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Wednesday, November 19, 2014

Monsanto Is Using Big Data to Take Over the World

Mother Jones

The GMO giant wants to help you beat climate change…with your phone.

| Wed Nov. 19, 2014 6:00 AM EST


From Big Ag to big data

You probably know Monsanto as the world's leading producer of genetically engineered seeds—a global agribusiness giant whose critics accuse it of everything from boosting our reliance on pesticides to driving Indian farmers to suicide.

But that's actually just the latest in a long series of evolving corporate identities. When the company was founded in 1901 by a St. Louis pharmacist, its initial product was artificial sweetener. Over the next few decades Monsanto expanded into industrial chemicals, releasing its first agricultural herbicide, 2,4-D, in 1945. In the '50s it produced laundry detergent, the infamous insecticide DDT, and chemical components for nuclear bombs. In the '60s it churned out Agent Orange for the Vietnam War. In the '70s it became one of the largest producers of LED lights.

It was around this time that Robb Fraley, now Monsanto's chief technology officer, joined the company as a mid-level biotechnology scientist. Back then, he recalls, the company had its hand in oil wells, plastics, carpets—you name it. It wasn't until the early '80s that Monsanto began to shift its focus to biotechnology, conducting the first US field trials of bioengineered plants in 1987. By the end of the '90s, it was a full-fledged biotech company. And over the last 10 years, after a series of seed company acquisitions, it has become the company we all know and love—or hate—today.

Now, there's a new evolution on the horizon: "I could easily see us in the next five or 10 years being an information technology company," says Fraley.
That's right: Monsanto is making a big move into big data. At stake is an opportunity to adapt to climate change by using computer science alongside the controversial genetic science that has been the company's signature for a generation. Data stands to benefit Monsanto's bottom line, too: In its 2013 annual report, the company blamed lost profits on knowledge gaps about both the climate and its customers' farming practices. And information services could even help Monsanto get its foot (and its seeds) in the door of untapped global markets from Africa to South America.


Seeds of a data company

Whatever your feelings about Monsanto, it's hard to argue that the company isn't paying attention to climate change. When I met Fraley in New York in September, he explained that since he joined the company in 1981, Monsanto scientists have observed corn production belts migrate northward by about 200 miles. That means traditional strongholds like Kansas are becoming less productive, while new markets for Monsanto products are opening in places like North Dakota and southern Canada. But for Fraley, who has spent his career digging through the minutiae of microscopic nucleotides, the most interesting trends are emerging on a much smaller scale.

"Just a couple degrees difference changes when insects will hatch, or when diseases will break out," he says. "So that puts a real premium on modeling microclimatic conditions, so you can become predictive on not only which field, but which part of a field should someone be looking at."

app shot
A screenshot of the Climate Basic app from my iPhone in October shows conditions on my family's farm in Iowa. 
Last year, Monsanto made a major investment in big data analytics when it paid $930 million to acquire Climate Corporation, a San Francisco tech firm whose original business was selling crop insurance to farmers with rates set by some of the most detailed weather data available anywhere. These days, Climate Corp.'s flagship product is a smartphone app called Climate Basic. The screenshot to the left—from my iPhone, taken back in early October—shows my family's corn and soy farm in Iowa. You can see each of five individual fields highlighted. There are 30 million agricultural fields in America, and the app has all of them, mapped with soil and climate data to a 10-meter-by-10-meter resolution.

The app knows our fields' real-time temperature, weather, and soil moisture, and what we can expect on those metrics for the coming week. The green tractor tells me Saturday is the best day to work the fields. If I were to input data about what kinds of seeds I planted and when, it could tell me when to harvest them and how much yield to expect. A premium, paid version of the app includes other detailed recommendations—for example, how much water and fertilizer to use.
That advice, says Climate Corp. CEO Dave Friedberg, represents a fundamental shift "from intuition-based decision-making to analytical decision-making," combining real-time climate data with records from Monsanto's trove of field trials.

"Ultimately all of this is the digitization of physical phenomena, and using that to better predict the future," he says.

Sprawling databases have long been an essential item in the Monsanto toolkit. Locating the genes for favorable traits in plants—drought or insect resistance, for instance—so they can be bred into new seed varieties requires sifting through the billions of base pairs in a genome, which is one reason why biotechnology has grown in tandem with computer processing power over the last two decades. Since the '80s, Monsanto has amassed one of the world's largest agricultural databases, gleaned from the results of countless field tests of countless seed varieties under countless experimental conditions. That's what made Climate Corp. such an attractive investment: The opportunity to integrate that company's climate database with Monsanto's seed data.

More than a third of US farmland is now cultivated with guidance from Monsanto's climate data.
With Monsanto now at the helm, a team of a dozen Climate Corp. researchers are working full-time to pull climate data from government satellites and weather stations, university research sensors, and any other source they can find. This gets fed through a pipeline of data analysts and software engineers and emerges at the other end as Climate Basic.

The payoff for growers can be huge: Monsanto estimates that farmers typically makes 40 key choices in the course of a growing season—what seed to plant, when to plant it, and so on. For each decision, there's an opportunity to save money on "inputs": water, fuel, seeds, custom chemical treatments, etc. Those savings can come with a parallel environmental benefit (less pollution from fertilizer and insecticides). These decisions can also help farmers make money by squeezing more yield from the same acreage. This year, as my colleague Tom Philpott reported, high input costs and low commodity crop prices have led Midwestern farmers to lose $225 per acre of corn and $100 per acre of soybeans. Big data, Friedberg says, reveals how seemingly small choices—a four- or five-day difference in planting time, for instance—can have a significant impact on the final harvest and on farmers' bottom lines.

A new tool for climate adaptation

Precision agriculture is also an essential climate adaptation strategy. Monsanto's data tools could become invaluable for farmers struggling to cope with changing conditions, says Rebecca Shaw, a scientist at the Environmental Defense Fund who studies the link between agriculture and ecosystems. With less water available, "we can't afford to be wasteful," she says. "It's really important that we get better at understanding what the crop needs and when, and apply only that."

The promise of data-driven farming, Shaw says, is to streamline the whole process and get the same or better output while cutting back on inputs.
Of course, data is a two-way street: Every new user of Climate Corp. software is a new source of real-time information for Monsanto about its customers—what kinds of products they're using and how much they're producing (i.e., how much money they're making). Matt Erickson, an economist with the American Farm Bureau Federation, says farmers need to proceed with caution when they sign on to share proprietary data about their business operations with an outside party like Monsanto. The key, Erickson says, is for farmers and Monsanto to be on the same page when it comes to deciding if and how that data will be shared with third parties—other retailers, for example, or crop insurance companies. It's just like how we all want to be kept apprised of the ways Google or Facebook use our data.

"We can't afford to be wasteful," says Shaw. "It's really important that we get better at understanding what the crop needs and when, and apply only that."
"The big thing we're striving for is transparency," Erickson says. "Making sure farmers are aware of any secondary or tertiary uses."

Climate Corp.'s privacy policy dictates that farmers continue to own their data after it is shared, and that data won't be used for purposes not explicitly approved by the farmer. Still, Fraley says he envisions using data to market custom products and services to farmers; a farmer whose crops are suffering from a disease or insect infestation might get an ad for appropriate chemical treatments, for example.

"There's a huge opportunity on the marketing side," he says. "We're just exploring it."

