Just International

Outing the Oligarchy: Billionaires Who Benefits from Today’s Climate Crisis- the Indian Oligrachs

The global image of India has been undergoing drastic changes in the last few decades: from being known as an exotic land of spirituality and great culture on the one hand, and massive poverty and destitution on the other, India suddenly finds itself on the world’s platform presented as one of globalization’s winners. ShiningIndia has become not only a national political slogan by which drastic economic, political and social changes were brought about and justified, but also the country’s new brand name abroad. Dollar billionaires from India, now famous worldwide, occupy the top slots of the Forbes billionaires list. How did the great Indian oligarchs emerge? Which policies and processes facilitated their rise? India is often referred to as an “emerging economy.” Indian civilization is, of course, too ancient to be called “emerging.” What has emerged from globalization and deregulation?

With the much-hyped, neo-liberal model (based on privatization, liberalization and globalization), the avenues were finally opened for the economic rise of India’s billionaires, misleadingly presented as “the rise of India,” the miracle growth story. In the era of globalization, the drastic reforms of the 1990s under the aegis of Cambridge/Oxford educated Manmohan Singh – then India’s Finance Minister and now the country’s Prime Minister – came to be seen as an undisputed propeller of growth, spinning out impressive double-digit GDP rates. What globalization advocates forego in their analysis is that, while India was rising and GDP growing, poverty, hunger, destitution, social conflict and inequalities of wealth and power were rising as well.

While it is true that great wealth has been accumulated, it has de facto remained in the hands of a few traditionally influential families, as sectors once included under the public domain have increasingly become private oligopolies. The policies of neo-liberal globalization imposed by the International Monetary Fund’s (IMF) Structural Adjustment Programs since 1991 and World Trade Organization (WTO) since 1995, have created the climate for such concentration of resources and wealth in the hands of a few.

Yet, today, a wave of scandals of enormous proportions involving politicians and some of the biggest business houses are rocking the very foundations of the new global image of India. Much of the new wealth is based on resource grab and land grab. The heat has been turned up on India’s wealthiest: where business acumen and ingenuity once were praised as sole determinants of such successful ventures, a question mark is now sneaking into the public’s mind as to whether this ingenuity was not also applied towards lobbying for particular policies, rule-bending and favoritisms rather than to just plain business. As people start to question the means through which such richness came to be, it is important to make explicit the connection between politics, economic policies and such lopsided patterns of growth: such inequality is, in fact, the result of a process initiated two decades ago that has been pushed forward, consistently and vehemently, by a government that professes inclusive growth.

THE DISTRIBUTIVE EFFECTS OF LIBERALIZATION, PRIVATIZATION, GLOBALIZATION

Liberalization and economic restructuring gave rise to new avenues for profit creation and wealth accumulation for the powerful. Any structural change has distributive effects. In the case of economic or political reforms, too, it is fundamental to not only assess the total sum of the game, but also the political economy of it – that is, who stands to gain and who stands to lose. In a country like India, where political, social, economic, religious and identity-based constituencies abound (alongside many particularistic interests), it is paramount to study the finer distribution of benefits and losses that any initiative entails. Studies of the economic liberalization process of the 90s strongly suggest that, indeed, the reforms were strongly biased in favor of the corporate business sector as well as of the local elites. These already powerful sections in society were able to reaffirm their status in a self-reinforcing trend where growing wealth increased political clout and political connections increased economic clout.

The corporate business sector was pushed to the forefront of the economy, presented as innovators, as the engines of change and growth. An India of 1.2 billion was reduced to India, Inc. Public sector units had come to be broadly seen as redundant and unnecessarily bureaucratic, if not hopelessly corrupt. Privatization was strongly promoted as the panacea that would resolve all of India’s structural inefficiencies and problems. International financial institutions have been systematically flogging the LPG mantra of Liberalization, Privatization and Globalization through a carrot-and-stick approach: on one hand, the country was lured by promises of rapid growth, modernization and increased social well being while, on the other hand, such reforms were pushed through Structural Adjustment Programs and loan conditionalities.

In 1991, at the time of these economic reforms, India was in the midst of a balance-of-payment crisis so accepting international institutional assistance also meant accepting their diktats. The World Bank initiated a $500 million Structural Adjustment Program (SAP) that was also supported by an IMF-led stabilization program. Approved in December 1991, the SAP closed in December 1993.1 The program envisioned by the SAP strongly pushed deregulation and liberalization with the idea of opening India’s economy to the world. Government subsidies were cut substantially; trade policy was liberalized with decreased tariffs; industrial and import licensing were reduced or removed considerably, foreign direct investment, foreign equity investment and foreign participation in Indian businesses were strongly increased.

In 1991, with introduction of the New Industrial Policy, the public sector’s domination was broken and crucial economic sectors such as power, telecommunications, infrastructure, mining and banking were opened up to private investment. Manufacturing sectors – including iron, steel and shipbuilding – were also opened up for private business ownership.2 All traditionally common property resources, public goods and services – including water, electricity, telecommunications, health and education – were steadily enclosed and privatized.

The conditions were thus created for domestic and foreign private players to enter and exploit a largely uncharted territory that they soon would come to dominate.

While the direct beneficiary of the new policy framework was the business sector, the middle classes also welcomed the restructuring with open arms. India had been a domestic economy in which production was intended for the Indian market, and consumption was based on local production. With globalization, the country’s middle and upper classes quickly fell under the spell of all that was foreign – they were hungry for international goods, values and lifestyles. They identified Government’s policies as regressive and saw them as the reason for their material deprivation. They supported India’s new access to the global market, insofar as it gave them what they thought they so badly needed.

Unfortunately, the general public has often remained oblivious to the deeper consequences the LPG process would inflict on the socio-economic reality of India – especially for local producers, small farmers, small industry and small retail. The middle and upper classes also became increasingly detached and segregated in islands of status – removed from the broader country’s reality.

If, for some, India’s opening to the world economy simply meant being able to access foreign consumer goods, for a much larger section of society this translated into a consistent, constant and unstoppable threat to their very survival through the loot of their resources and livelihoods. This divide has often been referred to as the “India-Bharat” divide – the divide between the privileged consuming classes in largely urban settings and the peasants and tribals in rural areas. These neo-liberal-paradigm-led structural changes were, in fact, accompanied by a steady shift in mentality and approach to social policy where wealth accumulation is presented as the foremost human achievement and poverty comes to be seen as an individual failure. What this hides is the massive transfer of wealth from the poor to the oligarchs, and the dispossession of millions from their resources, possessions, land and livelihoods.

The neoliberal paradigm has strongly pushed for a decrease in Government’s participation in the country’s economic affairs. The new reductionist role cast on the Government has signified a partial abandonment of what used to be the most guiding principles of social and economic policy in India – principles based on the socialistic ideology of equality and redistribution. While liberalization opened avenues for corporate profits for the rich, it closed down local economies, livelihoods, safety nets and social security for the poor. The socialist ideology as envisioned by Gandhi and Nehru implied a strong component of social justice. The new capitalist model increasingly does away with concerns over common welfare, replacing the notion of community with that of individual. In a market economy, actors are atomistic, competing for resources as a function of their financial status.

While the rhetoric calls for more market freedom and less Government regulation, what is in fact happening is deregulation for corporations and over-regulation of citizens. Laws like the Indian Seed Act, which would outlaw the sharing of thousands of traditional varieties of seeds in favor of a small selection of “licensed” seeds controlled by corporations, are aimed at regulating small, independent farmers while leaving corporations free. Laws like the Food Safety and Standards Act criminalizes the artisanal food producer while it deregulates the large corporations doing industrial food processing. The Biotechnology Regulatory Act would free the biotechnology industry to pursue the creation of Genetically Modified Organism (GMOs) while avoiding biosafety regulation. At the same time, the act would, criminalize citizens for demanding GMO-free food. This is not less Government, but more. This is Government as a partner of corporations, not citizens.

These economic reforms initially gained legitimacy from the high rate of GDP growth that followed. The corporate houses were favored by the newly deregulated market economy, which directly raised their economic and political clout. The social elites were condescending in their acceptance of globalization, which offered new opportunities to import an aspirational culture of consumerism. The political elites were ready to embrace the new “free market” and abandon the state-controlled dirigiste regime, convinced that following the signposts of the LPG would lead to broad, new avenues for personal profits and patronage.3

The process of globalization and deregulation of commerce has had several far-reaching and multifold consequences in India and elsewhere in the world. Firstly, the focus on pro-corporate policies (and a reductionist role for the State to privilege corporations) comes at the expense of weaker sections of society that are sorely in need of social safety nets to protect their social, economic and human rights. Secondly, as the market becomes the predominant ruling institution, rights are replaced by purchasing power. This excludes the majority of the population from welfare and benefit provisions and leaves them dependent on “dole outs.” Thirdly, competition for resources on an uneven playing field translates into the privatization of the commons and increasing concentration of wealth at the top of the social pyramid. Finally, the shift in mentality that accompanies capitalistic growth (driven by persistent and persuasive “corporate messaging” in the media) increasingly trains the public to see this accumulation of great wealth as legitimate and justifies whatever means are used to obtain the ends.

THE EMERGING OLIGOPOLIES

While privatization, deregulation and liberalization were presented as a bold way to break away from the constraints of State monopoly and create a “level playing field,” the political economy of the process actually translated into rising income inequalities. These new forces greatly affected the entitlements levels of many different sections of the social ladder by creating a new rung of large oligopolies dominated by a handful of private actors. Deregulation exposes the poor to new threats of exploitation as deregulation and privatization set the stage for a process known as “accumulation by encroachment or dispossession.” This is a process typical of capitalism, wherein new resources are not created ex novo, but are snatched from the pre-capitalistic or State sector through the direct appropriation of previously common property – such as communal water and land as well as public transportation, health and education resources – that can now all be privatized.4

When growth happens through this process, it doesn’t lead to poverty reduction, it just redistributes wealth from the large base at the bottom of society to a small elite at the top. Studies on income tax reports by Banerjee and Piketty show undisputedly that with the New Economic Policy, the incomes of the top 1% income India’s earners increased by about 50%. Out of this 1%, the richest 1% saw their incomes increase by more than 3 times.5 Indeed, the LPG approach has proved to be especially beneficial to the privileged top 1%. The problem is that, contrary to the promises of the “trickle-down theory,” wealth was being sucked upwards – the rich were getting richer while the poor were rendered increasingly dispossessed and marginalized – physically, socially and politically.

The most blatant evidence of the skewered pattern of wealth accumulation resulting from neo-liberal policies is the creation of scores of new Indian billionaires in the midst of growing swaths of poor, hungry, dispossessed and landless people. Practically unchallenged in the newly opened market, a handful of wellconnected firms and families soon came to control huge resources and this growing concentration of wealth laid the foundations for the rise of the Indian oligarchs.

The 2011 Forbes list counts 50 Indian billionaires. Most famously, there is Lakshmi Mittal, the owner of the Arcelor Mittal steel company and the world’s sixth richest man with $31.1 billion. There are managers of the Reliance Empire (petrochemical and telecommunications), the Ambani brothers, Mukesh (in ninth place with $27 billion) and Anil (ranked 103rd with a scant $8.8 billion). Earnings from the Essar Group (minerals, energy and communications) placed Sashi and Ravi Ruia in the 42nd position worldwide, with $15.8 billion. The Jindal family (Jindal Steel and Power, Ltd.) ranks 56th, with $13.2 billion. Gautam Adani’s Adani Group (real estate, power, oil and agriculture) has earned him a slot as the world’s 81st richest man at $10 billion. Sunil Mittal, owner of the telecom giant Bharti-Airtel, is the world’s 110th richest man with $8.3 billion. Finally, aluminum baron Anil Agarwal of Vedanta Resources holds down position 154 with $6.4 billion.

Ratan Tata, founder of the Tata Group, involved in manufacturing from tea to automobiles, does not appear in the list as his wealth is predominantly held by his charitable trusts. Although absent from the Forbes list, the size and operations of Tata’s conglomerate qualify him for this study. That some of the billionaires are self-made while others inherited their wealth does not affect the argument, as it witnesses the tendency of wealth to remain in the hands of those already wealthy and, even if some groups replace others, wealth stays concentrated in oligopolies.

1. LAKSHMI MITTAL —ARCELOR MITTAL STEEL

The richest man in India and sixth richest in the world, Lakshmi Mittal is known worldwide. He also happens to also be the richest man in Europe and in Britain, where he resides in a luxury mansion located at the prestigious and posh Kensington Palace Gardens. Mittal’s mansion, on a street known as Billionaire’s Row, is said to be the most expensive private residence ever bought. Lakshmi Mittal’s wealth of $ 31.1 billion derives fundamentally from the operation of his steel company, Arcelor Mittal.

With industrial capacity in 20 countries and operations in more than 60, Arcelor Mittal is reputed to be a leader in steel production on most global markets. The company is listed on the Stock Exchanges of New York, Amsterdam, Paris, Brussels, Luxembourg, Barcelona, Bilbao, Madrid and Valencia.

Lakshmi Mittal is also an independent director at Goldman Sachs and serves on the board of directors of the European Aeronautic Defence and Space Company, the World Steel Association, Kazakhstan’s Foreign Investment Council, South Africa’s International Investment Council and the Investors’ Council to the Cabinet of Ministers of Ukraine. He is also a member of the World Economic Forum’s International Business Council, the World Steel Association’s Executive Committee, Mozambique’s Presidential International Advisory Board and the International Iron and Steel Institute’s Executive Committee. Closer to home, Mittal is a board council member of the Prime Minister of India’s Global Advisory Council of Overseas Indians.

Starting out in the family’s steel business, Lakshmi Mittal first began to expand with the acquisition of a rundown steel mill in Indonesia. This purchase initiated his rise as a steel magnate through a process of consistent consolidation – acquiring steel-making units in Europe, Canada, Africa and the U.S. More recently (through Arcelor Mittal), Mittal has put forward proposals for Greenfield projects6 for India, Liberia, Mauritania, Mozambique, Nigeria, Russia, Saudi Arabia, Senegal and Turkey. The company employs the strategy of “vertical integration” to streamline production and increase the profitability of its steel-making operations. In addition to owning steel factories, Mittal also controls the essential raw materials, making the company a prominent player in mining of iron ore and coal. These consolidation and vertical integration strategies combine to produce a powerful market-domination – and this raises a number of issues.

Firstly, the consolidation trend has resulted in the creation of huge oligopolies with substantial economic and political weight (as Mittal’s connections and his CV testify) that translates into significant control over the market. Secondly, Mittal’s success has been based on exploiting weaker industries and regulations (often in fragile or less developed economies) and by turning poor labor standards and wages into profitable, “costcutting” business assets. Thirdly, the direct sourcing of raw materials entails a strong involvement in mining, which is, in turn, one of the most exclusive, environmentally and socially destructive economic sectors. Lastly, taking a broader perspective, the growth of metal industries depends on a prevailing ideology that sees overconsumption and industrialization as the ultimate goal of human development.

The policy framework in India is similarly geared to increase production of steel as the country aims at becoming a world leader with a national target of producing 200 million tons of steel by 20207. Demand for steel remains very high domestically and the government has set out an intensive advertising campaign aimed at further increasing domestic consumption8 while also looking to increase exports.

Following implementation of India’s new Industrial Policy in 1991, the Iron and Steel industry, so far part of a list of industries reserved for public sector ownership and control, was deregulated and exempted from compulsory Government licensing9. The New Economic Policy, also passed in 1991, introduced the following changes in India’s steel industry:

o After large-scale industrial capacities were removed from the list of industries reserved for public sector ownership and control, the licensing requirement for industrial units expansion was also largely withdrawn.

o The private sector came to play a prominent role in industrial steel production

o Pricing and distribution control mechanisms, so far imposed and regulated by the Government, were discontinued.

o The iron and steel industry was included in the high priority list for foreign investment, implying automatic approval for up to 50% foreign equity participation, subject to foreign exchange and other stipulations governing such investments.

o Quantitative import restrictions, aimed at limiting the quantity of goods that could be imported within a given time, were largely removed. Export restrictions in place to prioritize the domestic market over foreign trade, were withdrawn with a view to promote international trade

The regulatory framework was hence reshaped in a manner to encourage private domestic and foreign participation: other policies related to different economic sectors were hence tailored to similarly encourage private sector involvement. For example, in the case of the metal industries, the New Mineral Policy 2008 altered the existing Mining Framework by introducing considerable deregulation and placing a new emphasis on facilitating the entry of private players into the mining sector. The negative consequences of this favorable treatment were borne by local communities. Violent land wars and conflicts erupted across mineralrich Central India as mining and steel companies evicted villagers, seized forests and grabbed agricultural land to set up their facilities, leaving behind a trail of displacement, pollution and destruction. Arcelor Mittal naturally found itself tarred by controversy (and faced with strong, local opposition) when it set out to mine iron ore and build steel plants in the resource–rich states of Jharkand, Orissa and Chattisgarh.

The promise of offering investments and technology to promote the privatization of public property and public works has a long history. Back in 2008, Arcelor Mittal put forward a proposal to the Government for establishing a joint–venture to take over the state-owned coalmines held by Coal India Limited.

As public sector units are privatized and small mills and plants taken over, the steel industry has become increasingly concentrated and monopolistic. But even this is not enough: financial advisors and institutions alike have called for even further privatization based on the supposed benefits of economies of scale.” This obsession with efficiency works against the interests of India’s small businesses, which are slowly disappearing to make way for privately owned industrial giants. The proponents of the LPG Mantra argue against offering any offsetting protections for these small and infant industries as well as strongly stressing that public owned companies are inefficient and hence need to be privatized, but this is a clear departure from the approach followed by most developed countries.

