Sunday Excerpt: Unequal Protection - Corporations Go Global

How Corporations Became 'People' - and How You Can Fight Back"

Unequal Protection: How Corporations Became “People”

Back in 2002, when I wrote this book, most Americans thought the Boston Tea Party was a revolt against “excess taxes” and that “corporate personhood” was something the Supreme Court conferred on companies back in 1886. This book blew up both myths, pointing out that the Boston Tea Party was a revolt against the British government giving the East India Company the largest corporate tax cut in history (so they could unfairly compete with small colonial tea merchants) — basically a revolt against the Wal-Mart-ization of the colonies — and that the Supreme Court did not rule that corporations are persons and thus entitled to rights under the Bill of Rights in 1886 (it was a corrupt scam by a bribed SCOTUS justice and Court Clerk). In the 20 years since Unequal Protection first came out, this “new” knowledge is now widespread. With permission from the publisher, Berrett-Koehler, I’ll be sharing most of the book (the updated edition) with you, one chapter at a time (and not always in order), over the next dozen or so Sundays.

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People, at the time, generally weren’t all that concerned about the fate of the world’s dolphins. It was the last week of June 1944, and the war wasn’t going well for Adolf Hitler. The killing machines of his death camps were running full out, straining his resources and creating consternation as word leaked out across Europe. His forces were falling back before the Soviets, and his generals openly worried about an Allied invasion on the French coast. On Thursday, June 29, almost all of the eighteen hundred Jews of Corfu were murdered upon their arrival at Auschwitz, while twenty thousand Jewish women were relocated to the concentration camp at Stutthof. On Friday, June 30, more than a thousand Parisian Jews arrived at Auschwitz.

This same weekend that opened July 1944, a three-week meeting was convened in an isolated hotel in New Hampshire’s White Mountains near the town of Bretton Woods. Bankers, economists, and representatives of the governments of forty-four nations arrived for the meeting, which was convened as the International Monetary and Financial Conference of the United and Associated Nations.

The official history of the meeting suggests it was a group of nations getting together to work out a new international economic world order that would prevent a repeat of the Great Depressions and the European inflations that had occurred in the 1930s and driven Hitler to prominence and power with his promises to “restore Germany to greatness.”

Four years earlier, in November 1940, the German minister of finance, Walther Funk, had suggested a “New Order” for the world’s finances and banking that would be dominated by Germany. Partly in response to this, in 1942 John Maynard Keynes had begun to create a plan for an International Clearing Union, which formed part of the eventual basis of the Bretton Woods discussions.

According to Raymond F. Mikesell, who was present at the meetings, on the night of December 13, 1941, the U.S. secretary of the treasury, Henry Morganthau, “dreamed about an international currency” and the next morning called his undersecretary, Harry Dexter White, to ask him to write up a paper on how it could be brought to pass.[1]

“Two weeks later,” Mikesell wrote, “White responded with a general out- line of an International Stabilization Fund (ISF) and a (World) Bank.”

During these three weeks and in subsequent meetings, the attendees hammered out the Bretton Woods Agreement, which created the International Monetary Fund (IMF) and the World Bank and laid early foundations for the General Agreement on Tariffs and Trade (GATT), which gave birth to the World Trade Organization (WTO). The group selected as the first U.S. executive director of the IMF the lead U.S. representative to the meeting and then–U.S. undersecretary of the treasury, Harry Dexter White.

The Bretton Woods Agreement wasn’t ratified in whole by the United States until Bill Clinton’s administration roughly fifty years later. And the near- immediate result of that would be hundreds of thousands of dead dolphins— along with the loss of as many as 20 million American manufacturing jobs.

The Fear of the Worldwide Communist Conspiracy

To understand what saved—and then re-endangered—the dolphins and threw the American manufacturing worker under the train, it’s necessary to first have a bit of background.

The main obstacle to full ratification of all parts of the Bretton Woods Agreement was conservative conspiracy theorists—both in and outside the U.S. government but particularly in the U.S. Congress—who suspected that the Bretton Woods meeting was an early attempt to use the United Nations to impose a “one-world government” on the United States, perhaps even in collaboration with what they saw as an international communist conspiracy. That the meetings began more than a year before the war ended was evidence, in the minds of some of those suspicious of the agreement, that there was something up the sleeves of those who met to hammer out an accord. That at that time the Soviets were our World War II allies made it all the more suspicious to the American hard-right wing.

Although GATT’s predecessors were worked out before the end of World War II as part of Bretton Woods, the Eisenhower, Kennedy, Johnson, Nixon, Ford, Carter, and Reagan administrations couldn’t or didn’t work to get anything like it ratified by the U.S. Congress. As far as I could find, the first president to overtly push for full ratification of GATT was George H. W. Bush, as part of his “New World Order” agenda.

In the early years after World War II, members of both parties in the U.S. Congress were wary of one-world government and an internationalist agenda. They not only refused to ratify all parts of the Bretton Woods Agreement but also went after Harry Dexter White, the IMF’s first U.S. executive director.

