Archive for June, 2009

Regulating Murder

Wednesday, June 24th, 2009

death-cigarettesDespite a long-running war on crime and billions of dollars spent each year on the criminal justice system, murders keep on happening. Instead of trying to end all homicides, perhaps the solution is to give up on abolition and simply regulate the practice: discourage the murder of children, put strong warning labels on guns, impose a tax on killers.

Ridiculous? Yes, but this is roughly what the federal government has just done with the tobacco industry, which legally ends far more lives each year than all the non-corporate murderers in the country combined.

The legislation just signed into law by President Obama — the Family Smoking Prevention and Tobacco Control Act — is billed as an aggressive move to bring the coffin nail industry under federal control for the first time. It starts off with what amounts to a 49-point indictment of tobacco products as a public health menace. Use of these products is called “inherently dangerous,” “addictive” and a “pediatric disease.” The tobacco industry, it is noted, still spends vast sums “to attract new users, retain current users, increase current consumption, and generate favorable long-term attitudes toward smoking and tobacco use.”

All of this is certainly true, but it seems odd to follow this denunciation with legislative language that imposes restrictions on the noxious industry but does not seek to put it out of business. In fact, the law can be seen as conferring some degree of legitimacy on tobacco producers. For example, the industry is given a statutory role in the Tobacco Products Scientific Advisory Committee, which has to be consulted before any new industry regulations are promulgated. Fortunately, the three seats on the committee given to tobacco manufacturers and growers are non-voting positions, but it is still unseemly — to put it mildly — to have representatives of such a notorious industry so involved in government oversight.

According to Corporate Accountability International, which has played a central role in promoting tobacco control policies: “Not only is the inclusion of the industry on this committee akin to letting the fox guard the henhouse, it runs counter to a treaty provision that obligates ratifying countries to safeguard their health policies against tobacco industry interference.”  Kathy Mulvey of CAI adds: “U.S. policymakers must now gird themselves for inevitable attempts by Big Tobacco to delay and thwart [the law].”

The ability of a notorious industry to go on influencing policy is reinforced by the fact that the law generally treats tobacco companies in a way that is not greatly different from other regulated corporations. The Food and Drug Administration is instructed to collect “user fees” from tobacco companies — as if they were pharmaceutical manufacturers seeking to get new drugs approved. Unless tobacco companies plan to “use” the FDA in some way, the fees should at least be called something different; perhaps reparations.

Another problem is that the law mentions that any restrictions on tobacco industry advertising and promotion must be consistent with the First Amendment. You can be sure that the industry will be screaming loudly that the law violates its free speech rights (granted by misguided court rulings). This is another drawback to regulation rather than criminalization.

While some players in the tobacco industry have ardently opposed federal regulation throughout the 15-year campaign to bring it about, some shrewd parties eventually realized that government intervention was inevitable and jumped on the bandwagon. Tobacco giant Philip Morris (now part of Altria) took this tack back in 2000, reaping years of improved p.r. and now a law that allows it and its competitors to continue selling their deadly wares with restrictions that are far from fatal to their profits. As much as corporations like to complain about regulation, sometimes it is their salvation.

Corporate Power is, Alas, Alive and Well

Thursday, June 18th, 2009

donohueCongratulations, fellow “anti-business activists.” It seems we have forced the U.S. Chamber of Commerce to commit $100 million for a campaign designed to remind Americans that they are supposed to love capitalism.

“Many union leaders, some environmentalists, and a growing force of anti-business activists are pushing governments at all levels to close trading markets, lock down capital markets, expand entitlements, and raise taxes and debt to unsustainable levels,” proclaimed the Chamber’s CEO Thomas J. Donohue (photo) recently. “We are going to activate free enterprise supporters, educate the public, and hold politicians accountable as we defend and advance economic freedom.”

After this gratuitous and somewhat puzzling swipe at activists, Donohue made it clear that the campaign’s real target is the federal government, which he suggested is preparing “an avalanche of new rules, restrictions, mandates, and taxes.” However, the events of the past year — the financial bailout, unprecedented intervention in the auto industry, a huge stimulus program, etc. — make it impossible for even Donohue to preach the laissez-faire gospel in its pure form.

“Dire economic circumstances have certainly justified some out-of-the-ordinary remedial actions by government,” Donohue acknowledged. “But enough is enough. If we don’t stop the rapidly growing influence of government over private sector activity, we will squander America’s unmatched capacity to innovate and create a standard of living and free society that are the envy of the world.”