In the case of steel, a case worthy of notice is that of South Korea’s POSCO. Now amongst the top steel producer in the world (and operated under a consortium of foreign private shareholders), POSCO was originally born and successfully run as a public enterprise. It was privatized not on efficiency grounds, but under IMF diktats as condition of South Korea’s acceptance of institutional stabilization loans. That a State owned company can be successful and efficient is a fact often underplayed or left unmentioned by liberalization advocates, a point Ha Joon Chang makes very aptly to illustrate developed countries practice and preach mismatch.

Policies of privatization, consolidation and vertical integration form the pillars on which Mittal’s huge steel empires were created. In the absence of competition – or where competitors are too weak to survive without public protection and support – only the strong survive.

2. MUKESH & ANIL AMBANI – THE RELIANCE EMPIRE PETROCHEMICALS, PLASTIC, RETAIL, SEZ, OIL & GAS, ELECTRICITY, FINANCE, TELECOMMUNICATIONS

The Reliance brand name is associated, in the public mind, with a multitude of products. Dhirubai Ambani, the company’s original founder, is held in high esteem by an Indian public that sees Ambani as self-made man with a dream, whose drive and ambition lead to a rags-to–riches story. Common people embrace Ambani as a symbol of change and emancipation – an example that their own dreams of success might someday be realized.

While it is true that Dhirubai Ambani created an empire from scratch, he was surely backed by the right connections. It is widely accepted that doing business in the era of the license raj, policy of Government regulations and control over economic business through licensing and permits, implied keeping good relations with bureaucracy and politicians. Even after the economy was liberalized and competition expanded, connections continued to provide an important competitive advantage that allowed some companies to flourish massively while others lagged behind. Starting out working at a gas station, Dhirubai went on to become the owner of India’s largest refinery at Jamnagar.

In 1958, he launched a small business under the name of Reliance Commercial Corporation, trading in spices; a few years later, he shifted his business into textiles and changed the company name to Reliance Textile Industries Limited. The big break came in 1966 with the set up of a textile mill in Naroda, near Ahmedabad, producing under the brand name Vimal. A few years later, in 1977, Reliance was publicly listed: Ambani managed to raise operating funds from the broad-based society rather than from commercial institutions – thereby initiating what came to be known as the equity cult. As the company became more successful, Ambani set out to create an industrial manufacturing complex.

Dhirubai’s Reliance was favored by the government – particularly during Rajiv Gandhi’s regime, in the decades before formal liberalization, as India’s priority in the textile sector kahdi cotton – hand–spun and woven on the traditional handlooms promoted by Gandhiji (Mahatma Gandhi) as an emancipating tool that promised employment and self-reliance to generations of Indians – was eventually forced into retirement with the arrival of new policies favoring synthetic and machine-made cloth.

When Indira Gandhi was in power, Dhirubhai shared friendly relations both with her and with Finance Minister Pranab Mukherjee. Throughout the years, a number of malpractice complaints were filed against Reliance. The company was accused of insider trading, share-price manipulation and tax evasions. Yet, precisely because of Reliance’s acquired status and clout, the public, the media and the political apparatus were wary of taking on the group. The fundamental role that this kind of clout plays in making or breaking business fortunes was demonstrated by the difficulties the company faced when the political leadership changed. Prime Minister V.P. Singh famously became the first PM to challenge Reliance by imposing stricter regulations. As a result, the company’s business operations were not running so smoothly.

In the 1980s and 1990s, while Reliance was flourishing, the company began diversifying in a major way. These were the decades of India’s economic reforms and its entry into globalization. In the 1980s, the Rajiv Gandhi Government had initiated a set of reforms that included reducing income and corporation taxes to ”create incentives” for the private sector. The list of manufacturing items and products reserved for small-scale business sectors was reduced, while several sectors – including telecommunications and cement manufacturing were deregulated.

In the 1990s, the Narasimha Rao government pushed these reforms forward with even greater impetus, focusing particularly on industrial growth. The Government’s system of central licensing of businesses was dismantled and private companies were allowed to do business in sectors previously under the sole control of the State. Foreign participation was encouraged, imports were facilitated through a more liberal trade policy, and the Monopolies and Restrictive Trade Practices Act was relaxed to encourage private sector actors to enter previously closed markets.10

It is against this backdrop that the Ambani family’s spectacular rise occurred. As the economy was radically deregulated, liberalized and privatized, the Reliance group (backed by a familiar brand name that ensured the public’s continued loyalty and protected by its established economic and political clout) found renewed occasions to grow and consolidate – both by way of diversification and aggressive expansion. Allegations of the company’s unfair reliance on political connections did not end with the founder’s death – or the subsequent division of the company after a prolonged row between Dhirubhai’s sons, Anil and Mukesh. Today, Mukesh heads Reliance Industries Limited (RIL) while Anil heads the Reliance Anil Dhirubhai Ambani Group (ADAG).

Through a process of “backward integration,” Reliance diversified its operations to include producing the raw materials for its textile operations, starting with polyester and moving even further back into the production of oil and chemicals. In the following years, the company (through its two arms, RIL and ADAG) began expanding its reach into telecommunications, petrochemicals, power, life sciences, finance, infrastructure, retail, Special Economic Zones and so on.

Privatization was strongly pushed domestically by the New Economic Policy and internationally by the World Bank as a means of “creating competition.” Instead, these new initiatives translated into the creation of powerful new forms of private monopolies. Reliance provided an example of what “competition” really meant under the NEP, with its takeover of one of its leading rivals, the Indian Petro Chemical Limited. Reliance now controls more than 75% of the India’s petrochemical market.11

Having become a major player in the oil and gas sector, Reliance Industries Limited (RIL) was the biggest winner during the time of India’s economic liberalization. In 1994 the Oil and Natural Gas Corporation (ONGC) became publicly held. In 1997-98, following the impetus of privatization, the government introduced the New Exploration Licensing Policy (NELP), which allows private players to obtain hydrocarbons exploration and production licenses on the basis of competitive bidding. RIL was allotted the largest number of exploration blocks after ONGC.

Despite claims that privatization would stimulate competition and ensure a fair and transparent playing field, the process of allotting licenses has remained largely under the influence of well-entrenched patronage networks dominated by the powerful few. Recently, India’s Controller Auditor General reported that the Oil Ministry and the Directorate General of Hydrocarbons (DGH) practice of favoring Reliance’s oil business with huge benefits by way of rule-bending, was causing losses to the national exchequer.12 Reliance Petrol Ltd. was also amongst the largest beneficiaries from the United Nation’s Oil-for-Food scam. Oilfor- Food was ostensibly a program designed to provide “humanitarian relief” to the people of Iraq but it soon undermined by a whirlwind of corruption that mainly benefited scores of foreign contractors. (Reliance’s role substantially covered up until Arun Agarwal set out to expose the scandal in his riveting book, Reliance: the Real Natwar.)

As the volume of RIL’s oil pumped from the fields of Andhra Pradesh decreased, Mukesh Ambani embarked on a partnership with the British oil giant BP. In July 2011, the Oil Ministry hailed the $7.2 billion BPRIL deal as India’s biggest Foreign Direct Investment coup to date. As a result of the agreement, BP, the second largest oil producer in Europe, will gain access to a host of profitable Indian natural resources. The synergy between domestic companies and Western firms eager to enter the Indian market, lured by technology and investment, is increasingly visible. But as business becomes more transnational in nature, it becomes more detached from the original country’s local realities.

In another joint venture, RIL has partnered with Australia’s UXA Resources Limited to commence uranium mining operations and is lobbying for deregulation of the Indian uranium mining sector to allow private domestic companies to access it. At the same time, RIL is arguing that Indian firms should be granted incentives to secure uranium assets abroad.

A similar fate awaited the telecommunications sector when it was privatized around 1994. With the introduction of a National Telecom Policy, licenses for the telecom spectrum were to be allotted through open and competitive bidding. But what was promoted as a means to increase fairness and accountability produced just the opposite result. Reliance Communications is currently being investigated in the country’s biggest scam over 2G–spectrum telecom allocations. (This scandal involved the ruling-Congress party’s discounted sale of 1,232 telecom licenses to 85 companies, many of which had no experience in telecommunications.) Reliance Telecom and three ADAG officials stand accused of having conspired to set up Swan Telecom as a front for obtaining spectrum allocations.13 India’s Telecom Minister Kapil Sibal is currently denying allegations that he favored Reliance by decreasing penalties against the company from Rs 50 crores (over 10 million US$) to a mere Rs 5 crores.14 (1 million US$). Meanwhile, the Center for Public Interest Litigations claims the actual penalty that should have been assessed would amount to a whopping Rs 650 crores (over 131 million US$).15

If the final outcome of such enforcement litigations cannot be guaranteed (given the climate of lax implementation and fraudulent or absent regulatory compliance), the future oversight of questionable business practice will remain under a cloud of suspicion. Mukesh Ambani complained to none other than the Prime Minister that these lingering questions are “denting his reputation.”

Claims of unfair business practices being allowed to operate thanks to political connections and favoritism have always accompanied the Reliance brand. Its activities in the spheres of retail and real estate developments offer some of the starkest examples of how the Statecorporate Nexus can work to promote wealth accumulation by the rich at the cost of people’s livelihoods. Through its supermarket chain, Reliance Fresh, the company has brought about a destructive revolution that has devastated India’s small retail sector, in much the same way Wal-Mart did in the United States. If entry into the retail sector was once regulated with an eye to protecting small producers, corporate interests now are succeeding in bringing down the last vestiges of these regulations. For example, India’s private sector has lobbied successfully for 100% Foreign Direct Investment in retail. Currently, Reliance is earmarking plots of agricultural land for future food production. This constitutes the last step in the privatization of the commons, where food becomes a private commodity and is no longer an intrinsic right of the greater human community. In Andhra Pradesh’s Kakinara SEZ, the company has earmarked 200 acres for Jatropha plantations for biofuels.

In 2005, the introduction of the Special Economic Zone (SEZ) Act opened up land development as a huge profit-making sector for private domestic and foreign corporations facilitated by massive tax concessions and incentives. Meanwhile, the 1894 Land Acquisition Act, which institutionalized dispossession, was left untouched in its colonial state. Reliance’s resort to violent land acquisition in Dadri and in Haryana offers a chilling demonstration of how the government’s legislative 18 Outing the Oligarchy machinery can function to serve corporate interests over the interests of common citizens.

After Reliance declared a Special Economic Zone at Dadri, squads of armed police, acting on Anil Ambani’s behalf, brutally fired on protestors, assaulted locals and destroyed villages as people attempted to resist the corporate acquisition of 2,500 acres of productive farmland.16 At Jajjar, Haryana, 25,000 acres of fertile land were grabbed by RIL from farmers. The Electricity Act 2003 and the Energy Conservation Act 2001 introduced neoliberal conditions and deregulation in order to favor private sector participation in the energy and power sectors. These new acts made specific mention of the need to revise the Land Acquisition process to facilitate power-generating industries.17 RIL has benefited massively from these new laws. In addition to being the leading power distributor in Mumbai and Delhi, Reliance Power’s Sasan power generating plant in Madhya Pradesh has been registered with the UN Clean Development Mechanisms program, which has opened the door for Reliance to claim additional profits of more than Rs 2000 crores from the sale of Certified Emission Reduction credits.18 The super-critical technology based pit-head coal-fired plant was granted Host Country approval by Minister of Environment & Forests Jairam Ramesh who claimed the project contributes to India’s sustainable development. The news was received with strong criticism by environmentalists as well as climate change experts; in fact, the methodology panel which advises the CDM executive board supported the concerns as the methodology under which firms can apply for offsets by cutting greenhouse gas emissions through more efficient technology ‘may lead to significant overestimation of emission reductions19’. Besides, to qualify for CER credits the projects must prove that they would be unviable without the additional revenue; the Reliance plant was instead well underway already.

Anil Ambani’s Reliance is also prominent player in the world of finance, providing insurance and commercial services. Ambani’s fortunes have blossomed since the banking and financial sector was gradually privatized beginning in 1992 to allow for the entry of private and foreign entities.

Mukesh Ambani’s Antilla, an ostentatious 27-floor high-rise mansion in Mumbai (“the city of slums”) has come to stand as a blatant symbol of the gross inequality that the current economic and political system of deregulation, privatization and liberalization is pushing forward.

 

3. THE RUIA FAMILY – ESSAR GROUP

STEEL, MINING, OIL, POWER, TELECOMMUNICATIONS

Liberalization has similarly favored the fortunes of another family, the Ruia tribe of Mumbai. The Essar group, set up in 1969 by brothers Shashi and Ravi Ruia, exploited new avenues of profit accumulation and proceeded to establish a varied business empire that rocketed the brothers onto the world’s billionaires list.

Born into a business family, the Ruias started off as owners of a construction company. The turning point in the Ruia’s saga came with the deregulation and liberalization of India’s economy. During the 1980s, India’s state-operated shipping and drilling sectors were opened up for private business. During the 1990s, most of the remaining sectors – including power, telecommunications, mining, ports, roads and banking – were liberalized. The Essar group took advantage of these newly available avenues and substantially increased its wealth after having initiated a process of business diversification in steel, oil, gas and telecommunications. India, Indonesia, Canada and North America now host Essar’s steel manufacturing facilities while its retailing and processing activities cover India, Indonesia, the UAE and the UK.

As part of the “backward integration” of its steel-making ventures, Essar now is involved in mining operations in India, Indonesia, Mozambique, Brazil and the U.S. These efforts are focused on excavating iron ore (for a total reserve of 1.6 billion tons) and coal (for a total of 450 million tons).20 Growing domestic demand from the steel industry in a newly industrializing India has led to a boom in metals prices. Minerals are increasingly highly valued on the international market: increasing scarcity at a time of rising industrialization and urbanization continue to be significant factors pushing demand.

While it must be said that developed economies’ mineral and metal consumption has suffered from the effects of the global recession, which has caused the closure of smelters and plants, developing and emerging economies have not abandoned plans to scale-up their capacity, production and consumption. This trend – also arguably favored by carbon-trading approaches to mitigate climate change – is based on a model of “outsourcing of pollution,” the resource-intensive, resourcehungry and environmentally damaging industries like steel and iron and aluminum and automobile manufacture are increasingly being shut in the West and opened up in the East. This is happening with polluting metal smelters and even with nuclear power stations, as global capital moves across borders to run invasive, polluting business; as global divisions of labour dictate which country should produce what most cheaply; as the CDM reverses the principle that polluter pays.

If India is on the receiving end of “pollution outsourcing,” it is also actively reproducing the same model as Indian corporations target fragile countries with weak regulatory systems as convenient locations to relocate their unsustainable operations. Human Rights Watch has raised an alert about Asian, European and North American companies that are still investing in Burma/Myanmar despite the fact that foreign financing serves to support a military junta accused of multiple human rights abuses. In a bid to control the world’s remaining oil and natural resources, these resource-hungry foreign interests are fuelling conflict and violating human rights from oil-rich Burma to mineral-rich Central India. Amongst the Indian companies that have not divested their holdings in Burma/ Myanmar are GAIL, ONGS Videsh, Sun Group and the Ruia family’s ESSAR Oil.21

It is often the case that the regions or countries with the richest mineral and natural resources are also amongst the most impoverished and are often torn by armed conflict, if not outright civil war. In India, too, as the government went ahead with its privatization program, Essar was granted a prospecting license in Dantewada, Chattisgarh State,22 one of the regions most affected by violent resource wars. Similarly, the creation of Essar Steel’s plant in Dhurli, Dhantewada State, required the forceful acquisition of 600 hectares of land23 at the cost of the locals’ livelihoods, human rights and democracy. Interestingly, the Salwa Judum, a violent anti-Naxal civilian militia operation armed and equipped by the Government, was launched on the same day as Tata Steel and Essar Steel signed Memorandums of Understanding for the set up of steel plants in the region.

This trend of plunder-and-profit by seizing oil and mineral resources – encouraged by deregulation and privatization in mining policies – offers a stark example of the process of wealth accumulation by encroachment and dispossession. First, common property resources are privatized for individual accumulation; secondly, the industrial-capitalistic sector expands by encroaching and expropriating the living space and resources of pre-capitalist sectors;24 thirdly public utilities become private-sector domains, thus allowing for private wealth accumulation. Essar along with Tata now control a great part of the Sabri River in Chattisgarh, which they use for their industrial operations.25 Water and land “giveouts” to corporations have impoverished locals and blocked their access to essential resources linked fundamentally to their very right to life.

Up until, July 2011, Essar Group also controlled Vodafone Essar, India’s third-largest telecommunication provider. Essar Group held 22% through its Mauritius arm as well as an 11% stake through the Indian Joint Venture. The total of the shares was sold back to Vodafone in two transactions, leaving 26% ownership with Indian shareholders.

Only few months earlier, Essar Group’s CEO Prashant Ruia was questioned by the Central Bureau of Investigation in relation to its involvement in the 2G-spectrum scam. Nevertheless, the newly appointed Corporate Affairs Minister Veerappa Moily confirmed his intentions to proceed with the investigations into the role played by Loop Telecom as an alleged cover up for Essar-Vodafone to obtain favorable spectrum allocations. From a regulatory point of view, Loop was ineligible to receive allocated licenses. Yet, the company has so far been given a clean chit by the Corporate Affairs Ministry headed by Murli Deora, who resigned in July 2011 ahead of a Cabinet reshuffling – quite possibly in sight of pressing allegations of his connections to powerful business groups that he may have favored, including Reliance.

4. THE JINDALS – JINDAL STEEL AND POWER LIMITED

MINING, STEEL, POWER, INFRASTRUCTURE

Jindal Steel was started in 1952 by O.P. Jindal, a farmer’s son, who began by trading in steel pipes. He moved on to manufacturing steel pipes and fittings and opened his first factory near Kolkata. In a pattern familiar to other billionaire family companies, the Jindal group took advantage of expanding via “backward integration.” While steel remained the primary focus of business, the company went on to diversify its holdings to include a wide portfolio ranging from mining operations to power generation, infrastructure projects and telecommunications, making it one of India’s biggest private conglomerates.