In 1948 conservatives dragged White and Alger Hiss before a federal grand jury in New York City and accused them of “advocating the overthrow of the U.S. government by force” as agents of the Soviet Union, which in the three years since the end of the war had gone from anti-Nazi ally to Communist enemy.*

*The Smith Act of 1940 made it a criminal offense for anyone to knowingly or willfully advocate, abet, advise, or teach the duty, necessity, desirability, or propriety of overthrow- ing the government of the United States or of any state by force or violence; or for anyone to organize any association that teaches, advises, or encourages such an overthrow; or for anyone to become a member of or to affiliate with any such association. (Source: https://caselaw.lp.findlaw.com)

While White himself ultimately wasn’t charged, his name was dragged through the newspapers along with that of Alger Hiss, who was indicted along with twelve others under the Smith Act. White, looking back on that time and the anti-Soviet hysteria in Congress, later noted that none of the organizers of Bretton Woods thought there would one day be such enmity on the part of the United States toward the Soviet Union or that fear of the Soviets would sabotage their attempts to create a single worldwide banking and trading network.

White wrote, “It was expected that the early post-war world would wit- ness a degree of unity and good-will in international political relationships among the victorious allies [including Russia] never before reached in peace- time. It was expected that the world would move rapidly…toward ‘One World.’… No influential person, as far as I can remember, expressed the expectation or the fear that international relations would worsen during those years.”[2]

Mikesell, in his memoir of the Bretton Woods meetings, mentioned a private meeting he had with White the evening of April 19, 1947, just a few weeks before White was scheduled to testify before Joseph McCarthy’s House Committee on Un-American Activities. “Some say he committed suicide to avoid testifying before the House Committee,” wrote Mikesell about White’s self-inflicted death shortly after their meeting. “I do not believe it,” he added, although he offered no other explanation for White’s death.[3]

Joe McCarthy’s concern about any sort of “one-world agenda” persisted: GATT wasn’t ratified until roughly a half century later.

The Worrisome Power of Treaties

Congress was reluctant to accept all the provisions of the Bretton Woods Agreement for an important reason: international treaties almost always supersede national laws. If the United States signed a treaty with, for example, Saudi Arabia that said, “In exchange for a cheap oil deal, all American gas stations must display a picture of the King of Saudi Arabia out front,” that would become the binding law of the United States from coast to coast, even though neither Congress nor the American citizens had ever voted on it. If you didn’t put a picture of the king on your gas station, you could be subject to fines or imprisonment.

As former Secretary of State John Foster Dulles said on April 11, 1952, before a Louisville, Kentucky, American Bar Association meeting, “Treaties make international law and also they make domestic law. Under our Constitution, treaties become the supreme law of the land….”[4]

The language that provides for this is in the Constitution. Clause 2 of Article VI of the U.S. Constitution says, “This Constitution and the laws of the United States which shall be made in pursuance thereof, and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the constitution or laws of any state to the contrary notwithstanding.” In other words, treaties and some agreements can supersede federal, state, or local law, or court decisions, with the single exception of constitutionally defined rights or explicit state laws.

That’s why the Founders were so wary of treaties. Knowing how draconian this treaty power was, the Framers of the Constitution made it difficult for treaties to be ratified, by requiring a full two-thirds vote of the Senate instead of just a simple majority as with normal legislation. Such concerns kept the GATT from being ratified for years.

Reagan, Bush, and Clinton Make a Fast Track around the Constitution

The Reagan administration ushered in an era of mergers and acquisitions that in many ways resembled the trusts of the Gilded Age of the late 1800s and the Roaring Twenties. Corporations were well represented in the corridors of power, and their power to combine into market behemoths was again blessed by an American president.

Time magazine reported on August 3, 1981,

President [Reagan] appointed William Baxter, a Stanford law professor who firmly believes in the virtues of large-scale enterprises unfettered by excessive Government regulation, to be his antitrust chief in the Justice Depart- ment. Baxter’s boss, Attorney General William French Smith, succinctly stated the new Administration’s philosophy in an oft-quoted speech before the District of Columbia Bar. Said Smith: “Bigness in business is not necessarily badness. Efficient firms should not be hobbled under the guise of antitrust enforcement.”[5]

According to supply-side booster George Gilder, during the Reagan era there were “42,621 merger and acquisition deals worth $3.1 trillion, $89.9 bil- lion in shareholder gains, [and] the doubling of stock market value in real terms…”[6]

In addition to merging into giants that could keep out small competitors and largely control entire marketplaces, multinational corporations wanted the government to ease up on restrictions on their activities overseas. The U.S. Constitution specifically states that the president “shall have Power, by and with the Advice and Consent of the Senate, to make Treaties, provided two thirds of the Senators present concur.”