But where is this “avalanche” of new heavy-handed federal interference? The Obama Administration has done its best to limit intervention in the private sector, despite the gravity of the economic crisis. It resisted the pressure to nationalize the likes of Citigroup and Bank of America. Obama was more aggressive in restructuring General Motors, but he insists the feds will not be involved in managing the automaker and will return it to private ownership as soon as possible.

The Administration supported efforts in Congress to curb abusive practices by credit-card companies, but the reform avoided the more radical step of capping interest rates. Along with the Democratic leadership in Congress, the Administration has rejected the single-payer solution to healthcare reform, and it is unclear whether the half-baked alternative of a public option alongside private insurers will make it into the final bill. Obama has moved to restrict but not abolish the environmentally destructive practice of mountaintop removal by major coal mining corporations. And the key demand of organized labor — the Employee Free Choice Act — appears to be stalled in the Senate.

Now comes Obama’s ballyhooed overhaul of financial regulation. The plan has some good features, such as the creation of a consumer protection agency for financial products, but overall it focuses more on rearranging the structure of the regulatory system — mainly by giving more power to the Federal Reserve — rather than truly reining in financial institutions and markets. Even the New York Times pointed out the limited nature of the reforms: “Everywhere you look in the plan, you see the same thing: additional regulations on the margin, but nothing that amounts to a true overhaul.”

Obama seemed to acknowledge that the plan was less than audacious, saying:

In these efforts, we seek a careful balance. I’ve always been a strong believer in the power of the free market. It has been and will remain the engine of America’s progress — the source of prosperity that’s unrivaled in history. I believe that jobs are best created not by government, but by businesses and entrepreneurs who are willing to take a risk on a good idea. I believe that our role is not to disparage wealth, but to expand its reach; not to stifle the market, but to strengthen its ability to unleash the creativity and innovation that still make this nation the envy of the world.

Huh? Did Donohue use part of the $100 million to bribe an Obama speechwriter to insert Chamber talking points into the President’s remarks?  Or is Obama reminding us that neither he nor anyone else in official Washington intends to do anything that seriously challenges corporate power?

Shell’s Self-Serving “Humanitarian” Gesture

Thursday, June 11th, 2009

whaleOne of the advantages for a corporation in resolving a sensitive lawsuit out of court is that it can proclaim innocence and insist it is settling for other reasons. Royal Dutch Shell has done just that in a case brought in connection with the 1995 execution of author Ken Saro-Wiwa and eight other activists who campaigned against the oil company’s operations in the Ogoniland region of Nigeria.

Shell actually was even more brazenly self-serving than the typical company that says it is settling in order to put the case behind it. The Anglo-Dutch transnational insisted that its willingness to pay the plaintiffs US$15.5 million – $5 million of which will go into a trust fund for the Ogoni people – was a “humanitarian gesture.” It was unusual for Shell to allow the amount of the settlement to be disclosed, but it was apparently worth it to draw attention away from the lawsuit’s charges that the company collaborated with the repressive military regime that ruled Nigeria in the 1990s and that put Saro-Wiwa and the others to death after a sham trial. The suit  – brought in U.S. federal court under the Alien Tort Claims Act, the Torture Victim Protection Act and racketeering statutes – also accused Shell of being complicit in crimes against humanity, torture, inhumane treatment, arbitrary arrest, wrongful death, assault and battery, and infliction of emotional distress.

It is understandable why the plaintiffs and their lawyers – led by the Center for Constitutional Rights and EarthRights International – would feel a need to settle a case that had dragged on for 13 years and provide some financial assistance to the Ogoni community. Yet it is frustrating to see Shell trying to turn an outrage into an opportunity to burnish its image, even though other Ogoni claims are still pending.

The frustration is compounded by the fact that Shell continues to engage in dubious behavior in other parts of its global operations. For example, the company has a problematic relationship with another undemocratic government as part of its deep involvement in a massive oil and gas project in the Russian Far East. That offshore project, known as Sakhalin II, has been the subject of a great deal of controversy because it threatens the survival of one of the world’s most endangered species of whales – Western Pacific Grays (photo).

Groups such as Pacific Environment, collaborating with Russian activists who formed Sakhalin Environment Watch, have pressured Shell and its partners to adopt stronger environmental protections or abandon the project. Shell’s largest partner is Gazprom, a publicly traded gas monopoly that is controlled by the Russian government, which has used the company to advance Russian foreign policy goals vis-à-vis Eastern Europe by cutting off gas supplies at various times. Shell has acknowledged that it is interested in developing a new Sakhalin III project in collaboration with Gazprom.