Since the founder’s demise, the Jindal family’s assets have been managed by his widow, Savitri Jindal, and the couple’s four children, PR Jindal, Sajjan Jindal, Ratan Jindal and Navin Jindal. Under a complex crossownership agreement, each brother holds the largest holding of the arm he manages while holding shares in the all the others’ business operations.26

Politicians, bureaucrats and business houses in India are not only a closelyknit clique; indeed, in many cases, their roles appear interchangeable. Savitri Jindal, India’s richest woman, is also a Congress Member of the Legislative Assembly and was Minister of State for Revenue, Disaster Management, Rehabilitation and Housing in Haryana. Navin Jindal is a standing Member of Parliament. Before his demise, O.P. Jindal was also active in politics, winning a seat in Haryana State Assembly in 1991 and in Lokh Sabha in 1996. At the time of his death, O.P. Jindal was also Power Minister in Haryana27.

The Jindal Group also has resorted to forceful land acquisition to further its mining and industrial operations, opening way for additional violence and repression. In November 2009, a bomb blast targeted a convoy containing the West Bengal Chief Minister and Union Steel Minister Paswan. Their vehicles were returning after having inaugurated the Jindal Steel plant at Salboni. This incident unleashed a fury of brutal repression on the part of the police forces. The corporate-led scramble to exploit Central India’s natural resources, land and minerals particularly, justified by the corporate-state in the name of development comes with dispossession and the expropriation of the commons for private interests as well as Constitutional and human rights violations; this is fuelling the Naxal conflict, the armed struggle between people who have resorted to violence to protest exploitation, loot and forceful displacement, and the Government, which acts through police forces that routinely, in the name of anti-Naxal operations, resort to unrestricted violence. Following the bomb attack, several local boys and young villagers were labeled as Maoists and harassed, while three innocent tribals were killed in a clash with police.

In another case of expropriation of the commons, Jindal Steel and Power Limited (JSPL) was widely protested in Orissa after it acquired forest and community land for the construction of a 12.5 MTPA (million tones per annum) steel plant without providing compensation to the local residents.28 The locals complained that what the government calls its property is actually a community managed resource. They argue that the non-recognition of common property for the sake of private appropriation constitutes the central weapon in the unequal battle of accumulation by dispossession. The protests were inflamed by death of an indigenous Adivasi tribal woman (who died while taking part in a hunger strike protesting JSPL’s takeover of water from the local river to cool the furnaces of its steel plant).29 Stories of distraught farmers forced to become casual laborers after being displaced from their ancestral lands near the Rabo village tell another tale of the human impact of privatization and of the broader trend that allows industries a free run as far as resources and regulations are concerned. Dams built by private companies have risen aplenty across rural India – even in defiance of Governmental objections – robbing common people of livelihoods, land and water.

Jindal Steel is among the top tier of companies profiting through a more covert route: JSPL is building one of the world’s largest Clean Development Mechanism (CDM) projects in Chattisgarh. Clean Development Mechanisms were born as an initiative to fight climate change through Carbon Trading. Jindal’s sponge-iron plant, spread over 320 hectares in Chattisgarh, is supposed to help address climate change. Instead, JSPL’s plant is polluting groundwater, air and contaminating crops.30 Through such CDMs, companies claim benefits (often even in contravention with the CDM policy itself). Polluters also profit from this newly opened commercial opportunity in several ways. Meanwhile the ability of CDMs to reduce Greenhouse Gases remains controversial. CDMs function by establishing a system of “outsourcing pollution” that actually benefits polluters.

Using CDMs set up under the Kyoto Protocol, countries obtain a carbon emission certificate that can is then sold through the free market. These certificates have been criticized as a way to buy a “permit to pollute.” Instead of actually reducing their greenhouse emissions, developed countries are buying these certificatesfrom developing countries to meet their production targets without having to reduce their carbon pollution.

At the same time, Indian companies transfer the costs of their profit making and pollution to communities and the environment only to gain additional benefits and even a green reputation through the CDM façade.

In July 2011, the Karnataka Lokayukta (Ombudsman) for Karnataka State found three companies (NMDC, Adani Enterprises and the Jindal Group) guilty of “financial irregularities” and trading in illegally mined ironore31.

5. GAUTAM ADANI – ADANI GROUP

INFRASTRUCTURE, OIL, ENERGY, REAL ESTATE, AGRICULTURE

Gautam Adani started out as a diamond trader, but he went on to accumulate a huge fortune as one of India’s most powerful industrialists. Adani has prospered by building infrastructure (including ports) and through real estate development, power generation, oil and trade in agricultural commodities. His first break came when his brother purchased a plastic manufacturing unit in Ahmedabad, which Gautam was invited to run. Importing polyvinyl chloride (PVC) as a raw material for the business, Adani did not see the group’s profits soar substantially until after the liberalization of India’s economy.

The policies of the ‘90s were strongly centered on facilitating foreign trade. As tariffs were slashed and trade barriers removed, import and export became a thriving business. Taking advantage of this favorableenvironment, Adani went on to build his empire through an uncanny ability to adapt his business to the localeconomic and political climate. Adani is known to share friendly relations with Gujarat’s Chief Minister Narendra Modi and he regularly makes contributions to the conservative, free-market-friendly Bharatiya Janata Party (BJP) yet maintains good relations with the liberal Indian National Congress (INC).32 The billionaire’s companies – Adani Enterprises, Adani Power and Mundra Port and Special Economic Zone – have grown in sectors that have significantly benefited from liberalization and deregulation. These freemarketinitiatives have given Adani greater access to raw materials through mining, land and real estate development through infrastructure, and his Special Economic Zone has undertaken a number of extremely profitable ventures since 1991.

The Mundra SEZ is the largest in India. Spread over 10,000 hectares of land, its creation caused the destruction of a rich mangrove ecosystem that once lined the coasts of the Kutch Gulf. Destruction of the mangroves has had severe consequences on water availability, fishing activities and livelihoods of the local population.

A representative of the National Fishworkers Forum clearly framed the problem as one of malindustrialization at the expense of traditional livelihoods: “Hazardous units, manufacturing petrochemicals, pesticides and agrochemicals, have mushroomed along the Gujarat coast. Refineries and private ports have compounded the misery of people living in these areas. Our survey shows that the worst culprits are the Adani group, which is building a port at Mundra, Sanghi Cement Company in Sanghipur in Saurashtra and Atul Agrochemicals in Bharuch.”33

The SEZ and its captive port were developed in the prohibited coastal zone after the Adani group presented misleading evidence of its plans to obtain necessary clearance. Nevertheless, the regulatory scenario works to the advantage of big business houses rather than forcing compliance with existing legislations. The Coastal Regulation Zone (CRZ) notification prohibiting development on coastal areas was amended in 2002, then again in 2011 by India’s Ministry of Environment and Forests. The Ministry’s ruling allowing for industrial development in fragile coastal ecosystems was accompanied by a telling remark by then- Environment Minister Jairam Ramesh who reflected that India “must get used” to such industrial plants being located in fragile coastal areas. Thanks to government policies, Special Economic Zones (SEZs) have emerged as huge moneymaking enterprises for private developers. The relaxation of regulations and the wide application of the Land Acquisition Act have resulted in land being acquired cheaply in prime locations, with sufficient infrastructure and close to urban areas. The Act has been the instrument to facilitate the rulers’ takeover of land under the notion of “eminent domain” i.e. that the State has overwhelming power and control over the country’s resources. Through the invocation of the broad and ill-defined ‘public purpose’, the Government has promoted takeover of land for very private profits under pretence of public good. State agencies act as agents and facilitators in the process, favoring industrial houses at the expense of local farmers and citizens. SEZs bypass most of the country’s relevant legislation, including requiring Environmental Assessments as part of the application for expansion through new units.34 On the other hand, developers are attracted by the offer of tax holidays and financial incentives, framing SEZs as gated enclaves for very private profit making. Adani’s Mundra Port and SEZ, for instance, stands like an island on its own – completely furnished with private schools, private hospitals and exclusive residences for the very rich.

Adani also profits massively from mining – probably one of the most environmentally damaging and socially impoverishing activities short of war. In a bid to control raw materials at the source and given the domestic constraints, such as infrastructure and high demand Adani’s company has bought up mining assets across Australia, Africa and Asia.  In India, Adani operates two coalmines in Chattisgarh and one in Orissa. It is also the country’s largest importer of coal. Once again, the claim that introducing competitive bidding in order to allow for private competition and transparency was proven to be vacuous. A case in point: the Punjab State Electricity Board has been accused of having favored Adani over other bidders for a tender to import 22 lakh [2,200,000] metric tons of coal for its power plants. This apparent act of favoritism resulted in a 100-crore loss for the national Treasury.35

It is such instances that stand out as glaring examples of the contradictions and failures of the Indian growth story. The old networks of patronage and influence are still very much in place. They continue to work by concentrating favors and resources within the liberalized economy. In addition, the very process of deregulation and the removal of welfare provisions that accompany neoliberal growth have left common citizens at the bottom of an exploitative chain. Meanwhile, the bureaucracy, the corporate tycoons and political agents collude in exploiting every avenue for personal accumulation. Not only are public goods no longer provided, they are simply snatched away – becoming accessible only through purchasing power. The fishermen of Mundra are fighting their case in court but they realize the importance of political connections: they know their bargaining power will never match that of one of India’s greatest oligarchs.

Adani has been assigned a contract for building a 1320-MW coal-fired thermal power plant in Chindwara. The adjacent Pinch River will be diverted for the project. The land for the project is agricultural land. Farmers have been protesting against the displacement caused by a planned dam and the Adani power project.

At 6 PM on May 24, 2011, two local Kisan leaders, Dr. Sunilam and Aradhana Bhargava of Kisan Sangarsh Samiti were attacked by goons hired by Adani Power. Their car was smashed. Dr. Sunilam suffered a head injury and both his arms were broken. As a press statement issued by the Peoples Union of Democratic Rights states: “the attack by Adani Power Limited’s armed goons is yet another instance of how powerful corporate houses are resorting to organized violence perpetrated through their private mafias to silence those who come in the way of their interests and break peoples’ attempts to organize on issues of land, water, forests.”36

The Ombudsman (Lokayukta) report on mining in Karnataka found Adani involved in illegal mining andrecommended that Adani enterprises be blacklisted and its port lease cancelled.37

6. SUNIL MITTAL – BHARTI AIRTEL

TELECOMMUNICATIONS, RETAIL

Sunil Mittal founded Bharti Enterprises in 1976. Bharti Airtel, his flagship company, is the largest phoneoperator in India and now stands as the world’s fifth largest telecom operation with business spread across 19 countries. Starting out modestly as a bicycle part maker, Sunil Mittal moved to Bombay in search for a more favorable business environment. Once in Mumbai, he entered into the international trade arena by beginning to import different products, zinc, brass, plastics etc. Mittal says it was at this point that he learned to navigate the Indian regulatory environment. It was precisely around this time that the country’s economic scenario also began changing substantially. Mittal acknowledges that as the trade and regulatory barriers came down, his company’s fortunes turned and Mittal became one a tide of entrepreneurs who rose to great heights advantaged by deregulation and de-licensing. Previously, the telecom sector had been restricted by the constraints of manufacturing capacity, importing and exporting. Mittal recalls how from strict Government regulation, one day the Government suddenly announced that licenses were no longer required to run businesses. “From controlling what you could do [snaps fingers] it was gone in one day.”38 Today, Bharti Airtel is expanding beyond India’s borders: focusing on Africa, it is striking deals with local providers across the continent and has acquired assets in more than 16 African countries. Sunil Mittal’s name came up recently in the ongoing Government investigations over the 2G-spectrum scam. Lobbyist Niira Radia mentioned the tycoon in one of the taped conversations regarding the fixing of the Telecom Ministry. Radia hoped to find a way to favor her big-business clients, including Tata and Reliance ADAG. The allocation of the 2G-spectrum certificate was found to be absolutely tainted by powerful vested interests, some of which have been brought to justice while others managed to get a clean chit. While Sunil Mittal spoke in support of the investigation, he also has argued against the Telecom Regulatory Authority of India’s (TRAI) attempts at regulating spectrum price. Mittal insists on advocating for competitive bidding, even at a time when the evidence clearly indicates that unfair and corrupt practices were routinely involved in the process.

As the head of Airtel, Mittal is a leader in the telecom sector, but he is also involved in retail through a controversial partnership with the giant U.S. supermarket chain, Wal-Mart. Mittal has forged the alliance with Wal-Mart in hopes of introducing a chain of hundreds of similar retail stores across India.

Wal-Mart is already widely despised in its home country for its destructive impact on the small retail sector. In India – where this sector counts, a minimum, 40 million small retailers – the effects of bringing Wal-Mart’s to India’s cities and towns will be equally if not more devastating.

The move is one last step in the corporate sector’s ultimate strategy to hijack the entire food chain – from seed to table. As corporations increasingly control everything from production to marketing and distribution, the local food system in India is being undermined – with severe consequences for common people. Under the corporatizing process, food ultimately becomes just another commodity and henceforth ceases to betreated as a fundamental right intrinsic in our right to life.

7. RATAN TATA – TATA GROUP STEEL, ENERGY, AUTOMOBILES, CHEMICALS, TELECOMMUNICATIONS, AGRICULTURE, PHARMA, CONSTRUCTION, AEROSPACE

Tata is not only a household name in India, but it is also one of the country’s most renowned brand names around the world, where it is considered a symbol of renascent India. According to the Reputation Institute, Tata is the second most-trusted brand in India and the 11th most-reputable brand in the world. Ratan Naval Tata, the fifth-generation chair of the country’s biggest private conglomerate, is also one of the most respected and trusted tycoons. Unlike the other billionaires, he does not appear in the Forbes list: this is because the majority of his company’s shares are held under his charitable trusts.

After looking after the family’s Tata Steel business in Jamshedpur, Ratan Tata was appointed to head the company in 1991. Under Ratan Tata, the company began its international operations and went on to become the giant that it is today – with 96 companies and operations spread over 56 countries. Out of these, the steel business remains the country’s largest, followed by Tata’s automotive empire and the company’s outsourcing services.

As the economy was liberalized at the time of Ratan Tata’s appointment as company chair, the firm had been shedding a number of less relevant activities in hopes of achieving global competitiveness and domestic leadership. Ratan Tata is said to have foreseen and strategically anticipated the economic restructuring, thereby managing to use it to its advantage. By streamlining and refocusing operations while also initiating mergers and acquisitions on an international scale, he transformed Tata Sons into a group that could not only benefit from the reforms of the 90s but also rise to become a leading conglomerate. Providing everything from salt to luxury cars and service delivery, Tata Sons made it to heights of success. Admirers attribute Tata’s success to its ability to deliver goods and services tailored to the needs of the every sector of the public, providing everything from luxury items to cheap options for the less–well-off.

Tata also stood apart thanks to its numerous charitable initiatives – including a “better than the rest” rehabilitation policy for people displaced by industrial projects – and this has granted the company an aura of trust and benevolence. But there was another side to this growth story. While to many, Tata represented admirable business acumen in the service of his company and consumers, to another set of people, Tata has meant something quite different: loss of land, loss of livelihood and loss of life. The Tata groups have, in fact, been involved more or less directly in many environmental and social conflicts stemming from its industrial operations. Tata Steel, in particular, has been at the center of numerous controversies including the Dhamara Port project in Orissa. Operated through a joint venture between Tata Steel and L&T (Larsen & Toubro), Dhamara Port was found to be in violation of Forest Conservation Act, yet despite this ruling and despite huge protests, the project was allowed to operate in an ecologically sensitive area, without due assessment of the baseline ecology, the impacts of pollution and operations on the nearby Sanctuary and nesting site for the Olive Ridley turtles and on the broader ecosystem.

As the government deregulated mining and mineral processing, the Tata company began to eye the uranium mines in a fertile agricultural zone in Tamil Nadu. Tata proceeded with its plans to mine this uranium despite encountering opposition from a local population that was prepared to resist land dispossession, livelihood destruction and environmental degradation. Similarly, in Orissa and Jharkand, planned land takeovers to make space for Tata Steel plants, led to the killing of innocent Adivasis and the injuring of many women and children.

The most infamous instance of Tata’s forceful land acquisition occurred at Singur in West Bengal State. This region, once famous for land ref rms aimed at empowering landless laborers and small farmers, had succumbed to neo-liberal pressures and, under Chief Minister Bhattacharya, embarked on a path of intensive industrialization to make way for private investments. As part of this ambitious plan, land in Singur was acquired for a plant to build Tata’s Nano, the world’s cheapest car, costing only Rs 1 lakh (2000 US$) But what was presented as a milestone for the country’s common man, actually translated into a spectacle of violent repression as thousands of police brutally put down local resistance to the forceful land takeover. The company was forced to relocate and build it’s line of Nano’s elsewhere.

When Mamata Banerjee, a former resistance leader came to power as West Bengal’s New Chief Minister, one of her first acts was to pass a resolution for a Land Bill designed to return the seized land to the original owners. Tata challenged the move in court, labeling it “unconstitutional” and lamenting the protestors’ nonviolent occupation of the land, at night and without prior notice or consent. Isn’t this the crux that protesting farmers constantly face whenever State governments grab land for corporations? As has happened in too many other sites, the farmers’ cries were met with teargas, fire, bullets and charges of police armed with lathi – India’s version of a truncheon.39.

Tata was also involved in land grabbing in Kalinganagar, in the State of Orissa where 13 tribals were killed. In Gopalpur, Orissa, protests forced Tata to abandon plans to build the Gopalpur Steel plant.

Still, the TATA name remains practically stain free. Because the company’s charitable initiatives have granted it a considerable degree of respect and justification, the general public tends to overlook such violent instances as an act of the State alone. And once these episodes are placed in a context of “industrialization and development” even forceful operations come to be accepted as needed. This falls in line with the idea that “someone has to pay the price for the country to develop.” It also builds on an outdated view that those living outside the industrialconsumerist model are retrograde, poor and in need of rescue.