That two-thirds-of-the-senators requirement, however, made for a slow and contentious process, particularly when it came to issues that could affect American jobs. During the Gerald Ford era, the administration proposed that the Senate go around the Constitution and turn its power to negotiate and define the details of treaties over to the sole person of the president. The Sen- ate did this by using an obscure provision of the 1974 Trade Act that gave the president the right to negotiate trade treaties and then let him submit them to Congress for a straight up-or-down vote with no amendments allowed. Under these rules debate is limited to forty-five days in committee and fifteen days on the floor of the House or Senate.

Each president from Richard Nixon to Bush Sr. pushed to get this “fast- track authority” for himself. Bush Sr. pushed for ratification of the GATT agreement but was unsuccessful.

But Bill Clinton, in the final days of his first four-year term, joined with Senate leader Bob Dole to use political pressure, fast-track procedures, and careful timing (just before the Christmas recess) to bring the GATT agreement to pass.

Thus, after much lobbying and giving out of substantial campaign contributions by multinational business interests and a Senate vote to invoke cloture—a procedure that allowed only thirty hours of congressional debate and forbade amendments—the final parts of the Bretton Woods Agreement and its offspring were ratified in November 1994, just as Congress was hurrying to head home for the holidays. Most of the members of Congress didn’t read the document they voted on, but it became the law of the land in any case. One month later the now-fully-empowered GATT gave birth to the World Trade Organization.

Somebody Read the Agreement

Of course, the legislation had been around for years, but the record at the time, based on statements by at least one member of Congress, is that only one sena- tor, Hank Brown of Colorado, actually read the agreement. He was a supporter of the trade agreements when he first decided to read their nearly thirty thousand pages. By the time Brown finished reading it, however, he had changed his mind. On December 9, 1994, he wrote,

The GATT, which cleared Congress December 1, creates a form of world gov- ernment limited to trade matters without fair representation for the United States, and an international court system without due process. The details of this new government called the World Trade Organization (WTO) are buried in the thousands of pages of the Agreement.

Fifty new committees, boards, panels and organizations will be created by the WTO making it an international bureaucracy of unprecedented size. The United States could be responsible for up to 23 percent of the cost of running the WTO, yet will have less than 1 percent of the control of how the money is spent. The WTO courts’ (Dispute Settlement Body Panels) proceedings will be secret and decisions will be rendered anonymously by unaccountable bureaucrats. No conflict of interest rules exist to ensure impartial panelists…. Unfortunately, efforts which I supported to block the passage of the GATT implementing legislation (H.R. 5110/S. 2467) failed. The final measure, which I voted against, passed the Senate by a margin vote of 76-24.[7]

Senator Brown resigned after his one term and became a director of a multibillion-dollar corporation. Both the World Bank and the WTO were now reality.

Bretton Woods biographer Mikesell, looking back on the Bretton Woods Agreement, wrote in 1994, “There is little resemblance between the present functions and operations of the Fund and Bank and the way they were conceived at Bretton Woods.” He noted that over a period as long as fifty years, most organizations either change or disappear. The IMF and the World Bank changed but didn’t die. “They had too much money to fail,” Mikesell remarked, “and they have increased their assets, and their staff, at a rate that rivals the postwar growth of the largest international behemoths.”[8]

GATT/WTO/NAFTA Become the Law of the Land

The result of the fast-track implementation of these trade agreements was both swift and dramatic.

For example, back in 1972, in response to consumer outcries and twenty- five years of lobbying by the Humane Society, Congress passed the Marine Mammal Protection Act, which required U.S. tuna fishermen to reduce dolphin mortality in tuna nets that killed hundreds of thousands of dolphins each year. (Dolphins often swim above schools of tuna.) In 1990, with the support of the U.S. tuna industry, after extensive lobbying by American voters con- cerned about imported tuna, the law was strengthened with a provision banning the importation into the United States of canned tuna caught by chasing and netting dolphins from anywhere in the world and allowing for a “Dolphin Safe” label on tuna. The U.S. “Dolphin Safe” standards mean no dolphins were chased by tuna boats or caught in nets cast to catch tuna.

In 1991 Mexico challenged the United States under the rules of the GATT, claiming that the Marine Mammal Protection Act and subsequent laws that strengthened it were illegal violations of “free trade.” Although a GATT panel ruled in Mexico’s favor, the decision was never ratified by the full GATT tribunal.

The Clinton administration took Mexico’s side in 1995 (it was actually the transnational corporate food industry’s side), and Mexico prevailed: it is now legal to catch and import into the United States tuna from anywhere in the world whether it is “Dolphin Safe” or not.

Due to lawsuits filed by Earth Island Institute and the Dolphin Safe/Fair Trade Coalition, however, the “Dolphin Safe” label cannot be used on canned tuna that was caught by methods that chase and net dolphins. Resulting dolphin deaths have been reduced from an estimated 80,000 to 100,000 dolphins per year in the late 1980s to less than 2,000 dolphins, mostly by tuna purse seiners in Mexico, Colombia, and Venezuela.[9]

The GATT ruling was a problem for American packagers of imported and domestic tuna because consumers loved the “Dolphin Safe” labeling; so they lobbied Congress and U.S. regulatory agencies to get rules passed that upheld the “Dolphin Safe” standards of not netting dolphins, but Mexico’s position, backed by the Clinton and George W. Bush administrations, was supported in Congress.

