’s a challenge to government regulation because it’s easier in some ways, once you’ve got a regulatory strategy, to regulate big companies rather than smaller ones because you can get to them.

These smaller corporate units also tend to be more mobile, more flexible and they pose a problem for the labor movement. And I can’t imagine a politically credible progressive future unless you have a strong labor movement. So, you’ve got those changes going on. But I don’t think the labor movement yet has a strategy about how to deal with some of these smaller, more flexible markets and kinds of organizations.

There’s another thing that’s going on. Since World War II, we’ve had an alliance between government, especially the Defense Department, large defense contractors and unions. It has been a burden on the economy, but within it’s own sphere it had a virtuous cycle. Unions supported defense budgets and received the benefits of expansion, etc. We’re now seeing that system - in some versions called the "iron triangle" - diminishing in power. As the Cold War disappears, the companies that are becoming politically more important are companies that are not committed to manufacturing in the United States but are committed to manufacturing where they can get cheaper labor.

In the old system, high wages were part of the glue that kept the working force loyal to the corporate-government structure. In the new system, the American working force politically has been abandoned and now you’ve got the government, perhaps more the State Department and the Commerce Department, out there helping American corporations find places in the world where they might produce cheaply. The deal that followed World War II between the corporate community, its unionized labor force and government is breaking apart. A new deal has been formed, and there are only two partners. Labor is being dropped out.

Another point is that in the global economy corporate power vis-a-vis the public sector has increased. Twenty-five years ago, we all knew about how corporations were playing off one state against another state for tax breaks and subsidies. That has now gotten to the level of the United States versus other countries. The hidden point to Commerce Secretary Ron Brown roaming around the world to secure contracts for the U.S. companies is that he’s making concessions. The United States is being played against other countries or other groups of companies. Just the way that the Illinois taxpayer or Arkansas taxpayer has had to subsidize the business community in order to keep it from going other places, so the American taxpayer as a whole is more and more subsidizing U.S. companies in a variety of ways.

Around the turn of the century, when we had economies that were essentially state and regional economies, national corporations were created and ran roughshod over the states. Finally we got federal legislation to impose, as John Kenneth Galbraith called it, countervailing power. Now the multinationals have broken the bounds of the ability of national governments to restrain them; the question then becomes: is there some international order that’s necessary? I think the answer is yes.

You and I can sit down and draw boxes and say here’s the [international] central bank and here’s the international Securities Exchange Commission, but that wouldn’t be worth anything. The real question is how you develop a politics that recognizes this and creates a popular understanding that this is our objective situation and, from there, develop a democratic politics around this understanding. But we are at the very, very embryonic stages of that. Meanwhile, the multinationals are off to the races.



Spinning its Wheels in India

by Gary Cohen and Satinath Sarangi

GOA, INDIA - Lakshman Kolekar and his family have tended goats and planted rice and millet along the verdant slopes of India’s Western Ghats for 70 years. They have ready access to water and are surrounded by terraced groves of cashew nut, mango, coconut and banana. On grounds they consider sacred near their lush forest home, they have cremated their ancestors and have built shrines to their spirits.

This bucolic backwater is an unlikely setting for one of the fiercest battles against a multinational company in the world today, but as Kolekar and other locals are quick to point out, they did not ask DuPont to build a chemical factory in their community. After the dramatic setbacks earlier this year, DuPont also may be wondering why it staked its fortunes on this remote mountain location.

For seven years, DuPont has tried to build a $217 million synthetic nylon 6,6 factory in the jungle highlands of Goa, India’s smallest state, to capture the booming Asian market in automobile tires. Because of India’s longstanding prohibition against foreign companies owning a majority share in Indian businesses, DuPont hooked up with Thapar, a prominent industrial company. In 1985, the new partnership, Thapar-DuPont Ltd. (TDL), picked the village of Keri, 30 miles from the state capital of Panjim, as the site of its future nylon factory. The state Economic Development Corporation agreed to use its authority under the national Land Acquisition Act to take the land from a local cooperative, then lease it back to TDL for a nominal rate in exchange for an 11 percent share in the project. The state’s participation also guaranteed the company discount rates for water and electricity hookups.

