by Lloyd Hart
On one of the best trips I have ever taken to New York City in which I started the filming of a documentary on globalization, I had no idea what to expect from the protests that were about to take place over the arrival of the World Economic Forum as it made it’s hasty retreat from it’s mountain hideaway in Switzerland to what it thought was sacred corporate ground in New York City. I did however have a good idea what I could expect from Gregory Palast having delved into his not yet published book titled “The Best Democracy Money Can Buy” and subtitled “An Investigative Reporter Exposes the Truth about Globalization, Corporate Cons, and High Finance Fraudsters.” Greg’s book is a gripping series of exposes that provide the details that every activist working to turn the tide on globalization could and should use to convince the fence sitters to join us in hitting the streets to effect change.
And as you will find out in this interview people hitting the streets are doing exactly that. Greg’s book is now published and in this interview he gives us a powerful preview of what to expect and also some earth shakers about Enron not to many other folks are talking about. Greg Palast is an award winning investigative journalist who takes the job of uncovering the inside track and the effects of those policies that the IMF, the World Bank and global corporate corruption produce, very seriously. He writes in a style of biting humor, intelligence and emotional depth that equal the absurdity of corporate feudalism and the terrible suffering that it brings. For those that are familiar with Greg’s writing this interview will provide further insight into the world of investigative journalism and for those that are not it will provide an introduction to a depth of reporting we should expect and demand from all journalists.
Lloyd Hart: So here we are, in New York for the World Economic Forum. You were on a panel sponsored by Friend of the Earth. Could you talk about that a little?
Gregory Palast: Down town at the big hotels you’ve got the movers and shakers and up town the people who represent the moved and shaken. But the world is a bit different now than the last meeting of the World Economic forum. Last year was triumphalism. There was one theory, as Thomas Freidman of the NY Times says “you’ve got your one flavor”, you’ve got the golden straight jacket sewed by Margaret Thatcher with the buttons put on by Ronald Reagan. So they were quite triumphant, there was no alternative. This year things are little bit grimmer, after the 9/11 attacks, the terrorist attacks on NY, the economy, which was already suffering, started sinking. Argentina went under which was the poster child of globalization and now you’ve got Enron that sank in on it self. And so suddenly the two poster boys of globalization, Ken Lay of Enron and Argentina, who followed the IMF dictates to a T, have both collapsed. And so now they have to worry that the anti-globalization movement has a second wind as a result the recent tragic events. So these meetings in the anti-globalization groups are absolutely packed. Its amazing the spectrum we have, with guys in fancy suits coming from NGOs like Friends of the Earth to Bolivian water workers.
Lloyd Hart: So there is a new word around these days. Maybe you could define neo-liberalism for me.
Gregory Palast: Yeah neo-liberalism, like new liberalism well it’s very odd because what we think of as liberal is bleeding heart, concerned about the rest of the planet, about social and environmental issues, progressive and positive. Where as the term as it has been seized upon by the right wing, liberalism, liberalization, reform, all these new things are now related to selling off public property, privatizing and eliminating protections for the environment and consumers etc. So when they talk about reform they talk about smashing unions, eliminating state pensions, selling off state owned water systems. Neo-liberalism or new liberalism is Milton Freidman, Margaret Thatcher, Ronald Reagan and it’s all about selling off public systems, eliminating controls on business, in what they call liberalization. Liberalization means removing barriers, well its just like removing the guard rails and speed limit signs on the highway and needless to say there are a lot of dead bodies on the side of globalization highway.
Lloyd Hart: Who is Joe Stiglitz?