Privacy concerns aside, American farmers seem to be buying in. According to Friedberg, prior to the Monsanto acquisition, less than 10 million of the 161 million acres of US farmland were being farmed with help from Climate Corp. software. Today, that number has grown to over 60 million. In other words, more than a third of US farmland is now cultivated with the guidance of Monsanto climate data. And it's continuing to grow rapidly: According to Climate Corp., the number of Climate Basic accounts has grown from 30,000 to over 70,000 just since the spring of this year.

"The information itself becomes the business"


For Monsanto's data push, the US market is only the beginning.

Efforts to increase crop yields are especially important in the developing world. The global population is projected to swell to more than 9 billion people by 2050—with over half of that growth in Africa. The UN Food and Agriculture Organization estimates that as a result, food production will have to increase by 70 percent. But according to the UN's latest climate change report, South Asia and sub-Saharan African—the two regions with the most food insecurity—are actually expected to see an 8 percent drop in crop yields by 2050, thanks to rising temperatures and increasingly sporadic rainfall.

Tanzania farmer
Data services could help Tanzanian farmers adapt to unpredictable climate patterns. Karel Prinsloo/AP
Fraley estimates that in central Africa, a typical corn farm produces less than a tenth of what the same-sized plot would yield in the US, despite having roughly equivalent soil and weather quality. Poorly bred seeds are part of the problem, he says, but biotechnology can't fill the gap by itself. That's because African countries also suffer from a chronic lack of basic weather data that US farmers take for granted. Sub-Saharan Africa (excluding South Africa) has roughly one weather station per 239,000 square miles; the US has one station per 14,000 square miles.

The need for better data is becoming even greater as climate change alters rainfall patterns that have informed farming practices for generations. A 2012 UN study found, for example, that between the 1970s and the 2000s, precipitation during Tanzania's main rainy season fell by nearly 30 percent. The rainy season now starts a month earlier, as well.

Sub-Saharan Africa has roughly one weather station per 239,000 square miles. The US has one station per 14,000 square miles.
What farmers in the developing world do have, though, is cell phones. And that's where Monsanto sees an opportunity to distribute its data. "There will be value in information on crops and geographies where we currently don't do business, so it's a great opportunity to expand our footprint and get us into new spaces," Fraley says. "Where the information itself becomes the business, we see a lot of opportunity."

Beyond weather predictions, mobile data services could help African farmers identify pests and diseases—text in a photo of a mysterious bug, and get advice on how to get rid of it. They could also help connect farmers in remote villages to urban markets for their crops, says Andrew Mattick, a former World Bank agricultural consultant who is currently based in Mozambique. Rural farmers are often so isolated from markets, he says, that it's impossible to know whether they are getting a fair price for their produce.

"When you're not linked to markets," he says, "you have no idea how much a cabbage costs in Maputo [the capital]." Mobile data could help bridge that gap.
Monsanto is already active with data services in India, where according to Friedberg some 3 million smallholder farmers have signed up for text message updates that are essentially a simplified version of the Climate Basic app. Field-by-field mapping efforts are underway in South America, Fraley told me, and SMS services are being developed for Africa, where the company's reach is currently relatively small.

Without access to market data, "you have no idea how much a cabbage costs in Maputo," says Mattick.
Data tools "are going to transform agriculture for smallholders across Africa," Fraley says. "Even farmers who cannot read or write can intuitively digest the information on a cell phone."

Of course, data products are only part of the business model. There are strict limitations on GMO crops in India and in all but four African nations, as Michael Specter recently reported in The New Yorker. But Fraley envisions that as African farmers begin to share data about their farms, the company "will initially use that approach to support our seed business. There's a huge opportunity to provide African growers with better seeds."

In other words, free data services provided in Africa could eventually feed back information about growing practices, disease and insect problems, and climate conditions. That information could be converted into seeds developed specifically for African fields and sold to African farmers. The ball is already rolling: In May the company announced the results of the first harvest in Kenya of a new variety of drought-resistant corn that had been in the works since 2008. Yields from the new seeds were twice the national average, the company reported.

The real test for Monsanto's data push will be closer to home. For farmers who have already signed on to the company's services, the next few years' worth of harvests will show whether a smartphone app really can pull extra corn from their ground—and put extra cash in their pockets. Friedberg is confident that it will.

"As you start to realize that the upside is there," he says, "everything starts to change."

Saturday, October 18, 2014

#iBoycott iEmpire: Apple's Sordid Business Practices Are Even Worse Than You Think

Corporate Accountability and WorkPlace  

New research shows just how disturbing labor conditions at Foxconn, the "Chinese hell factory," really are.

English: Apple iPad Event

October 14, 2014

Behind the sleek face of the iPad is an ugly backstory that reveals once more the horrors of globalization. The buzz about Apple’s sordid business practices comes courtesy of the New York Times series on the “iEconomy." In some ways it’s well reported but adds little new to what critics of the Taiwan-based Foxconn, the world’s largest electronics manufacturer, have been saying for years. The series' biggest impact may be discomfiting Apple fanatics who as they read the articles realize that the iPad they are holding is assembled from child labor, toxic shop floors, involuntary overtime, suicidal working conditions, and preventable accidents that kill and maim workers.

It turns out the story is much worse. Researchers with the Hong Kong-based Students and Scholars Against Corporate Misbehavior (SACOM) say that legions of vocational and university students, some as young as 16, are forced to take months'-long “internships” in Foxconn’s mainland China factories assembling Apple products. The details of the internship program paint a far more disturbing picture than the Times does of how Foxconn, “the Chinese hell factory,” treats its workers, relying on public humiliation, military discipline, forced labor and physical abuse as management tools to hold down costs and extract maximum profits for Apple.

To supply enough employees for Foxconn, the 60th largest corporation globally, government officials are serving as lead recruiters at the cost of pushing teenage students into harsh work environments. The scale is astonishing with the Henan provincial government having announced in both 2010 and 2011 that it would send 100,000 vocational and university students to work at Foxconn, according to SACOM.

Ross Perlin, author of Intern Nation, told AlterNet that “Foxconn is conspiring with government officials and universities in China to run what may be the world's single largest internship program – and one of the most exploitative. Students at vocational schools – including those whose studies have nothing to do with consumer electronics – are literally forced to move far from home to work for Foxconn, threatened that otherwise they won't be allowed to graduate. Assembling our iPhones and Kindles for meager wages, they work under the same conditions, or worse, as other workers in the Foxconn sweatshops.”
The state involvement shows Foxconn and Apple depend on tax breaks, repression of labor, subsidies and Chinese government aid, including housing, infrastructure, transportation and recruitment, to fatten their corporate treasuries. As the students function as seasonal employees to meet increased demand for new product rollouts, Apple is directly dependent on forced labor.

The real story of the Apple-Foxconn behemoth, then, is far from being John Galt incarnate. Their global dominance is forged in the crucible of China’s state-managed authoritarian capitalism. Since the 1980s China has starved rural areas to accelerate the industrialization of coastal cities like Shenzhen, where Foxconn first set up shop in 1988. Scholars who study China’s economy and labor market link rural underdevelopment to the creation of a massive migrant work force that serves as the foundation of the country’s industrialization.
Deprived of many rights, migrants are recruited to work in Foxconn's city-sized complexes by government employees with false promises of good-paying jobs that will help them escape rural poverty. A large percentage of migrant workers are student interns as they are recruited from poor rural regions like Henan and sent to work in coastal metropolises like Shenzhen.

