Revolt of the Dammed: The Bolivian Water Wars
As if on queue from the LOTIS group, a business-friendly columnist (are there any others?) for the International Herald Tribune paved Ambassador Zoellick’s way to the WTO meeting with this:
Here we go again: Enemies of open markets are seeking to derail another set of trade negotiations intended to increase world prosperity, to the benefit of both rich and poor nations.*
*This from Reginald Dale; International Herald Tribune, April 3, 2001, but I could have chosen any of the columnists from the U.S. press establishment.
My God, who are our Enemies? “Anti-globalization activists,” warned the Trib writer, and anyone who opposes GATS. What should be the punishment for those opposing world prosperity?
Should we arrest them? Shoot them? Well, that had already been done—in Bolivia.
One of the key aims of the GATS treaty is to turn publicly owned water services over to private enterprise. Governments have built a trillion dollars in piping systems worldwide, with no intention of turning a profit. The WTO, the World Bank, Azurix (subsidiary of Enron), Vivendi (formerly Lyonnaise des Eaux) and an outfit called International Water Limited thought this a terrible waste. But water was cheap stuff—foolish governments seemed to give the stuff away, just covering the cost of the pipes. Higher prices would make markets in water possible, and lure entrepreneurs to the spigots.
Public water was first sold off to corporate operators in England. Prices jumped 250 percent and watering English gardens has, at times, been criminalized. The English, as they do, grumbled, then shrugged, then paid. Meeting no resistance, the water privateers marched on Egypt, Indonesia, and Argentina. But when they reached Cochabamba, Bolivia, something happened that the water barons did not expect. The thirsty poor resisted. In the end they paid, too—in blood.
“Protests Claim Two Lives” was squeezed into a single paragraph blip in the World in Brief page of my paper, Britain’s Guardian. In U.S. papers, the story of the Bolivian dead vanished under Monica Lewinsky’s dress. It was April 2000, and I used the Internet and my turista Spanish to try to find out what the heck was going on there.
First, let’s correct the Guardian’s arithmetic. Six died in Bolivia. Another 175 were injured, including two children who were blinded, after the military fired tear gas and bullets at demonstrators. The victims were opposing the 35 percent hike in water prices imposed on the city of Cochabamba by the new owners of the water system, International Waters Ltd. (IWL) of London. Following the Cochabamba killings, Hugo Banzer (once Bolivia’s dictator, then the elected president) declared a nationwide state of siege, setting curfews and abolishing civil liberties. On April 12, 2000, just after the martial law declaration, World Bank president Wolfensohn took time out from his own preparations against protests in Washington to comment to reporters, “The riots in Bolivia, I’m happy to say, are now quieting down.”
I contacted Oscar Olivera, leader of the Cochabamba protests, to ask him how he organized the riots. On April 6, following the first protests against the price increases, Olivera, a trade union official, with a coalition of fourteen economists, congressmen, lawyers and community leaders, accepted a government invitation to discuss the IWL price hikes. After entering the government offices in Cochabamba, Olivera and his colleagues were arrested. With Olivera in chains, the riot outside the building could only have been directed by the leader of the five hundred protesters, Cochabamba’s Roman Catholic archbishop (figure 4.3).
Fig. 4.3. From February through April 2000, Bolivians, including this Quechua woman, took to the streets of Cochabamba to protest huge increases in the price of drinking water. (@ Tom Kruse)
(Figures can be seen in the PDF at the end of Part I, here)
There is, of course, the possibility that the World Bank’s Wolfensohn had it wrong, and that what he calls rioters were in fact innocent victims of deadly repression. Olivera, one of five protest leaders released (the government banished the seventeen others to internal exile in the desert), flew to Washington to try to speak with Wolfensohn. But the Bank prez is a busy man and Olivera left without a meeting.
Never heard of International Water Limited OWL)? It’s just another alias for Bechtel Corporation of San Francisco, USA, once headed by Nixon’s secretary of state, George Shultz. Also feeding at the Bechtel trough: Reagan secretary of defense Casper Weinberger (pardoned for his crimes by Bush Sr.) and, in years past, two former directors of the CIA, John McCone and William Casey (whose crimes are unpardonable).
From its U.S. headquarters, Bechtel issued a statement flatly denying the upheaval in Bolivia had anything to do with its water price hikes. Rather, IWL’s American owner hinted darkly that the revolt was partly the work of those opposing a “crackdown on coca-leaf production.” Olivera insists that neither he nor the archbishop traffics in narcotics.
The price hikes that triggered the water war were driven by IWL’s need to recover the cost of the huge Misicuni Dam project. Water from the Misicuni Dam system costs roughly six times that of alternative sources. Why would IWL buy water from a ludicrously expensive source? Perhaps because IWL owns a part of the Misicuni Dam project?
The public had one other objection with IWL’s charging for the dam project: There is no dam. It has not yet been built.
It is a basic tenet of accounting that investors, not customers, fund capital projects. The risk takers then recover their outlay, with profit, when the project produces a product for sale. This is the heart, soul and justification of the system called “capitalism.” In theory, anyway. But when a monopoly operator gets its fist round a city’s water spigots, it can pump the funds for capital projects (even ones that cost 600 percent over the market) from captive customers rather than its shareholders.
Samuel Soria, the Bolivian government’s former consultant on the water projects, said he was unable to extract evidence from IWL that it had put any funds at all into the operation. Soria, chairman of Cochabamba’s Council of Economists, was told the water system’s purchasers had deposited $10 million into a Citibank account in New York, but Soria found no evidence of its transfer to Bolivia. Water prices, he feared, could eventually rise 150 percent under IWL management.
Luis Bredow, the editor of Cochabamba’s newspaper Gente [People], told me that his investigation concluded that IWL/Bechtel grabbed the entire system for nothing. “No money was shelled out by anybody” for the water company, he said. Bredow attributes these exceptionally favorable terms to IWL’s partnering with former Bolivian president Jaime Paz Zamora, leader of a political party allied to Banzer.
I contacted IWL’s spokesman in London, who said little more than, “How did you find out that IWL was involved in Cochabamba?” (The company’s Bolivian group is called Aguas de Tunari.) In fact, Bechtel’s IWL operation, based out of London, is getting to be, to use Bredow’s term, “misterioso.” To quell the spreading demonstrations, President Banzer announced cancellation of the water privatization on April 5, 2000.