Gregory Palast: Joe Stiglitz, he was the chief economist for the World Bank and he began to raise a couple questions about how the world bank was operating, because he knows that every where the World Bank imposed policy to reorganize a nation’s economy the nation very quickly fell to it’s knees and collapsed, gasping. And so he said, look we tried to help Bolivia, it went under. We tried to help Brazil, it exploded. We tried to help Indonesia, it was burning in riots. He said maybe there’s a pattern here. And as chief economist he asked that some studies be conducted so that the neo-liberals, the privatizers, the proponents of the new global order could prove that their theories actually are producing economic miracles as they claim. They refused to do the studies because their own information was painting a clear picture. The only economies that seemed to be doing well were China, Vietnam, Botswana, Venezuela and the United States. What did all five of those economies have in common? All five told the IMF to go to hell and that includes the United States who does not listen to the IMF dictates at all. So Stiglitz said maybe we ought to change our methodology in dealing with the third world, in dealing with developing nations or even dealing with nations like Brazil. That our systems for eliminating barriers, eliminating unions, that cause pain, but not pain that which leads to gain, it’s the pain that leads to collapse, failure and economic death. And for suggesting, simply suggesting that they reevaluate their positions, the World Bank fired him. He wasn’t even allowed to resign, he was banished from the entire World Bank community. It was as if they cut off his head and stuck it on a pike and placed it outside the World Bank. But he may have had the last laugh as a couple of months ago he won the Nobel Prize for economics.
Lloyd Hart: Do you think the Nobel committee was reacting to his firing from the World Bank.
Palast: No he didn’t get his Nobel Prize for taking a courageous position on globalization, questioning the orthodoxy. But it was his work prior that led him to that direction. He created the field of information economics. Now, it’s a little technical but maybe it’s worth understanding a little bit. The entire theory of the right wing that free markets always work, is based on something very interesting. It’s based on what’s called rational expectations and that’s based on, in the field of economics, that information is free, that markets communicate information for free. Well there is a big problem for an economist to say that a product is free. If you think information free then try taking a copy of the New York Times from a newsstand with out paying for it. If you think information is free then how come we pay a trillion dollars a decade to the CIA to find out more of it. Information is very expensive stuff and if the information is expensive then markets can not work freely and properly automatically, you have to regulate, you have to have government make sure that someone doesn’t cheat the market.
Lloyd Hart: Especially when your getting into intellectual properties. In that case information is very expensive.
Gregory Palast: Well that’s very interesting, you see the globalizers talk about bringing down barriers. That workers should not erect barriers against the products of foreign workers. That they should understand that in the long run they’re better off even if they lose their jobs and are unemployed. But when it comes to corporations, the same medicine does not apply to them. God forbid you say, well, lets have a competing drug, lets have competing software program, the same program made cheaper in another country. So what has happened is that the WTO, the World Trade Organization has been set up in such a way that it’s purpose is to knock down national borders between nations and remove tariffs between nations but in actuality it is to raise tariffs determined by product markets of corporations. So that, you no longer have tariffs between the United Kingdom and the United States but you do have tariffs between different market segments of Nike shoes, different market segments of Glaxo drug corporation. Which is enforced by the WTO because you can not move one set of products across the market defined lines of the corporations without paying a toll, a tariff, a tax to these corporations and this is covered under the international treaty T.R.I.P.S. which stands for Trade-Related Intellectual Property Rights.
Lloyd Hart: So now we are looking at a failure but is it really considered a failure by these folks these free marketeers. Is it really truly a failure when a country emplodes like Argentina just did or is it an opportunity or seen as an opportunity to go in and grab resources dirt cheap.