Apple’s formula for mammoth profits starts with a highly flexible workforce. Foxconn wields military-style discipline to turn workers into flesh-and-blood robots who can fulfill exacting specifications and orders for new and constantly updated product lines, such as five generations of iPhones in four years. 
Workers are driven to crank out more computers in less time at lower costs because they are disposable. Of 420,000 employees at “Foxconn City” in Shenzhen, which abuts Hong Kong, half had less than six months service. The inevitable and systematic abuses crush the dreams of young rural migrants, argue scholars, making the suicides a logical outgrowth of the iEconomy as much as the iPad. Simply put, nothing will change unless Apple and Foxconn are forced to because their empires are built on these practices. (Foxconn denies everything.)


Speaking by Skype from SACOM’s office in Hong Kong, Debby Chan Sze-wan says that in Henan province alone more than 100 vocational schools and 14 universities supply students to Foxconn. “Vocational students are required to do internships. Many student workers are as young as 16. They have to work the same positions as other workers, including working on the night shift.” (One worker spoke to SACOM about irregular shifts, lamenting, “day and night shifts are sometimes changed two to three times a month. The change of shift is unbearable. It is difficult to adjust our body clock.”) In June 2010, Foxconn signed an agreement with an additional 119 vocational schools in the southwest municipality of Chongqing to supply student workers.

SACOM and others report that schools teaching journalism, hotel management and nursing threatened students with failure if they did not take a factory position. The Chinese government-owned Global Times noted that “automotive majors at a vocational school in Zhengzhou, capital of Henan, were also forced to serve as interns for Foxconn before they were given their diplomas.”
One study found in some Foxconn factories, which employ 1.3 million people in China, up to 50 percent of the workforce were students. Foxconn probably prefers it that way because it does not have to sign contracts with the students. Chan says this frees the company from having to pay into social welfare insurance that covers unemployment, healthcare, pensions, disability and maternity leave. In 2010, noted SACOM, “Foxconn ceased to recruit new workers in Shenzhen. Instead, a high number of vacancies were filled by tens of thousands of student interns.”

Not just students are shipped off to Foxconn, says Chan, “teachers have to come to manage them in the factories.” SACOM found that near one facility nearly all the rooms in a seven-story hotel had been rented by vocational teachers accompanying students. Government authorities apparently charge teachers with recruiting students and tech colleges have quotas for interns to be sent to Foxconn, according to a student paper from China Europe International Business School.
SACOM notes, “It is believed that Foxconn alone cannot mobilize such a high number of students.” Another account states, “Many high schools in Zhengzhou are required by local authorities to make arrangements for their students to intern at Foxconn factories in Shenzhen.”

There appears to be a simple reason why many vocational schools eagerly force their students to take hazardous industrial jobs: greed. Evidence comes from another Apple supplier in China, Wintek, where students seem to have it worse than Foxconn. Wintek gained notoriety for making workers use n-hexane, a toxic compound, to clean iPhone touchscreens because it evaporated much faster than rubbing alcohol, enabling workers to increase their output. In 2010 interns told SACOM there were 500 students at the plant who worked 11 hours a day, seven days a week with a maximum salary of 500 yuan, less than $80 a month. According to the report, “Wintek pays the students’ salaries in accordance with law, but the lion’s share goes to the schools directly.” Over the course of a year, 500 students could net a school more than a million U.S. dollars in income.

The China Labor Bulletin found schools stealing wages to be common: “The key issue in forced internships appears to be the entrenched relationship between schools and businesses, a relationship actively encouraged by the Chinese government.” They added that “it was not unusual for schools to deduct a ‘commission’ from the interns’ salary or get paid directly by factories for providing cheap labor,” despite the illegality of the practice. As for redress for abuses, “students have little or no legal recourse when they are cheated out of their pay or forced to work long hours in hazardous conditions.”

In other cases, the state education bureau will withhold funds reserved for vocational schools if they fail to meet quotas for interns.

Corporate Socialism

The use of hundreds of thousands of students is one way China’s state regulates labor in the interests of Foxconn and Apple. Other measures include banning independent unions and enforcing a household registration system that denies migrants social services and many political rights once they leave their home region, ensuring they can be easily exploited. In Shenzhen about 85 percent of the 14 million residents are migrants. Migrants work on average 286 hours a month and earn less than 60 percent of what urban workers make. Half of migrants are owed back wages and only one in 10 has health insurance. They are socially marginalized, live in extremely crowded and unsanitary conditions, perform the most dangerous and deadly jobs, and are more vulnerable to crime. Finally, the state rigorously enforces the registration system, often packing migrants back to the countryside if they lack the proper documents. It’s the very picture of the Foxconn workforce.

But that is just the beginning of state subsidies. China’s growth model over the last 30 years is based on “heavily intervening” in the process of economic development while retreating from “the social and civic sphere by providing social and labor protections,” according to scholars Ngai Pun and Jenny Chan. Foxconn is taking advantage of the latest phase, known as the “Go West” strategy, which is enabled by the government’s “massive investment in interior infrastructure including airports, highways, power grids and high-speed rail.”
Outright plunder is sometimes the tactic, and government officials are notorious for grabbing collectively held lands in China to benefit themselves and well-connected corporations. Debby Chan claims some of Foxconn’s new facilities have been a result of such land confiscations. (As elsewhere, privatizing the commons in China also serves the goal of turning rural peasants into industrial laborers.)

SACOM video features Foxconn boasting that the building of its Chengdu Technology Park in Sichuan Province “had strong government support at the state, provincial, city and local levels.” For the facility, which will be able to spit out 40 million iPads annually on 50 production lines, the local government “increased cargo flights to Hong Kong and set aside the biggest block of land in its tariff-free zone for the company to help cut costs.” SACOM’s video also showed packed public buses being used as Foxconn’s transport fleet, and workers’ housing that was supposed to be “resettlement housing for rural farmers.”

In Foxconn’s Zhengzhou complex that manufactures iPhones, the government “fast-tracked approval for the factory in 16 days, including clearances for fiscal subsidies and preferential corporate income tax rates.” The government provided the land to Foxconn as well as renting it a renovated factory and rooms for 100,000 workers. The city is also talking of spending more than $4 billion to expand the airport so it can accommodate more cargo flights.

In Chongqing “employment promotion officials granted Foxconn a discounted corporate income tax rate of 15 percent” and lengthened an airport runway by 400 meters “to meet increasing transportation and logistical needs.” For Taiwan’s computer industry, Chongqing offers “direct charter flights, entry permits for Taiwanese citizens upon arrival, cross-border Chinese Yuan’s trade settlement services, 10-year subsidies on income taxes, export tax rebates and export custom declaration services.”

The New York Times feature on China’s role in Apple’s empire touched upon this, explaining how government subsidies enabled a glass-cutting factory to have engineers, workers, glass samples and a whole manufacturing wing on standby to service Apple’s possible needs.

