Corporate mobsters to meet in casino
BY SEAN HEALY
If their rackets were heroin and prostitution, their meeting would
be called a Godfathers' convention. But their rackets are more legitimate,
or at least more legal, so their gathering is called an economic summit.
However, there the difference ends. Just as Lucky Luciano and Al Capone
would divide up numbers games and booze smuggling on the Lower East Side
and plot how they'd put the ice on the feds, the 800 corporate heavyweights
gathering in Melbourne's Crown Casino for the World Economic Forum's (WEF)
Asia-Pacific Economic Summit in September will plan how they will add to
their already considerable wealth and power.
And, just like any hood, these corporate families all have records as
long as your arm. Among the keynote speakers:
Capo di tutti capi
At the head of the table will be the capo di tutti capi, the boss
of all bosses, Bill Gates, chairperson of Microsoft and the dominant corporate
player in the information revolution. Gates will continue from where
his sales pitch at the WEF's annual meeting in Davos in January left off:
the internet and information technology can bring untold wealth and happiness,
provided you buy his company's products.
Microsoft, whose 1999 gross revenues totalled US$19.7 billion and whose
1999 profits were US$7.7 billion, has reached its pre-eminent position,
not through superior products or innovation, and certainly not through
helping to close the digital divide between the world's rich and poor,
but through corporate tactics that even other multinational corporations
and the US government regard as too viciously predatory.
The company built up a near monopoly position in operating systems (90%
of the market) and launched an aggressive technological acquisition campaign,
buying everything it could to ensure it controlled new products coming
onto the market. Those technologies it couldn't control, it copied and
then bundled with Windows or Microsoft Office.
Microsoft then used this position as leverage to seek to wipe out its
competitors in the computer language (Java), software (Lotus) and web browser
(Netscape) markets. It could then charge consumers pretty much whatever
it wanted to.
On June 7, after a year-long suit brought by the US Justice Department,
a District Court found that Microsoft had breached the US's lenient and
rarely enforced anti-trust laws and ordered the company be split in two.
Gates announced the company would appeal, all the way up to the Supreme
Court if necessary.
In the mafia families, there was always a consigliere, who whispered
in the boss's ear about which deals to make and which to break. At this
conference, that job falls to Kenneth Courtis, the Asian vice-chairperson
of New York investment bank Goldman Sachs.
His advice will be that if the nations of the Asia-Pacific want some
of Wall Street's cash to leverage themselves out of economic crisis,
they will have to play by Wall Street's rules: deregulate their finance
markets, privatise state assets, restructure battered industries and open
up further to Western capital.
Courtis should know all about the Asian economic crisis. Before the
meltdown began in Thailand in July 1997, the investment banks were among
the leading hot money investors in the region. They speculated on everything:
corporate debt, government debt, shares, futures, options on futures. Much
of it was very profitable (Goldman Sachs' revenues for 1999 were US$25.3
billion, its profits US$2.7 billion), but also very risky.
When the Thai economy showed signs of faltering, the investment banks
were among those who speculated on its collapse, and made billions by buying
the country's foreign reserves when the central bank spent them in a vain
attempt to prevent its currency's devaluation.
When the region's economies collapsed as the hot money flowed out
and access to credit dried up, the investment banks made another killing,
on the International Monetary Fund's bailout packages.
On Christmas eve 1997, Goldman Sachs, four other giant investment banks,
six major US commercial banks and the US Federal Reserve Board discussed
and decided the fine points of the IMF's US$57 billion South Korea bailout
package. The first to be bailed out would be the country's Western creditors
â themselves â whose risk exposure just evaporated, paid for by workers
and the poor in Korea, Thailand and Indonesia.
Investment banks made even more money when they were engaged to draw
up industry restructuring plans for the crisis-wracked countries. The restructuring
threw millions out of work but allowed Western companies to buy massively
marked-down assets and the financiers themselves to sign lucrative alliance
agreements with the cash-starved local banks (Goldman Sachs, for instance,
signed one with the Korea First Bank).
Now Goldman Sachs wants to be let back onto the merry-go-round.
While privatisation doesn't benefit many, it does benefit some: one of
its biggest fans, and biggest beneficiaries, will also speak at the Melbourne
summit. Jean-Marie Messier's Vivendi is at the forefront of capturing undervalued
state utilities and transforming them into privately owned money-making
machines, especially fresh water.
Vivendi's motto is Water is life and, in a world where fresh water
sources are increasingly scarce, you better be prepared to pay up big.
In 1999, Vivendi earned US$35.2 billion in revenue and made US$1.2 billion
in profits from this scam.
Its fastest expanding market is in the Third World where the privatisation
of state water utilities is frequently enforced by the IMF. In April, the
company won the contract to run the water services of Dar-es-Salaam, the
impoverished capital of Tanzania. Twice, the company has been found guilty
of using bribery to win its contracts.
A Vivendi subsidiary, Compania des Aguas, owns the once-public water
services of Puerto Rico. Areas belonging to those who can pay, such as
the golf courses at the five-star Palmas del Mar resort and the US Navy's
Roosevelt Roads base, never have problems with water supply. But, said
one resident of a poor community, I live in front of the entrance to Palmas
del Mar and in February I went without water for 15 days.
The CEO of Siemens, Heinrich von Pierer, will no doubt speak in breathless
tones of the growing interconnectivity of global communications â and
hope that translates into more Asians buying his company's mobile phones.
Siemens is one of the biggest players in the global electronics market
(US$66 billion in revenues in 1999, US$370 million in profits). But, as
well as specialising in technology which may cause brain tumours, Siemens
has an even darker side.
