Multinational Monitor

JUL/AUG 2005
VOL 26 No. 7


Merger Mania and Its Disontents: The Price of Corporate Consolidation
by James Brock

Indigenous People's Power: Global Mobilization Scores Dramatic Gains - With Many Challenges Ahead
by Marcus Colchester

Crisis of Credibility: the Declining Power of the International Monetary Fund
by Walden Bello and Shalmali Guttal

Programmed to Fail: The World Bank Clings to a Bankrupt Development Model
by Walden Bello and Shalmali Guttal

Heartache and Hope in Africa: The Failures of Market
Fundamentalism and Hope for an Alternative
by Soren Ambrose and Njoki Njoroge Njehu

Victories! Justice! The People's Triumphs Over Corporate Power
by Robert Weissman


Offshore: Tax Havens, Secrecy, Financial Manipulation, and the Offshore Economy
An Interview with William Brittain-Catlin


Letter to the Editor

Behind the Lines

The Global Justice Movement

The Front
Bolivia Insurrection -
ICSID Bleeds Argentina

The Lawrence Summers Memorial Award

Names In the News


Behind the Lines

Wartime CEO Profiteers

Military business is very good for CEOs. That’s the conclusion of an August report on executive compensation issued by the Washington, D.C.-based Institute for Policy Studies and the Boston-based United for a Fair Economy.

From 2001 to 2004, at the 34 publicly traded U.S. corporations among the 2004 top 100 companies with 10 percent or more of their revenues from defense contracts, average CEO pay increased 200 percent. By contrast, large company CEO pay as a whole increased by only about 7 percent.

The pay ratio between defense CEOs and army privates soared to 160 to 1, up from just 89 to 1 in 2001.

Among the key findings of the report:

  • A body armor profiteer received a 13,349 percent raise since 9/11. David H. Brooks, CEO of bulletproof vest maker DHB Industries, earned $70 million in 2004, 13,349 percent more than his 2001 compensation of $525,000. Brooks also sold company stock worth about $186 million last year. In May 2005, the U.S. Marines recalled more than 5,000 DHB armored vests after questions were raised about their effectiveness. By that time, Brooks had pocketed over $250 million in war windfalls.
  • United Technologies CEO George David made $88 million in 2004 — the same year that his company faced the humiliating cancellation of its Comanche helicopter program. The U.S. Army requested it be scrapped after investing $6.9 billion and 21 years of effort into the helicopter (including 10 years with David at the helm).
  • Halliburton CEO David Lesar received a 171 percent pay raise between 2003 and 2004, the period when government auditors were tallying up $1.4 billion “questioned” or “unsupported” charges by the company for work in Iraq.

“As the death toll mounts among Americans and Iraqis, it seems particularly unjust to see executives profiting personally from the horrors of war,” says report co-author Sarah Anderson of the Institute for Policy Studies.

Energy Policy Meltdown

In a move that consumer and environmental critics denounced for showering subsidies on the oil and nuclear industries, sure to worsen pollution and removing vital consumer protections, President Bush in August signed into law the Energy Policy Act.

The bill provides $4.5 billion in tax breaks and more than $7 billion in subsidies to the fossil fuel industry, and eases environmental regulations for oil and gas drilling and refining.

It will provide billions more in corporate welfare for the nuclear power industry. According to Public Citizen, the bill provides $2.9 billion in R&D supports for the nuclear industry, $3.25 billion in construction subsidies, $5.7 billion in operating aid (including re-authorization of the Price-Anderson Act, which limits the industry’s liability in event of an accident), and $1.3 billion in shut-down subsidies.

The bill also repeals the Public Utility Holding Company Act, a venerable statute that prevented cross-ownership between utilities and other industries, and established a strong structure of state-based regulation of utilities. Repeal of the law will pave the way for massive consolidation among utilities and cross-industry ownership.

The bill “is a simply stunning display of congressional indifference to our serious energy problems and an example of corporate welfare at its worst,” says Public Citizen President Joan Claybrook. “It does nothing to ease prices for gasoline or electricity for consumers, does not address climate change and utterly fails to chart a course toward a more energy efficient, cleaner future for America.”

“Not only does this bill hand over billions in taxpayer subsidies to mature industries that should not need — and certainly don’t deserve — government handouts,” Claybrook warns, “it rolls back the clock to the 1920s in terms of electric utility regulation. The bill’s repeal of the Public Utility Holding Company Act will set the stage for utility mergers that could very well destabilize an industry that for the past 70 years has brought us the world’s most reliable electricity grid. Under this legislation, banks, oil companies and even foreign countries could purchase electric utilities, further removing them from local control and state oversight.”

The bill does not include measures to open the Arctic National Wildlife Refuge to oil and gas exploration and a product liability waiver for producers of the fuel additive MTBE that has contaminated groundwater across the nation. These provisions had held up congressional passage of the energy bill for years, but Republican leaders say they will try to get them included in other legislation.