Such regressive thinking leads to the acceptance of dispossession and the destruction of traditional livelihoods, as long as a top-down option is presented as the “modern alternative.” Tata Steel Vice President H.H. Nerukar’s words on the rehabilitation of Adivasis and other rural communities go a long way in explicating this mentality: “Tata Steel has improved the standard of living. There are many special initiatives for tribal development. In spite of doing this, tribals have not reached where they ought to have, even in Jamshedpur. Tribals have to be looked after much more.” And further: “These people haven’t seen anything positive in life. So, we’ll give them training. It will be a residential course. We’ll take them and give them 10 days of attitude training. We’ll get them to quit their habits.”40

8. ANIL AGARWAL – VEDANTA RESOURCES

(ALUMINUM, COPPER, ZINC)

The 12th richest Indian in the Forbes List (and the world’s 154th richest individual), Anil Agarwal was born into a business family already involved in manufacturing aluminum conductors. He went on to found his own company, Sterlite Industries Limited, and proceeded to expand his metal empire by acquiring previously government-owned assets. In 2001, thanks to the government’s privatization program, Agarwal’s company was able to acquire 51% ownership of the previously publicly owned Baharat Aluminum Company Ltd. (BALCO), for a giveaway price. BALCO was allegedly worth Rs 3,000 crores [approximately 613.000.000 US$] whereas the deal with Agarwal totaled only Rs 551 crores. [approximately 113.000.000 US$] At the same time as the takeover, Agarwal also signed a Memorandum of Understanding under which the Orissa Government was to supply of iron ore to Agarwal’s newly acquired plant.

In 1974, BALCO had become the first Public Sector Undertaking (PSU) to begin producing aluminum in India so Agarwal’s 2001 takeover of the historic plant was widely protested. Chattisgarth Chief Minister Ajit Jogi joined the public protests in support of striking BALCO workers opposed to the takeover. The case was brought to the Supreme Court with Agarwal’s critics arguing that the sale violated national laws written to protect the rights of tribal people, in particular, the V Schedule of the Indian Constitution, which states that tribal land cannot be transferred to private owners. Chief Minister Jogi also filed serious corruption allegations against top political figures, while protesting the Central Government’s attempts to bypass the Chattisgarh State Government. The bureaucratic apparatus remained unfazed, however, and (as is often the case) the deal was justified on financial grounds.

Local people were quick to understand how the policy of privatization that the government was so vigorously pursuing would spell disaster for the disadvantaged and marginal communities of the country. The protesters had a clear vision of how, once BALCO’s public assets were placed in private hands, they would have forever lost rights inscribed in the Constitution. Agarwal’s takeover of BALCO illustrates, once again, how wealth is accumulated through dispossession. Land that had originally been recognized as tribal land protected by the Constitution, became “publicly owned” when the Government acquired the property (for a mere Rs 20 peracre) under the “public purpose” exemption. Ultimately, land that had historically been recognized as tribal property was transferred to a private company. While the transfer generated profits for Sterlite’s shareholders, the deal clearly violated tribal Constitutional rights, increased regional insecurity and undermined the livelihoods of the local residents.

Similarly, the government’s proposal to divest from the National Aluminum Company Limited (NALCO) was received with huge protests from the public, trade unions and political parties. Vedanta’s Sterlite and Hindalco were among the top bidders. Acquiring NALCO would make Agarwal India’s largest player in aluminum and copper. He also bought a majority share in the formerly government-owned Hindustan Zinc Limited (HZL) and in the Madras Aluminum Company. Agarwal recently proposed to buy out the government’s remaining 49% stake in BALCO and 29 % in HZL. Agawal’s Sterlite also owns 51% of SESA Goa, India’s largest iron-ore producer and  exporter: the deal raised allegations of severe financial irregularities and came under the scrutiny of the Serious Fraud Investigation Office. Other questions were raised about the NALCO divestment move after it was pointed out that Finance Minister (now Home Minister) P. Chidambaram was, in fact, on Vedanta’s board of directors before becoming Finance Minister, a conflict of interest which has raised very serious questions.

While divestment advocates often can make sound arguments for selling off the government’s money-losing PSUs, investigators deemed the BALCO and NALCO buyouts were unnecessary since both state-owned companies were successful operations running at a profit: it made no sense to sell them to private interests – especially at such meager rates. The big winner clearly was Agarwal. Owning and managing the ex-PSUs would allow huge turnovers owing to near-total market domination and free access to the State-owned hugely sought-after raw materials – the iron ore, bauxite and other mineral riches that lie deep in India’s earth.

Anil Agarwal‘s strategy of buying out PSUs has paid out handsomely by allowing him to create a lucrative quasi-monopoly in aluminum, copper and zinc that has propelled his rise in the Forbes list of India’s dollar billionaires.

In 2003, the listing of Vedanta Resources on the London Stock Exchange made it the first Indian company listed on international markets and this move proved to be a turning point for Agarwal’s richness.

Unlike others who managed to maintain a good name despite serious malpractice allegations, Agarwal’s ill reputation grew along with his business plans. Vedanta’s most egregious move, and one that shot its chairman into the top tiers of corporate infamy, was a callous attempt at mining bauxite from the hills of Niyamgiri, part of the ancient homeland of the Dongria Kondh, one of India’s protected indigenous Primitive Tribal groups. Niyamgiri means “the mountain that upholds the law of the Earth” and local residents revere the mountain as a “living God.”

The Dongria Kondh reside inside the mountain’s cover of thick and lush vegetation and thrive within a strongly knit community that lives and functions according to the laws of Nature. The Dongria Kondh do not require a legal framework to determine how and when they are permitted to access and use their resources: their own ancient principles of sustainability, equity and community guide their lifestyle. Yet it is precisely this system – and even ideology of “common property resource” – that has been bashed by the advocates of divestment and privatization. The institutional system based on individual rights not only fails to protect customary values of indigenous people, but it also threatens the implementation of any rights at all.

Despite having introduced specific legislation such as the 2006 Provisions for Extension Scheduled Areas (PESA) and the Forest Rights Act to “undo centuries of historic injustice” suffered by tribal groups in India, the government has repeatedly failed to impose the same operational prohibitions on corporate-led industrial initiatives, hence leaving business leaders free to deny tribal land-dwellers even most basic rights enshrined in the Constitution.

The model of development that has been promoted is authoritarian and top–down and, hence, totally undemocratic. The imposition of an alien way of life and an imposed system of foreign governance has had devastating consequences on traditional livelihoods. As Vedanta lobbied hard to feed its aluminum smelters by mining bauxite from the rich hills of Niyamgiri, the Dongria Kondh faced displacement, loss of livelihood and, ultimately, genocide.

The Niyamgiri battle is probably the most revealing demonstration of the link between wealth accumulation for the few and impoverishment for the many. Vedanta’s predatory modus operandi clearly uncovers the connection between privatization, accumulation by dispossession, and the infringement of rights and regulations that occur when the State becomes an agent of forced industrialization.

CONCLUSION

India is commonly hailed as “the world’s biggest democracy.” It is also famously one of the most multicultural, multilingual and multiethnic countries in the world. Its Constitution incorporates provisions and principles from a number of other Constitutions in an attempt to design a framework for the protection and empowerment of all segments of the country’s extremely diverse society. India is also celebrated as one of globalization’s “winners,” a country whose GDP has picked up and remained higher than most other world economies.

But presenting India exclusively as a “miracle growth story” fails to account for the greater reality. The grim fact is that, out of a population of one billion, only 50 have attained sufficient wealth to sit among the world’s richest individuals. The extravagant wealth of 50 billionaires is no reason to feel proud – not when this “success” is contextualized within a country that cannot feed half of its children. Nor is it reason to gloat about the success of globalization – whose failures become apparent once the victims of the wealth-creation process are included in the picture.

A closer look at the means through which such riches were achieved forces the question: is wealth really being “created” or is it mostly being redistributed from the weaker to the more powerful? India’s founding social policy has similarly inverted. From a political philosophy based on advancing the ideals of social justice and equity, India has increasingly adopted a series of governing theories dangerously based on crony capitalism – where rights and fortunes are increasingly dependent on who you know and what you possess.

What does this mean for citizenship? What does it mean for development? When huge monetary wealth isaccumulated through the dispossession of the vulnerable only to be applauded globally, citizens lose faith in the system and lose faith in democracy.

The government professes an interest in promoting inclusive growth: yet what this has come to mean for India’s majority – agricultural communities, fishermen, landless laborers, Adivasis and tribals – is the destruction of homes and livelihoods, the loss of a sense of community and kin. What is gained in exchange is the superimposition of an alien way of life – a fundamentally unsustainable one – where wealth translates into nothing more than consumerism, the pursuit of material possessions and overconsumption in a dense, urban context. The word “rural” has come to mean primitive, non-consumerist and poor. If the success stories of a few billionaires are the yardsticks we use to measure progress and growth, we might say India has been successful. But India’s “miracle 36 Outing the Oligarchy story” is actually a work of fiction – a biased and partial perspective that ignores the unrelieved misery of millions.

If we do account for those who have lost their land, their sustenance, their homes and even their lives in the battle between these two opposing paradigms, surely the story of India’s “miraculous growth” takes a hit. If we account for the hectares of land diverted for industries and, hence, removed from food production, that’s another hit. If we start factoring in the increasing costs of food imports and of healthcare (compounded by increased exposure to industrial pollution, chemical exposure, and a range of “lifestyle diseases” attributed to the extremes of poverty and overconsumption) and then add the costs of internal conflict and growing extremism, it becomes fairly evident that the end result will look much different than India’s “Shining Miracle.” And, if we start accounting for the impacts of the LPG “revolution” in social and environmental terms, we will realize that it is not just the present that is at risk but that our future is at stake, as well.

The process of integrating with the global economy– which is fundamentally centered on the neoliberal tenets of deregulation, privatization and opening new markets – has had a tremendous impact on the Indian and the global economy, on governance and on society. The shift of ownership from public to private control – privatization – has been imposed in the name of efficiency. Deregulation, its byproduct, has created a freewheeling, business-friendly environment that encourages companies to seize properties and assets previously held in the public domain and operate them, not for the public good, but according to their own bottom-line rules and standards.

According to the LPG Mantra, self-regulation alone should be sufficient to ensure a company’s compliance with laws and policies; yet extensive evidence has proven this claim fictitious. But even as projects laced in illegalities, misdeeds and unfair practices continue to be exposed – more often than not, these activities have been condoned. One of the foremost issues that has arisen with the growing dominance of private actors has been the so-called “enclosure of the commons” in which resources born as common property are taken over and henceforth treated not as an entitlement but as a function of purchasing power. In such a situation, the common historical heritage of people’s traditional income and livelihoods are simultaneously and irreparably destroyed. In the official discourse (as well as in practice), these grim and wrenching local realities fail to be accounted for – only the most positive assessments of globalization’s impacts are admitted to the debate.

Similarly, “the rise of the Indian billionaires” has been hailed as proof of the neoliberal paradigm – i.e., that LPG opens up avenues for wealth creation. But this is only a partial picture that accounts for none of the lasting social, economic and environmental costs – and refuses to accept the failure of the “trickle–down” paradigm. An impartial analysis of the processes that sponsored the rise of Indian billionaires reveals that what is presented as wealth-creation is instead wealth-accumulation – achieved through dispossession of the poor and encroachment on the commons. In practice, this “success story” required removing wealth from a broadly shared community base and concentrating it in the hands of a small elite at the top of the economic pyramid.

While it is worrying enough that India’s growth is following such a lopsided pattern, it is even more troubling to realize how the few powerful individuals at the top are becoming increasingly denationalized. As they collaborate with their other super-rich counterparts at home and abroad, billionaires in India (and elsewhere around the world) are becoming increasingly removed from the reality of their own countries. And this trend towards “cultural globalism” is not limited to multinational corporations, even domestic businesses are becoming increasingly rootless as the drive to increase profits pushes them into new partnerships and joint ventures, mergers and acquisitions the world over.

Foreign companies eye the dynamic Indian economy both as a vast, potential market for goods and services and as an open door to gain access to India’s wealth of natural resources. Indian companies are following this lead, either to avoid domestic regulation (where it still exists) or to duplicate the same plunder-and-profit model abroad, often in weaker economies or fragile states. While the neoliberal economic agenda was initially justified on grounds that it would enhance domestic economies by attracting foreign investment, what we find instead – especially among the ranks of India’s billionaire oligarchs – is a disturbing outflow of investment.

During 2010-2011, Shashi Ruia of Essar invested $1.2 billion abroad and $200 million in India. Mukesh Ambani’s domestic investments were $2.7 billion and investments abroad were $8 billion. Ratan Tata invested $200 million in India and $3 billion abroad. Anil Ambani invested $400 million in India and $3 billion abroad. Sunil Mittal invested $2 billion in India and $16 billion abroad41.

The disregard for national priorities – which can be attributed to the change in ideology from one dominated by the sense of community to that of individual welfare – seems to be a common characteristic of the wealthy family of global oligarchs increasingly removed from the reality of society. Through the LPG process, local economies are being destroyed as common people and their rights are increasingly rendered invisible. Cities are increasingly fragmented and the poor are being marginalized both symbolically and physically, failed by both the State and the market and pushed to the far borders of society. The super–rich, on the other hand, work towards the shared objective of amassing great wealth, creating gated islands of luxury beyond the reach of common people and feeding into their disengagement with the broader reality while, at the same time, ensuring that their wealth is on convenient display for others to admire and covet.

Mukesh Ambani’s towering Mumbai residence, the 27-floor Antilla skyscraper-cum-mansion, symbolizes this dichotomy. Similarly, India’s Special Economic Zones stand in defiant opposition to any sense of community obligation. They act as foreign entities, with the nearsovereign power to grab land and resources. Neither the oligarchs nor their quasi-legal SEZ fiefdoms, share any abiding concern for the displacement of local communities and the destruction of small, sustainable livelihoods. Under the banner of LPG, the oligarchs have only one abiding mission: to take full advantage of the huge incentives for profit accumulation that exist outside the realm of law and beyond the loyalties of citizenship.

By Dr. Vandana Shiva

6 December 2011

@ International Forum on Globalisation (www.ifg.org)

NOTES

1 The World Bank Group: Independent Evaluation Group: Structural Adjustment in India http://lnweb90.worldbank.org/oed/oeddoclib.nsf/b57456d58aba40e585256ad400736404/0586cc45a28a2749852567 f5005d8c89?OpenDocument

2 Aghion, Burgess, Redding, Ziliboti: The unequal effects of liberalization: theory and evidence from India, March 2003

3 Jenkins: Democratic Politics and Economic Reforms in India

4 Prabhat Patnaik: The Economics of the New Phase of Imperialism Outing the Oligarchy 39

5 Parthapratim Pal and Jayati Gosh: Inequality in India: A survey of recent trends, DESA working paper no. 45, July 2007

6 Greenfield projects involve the construction of new operational facilities as opposed to brownfield projects which involve redevelopment or expansion of existing ones

7 Steeling the show, N.B. Rao www.ibef.org

8 ibid

9 India’s mixed economy before of liberalization was characterized by what is known as ‘License Raj’ a system of Government control over business set up and functioning through licenses and regulations

10 Harris and Corbridge: Reinventing India

11 A loss making venture, Outlook India 7th June 2004

12 The Statesman: CAG says Govt favored Reliance, 13th June 2011

13 Business Standard: Anil Ambani faces Parliament in 2G scam, 5th April 2011

14 India today: 2G scam: Hit by PIL, Sibal denies favours to Reliance Infocomm

15 Business Line: Sibal favored Reliance Infocomm says NGO, 7th July 2011

16 Corporate Hijack of Land, Navdanya 2011

17 Power and Energy Industry in India

18 Reliance Power Press Release, 3rd February 2011

19 http://in.reuters.com/article/2011/07/12/idINIndia-58214120110712

20 Essar Company Profile, www.essar.com

21 http://www.hrw.org/legacy/campaigns/burma/drilling/

22 Down to Earth: Essar gets Bailadila prospecting lease

23 Down to Earth: Land Factor, 31st October 2006

24 Prabhat Patnaik: The Economics of the new phase of Imperialism”

25 Tehelka: The water wars, 29th January 2011

26 Business today: Jindal vs Jindal…or Jindal plus Jindal? 9th October

2010

27 Naveen Jindal website

28 Down to Earth: villagers protest forest acquisition, Jan 31st 2011

40 Outing the Oligarchy

29 Tehelka: Water wars, 29th January 2011

30 Soil not oil

31 http://news.oneindia.in/2011/07/29/karnataka-lokayukta-5-firmsindicted-for-illegal-mining.html

32 Business Standard: Newsmaker: Gautam Adani, 6th August 2010

33 Down to Earth: Fishworkers’ campaign draws attention to the sale of marine waters

34 Corporate Hijack of Land, Navdanya 2011

35 Tehelka: Power of Black gold, 10th September 2011

36 http://sanhati.com/articles3610

37 The Financial Express, S.C. Bans, Mining in Bellary: Hegde wants JSW, Adani role probed, July 30, 2011

38 Bharti’s group Sunil Mittal on Lessons of Entrepreneurship and Leadership, available at http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4306

39 Lathi is the wooden stick tipped with metal used as a weapon by the Indian police

40 Excerpts from Corpwatch: Interview with Mr H.H. Nerurkar, Vice President Tata Steel

41 India Today, “Flight of Capital,” August 1, 2011

 

Opening the other eye: Charles Taylor and selective accountability

Leaders are typically held accountable to international criminal law when they block Western interests.