A day later, word leaked that IWL was back in the saddle at the water company and people took to the streets again, nationwide. On April 10, the panicked government declared that the foreign consortium had “abandoned” their franchise when its British CEO supposedly fled the country. But I was able to track down the IWL executive at a La Paz hotel where, his associates told me, they were about to open negotiations with the Banzer government.
It can’t be said that Bechtel brought misery to Cochabamba; they found plenty already there. Intestinal infections leading to diarrheal illness is Bolivia’s number-one disease and child killer, a result of the fact that water hookups and sanitation reach only 31 percent of rural homes.
World Bank director Wolfensohn has a solution to the lack of water: raise its price. So pay up, Wolfensohn demanded of the protesting Bolivian water users in his extraordinary April 12 diatribe against the “rioters.” Wolfensohn’s shut-up-and-pay-up outburst contradicts the internal counsel of his own experts. In July 1997, at a meeting in Washington, the Bank’s technocrats laid out to the Bolivians the case against Misicuni and even warned about social upheaval if prices rose. According to World Bank insiders (I won’t use their names lest I get them fired), the Bank’s hydrologists and technicians devised a water plan for Cochabamba at a fraction of Misicuni’s bloated cost.
This alternative could be paid off without raising prices on current customers. Water supply and distribution, the Bank’s experts told me, would be divided between two companies to avoid the kind of self-dealing inherent in IWL’s Aguas de Tunari setup. So why did Wolfensohn condemn the protests against a project the World Bank itself found dodgy and damaging? Long before ministerial limousines clogged the U.S. capital for the April 2000 World Bank “Ministerial” meeting, the big policy decisions were settled in far-flung “sectoral” meetings. In the case of water, nearly one thousand executives and bureaucrats gathered in The Hague in March 2000 to review and refine a program to privatize the world’s water systems.
But these private operators who carved the planet into “market segments” in March can only turn in profits if prices rise radically and rapidly. IWL secured from Bolivia a 16 percent real guaranteed return. This profit boost itself was enough to account for the initial 35 percent hike in rates. The ransacking of Bolivia’s water supply would not have occurred without a bit of helpful arm-twisting by the World Bank. The IMF, World Bank and InterAmerican Development Bank have written water system sell-offs into what they modestly term “master plans” for each Latin American nation. Consortia such as IWL were formed to capture these cast-off public assets.
The IMF and World Bank justify the sell-offs by claiming that privateers are committed to delivering capital for desperately needed water system repairs and expansion. But, like a gigolo’s flowers, the promises wilted rapidly.
Cochabamba’s protest organizers knew that just across the border in Buenos Aires, the region’s first privatization consortium eliminated 7,500 workers, the system bled from lack of maintenance and prices jumped, repeating the story of virtually every water privatization from the Philippines to the English midlands. In Argentina, the new owners of the Buenos Aires system include, notably, the World Bank itself.
The reversal of the water system sell-off and the general boycott against higher water bills marked the first successful resistance to the globalization blitzkrieg. From Wolfensohn on down, the globalizers were not happy. The big money in the globalization racket is not in hawking video decks to Bangladeshis. The real loot is in rapid low-capital takeovers of former state assets, concentrated in infrastructure where monopoly control virtually guarantees outsized profit. From the British Gas takeover of the Sao Paolo gas company to United Utilities’ buyout of the Manila water company, it all seemed a riskless romp—until a few thirsty, angry peasants in the Andes decided they could stop the new global order in the streets.
Bolivia Vanishes: See Style Section
You didn’t read about the killings in Bolivia in your newspaper?
Come now, it. was right there in the Washington Post… in paragraph ten of the story on page thirteen of the Style section. I kid you not: the Style section. It dangled from the bottom of a cute little story on the lifestyle of some local anti-WTO protesters.
And so one of the most extraordinary international stories of 2000 just went PFZZZT! —and disappeared from sight.
Some vital stories get buried because they fail the “sex” test of hot photos or have no domestic news hook. But Bolivia had it all. TV networks could obtain high-quality video footage of the military gunning down civilians. At the center of this story were huge American corporations, including the political players at Bechtel. Most importantly, this general strike in South America offered a dramatic and bloody parallel to protests in Washington occurring on the very same days. By any normal news measure, this was a helluva story of globalization stopped dead in its tracks.
When Wolfensohn called the massacred protesters “rioters” he was hoping to discourage the press from writing sympathetically about the Bolivians. He need not have worried. There was nothing on the tube; and aside from the mention in the Post’s Style section and a few news wire paragraphs in the New York Times, for the mainstream media the Bolivians simply vanished.
However, the little bit of coverage obtained was actually worse than none.
The Financial Times sent a reporter to Bolivia. The lead paragraph of his report informed us that on the wall of the protesters’ headquarters hung “faded portraits of Che Guevara and Fidel Castro.” There was no mention at all that six people had died.
The FT reporter, who should know better, picked up the line that drug traffickers were somehow behind the water protests. The fanciful accusation was put out on a Bechtel Corporation news release, but hey, a corporate press release is better than a fact.
Bolivians themselves were also denied the full story, but by more direct means. The courageous editor of the Bolivian newspaper Gente published an investigative series exposing the sweetheart deals between the U.S.-European investors and politically connected Bolivians. At the end of April, Gente’s publishers submitted to threats of financial ruin by the water system’s Bolivian partners and demanded that their editor, Luis Bredow, print a retraction of his reports. Instead, Bredow printed his resignation. Dr. Soria, the government expert who spoke with me about his hunt for Bechtel’s assets, faces arrest for making his findings public.
As to the Cochabamba protest leader Oscar Olivera, his release was secured by an international campaign (more than once—he has been arrested three times). That was good news I got the night after I debated Thomas Friedman. But what of “Protests Claim Two Lives,” the note that sent me on this trail? Needless to say, the Western papers told me nothing, nor did the Bolivian press; no names were given for these protesters who lost their lives. Who were they? Coca dealers, as Bechtel claimed? Provocateurs? Guerrillas? Months later, I finally obtained this from a colleague:
IN A MESSAGE DATED 9/5/00 9:29:32 AM EASTERN DAYLIGHT TIME, SENDER WRITES: SUBJECT HEADING: BOLIVIA DEAD ON THE AFTERNOON OF SATURDAY APRIL 8TH 17 YEAR OLD VICTOR HUGO DAZA WAS KILLED BY A SHOT THROUGH HIS FACE. A FRIEND OF MINE KNOWS HIS FAMILY AND SAYS HE WAS IN TOWN RUNNING AN ERRAND FOR HIS MOTHER.