Gregory Palast: Well this is one of the problems. Actually Stilitz brought this up. In the IMF explosions like in Argentina, in Brazil and in Indonesia where there are riots in the streets. He calls them the IMF riots. They’re virtually written into the plan. In fact I have been able to obtain inside documents from the IMF and World Bank which go through the steps. You actually see it in there where their squeezing and squeezing a country until the point where they know it will create an explosion as in Ecuador. They know it. And so they use such polite terms as “We understand that these policies may create social unrest” what they mean is a riot, that means troops move into the street and they say “It will require firm resolve”. Firm resolve means send in the tanks to up hold these policies. What polices? Well, let me give you some simple examples: At the IMF and the World Bank in order for nations to get financing to be able buy and sell products on the market you have to borrow money. Just like any individual does you need credit to operate, so do nations. To get that credit, it’s not just good enough that they be credit worthy, they also have to agree to what are called conditionalities of the IMF and the World Bank. The average of conditionalities is 111 for each nation. Each nation is sent a package, “you must do this!” In the case of Ecuador, one of the conditionalites, when the country was in terrible shape in the 90s, because the price of oil dropped, as they are an oil exporting country, was to raise the price of cooking gas. Now, there in the Andes, people can’t cook their food without bottled gas. It’s a necessity, it’s like beans, it’s an absolute necessity of life to get cooking gas to cook your food. The IMF required Ecuador to raise the price of cooking gas by 80%. Now that was devastating. At the same time that they were forcing the government to lay people off. At the same time that they were reducing public pensions. At the same time that they were devaluing the currency so that people had less income, they were raising the price of this basic necessity. And where it’s really cruel and strange and odd and just completely stupid is that Ecuador is an oil exporting country. It was a member of OPEC and part of the reason it was in trouble in the nineties, it had so much oil and gas it didn’t know what to do with the stuff. It was coming out of its ears. And the government simply said why can’t we give some of this excess gas to our own people so they can cook their food. And the IMF said don’t you dare, not only are you not going to give it away because you have so much of it that the price should be going down, we’re telling you to raise the price. So they raise the price of cooking gas, the Indians came out of the hills, they started burning cars in the capital. Soon there are troops in the streets and yes, what was the next thing that happens? Suddenly British Petroleum gets a license for an oil pipeline. Also promoted by the IMF and the World Bank and that was because now with the capital in flames this nation now was desperate for money and so they start selling they’re pipelines, selling their assets. Now is this their plan, do they sit down and say well what we’re going to do, we’re going to squeeze these people until they torch the capital and then we can seize all their assets. I don’t know if they think it out that carefully but it happens again and again and again. And what’s interesting about Stiglitz is he said “I see a pattern here and I’m beginning to question it” and then they said “your not going to question it and work with us” and he was fired.
Lloyd Hart: Obviously you’ve been able to source some data that no one else has been able to get at.
Gregory Palast: Well what I do and I’m offering this to any one who sees this tape. I like documents. You got some inside documents? Don’t steal anything. But if something falls your way that illustrates how the system operates within your corporation, within your organization which you think ought to be brought to public attention, I’m here. Go to my web site get a hold of me www.gregpalast.com . Don’t break the law, please keep me out of trouble but if you’ve got something, if you’re a whistle blower I’m here.
Lloyd Hart: The Pentagon Papers are a prime example of how the press should function.
Gregory Palast: Very rare, but the press really doesn’t function. Watergate was so unusual that they had to make a movie of it. The My Lai massacre, if you think the papers were dying to have that story. The guy that actually uncovered it originally with Seymour Hersch and then gave it to Hersch was a guy named Ron Ridenhour, a fantastic journalist , was also a soldier in Vietnam. He took the story to thirty newspapers but they turned it down. Finally they pushed it into the public, they were basically mimeographing the story until finally they couldn’t suppress it any longer. But papers don’t want to hear this news. That’s why I’m reporting from Britain because in the United States you’re not going to get my reports. Our biggest problem is that there is no dissent allowed. And so you’ve got Thomas Freidman the great liberal voice of the New York Times and yet is pro globalization. So that you have your choice of either the right wing commentators and newspapers which support globalization, liberalization, selling off the public services, ending government protections. You either have that in the right wing press or you have the same exact thing, pro-globalizers in the so-called left press of America and the New York Times. And because they don’t print any dissent you get Thomas Freidman saying there are no dissenters. The fact is that they simply muzzle your voice.
Lloyd Hart: We talk about left wing and right points of view but what it really boils down to, is imperialism is imperialism and why does the US Treasury have a 51% stake in the World Bank.