Wages of Misery

The justification for soup-to-nuts state funding of corporations is they provide jobs and a rising standard of living. That’s not the case with Foxconn. The high turnover – less than 5 percent of Shenzhen’s workforce has five years or more seniority – and consistent worker accounts of being misled about wages as recruits and shorted on earned overtime pay once in the factory point to how Foxconn squeezes workers for profit. That, in turn, is the result of Apple’s strategy of squeezing suppliers. One executive who’s worked with Apple told the New York Times, “The only way you make money working for Apple is figuring out how to do things more efficiently or cheaper. … And then they’ll come back the next year, and force a 10 percent price cut.” While Apple’s profit margin tops a rarified 30 percent, Foxconn ekes out a puny 1.5 percent. (Though don’t cry for owner Terry Gou, who has to make do with $5.7 billion.) In the case of an iPad, labor costs in China amount to 2 percent of the final retail cost.
Despite headlining one article, “In China, Human Costs Are Built Into an iPad,” the Times highlighted environmental hazards and overtime, glossing over wages, working conditions and abusive supervision. (Even then the Times barely scratched the surface of how Foxconn and other Apple subcontractors have trashed the environment and poisoned workers as documented in these studies.)
SACOM found that after the spate of suicides in 2010 compelled Foxconn to raise wages (which weren’t really raises because housing and food subsidies were cut), the pay of frontline workers ranged from 50 to 61 percent of the minimum living wage depending on the city. To make a sufficient wage, workers must take on overtime shifts. But if they decline even one overtime shift they get iced out for the entire month. One student worker in Chengdu summed up the dilemma, “If there is no overtime at all, I will only receive the basic salary. Hence, I have no choice.”

This is backed up by an eye-opening paper published in 2010 by Pun and Chang, titled, “Suicide as Protest for the New Generation of Chinese Migrant Workers: Foxconn, Global Capital, and the State.” The two academics found that for migrant workers in Shenzhen their average pay, even with overtime, was 47 percent of what city residents earned, and amounted to only two-thirds of the living wage calculated by SACOM.

Military-Style Management

To meet production goals Foxconn relies on “military-style management…on the shop floor.” Workers say “military training” starts during the recruitment phase, such as being forced to stand in the sun for hours with no water. In Chengdu, some workers claimed that for up to one month before work began they had to line up in formation and “stand still as a soldier for hours.” Even the China Daily reported that the state-controlled Shenzhen Federation of Trade Unions said Foxconn has a “quasi-military management system.” According to scholars as well as business publications, Taiwanese managers in China refer to their management style as militaristic.

The workers believe the goal is “to indoctrinate the idea of absolute obedience.” This reflects Foxconn founder Terry Gou’s principles that a leader must be “a dictator for the common good,” and “a harsh environment is a good thing.” One SACOM report stated, “New workers are always reminded by the management that they should obey all the instructions of the superiors without question.”
Another apparent goal is to train the workers to stand all day. One female worker in Shenzhen said, “We have to stand all day long. Even worse, we have to stand like a soldier. I am totally exhausted after non-stop work.”

The absolute power inevitably leads to abuses. In another paper Pun and Chang cite a study by the independent Foxconn Research Group in 2010, involving interviews of 1,736 employees in 12 separate factory areas and 14 investigators who took one-month positions in the company. It found that 38 percent of employees had their privacy violated and 16.4 percent – one in six workers – were “subjected to corporal punishment by management and security personnel,” according to Ross Perlin (who is fluent in Chinese and translated parts of the study at my request). Twenty-eight percent of workers said they were abused or insulted. “Public humiliation and confession… is a frequently used management method,” write Pun and Chang. “Line leaders, who are also under pressure, tend to treat workers in a harsh way to reach the productivity targets.”

Pun and Chang conclude, “Foxconn employees experience long hours of repetitive work for very low income. They submit to management scrutiny on the job, and their low income and limited free time restricts their options outside of work. Many young men and women workers rarely stop working except to eat and sleep, simply to make ends meet. The result is a community of people under intense stress with few resources, a situation conducive to depression.”

In May 2010, the same month six Foxconn workers died after hurling themselves out of buildings, a letter issued by Pun and eight other mainland Chinese and Hong Kong academics connected the dots between state policies, global capitalsim and the effects on the workforce. The writers maintained that because young migrant workers never think of “going back to farming like their parents … they see no other option when they enter the city to work. The moment they see there is little possibility of building a home in the city through hard work, the very meaning of their work collapses. The path ahead is blocked, and the road to retreat is closed. Trapped in this situation, the new generation of migrant workers faces a serious identity crisis and, in effect, this magnifies psychological and emotional problems.”

For some, the way out is suicide, writes UCLA professor Russell Leong: “It’s my belief that workers internalized their oppressive conditions because they could not find ways to resolve the oppressive ‘relations of production’ – treated as part of the machinery of the production assembly line they became demoralized, dehumanized, and finally, desperate. So their only option was a very human one: to throw away or destroy their own bodies as a gesture of frustration – and of defiance.”

As much as Foxconn and Apple laud their audits, their devotion to the law and their ethics (Steve Jobs emailed an Apple user critical of the suicides, “We do more than any other company on the planet”), the companies ascended to the top on a heap of bodies. They are hardly unique, and that’s the problem.
As far as labor practices goes, Foxconn is no different than its rivals, and it’s impossible to escape. It assembles electronics for everyone including the iPad’s rival, the Kindle, and the Acer computer I’m writing this on. All that matters is that Wall Street is happy because Apple has more cash on hand than the U.S. Treasury.
Apple and consumers alike could easily pay more as labor accounts for only 7 percent of costs. Tripling wages and benefits might add $100 to an iPad. But that would set a bad example. Apple’s profits might decline a notch and Wall Street would dump its stock. Consumers would still have their toys but might buy fewer smart phones, tablets, iPods, Xboxes, laptops, desktops and other digital sundries.
Giving Foxconn workers a job with a living wage instead of one that cripples them by their mid-20s would pressure other Chinese companies to do the same. And then more demands would be made: Why can’t the factories stop poisoning waters, lands and workers, fouling the air and frying the planet?

It’s not that we can’t have advanced technology, a healthy society and a green economy. We just can’t have it with the Foxconns and Apples of the world, where dictatorial billionaires make closed-door calculations based on market share, revenue and profit at the expense of everyone, and everything else.

So don’t expect anything to change in Apple and Foxconn’s hell factories, unless workers in China (and wherever else Foxconn goes next) rise up and make it change. In the meantime, enjoy your iWorld.

Arun Gupta is a co-founder of The Indypendent and the Occupied Wall Street Journal. He is writing a book on the decline of America empire for Haymarket books.

Thursday, October 16, 2014

Chomsky: There's an Overt Corporate Effort to Indoctrinate American Children

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The academic talks about education and indoctrination, ISIS, and the media in a new interview.

October 13, 2014

This article first appeared on Truthout.

History teacher Dan Falcone and English teacher Saul Isaacson spoke with Noam Chomsky in his Cambridge office on September 16, 2014, about education and indoctrination, the 1960s, the Powell memorandum, democracy, the creation of ISIS, the media and the way "capitalism" actually works in the United States.

Dan Falcone: We're in Cambridge, Massachusetts, with Professor Noam Chomsky. I am Dan Falcone with Saul Isaacson, and this is actually the third time I've visited you. So I wanted to thank you for that. And since I am a teacher, I wanted to start off by continuing on the themes of democracy and education.