Over the next several years, TDL built a road to a bulldozed plateau, where it constructed several administrative buildings, dug bore wells for water and put up a huge billboard at the front gate that greeted the occasional visitor: "Thapar DuPont Limited: Better Things for Better Living."

DuPont claimed the project would provide needed jobs in a state with high unemployment and, through the export of nylon, help boost India’s push to develop an export-oriented economy.

DuPont has learned important lessons from the 1984 Bhopal disaster, in which thousands of Indians died in the aftermath of a deadly gas leak from a Union Carbide pesticide factory. Eager to avoid the liability problems that Union Carbide faced, DuPont has written into its contract with TDL a limited liability clause that exempts the U.S.-based parent company in the event of a chemical accident or pollution problem.

For many years, local opposition to the factory was muted, principally because TDL claimed its production process was pollution free. To bolster its claims, DuPont took out a full-page ad in a Goan newspaper in which TDL President Eugene Kreuzberger reiterated the company’s environmental policy: "We will not handle, use, sell, transport or dispose of a product unless we can do it in an environmentally sound manner."

Challenging DuPont

But local activists, organized into the Anti-Nylon 6,6 Citizen’s Committee, soon became skeptical of DuPont’s claims. With information collected from U.S.-based environmental groups, the community pieced together a very different picture of DuPont. They learned from a Friends of the Earth report, "Hold the Applause," that DuPont had the highest pollution emissions of any company in the United States in 1989. Information from the National Toxics Campaign documented how DuPont continued to produce chlorofluorocarbons, which destroy the ozone layer, and leaded gasoline, which causes brain damage in children, long after research showed the destructive effects of these chemicals.

At a public meeting attended by company officials and elected members of the five local panchayats (village councils) in October 1994, project opponents presented documents that showed that adipic acid and hexamethylene diamine (HMDA), the primary chemicals used in the nylon 6,6 process, were classified as hazardous substances by the U.S. government. The panchayats also raised the objection that the 250,000 liters of water required each day to run the factory would drastically lower the water table, severely harming local agriculture. Additionally, an estimated 10,000 liters a day of effluent would contaminate drinking water for hundreds of thousands of people downstream.

Shortly after this meeting, all five panchayats voted to reject the proposed factory. Popular opposition also intensified. Villagers complained that they could not honor their ancestors since TDL controlled the land where the local cremation grounds had been located for generations. This loss was especially acute during the Hindu festival of Dussehra, which commemorates the victorious battle of good over evil, and is an auspicious time to offer prayers and gifts to the deceased.

After issuing an ultimatum to the government to tear down an illegal boundary wall that TDL had constructed, local people took matters into their own hands. On Dussehra eve, hundreds of villagers marched to the site, bearing sticks and torches. Within two hours, they completely demolished the boundary wall, torched the guard shed and ripped up the paved road leading to the factory. Bulldozers and other construction equipment were also disabled.

The government’s response was swift and severe. Police jailed the entire leadership of the Anti-Nylon 6,6 movement under the Terrorist and Disruptive Activities Act (TADA). The courts, however, disallowed this use of TADA, which is meant to imprison people threatening the security of the Indian state. The activists were released with no charges brought against them.

By November 1994, tensions in the area had created the atmosphere of a showdown. Police vans parked along the narrow roads leading into Keri and Savoi-Verem villages. TDL hired more than 75 security guards to camp out at the factory site.

Meanwhile, local village men guarded the entrance roads to the site and monitored any outsider coming to the area to work on the project. Villagers also instituted a total boycott of the project. Shops refused to sell any food or supplies to anyone working at the factory. When one of the locals took a job with TDL as a public relations officer, his family was shunned by local villagers. His wife soon convinced him to resign.