Gregory Palast: The US Treasury has 51%, is a 51% percent shareholder in the World Bank. Which if the US were to use it for good, that’s a hell of a lot of power. That’s not such a bad idea. The problem is that it has been pushing an agenda, which is very very helpful to a few corporations in corporate America. And not necessarily America but corporate America which are two quite different things. So for example, you take a company like Enron which had supposedly 80 billion in sales but very few employees compared to their sales. This isn’t creating employment. Under the World Bank rules, under IMF rules, under the conditionalities for borrowing. Every single nation, every single nation that borrows from the IMF and the World Bank is given the conditionality of selling off their water systems, selling off their electric utilities. Golly who does that benefit? Well a big subsidiary of Enron’s was Azurex, which was a company created to absorb these newly privatized water systems. So some one wins in this game and some one loses. And of course we’re beginning to see the big loser is now Argentina. The collapse of Argentina is a very serious business for the globalizers because they could not point to one single success for the Reaganite, Thatcherite plan except for Argentina. They kept saying, heres our big success story, we have reshaped this economy. We’ve gotten rid of the old Peronist labor unions and we’ve gotten rid of all the State enterprises and we sold off the state banks and this is a booming economy. Well it wasn’t a booming economy. In 1995 the Economics Minister who also was the head of the of the central bank, a man named Cabio embarked on a program of selling off every thing in site to US and European corporations. Argentina was an oil exporting nation so it sold it’s oil to Repsol of Spain. Buenos Aires’ water went to Azurex a subsidiary of Enron, Vivendi of France bought up other water systems throught the country. All of the power lines were privatized. The labor unions were smashed and the currency was pegged to the US dollar. Which meant that the US treasury literally owned the currency of this nation, this was very costly to Argentina, because they had to literally borrow these dollars to maintain their currency. Every peso in Argentina had to be backed by a US dollar. But it looked like they were doing well. The reason they looked like they were doing well for two years, which is not a long time in economic life, is because they were selling everything in sight. Now if you sold your house, if you sold car, you could run out and say look how rich I am, look how successful I am. Well you’ve just sold your house and car, unless your going to live out in the rain and walk every where on the planet, your going to have to get your house and car back and your going to have to lease them now from some one else that owns them. So suddenly the water charges were doubled, suddenly the electricity charges went through the roof, suddenly they had to buy their money literally from the US treasury, buy the money at very high interest rates. While you may pay 4 percent, 5 percent and maybe 8 percent if you’re a big corporation borrowing in us dollars. Argentina was paying 10, 20, 30 percent to borrow dollars. So it didn’t take long if Argentina has to borrow at 20 percent and it has no assets because it sold them off, it didn’t take long for this game to collapse. Pretty soon the so called riches of selling off all the nations assets quickly disappeared. And all that was left was the debt. Now Argentina which once fed Latin America, was the rancher for Latin America, exporting beef, was the bread basket for Latin America. Suddenly you’ve got millions people scouring the streets for garbage to eat. And that is the miracle case, that is the number one example of a success listed by the IMF and the World Bank. That was their answer to Joe Stiglitz, that was their answer to me. Look at Argentina. Well baby look at Argentina today.
Lloyd Hart: This water issue, being a Canadian myself, born and raised. I live in the US now but water has been an issue that the US and Canada have always debated about because the great lakes are on the border between the two countries. And of course in recent time conglomerates have made attempts to go in and wholesale comoditize Canada’s fresh water resource. And Canada has the world’s largest fresh water resources, 20% of the world’s fresh water supply. So it makes it a player but it was so blatant a grab.