Fortunately, a combination of amendments to the legislation (passed in 1997) and the Earth Island federal lawsuits, have maintained the strong “Dolphin Safe” tuna label standards in the United States. Dolphin-deadly tuna can still be imported into the United States from Mexico and other countries (as of 2010), but it cannot carry a “Dolphin Safe” label. Mexico is now back before the World Trade Organization (which replaced the GATT), protesting the “Dolphin Safe” label standards.

According to Noreena Hertz, PhD, of Cambridge University, in every environmental or species dispute that had come before the WTO, “the WTO has ruled in favor of corporate interests against the wishes of democratically elected governments.”[10]

It remains to be seen, as of this writing in 2010, if Mexico can prevail against the “Dolphin Safe” label standards for canned tuna, which have been voluntarily adopted by 90 percent of the world’s tuna companies.

The Role of NAFTA and GATT/WTO

The biggest hit on the average family in the developed world has been the result of changes in how international trade is regulated. While Ross Perot stepped up to the podium during the presidential campaign and warned about “giant sucking sounds” from the south, both Bill Clinton and George Bush Sr. supported the U.S. ratification of the North American Free Trade Agreement (NAFTA), both saying that it would produce at least 170,000 new jobs.

NAFTA did, in fact, create that many new jobs and more—in Mexico. But in the United States, more than 420,000 jobs vanished by 1996 as a result of NAFTA, and over $28 billion in business was lost to U.S.-based workers. When job losses because of other international trade deals and the resultant U.S. trade deficit are factored in, more than 20 million U.S. manufacturing jobs have disappeared since the 1970s, most of them year-round and full-time, although many have been replaced by part-time or low-pay service-sector jobs, thus the “net loss” of “only” 420,000 jobs.*

*www.lights.com summarizes an analysis of NAFTA’s impact by Public Citizen’s Global Tradewatch and the Institute for Policy Studies. Interestingly, in 1996 the U.S. government stopped including “inputs of imported goods and services” in its calculations of “U.S. Jobs Supported by Goods and Services Exports.” See John R. MacArthur, The Selling of Free Trade (Hill & Wang, 2000).

Speaking in opposition to giving George W. Bush new fast-track authority, Congressman Bernie Sanders of Vermont wrote in the December 14, 2001, Burlington Free Press,

Our current trade policy has resulted in a record-breaking trade deficit in goods of more than $400 billion in 2000, including a trade deficit with China of more than $80 billion. Anyone with even a modest understanding of economics has to realize that a net [out]flow of $400 billion a year is a disaster. And it is.

The result has been the loss of millions of decent-paying jobs as companies go abroad in search of cheap labor, or are forced to shut down because they can’t compete against companies who set up shop in developing countries so they can pay starvation wages….

Today, the average American worker is working longer hours for lower wages than was the case 28 years ago—before the explosion of “free trade.” This wage crisis is especially acute for entry-level workers without a college education. For men with less than six years in the work force and no college education, average real wages fell about 28 percent between 1979 and 1997.[11]

Congressman Sanders noted and then refuted the argument that the WTO free-trade agreements “would benefit the poorest people in the developing world. Really? Since the passage of NAFTA, more than 1 million more Mexicans work for less than the minimum wage of $3.40 per day, and 8 million Mexicans have fallen from the middle class into poverty.”

An earlier editorial in the Gannett-owned Burlington Free Press in favor of fast track and free trade had noted how many people in Pakistan are now employed making clothing for Americans.*

*Gannett, a $6 billion corporation, also owns USA Today as well as ninety-seven newspapers and twenty-two television stations across the United States and the United Kingdom as of this writing.

Congressman Sanders replied,

The Free Press mentions that fabric and apparel factories employ 60 percent of the industrial work force in Pakistan. True. But the Free Press forgets to men- tion that while the apparel industry in America has been decimated, and tens of thousands of jobs have been lost here, the average Pakistani worker is paid 25 cents an hour. The Free Press may think that the Tommy Hilfiger company is producing shirts in Pakistan because they want to help the poor people there. I think they’re there because they can pay slave wages and increase their profit margin.[12]

The bottom line is that neither the average working people of rich nations nor those of poor nations have benefited from free trade or its corollaries: the gains have gone to a few hundred corporations that are each larger, economically, than most nations. These treaties and agreements, Sanders concluded, “simply encourage a ‘race to the bottom,’ pushing wages down here and exploiting poor people abroad so that multinational corporations can expand their profits.”

And now Americans are discovering that the WTO can bite back when it comes to internal domestic tax policy. On January 15, 2002, the Associated Press reported that the WTO had concluded that American tax laws that let American-based transnational corporations exempt themselves from paying American taxes on income they earned abroad were illegal.