The opposition movement was also aided by several key allies. The Goa Foundation, an environmental organization led by Claude Alvares, filed a writ in the Goan High Court, challenging TDL for violations of several national and state laws.

The writ alleged the government violated the Land Acquisition Act because land purchased under this law can only be used for public purposes and cannot be used to acquire land for a company. Once the land was illegally expropriated, TDL failed to get the necessary legal clearances under various environmental and industrial siting laws. Additionally, the writ argues, TDL withheld vital information regarding the impacts of adipic acid and HMDA, the two hazardous chemicals to be used at the site.

Finally, the Goa Foundation intercepted an electronic mail message from DuPont to Goan project manager Sam Singh, in which DuPont acknowledged that the company had not considered and taken appropriate measures regarding four critical areas of pollution control: groundwater protection, waste water treatment, solid waste recycling and air pollution control. The e-mail memo, dated October 13, 1994 - nine years after the project application - also raised the question of who would pay the $100,000 consulting fee needed to design these pollution control systems.

"Not only is DuPont completely dishonest and cynical regarding its concern for India’s environment, it is cheap as well," says Alvares. "DuPont is willing to invest tens of millions to make a hefty profit, but it doesn’t want to invest a paltry $100,000 to figure out how to avoid poisoning the local Goans."

Opposition gathers force

Despite his belief in the merits of the case, which has yet to be heard, Alvares advised the villagers in early 1995 that "people should never depend on the courts to solve all their problems."

This message was not lost on the anti-nylon activists. On January 18, 1995, 500 protesters rallied in front of the Goan Legislative Assembly and demanded that the project be scrapped. At the rally, they accused both Prime Minister P. V. Narasimha Rao and Goan Chief Minister Pratapsing Rane of being public relations agents for U.S. multinationals.

Two days later, three leaders of the Anti-Nylon 6,6 Committee, including its coordinator Dr. Dattaram Desai, were arrested by Goan Superintendent of Police S.K. Gautam. No charges were brought against them. But, according to Desai, the police took the three to the police station in the nearby city of Ponda, where police stripped, handcuffed and beat them. They also forced the three activists to fill in trenches that had been dug in the road by local factory opponents. When news of the arrests circulated through the surrounding villages, 1,200 people converged on the police station and forced the police to release the activists.

The arrests ignited the already tense situation. Two days later, 500 protesters disrupted a clinic providing limited health services that was presided over by Goan Chief Minister Rane and Indian Minister of State for Chemicals and Fertilizers Eduardo Faleiro. The activists forced a meeting with the officials and demanded punitive action against the offending police and immediate cancellation of the nylon project. They demanded a response within three days. The stage was set for a decisive confrontation, which came 48 hours later.

Opening fire

On the morning of January 23, a busload of U.S. DuPont officials, accompanied by three police jeeps, were met by 70 protesters, mostly women and children, sitting in the road leading to the factory. When the women refused to let the bus pass, police advised the DuPont officials to return to the state capital Panjim. In Panjim, they met with Chief Minister Rane and demanded that more aggressive action be taken against the activists. By 4:30 p.m., two busloads of police returned to the scene. According to eyewitnesses, the police opened fire without issuing a warning to disperse.

Nilesh Naik, age 25, was shot in the chest, while others received minor injuries. The villagers retaliated by burning one police bus and three jeeps. Naik died soon after admission to a nearby hospital.

In response to the police action, the opposition movement called for a general strike in Ponda. The next day, an angry crowd gathered outside the TDL office there. Forcing their way inside, according to eyewitnesses, they burned hundreds of files, computers, fax machines, three pistols and a suitcase containing more than $7,000. The protesters also burned a TDL jeep and a fire engine that arrived to put out the blaze.

The government then issued an order banning the assembly of more than four citizens for any reason. The protesters, however, informed the police that only the police would be prevented from gathering in public places. They advised the police to lock their station gates and spend the rest of the day inside, which they did. From mid-morning onward, anti-nylon protesters controlled the city of Ponda. There were no reports of personal violence or vandalism.