I have noticed students making very insightful and uplifting observations in the midst of chaos. For example, they noticed that support for Israel fell out of favor in certain mainstream circles, and that the recent police treatment of unarmed black teenagers in intensifying areas of violence is a crucial matter of concern. This, to me, is an example of reasons to be hopeful. Can this type of thinking be traced to the work done in the 1960s or is that an oversimplification in your view?

Noam Chomsky: I think the activism of the 1960s had a very definite civilizing effect on the whole society in all kinds of ways. So lots of things that by now are almost taken for granted were heretical in the 1960s. We had anti-sodomy laws until not many years ago.

When people denounced [former Iranian president Mahmoud] Ahmadinejad for rejecting and criminalizing homosexuality, it should be remembered that was true of the United States until very recently. Women's rights were unheard of. Civil rights proponents were horribly treated, not just in the South. It was awful there, but pretty bad here. Environmental issues did not exist. Opposition to aggression was virtually zero. In fact, so little, that to this day, even scholarship mentions the Vietnam War as beginning in 1965.

By 1965, South Vietnam had already been practically destroyed. At least a couple of hundred thousand US troops were ravaging and began the attack on the north. You literally could not have mentioned this in Boston, which is a liberal city. The first time we tried to have a public antiwar demonstration on the Boston Common, which is where everything takes place, it was broken up; [we] couldn't have it. It was October 1965. I was supposed to be a speaker. Nobody could hear the speakers. The Boston Globe - the most liberal newspaper in the country - the next day, you can look it up on the internet, was full of denunciations of these people who were daring to question the validity of the bombing of North Vietnam. I mean, this is five years into the war. There's nothing like that anymore.

The Iraq War, for example, is the first war in history, in which there were huge demonstrations before the war was launched, not beginning five years later and then being broken up. All of these are changes, and the people who are writing in journals today lived through these changes. They were all affected, and so I think you and your students' perceptions are correct. It's kind of interesting and sick that the intellectual culture called the 1960s, "time of troubles," a dangerous period in which a lot of harm was done to the society. And the reason is because we were civilized and that's dangerous. That increased the commitment to democracy, to rights and so on, and this left people much less obedient.

There's actually a classic presentation of this which maybe we discussed, so stop me, but the study of The Crisis of Democracy, a very important book which was published. It's the first publication of the Trilateral Commission, which was a group of liberal internationalists. For example, the Carter administration was entirely drawn from their ranks. It's basically where they come from; so kind of the liberal end of the mainstream spectrum.

The Crisis of Democracy was published in 1975, and it was a discussion of the destructive effect of the 1960s. The destructive effect was that it called for too much democracy. You have to read it to believe it. The picture was that before, people were mostly passive and obedient and they did what they were told and democracy functioned fine.

But in the 1960s, various parts of the population became energized and began to enter the public arena to call for the rights of women, students, young people, old people, farmers and workers. What are called "special interests" - meaning the whole population - they began to press to enter the public arena. And they said that puts too much pressure on the state and therefore we have to have more moderation in democracy and they should go back and be quiet and obedient.

There's interestingly one group that they never discussed as a special interest, corporate power, which makes sense. That's the national interest, so we don't talk about that. But, of course, they have overwhelming control over policy and they particularly singled out the universities. Schools, churches, universities - they describe them as institutions responsible for "the indoctrination of the young" - their phrase, indoctrination of the young. And they said they're failing. You can see it because all these young kids are out in the street, opposing the war, calling for women's rights and so on.

So the young are not being indoctrinated properly and they therefore called for more efforts to - the state, they said, should intervene to ensure that indoctrination takes place properly. They also criticized the media. Anyone who looked at the media could see that it's overwhelmingly conformist. But there was some criticism. I mean, there were people in the media who were saying, "The war's too costly. Maybe we shouldn't continue with it" and so on. And they said even that's too much. You can't have the media being this oppositional and critical of power. So maybe the state should step in with some form of censorship and control over the media.

This is the liberal extreme of the spectrum. If you want to see the other extreme, one important thing to look at, which came out around the same time, is the Powell Memorandum. You can pick it up on the internet. This is Justice Powell. He was picked by Nixon to be on the Supreme Court. He was an advisor to the Nixon administration, very right-wing, and he essentially expresses the same views except in a less polite form. And you have to read it to believe it. It was very influential. It was a letter written to the Chamber of Commerce, a business group, but it surfaced pretty quickly. It was supposed to be secret.

But what he essentially says - and the rhetoric is revealing, almost quoting, he says, "Marxists have taken over practically everything. They run the universities. They run the media. There're overwhelming attacks on business. Business is being persecuted. Nobody's standing up for business. We're the persecuted minority and the world is lost," which is a very interesting illustration of the attitude of people who own everything. If you owned everything and a tiny little piece gets out of control, then your world's gone. Like some unusual child who has a million toys and one of them is stolen, he's going to perish.

That's the standard attitude of people who fundamentally own the world. And then he goes on to talk about how we can deal with this. He says, look, take the universities. The universities are funded by business. The trustees are from the business world. Instead of just allowing the universities to be taken over by Marxists led by Herbert Marcuse and so on, which is such an illusion you can't even talk about it. Instead of that, he says, "We could discipline them by using the power of the purse, which we have, and we can oppose it and we can defend this." It's all defensive. We can defend ourselves from this tremendous attack by using our economic power to sort of allow business a tiny little sector in which it can function.

You really have to read it to get the sense. Well, those are the two ends of the spectrum and out of that comes the whole liberal assault, the population on the colleges, on the schools and so on. So the students are right. There was a big impact and it's partly illustrated by the reaction, but it's there. You can see it in all kinds of ways. It's just a much more civilized world than it was.

Falcone: Just recently in the Myth of the Spoiled Child, a book by Alfie Kohn, he systematically discredits this belief that children are spoiled. He seems to challenge the standard bipartisan effort that undermines democratic education and drives it toward a business model or corporate setting for education. In other words, the standard complaint by those parents or educators whether liberal or conservative, is that no matter what the tactic, old school or new, education is still compliance-based, while focusing little on development. What are your thoughts on his sentiments, which are probably the same as a Jonathan Kozol?

Chomsky: I think they're basically right. Both Kozol and Kohn, and others too, are focusing on what traces back to the kinds of attitudes that are expressed in the books I mentioned across the spectrum. Maybe people didn't follow those particular prescriptions, but these are reflected as very widely held views, which is why the '60s are called "the times of troubles" by "real" intellectuals. And out of that comes the sense that, yes, you have to improve the institutions responsible for indoctrination of the young. You have to control children. You have to make sure that they're not too free and creative and independent, and it shows up in all sorts of ways.

So, for example, take say the neighborhood where I live. We moved there 50 years ago. It's a quiet neighborhood out in the suburbs. No traffic on the streets, practically none; woods in the back where the kids can play. When we moved, we moved there mainly because we had young children. It looked like a great place for children to grow up and kids were all over the streets. We had a couple of little girls playing out in the woods by themselves and so on. You go in that neighborhood now you'd never see a child.

If I take a walk, occasionally I'll see an adult with a dog and sometimes they'll have to drag a child along with them that didn't want to be there. But in general, there are no kids playing. Back in the woods behind our house, for example, there's a tree, which for children automatically is a climbing tree. It's just perfect. As soon as a kid sees it, they want to climb.