Bad TRIPS at the WTO
In July 2002, the New York Times reported that George W. Bush had saved Africa. That big-hearted lug proposed giving African and Caribbean nations half a billion dollars for AIDS drugs. Combine this with Bill Clinton’s deal with the pharmaceutical companies to practically give away their AIDS drugs to Africa at 75 percent off their list price and I was ready to concede that private enterprise without regulations could, at times, perform miracles.
But just when I was ready to announce Christmas in July, I came into possession of a twelve-page document from Argentina.
It appears to have originated in the Office of the United States Trade Representative in Geneva (which does not deny the document’s authenticity). The confidential official missive, dated June 2000, threatens Argentina against opening its borders to the drug trade—not the fun stuff, but sales of legal, licensed medicines. If Argentina did not end its commitment to free cross-border trade in pharmaceuticals, wrote the U.S. trade rep, America would keep Argentina on the “Section 301 Watch List”—a kind of death row for trading partners.
There’s more to the World Trade Organization than GATS and combat over water ownership. The WTO treaty most pertinent here is the psychedelically named TRIPS: Trade-Related Intellectual Property Rights.
If you read the gospels of globalization apostles, you might get the impression that the World Trade Organization is all about doing away with tariffs and trade barriers. Only in your dreams. In the real world, the WTO is the mechanism for privatizing the tariff system. Once, countries protected their workers and local industry behind taxes at national borders. In the new world trade order, global corporations may demand levies against nations that sell or buy products outside the zones they have marked out by brand names and market segments. TRIPS is the WTO’s penal system for countries caught importing or exporting in contravention of marketing plans of corporations that own ideas.
The story of TRIPS, Africa and Argentina begins with this unfun fact: 25.3 million people in Southern Africa are going to die of AIDS unless medicine arrives now. Luckily, Brazil, India and, most aggressively, Argentina can make the necessary drugs dirt cheap and ship them to the dying. But U.S., British and Swiss pharmaceuticals giants howled about the proposed cross-border shipments.
During the Clinton administration, the U.S. trade cops, led by then-Vice President Al Gore and backed by Big Pharma, halted the life-saving plan of selling cheap Argentine drugs to South Africans—Nelson Mandela’s pleas, Nobel Prize and flowered shirts notwithstanding.
Unfortunately for Gore, who was running for president at the time, the let-them-eat- aspirin policies he was advocating resulted in packs of enraged Gay-mericans protesting his every campaign stop, hollering about his killing more Africans than Michael Caine did in Zulu. This did not make good TV for Al.
In response President Bill found a few billion to quell the restless natives. However, the billions came with strings attached—or, more accurately, chains and manacles. South Africa had to buy 100 percent of the medicine from the United States and pay back all the cash at “commercial interest rates.”
On the supply side of this scheme to stop South Africa breaking the de facto embargo on free trade in pharmaceuticals was the U.S. trade rep’s poison pen letter to Argentina. South Africa hoped to use a loophole in TRIPS that permits the importing of patent drugs in extreme emergencies, even without the patent holder’s approval. Initially, Clinton retaliated against South Africa by taxing some of its imports to the United States—until the anti-Gore demos. The U.S. trade rep’s threat against Argentina indicates that the Clinton administration re-aimed the sanctions missiles at Argentina to avoid the impolitic Mandela imagery, while still cutting off South Africa’s AIDS drugs supply at the source.
If Argentina hadn’t backed down, there would have been an expected WTO show trial, after which Argentina’s economy would have been hung from a pole in Geneva as an example for India and Brazil, other potential exporters. As Argentina was already on its knees, it gave in quickly to Clinton’s swift kicks to its economic gonads. The Africans were too wise and too poor to accept Clinton’s fraudulently generous loan con. Bush promises a fourth of the Clinton sum—albeit as a grant, not a loan. But one thing did not change with the White House party turnover: The U.S. trade rep (now Zoellick) remains the knuckle-dragging enforcer of Big Pharma’s withholding medicine by authority of WTO TRIPS.
Maybe I’m not being fair. After all, TRIPS seeks to protect and compensate manufacturers for their risky investments and inventiveness in creating medicines like AZT, Glaxo-Wellcome’s anti-AIDS drug. Right?
Glaxo was inventive, all right, but not in discovering AZT. A Professor Jerome Horowitz synthesized the drug in 1964, under a grant from the U.S. government’s National Institutes of Health (NIH). A Glaxo unit bought the formula to use on pet cats.
In 1984, an NIH lab discovered the HIV virus. The government lab urgently asked drug makers to send samples of every anti-retrovirus drug on their shelves. NIH spent millions inventing a method to test these compounds. When the tests showed AZT killed the virus, the government asked Glaxo, as the compound’s owner, to conduct lab tests. Glaxo refused. You can’t blame them. HIV could contaminate labs, even kill researchers. So the NIH’s Dr. Hiroaki Mitsuya, combining brilliance, bravery and loads of public cash, performed the difficult proofs on live viruses. In February 1985, NIH told Glaxo the good news and asked the company to conduct human trials.
Glaxo refused again. Here’s where Glaxo got inventive. Within days of the notice, the company filed a patent in Britain for its “discovery.” Glaxo failed to mention the U.S. government work.
But Glaxo has a heart. In July 2000, the American-British behemoth announced it would sell South Africa an AZT-based drug for only $2 a day per patient, more than 75 percent off the price charged in America and Europe. I called Glaxo USA to say thanks but, after a few questions, it became clear that the $2 price merely matched the Brazilian/Argentine prices, still about triple the cost of production.