Santa Barbara, CA – From all that we know, Charles Taylor deserves to be held criminally accountable for his role in the atrocities committed in Sierra Leone during the period 1998-2002. Taylor was then president of Liberia, and did his best to encourage violent uprisings against the governments in neighbouring countries so as to finance his own bloody schemes and extend his regional influence. It was in Sierra Leone that “blood diamonds”, later more judiciously called “conflict diamonds” were to be found in such abundance as to enter into the lucrative world trade, with many of these diamonds reportedly finding their way eventually onto the shelves of such signature jewelry stores as Cartier, Bulgari and Harry Winston, and thereby circumventing some rather weak international initiatives designed to protect what was then considered the legitimate diamond trade.

It is fine that Charles Taylor was convicted of 11 counts of aiding and abetting war crimes and crimes against humanity of the rebel militia that committed atrocities of an unspeakable nature, and that he will be sentenced in early May. And it may further impress liberal commentators that fair legal procedures and diligent judicial oversight led to Taylor’s acquittal with respect to the more serious charges of “command responsibility” or “joint criminal enterprise”. Surely, the circumstantial evidence sufficiently implicated Taylor in a knowing micromanagement of the crimes that it would have seemed reasonable to hold him criminally responsible for the acts performed, and not just for aiding and abetting in their commission. I share the view that it is desirable to lean over backwards to establish a reputation of fairness in dealing with accusations under international criminal law. It is better not to convict defendants involving crimes of state when strong evidence is absent to uphold specific charges beyond any reasonable doubt. In this respect, the Taylor conviction seems restrained, professional and not vindictive or politically motivated.

But as Christine Cheng has shown in a perceptive article published online on Al Jazeera, there are some elements of this conviction that feed the suspicion that the West is up to its old hypocritical tricks of seizing the moral high ground while pursuing its own exploitative economic and geopolitical goals that obstruct the political independence and sovereignty of countries that were once their colonies. As Cheng points out, the financing of the Special Court for Sierra Leone was almost totally handled by the United States, United Kingdom, the Netherlands and Canada. In addition, there were pragmatic reasons to make sure that Taylor was never allowed to return to Liberia, where he retains a strong following. It was feared that if Taylor were back in Liberia he would likely again foment trouble in the Liberian sub-region, and this would make it impossible to restore stability, and begin “legitimate” mining operations, which is what the West apparently wanted to have happen in Sierra Leone.

A double standard on criminality

What is dramatically ironic about the whole picture is that the United States is the number one advocate of international criminal justice for others. President Obama has even taken the unprecedented step, on April 23, 2012, of establishing an Atrocity Prevention Board under the authority of the National Security Council, and headed by Samantha Power – a prominent human rights activist that has been serving in his administration. In his speech of April 23 at the US Holocaust Memorial Museum, announcing the formation of the board, Obama said that atrocity prevention and response was a “core national interest of and core moral responsibility” of the United States. It is hard to fault such an initiative in light of the faltering US (and UN) response to recent allegations of mass atrocities in Syria and Sudan, and against the background of refusing to be more pro-active back in 1994, as a grotesque and preventable genocide unfolded in Rwanda. At the same time, there is an impression, the essence of the liberal mentality, of Uncle Sam surveying the world with a blinkered vision, seeing all that is horrible while overlooking his own deeds and those of such friends as Israel or Bahrain.

Heeding the sound of one hand clapping, it might be well to remember that the United States – more than any country in the world – holds itself self-righteously aloof from accountability on the main ground that any international judicial process might be tainted by politicised motivations. Congress has even threatened that it would use military force to rescue any US citizens that were somehow called to account by the International Criminal Court in The Hague, and has signed agreements with more than 100 governments pledging them not to hand over US citizens to the ICC. And yet it is international criminal lawyers and human rights NGOs from the US that have been most loudly applauding the outcome in the Taylor case, without even a whimper of acknowledgement that there may be some issues relating to double standards. If international criminal adjudication is so benevolent when prominent Africans are convicted, why does the same not hold for US officials? Given the structure of influence in the world, there exists more reason for Africans to be suspicious of such procedures than for Americans who fund such efforts, and who are so influential behind the scenes.

If aiding and abetting is what the evidence demonstrates, then should there not be at least discussion of whether international diamond merchants and jewelry retailers making huge profits by selling these tainted diamonds should be investigated, or even prosecuted? There was a voluntary, self-regulating certification procedure was established, the Kimberly Process (2001) – named after the city in South Africa where the meeting of concerned governments, corporate leaders and civil society representatives took place. This joint initiative was especially pushed by large diamond sellers, such as the notorious De Beers cartel of South Africa, that were distressed by the downward effect on world prices by the availability of blood diamonds.

A British NGO, Global Witness, reports that almost none of the prominent diamond retailers took any notice of this cooperative effort to restrict the flow of blood diamonds, and seemingly purchased diamonds at the lowest price without enquiring too much as to their origins, or complying with the certification requirement established by the Kimberly Process. The latter process was partly developed to avoid a civil society backlash protesting this indirect support of atrocities, as well as to protect the market shares and control of the established international companies that had long dominated the lucrative trade in diamonds. But isn’t revealing that Western corporations are asked to act in a morally responsible manner by way of a voluntary undertaking, while political leaders of sovereign states in Africa are subject to the draconian rigour of international criminal law?

Overlooking atrocities

These issues are absent from the Western public discourse. Take the self-satisfied editorial appearing in the Financial Times (April 27, 2012). It starts with words affirming the larger meaning of Taylor’s conviction: “A strong message was sent to tyrants and warlords around the world yesterday. International law may be slow, but even those in the higher ranks of power can be held to account for atrocities committed against the innocent.” And the editorial ends even more triumphantly, and without noticing the elephant standing in the middle of the room, that leaders “… in states weak and strong – now know that there can be no impunity for national leaders when it comes to human rights.” Such language needs to be decoded to convey its real message as follows: “National leaders of non-Western countries should realise that if their operations henceforth stand interfere with geopolitical priorities, they might well be held criminally responsible.”

There are several observations that follow:

If non-Western leaders are supportive of Western interests, their atrocities will be overlooked, but if there is a direct confrontation, then the liberal establishment will be encouraged to start “war crimes talk” – thus Milosevic, Saddam Hussein and Gaddafi (killed before proceedings could be initiated) were charged with crimes, while the crimes of those governing Bahrain, Saudi Arabia and Israel are ignored.

The great majority of cases dealing with international crimes have been, up to this point, associated with events and alleged criminality in sub-Saharan Africa, confirming the extent to which this region has been devastated by bitter conflicts, many of which are attributable to the remnants of colonialism (divide and rule; the slave trade; formation of arbitrary boundaries separating tribal and ethnic communities; apartheid; the continuing quest for valuable mineral resources by international business interests etc).

The Western mind is trained not to notice, much less acknowledge, either the historical responsibility of the colonial powers or the unwillingness of the West to submit to the same accountability procedures that are being relied upon to impose criminal responsibility on those who are perceived to be blocking Western economic and political interests.

The United States is particularly vulnerable from these perspectives. When we hear the names of Guantanamo Bay and Abu Ghraib, the immediate association is with US war crimes. When US leaders openly endorse reliance on interrogation techniques that are generally condemned as “torture”, we should be commenting harshly on the wide chasm separating “law” from its consistent implementation. When a soldier, such as Bradley Manning, is reported to have exposed the atrocities of the Iraq and Afghanistan wars, he is held in humiliating prison circumstances and prosecuted for breaching secrecy, with suggestions that his intent was “treasonous”, that is, intended to help enemies. At least, if there was a measure of good faith in Washington, it should have been possible to move forward on parallel paths: hold Manning nominally responsible for releasing classified materials, mitigated by his motives and absence of private gain, but vigorously repudiate and investigate the horrible crimes being committed against civilians in Iraq and Afghanistan, as well as the battlefield practices and training programs that give rise to such atrocities.

Hypocritical punishers

The Western powers have gone significantly further in sculpting international law to their liking. They have excluded “aggressive war” from the list of international crimes contained in the Rome Treaty which governs the scope of ICC jurisdiction. When the defendants were the losers in World War II, aggressive war was treated at Nuremberg (and Tokyo) as the supreme war crime – as it was declared to encompass the others: war crimes and crimes against humanity. The UN Charter was drafted to reflect this outlook, by unconditionally prohibiting any recourse to force by a state except in self-defence – narrowly defined as a response to a prior armed attack. But in the decades that followed, each of the countries that sat in judgement at Nuremberg engaged in aggressive war and made non-defensive uses of force – and so the concept became too contested by practice to be any longer codified as law. This reversal and regression exemplifies the Janus face of geopolitics when it comes to criminal accountability: when the application of international criminal law serves the cause of the powerful, it will be invoked, extended, celebrated, even institutionalised, but only so long as it is not turned against the powerful. One face of Janus is that of international justice and the rule of law, the other is one of a martial look that glorifies the rule of power on behalf of the war gods.

Where does this line of reasoning end? Should we be hypocrites and punish those whose crimes offend the geopolitical gatekeepers? Or should we insist that law, to be law, must be applied consistently? At least these questions should be asked, inviting a spirit of humility to emerge, especially among liberals in the West.

By Richard Falk

1 May 2012

@ Al- Jazeera

Richard Falk is Albert G Milbank Professor Emeritus of International Law at Princeton University and Visiting Distinguished Professor in Global and International Studies at the University of California, Santa Barbara. He has authored and edited numerous publications spanning a period of five decades, most recently editing the volume International Law and the Third World: Reshaping Justice (Routledge, 2008). He is currently serving his third year of a six-year term as a United Nations Special Rapporteur on Palestinian human rights.

Obama Invokes Holocaust To Ratchet Up War Threats On Iran, Syria

President Barack Obama used a visit to Washington’s Holocaust Memorial Museum Monday to unveil a set of new sanctions against Iran and Syria and to promote the administration’s use of “human rights” as a pretext for aggressive war and regime change.

The new sanctions target Syrian and Iranian intelligence agencies as well as telecommunications and Internet providers for use of information technology to monitor and repress political opposition. They have been rolled out under conditions in which the United Nations is deploying its monitors in Syria to oversee a ceasefire and as Iran prepares for a second round of negotiations next month in Baghdad with the P5+1 (the five permanent members of the Security Council plus Germany) over its nuclear program.

The timing of this latest round of sanctions, coming on top of a whole series of unilateral US and European Union measures aimed at crippling the Syrian and Iranian economies, strongly indicates that Washington is merely using negotiations with both countries as a cover for preparing war and regime change.

Obama’s executive order calls for Washington to impose sanctions on Syrian and Iranian officials for using information technology, including software to track cellphones and monitor Internet use and to spy upon and repress dissidents. It also would punish what the US president refers to as the “digital guns for hire,” i.e., information technology companies that sell software and equipment to targeted regimes.

“These technologies should be in place to empower citizens, not to repress them,” Obama declared.

Among those named in the order are the Syrian General Intelligence Directorate, the Syriatel phone company as well as Iran’s Revolutionary Guard Corps, its Ministry of Intelligence and Security, and Datak Telekom, an Iranian Internet provider.

Left unscathed by the order are dictatorial regimes that are US allies in the region. Virtually all of them have contracted with the so-called “digital guns for hire” of Silicon Valley to carry out the same kind of operations in their countries.

As the Wall Street Journal reported last month, “McAfee Inc., acquired last month by Intel Corp., has provided content-filtering software used by Internet-service providers in Bahrain, Saudi Arabia and Kuwait,” while Websense Inc. of San Diego, California “has sold its Web-filtering technology in Yemen, where it has been used to block online tools that let people disguise their identities from government monitors.”

The dictatorial monarchy in Bahrain, which hosts the US 5th Fleet, has installed a string of “monitoring centers” using sophisticated technology to track and eavesdrop on oppositionists, who have been rounded up, imprisoned and tortured.

For that matter the US government and the military’s National Security Agency (NSA) employ a spying apparatus that makes surveillance operations in Syria and Iran look amateurish by comparison. Congress, meanwhile, is preparing to act upon new legislation, the Cyber Intelligence Sharing and Protection Act of 2011, that would promote the government’s ability to monitor and block Internet use.

Obama’s supposed concern that the Internet be utilized to “empower citizens, not to repress them,” is belied by his administration’s ruthless repression of WikiLeaks, whose founder Julian Assange faces the threat of extradition to the US to face espionage charges, punishable by death, and of Private Bradley Manning, who is being prosecuted by the military for allegedly exposing US war crimes via WikiLeaks.

Obama announced the new sanctions in a speech saturated with hypocrisy and lies. The US president invoked the Holocaust as an abstract evil, whose causes were seemingly inexplicable. The words “Nazi,” “fascist,” or “Hitler” did not appear in the text. Rather, the words “never again” were mouthed as a slogan meaning unconditional support for Israel. How the death camps and the extermination of millions came to be is not explained, outside of the suggestion that it arose out of a failure to intervene militarily.

That fascism in Germany was the answer of the country’s ruling class to the desperate crisis of the capitalist system—and was able to consolidate power only through crushing the socialist movement and the working class as a whole—is of no interest in this brand of “Holocaust remembrance.” Nor for that matter is the fact—underscored by the US prosecutors of the Nazi war criminals at Nuremberg—that their crime of mass murder arose out of the policy of aggressive war, described by the tribunal as “the supreme international crime differing only from other war crimes in that it contains within itself the accumulated evil of the whole.”

The invocation of the Holocaust to justify wars of aggression is not merely hypocritical, but morally obscene. But this is precisely what Obama did.

He hailed the US-NATO war against Libya as a success and a model for future imperialist interventions. As a result of the eight-month war, he claimed, “the Libyan people are forging their own future, and the world can take pride in the innocent lives that we saved.” The Libyan regime installed by the US-NATO intervention has itself estimated that some 50,000 Libyans died in the war, far more “innocent lives” lost than were ever threatened by the repression of the Gaddafi regime. Meanwhile, the destabilization of not only Libya, but the entire region, threatens to claims many thousands more lives.

Obama also used the speech to announce that he is extending the deployment of US Special Operations troops in Central Africa, ostensibly to assist in the hunt for the Lord’s Resistance Army led by Joseph Kony.

Finally, he announced the creation of a new “Atrocities Prevention Board,” which is to be chaired by Samantha Power, the White House National Security Council senior director for multilateral and humanitarian affairs and a leading advocate of “humanitarian” military intervention. The new panel is supposed to coordinate actions across the US government in promoting imperialist interventions in the name of protecting civilian life and human rights.

In exploiting the Holocaust to justify a buildup to a war against Iran that could well lead to millions more deaths, Obama was merely echoing Israeli Prime Minister Benjamin Netanyahu, who last week delivered a speech on Israel’s Holocaust Remembrance Day declaring Iran an “existential threat” to nuclear-armed Israel and equating Iran’s nuclear power program to the Holocaust.

At the time, Elie Wiesel, who has made a career as Washington’s semi-official Holocaust spokesman, criticized Netanyahu’s remarks on Iran. “Iran is a threat, but can we say that it will make a second Auschwitz?” Wiesel remarked. “I don’t compare anything to the Holocaust … Only Auschwitz was Auschwitz.”

By the time of his appearance Monday, introducing Obama at the museum, Wiesel had gotten his line in sync with the war propaganda needs of Israel and Washington. “Have we learned anything?” he declared in reference to the Holocaust. “If so, how is it that Assad is still in power? How is it that the Holocaust’s No. 1 denier, Ahmadinejad, is still the president, he who threatens to use nuclear weapons … to destroy the Jewish state.”

By Bill Van Auken

25 April 2012

@ WSWS.org

Obama Gives Green Light For Punishing Sanctions On Iran

President Barack Obama has issued the green light for punishing new US economic sanctions directed at forcing the Iranian government to submit to Western pressure over its nuclear program by starving the country of oil revenues.

These new sanctions, which go into effect on June 28, aim to impose a warlike blockade of the Iranian economy by penalizing any government or private entity that carries out financial transactions with the country’s central bank.

Western Europe is preparing its own new sanctions, which are to include a European embargo on Iranian oil purchases, beginning in July.

The official memorandum authorizing the US sanctions affirmed, as required by the legislation creating them, that given existing oil supplies internationally, “the market can continue to accommodate” the cutting off of petroleum from Iran.

The theory is that Saudi Arabia can make up the difference in reduced oil supplies from Iran, and that in an emergency, the US and other oil consuming countries could tap into their strategic reserves. However, such safeguards may well prove ineffective in the face of a speculative bidding up of oil prices under conditions in which the margin of excess supply has been significantly reduced. The effect could prove a dizzying rise in gasoline prices, spelling sharp reductions in living standards internationally and the threat of an intensified economic downturn.

The ratcheting up of US sanctions came together with confirmation that the so-called P5+1 talks on Iran’s nuclear program are to be renewed in the middle of this month. The talks include the Iranian government together with the five permanent members of the United Nations Security Council—the US, Britain, China, France and Russia—plus Germany.

Washington and its allies have charged that the Iranian government is developing a nuclear weapons program, while Iran has insisted that its nuclear program is solely for peaceful purposes. Unlike nuclear-armed Israel, which together with Washington has continuously threatened military strikes against it, Iran is a signatory to the nuclear Non-Proliferation Pact and has submitted to an inspection regime by the International Atomic Energy Agency (IAEA).

Speaking in Saudi Arabia, where she was coordinating an anti-Iranian military alliance with the reactionary Persian Gulf monarchies, US Secretary of State Hillary Clinton made it clear that the sole purpose of the scheduled talks would be to achieve full Iranian compliance with US demands, or to pave the way to war.

“It will soon be clear whether Iran’s leaders are prepared to have a serious, credible discussion . . . to start building the trust we need to move forward,” Clinton said.

The US secretary of state told reporters that Iran should cease all production of 20 percent enriched uranium and open up all its facilities to continuous inspection. Neither of these steps is required under international treaties and law.

“So far,” she added, “they have given little reason for confidence. What is certain is that Iran’s window to do so will not remain open forever.”

This reference to the “window” closing represents yet another US threat of war against Iran.