Back in the '60s and '70s, that tree over the summer became a cooperative, a spontaneous activity for the kids in the neighborhood. Each kid would bring a piece of wood and they'd put it up and somebody would bring something else, and by fall you had this elaborate construction up in the tree of tree houses and kids playing and running around and so on.

You take a walk now, the tree's bare. Children are not allowed out. They don't play. They're either inside looking at video games or something or they're in organized activities. I've seen it in the most amazing ways. Look, I have a grandson who's in his 20s, but when he was a kid, he loved sports. So he wanted to play soccer and basketball and everything.

But the only way to do it was to be in a league. It happened to be Salem, so he was in the Salem baseball league or something. I remember once my wife and I went out to watch him one Saturday afternoon. He wanted us to come out. He was 7 years old. There were two teams of 7-year-old kids playing soccer. Now, the referee was 11 years old. The parents were standing on the sideline screaming at the referee and ready to kill him because somebody had pushed their kid and he didn't do something about it.

I remember once we went over to his house on another Saturday afternoon. He was to play a baseball game. He came back about half an hour later very unhappy. We asked him what happened. They said they had to call off the game. The kids were about 10. They had to call off the game because the other team only had eight players. So therefore the kids couldn't play baseball. Everybody's sitting around. But they couldn't allow their teammate to be the ninth player for the other team so that the kids could have some fun because it has to be run by adults so that the league works the way it does.

And this just goes on and on. I mean, childhood is just being lost and in the schools you see the same thing. Well, you know better than I do that the indoctrination is incredible. The Bush-Obama programs are programs for training kids for the Marine Corps. And I think they're purposely done that way. It undermines the independence of teachers. If kids are studying for a test, they're not going to learn anything. We all know that from our own experience. You study for a test and pass it and you forget what the topic was, you know. And I presume that this is all pretty conscious. How conscious are they? I don't know, but they're reflections of the attitude that you have to have discipline, passivity, obedience, the kind of independence and creativity that we were shown in the '60s and since then - it's just dangerous.

Falcone: Faith Agostinone-Wilson has conducted some educational research that's similar to Henry Giroux's in that she examines school-based implementations, as you mentioned the "neoliberal worldview via correct worker attitude." This would be for a teacher - I'm assuming a student also - in order to "promote classroom management as a way to build teamwork or steering students towards self-regulation. These efforts worked together to ultimately shape attitudes and dispositions towards a capitalist ethos." Almost as if the schools are becoming embodiments of modern corporations. Is that overstated?

Chomsky: Well, you may know better than I do. I see the schools only from a distance, but my feeling is, it's basically correct. I don't think Duncan and those guys are saying, "Let's instill capitalist values." I think what they want to do is instill discipline, obedience and passivity. We're going to say this is what you have to know to repeat at age 7, at age 10, at age 12. And if you can repeat those things, you go on ahead. If a kid decides "I don't want to do that. I want to study something else," you have to stop them.

Actually, I've talked to teachers' groups occasionally and the reactions are interesting. I remember not long ago I talked to a group of teachers. At the end, a sixth-grade teacher came up just to talk to me and she told me of her own experience in class. It was a little girl that came up after class and said she was interested in something that came up. Could she have some ideas as to how to pursue it? And the teacher had to tell her, "You can't do it because you have to study for the MCAS. You have to pass that exam that's coming." The teacher even said, "My salary depends on it." So you're not going to get ahead if you do that. If you pursue your own interest, you're not going to pass. And I happened to go to a school when I was a kid and that's all we did, pursue our own interests. It was kind of structured so you ended up knowing everything you were supposed to know, arithmetic, Latin, whatever it was. But almost always it was under your own initiative.

Falcone: A lot of this is accompanied by a very strong emphasis on technology, and not necessarily for liberating or creative impulses. It's technology that's driving software managers or selling products and driving obedience training. It makes education difficult.
Chomsky: Technologies can be liberating, but it can also be a tool of coercion and control.

Falcone: Can I ask you about "The Responsibility of Intellectuals"? Your famous essay is nearing its 50th anniversary. In your opinion, have the challenges associated with that essay shifted or remained relatively the same?

Chomsky: I think they're virtually identical. It's almost comical. I could give so many examples. To pick one out, it doesn't make any sense. But this morning I happened to read a Washington Post editorial which was about the conference on building this great coalition to fight ISIS. Everybody thought it was wonderful. They said there was one spoiler. The spoiler was Iran and then it quoted a tweet by the Ayatollah Khomeini condemning the conference. It also pointed out that Iran hadn't been invited to the conference, but that couldn't be the reason why Iran was criticizing it. It was because Iran was the spoiler.
That's typical of the way intellectuals look at the world. You take the party line and you internalize it and then you interpret everything in those terms with few exceptions. In fact, there are probably more exceptions now than there were in the '50s and '60s, but they're still pretty restrictive. A lot of people who try to break out of the mold are just kicked out.

Saul Isaacson: I have a media question. When I heard about the fall of Mosul, to be honest, that was the first I've heard of ISIS and I follow the mainstream media fairly closely.

Chomsky: Same here. It was a real surprise.

Isaacson: Why is that? Were there people who knew and were keeping it from us?

Chomsky: First of all, when Iraq stopped being a US story, the press corps left. If we're not involved, what's the difference? So, for example, the worst crimes in the world right now in the last couple of years are going on in Eastern Congo. There's almost nothing about them.

Isaacson: I've read nothing of it.

Chomsky: Nothing, but maybe 5 million people have been killed in the last couple of years. One reason we don't hear anything about it is because there's very limited official US involvement of the press corps. The other reason is that the story is not going to be palatable. Part of the reason for the atrocities is so that you can have a device like a cell phone. The multinationals are all over the place. They're ripping off essential minerals. And the militias that are slaughtering everyone are basically providing the mineral resources for multinationals that are profiting off this kind of cheap access to resources and selling it to you. That's not the kind of story you want to tell people.

So there are several reasons why it's not covered. In the case of Mosul, there was an official story. General [David] Petraeus, who is a military genius, went to Mosul and pacified everything - was wonderful and he left and became a big hero. Five minutes after he left, it all fell apart because there was nothing going on. And as soon as he left, the place fell apart with warring militias and so on. But that's not a good story. It didn't fit with the party line at the moment. And since then, that's been continuing. It's kind of ironic a US and Iranian-backed government happens to be very brutal. It's been attacking the Sunni minority quite viciously and nobody's paying attention. Then all of a sudden, it turns out that you got this group ISIS, which had literally a couple of thousand lightly-armed jihadis facing an Iraqi army of 350,000 people heavily armed, trained by the United States for 10 years. The army, as soon as it looked at them, ran away and left their weapons behind. What does that tell you about the attitude of Iraqis toward the United States? It's not the kind of thing you report back. There are people doing it, like Patrick Cockburn of the London Independent, but he's almost alone.

Isaacson: Did it remind you of the army of South Vietnam? (ARVN)

Chomsky: Yeah, it's kind of like that. You go back to the Vietnam War; it's kind of interesting. The American military intelligence couldn't understand what was happening. They said that our Vietnamese don't want to fight, but their Vietnamese are 10 feet tall. They seemed to be supermen. They're the same people. How can that be? But the obvious answer, of course, doesn't occur. In fact, you can generalize this. Let's take Southeast Asia. The last 20, 30 years has been what's called the "Asian Miracle" - fast economic growth, industrial society. It's happening all over, with one exception, which one? The Philippines is the one that can't grow, which the US has been running for 100 years. Is there a correlation? Have you read about it? It comes to mind, at least.