On the following morning, the body of Nilesh Naik was brought to the Ponda bus station, where a crowd of 400 people gathered to escort his body to his village, Savoi- Verem, and then on to the factory site, where the body was to be cremated. The body was displayed in an open van and garlanded with flowers.

By late afternoon, the procession had swelled to more than 4,000 people, who converged on the deserted factory site, known locally as Bhootkamb (the place of spirits). Leaders of the Anti-Nylon 6,6 Committee had negotiated the previous night with TDL’s security force to vacate the factory site. Factory officials were advised that their presence would provoke violence, and they agreed to leave the site, escorted by committee members.

Many prominent Goans spoke at the funeral service, standing on a platform made from the dismantled factory signboard. Naik was praised as the first martyr of the Goan environmental movement. The crowd renamed the plateau in his honor. But before Naik’s pyre was lit, a large explosion went off at the factory site and a huge billow of smoke rose from the TDL administrative complex, where an electricity generator had been blown up.

Company officials were stunned. "We were completely shaken up over this issue," said TDL Manager Sam Singh following the event. "But we have no plans to move the factory from Goa."

After several meetings with both Thapar and DuPont officials, the government remained largely silent on the fate of the nylon plant, although Goan Chief Minister Rane, who had removed many administrative hurdles for the plant, complained that opponents of the factory "were against the development of Goa."

Redefining "better living"

The proposed chemical plant has assumed strong symbolic value in India, where the General Agreement on Tariffs and Trade and new liberalization laws have opened the country to foreign investment. One of the most protected Asian markets over the last 50 years, India has seen an explosion in foreign investment recently, from $67 million in 1990 to $1.2 billion in 1993. Power plants, oil refineries and food processing factories - industries associated with massive polluting - account for more than half of this investment.

A rejection of this chemical project, the largest single investment in Goa’s history, could signal a more fundamental rejection of the corporate-dominated, export-oriented industrialization being promoted by the ruling Congress Party in Delhi.

This symbolism has not been lost on the largely illiterate and barefoot anti-nylon opposition. On December 19, the anniversary of Goan independence from the Portuguese in 1961, anti-nylon activists hoisted the Indian flag in front of the factory gate. They repeated the exercise on Republic Day, the day after Naik’s funeral. The Committee’s coordinator, Dr. Desai, says that the struggle against DuPont should be seen in the larger context of the independence struggle against the recolonization of India by multinational corporations.

Thapar DuPont officials argue that projects like theirs will be beneficial to the Goan economy. They point to the 650 full-time jobs they say their factory would create, and, after the January uprising, they promised that 80 percent of these jobs would be reserved for Goans.

But Kalanand Mani, director of Peaceful Society, a Goan rural development organization, argues that with an investment of $217 million, each job will be created at a cost of $333,000. The group has developed an alternative economic plan that it projects would enhance the horticultural and grazing activities, creating 4,500 jobs at a fraction of the nylon plant’s investment costs. "We need development that enriches the natural and cultural heritage of Goa, development that involves the participation of the people, not projects that benefit only one percent of the population," Mani says.

The anti-nylon movement has been remarkably non-partisan. Its membership includes people from every political party, as well as Catholics and Hindus, the two principal religious groups in the state. Since the killing of Naik, major institutions, including the Catholic Church and the main opposition Bharatiya Janata Party, have thrown their full support behind the campaign.

The struggle’s future

Since the January uprising, Lakshman Kolekar has taken to grazing his goats again on the grounds of the still deserted factory site. Each day, he passes the newly-erected shrine to Goa’s first environmental martyr and offers prayers to Nilesh Naik along with his ancestors.

Kolekar’s prayers that the spirits of the place will keep Thapar DuPont from returning to the site have been answered. By February 1995, TDL had begun negotiations with the Indian state of Karnataka to shift its nylon 6,6 factory from Goa to Karnataka. Political pundits in India claim that Goa’s ruling Congress Party could no longer run the political risk of supporting the project against such fierce popular opposition.