“The WTO appeals panel in Geneva ruled against a U.S. law granting multibillion-dollar tax breaks to Microsoft, Boeing, and thousands of other American companies operating overseas,” the article said, indicating, “the EU [European Union] could ask the WTO for permission to start imposing up to $4 billion in sanctions almost immediately.” The trade representative for the United States, Robert Zoellick, said, “We are disappointed with the outcome.”[13]

The New “Harmonization”: Leveling to the Lowest Common Denominator

Since 1995 virtually every area of consumer and industrial product has been affected by the new WTO or NAFTA regulations, which have the force of law in those countries where they’re ratified. Thousands of U.S., Canadian, Euro- pean, and other safety and consumer protection laws and regulations have been overturned or, through a process called harmonization, weakened to the point of irrelevance.

Harmonizing is a term that refers to bringing the laws of different nations into alignment. The effect is usually to force all nations to accept the most corporate-friendly and least restrictive laws of any of the member nations. Anti-globalization folks have referred to the process as leveling all nations to the standards of the lowest common denominator. Supporters point out that harmonization increases profits for corporations that participate, and assert that that has a positive social benefit.

These trade agreements use tribunals and Dispute Resolution Panels (DRPs) to review complaints. Their largest effect has been to put corporations on a level ground with national governments. Corporations can sue countries under NAFTA, and many have successfully won tens of millions of dollars for “unfair restraint of trade” because of laws designed to protect the environment or workers. So far no countries have sued a corporation.

If a DRP decides a law is obstructing corporations from their right to engage in free trade across national borders, fines are assessed unless all of the WTO members vote within sixty days to dispute the DRP’s decision. As of this writing, this has rarely happened. If a nation continues to try to enforce laws ruled antitrade by a DRP, it suffers huge ongoing fines, must pay reparations, and can be branded a renegade nation and suffer massive trade penalties.

Thus the DRPs are among the most powerful groups in the world—they can pressure governments to repeal or change laws that were legally passed by the people of those nations, and they can enforce their judgments with penal- ties, sanctions, and fines. Even with all this worldwide power, the DRPs are not democratic, not elected by the people, and not controllable by the voters of any nation, and they don’t meet in public.

The Dispute Resolution Panels meet in private in Geneva, Switzerland. The panels comprise three to five members in total. The public is forbidden to watch, listen, or participate in the meetings; the experts on whom the panels rely for testimony are never publicly named or identified; and the documents resulting from the meetings are forever sealed from public view.

NAFTA actually allows corporations to sue countries, although its scope is limited to the United States, Canada, and Mexico. It operates similar pro- grams and offices out of its headquarters in Dallas, Texas, and its decisions are equally binding on the nations they affect. (NAFTA’s Chapter 11 processes are even more draconian than are similar rules of the WTO.)

Here are a few examples of laws in the United States or Europe that were passed by elected legislatures and supported by citizens but were over- turned because of the unelected, secret Dispute Resolution Panels of NAFTA or the WTO:

• The state of Massachusetts and thirty other local governments in the United States had passed laws that banned imports of products that were manufactured with slave or child labor from the repressive dictatorship of Myanmar, formerly known as Burma. Facing a WTO challenge from Japan and the European Union, the U.S. Supreme Court struck down these laws, making now illegal the kind of boycott that led to the freedom of Nelson Mandela and the end of apartheid in South Africa.

• Laws in England and France restricting the use of asbestos in construction were challenged by Canada, which exports asbestos.

• Asian laws that barred the marketing of tobacco products were overturned.

• The Venezuelan government successfully challenged the 1990 U.S. Clean Air Act’s provisions banning the import of “dirty gasoline” reformulated in refineries of Venezuela.

• Laws in several European countries restricting the import of lumber cut from old-growth forests or by environmentally destructive clear-cutting were successfully challenged by Canada’s Department of Foreign Affairs and International Trade.

• Japanese laws proposed to reduce automobile emissions by cars sold in that country were successfully challenged by the United States.

• U.S. laws banning the import of shrimp taken from regions where the shrimp industry is destroying habitats of endangered sea turtles were successfully challenged by several nations and corporations.

• European laws banning the importation of genetically modified organisms (GMOs) were successfully challenged by the United States.

• A Canadian ban on the gasoline additive MMT (methylcyclopentadienyl manganese tricarbonyl), which can cause disabling neurologi- cal impairments in movement and speech, was struck down, and the Canadian government paid millions to MMT’s American manufacturer for the “economic harm to that corporation” caused by Canada’s law to protect its citizens.*

• A California ban on the gasoline additive MTBE (methyl tertiary butyl ether) that the EPA has found to be a “known animal carcinogen and probable human carcinogen” was challenged.[14] MTBE is manufactured by a Canadian corporation, which sued the United States for $75 million to make up for their loss of profits in California because they can- not now sell their product in that state.

• European laws, passed by elected legislatures, that banned beef laced with hormones, regulated cosmetic testing on animals, and banned the import of furs caught with steel-jaw leg holds were all thrown out.