Think about that. If $2 is the free market price, then Americans and Europeans pay 400 percent over the odds, price discrimination explicitly protected by TRIPS. That’s the funny thing about the WTO’s expansion of so-called intellectual property rights. TRIPS trade barriers are sold in the West on the slick line that those people—the dark, un- industrious tribes of the Southern Hemisphere—are trying to steal our inventions. In fact, says expert Jamie Love of the Consumer Project on Technology in Washington, Western patients have as much to lose as Africans under the new regime of thought ownership. This came to Love graphically in 1997 when Maude Jones, a thirty-year-old London woman, called him, begging help to obtain Taxol. The drug could have cured her breast cancer, but the National Health Service did not prescribe it because of its stratospheric cost.
There is no patent on Taxol. U.S. government scientists discovered it. But pharmaceutical behemoth Bristol-Myers Squibb, because it performed minor work calculating dosage levels, holds the intellectual property rights on dose-related data, even though the data were originally collected by government. Even without a patent, Britain’s data protection laws give Bristol-Myers lockup control on Taxol in the United Kingdom for ten years.
Bristol-Myers takes no chances with its cancer monopoly. Taxol comes from the yew tree. While Western drug companies have long argued that Asian rain forest plants are theirs for the taking without paying royalties, Bristol-Myers obtained from Congress the exclusive right to harvest yew trees on U.S. government lands, about the only place it grows on the planet. For these public assets, B-M paid nothing.
But Maude Jones paid. Ultimately, the company was shamed into offering her the medicine for free, if she moved to America. However, doctors concluded the offer was probably too late. As her family already faced bankruptcy, Maude (not her real name) phoned Love to say she had chosen to die.
Love told me the young woman, from her deathbed, hoped South Africans, Americans and Europeans would discover “a helpful solidarity.” In AIDS and breast cancer, the stricken North and South share a horrific commonality as the new landless peasantry in the apartheid of intellectual property rights.
Dr. Dre Guards Sony’s Plantation House
When I asked the Doctor about the WTO TRIPS treaty, he didn’t mince words: “Now shut the fuck up and get what’s coming to you!” In my exchange with Endre Young, the artist known as Dr. Dre, this was the example he gave of his copyright intellectual property, which was reproduced, without compensation, by ne’er-do-wells accessing www.napster.com. Mr. Young filed suit and a California judge, to protect this gentleman beset by copyright pirates, effectively ordered Napster’s closure. Mr. Young was philosophical about the ruling: “I’m in a murderous mind-state with a heart full of terror.” Yo, what’s going on here? Behind the angry Black face of the rapper’s assault on Napster are the grinning white faces of his co-plaintiffs, Recording Industry Association of America, front for the Big Five record companies—BMG, EMI, Sony, Time-Warner, and Universal. Together, these five media megaliths distribute over 95 percent of all music CDs sold in the Western world. Behind their public tears shed for compensating their artists—and since when did that become a concern of the music industry? —is the deeper agenda of protecting this musical OPEC.
Now let’s look at the B-side of the recording industry combine. According to consent decrees in little-noticed cases filed by the U.S. Federal Trade Commission, the Big Five have for years bullied retailers to ensure that you get whacked for $36 for that Abba tribute CD you just had to have. As Bill Gates teaches us, a well-functioning monopoly fleeces its customers at one end while simultaneously squeezing suppliers at the other. In the case of the music cartel, the suppliers of raw material—the musicians—have to get through one of five tightly guarded gateways. As a result, the only stuff that makes it out the other end of these resistant sphincters onto the airwaves and into the big stores are Spicebunnies, Eric Clapton de-plugged, prefabricated bad boys like Eminem and middle-aged moguls’ talent-free trophy wives (which should not be taken as a dig at the gifted Mariah Carey).
In other words, the Big Five don’t just control how you buy what you want, they tell you what you want.
It used to be that industry’s inputs, the talent, railed against this closed system. That’s where Dre’s posse comes in. His tinkertoy “ganstas” give street cred to the moguls’ assault on the Internet, the first serious alternative route for distributing music Time- Warner hasn’t chosen for you. The system suits rap producer Dre just fine as the cartel allows him and Puff Daddy to jointly lock out musicians that could replace them or the artists in their stable, such as Mr. Marshall Mathers (Eminem), author of the “get what’s coming to you” lyric. Dre’s no fool. He knows that control of his little patch is dependent on his defending his bosses’ intellectual property plantation.
Dre v. Napster is the musical sideshow of the bigger war over ownership of intellectual property, ranging from ditties to DNA.
When Nelson Mandela suggested that South Africa could issue “compulsory licenses” for local manufacture of cheap AIDS drugs, Al Gore threatened him with the WTO hammer. Yet, at the same time, at the behest of the “Gore-Techs,” Al’s Silicon Valley billionaire buddies from AOL and Oracle, the U.S. Justice Department compelled Microsoft to divulge its proprietary codes and license Windows software to Gore’s buddies at a government-capped price.
Hey, I’m all for the U.S. seizure of Gates’s intellectual property, but I can’t ignore the rank whiff of hypocrisy.
But then, hypocrisy is the oxygen of the new imperial order of thought ownership. Every genteel landlord of fenced-in intellectual real estate began life as a thief. Under WTO and U.S. law today, how many products built on others’ ideas might never have made it to market? As Isaac Newton would say now, “If I see further than others, it is because I stand on the shoulders of giants too dumb to patent their discoveries.”
I bet Mr. Gates, so quick to shout “piracy!” could name two products that depend heavily on the lifted intellectual discoveries of others: MS-DOS and Windows. To make sure no one could steal from him what he had so freely boosted, Gates has run an international campaign to legally lock up his monopoly on ideas. Bill’s nobody’s fool. He must know that if the intellectual property defenses are breached, it will come from the need to get cheap AIDS drugs to Africa. So we see Gates putting his two cents (in his case, two billion) into the Africa AIDS holocaust issue. In February 2002, Bill and wife Melinda made the cover of Newsweek for their big-hearted philanthropy. The grinning couple’s foundation has spent hundreds of millions for AIDS treatment in Africa, working paw-in- claw with Merck and other Big Pharma corporations tied to a PR campaign that drowns out the calls of doctors pleading to end TRIPS restrictions. If there’s any doubt where the Gates’s hearts lie, the Wall Street Journal notes that their foundation has, oddly, invested over $200 million in drug company stocks. If this “charitable” operation eviscerates protest against the TRIPS thought-police and medical patents are upheld, Gates’s donations could have the effect of killing more people than they save.