Gregory Palast: The take over of water systems is one of the great gold rush swindles of all time. And you can’t separate the rush to grab water from the collapse of Enron because it is all part of the same game. Enron had set up the subsidiary Azurex to grab water but there has been a problem though. A lot of nations going from Argentina to Bolivia and else where and England too. People started rising up against the new water pirates. Water systems have been built by the public for years and all these guys did was buy what the public built. Their promise was that they would invest. Now there is a whole idea and if you listen to Jim Wolfensohn, President of the World Bank you can’t get a more heart felt story, ‘Oh we want to bring clean water to all the poor little people of the world who don’t have clean water and these horrible bureaucratic governments that won’t give them clean water, so we’ll sell off the water systems to private companies who will then invest and they will expand the water systems’. And I even see this in one of Wolfensohn’s private memos, that fell my way some how, which praises Argentina’s privatizing of the water systems. Now what happened there? They ended up with Enron affiliates, Vivendi affiliates going into Buenos Aires and to Tucamon province. They raised water prices in some areas much as by 400 percent. They laid off workers, they didn’t extend the system. They disinvested from the system. They took the money out of the country and so you ended up with systems that began to fall apart. Enron for example did this not just in the third world, because we’re all the third world from Enron’s view, from up in that tower in Houston we all look like the third world. It took over a water company called Wessex Water in Britain and you see after privatization that water charges in Britain went up to 250 percent of the price charged in the US. A third of the water leaks into the ground and the profits of the companies were astronomical, absolutely astronomical, running 35 percent after taxes a year. Just unbelievable profits, nobody makes that type of money. And they put up next to nothing because they borrowed the money locally anyway. So these guys actually put up no money. Enron never actually had any cash. It was a big hair ball, it was a big fur ball of financial gimmickry, So they never put up cash but they would grab assets anyway. What you ended up with is we could say ‘well to bad for the stock holders’ but the problem is in the middle of this are the water customers, in the middle of this are people who can’t get water in Tucamon province in Argentina. And that’s the come down to these things.
Lloyd Hart: This leads me to the situation with Oscar Olivera in Bolivia and how the hell did a water take over get turned into peasants rioting over not being able to grow coca leaf.
Gregory Palast: Well there is always two stories. There is the true story and then one as it is reported. What happened in Bolivia was an extraordinary and an important story. By the way, Bolivian peasants had a lot to do with the collapse of Enron because in Bolivia the game of water privatization basically came to a near halt. What happened was that the city of Cochabamba which is the second largest city in Bolivia, 70 percent of the people lacked piped water, it’s horrible they had terrible diseases from the lack of water and from the existing system and people need water. The government didn’t have the where with all to buy the pipe to expand or improve the system. So the World Bank said lets privatize the system. Instead of saying why don’t we give a development loan which is what the world bank used to do in the good old days. They used to give development loans. They would say, okay, you need a water system, here’s a loan at a reasonable interest rate and you pay us back when you start selling the water. They don’t do that any more. They say, here’s the money but oops, no no no, we won’t give it to you, we will give it to a private contractor. Remember this is public money in the World Bank that goes to Private operators. They say, we won’t give you any money for water unless you privatize. So they privatized the Cochabamba water system, sold it to International Water which is a fancy name for an affiliate of Bechtel a very powerful corporation out of San Francico, a large construction outfit. Bechtel’s affiliate went and raised the price of water by 35 to 200 percent depending on who’s counting. It’s hard to know exactly because the expert economist that was working on it, who was raising questions on how the operation was going was arrested by the Bolivian government. So it was hard for me to ask him about the details but the last time I talked to him he said the price of water was rising about 200 percent and they weren’t extending any of the lines to people who didn’t have water in the city. They were also not expanding employment to get those lines extended. So people began to protest when their water bills went up and they had what they claim was a peaceful demonstration. It was led by the Arch Bishop of Cochabamba and a union leader named Oscar Olivera. Olivera and the ArchBishop and some other leaders, and some economists, and some professors, and some workers, and some peasant leaders went to meet with the government to negotiate. The government invited them into the government building and then arrested them and banished some into the deserts. They were finally released and there were further demonstrations. It was April 2000 and the Bolivian government called out the troops to put down those resisting to pay their water bills. The troops fired into the crowd killing four people. The people remained unarmed