Under NAFTA a corporation can sue a foreign government and can also force the taxpayers of the defendant nation to pay the corporation for any profits it might have earned if the nation had not passed laws that “restricted free trade.” The effect of the treaties has been to not only validate the Santa Clara contention that corporations have human rights but also expand those rights and powers to the point where multinational corporations have greater powers even than sovereign governments.

For example, a Canadian multinational corporation lost a court case in Mississippi when a jury ruled that the corporation had engaged in fraudulent and predatory trade practices; the corporation paid $175 million to settle the case after losing in the jury trial. Rather than appeal the jury’s ruling to a higher court and eventually to the U.S. Supreme Court, however, the Canadian corporation went over the Supreme Court by appealing directly to a NAFTA- authorized tribunal, demanding $725 million in damages. The NAFTA tribunal, like the WTO’s DRPs, meets in secret, does not allow in the public or report their discussions to the public, and is accountable to no democratically elected government.* The government being sued by the corporation, in fact, does not even have the right to be present at the deliberations, and there is no possibility of an appeal to any nation’s Supreme Court.

Reactions to these and other changes in the international trade landscape brought about by the International Monetary Fund and the World Bank have been mixed. The news media owned by multinational corporations have tended to either ignore such events or report them as victories for “free trade.”

At the citizen level across the world, the response has also been mixed. When the World Bank demanded that Argentina cut social programs and services to its citizens so that it could speed up payments of its debt to the World Bank, the resulting loss of much of Argentina’s social safety net led to riots, martial law, and the resignation of that nation’s president the week before Christmas 2001. Similar scenes have been repeated around the world, as more than a hundred nations are now required by the World Bank to adopt “budgetary austerity, trade liberalization and privatization.” Local liberation movements are demanding that their governments stop privatizing their commons by selling natural resources to transnational corporations.[15]

Jock Gill was director of White House Special Projects in the Clinton administration and, as such, had occasion to work with many people in governments around the world both during and after his time in the White House. He reports a chilling effect of WTO regulations on the rights of government to oversee the commons of its people.

Recalling the benefits that FDR’s Rural Electrification Administration (REA) and Truman’s telephony program had on rural America, Gill related a conversation he had after leaving the White House. “When I asked some representatives of the Mexican Telephone Company if they could institute a program in Mexico modeled after the REA and Truman’s solution to rural telephony and electrification,” Gill said, “they said, ‘Absolutely not.’ Why? Because the WTO treated such plans as outlaw solutions requiring drastic penalties.”[16]

Imagine if the WTO had been in power in the time of Teddy Roosevelt, who said,

This country, as Lincoln said, belongs to the people. So do the natural resources which make it rich. They supply the basis of our prosperity now and hereafter. In preserving them, which is a national duty, we must not forget that monopoly is based on the control of natural resources and natural advantages, and that it will help the people little to conserve our natural wealth unless the benefits which it can yield are secured to the people. [17]

The Problem of International Poverty—and Why More Corporate Power Is Not the Solution

The United Nations Millennium Report [18] submitted to member nations and the world by then Secretary General Kofi Annan pointed out that as of the year 2000:

• More than 2.8 billion people, close to half the world’s population, lived on less than the equivalent of $2 per day. More than 1.2 billion people, or about 20 percent of the world’s population, lived on less than the equivalent of $1 per day.

• More than 1 billion people did not have access to clean water; some 840 million people went hungry or faced food insecurity.

• About one-third of all children under the age of five suffered from malnutrition.

• The top fifth (20 percent) of the world’s people who live in the highest- income countries had access to 86 percent of world gross domestic product (GDP). The bottom fifth, in the poorest countries, had about 1 percent.

• The assets of the world’s three richest men exceeded the combined GDPs of the world’s forty-eight poorest countries.

• In 1998, for every $1 that the developing world received in grants, it spent $13 on debt repayment.

Since that report—the result of years of research leading up to the transition from the twentieth to the twenty-first century—although the United Nations has not issued a new and comprehensive similar world overview, it has kept track of many of the developing world’s problems. With the exception of industrializing China, in virtually every other respect all of these problems continue to move in the wrong direction.

The need (and the moral imperative) for developed-world citizens to help bring people up out of poverty in most of the world is very real. But how? The advocates of corporatism suggest that the way to bring this about is to unleash corporations and let them roam freely from nation to nation to “create jobs” and “recover resources” (to use phrases common in modern corporate marketing). And it’s important to acknowledge that when corporations do this—moving manufacturing from high-labor-cost nations to low-labor- cost nations, or mining/drilling/cutting in nations with lax environmental regulations—they are doing so not for humanly immoral reasons but for reasons that are at the very core of corporate morality: profits. Yet this profit-driven behavior does, over the short term, create jobs in and extract resources from the developing world, although at the same time it is placing the very nations that are trying to emerge from poverty at high risk of social upheaval because of the natural tension between democratic social stability and corporatism.