Not everyone is entitled to compensation. The WTO requires, on penalty of sanctions, that every nation pass laws granting patents on “life-forms,” by which Americans and Europeans mean genetically modified Frankenstein seeds or drugs, often remakes of traditional genomes shoplifted from Third World forests.
When Thailand mischievously registered traditional medicines as that nation’s intellectual property, the U.S. trade representative wrote that turning nature’s bounty into patent property could “hamper medical research” (reinforcing the notion that Americans are incapable of irony).
WTO is sold as the defender of unfettered markets. But Lori Wallach of Ralph Nader’s Global Trade Watch notes that WTO’s TRIPS exists to prevent free trade. No pharmaceutical or media magnate has to suffer the same lectures that workers who lose their jobs to uncontrolled imports do—that sales lost to open borders will benefit them in the long run.
As the Napster case shows, the new expansion of intellectual property rights has little to do with compensation for the creator and everything to do with corporate control.
Still, shouldn’t originators receive remuneration? Well, Dr. Dre swears his touching soliloquies about his piteous “bitch mama” are taken from The Streets. Has he sent royalty checks to the brothers?
I confess I never interviewed Dre. He didn’t return my call. But the words quoted here are, unarguably, his intellectual property, and I wish to compensate him. I want to make sure that you, Dre—and Sony and Microsoft and Glaxo-Wellcome—get what’s coming to you.
The Price of Dissent:
Venezuela, Exception to the New Globalization Order, Taken Hostage
Sometimes a picture is worth a thousand lies. Take the San Francisco Chronicle’s front-page story of June 13, 2002. Not much of a story actually, just a big photo of angry people and a caption under the headline “100,000 March Against Venezuelan President.” The caption said the angry people wanted Hugo Chavez, president of Venezuela, kicked out. The demonstrators say Chavez is a dictator. There was no story beyond the photo and caption from Reuters (Mr. Manisty’s amenable service), but they ran in almost every paper in the USA.
I’d just come back from Caracas—and I have to report the photo is legit. In fact, I saw a good 200,000 march against President Hugo Chavez. But what the American papers did not report was that nearly half a million Venezuelans marched for Chavez (figure 4.4).
Fig. 4.4. The demonstration in Caracas you weren’t supposed to see.
By the time the story reached the New York Times, the anti-Chavez crowd had metastasized into 600,000, a fantasy easy to print as the paper of record had no reporter in Venezuela. Pro-Chavez demonstrations of up to a million citizens had, appropriate to Latin America, “disappeared” from American papers and broadcasts.
This Stalinesque cropping of the news simply continued the yearlong disinformation campaign against the populist South American president. It hit bottom when, on April 12 and 13, 2002, every major paper in the USA—with no exception—announced that Chavez had resigned his presidency. He was “unpopular,” he was “dictatorial” and so, admitting to these truths, he quit. Two things caught my eye about that story: First, every one of these factoids was dead wrong. Second, almost all papers used identical words, the ones quoted, plus “resigned” . . . which I traced back to a U.S. State Department briefing.
In fact, President Chavez had been kidnapped but had spoken to cabinet members via a cell phone handed him by a sympathetic guard. Chavez had agreed to his “arrest” by leaders of a coup d’etat who, had he resisted, would have slaughtered everyone in Venezuela’s White House, Miraflores. But, he told his cabinet, “I am still president.” Within twenty-four hours, Chavez was back at his desk, “unresigned.”
What was this all about—a president taken hostage, the bent coverage, the smears? Why was the Bush administration’s maniacal hatred of Chavez fiercer, if less public, than its hatred of Saddam Hussein? In Caracas, Chavez minister Miguel Bustamante Madriz explained it to me. “America can’t let us stay in power. We are the exception to the new globalization order. If we succeed, we are an example to all the Americas.” Bustamante Madriz, who had first tipped me off about the false “resignation” reports, is a lucky man. He came close to a bullet in the head from the coup leaders. But he didn’t feel lucky. The Bush administration still had his government in its crosshairs.
That Bush had played footsy with the coup plotters is beyond question. Chavez has videotape of a U.S. military attaché from our embassy entering the army base where Chavez was held captive—something the State Department would not deny. And there was no denying that Bush’s ambassador had rushed down from his hilltop compound to have his picture taken with the grinning cutthroats who had overthrown a democratically elected president. Bush’s White House is quoted as saying that Chavez’s election by “a majority of voters” did not confer “legitimacy” on his government. (How appropriate from the victors of Florida.)
What “exception to the new globalization order” could instigate such fury from Washington?
Back to the demonstrations. On May Day, 200,000 blondes started out from the Hilton Hotel marching east through Caracas’s shopping corridor along Casanova Avenue. At the same time, half a million brunettes converged on them from the west. It would all have seemed like a comic shampoo commercial if sixteen people hadn’t been shot dead when the two groups crossed paths two weeks earlier.
The May Day brunettes support Chavez. They funneled down from the “ranchos,” pustules of crude red-brick bungalows, stacked one on the other, that erupt on the steep, unstable hillsides surrounding the capital city. The bricks in some ranchos are new, a recent improvement in these fetid, impromptu slums where many previously sheltered behind cardboard walls. “Chavez gives them bricks and milk,” a local TV reporter told me, not hiding her contempt, “and so they vote for him.” Chavez’s crimes go beyond giving milk and housing to the poor. His real sin was to pass two laws through Venezuela’s national assembly. First was the Ley de Tierras, the new land law that promised to give unused land to the landless—but only those properties held out of production for more than two years by big plantation owners.
But Chavez’s tenure would not have been threatened had he not also passed the petroleum law that doubled the royalty taxes paid by ExxonMobil and other oil operators from about 16 percent to roughly 30 percent on new finds. Chavez also moved to take control of the state oil company PDVSA—nominally owned by the government, but in fact in thrall to these foreign operators.
This was no minor matter to the United States. Few Americans realize that Venezuela has at times become the USA’s number-one supplier of foreign oil. It was the South American nation that broke the back of the 1973 Arab oil embargo by increasing output from its vast reserves way beyond its OPEC quota. Chavez is not only president of Venezuela, but equally importantly, president of the Organization of Petroleum Exporting Countries (OPEC).