Rewarding Halliburton

Halliburton’s unit handling Pentagon contracts saw profits jump 284 percent in the second quarter, the company announced in July.

The increase in profits was primarily due to the Pentagon’s payment of “award fees” for what military officials call “good” or “very good” work done by Halliburton’s KBR division in the Iraq and the Persian Gulf.

Despite the scandals that plague KBR’s military contracts, the Pentagon gave $70 million in “award” fees to the company, along with four ratings of “excellent” and two ratings of “very good” for the troop logistics work under the Army’s contract with Halliburton.

The Pentagon has provided preferential treatment to Halliburton on a number of occasions, including the concealment from the public of critical reports by military auditors.

Audits conducted by the Pentagon’s Defense Contract Audit Agency determined that Halliburton’s KBR unit had $1 billion in “questioned” expenses — considered “unreasonable” by military auditors — and $442 million in “unsupported” expenses — determined to contain no receipt or any explanation on how the expenses were disbursed. But top Pentagon brass ignored these audits and kept the honey flowing.

Halliburton’s earnings announcement comes on the heels of new reports showing the Iraq and Afghan wars have already cost U.S. taxpayers $314 billion and that another 10 years of war will cost $700 billion.

Chinese Environmental Riots

Thousands of rural Chinese rioted in July to protest pollution from a pharmaceuticals plant that is poisoning miles of river water. The large-scale protest, in Xinchang, a village 180 miles south of Shanghai, marked a high point in ongoing local demonstrations against the non-responsiveness of government authorities to community grievances.

Reporters said that as many as 15,000 people engaged in a pitched battle with police at the Jingxin Pharmaceutical factory, throwing stones and braving tear gas.

“The riots in Xinchang are a part of a rising tide of discontent in China,” reports the New York Times, “with the number of mass protests like these skyrocketing to 74,000 incidents last year from about 10,000 a decade earlier, according to government figures. The details have varied from incident to incident, but the recent protests all share a common foundation of accumulated anger over the failure of China’s political system to respond to legitimate grievances and defiance of the local authorities, who are often seen as corrupt.”

Weeks prior to the riots, Xinchang villagers told the Times, they sent a small group of representatives to present demands for compensation, including free health examinations and medical care for people who live near the factory which produce antibiotics. But security guards beat the representatives.

The villagers responded by changing their demand to insist on the outright closure of the factory.

“Our fields won’t produce grain anymore,” a 46-year-old woman who lives near the plant told the Times. “We don’t dare to eat food grown from anywhere near here.”

“They are making poisonous chemicals for foreigners that the foreigners don’t dare produce in their own countries,” said her husband, a former worker at the factory who had quit because of illness and was one of the first to join the protests. Explaining why he had been willing to rush into the plant, despite signs warning of toxic chemicals all about, he said, “It is better to die now, forcing them out, than to die of a slow suicide.”

Bayer Antibiotic Restricted

Citing fears of the development of superbugs that could harm humans, the U.S. Food and Drug Administration (FDA) in July announced that it would ban the use of Bayer Corporation’s antibiotic Baytril for the purpose of treating bacterial infections in poultry.

This action is the first time that FDA has ever withdrawn an agricultural antibiotic from the market because of concerns about antibiotic resistance affecting human health.

The use of Baytril in poultry facilitates the spread of antibiotic-resistant bacteria, in poultry and ultimately in humans, the FDA found. In recent years, and especially as poultry operations have shifted to factory farms with massive numbers of birds in confined spaces, agribusiness has increasingly dosed poultry with antibiotics, including for prophylactic purposes.

FDA issued the ban because it concluded that the use of Baytril, a Cipro-like antibiotic with the generic name enrofloxacin, in poultry caused resistance to emerge in Campylobacter, a bacterium that causes foodborne illness. Chickens and turkeys normally harbor Campylobacter in their digestive tracts without causing them to become ill. Baytril does not completely eliminate Campylobacter from the birds’ intestinal tracts, and those Campylobacter bacteria that survive are resistant to Cipro, the drug that would normally be used to treat humans with the bacteria.

The proportion of Campylobacter infections that are resistant to Cipro and other drugs in its class has increased significantly — to 21 percent, according to a 2002 study — since the use of Baytril in poultry was approved in the United States.

“This is a very important decision because it is the first time FDA has cited antibiotic resistance as the reason for banning use of a drug,” says Margaret Mellon, director of the food and environment program at the Union of Concerned Scientists. “But FDA also needs to take additional steps to address inappropriate antibiotic use in agriculture, particularly use of medically important antibiotics as feed additive uses.”

The Union of Concerned Scientists estimates 70 percent of all antibiotics used in the United States — about 25 million pounds annually — are routinely fed to poultry, swine, and beef cattle not to treat illness but rather to promote slightly faster growth and to compensate for overcrowded and unhealthy conditions in concentrated animal feeding operations. More than half of these drugs are identical or similar to antibiotics that are important in human medicine.


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