Many of those same corporations that are now providing jobs for wage earners in low-wage nations also explicitly warn those countries that if their workers begin to demand higher standards of living and their wages go too high, the corporations will simply move elsewhere—as has already happened to the United States, Japan, the developed European nations, Korea, Taiwan, and Thailand. Each struggles with the social crises brought about by this form of unconstrained global free trade that allows the unrestricted movement of corporations in constant search of cheaper resources, including human labor.

The result is that most of the workers of the developed world experience a continuous decline in their standard of living, while developing nations find themselves in a competitive battle against one another for corporate lar- gesse, which is also socially destabilizing and anti-democratic. In this com- petition these nations essentially have only two things they can use to raise their standard of living in the direction demanded by their citizens who watch American-produced television and movies: sell off their natural resources to the highest bidders and do whatever they can to suppress labor movements and other efforts within their nations to raise living standards to the point where they’ll no longer be “competitive” with poorer nations. This, in part, is why more than twenty-five hundred union members and organizers have been murdered just in the country of Colombia since 1985 (some put the number much, much higher).[19]

The end result is that the nations are strip-mined of their natural resources, corporations “play the spread” between labor costs among nations to skim off the cream, and the developed-world countries (where the corpo- rations are based) play the role England once did for the East India Company—building a huge military with worldwide reach so that it can act as the suppressor of local independence movements all around the world where “our” corporations are mining local resources or labor. And often those sup- pressed movements for local culture bite back: When the United States did it in 1776, we called our citizen-soldiers “patriots.” Today, however, when other nations’ peoples do it against us, we most often call them “terrorists.”

How to Respond to Poverty

So what can we do about this? On the one hand, there is the very real problem of poverty around the world and the reality that in many ways industrialization helps that problem in the short term. On the other hand, there is the very real problem of how such development becomes anti-democratic (both in the developing and developed worlds) and eventually leads to political crises in emerging nations.

The corporate position is clear: let the “invisible hand of the marketplace” work things out, while the corporations pry as many of the natural resources of the commons as possible out of the hands of democratically elected governments and put them into the invisible hands of the corporations.

But both Adam Smith and history tell us that such privatization schemes and the invisible hand work only to place more and more wealth into the pock- ets of the corporations and their stockholders. Citizens and their elected officials must intelligently constrain that invisible hand, or it will end up holding those officials and the resources of the citizens by the throat, as we can so clearly see in the entanglement of Enron and governments around the world.

The response the Founders of America came up with when they faced this same sort of problem was to encourage business but at the same time place controls and limits on what corporations could do both domestically and abroad. Developed and developing nations both need essential economic stability, but when corporations operate in what they call a free environment (creaming off labor and natural resources then moving on to greener pastures when it’s profitable to do so), stability is threatened worldwide, indigenous peoples’ cultures are destroyed, and the natural world is spoiled.

The suggestion I’m putting forth in this book is to try democracy— government of, by, and for We the People—and to encourage it in nations all around the world once it is reinstated in the United States and other developed nations.

Because raw or free-trade corporatism is essentially undemocratic—it answers to stockholders instead of citizens, and it drives to the moral impera- tive of profit, thus ignoring future generations and long-term consequences to environments, cultures, and governments—there is a natural and dynamic antagonism between corporatism and democracy.

The Founders of the United States faced this in the Boston Tea Party and the Revolutionary War, and they solved the problem in early America with the passage of thousands of laws—all put into place by citizens or officials elected by citizens—to control and constrain corporate behavior. Since the era of the Santa Clara mistake, however, corporatism has steadily been overwhelming democracy, both in the developed and developing worlds.

Globalism Drives a Permanent Defense Industry

In the novel 1984 by George Orwell, the way a seemingly democratic president kept his nation in a continual state of repression was by having a continuous war. That lesson wasn’t lost on Richard Nixon, who, history suggests, extended the Vietnam War specifically so it would run over an election cycle, knowing that a wartime president’s party is more likely to be reelected and has more power than a president in peacetime.

Similarly, the first ghostwriter hired by George W. Bush’s campaign advisers (presumably Karl Rove) in 1998 to write Bush Jr.’s autobiography (A Charge to Keep), was a Texas author and Bush family friend named Mickey Herskowitz. In an interview with investigative reporter Russ Baker, Herskowitz laid out how two years before George W. Bush was handed the presidency by a corrupted Supreme Court, he was already planning to invade Iraq. And it was not to “protect” America but purely to get “political capital” so that he could accomplish things like his lifelong goal of privatizing Social Security.

In 2004 Baker wrote:

“He was thinking about invading Iraq in 1999,” said author and journal- ist Mickey Herskowitz. “It was on his mind. He [Bush] said to me: ‘One of the keys to being seen as a great leader is to be seen as a commander-in- chief.’ And he said, ‘My father had all this political capital built up when he drove the Iraqis out of Kuwait and he wasted it.’ He said, ‘If I have a chance to invade, if I had that much capital, I’m not going to waste it. I’m going to get everything passed that I want to get passed and I’m going to have a successful presidency.’”[20]

An earlier president had considered the idea of war as a way to increase presidential power. On April 20, 1795, James Madison, who had just helped shepherd through the Constitution and the Bill of Rights and would become president of the United States in the following decade, wrote:

Of all the enemies to public liberty war is, perhaps, the most to be dreaded because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes. And armies, and debts, and taxes are the known instruments for bringing the many under the domination of the few.

