All smiles for Corporate America

Published : Jul 15, 2005 00:00 IST

A protest against war profiteering, outside the headquarters of Halliburton in Houston. - MICHAEL STRAVATO/AP

A protest against war profiteering, outside the headquarters of Halliburton in Houston. - MICHAEL STRAVATO/AP

The New York Times columnist Thomas Friedman's new book avoids the sleaze within corporate America in order to paint a rosy picture of global capitalism.

THOMAS FRIEDMAN'S new book, The World is Flat: A Brief History of the Twenty-first Century, has been reviewed in almost every major English-language publication. The Financial Times (London) finds it an important book despite its appalling prose. If the book's back page announces that Friedman is a world-class writer, and if he himself says that the world has changed, then The Financial Times notes, what has changed is that a writer is deemed world-class despite his purple prose and liberal use of mixed metaphors. Shortly after the book appeared, the French and Dutch voters rejected the European Union's draft constitution. Friedman, who is one of the regular columnists for The New York Times, could not contain himself. The French and the Dutch, and Europe in general, had rebuked the globalisation that Friedman cherishes - open borders for capital and minimal social welfare schemes maintained by nation-states. "French voters are trying to preserve a 35-hour work week in a world where Indian engineers are ready to work a 35-hour day. Good luck" (June 3). The world is flat, but the Europeans behave as if this is not so.

The problem with Europe, Friedman writes in his book, is that the European labour movement made far too many gains that it has been able to preserve. What states need to do to be "competitive" in the new epoch, Friedman writes, is to don the "Golden Straitjacket" of low to no social welfare expenditures, no tariffs, no barriers to foreign ownership, no barriers to currency speculation, no labour market distortions (what are otherwise known as unions), and no progressive taxation schemes. If a government deviates from the "Golden Straitjacket", "investors stampede away, interest rates rise, and stock market valuations fall". The best option for the nation-state's government is to tighten the "Straitjacket", because "the tighter you wear it, the more gold it produces and the more padding you can then put into it for your society". Europe is bound by social welfare regulations when it should chose to bind itself in this "Golden Straitjacket".

Corporate America is all smiles as its sycophant goes forth to sing on the world's flat stage (the word "sycophant" comes from the Greek, where its root word means "informer"). The book comes out just as other good news reaches the boardrooms along Wall Street. The head of the Securities and Exchange Commission (SEC), William Donaldson, resigned after he could make no headway on the regulation of hedge funds. In addition, Donaldson could offer no more democracy to shareholders, whose various organisations had clamoured for easier removal of unpopular chief executive officers (CEO) and for more oversight on CEO compensation. Republican appointees on the SEC blocked Donaldson's agenda vigorously, and despite some gains on behalf of shareholder confidence, Big Money has certainly won out against the small investor. President George W. Bush quickly replaced Donaldson with a close ally, Christopher Cox, who spent some of his time in the United States House of Representatives bashing China politically and mollifying Corporate America's ability to do business there. The Washington Post (June 3) pointed out that Cox would "make the SEC Corporate America's sponsor". Cox's philosophy of corporate governance, The Washington Post noted, "is that investors who don't like how a company is run should simply sell their shares and put their money somewhere else. Look for Cox to make it easier and cheaper for companies to issue new shares of stock, even when they have no business doing so, while soft-peddling enforcement against big brokerage and insurance firms that merely aid and abet corporate fraud but don't actually do it themselves".

The Donaldson resignation and the Cox ascension came just as the U.S. Supreme Court reminded the country of the Enron fiasco. When Enron went down, government investigators found that part of the problem lay in its accounting firm Arthur Andersen. Andersen had, according to the Justice Department, destroyed Enron documents in anticipation of an SEC investigation, and in 2002 a Houston jury found that the firm had committed corporate fraud. The Supreme Court rejected this verdict on the basis that the original Judge had given the jury far too vague instructions. William Mateja, who worked at the U.S. Department of Justice's corporate fraud task force, told The Washington Post (June 1): "To lose a case like this is huge. Arthur Andersen was the poster-child case of all the corporate fraud cases." The judiciary has now raised the bar on corporate cases, since future juries will now have to be absolutely certain that the firm in question demonstrated malign intent when it committed any infraction.