Chavez had almost single-handedly rebuilt OPEC by committing Venezuela to adhere to OPEC sales quotas, causing world oil prices to double to over $20 per barrel. It was this oil money that paid for the “bricks and milk” program and put Chavez head to head against ExxonMobil, the number-one extractor of Venezuelan oil.
As OPEC’s general secretary Ali Rodriguez says: “The dependence of the U.S. on oil is increasing progressively. Venezuela is one of the most important suppliers of the U.S., and the stability of Venezuela is very important for [them].” It is from Rodriguez that I learned the April 12, 2002, coup was enacted before the plotters were ready, and why. Iraq and Libya were trying to organize OPEC to stop exporting oil to the United States to protest American support of Israel. U.S. access to Venezuela’s oil suddenly became urgent. The April 12 coup against Chavez was triggered by U.S. fears of a renewed Arab oil embargo without the Venezuela failsafe in place. Chavez had to go, and right now.
The Ultimate in Corporate Lobbying
Chavez is dark and round as a cola nut. Like his followers, he is an “Indian.” But the blondes, the “Spanish,” are the owners of Venezuela. A group near me on the blonde march screamed “Out! Out!” in English, demanding the removal of the president. One edible-oils executive, in high heels, designer glasses and push-up bra, had turned out, she said, “To fight for democracy.” She added: “We’ll try to do it institutionally,” a phrase that meant nothing to me until a banker in pale pink lipstick explained that Chavez’s removal “can’t wait until the next election.”
Like their hero George W. Bush, the anti-Chavistas don’t equate democracy with voting. With 80 percent of Venezuela’s population at or below the poverty level, elections are not attractive to the protesting financiers. Chavez had won the election in 1998 with a crushing 58 percent of the popular vote and that was unlikely to change except at gunpoint.
And so on April 12 the business leadership of Venezuela, backed by a few “Spanish” generals, turned their guns on the presidential palace and kidnapped Chavez. Pedro Carmona, the chief of Fedecamaras, the nation’s confederation of business and industry, declared himself president. One might say this coup was the ultimate in corporate lobbying. Within hours, Carmona set about voiding the forty-nine Chavez laws that had so annoyed the captains of industry, executives of the foreign oil companies and latifundistas, the big plantation owners. Carmona had dressed himself in impressive ribbons and braids for the inauguration. In the Miraflores ballroom, filled with the Venezuelan elite, Ignazio Salvatierra, president of the Bankers’ Association, signed his name to Carmona’s self-election with a grand flourish. The two hugged emotionally as the audience applauded.
Carmona then decreed the dissolution of his nation’s congress and supreme court while the business people clapped and chanted, “Democracia! Democracia!” I later learned the Cardinal of Caracas had led Carmona into the presidential palace, a final Genet-esque touch to this delusional drama. But this fantasy would evaporate “by the crowing of the cock,” as Chavez told me in his poetic way.
OPEC director Rodriguez, now a lawyer-executive but once a leftist guerrilla in Venezuela’s mountains, helped clear up a mystery for me: How Chavez saved himself from execution by the coup plotters. It turns out Rodriguez had telephoned his old buddy Chavez from OPEC headquarters in Geneva just before the coup to tip him off about the Arab embargo talk. Chavez himself told me that the call helped him prepare. According to Juan Barreto, a leader of Mr. Chavez’s party in the national assembly, pro-Chavez troops were hidden in the corridors underneath the presidential palace.
On April 13, corporate coup leader Carmona, fresh from his fantasy inaugural, received a call from the head of a pro-Chavez paratroop regiment stationed in Maracay, outside the capital. Up to a million Venezuelans were marching on the presidential palace demanding Chavez’s return. Carmona, surrounded, could choose his method of death: bullets from the inside, rockets from above, or dismemberment by the encircling “bricks and milk” crowd. Carmona took off his costume ribbons and surrendered.
While the immediate cause of America’s panicked need to remove Chavez was a looming oil embargo, the heart of the Bush administration’s grievance goes much deeper, to Venezuela’s unique place as the “Anti-Argentina”—to globalizers, the economic equivalent of the Anti-Christ. Argentina accepted the World Bank’s four-step economic medicine with fatal glee: free trade, “flexible” labor laws, privatization and reduced government budgets and regulation. Chavez rejects it all outright, beginning with the phony “free” trade agenda under the terms of the WTO and NAFTA (which the United States would expand to South America under the aegis of the Free Trade Area of the Americas). Trade under these terms is anything but free to the peoples of the Southern Hemisphere—the “Opium Wars” coercive imbalance as identified by Joe Stiglitz. Instead, Chavez calls for a change in the North-South terms of trade, increasing the value of commodities exported to Europe and America. Chavez’s longer-term policies of rebuilding OPEC and higher tariffs on oil must be seen in the context of smashing imbalanced trade relations epitomized by the WTO.
We saw how the World Bank’s secret June 2001 “Country Assistance Strategy” progress report ordered Argentina to pull out of its economic depression by increasing “labor force flexibility.” This required cutting works programs, smashing union rules and slicing real wages. Contrast that with Chavez’s first act after defeating the coup: announcing a 20 percent increase in the minimum wage.
Chavez’s protection of the economy by increasing the purchasing power of the lower-paid workers, rather than cutting wages, is anathema to the globalizers. Chavez moved to renationalize oil and rejected the sale of Venezuela’s water systems, while Argentina sold off everything including the kitchen-sink tap. Economist Mark Weisbrot of the Center for Economic Policy Research calculated that the loss of income from state businesses accounts for 100 percent of Argentina’s cavernous fiscal deficit. Argentina followed World Bank and WTO directions and sold off the banks and water companies owned by the state or Argentines to Citibank, Enron, Bank Santander and Vivendi of the United States, Spain and France. These swiftly vacuumed up Argentina’s hard currency reserves, setting the stage for the national bankruptcy at the first hint of speculator-driven currency panics. Imagine if Argentina had not sold off its oil companies on the cheap, or impoverished Ecuador had not dropped out of OPEC, they would today be wealthy, not wanting.