The Karnataka government is eager not to repeat the traumatic events that shook its northern neighbor. "We will not tolerate a Goa-type agitation against TDL in Karnataka," said Industries Minister R.V. Deshpande in a recent interview.

Even before the official announcement of TDL’s departure from Goa was made public, the anti-nylon movement was heralding DuPont’s ouster as a major people’s victory against polluting industries and multinational corporations in India.

Goa Foundation’s Claude Alvares says, "The recent events are a sign of hope that the people of this country have begun to resist the takeover of their resources by multinational corporations, even if they have to die while doing so."

But movement leaders acknowledge that their work will not be completed until DuPont is denied permission to operate its polluting plant in any Indian state - which is why they are busy contacting their counterparts in Karnataka to warn them about an unwelcome guest that is about to land on their shores.

Book Review

The War Against the Greens

The War Against the Greens:

The "Wise Use" Movement, the New Right,

and Anti-Environmental Violence.

By David Helvarg

Sierra Books, 1994

502 pages, $25.00

The chief theorist of the anti-environmental regulation Wise Use movement Ron Arnold once told Canadian timber industry officials that what they needed to fight the environmentalist agenda effectively was their own grassroots campaign. In Arnold’s view, the only way to defeat a social movement in North America’s activist society is with another social movement. The second given, as the resource industry propagandist explained, is that the public (and its media surrogates) naturally suspect big business. However, no such stigma applies to grassroots organizations which "can do things the industry can’t," he said. "They can form coalitions to build real political clout. They can be an effective convincing advocate for your industry ... [They] can evoke powerful archetypes such as the sanctity of the family, the virtues of the close-knit community, the natural wisdom of the rural dweller, and many others you can think of."

Simply put, Arnold advised multinational resource extractors that in an all- enveloping mediascape the way to achieve their corporate ends is by simulating democratic action.

Readers interested in the vital task of distinguishing the simulated reality from the genuine democratic article are indebted to investigative reporter David Helvarg, whose The War Against The Greens reveals how earnestly major resource companies and a supporting claque of right-wing populist media personalities have heeded Arnold’s cri aux barricades. His exposé is a dissection - admirable in the breadth and depth of its reportage - of organized anti-environmentalism today.

What draws ordinary folks into environmental and anti-enviro movements alike is the perceived threat to individuals’ health and way of life. It is no coincidence that the Wise Use movement (the banner under which anti-enviros agitate for abolition of environmental laws and agencies and de-regulation of timber, oil, gas, minerals and range land) originated over public land use policies affecting financially stressed small-scale farms, ranches and mines. However, what Helvarg unmasks are the deceptions of Wise Use’s leaders, who purport to head a broad-based popular social movement with millions of members.

Helvarg puts the actual number at fewer than 100,000. But those limited numbers, when marshaled by Arnoldian ideology (Arnold claims he blended Lenin’s organizing theories with the "collective-behavior analysis of a couple of professors in the social movements field") and the support of powerful vested interests add up to a militant new force on the political Right. The result is a peculiarly U.S. hybrid of industrial boosterism which contributes to anti-environmentalism’s decidedly sinister cast.

The War Against The Greens catalogues disturbing terroristic acts perpetrated against green activists. The family and dog of Diane Wilson, the shrimper protesting the expansion of Taiwanese plastics giant Formosa near Seadrift, Texas, were descended on and shot at by a marauding helicopter. Pat Costner, a toxics researcher, had her rural Arkansas home torched weeks before her major Greenpeace report on hazardous waste incinerators was published. None of these or other violent acts (including bombings, rape and assault) ever were linked to Wise Use, but they underscore why the presence of anti-enviros often inspires fear rather than a sense of justice denied.