At the time of the Andersen-Enron collapse, Friedman cheered on Corporate America. He wrote: "What distinguishes America is our system's ability to consistently expose, punish, regulate and ultimately reform those excesses - better than any other. How often do you hear about such problems being exposed in Mexico or Argentina, Russia or China? They may have all the hardware of capitalism, but they don't have all the software - namely, an uncorrupted bureaucracy to manage the regulatory agencies, licensing offices, property laws and commercial courts" (July 28, 2002). Friedman repeats this in his new book: "What distinguishes our capital markets is not that Enrons don't happen to America - they sure do. It is that when they happen, they usually get exposed, either by the Securities and Exchange Commission or by the business press, and get corrected." With the new SEC head in charge and the new decision from the Supreme Court, the software of capitalism seemed to have an uncontrollable virus.

IN The World is Flat, Friedman argues that globalisation produces democracy, whose most important aspect for capitalism is bureaucratic competence. Good government means good laws and good regulations that are produced by what Friedman calls a "globulation" (another one of his several neologisms - here the compound of global revolution). Very little of this is on offer in the current corporate environment in the U.S. Friedman has little to say about Iraq in his book. In his many opinion pieces in The New York Times (from 2003 onward), he adopted the Iraqi "globulation" conducted by the Coalition Provisional Authority (CPA) as a model. The CPA under Paul Bremer passed a series of orders that, among other things, gave foreign contractors full immunity from Iraqi laws (#17), encouraged the privatisation of 200 Iraqi concerns and allowed foreign firms to expatriate all profits (#39), cut corporate taxes dramatically (#49) and produced a regulatory apparatus controlled by the CPA (#77). Order #39 makes the overall point quiet cleanly, that the CPA has to shift Iraq's political economy from a "centrally planned economy to a market economy". Fully aware that the CPA would soon hand-over the reins of the government to one or other of the Iraqi political parties, Paul Bremer pointed out: "You set up these things and they begin to develop a certain life and momentum on their own and it's harder to reverse course."

The Jacobins of the Iraqi "globulation" will not be found among the resistance or even among the electoral political parties. They will be found in the ranks of Halliburton and its subsidiary KBR (formerly Kellogg Brown and Root), among other global corporations who operate in the country. Whistleblowers among former employees and government regulators came forward in 2004 with long depositions on how KBR used its proximity and intimacy with the Bush administration to gain non-bid contracts and how it over-billed the U.S. government for its services. Friedman entirely ignores Halliburton and KBR, two pillars of the new "globulation" at work in Iraq. To date Halliburton/KBR has billed the U.S. government almost $10 billion for its logistical work in Iraq, much of this including vastly inflated gasoline bills and extravagant expenses for its managers who live in Kuwait City. One government overseer of the contract has been fired (Bunnatine Greenhouse of the U.S. Corps of Engineers), and others who have tried to get the story out have been maligned or censored. Michael Shnayerson in a Vanity Fair expose (April 2005) writes: "The picture that emerges [of Halliburton/KBR] is of a company like the one in John Grisham's The Firm, a rogue operation, with corrupt management, cynically conning the federal government as it rakes in billions of ill-earned taxpayer dollars." These Halliburton-KBR contracts came at a time when the firm faced enormous liabilities from an asbestos lawsuit ($4.2 billion) within the U.S. It would have gone the way of Enron in 2002-2003 if its former CEO Dick Cheney's administration had not come to its rescue with these no-bid deals. By avoiding the sleaze within Corporate America, Friedman is able to paint a rosy picture of global capitalism.

In his earlier book (The Lexus and the Olive Tree, 1999), Friedman offered the "Golden Arches Theory of Conflict Prevention", that "no two countries that both had McDonald's had fought a war against each other since each got its McDonald's". If a country had a McDonald's chain, Friedman argued, it had a middle class substantial enough to prevent war. "People in McDonald's countries didn't like to fight wars any more. They preferred to wait in line for burgers." The Kargil War of 1999 belied this theory. In The World is Flat, Friedman offers an updated version, which is no less facile, the "Dell Theory of Conflict Prevention", "The Dell Theory stipulates: no two countries that are both part of a major global supply chain, such as Dell's, will ever fight a war against each other as long as they are both part of the same global supply chain, because people embedded in major global supply chains don't want to fight old-time wars any more." Globalisation not only brings prosperity, but it is also the best foundation for peace. But the Iraq "globulation", the finest example of privatisation we have thus far, is a product of an endless war. The beneficiaries of that war are many of the largest capitalist concerns (Bechtel, KBR) who make no appearance in Friedman's book. There is no Bechtel or Halliburton Theory of Inter-State Conflict Use for Private Profit. Friedman's book is a gift to Corporate America, which is enjoying a season of giving (including the newly anointed SEC chair and the Supreme Court verdict). Everyone in pin stripes is ecstatic.

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