Chavez took the path exactly opposite to the guidance given, and ultimately imposed, on Argentina by the World Bank and IMF. To pull out of the downturn threatened by a corporate embargo of investment in his nation, Chavez taxed the oil companies and spent the money—the “bricks and milk” solution, old-style Keynesianism. This is none too revolutionary despite his rhetoric. Chavez is no Fidel—in fact, he’s not a socialist of any sort. With Marx discredited as the philosophy of the “losers” of the Cold War, “Chavismo” is as radical as it gets. Chavez is an old-style social democratic reformer: increased investment in housing and infrastructure, control over commodity export prices and land to the landless—an attack on the “landlordism” that Professor Stiglitz places at the heart of world poverty. Had Chavez won office in the time of Jack Kennedy, he would have fit in nicely with the old “Alliance for Progress” development model, JFK’s kinder, gentler answer to Communism. Today, Chavez’s redistributionist reformism offers an operating, credible alternative to the IMF’s corporate-friendly free market nostrums.
Unfortunately for Chavez, his economic plan was working. Despite the European and American media’s hoo-ha over how Chavez has “ruined” Venezuela’s economy, its gross domestic product grew by 2.8 percent in 2001. And it wasn’t all due to improvements in oil prices; excluding crude oil, economic activity jumped by about 4 percent. Compare the “ruined” Venezuelan economy to Argentina, which the World Bank displayed as the pet student of market theory, now a financial delinquent.
The Keystone Kops-style plot against Chavez by Venezuela’s military-industrial complex served Big Oil’s interests. But that’s an old-style shoot-’em-up coup, likely to fail. The coup d’etats of the twenty-first century will follow the Argentine model, in which the international banks seize the financial lifeblood of a nation, making the official presidential titleholder merely inconsequential except as a factotum of the corporate agenda.
This is what Chavez’s minister meant when he said Venezuela represented a threatening example that could not be allowed to succeed. Dissent from the new globalization order will be punished. Already, the plan I saw put in place in Chile against Allende (President Richard Nixon’s order to his CIA chief to “make their economy scream”) is in the offing for Venezuela: capital boycotts, sabotage, disinformation intended to cause panics and financial runs. And lastly, there is the all-important propaganda war aimed at U.S. citizens to ensure that Americans remain ignorant and quiescent when a democratically elected president is assassinated, overthrown or hounded from office.
Two Friedmans, One Pinochet and the Fairy-Tale Miracle of Chile: Questioning Globalization’s Genesis Myth
I have an advantage over globalization fetishists like Thomas Friedman, Mr. Lexus-and-Olive-Tree. I was there at the beginning, at the moment of globalization’s conception when the sperm of Milton Friedman’s oddball economic theories entered the ovum of the fertilized mind of Ronald Reagan, who was then governor of California. I witnessed the birth of Thatcherism before Thatcher—there, at the University of Chicago, in the early 1970s, as the only American member of an elite group later known as the “Chicago Boys.” Professor Friedman (no relation to Thomas) was the economic god who walked among us, soon to win the Nobel Prize for his extremist laissez-faire theories. Other academics found Friedman intriguing, but considered his free market fanaticism off the kooky edge. But the Chicago Boys believed; and, quite different from other students, were handed an entire nation to experiment on, courtesy of a coup d’etat by a general in Chile. Most of the “Boys” were Latin Americans, a strange collection in white turtleneck sweaters and dark shades, right out of the movie Missing, who would return to Chile and make it into a Friedmanite laboratory. ( . . . With a twist. Contrary to typical academic exercise, those who asked questions “disappeared.”)
Like Tinkerbell and Cinderella’s fairy godmother, General Augusto Pinochet is reported to have performed magical good deeds. In the case of Pinochet, he is universally credited with the Miracle of Chile, the wildly successful experiment in free markets, free trade, privatization, deregulation and union-free economic expansion designed by the Chicago Boys, whose laissez-faire seeds have spread from Santiago to Surrey, from Valparaiso to Virginia.
Some may be a bit squeamish about the blood on his chariot, but all conservative “reformers” must agree, globalization’s free market revolution was born from the barrel of Pinochet’s guns. Whatever the general’s shortcomings, they tell us, he was Chile’s economic savior and lit the world’s future economic path.
Within the faith of the Reaganauts and Thatcherites, Pinochet’s Chile serves a quasi- religious function. It provides the necessary genesis fable, the ersatz Eden from which the laissez-faire dogma sprang successful and shining. But what if Cinderella’s pumpkin did not really turn into a coach? What if the Miracle of Chile, too, is just another fairy tale? The current measurable failure of the economics of free markets, starvation from Quito to Kyrgyzstan, is dismissed as the pain of “transition” to market economies. But unblinking study discloses that the original claim to “success”—that General Pinochet begot an economic powerhouse—is one of those utterances, like “we are winning the war on terror,” whose truth rests entirely on its repetition.
Chile can claim some economic success. But that is the work of President Salvador Allende, who saved his nation, miraculously, a decade after Pinochet had him murdered.
These are the facts. In 1973, the year the general seized the government, Chile’s unemployment rate was 4.3 percent. In 1983, after ten years of free market modernization, unemployment reached 22 percent. Real wages declined by 40 percent under military rule. In 1970, before Pinochet seized power, 20 percent of Chile’s population lived in poverty. By the year “President” Pinochet left office, the number of destitute had doubled to 40 percent. Quite a miracle.
Pinochet did not destroy Chile’s economy all alone. It took nine years of hard work by the most brilliant minds in world academia, that gaggle of Milton Friedman’s trainees, the Chicago Boys. Under the spell of their theories, the general abolished the minimum wage, outlawed trade union bargaining rights, privatized the pension system, abolished all taxes on wealth and on business profits, slashed public employment, privatized 212 state industries and sixty-six banks and ran a fiscal surplus. The general goose-stepped his nation down the “neoliberal” (free market) path, and soon Thatcher, Reagan, Bush, Clinton, the IMF and the planet would follow.
But what actually happened in Chile? Freed from the dead hand of bureaucracy, taxes and union rules, the country took a giant leap forward. . . into bankruptcy. After nine years of economics Chicago-style, Chile’s industry keeled over and died. In 1982 and 1983, gross domestic output dropped 19 percent. That’s a depression. The free market experiment was kaput, the test tubes shattered. Blood and glass littered the laboratory floor.