This is not necessarily a libel on every Wise Use and property rights member who believes new environmental regulations and fees for grazing or mineral exploitation on public lands unfairly threaten his or her livelihood. But when underwritten by corporate sponsors and orchestrated by professional ideologues, as this book starkly illustrates, rank-and-file protest can smack more of puppetry than populism.

The anti-enviro movement takes its name from Wise Use Agenda, a book published in 1988 by Arnold and former Youth Against McGovern leader and New Right fund raiser Alan Gottlieb, through the latter’s Center for the Defense of Free Enterprise.

Wise Use’s primary membership in the West consists of workers and middle managers of logging and mining companies - those most immediately susceptible to equating environmental protection with job loss. It also attracts those whose traditional access to public lands at far below cost - specifically, ranchers, corporate farmers and miners - is threatened by federal environmental policies designed to account fully for the significant long-term costs to society of such resource exploitation.

In the East, in contested areas such as Vermont’s Northeast Kingdom and the Adirondacks, the anti-enviro movement is decidedly more upscale, appealing primarily to developers and land owners threatened by regulations governing endangered species and wild and scenic rivers.

In Helvarg’s view, what unifies anti-enviros both east and west of the Mississippi is that at "its core [Wise Use] is not about differing conservation philosophies or ecological world views, religion, or politics, but about basic economic interests."

Achieving sustainability inevitably disrupts a waste-based primary resource-based economy that is grossly subsidized. Logically, those with high stakes in virgin materials production will fight environmentalists’ attempts to impose full cost accounting for the ecological impact of their extraction and processing activities. Industries long accustomed to passing along to society responsibility for managing their toxic by-products accept doing so as a natural right.

Not surprisingly, Helvarg finds that the mining industry is an animating force behind Wise Use. For in an economy serious about kicking the waste habit and moving itself towards sustainability, the whole panorama of subsidies favoring primary material producers and consumers would recede, to be replaced by supports for widespread secondary materials use. And in such a set-up, mine owners surely rank among those with something to lose.

In the United States, the mining industry still operates under the 1872 Mining Act, which was written to attract prospectors to the frontier. As Helvarg notes, this 1872 law is a "legacy of the nineteenth-century Indian wars that allows mining companies to ‘patent,’ or take title to, federal lands and mine the hard-rock minerals they find there without paying fees." The resulting archaic fee structure is estimated to cost the public treasury $1 billion annually in foregone revenues. Yet, the full amount of subsidies to mining multinationals is far greater.

In 1980, mining trade associations convinced Congress to pass the Bevill Amendment to the Solid Waste Disposal Act, temporarily exempting their wastes from regulation. A 1987 Environmental Protection Agency (EPA) study, "Unfinished Business: A Comparative Assessment of Environmental Problems," rated problems related to mining wastes after global warming and stratospheric ozone depletion in terms of ecological risk. Yet, fifteen years after passage of Bevill, there still are no federal programs governing most mining wastes.

The Bevill exemption and the longevity of the 1872 Mining Act belie Wise Use propaganda about strictures imposed by runaway environmentalism, especially given that a 1985 EPA report to Congress estimated mining alone generated almost as much hazardous waste as all non-mining industries combined. (Sixty-one million metric tons compared to 64 million metric tons of nonmining waste.) Added to the public lands rip- off, the economic benefits of being exempted from hazardous waste management laws means the industry is mining the public treasury of astonishing sums of money.

For the mining industry, funding an angry, pseudo-grassroots front is a cheap alternative to figuring out how to stop contaminating the earth with toxic, heavy metal sludges. Not surprisingly then, Helvarg finds mining executives among those choreographing "grassroots" support for the 1872 Mining Act in John Ascuaga’s Nugget Hotel/Casino in the gold mining capital of Reno, Nevada. At the Nugget Hotel, Helvarg introduces readers to another Wise Use champion, former Beverly Hills insurance salesman Chuck Cushman. Cushman is reputed to be "the most active anti-enviro field organizer in the United States."