Falcone: I remember you making the point about the iPads and the materials used from the Congo and you made a comment that said something like, maybe American taxpayers, if they had their choice between the brutal behavior with transnational support or services, they might pick governmental goods and services but they didn't have a choice.

Chomsky: Go back to the '50s when I got here. I was in a research lab. In fact, right down below this, there's a research lab for electronics. It was 100 percent funded by the Pentagon. What it was doing was creating the modern IT technology culture in a high-tech economy on public funds: the internet, computers, microelectronics. It was all coming out of public funds. Thirty years later, it began to be profitable. Then it was handed over to private enterprise.
The first marketable small computer was Apple in 1977. That's after about 30 years of research and development mainly in the state sector, places like this, of public expense. In a capitalist system, there's a principle that if you invest, especially in a long-term risky investment, if something comes out of it, you're supposed to get the profit. It doesn't happen in our system. The taxpayer paid for it and gets nothing - assumes all of the risk, gets zero. The money goes into the pockets of Bill Gates and Steve Jobs, who are ripping off decades of work in the public sector.

Now, go back to your question and comment. Had the people in the 1950s had been asked, "Do you want your taxes to go to development of the kind of technology that will allow your grandchildren to have iPads or do you want your taxes to go into a livable society? Health care, education, places where people can have decent lives? And so on. What would people have decided? Well, whatever the answer was, they didn't have an answer because they never had a choice. They were told, "You have to pay taxes for the Pentagon because the Russians are coming and the Chinese are coming."

And it turns out that they were paying their taxes so that their grandchildren could have an iPod and Steve Jobs could get rich. Well, that's the way the whole society works, but you don't read about that. Go back to "The Responsibility of Intellectuals." How often do you read this? It's a glaring, obvious fact. You can find it. There are a couple of people around the fringes who read about it. But it's not the kind of thing that's presented to the public. The economics department here - a good department - they don't even write about it. They produce abstract models of free markets, which have very limited relation to the reality right under their nose.

Falcone: Thank you very much for your time.

Isaacson: Thank you. It was fascinating as always.

Dan Falcone is an educator with more than 10 years of experience in both the public and private setting. Saul Isaacson studied at Columbia University and The University of Pennsylvania. He has taught English at Trinity School in New York for over two decades.

Thursday, September 25, 2014

American Corporations Too Busy Cheating Taxpayers to Actually Produce Good Products


In the "gimmick economy," it's not about good products or labor, but something far more scary.

Treasury Secretary Jack Lew’s announcement of a series of new rules to reduce the financial incentives behind corporate inversions tells you a lot about where our economy sits right now. Productivity and growth scarcely matter as much as what I would call the “gimmick economy.”

Companies now spend an inordinate amount of time figuring out not how to beat their competition, but how to prosper from tricks and loopholes their accountants find buried in the law. Every corporation has become, at the root, a financial company, adept at moving money around on paper and little else. And the government has to scramble in a never-ending race to keep up with the innovations.

To start with, understand what a corporate inversion is: an on-paper transaction involving a merger between a larger U.S. company and a smaller counterpart abroad. No worker moves overseas as a result of the merger. No production facilities or corporate offices transfer. Instead, the address on the corporate masthead changes from America to the low-tax alternative where the overseas company is headquartered. It’s a completely fictitious pretension, no different than if I used a handicapped placard to park in good spots everywhere I went, and then limped around after getting out of the car.

CEOs claim that America’s burdensome 35 percent corporate tax rate forces them to be creative, and in absence of fundamental tax reform, they must reluctantly renounce their corporate citizenship to stay competitive with their overseas counterparts. First of all, in actuality, corporate taxes are not much of a burden; thanks to all the loopholes and credits, corporations pay on average a 12.6 percent tax rate, according to a 2013 Government Accountability Office paper. Second, by that logic, if I think a bank vault unfairly denies me access to lots of money, I should be allowed to use creative strategies to bust it open.

In reality, corporations’ reasons to invert have nothing to do with staying competitive, as USC law professor Ed Kleinbard explained in a recent paper. It’s merely about preventing the unintended consequences of one gimmick, by loading up on another gimmick.

You see, multinational corporations have more than $2 trillion parked offshore, money that was either earned through foreign subsidiaries, or from a series of tax-sheltering strategies. That money, in theory, cannot be transferred to their American operations – in particular, to reward executives and shareholders – without paying a tax. Corporations therefore defer repatriating these profits, and the money remains “trapped” overseas, although the bulk of it is actually invested in things like Treasury bonds, earning modest interest amid the tax avoidance.

Corporations first tried to deal with this through public whining, claiming that they could not reinvest in America without bringing this money home tax-free. In 2004, Congressapproved a tax amnesty on offshore cash, but the $300 billion repatriated did not go to investment or growth, but mostly to stock buybacks and dividends to goose share prices.

The 2004 amnesty led corporations to assume that they could simply stockpile money out of the U.S., and beg Congress for another reprieve. But Congress, incredibly, learned a lesson, and never allowed repatriation again.

So inversions became a second option for trying to unlock overseas cash. Once corporations establish a headquarters offshore, they can basically funnel money into it to avoid taxes, in a number of ways. They can make loans from the offshore cash into their new foreign parent company, “hopscotching” the U.S. tax system. They can strip earningsfrom their domestic operations and, through accounting tricks, pretend they were earned overseas, again passing them along to the foreign parent. They can spin out their assets to a shell company built in a tax haven (known as a “spinversion”) to facilitate the earnings stripping and hopscotch loans.

In all cases, the goal is to get as much money into the lowest tax treatment as possible. And it won’t surprise you to know that Wall Street, which facilitates all these mergers,makes a tidy profit in the exchange, nearly a billion dollars in the past three years.

With the new regulations announced Monday, the Treasury Department will attempt to stop some of these transactions, though not all of them. The rules attack hopscotch loans by making the inverted company liable for taxes when they try to take deferred profits from a subsidiary. They prevent pass-throughs of stock or property into foreign parent companies to avoid taxation. And they try to prevent spinversions into a third-party shell corporation. But Treasury did not try to reduce incentives for earnings stripping, the ways in which inverted companies shift money into the foreign parent and lower the tax bill on their U.S. earnings.

Victor Fleischer, a tax law professor at the University of San Diego, told Salon, “It should shut down a few deals but not all. It’s not as aggressive as the Treasury could have been, but far better than doing nothing.” You’ll be shocked to learn that the Obama administration found a middle path on a policy.

You can read tons of articles debating the administration’s anti-inversion strategy. But let’s look at the big picture of what these inversions signify. Corporations, at great effort and expense, have figured out how to pretend to be domiciled overseas to save money. The government, through similar effort and expense, cuts off some of the benefits. Presumably what happens next is that corporations engage in another round of scouring the tax code for some other way to profit.

And government has to chase that. And so on.

Tax dodges are as old as the republic. But I seem to remember a time when selling a half-decent product was the pathway to corporate riches. Since the 1980s, however, large corporations, from Google to GE, have fundamentally become financial firms, using sophisticated techniques to manage their cash.