Yet, with remarkable chutzpa, the mad scientists of Chicago declared success.
In the United States, President Ronald Reagan’s State Department issued a report concluding: “Chile is a casebook study in sound economic management.” Milton Friedman himself coined the phrase “the Miracle of Chile.” Friedman’s sidekick, economist Art Laffer, preened that Pinochet’s Chile was “a showcase of what supply-side economics can do.”
It certainly was. More exactly, Chile was a showcase of deregulation gone berserk. The Chicago Boys persuaded the junta that removing restrictions on the nation’s banks would free them to attract foreign capital to fund industrial expansion. (A decade later, such capital market liberalization would become the sine qua non of globalization.) On this advice, Pinochet sold off the state banks—at a 40 percent discount from book value—and they quickly fell into the hands of two conglomerate empires controlled by speculators Javier Vial and Manuel Cruzat. From their captive banks, Vial and Cruzat siphoned cash to buy up manufacturers then leveraged these assets with loans from foreign investors panting to get their piece of the state giveaways.
The banks’ reserves filled with hollow securities from affiliated enterprises.
Pinochet let the good times roll for the speculators. He was persuaded that governments should not hinder the “logic” of the market. By 1982, the Chilean pyramid finance game was up. The Vial and Cruzat groups defaulted. Industry shut down, private pensions were worthless, the currency swooned. Riots and strikes by a population too hungry and desperate to fear bullets forced Pinochet to reverse course. He booted his beloved Chicago experimentalists.
Reluctantly, the general restored the minimum wage and unions’ collective bargaining rights. Pinochet, who had previously decimated government ranks, authorized a program to create 500,000 jobs. The equivalent in the United States would be the government’s putting another 20 million people on the payroll. In other words, Chile was pulled from depression by dull old Keynesian remedies—all Franklin Roosevelt, zero Ronald Reagan. The junta even instituted what remains today as South America’s only law restricting the flow of foreign capital New Deal tactics rescued Chile from the Panic of 1983, but the nation’s long-term recovery and growth since then is the result of—cover the children’s ears—a large dose of socialism. To save the nation’s pension system, Pinochet nationalized banks and industry on a scale unimagined by the socialist Allende. The general expropriated at will, offering little or no compensation.
While most of these businesses were eventually reprivatized, the state retained ownership of one industry: copper.
University of Montana metals expert Dr. Janet Finn notes, “It’s absurd to describe a nation as a miracle of free enterprise when the engine of the economy remains in government hands.” (And not just any government hands. A Pinochet law, still in force, gives the military 10 percent of state copper revenues.) Copper has provided 30 to 70 percent of the nation’s export earnings. This is the hard currency that has built today’s Chile, the proceeds from the mines seized from Anaconda and Kennecott in 1973— Allende’s posthumous gift to his nation.
Agribusiness is the second locomotive of Chile’s economic growth. This is a legacy of the Allende years as well. According to Professor Arturo Vasquez of Georgetown University, Allende’s land reform, that is, the breakup of feudal estates (which Pinochet could not fully reverse), created a new class of productive tiller-owners, along with corporate and cooperative operators, who now bring in a stream of export earnings to rival copper. “In order to have an economic miracle,” says Dr. Vasquez, “maybe you need a socialist government first to commit agrarian reform.”
So there we have it. Keynes and Marx, not Milton Friedman, saved Chile.
Half a globe away, an alternative economic experiment was succeeding quietly and bloodlessly. The southern Indian state of Kerala is the laboratory for the humane development theories of Amartya Sen, winner of the 1998 Nobel Prize for economics. Committed to income redistribution and universal social services, Kerala built an economy on intensive public education. As the world’s most literate state, it earns its hard currency from the export of technical assistance to Gulf nations. If you’ve heard little or nothing of Sen and Kerala, maybe it is because they pose an annoying challenge to the free market consensus.
In the year Sen won the prize, the international finance Gang of Four—the World Bank, the IMF, the Inter-American Development Bank and the International Bank for Settlements—offered a $41.5 billion line of credit to Brazil, which was then sinking in its debts. But before the agencies handed the drowning nation a life preserver, they demanded that Brazil commit to swallowing the economic medicine that nearly killed Chile. You know the list by now: fire-sale privatizations, flexible labor markets (that is, union demolition) and deficit reduction through savage cuts in government services and social security.
In Sao Paulo, the public is assured that these cruel measures will ultimately benefit the average Brazilian. What looks like financial colonialism is sold as the cure-all tested in Chile with miraculous results.
But that miracle was in fact a hoax, a fraud, a fairy tale in which no one lived happily ever after.
It’s been twenty-five years since I sat with Milton Friedman and the Chicago Boys as they planned our new world. The Chicago Boys’ grouping, officially called the “Latin American Finance Workshop,” was directed by Professor Arnold Harberger. Friedman’s was the “Money and Banking Workshop.” I worked my way in with both of them—even then I was undercover, operating for the electrical and steelworkers’ union leaders Frank Rosen and Eddie Sadlowski. Frank told me, “Keep your mouth shut, put away the childish Mao buttons, put on a suit and find out what these guys are up to.”
I wouldn’t call Milton Friedman a midget, but what sticks in my mind is that his feet didn’t touch the floor from the built-up in which he presided.
In those years, Rhodesia (now Zimbabwe) was a hot topic. The nation was controlled by whites, 5 percent of the population, who kept the 95 percent Black population in virtual slavery, without hope and certainly without the right to vote. Professor Friedman opined from his high chair, “Why are people attacking the only democracy in Africa?” And I remember that, at time, the professor was driven around in a black limousine by a Black chauffeur.
So, while the other students—the budding bankers and dictators-in-training—are drooling in admiration, I’m reporting back to the unions, “This Friedman is one sick puppy. And no one’s going to buy this self-serving ‘laissez faire’ free market mumbo jumbo from some ultra-right wing-nut.”
But now, two decades later, Bush and Clinton and Putin and Wolfensohn open their mouths and out comes Milton Friedman. And everywhere I turn, the guys running the show are wearing their Golden Straitjackets and grinning and groping and agreeing with each other. And all I can think of is something another professor of mine, Allen Ginsberg, once said: The soul should not die ungodly in an armed madhouse.