Cushman operates at the counter-movement’s heart, a nexus consisting of Wise Use’s founding fathers, Arnold and Gotlieb, the agro-business lobby Farm Bureau, East Coast property rights activists and a chain of "public interest" law firms like the New England Legal Foundation and the Pacific Legal Foundation, which cut its teeth defending DDT spraying in national forests. Today, according to Helvarg, Wise Use advocates draw on the support of two dozen conservative nonprofit law firms. The firms are sumptuously endowed by the right-wing Coors, Olin, Scaife and Bradley Foundations and corporations such as Exxon , Ford , Union Carbide and Phillips Petroleum .

Even anti-enviro groups which distance themselves from the ideological extremism of Arnold, Gotlieb and Cushman may have dubious claims to grassroots status themselves. The largest anti-enviro group, People for the West, for instance, disavows any association with Wise Use. But Helvarg notes that almost its entire 1992 budget of $ 1.7 million was ponied up by mining companies fighting 1872 mining law reform.

More surprisingly, perhaps, the grassroots game today is played not merely by multinationals but also by fanatical groups. Lyndon LaRouchites promote so-called anti- environmental "counter-science" through such magazines as 21st Century Science. Funding also comes from South African gold mining companies, Japanese manufacturers of dirt bikes and other off-road recreational vehicles and, as Helvarg puts it, "a Korean billionaire who thinks he’s God." Disturbing evidence is provided of intertwining tentacles between elements of the anti-enviro leadership and Reverend Sun Myung Moon.

Drawing on other reporters’ revelations, Helvarg makes the point that Reverend Moon’s cult (whose American Freedom Coalition played a key role in early Wise Use organizing) may be seen as a front for a neo-colonialist cheap resource grab by ultra- nationalist Asian tycoons. From this perspective, the cult’s presence on the anti-enviro scene is no theological mystery. It represents a devious strategy by the Unification Church’s extremist Korean and Japanese founders to remove environmental limits on their exploitation of the timber, fish, coal, beef and oil resources of the United States.

Against such an array of forces, both corporate and cult alike, legitimate grassroots environmental activism, no matter what the political beliefs of its participants, can be seen as a defense of not only natural and biological resources but also a defense of democratic traditions and practices.

Names in the News

Shelling Out for Pollution

IN ONE OF THE LARGEST citizen enforcement lawsuit settlements in California history, Shell Oil Company agreed in February 1995 to drastically reduce selenium pollution from its Martinez, California refinery, and to pay $2.2 million to address pollution problems in San Francisco Bay.

Selenium is a by-product emitted from the oil refinery operations of Shell and other companies located on the Bay. As a result of these discharges, the U.S. Environmental Protection Agency has designated portions of the Bay as "toxic hot spots" under the Clean Water Act.

The settlement of the Clean Water Act lawsuit brought by the California Public Interest Research Group (CalPIRG) requires Shell, the largest Bay selenium discharger, to cut its selenium pollution by more than a ton compared to the less-stringent reductions agreed to by state regulators last year.

Under the terms of the proposed consent decree, Shell must pay a total of $2.2 million for environmental projects benefitting the San Francisco Bay and must meet strict deadlines calling for annual reductions in selenium discharges each year until 1998.

"There doesn’t appear to be an appropriate technology today for eliminating selenium from discharge," says Shell spokesperson Tomi Van de Brooke. "We will continue to dedicate significant resources to find a solution, and we are very optimistic."

"The method Shell has chosen to remove selenium is producing hazardous waste," says CalPIRG’s state-wide campaign director Tom Subak. "But this waste can be disposed of in an appropriate way. Shell was breaking the law, and the suit was to force compliance."

Green Scissors

THIRTY-THREE BILLION DOLLARS in wasteful and environmentally harmful spending should be cut from the federal budget, urges a February 1995 report released by a coalition of taxpayer and environmental groups.

The 34 programs targeted by the Green Scissors Report include water projects, highways, energy research and development programs, public land subsidies, foreign aid projects, agricultural programs and federal flood and disaster insurance. The report cites the price tag for each program and describes the environmental damage that results. It proposes terminating most of the programs, delaying a few and instituting user fees for others.