In her talks with the Gulf oil potentates, Clinton unveiled US plans to build a regional missile defense system. The Washington Post reported that Vice Adm. Michael Fox, the commander of the US 5th Fleet based in Bahrain, presented the dictatorial regimes with the plans for the missile shield, which will provide lucrative new contracts for the US arms manufacturers, Raytheon and Lockheed Martin.

Clinton and the ministers of the Gulf Cooperation Council regimes also reportedly discussed means of securing the shipment of their oil supplies through the Strait of Hormuz, which passes through Iranian territorial waters, even as Iran is faced with the choking off of its own oil exports and the threat of military attack.

Clinton praised the Saudi monarchy for pledging to increase its oil supply to make up for the supplies from Iran that Washington is attempting to keep off the international markets. “Both the United States and Saudi Arabia share an interest in ensuring that energy markets foster economic growth,” she said. “We recognize and appreciate the kingdom’s actions to respond to market demand.”

While Iran had earlier announced that its talks with the P5+1 would resume on April 13, it had not fixed a locale for the meeting. In her remarks, Clinton indicated that it would be held in Istanbul, Turkey.

It is not clear, however, whether Tehran will accept convening the negotiations in the Turkish capital. Mohsen Rezaee, the former Iranian presidential candidate and secretary of the country’s Expediency Discernment Council, said that the talks should take place in an “Iranian-friendly” country, and that Turkey was not suitable given its “failure to fulfill relevant commitments.”

Rezaee did not elaborate on his statement, but tensions between Iran and Turkey have increased following Turkey’s announcement that it will at least partially comply with US sanctions, reducing its oil imports from Iran by 20 percent. Istanbul’s hosting Sunday of the “Friends of Syria” conference, which produced a plan for issuing paychecks to elements carrying out terrorist attacks inside Syria, Iran’s principal ally in the region, as well as Turkey’s threats of military intervention inside Syria, have further soured relations.

China, which imports 20 percent of its oil from Iran, has firmly rejected the US sanctions as an extra-legal interference in international trade.

“The Chinese side always opposes one country unilaterally imposing sanctions against another according to domestic law,” a statement from China’s Foreign Ministry affirmed Saturday. “Furthermore it does not accept the unilateral imposition of those sanctions on a third country.”

India, which imports some 12 percent of its oil from Iran, has also evaded US sanctions, paying for Iranian oil in rupees and with the barter of its own manufactured goods. Washington has exerted significant pressure on the Indian government to cut its trade ties with Tehran.

The BRICS summit—Brazil, Russia, India, China, South Africa—in New Delhi last week issued a declaration recognizing “Iran’s right to peaceful uses of nuclear energy” and warning against the “disastrous consequences” of a military attack.

Meanwhile, the US, Israel and Greece are conducting war games involving at least 10 warships and combat aircraft in the eastern Mediterranean. The operation, dubbed “Noble Dina,” is led by the US Sixth Fleet and the Israeli navy. It began on March 26 and continues until April 5.

The exercise, which includes simulated defense against submarine attacks and securing offshore oil platforms as well as air combat, is, according to Israeli sources, a rehearsal for war against Iran.

By Bill Van Auken

3 April 2012

@ WSWS.org

NATO Discusses Military Intervention In Syria

Turkey is leading calls for a military attack on Syria on behalf of the United States. Foreign Minister Ahmet Davutoglu attended yesterday’s NATO meeting in Brussels and will attend the Paris meeting today of the Friends of Syria—the Washington-led front, encompassing the European powers and Arab League states such as Saudi Arabia and Qatar, that is leading the war drive against Syria. Also in attendance along with Davutoglu will be Turkish Defence Minister Ismet Yilmaz.

Behind the smokescreen of the United Nations and Kofi Annnan’s ceasefire, plans are being finalised for intervention, including US involvement under the auspices of NATO. Turkey had said it would raise the issue of an alleged violation of its Syrian border at the NATO ministerial meeting and call for NATO to come to its “defence.”

US Secretary of State Hillary Clinton will attend today’s Friends of Syria meeting and will, according to French diplomatic sources, discuss the ouster of Syrian President Bashar al-Assad.

The two meetings are in preparation for the NATO Heads of State and Government Summit in Chicago on May 20-21.

Turkey is acting as a base of operations for the Free Syrian Army’s military attacks in Syria. The FSA is a sectarian Sunni force armed by the US, Britain and France. It includes covert troops supplied by Saudi Arabia, Qatar and Libya.

Turkey is also home to the opposition Syrian National Council, a front made up of Islamists, CIA assets and ex-regime elements. It functions as a political proxy for Washington.

Ankara is using a border incident on April 9 in which Syrian forces are accused of wounding four Syrians and two Turkish staff working at a refugee camp to urge a military response by NATO. The Syrian regime claims that its forces had come under fire from Turkish territory. The incident is the only case to date of Syrian fire allegedly hitting people on Turkish soil.

Turkish Prime Minister Tayyip Erdogan responded to the incident last week by insisting, “A country has rights born out of international law against border violations. … NATO has responsibilities to do with Turkey’s borders, according to Article 5.”

Article 5 of the NATO treaty declares that an armed attack against a NATO member is tantamount to an attack against all members and can be met with armed force. Invoking Article 5 would allow NATO members to take military action against Syria without a UN Security Council resolution, bypassing the objections to armed intervention of Russia and China.

To date it has been invoked only once—following the September 11, 2001 terror attacks on the United States which became the pretext for the nearly 11-year-long war against Afghanistan.

Turkish officials have repeatedly denounced Syria for not abiding by the terms of the UN ceasefire, blaming Assad personally for violations. “Syrian President Bashar al-Assad is trying to buy time. It is the reason why Turkey does not believe in a ceasefire in the country”, Erdogan said.

The Turkish prime minister held extensive discussions with President Barack Obama and CIA Director David Petraeus at the beginning of this month. He told reporters that studies were “underway” on a creating a buffer zone on Syrian territory and that “The ‘right to protection’ may be put into use, according to international rules.”

Making use of a minor border clash to declare war would be difficult, but the incident could be cited to legitimise the setting up of a buffer zone by Turkey’s military on Syrian soil. The need to defend such a bridgehead would provide an excuse for deploying NATO air power.

Turkish media reports have cited specifics regarding the preparations for a buffer zone, with 500 military personnel involved in inspecting areas close to the border as sites for a possible 20 kilometre (12.5 mile) incursion into Syria.

There have been numerous reports of the involvement on the ground of US Special Forces and troops in the planned operation, including the reassignment of troops previously stationed in Iraq. There are also reports of Saudi Arabia and Qatar training thousands of fighters in a closed-off location to boost the numbers of the FSA. The Obama administration has publicly agreed to a $12 million donation to the FSA.

A Captain Amar Wawi told CNN this week that the FSA is gathering more weapons and “preparing ourselves for the next stage if the Annan mission fails”. A Lieutenant Abdullah Oda said he was in Iraq last week brokering a deal to send weapons, including anti-tank missiles, “which we need strategically on the ground against tanks and against armour.”

In a significant political shift, the Syrian National Coordination Board (NCB), or National Coordination Committee for the Forces of Democratic Change, has come out in favour of armed intervention by the Western powers for the first time. The alliance of nominally leftist and nationalist parties previously opposed the SNC on this question. A spokesman told RIA Novosti that if the UN peace plan failed, the NCB would first call for a UN Security Council resolution to allow for “humanitarian intervention” in Syria.

Washington has repeatedly dismissed the ceasefire as a fraud and continues to push for action. US ambassador to the UN Susan Rice said the Assad regime had “lied to the international community, lied to their own people”. She continued, “And the biggest fabricator of the facts is Assad himself. … His representatives are merely doing his bidding and under probably some not insignificant personal duress.”

Targeting Assad personally in this way is an attempt to encourage defectors at the top, through which the US can secure its aim of regime-change. A UN commission of inquiry on Syria issued a report February 23 accusing Syrian forces of crimes against humanity, including murder, abductions and torture carried out under orders from the “highest level” of army and government officials. A secret list of suspects was handed over to UN High Commissioner for Human Rights Navi Pillay, who urged action by the International Criminal Court (ICC).

Qatar’s Emir Sheikh Hamad bin Khalifa Al Thani used a visit to Rome to declare that the Syrian people should not be supported through peaceful means, but “with arms”. Italian Prime Minister Mario Monti stressed the “close collaboration” between Rome and Doha on Syria.

Russian Foreign Minister Sergei Lavrov stated bluntly, “There are those who want Kofi Annan’s plan to fail. … They are doing this by delivering arms to the Syrian opposition and stimulating the activity of rebels, who continue to attack both government facilities and … civilian facilities on a daily basis.”

He called for the Syrian opposition to be pressured to comply with Annan’s plan. Instead, he said, “There are countries, there are external forces, that are … encouraging the Syrian opposition not to cooperate with the government in providing for a ceasefire and the subsequent establishment of dialogue.”

French diplomats boasted this week that Western sanctions on Syria are bleeding the country dry. A spokesman said, “We haven’t got a perfect measurement instrument to tell us when the regime will no longer be able to function, but we are seeing an extremely strong decline in foreign reserves: About half.”

“With the deteriorating economy there is a hyperinflationary context, sharp collapse of the currency and a fall in revenues. That pressure will eventually be felt”, said another source.

The European Union is set to impose a new round of sanctions after talks in Paris.

By Chris Marsden

19 April 2012

@ WSWS.org

Myanmar: Opening up

Reform promises opportunities for overseas investors – but locals and neighbours alike are wary

Near Yangon’s historic riverfront on Monday, the buzz at the Thein Phyu Money Changer Centre came not only from the overnight news that Aung San Suu Kyi and her opposition National League for Democracy party had won a landslide victory in parliamentary by-elections. It was also the first trading day at a newly liberalised market rate for the kyat, the local currency.

The opening rate of Kt818 to the dollar was a far cry from the previous official rate of Kt6.4. The shift is the most crucial of a raft of financial reforms under way in the south-east Asian country as its long-ruling generals ease their grip.

“It’s a new system, new era – and I hope, also new politics,” says one young teller at the recently opened exchange centre, a venture by six commercial banks where a shiny digital signboard takes pride of place.

Yet just outside, rusting taxis rattle past dilapidated buildings. Power cuts have kicked in again, despite Myanmar’s abundant natural gas reserves. On the broken pavements, one stall featuring ancient handsets has hot-wired public phone lines to offer local calls for the equivalent of 10 cents.

In a nation with a per capita income of barely $800 a year, mobile phones and computers are limited to the affluent classes. Sim cards for mobile telephones cost from $3,000 upwards, and most homes lack landline and internet connections. There are no cash machines for foreigners’ use, and just one or two for domestic customers. Credit cards are accepted only by a few high-end hotels. Like many other things, this is about to change – and that change will be given impetus as western governments, led on Wednesday by the US, ease sanctions that have helped to cripple the economy.

Already, however, the reformist government is reeling out changes at breakneck speed. A more liberal foreign investment law will emerge to replace the existing, restrictive code within weeks. A land use bill improving rights for farmers, who constitute about three-quarters of the nearly 60m population, has just been passed. Sweeping financial, banking and other economic reforms are in train.

Some banks have recently gained permission to install cash machines. One company has proposed introducing a Kt5,000 ($7) Sim card. Businesses, from foreign-owned hotels to local department stores, hope that credit cards, like other aspects of a modern financial system, will accompany the easing of sanctions. “It will be a watershed moment,” says Craig Powell, general manager of Traders, a leading downtown hotel.

The “managed” float of the kyat enables the government to intervene to influence the exchange rate, something experts – including the International Monetary Fund and Joseph Stiglitz, the US economist who has taken a close interest in Myanmar – say is essential. The aim is to create a cushion against the impact of expected heavy inflows of aid and investment that could push up inflation.

At the same time, the government is planning to liberalise current account transactions and develop capital markets – including allowing the entry of foreign banks – and to encourage banks to lend rather than holding government bonds.

Together, the measures form the economic frontline of bold reforms unleashed by the government of President Thein Sein since it took power just over a year ago. Mr Thein Sein, a former general known for his low-key approach and lack of cosy business ties, has astonished compatriots and the world with his determination to bring Myanmar into the 21st century.

Driving this push, say government insiders, was a growing realisation among the generals that decades of economic mismanagement and diplomatic isolation under their harsh rule had brought the country to its knees by 2010.

By then, Myanmar had for some years been ranked one of the poorest countries in global indices. It is difficult to imagine it was Asia’s rising star in the early 1960s, the world’s biggest rice exporter with an educated workforce and a well-functioning economic and legal system. One UN agency described it at the time as the nation “most likely to become fully industrialised” before its neighbours.

However, the 1962 coup that brought the generals to power put paid to that, leading instead to decades of stagnation. During a 2003 domestic banking and financial crisis, one of the economy’s lowest points, private banks were shuttered and mortgages banned. Even today, it is hard to obtain housing finance, and farmers are forced to turn to often predatory private lenders for credit.

In one of the frankest assessments yet, U Myint, the president’s most senior economic adviser, told a recent gathering of foreign aid officials: “We have to acknowledge that over half a century since we gained independence, it has not been lack of resources but rather misconceived ideas and flawed policies that have been our undoing.”

That message underlines the view among local analysts that the impetus for change came – perhaps inadvertently – from Than Shwe, the previous leader and military strongman. In an effort to redeem his stained legacy, he chose Mr Thein Sein, a loyal, quiet military professional, to run in 2010 elections to succeed him.

Western sanctions had by then brought Myanmar to the point where it was more than 70 per cent reliant on China for foreign direct investment: “Not a happy place to be,” remarks an expatriate executive. According to the Economist Intelligence Unit, the value of approved foreign investment projects reached nearly $20bn in the 2010-11 financial year, leaping more than 60-fold from the previous year. But 99 per cent of it was in oil and gas, mining and power-related projects. The consumer economy remained moribund.

Government actions have now begun to reflect a keener appreciation of public needs – in a way that has also affected foreign governments and businesses. The abrupt suspension last September of a $3.6bn Chinese hydropower dam project in Myanmar’s north telegraphed the changing attitude. The decision followed a public outcry over the environmental impact and terms that meant 90 per cent of the power generated would go to China.

The decision, though applauded by many, shocked China and would-be investors, putting pressure on the government to accelerate a new foreign investment code to assure investors that suspension of a mega-project was a one-off. Through a series of bilateral visits, the government also discreetly assured China that its other projects – including up to six dams and a massive pipeline and port development, remained on track.

A few months later, however, a Thai-led project to build a coal-fired power plant in the planned $56bn Dawei port development in the country’s south was suspended. One Yangon-based economist says the government again used the decision to signal to investors that big projects would be welcome only if they fitted with its new-found concerns about the environment and local impact. Both issues are addressed in new environmental laws.

Cross-border trade with Thailand, China and India is huge and largely unofficial. Other countries, including South Korea and Malaysia, have invested too. The significance of Myanmar’s re-emergence is noted most of all by Thailand, which regards it with mixed feelings.

On the one hand, Thailand has benefited from open access to Myanmar’s natural resources – more than half of Bangkok’s electricity supply relies on gas piped from its western neighbour. Thai companies have also moved into property development and service industries there.

On the other hand, Myanmar is drawing a steady stream of tourists, one of Thailand’s mainstay service industries, and is targeting close to 1m visitors in 2014, up from about 300,000 in 2011.

Other south-east Asian countries will also have justifiable concerns. Myanmar’s labour force is largely unskilled. However, with wages as low as Kt700 a day for a worker in a garment factory, it could compete with many of the low-cost manufacturing destinations.

The IMF said in January that it saw “high growth potential” for the country. Citing stronger commodity exports and higher investment, supported by robust credit growth and improved business confidence, it estimated economic growth of 5.5 per cent in the 2011-12 fiscal year and forecast a rise to 6 per cent in the current year to March 2013. The government recently raised its estimate to close to 7 per cent in the current fiscal year.

Inflation, projected at 4.2 per cent for the 2011 financial year, is on the rise, however, and expected to pick up to 5.8 per cent or higher given the likely increase in foreign investment and aid flows. That in turn has lent greater urgency to financial reforms, including the kyat’s managed float and moves to grant the central bank independence from the finance ministry.

The currency reforms are not only fundamental to a more open economy, they are “a key to western investment”, notes Prof Stiglitz. Indeed, says Rajiv Biswas of IHS Global Insight: “This monetary transition will encourage a significant upturn in trade and investment flows over the medium-term, helped by major new legislation to encourage foreign investment.”

For western investors, the “look-see” phase is likely to intensify with the lifting of sanctions. Before then, however, companies are eyeing opportunities to sell goods and are investigating potentially lucrative infrastructure and transport contracts. Big investment banks are arranging client visits. Some, including Nomura of Japan and Switzerland’s UBS, have issued reports cautiously endorsing Myanmar as a possible “Asian tiger” – even as they all warn that developments will take time.

“Myanmar is in the same place China was in early 1979, when Deng Xiaoping said: ‘We have to do something new.’ Myanmar is opening up,” Jim Rogers, the billionaire US investor, told a recent conference in Singapore. “If I could put all my money into Myanmar, I would.” The country, as Mr Rogers noted, is “right between China and India, 60m people, massive natural resources, agriculture … they have metals, they have energy, they have everything.”

As for Myanmar’s own companies: “We’re jittery,” says one local executive with a pharmaceuticals importer. “Big foreign investors have economic scale and access to markets – they can easily overwhelm us … We have had discussions with the government about this; we can’t compete with multinationals.”

After local business fiercely opposed initial government proposals to give foreigners eight-year tax breaks, the incentive was watered down to five years in the forthcoming foreign investment code, he says.

“Even so, it will be a struggle for us. In the end, though, we have lived through so many systems – and have faced the worst scenarios. We can survive, we can handle anything.”

Sanctions impact: ‘Reformers need help to address heightened expectations’

The orderly conduct of Myanmar’s April 1 by-elections appears to have met an important western benchmark for easing sanctions. The upshot is a frenzy of diplomatic manoeuvring both from within and outside the country.