and would not shut down their protests. So Bechtel issued a statement out of San Francisco saying that the reason people were in the streets of Bolivia was not because they were over charging the public for water but because but because these people were trying to protect and support drug traffickers, the cocaine dealers. So I called the Archbishop in Bolivia and I asked him “How many kilos are you moving your excellency?” and he said “well I haven’t really been touching a lot of cocaine lately” and so he said “It’s really all about water.” The government kept firing into the crowds but the people wouldn’t give up. There was a general strike and eventually Bechtel was tossed out of the country. So it was a case in which the people in the streets using a general strike actually stopped the globalization process stoned dead. And that shook up the World Bank and at that point politicians all over the world heard all about Bolivia and they didn’t want that there, so what happen was the whole water privatization process began to slow down and that hurt Enron which has to keep those investments churning and burning so that they could pretend they have assets somewhere. And so that slowed down. And the collapse of Argentina where they had water and a gas piplines, so globalization bit Enron in the behind. The Governor of California stood up to Enron and said enough with these games of trading and pretty soon the house of cards began coming down and when I say house of cards Enron is just the first card. But what I am really worried about is not even so much about the finances of Enron because I don’t cry for the stock holders. They didn’t cry when the stock was going through the roof, they weren’t moaning then. What I am concerned about is what they did to their customers and their employees. And let me tell you in California they played games, in fact they used to have names for these games, they called them cramming, stacking, false scheduling and they were able to manipulate the power market to cause false shortages. What the experts who had to buy the power into the system grid politely called “Economic and physical with holding”. What that meant is that they literally laid siege to the state of California. They literally would hold back power from the power lines, causing panic, causing a false shortage in the market, causing the prices to sky rocket, filling Enron’s pockets. Unfortunately when you play that game your greed out strips your devious means to keep up with it and that is how they collapsed in on themselves. What I’m worried about of are the guys who are a step more cautious and don’t collapse.
Lloyd Hart: Your looking into Enron at the present, can you discuss that subject a little bit.
Gregory Palast: I was talking to a mutual friend of George W. and Ken Lay. His name is Teal Bivens and he is one of the Texas pioneers that raised $100,000.00 to put G.W. in the White House. Teal Bivens said “look , of course Ken lay has special access, he’s raised hundreds of thousands of dollars for George W. Bush.” And he said “He’s a Texan, you dance with dem dat brung ya.” He looked at me as if to say what do mean does money influence your access to the president. Not every one can meet with the president of the United States but if you put up a couple of hundred grand you can meet with the president. Ken Lay was put on George Bush’s transition team to make suggestions on who should be appointed to regulate his company. So he was very subtle about it. He’d call up candidates and say here’s what Enron would like. He called up the incoming new chairman of the National Electrical Regulatory Commission that he approved of and said I have veto over your appointment. So what’s made the Bush administration different from the Clinton administration or even the daddy Bush administration is that before, lobbyists had unbelievably easy access to the White House. Now they don’t have access to the White House their in the White House. They don’t have to lobby the administration they are the administrations. It’s a whole other level.
Lloyd Hart: It’s like the NRA (Nation Rifleman’s Association) during the campaign bragging that they would have an office in the White House.
Gregory Palast: That they would have a gun in the desk in the Oval Office. Let me get down to some nasty little details. In the month of December of 2000 Clinton’s Energy Dept. put out an order that effectively said that Enron could no longer trade in California. It basically put these power pirates out of the game. Because they had California by the balls and they were squeezing. Clinton put a stop to it. At least slowed it down. The day after the inauguration George W took office, was still hung over, still cleaning out the confetti from the Oval office. His Energy dept. reverses Clinton’s order and Enron is back in the power game in California squeezing the State. So these are the details and this is what the access was buying. I think it’s too simple to say that their money bought the policy. They own George W.’s brain I mean it may not be big, it fits in Ken Lay’s pocket and there’s room for spare change but they own it. Bush Believes in this stuff so you have to be careful that it’s bought but there’s no question when it get down to details like that, when you have a direct pipeline into the President of the United States you can say I don’t like executive order A, B, C. That’s a whole new level lobbying power that we’ve never seen before and Enron has used and abused it.
Copyright Lloyd Hart 2002 All Rights Reserved.
At http://www.GregPalast.com you can read and subscribe to Greg Palast’s London Observer columns and view his reports for BBC Television’s Newsnight.