Last year, there were reports that Shell had sought to influence the outcome of a purportedly independent environmental audit of Sakhalin II. Previously, Shell gained notoriety for overstating its proven petroleum reserves by 20 percent. The company ended up paying about $150 million to U.S. and British authorities to settle the charges. It did not try to depict that payment as a humanitarian gesture, but it is possible that one day Shell may have to put a positive spin on millions paid to settle claims stemming from the harms caused in Sakhalin.

Note: If you want to keep track of the far-flung operations of U.S.-based transnationals, check out a new tool called Croctail, which provides an easy way to search the names of domestic and foreign subsidiaries that publicly traded companies report in their 10-K filings to the Securities and Exchange Commission. Croctail is an extension of the Crocodyl wiki of critical corporate profiles sponsored by CorpWatch and other groups (full disclosure: I am a contributor and advisor to Crocodyl).

Ruling by Fiat

Wednesday, June 3rd, 2009

marchionneThe outpouring of angst about the bankruptcy and downsizing of General Motors is overshadowing what is perhaps an even more dramatic transformation at Chrysler. The smallest of what we used to call the Big Three has been delivered on a silver platter to a foreign company with outsized ambitions. It is now clear that the federal government is in the business of picking winners and losers, in certain industries at least. The question is why the Obama Administration has been so eager to make Fiat one of those favored few, given that it apparently aspires to challenge GM, the presumptive flagship U.S. automaker in which the feds are investing some $50 billion.

Only a few years ago, Fiat (profiled here) was accorded the same basket-case status that came to be applied to Chrysler and GM. In fact, in 2000 the Italian automaker was forced to turn to GM for help as its market share began tumbling both at home and in the rest of Europe. GM purchased a 20 percent stake in Fiat as part of a strategic cooperation deal between the two companies. In 2004, as Fiat’s condition grew worse, it invoked a provision of the cooperation agreement that would have compelled GM to buy the company. GM had no interest in taking on Fiat’s huge debt load, so it paid $2 billion to get the Italians to go away.

Fiat’s chief executive Sergio Marchionne (photo) decided that the company’s only path to survival was to combine with other car companies. He saw an opening earlier this year when the federal government agreed to provide emergency loans to Chrysler but pressured the company to restructure and find a partner. Fiat agreed to be that partner without investing any cash.

When Chrysler went back to the government for more aid, the Obama Administration took an even harder line, explicitly requiring the company to join with Fiat. The feds later pushed Chrysler into a bankruptcy filing designed to bring about the emergence of a reorganized company run by Fiat.

Marchionne took full advantage of his privileged position to intensify the pressure on Chrysler’s unions to make major contract concessions. He took a tough stance both with the United Auto Workers and the Canadian Auto Workers, threatening to scuttle the deal unless they capitulated. Canada’s National Post headlined its story FIAT PUTS GUN TO CHRYSLER UNION HEADS. Both unions gave in to the pressure and signed new contracts with major givebacks.

Fiat is no stranger to hard-line labor relations. Its relationship with unions has been tumultuous throughout the company’s history. The 2002 announcement of a 20 percent cut in the Fiat’s Italian workforce opened a new period of unrest in its domestic operations. In recent months, as Marchionne has pursued his grand plans for the creation of a new auto giant, Italian metalworkers have grown worried that they may lose out. Last month they held a national protest near the company’s headquarters in Turin. Frequent work stoppages and blockades have been taking place at various Fiat plants.

Chrysler’s workers may soon find themselves resorting to similar tactics.  Even though 55 percent of the company will initially be controlled by the UAW’s Voluntary Employee Beneficiary Association, it is likely that Fiat’s executives will be the ones really calling the shots. The VEBA will have its hands full meeting its obligations to workers. In fact, UAW President Ron Gettelfinger has said the union would probably sell its Chrysler holdings as soon as it is financially feasible.

The party that has the most to gain from Chrysler’s restructuring is Fiat. Even though Marchionne was thwarted in his attempt to go from the Chrysler coup to the purchase of GM’s European operations, he still has grand dreams and is seeking other industry partners. In the meantime, the Chrysler deal will enable Fiat to expand sales of its small cars in the North American market, creating more competition for the new GM. How nice of the Obama Administration to use U.S. taxpayer dollars to make this happen.