The coalition is being led by the National Taxpayers Union Foundation and the Friends of the Earth. On the fiscally conservative side were groups such as the Concord Coalition, Council for Citizens Against Government Waste (successor to the former Grace Commission) and Citizens for a Sound Economy, which advocates free market economics and deregulation. On the progressive side, supporting organizations include the U.S. Public Interest Research Group (USPIRG), the National Wildlife Federation, the Sierra Club, Defenders of Wildlife and the Taxpayer Assets Project.

The report describes an irrigation project that wastes $4 billion; an Indiana highway that would waste more than $800 million; an unneeded Los Angeles County highway that would cost $900 million; $1 billion in taxpayer losses through handouts to mining conglomerates under the 1872 Mining Law; and the proposed $600 million Auburn Dam in California.

"These programs are a double whammy on the taxpaying public because they waste money and harm the environment," says Friends of the Earth’s Ralph DeGennaro.

Consol Directors Let Off

IN A SETTLEMENT AGREEMENT that outraged environmental and Native American activists, the Department of Interior’s Office of Surface Mining (OSM) in January 1995 agreed to drop penalties proposed against 18 executives of Consolidation Coal Co. (Consol ) for failing to reclaim a coal mine.

Eighteen officers and directors of the Consolidation Coal Company, the second largest U.S. coal company, were each hit with $198,000 in civil penalties last year for the company’s failure to reclaim its Burnham mine located on a Navajo reservation in New Mexico. In settling the case, the penalties were dropped and Consol agreed to reclaim the mine.

The decision prompted a harsh reaction from a coalition of Native American and environmental groups. "We are asking that Bob Uram step down as director of OSM and that he be replaced with someone who is willing to enforce the law, especially on Indian lands," says Ernest Diswood of the Navajo Nation’s Nenahnezad Chapter. "We have found that OSM’s top management has hampered, interfered with and taken steps to keep enforcement from happening on Indian lands."

Without addressing any of the specific criticism of Uram’s handling of the Consol case, Interior Secretary Bruce Babbitt issued a statement in February 1995 defending him. "OSM is fast becoming one of the finest regulatory agencies in the country, and Bob Uram deserves much of the credit for this accomplishment," Babbitt said.

Tom Hoffman, vice president of public relations at Consol, says the company was not to blame for failing to reclaim the mine. Last year, he says, OSM’s Albuquerque office, responding to a complaint, demanded that the company begin reclamation within 90 days. Consol was caught in a catch-22, he says, because the Denver OSM office forbid the company from proceeding until it had approved the reclamation plans and the Denver office did not view the Consol site with urgency.

"There is no reason a company our size would just walk away from those [reclamation] obligations," Hoffman says.

- Russell Mokhiber

Correction: The headline "Consol Fined" in the January/February 1995 Names in the News was inaccurate. As the story indicated, proposed fines were levied against executives and officers of the company, not against the company itself.




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Burmese Looking Glass: A Human Rights Adventure

By Edith Mirante

Grove Press, 1993



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The War Against the Greens:

The "Wise Use" Movement,

the New Right, and

Anti-Environmental Violence

By David Helvarg

San Francisco: Sierra Books, 1994

Quotations From Speaker Newt

Edited by Amy and Peter Bernstein

New York: Workman Publishing, 1995


Edited by Tom Connor & Associates

New York: Doubleday, 1995


Edited by Geoff Rodkey

New York: Pocket Books, 1995

Freedom From Fear and Other


By Aung San Suu Kyi

New York: Penguin Books, 1991

Corporate Crime and Violence

By Russell Mokhiber

San Francisco: Sierra Books, 1988

Corporate Crime Reporter

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in the U.S. Food Supply

By Susan Elderkin and Richard Wiles

Environmental Working Group

Washington, DC, 1995

Green Scissors Report

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