In Myanmar, the issue has acquired a new political dimension after the resounding electoral defeat of the government-backed Union Solidarity and Development party. People close to Mr Thein Sein warn of mounting pressure on the former general from conservatives within his government and party who opposed his ambitious reform agenda.

Since coming to power just over a year ago, he has played a delicate balancing act between competing political agendas – including from a core of retired military officers who were reluctant to make concessions that could threaten their power.

While praised abroad for his moves to release political prisoners, resolve ethnic conflicts and ensure clean elections, the president is facing internal criticism, says one government adviser. “He fought the hardliners in order to try to meet the west’s demands; they complain it has brought nothing but humiliation and now he’s under pressure to deliver economic benefits – the first and most visible thing would be a significant gesture from the west.”

Charles Petrie, a former UN resident representative in Myanmar, warns that people’s expectations have been raised and that the west should move quickly.

“Everything hinges on three things: the democratisation process, ongoing efforts to fully resolve conflicts in ethnic zones, and economic reform efforts. When you are dealing with the first two, and even if you are successful, the fragility of the economy means that third leg of the stool may not be strong enough,” says Mr Petrie. “They [government reformers] need support to help address heightened expectations that have been raised by the reforms.”

Many argue in favour of a phased easing of sanctions, to maintain pressure on the government for further reform. Others warn of economic disruption from a flood of foreign investment that could accompany a broad lifting of restrictions.

Western business is keen to access the resource-rich country. Reforms include a foreign investment code, now being finalised, that is understood to offer strong incentives for companies to set up in Myanmar. Their worry is that regional rivals may get in first. “Many Asian firms are already investing and operating in Myanmar,” says Rajiv Biswas at IHS Global Insight, a forecaster. “Asian companies are definitely positioning for more rapid economic growth in Myanmar as economic reforms are implemented.”

By Gwen Robinson

4 April 2012

@ Financial Times

 

Ms. Rousseff Goes To The White House

“One of Lula’s foreign policy advisors told a friend of mine that when Brazil looks at Iran, it doesn’t see just Iran, it also sees Brazil.” – Larry Rohter, New York Times Reporter

Barack Obama recently visited with current Brazilian President Dilma Rousseff. President Obama didn’t receive her, however, with the kind of pomp and circumstance, that has been given to nations like India and China. President Rousseff only met with Obama in a brief meeting, she did not receive a state dinner, and Obama spent most of the day rolling Easter eggs on the South Lawn. While CEOs, university presidents, and even the Chamber of Commerce — were literally chomping at the bit to meet with her — Obama seemed to be very low key and nonplussed, about his meeting with this extraordinarily capable and singular woman. What could be the reasons/reasoning for such a cold shoulder, from our 44th and current president and commander-in-chief?

Could it be that Brazil has advocated for the cause of Palestinian statehood, that it has traditionally had amicable relations with Iran, that it is a member of CELAC (Community of Latin American and Caribbean States) and UNASUR (Union of South American Nations), or that it has pressured the US to include Cuba in the meetings of the OAS (Organization of American States)? [1] Indeed, Brazil is currently involved in an $800 million modernization project of the western harbor of Havana. [2]

Additionally, Brazil has inquired to the US government about a permanent position on the United Nations Security Council, and the US — has not responded in the affirmative, that it is interested in supporting that. Brazil also gave refuge to Honduran President Manuel Zelaya in its embassy, after the takeover (of the US-supported) coup regime. Furthermore, President Rousseff has been a cutting and incisive critic of the Federal Reserve’s quantitative easing policy, and moreover China has still fairly recently emerged as Brazil’s chief, cardinal — number one and foremost — trading partner/associate. A writer in the Financial Times, has even likened Brazil to the France of Latin America. Not obstructing US hegemony, and an attempted unimpeded global power monopoly; out of any sound principle, or deeply held belief or vision, but according to this bourgeois analyst, “[Brazil is] undermining our initiatives in Iran or over trade talks…[as a] way of forcing us to pay attention to them.” [3]

Perhaps Obama thinks that Brazil, should be like a child bouncing on his leg (like the aforementioned FT “pundit”)? And is Brazil’s insufficient fealty to the Monroe Doctrine, and diktats coming from its “superior” northern nation, actually what ails this bilateral rapport/interrelationship? Perhaps, it’s simple envy as Rousseff enjoys a 77% approval rating, she has been seen as an effective battler of corruption, and Brazil’s economy — under her watch — is now considered to be the sixth largest in the world. [4]

In comparison, Obama is trying to sell a non-existent recovery, and that the Republicans are absolutely, totally, and utterly batshit crazy, in order to win himself a reelection/second term. Rather than languid then, however, perhaps Obama should have been absolutely ecstatic, at the prospect of meeting — with the categorically more than serviceable Brazilian President. Unequivocally, Obama is far from Rousseff’s popularity, dynamism and overall effectiveness, but seemingly, it was far more important to him — to be rolling multi-colored Easter eggs on the White House South Lawn — than to be meeting with such an acute, capable, effectual and resultant; world leader, stateswoman, dignitary, and noteworthy head of government.

By Sean Fenley

14 April 2012

@ Countercurrents.org

Notes:

[1] http://www.cnn.com/2012/04/05/opinion/gomez-iran-brazil-chill/index.html

[2] http://www.reuters.com/article/2012/01/25/us-brazil-cuba-idUSTRE80O1QX20120125

[3] http://www.ft.com/intl/cms/s/0/9311c644-7da4-11e1-bfa5-00144feab49a.html#axzz1rlYGh9Hj

[4] http://www.mcclatchydc.com/2012/04/08/144532/what-could-obama-learn-from-brazil.html

Sean Fenley is an independent progressive, who would like to see some sanity brought to the creation and implementation of current and future, US military, economic, foreign and domestic policies. He has been published by a number of websites, and publications throughout the alternative media.

 

Jeju and Easter’s Challenge against Empire

Part of the story of Holy Week is how the forces of the Roman Empire conspired against the Prince of Peace in the last days.  It is not only a lesson of history, but it is central to the witness of Jesus that we should exercise faithfulness to God and justice toward all people in the face of whatever powers, principalities and structures of violence would dominate and divide us.  Global Ministries is blessed to be in partnership with many communities around the world who continue to demonstrate a faithful witness against such forces today.

The residents of Jeju Island off the southern coast of South Korea are such an example. For months protests have been building against the construction of a new naval base on Jeju in the village of Gangjeong. Given historic security agreements between the U.S. and Republic of Korea, analysts surmise Korea is building the deepwater base at the behest of the U.S. military.  However locals from the area around Gangjeong oppose the militarization of their serene island and the threat to the environment and to their distinct culture that the base poses. Protesters have reached out to allies throughout Korea, including our Korean church partners, to ask the international community to join them in protesting the base and the escalating arms race throughout the region.

The villagers of Gangjeong have repeatedly rejected the decision to build the base adjacent to their homes and on land Koreans have long regarded as a national treasure for its natural and cultural significance.  Jeju Island was listed in 2007 as a UNESCO World Heritage Site.  Its beautiful landscape is marked by unique rock formations and fragile ecosystems.  Traditional practices like the haenyho  women who dive while holding their breath under water are distinctive to the island culture.  A major lava-formed rock structure juts into the sea beside Gangjeong and has been revered by Koreans as a sacred site for pilgrimage and devotion. But the Gureombi or “Living” Rock has been cordoned off and access to it restricted by the military for construction of the base.

The government’s treatment of protestors has led to charges of human rights violations by the Asia Human Rights Commission. Christine Ahn, columnist for Foreign Policy in Focus, has reported that “[t]he government and construction contractors are attempting to stamp out the outcry by arresting, beating, fining, and threatening villagers and activists.” This attack on dissent echoes a dark moment in Korea’s history, the government’s massacre in 1948 of over 30,000 Jeju residents in an attempt to put down a popular uprising against the division between North and South Korea.  In 2005 the late President Roh Moo Hyun declared Jeju an “Island of World Peace” in commemoration of the event, making the current dispute over the military base and official crackdown a tragic irony.

 But the Jeju Island controversy represents a larger drama being played out in the age-old struggle against the forces of empire. Why does the U.S. want South Korea to build this new naval base?  U.S. foreign policy is undergoing a major “pivot” to the Asia-Pacific region, heralding what Secretary of State Hillary Clinton has called “America’s Pacific Century.” Under pretext of defense against North Korea, the Gangjeong naval base is at the forefront of a U.S. strategy of increased militarization designed to counterbalance China’s growing economic and military sphere of influence.  Not only does Jeju put the most advanced U.S. military might on China’s doorstep, but it is the top edge of a new U.S. theatre of military operations that includes a new U.S. Marine base in Australia, increased troop rotations through the Philippines, and pressure on Japan to increase military funding and cooperation with U.S. bases in Okinawa.

 During Holy Week we are invited to identify in our lives the powers and principalities that threaten war over peace and death over life. For many in the world this is not an act of spiritual imagination, but a matter of everyday struggle. The people of Jeju are right not only to want to protect the sanctity of their island, but to fear the threats of violence—indeed of nuclear war—being amassed around them.  What is the role of the church in bearing witness to the Prince of Peace against the structures of violence amassing in the Pacific? As Easter people what have we to say to the forces of empire today?

Derek Duncan, M.Div.

April 5, 2012

Associate for Global Advocacy and Education

Insight Into The 9/11 Debate: ‘Economists Are Scared’

Recently, I had published at Asia Times Online an exclusive investigation, Insider Trading 9/11 … The Facts Laid Bare (March 21, 2012).

In this article I presented evidence of informed trading activities prior to the terror attacks of September 11, 2001 on areas of New York City and Washington that resulted in the death of 2,996 people, including the 19 hijackers of four commercial jets. (The four aircraft hijacked on September 11 were American Airlines Flight 11, American Airlines Flight 77 and UAL flights 175 and 93.)

On the same subject matter, Asia Times Online now presents an interview that I have conducted with United States economist Paul Zarembka.

Professor Zarembka is a professor of economics at the State University of New York (SUNY) at Buffalo. He has been the general editor for Research in Political Economy since 1977, and is the author of Toward a Theory of Economic Development, editor of Frontiers in Econometrics, and co-editor of Essays in Modern Capital Theory.

He is working on the concept and application of accumulation of capital. Furthermore, he is an expert on Marxist theory and economic development. In 2008, Zarembka edited the book The Hidden History of 9-11, a serious reference volume that examines 9/11 and its background, showing how much remains unknown and where further investigation and debate is needed. His own chapter in the book includes investigation of insider trading before 9/11 and was updated in 2011 [1].

Lars Schall: Professor Zarembka, how did you as an economist became interested in the topic of insider trading activities prior to the terror attacks of 9/11?

Paul Zarembka: Well, I did not got directly interested in it, I got directly interested in 9/11 itself. That eventually led to insider trading, and since I specialized in econometrics it was the natural thing for me to jump unto and investigate for myself.

LS:Right after the attacks, a fair amount of mainstream financial media articles surfaced suggesting that there was informed trading going on related to 9/11. Why do you believe this reporting disappeared soon after and was never seen again?

PZ: That’s a good question, and I’ll tell you what I think, but it’s kind of speculative, I can’t know for sure. What I think happened was that many people who were not involved in any way whatsoever with 9/11 noticed the extreme levels of put options in certain securities before 9/11.

That is publicly available information, particularly if you have the services that provide that data to you. Some of these people noticed the extreme volumes and they thought, I believe, that it would lead to nailing [al-Qaeda leader] Osama bin Laden as responsible for 9/11. So we’ve got a lot of news coverage for about a month or two after 9/11, and then suddenly it died. I think the reason why it died – and that’s speculation – is that somehow the word got out that it’s not going to lead to Osama bin Laden.

LS: And so said the 9/11 Commission in its report.

PZ: Right, but that was much later after it died, and I mean it really died very quickly. On the other hand, the fact that it got out there at all meant that the 9/11 Commission report had to say something about it. They said something very minimal, but they said something, and if hadn’t been for those news stories nothing would have probably got out about it.

LS: What was the position of the 9/11 Commission relating to insider trading, and why do you think its conclusions are unconvincing?

PZ: That’s a big question, perhaps bigger than you anticipated. Let me go back a little bit to the history of discussions about insider trading connected with 9/11.

The first scientific paper that came out about it was from Professor Allen Poteshman, who was at that time working at the University of Illinois at Urbana-Champaign. His article was published in the Journal of Business which nobody can criticize for its respectability and the integrity of its peer-review process, and yet he came to the conclusion that there was insider trading with high probability (nothing is ever certain in statistics) in American Airlines stock options and to a lesser extent in United Airlines [2].

It was accepted for publication, I think, around 2004, well before the 9/11 Commission report came out, but they did not make any reference to it. I am not sure if they knew or didn’t know about it, but my guess would be that they would have been informed that that study had been done.

Now the 9/11 Commission made its reports and said that they did investigations throughout the financial world, I mean not just only in the United States but also abroad, and not just in put option trading but in other financial instruments, and they concluded that they could not find any evidence of irregular financial transactions.

In its report, only two cases are actually cited, the two cases that Poteshman had studied and written about, namely in American Airlines put option trading and United Airlines. However, the commission provided almost no direct evidence of what its finding was, but rather just made assertions. So what the 9/11 Commission said is basically worthless because it didn’t give us any evidence for its statement.

The drama is magnified when two more studies were done which again confirmed that insider trading took place. Where it also gets dramatic is that in 2009, some parts of the investigation fed into the 9/11 Commission were released, and frankly I have to tell you that at least for American Airlines the report is convincing that there wasn’t insider trading in American Airlines.

I say this not because it changes the final result very much, but I think it is a deep warning to everybody working on these kind of issues that these issues are complicated, and that in the final analysis the government has the data and has knowledge we don’t have – so some of what we are doing is based upon hard facts, but some of it speculates around things we don’t have the hard facts about.

LS: And then the label “conspiracy theorist” raises its ugly head very fast when you do speculate.

PZ: Yes, and that’s why I am not interested in speculating. I try to say truthfully whatever I discover. For example, Poteshman’s results were never a certainty, they were always stated as a high probability. But from an econometric point of view when you get results which have a probability of 99% you take them very seriously.

And that leads us to something else. I have enough experience in econometric issues which were controversial to know that typically, when you got controversial results, somebody else comes along with a series of objections to the methodology that you have used and you get a big controversy.

No one ever responded to Poteshman’s article from a critical perspective, and this is very curious. It’s a major piece of work, and he got the data actually from the Chicago Board Option Exchange [CBOE] in a way that the rest of us don’t have; he got confidential data for his work.

I suspect that the CBOE wanted to find out if a methodology could be developed which would be useful for checking into insider trading in other incidents, not only in this one, and I think that’s why the CBOE gave him the data. Whatever the reason is, he had data the rest of us don’t have. So it really was something to investigate further, but his work was never challenged. And then we get two other papers which actually more than reinforced what Poteshman said.

One of those papers came from two professors and a graduate student at the University of Wisconsin-Madison, who studied abnormal trading in the S&P 500 index options prior to the 9/11 attacks. [3] Their study came to the conclusion that there was a high probability of insider trading in S&P 500 index options prior to September 11.

What is very interesting about their results is that the underlying reports that were made available to the 9/11 Commission (which we didn’t see until later) say that they could not examine the S&P 500 index options because trading in it is too extensive. Now why that becomes interesting is because the 9/11 Commission report had said that they made a wide-ranging study and they found no evidence of any sort of financial irregularities before 9/11, but also said the S&P 500 index options couldn’t even be investigated – so the commission is kind of contradicting itself. And more than that, when some did investigate the S&P 500 index options, they find out that in fact it did have abnormal trading before 9/11, with high probability.

The other paper, the third one, is from Professor Marc Chesney and two of his colleagues at the University of Zurich in Switzerland. [4] They are engaged in a long-term project which has been ongoing now for about five years, continually improving their work and it’s getting larger and larger. What they do is they look at 14 corporations – five airlines, five banks and four other stocks. They also find that there was insider trading prior to 9/11 in a number of stocks, for example in Boeing and Merrill Lynch.

We can discuss this further, but the basic message now is that there are three studies showing high probability of insider trading prior to 9/11, while there are no reports out there which are showing the opposite. We only have the 9/11 Commission report saying something different.

Also interesting from Chesney’s work is this: Michael Ruppert [author of Crossing the Rubicon] made a lot of noise about the enormity of the profits that were made on put options before 9/11 and he also talks about options that were not exercised after 9/11, suggesting that some people were afraid of exercising their options. [5]

But if you look carefully at Chesney’s paper, the detail in Chesney’s paper indicates that every single put option was exercised by the time of its expiration day. So there wasn’t anything left over. And in fact I have learned something along the way: If a put option is in the money on the day of the expiration date, it is automatically exercised. It isn’t allowed to just expire.

The other thing that came from Chesney that I wouldn’t know otherwise: he is calculating the actual gains from exercising the put options, and you can add up his numbers, and he comes up to about US$15 million just on the put options that he has looked at.

And if you double that in order to kind of add the other put options he didn’t examine, it would be $30 million that could have been earned as a result of exercising the put option trades. The point I am making is that, for the put option trades, while important, we are not talking about billions of dollars here. There are other things that happened before and after 9/11 that were worth much more than $30 million.

LS: Am I right that the paper about the S&P 500 Index and the study by Professor Chesney are both not challenged either?

PZ: That’s correct.

LS: In light of these econometric findings, what do you think about the performance of the SEC [Securities Exchange Commission] and the FBI [Federal Bureau of Investigation], since their investigations have been the basis for the conclusions of the 9/11 Commission?