Reflecting on the ability of a president to use war as an excuse to become a virtual dictator, Madison continued his letter:

In war, too, the discretionary power of the Executive [President] is extended. Its influence in dealing out offices, honors, and emoluments is multiplied; and all the means of seducing the minds, are added to those of subduing the force of the people. The same malignant aspect in republicanism may be traced in the inequality of fortunes, and the opportunities of fraud, growing out of a state of war…and in the degeneracy of manners and morals, engendered by both.

“No nation,” our fourth president and the father of the Constitution concluded, “could preserve its freedom in the midst of continual warfare.”[21]

Since Madison’s warning, “continual warfare” has been used repeatedly in the real world.

Adolf Hitler used the 1933 burning of the Reichstag (Parliament) build- ing in Berlin by a deranged Dutchman to declare a “war on terrorism” and establish his legitimacy as a leader (even though he hadn’t won a majority in the previous election).

“You are now witnessing the beginning of a great epoch in history,” he proclaimed, standing in front of the burned-out building, surrounded by national media. “This fire,” he said, his voice trembling with emotion, “is the beginning.” He used the occasion—“a sign from God” he called it—to declare an all-out war on terrorism and its ideological sponsors, a people, he said, who traced their origins to the Middle East and found motivation for their “evil” deeds in their religion.

Two weeks later the first prison for terrorists was built in Oranienburg, holding the first suspected allies of the infamous terrorist.

Within four weeks of the terrorist attack, the nation’s now-popular leader had pushed through legislation, in the name of combating terrorism and fighting the philosophy he said spawned it, that suspended constitutional guarantees of free speech, privacy, and habeas corpus. Police could now intercept mail and wiretap phones without warrants; suspected terrorists could be imprisoned without specific charges and without access to their lawyers; and police could sneak into people’s homes without warrants if the cases involved terrorism.

To get his patriotic “Decree on the Protection of People and State” passed over the objections of concerned legislators and civil libertarians, he agreed to put a four-year sunset provision on it: if the national emergency provoked by the terrorist attack on the Reichstag building was over by then, the freedoms and the rights would be returned to the people, and the police agencies would be re-restrained.

As he was leaving office, the old warrior president Dwight D. Eisenhower looked back over his years as president and as a general and supreme com- mander of the Allied Forces in France during World War II and noted that the Cold War had brought a new, Orwellian type of war to the American land- scape—a perpetual war supported by a perpetual war industry.

He first pointed out that before World War II, “the United States had no armaments industry.” But by 1961, “We annually spend on military security more than the net income of all United States corporations.”

Eisenhower added, “This conjunction of an immense military establish- ment and a large arms industry is new in the American experience. The total influence—economic, political, even spiritual—is felt in every city, every State house, every office of the Federal government.”

And while he felt it important to have a strong military, he noted:

We must not fail to comprehend its grave implications. Our toil, resources, and livelihood are all involved; so is the very structure of our society. In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.

We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge indus- trial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.[22]

Unfortunately, Eisenhower’s warning was a bit too late by the time it was given.

War Profits for the Largest Transnational Corporations

War has become big business in America, and now not only are we a big user of military equipment but we sell it to the world: we’re the world’s largest exporter of weapons of virtually all sizes and types. While some consider the U.S. defense budget excessive, others argue that we live in a dangerous world and that a strong military is necessary. After all, there are sociopaths and psychopaths out there, and sometimes they rise to the highest levels of power and threaten life and liberty around the world.

But in a nation where the political process is more strongly influenced by the profit value than by human and life-based values—where corporations have human rights but not human vulnerabilities—Eisenhower’s warning becomes more of a concern.

Military spending is the least effective way to help, stimulate, or sustain an economy for a very simple reason: military products are used once and destroyed.

When a government uses taxpayer money to build a bridge or highway or hospital, that investment will be used for decades, perhaps centuries, and will continue to fuel economic activity throughout its lifetime. But when tax- payer dollars are used to build a bomb or a bullet, that military hardware will be used once and then vanish. As it vanishes, so does the wealth it represented, never to be recovered.

As Eisenhower said in an April 1953 speech, “Every gun that is made, every warship launched, every rocket fired, signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. The world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children.”[23]

It was a brilliant articulation of human needs in a world increasingly dominated by nonbreathing entities whose values were not human values. But it was a call unheeded, and today it is nearly totally forgotten.

Meanwhile the ruling elites of the developing world, aligned with trans- national corporations, generally become richer and better armed as their people become poorer. The world, in part as a result of the notion contained in the Santa Clara ruling’s corrupt headnote—that corporations have the rights of persons—is becoming more unsafe and unequal day by day.