The company is the major force in the continuing operation of Eastern
Europe and Russia's dangerous nuclear power plants. Without Siemens, those
governments probably would have followed the World Bank's 1992 advice and
closed their nuclear industries. Instead, they contracted Siemens to provide
safety upgrades, which most experts deem inadequate. The only Eastern
European reactor to be closed was in Greifswald, in Siemens' home state
Siemens is also a major provider of military and spy technology. It
sold a traffic control system to the Chinese government which was used
to film pro-democracy protesters in Tiananmen Square in 1989 for later
arrest. Its systems have also been installed in Lhasa, Tibet, a city not
known for its traffic problems.
For all its high-tech image, Siemens built up its position of global
dominance the old fashioned way. In October, Siemens and other major Greman
companies offered to pay US$3.3 billion in compensation for their use of
slave labour to make their products in the Nazi concentration camps. As
its slogan says, We can do that.
If and when poor countries adopt free trade orthodoxy, they'll meet people
like Michael Garrett, the Asia and Africa executive vice-president for
Swiss food giant Nestle. He'll address the Melbourne summit, no doubt talking
about the wonders of free trade.
For the countries which rely on export crops like cocoa and coffee for
their earnings, this dependency is disastrous. The reason is not just that
these commodities' prices are in long-term decline, but that they have
to deal with food companies like Nestle, which control the market and dictate
Of the price of every jar of coffee, for example, the growers get only
10%, exporters get 10%, retail chains get 25% and the food companies, like
Nestle, get 55%. In 1999, Nestle took in US$49.5 billion and made a profit
of US$2.9 billion.
But this is the more scrupulous side of Nestle's work: the company has
also been the subject of a public boycott campaign since the 1970s over
its unethical marketing tactics in the baby formula market (of which it
has a 50% share).
The World Health Organisation estimates that 1.5 million children in
the Third World die each year because they're not breast fed. Where water
is unsafe, the death rate for babies fed on formula milk is 25 times higher
than those who are breast fed.
Whistleblower Syed Aamar Reza, a Nestle salesperson in Pakistan, revealed
to the International Baby Milk Action Network in February how he had been
directed to breach international formula milk conventions and Nestle's
charter by bribing doctors to prescribe Nestle formula to local babies
and by offering free samples during the crucial few weeks immediately following
birth. Nestle's PR people deny the allegations.
The WEF won't feature only international bosses; their local cousins, such
as BHP chief Paul Anderson, will get their moment in the bright lights
too. The Australian mining giant's speciality is using its considerable
financial and industrial muscle (1999 revenues were $10.1 billion) to force
workers and communities to toe its line.
BHP is the only game in town for many workers in regional Australia.
Claiming the need to be competitive on international markets and threatening
closure if it doesn't get its way, since the early 1980s BHP has demanded
greater sacrifices from its workers and heavy subsidies from the government
â and watched its profits soar ($1.08 billion in 1999).
The reward given to Newcastle steelworkers for doubling productivity
during the 1990s was unemployment; the Newcastle steel mill closed in September.
The reward the company plans for its mineworkers in Western Australia's
Pilbara is to be pushed into individual contracts and have their unions
Communities overseas are treated even more brutally. BHP's Ok Tedi copper
mine in Papua New Guinea has been amongst its most profitable investments,
and amongst the most environmentally destructive. BHP has avoided action
against it by the PNG government by threatening to pull out and deny the
government a valuable source of royalties.
The Mineral Policy Institute estimates that the damage from dumping
mine tailings into the Fly River will last 60-100 years. The company is
now trying to pull out of Ok Tedi, but is still seeking to avoid its responsibilities
to rehabilitate the area.
BHP is facing action in the Supreme Court of Victoria by traditional
landowners who claim that it has breached its articles of settlement by
failing to meet commitments, including construction of an adequate tailings
While most at the summit will preach high-tech virtues, Frank Cicutto,
the CEO of the National Australia Bank, the country's largest bank, will
probably speak of more homely ones: like gouging your customers.
The NAB makes its money ($9.6 billion revenue in 1999, $1.4 billion
profits) by concentrating on the basics: charging higher rates of interest
to its mortgage holders than it pays out in interest on deposits, whacking
exorbitant interest rates on its credit cards and charging fees for such
things as visiting a bank teller.
It has also benefited from a decade-long campaign of job shedding: the
Finance Sector Union estimates that the four big banks sacked 50,000 staff
over the 1990s. If the NAB's planned merger with insurance company MLC
goes ahead, more jobs will go.
The NAB is at the centre of an intricate web of cross-company directorships,
which binds Australia's capitalist class together. A 1997 study found that,
in 1995, 657 directors held the available 847 positions on company boards
and 62% had multiple directorships; the NAB's chiefs held the most cross-company
The bank is also a prime mover in the Australia-Indonesia Business Council,
from which position it has lobbied hard for the federal government to maintain
close relations with Jakarta. The NAB is a major investor in oil operations
in the Timor Gap.
While the similarities between this gang of thieves and the one that
terrified 1920s Chicago and New York are obvious, this group has learned
from its predecessors. Capone and Luciano used their own muscle and made
their own hits; in the end that brought them into competition with the
state, who eventually snuffed them out.
The Melbourne crew have been smarter: rather than compete with the state,
they've formed an alliance with it. Senior politicians, like Prime Minister
John Howard and US assistant secretary of state Stanley Roth, will rub
shoulders with them in September and speak in loving tones of close business-government
ties. And for muscle, the entire Victoria Police will be camped outside.
For those considering protesting against the tyranny of the modern multinational,
their summit is an offer you can't refuse.