PZ: Well, let us go back to the implications for Poteshman because that indicates where the weaknesses of the conclusions of the 9/11 Commission are and what they might have gotten away with. First of all, the report that was released in 2009 cites a guy from the SEC by the name of Joe Cella, and that report basically gave the evidence of what the 9/11 Commission report asserted without stating how they came to that assertion. [6]

Cella said that they found a financial advisory service that sent out on September 9, 2001, a fax to its subscribers that they should buy American Airlines put options at the current price. Cella reports that his investigators went out and got the list of the 2,000 subscribers to this newsletter, Options Online.

They found out that 55 of those subscribers had purchased put options on American Airlines. And they contacted about half of them and were told by them that they purchased the put options on September 10 because of the recommendation of the newsletter. So Cella was claiming that they nailed down 50 plus subscribers of that newsletter who bought put options on American Airlines.

That number is not dramatic, representing about 2.5% of the subscribers who received the recommendation. But it is a convincing report and would seem to account for a majority of the put option purchases on September 10.

LS: There were also purchases of put options on American Airlines and other stocks the days before, so maybe Options Online was only reacting to those.

PZ: That’s where it gets interesting. We don’t know exactly the motivations for the advice of Options Online. What you are mentioning means that we need to trace those other put options that Professor Chesney and his colleagues found, namely Boeing, Merrill Lynch, Morgan, Citigroup, and so forth.

In other words, there could well have been a climate being created of buying put options before September 11 by people in the know, by people who had insider knowledge about what was going to happen, and that it spun off to some people who did not have that insider knowledge, for example maybe the editor of Options Online who made the recommendation of buying put options on American Airlines.

There’s another reason to think why this might makes sense. The article by Wong, Thompson and Teh [economists Wong Wing-Keung, Howard E Thompson and Kweehong Teh], whose findings were published in April 2010 under the title “Was there Abnormal Trading in the S&P 500 Index Options Prior to the September 11 Attacks?” notes that actually buying put options on American Airlines and United Airlines was kind of the most stupid thing to do if you knew what was coming down and you knew that airplanes of American Airlines and United Airlines would be involved on 9/11, because buying put options on exactly those airlines would have meant the risk of exposing yourself.

Also, I have to point out that I’m defending as an econometrician my profession in a certain way. I have looked very carefully at all these econometric works and I didn’t find a substantial weakness in them. They are not crazy pieces of research, but solid ones. And from their work we get also into internal contradictions of the Cella report when it is said that every avenue was investigated, but then said: “Oh, by the way, we didn’t investigate the S&P 500 index options.” When it was investigated by those people at the University of Wisconsin, Madison, they find that there was in fact high evidence for insider trading in put options on the S&P 500 index.

LS: Wong, Thompson and Teh also said that they would need better trading data to nail it really down.

PZ: That’s actually a factor in all of the three studies.

LS: I think another problem here with nailing down the evidence of 9/11 insider trading is that if the government had any interest in prosecuting this, they would offer protection to some people who know about the insider trading firsthand, correct?

PZ: Yes, right. I mean, a very common method of criminal investigation is to offer protection to certain individuals to get to others.

LS: You are calling for an international investigation. Why?

PZ: Because I don’t feel at all satisfied with the study that was done by United States authorities. They don’t give us the truth about what happened, for example, with Merrill Lynch insider trading before 9/11, or with Boeing. They had the opportunity and they don’t provide the information. They provided it only for American Airlines, that’s the only one that is convincing.

LS: Isn’t it also an important reason due to fact that it is connected to mass murder, which isn’t time-barred, and thus it still needs to be prosecuted?

PZ: Absolutely. It needs to be prosecuted. We need to go back and find out about the put option trades Chesney talks about, to every single one of them – we need to go back to Boeing, Merrill Lynch, Morgan, Citigroup etc. You have to look at every single one of those and look at exactly at who did it, and don’t make a presumption that so-and-so is an American citizen and would never have done such a thing, etc. That’s not the way to go about anything in any serious piece of work. That needs to be done.

LS: Why is it that those scientific papers we have talked about don’t get addressed from other economists?

PZ: To be frank about my profession, the real reason is that they are scared. I know my profession. Ordinarily, when you have a topic which is as hot as this one, or maybe a topic not as quite so hot but has huge social implications, you want to research it, because you could make your career really moving forward, I’m just talking in normal academic terms.

So you would think that there are other econometricians out there who would want to do their own study or criticize the other studies, but doing it in a very serious way, hoping that it will move their own professional career forward – and it’s not happening. And I think the reason is what I have said, they are afraid. This is too big for them to deal with. They are afraid that even getting into the topic gives it credence. Let me say it again: even getting into the topic legitimatizes the topic. That’s why Poteshman’s paper in the Journal of Business was so enormously important, because it legitimized the topic.

LS: It seems as if there were more remaining questions about financial issues surrounding September 11. For example, something that calls for attention is the staggering growth in

the amount of US currency circulating outside banks … in July/August 2001. The growth ran into the billions of dollars. … The currency component of the M1 monetary aggregate reported by the Fed rose by $13 billion (in the non-seasonally adjusted data), posting the highest such June-August growth rate in the 55 years since World War II. Balance sheet data for the Reserve Banks show a similar decline in inventory holdings of currency in July/August 2001, while data from the US. Treasury Department suggest the growth in currency in circulation was concentrated in $100 bills. [7]

Do you have an opinion on that

PZ: Bill Bergman, whom you quote here, basically says that there’s a field of research here that needs more explanation, and I understand what he is trying to ask us to look at and it is important. As you said, there was a huge increase in, particularly, the $100 bill currency supply in July/August of 2001, it was an enormous increase.

That drives a question for explaining why it happened. And Bergman got apparently fired from his job for even asking the question, for even pointing out the problem. That’s my understanding. But having said that, I don’t have anything to offer to add to what he has done, expect that I would note what he has done is important.

But there were other things happening on that day that were connected to financial issues. For example, I don’t know what to say about it, but the specific floors in which the World Trade Center towers were hit were particularly important financial floors. I am not talking about the whole buildings, I am talking about specific floors which were hit. Or the specific portion of the Pentagon which was hit was also extremely important for financial issues.

LS: For the accounting?

PZ: Yes, for the accounting, right. It is almost too much to believe that this is just a coincidence. Another thing, I have read reports that there were enormous gold stocks at the bottom of the World Trade Center, and trucks were coming in, carrying it out. Where did the gold go to? Did it happen, first of all, and if it did, where did it go to?

And in Building 7, the third building that collapsed, you have SEC files that were destroyed. I know a person working in the Washington office of the SEC, who told me afterwards – they were dealing with all kinds of investigations that were being undertaken, and case after case after case was closed because they had no copies located elsewhere, the documents that they needed to prosecute these corporations.

What I’m saying is that the case of M1 money supply is just one of many cases. The significance of the put option issue is that the numbers are clear and what you ought to do as a prosecuting person is also clear: you go to the people, you go to the exact names, the exact people who did the trades, and you can get that, no question about that.

LS: Through the brokers?

PZ: Yes, who ought to know, right. But I’m just saying that insider trading is the cleanest example we have in financial irregularities, which is why it is attractive to investigate. There are other things out there. Insurance payoffs for the buildings that were destroyed, that’s another example, billions of dollars that we are talking about.

LS: And we know that some re-insurance companies like Munich Re and Swiss Re were also targeted via put options.

PZ: Yes, right.

LS: You’re not only an expert on econometrics but also an expert on Marxist theory. Could you give us at the end of this interview an interpretation from a Marxist approach to the critical question “Cui Bono 9/11”? [Who benefits?]

PZ: Well, first of all let me say, since I have done Marxist research and been the editor of a Marxist series for years – when 9/11 happened it took me a little while to decide that 9/11 is worth investigating in its own right. While it is a shocking human event, it is not a shocking theoretical event – I mean, it’s not shocking from a point of view of what I see as the Marxist understanding of what the state is capable of doing even to its own citizens. It is not shocking from that point of view.

But, anyway, you then go to the next question: Why would the US state possibly do this at this time and for what purpose? Well, that can be a kind of a trap question, because no matter what I say somebody could come back and say: Well, they could have accomplished the same thing without 9/11.

Nevertheless, I still am going to say just a fact: the United States military-industrial complex has earned billions and billions of dollars as a result of 9/11. I think it would have been much more difficult to achieve those sums of money without 9/11. The US military expenditures are already equal in size of all of the rest combined. 9/11 surely helped that ideological support for such an incredibly large military.

LS: Do you think from an economist’s point of view it has become reality what president [Dwight] Eisenhower warned about, that the military-industrial complex has become too large and too powerful, and is now calling the shots economically? [8]

PZ: The short answer is yes, but the more complicated answer is that my understanding of Eisenhower’s statement is that it was long in preparation, it was kind of a year in the making. But, on the other hand, I mean, you can ask yourself the question: Well, why didn’t he do it two years earlier than that? It was kind of something he threw out at the last minute and didn’t have to take any responsibility for.

At the same time he was setting up the Bay of Pigs invasion [in Cuba] that he foisted on [president J F] Kennedy. So, yes, it’s a great thing to quote what Eisenhower said; I like it and it turns out to be correct, but I don’t fully understand his motivation when he waited to the last minute to say it and then afterwards couldn’t do anything about it, and what he did do as president was consistent with the rest of the US foreign policy.

LS: Well, his successor John F Kennedy was dealing with the military-industrial complex a bit differently.

PZ: Yes, he was the one who really challenged it. There is a wonderful book on this that should be read by anybody: JFK and the Unspeakable by Jim Douglas. [9]

LS: Yes, it is just brilliant, I agree.

PZ: If people want to read something about JFK’s challenge of the military-industrial complex this is definitely the book to read, no doubt about it.

LS: Thank you very much for taking your time, Professor Zarembka!

By Lars Schall

27 April 2012

@ Asia Times Online

Notes

1. Paul Zarembka:, “Evidence of Insider Trading before September 11th Re-examined”, International Hearings on the Events of September 11, 2001, September 8-11, 2011, Ryerson University, Toronto, Canada, online here, September 9, 2011.

2. Allen M Poteshman: “Unusual Option Market Activity and the Terrorist Attacks of September 11, 2001,” published in The Journal of Business, University of Chicago Press, 2006, Vol. 79, Edition 4, page 1703-1726.

3. Wing-Keung Wong, Howard E. Thompson und Kweehong Teh: “Was there Abnormal Trading in the S&P 500 Index Options Prior to the September 11 Attacks”, Multinational Finance Journal, Vol. 15, no. 1/2, pp. 1- 46 online here.

4. Marc Chesney, Remo Crameri and Loriano Mancini: “Detecting Informed Trading Activities in the Option Markets”, University of Zurich, April 2010, online here.

5. See Michael C Ruppert: “Crossing the Rubicon: The Decline of the American Empire at the End of the Age Of Oil”, New Society Publishers, 2004.

6. See Commission Memorandum: “FBI Briefing on Trading”, dated August 18, 2003, online here.

7. Bill Bergman: “A 9/11 Paper Trail: Benjamin Franklin, Rolling Over In His Grave”, published March 23, 2012, see here.

8. See Dwight D. Eisenhower: “Farewell Address”, delivered 17 January 1961, online here.

9. James Douglass: “JFK and the Unspeakable: Why He Died and Why It Matters”, Orbis Books, 2008.

Lars Schall is a German financial journalist.

In Defense Of Guenter Grass

“Throughout history, it has been the inaction of those who could have acted, the indifference of those who should have known better, the silence of the voice of justice when it mattered most, that has made it possible for evil to triumph”- Haile Selassie

“Have our Jewish sisters and brothers forgotten their humiliation? Have they forgotten the collective punishment, the home demolitions, in their own history so soon? Have they turned their backs on their profound and noble religious traditions? Have they forgotten that God cares deeply about the downtrodden” – Bishop Desmond Tutu

These two cautionary admonitions capture the thrust of Guenter Grass’ electrifying poem, “What Must Be Said,” that has brought an avalanche of invective – some scurrilous, some vituperative, some even personal vilification – against the man who warns the people of the world as well as the Jewish people of the dangers inherent in the actions of the Zionist controlled government of the State of Israel. Such condemnations avoid direct rebuttal of Grass’ pointed cries of despair as he contemplates continued indifference to the slow yet calculated genocide that exists in Israel ‘s occupation of Palestine reverting instead to derogatory innuendo, ignorance of conditions prevalent in the occupied territories, ignorance of those determined to destroy Israel , and personal guilt as a German. There is no reflection on the worst sin human kind can inflict on their fellow human beings, the silence of indifference to the plight of the Palestinians or to the potential danger facing the people of the mid-east should Israel preemptively strike Iran .

The title of his poem, “What Must Be Said,” echoes the prophets of old, cries of those weeping in the wilderness to heed the obvious, to hear the hypocrisy that masks the reality of a nation that cries for peace as it stealthily steals more land, that demands dismantling of Iran’s nuclear plants as it declares its right to Demona and untold weapons of mass destruction, that denounces with all brazen duplicity, indeed silences those who criticize the state of Israel while they are free to attack them as anti-Semitic.

“Why silence so long,” Grass asks of himself and answers, as must we all, that we are “slaves to an oppressive lie,” what cannot be said without condemnation because Israel has the “right” to demand and defend what it will. Is it wrong to criticize the obvious? Is it wrong to bare truth when silence once before begot a holocaust? Is it wrong for the German people to mark what they have learned through decades of reflection and reparation and not reveal what they have lived and learned? Is it wrong to speak when devastation threatens, when arrogance buries truth, when the weak have no voice, when the unknown consequence of brutal, raw, preemptive poweris imminent?

I would have Guenter Grass speak for me, my children and grandchildren, and all others who could suffer yet another World War, by noting the obvious that has been silenced so long:

•  a state provided with the fourth greatest military machine in the world to defend less than 6 million people,

•  a nation, the only nation in the mid-east with weapons of mass destruction,

•  a nation that refuses to sign the mid-east nuclear non-proliferation agreement,

•  a nation that has demonstrated its willingness to invade its neighbors in Lebanon , Syria , Egypt , Iraq , and drools to bomb Iran ,

•  a nation that occupies a land provided for it by the same United Nations that gave Israel license to declare itself a nation,

•  a nation that damns Iran for proclaiming that it will “wipe Israel off the map,” when in fact it never made such a declaration yet innocently hides its own declaration in the Likud Party Platform that the state it professes to want peace with, Palestine, shall never have a state west of the Jordan,

•  a nation that is of such demonstrable threat to world peace that if it is not condemned would be a blot on all who remain silenced and thereby complicit in its crimes,

and for such inaction, such indifference we must accept responsibility and condemnation; let the indignant ring their bells of anger and hatred, truth will prevail.

Who better to speak than a citizen of a country that supplies Israel with nuclear submarines capable of terrorizing its neighbors if not the world, submarines provided as reparation to a people destroyed so they can become the destroyer. “Why silence so long?”because “this must be said” with strength, conviction, integrity and honesty, and without personal fear or trepidation because the silence has been broken by a voice that resounds throughout the world in righteous thunder against the greatest danger the world now knows, an Israel that can act with impunity to crush whomever they determine to be their enemy.

Let me close this defense of Guenter Grass with a story told by Professor Michael Klein years after he had escaped death at Auschwitz . Klein’s brief narrative is titled “Breaking Silence.” It captures what I believe is the real essence of Guenter Grass’ plea, both in time and shame. The story reflects on Klein’s close friend, SalamonAbshalom, who had attempted escape and was to suffer death as a consequence. The story is a parable that parallels our time; what if voices had told of the Jewish plight before the trains took them to the death camps; maybe SalamonAbshalom would still be alive.

“My friend SalamonAbshalom was let out. He was barely able to walk; his hands were tied behind his back. An SS guard took him to the back of the camp yard. … He was led to the gallows and made to climb onto what looked like a stepladder. The noose was tied around his neck.

We stood paralyzed, in bewildered despair. How could the Heavens allow this to happen on this holy Yom Kippur evening? Did the Germans set up the execution specifically for Yom Kippur to humiliate the God of Israel and His people? The silence of the Heavens screamed out in our hearts and in our souls. The desecration of the God of Israel, of the people of Israel , of Yom Kippur, and the humiliation of man created in the image of God proceeded in silence as the German hangman, the Camp’s SS commander, stood over SalamonAbshalom.

Suddenly, as if from nowhere, a powerful, high pitched voice rang out over the camp yard. It sent chills down our spines, as we heard the cry of ” Sh’maYisrael… “, Hear O Israel”, as SalamonAbshalom declaimed the eternal proclamation of the Jewish people’s belief in one God….

With his prayer of Sh’maYisrael arising from his last breath, he raised all of us standing Zaehlappell to the highest spiritual level. Even as his life was extinguished by the brutal murderer to whom nothing was holy, he still proclaimed the eternity of the Jewish People, in defiance of evil, in defiance of the Germans, in defiance of the silence of humanity, and in defiance of the silence of the Heavens. SalamonAbshalom proclaimed the Godliness of the Jewish People even at a time when God seemed to be totally absent.

I slowly calmed my emotions and tried to analyze my thoughts. The Germans murdered SalamonAbshalom, but I was guilty having been silent in spite of the promise we made to each other in the camps that we will tell the world of what happened. I had kept SalamonAbshalom’s memory a secret for all these years.”

Silence sacrifices the innocent because it allows continuation of slaughter; silence rests in the soul as it acidifies into self-shame; silence speaks no language, offers no aid, but ensures that time will extinguish both hope and guilt. Silence is the voice of the coward and the accomplice. Silence must be extinguished.

By William A. Cook

7 April 2012

@ Countercurrents.org

William A. Cook is a Professor of English at the University of La Verne in southern California. He writes frequently for Internet publications including The Palestine Chronicle, MWC News, Atlantic Free Press, Pacific Free Press, Countercurrents, Counterpunch, World Prout Assembly, Dissident Voice, and Information Clearing House among others. His books include Tracking Deception: Bush Mid-East policy, The Rape of Palestine, The Chronicles of Nefaria, a novella, and the forthcoming The Plight of the Palestinians. He can be reached at wcook@laverne.edu or www.drwilliamacook.com