Sometimes that involves parking money offshore; sometimes it involves interest-rate swaps or other derivatives; sometimes it involves using debt to finance operations because it offers better tax advantages than equity; sometimes it involves using stock buybacks or real estate sales to simulate better corporate performance.

So many resources go to financial engineering that research and development or capital investment, things that circulate money through an economy, ends up withering. The gimmick economy values tax arbitrage or pretend growth to actually out-achieving business competitors. The stock price, and how to game it, becomes an end goal for executives who are typically paid based on how well the stock performs. CEOs with backgrounds in investment banking become more valuable than those with experience in the corporation’s actual industry.

This myopic preference of the short-term over the long-term goes a long way to explaining why we have a Main Street economy with stagnant wages, weak job security and an inability to get ahead. All the money gets tied up in financial game-playing to goose short-term values. And the powerful actors who created this system don’t want it to change.

Congress can end this gimmick on inversions by deciding that, if a company is managed in the United States, it’s American, regardless of the address on the letterhead. Hilariously, they may get it done by threatening a bunch of other corporate gimmicks. Corporations want Congress to retroactively extend a bunch of tax breaks that expired at the end of 2013 in the lame-duck session.

Democrats may link those tax extenders to anti-inversion legislation, forcing corporations to choose between which set of tax breaks they want to keep.

But the larger point holds. Until we end this over-financialization that has crept into every aspect of our economy, corporations will simply move from one gimmick to the next.

David Dayen is a contributing writer to Salon who also writes for The New Republic, The American Prospect, Politico, The Guardian and other publications. He lives in Los Angeles. Follow him on Twitter: @ddayen

Saturday, August 23, 2014

Corporations Spy on Nonprofits With Impunity


Corporations Spy on Nonprofits With Impunity

Posted: Updated: 

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Here's a dirty little secret you won't see in the daily papers: Corporations conduct espionage against U.S. nonprofit organizations without fear of being brought to justice.
Yes, that means using a great array of spycraft and snoopery, including planned electronic surveillance, wiretapping, information warfare, infiltration, dumpster diving and so much more.
The evidence abounds.
For example, six years ago, based on extensive documentary evidence, James Ridgewayreported in Mother Jones on a major corporate espionage scheme by Dow Chemical focused on Greenpeace and other environmental and food activists.
Greenpeace was running a potent campaign against Dow's use of chlorine to manufacture paper and plastics. Dow grew worried and eventually desperate.
Ridgeway's article and subsequent revelations produced jaw-dropping information about how Dow's private investigators, from the firm Beckett Brown International (BBI), hired:
• An off-duty DC police officer who gained access to Greenpeace trash dumpsters at least 55 times;
• a company called NetSafe Inc., staffed by former National Security Agency (NSA) employees expert in computer intrusion and electronic surveillance; and,
• a company called TriWest Investigations, which obtained phone records of Greenpeace employees or contractors. BBI's notes to its clients contain verbatim quotes that they attribute to specific Greenpeace employees.
Using this information, Greenpeace filed a lawsuit against Dow Chemical, Dow's PR firms Ketchum and Dezenhall Resources, and others, alleging trespass on Greenpeace's property, invasion of privacy by intrusion, and theft of confidential documents.
Yesterday, the D.C. Court of Appeals dismissed Greenpeace's lawsuit. In her decision, Judge Anna Blackburne-Rigsby notes that "However Greenpeace's factual allegations may be regarded," its "legal arguments cannot prevail as a matter of law" because "the common law torts alleged by Greenpeace are simply ill-suited as potential remedies." At this time Greenpeace has not decided whether to appeal.
The Court's opinion focused on technicalities, like who owned the trash containers in the office building where Greenpeace has its headquarters and whether the claim of intrusion triggers a one year or three year statute of limitations. But, whether or not the Court's legal analyses hold water, the outcome -- no legal remedies for grave abuses -- is lamentable.
Greenpeace's lawsuit "will endure in the historical record to educate the public about the extent to which big business will go to stifle First Amendment protected activities," wrote lawyer Heidi Boghosian, author of Spying on Democracy. "It is crucially important that organizations and individuals continue to challenge such practices in court while also bringing notice of them to the media and to the public at large."
This is hardly the only case of corporate espionage against nonprofits. Last year, my colleagues produced a report titled Spooky Business, which documented 27 sets of stories involving corporate espionage against nonprofits, activists and whistleblowers. Most of the stories occurred in the US, but some occurred in the UK, France and Ecuador. None of the U.S.-based cases has resulted in a verdict or settlement or even any meaningful public accountability. In contrast, in France there was a judgment against Electricite de France for spying on Greenpeace, and in the UK there is an ongoing effort regarding News Corp/News of the World and phone hacking.
Spooky Business found that "Many of the world's largest corporations and their trade associations -- including the U.S. Chamber of Commerce, Walmart, Monsanto, Bank of America, Dow Chemical, Kraft, Coca-Cola, Chevron, Burger King, McDonald's, Shell, BP, BAE, Sasol, Brown & Williamson and E.ON -- have been linked to espionage or planned espionage against nonprofit organizations, activists and whistleblowers."
Three examples:
• In 2011, the U.S. Chamber of Commerce, its law firm Hunton & Williams, and technology and intelligence firms such as Palantir and Berico were exposed in an apparentscheme to conduct espionage against the Chamber's nonprofit and union critics.
• Burger King was caught conducting espionage against nonprofits and activists trying to help low-wage tomato pickers in Florida.
• The Wall Street Journal reported on Walmart's surveillance tactics against anti-Walmart groups, including the use of eavesdropping via wireless microphones.
Here's why you should care.
This is a serious matter of civil liberties.
The citizen's right to privacy and free speech should not be violated by personal spying merely because a citizen disagrees with the actions or ideas of a giant multinational corporation.
Our democracy can't function properly if corporations may spy and snoop on nonprofits with impunity. This espionage is a despicable means of degrading the effectiveness of nonprofit watchdogs and activists. Many of the espionage tactics employed appear illegal and are certainly immoral.
Powerful corporations spy on each other as well, sometimes with the help of former NSA and FBI employees.
How much? We'll never begin to know the extent of corporate espionage without an investigation by Congress and/or the Department of Justice.
While there is a congressional effort to hold the NSA accountable for its privacy invasions, there is no such effort to hold powerful corporations accountable for theirs.
Nearly 50 years ago, when General Motors hired private investigators to spy on me, it was held to account by the U.S. Senate. GM President James Roche was publicly humiliated by having to apologize to me at a Senate hearing chaired by Senator Abraham Ribicoff (D-CT). It was a memorable, but rare act of public shaming on Capitol Hill. GM also paid substantially to settle my suit for compensation in a court of law (Nader v. General Motors Corp., 307 N.Y.S.2d 647).
A public apology and monetary settlement would have been a fair outcome in the Greenpeace case too.
But in the intervening half-century our Congress has been overwhelmed by lethargy and corporate lobbyists. Today, Congress is more lapdog than watchdog.
Think of the Greenpeace case from the perspective of executives at Fortune 500 companies.
They know that Dow Chemical was not punished for its espionage against Greenpeace, nor were other US corporations held to account in similar cases.
In the future, three words may well spring to their minds when contemplating whether to go after nonprofits with espionage: Go for it. Unless the buying public votes with its pocketbook to diminish the sales of these offending companies.