The
AGRIBUSINESS
EXAMINER
July 24, 2002   #176
Monitoring Corporate Agribusiness
From a Public Interest Perspective

EDITOR\PUBLISHER: A.V. Krebs
ADDRESS: PO. Box 2201, Everett, Washington 98203-0201

E-MAIL: avkrebs@earthlink.net
WEB SITE: http://www.ea1.com/CARP/
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COMMENTARY:
FARM LED, FARM FED ???

Among some traditional economists the old saw "farm led, farm fed" was used throughout the 19th and 20th century as one of the characteristics of an economic depression. While the current state of capitalism in our nation has yet to meet the technical criteria one often ascribes to a depression, in the psychological sense depression might well be the most appropriate description of our current economy.

And once again the media, the government, our elected officials and the public in general have ignored the telltale economic and psychological messages that have been coming from our rural communities over the past two decades and which have now burst into the public spotlight, compounded each day with some new scandal, some new violation of the public trust and some new instance of pure greed.

It is fitting, while unfortunately not referring directly to the plight of family farm agriculture as an example of capitalism's most recent aberrations, that Ralph Nader, the one man who has been tirelessly seeking to speak truth to corporate power for decades, has synthesized and exposed how "big business is in the process of destroying the very capitalism that has provided it with a formidable ideological cover" in his perceptive essay "Corporate Capitalism" which appeared in the July 8, 2002 Washington Post. (see below)

As one reads through what Nader calls five "assumptions of a capitalistic system" one cannot help be struck how the abuse of those assumptions, which the general public is now becoming rapidly aware of on a daily basis, has simply been for decades the way business has gotten done in the agricultural sector of our economy.

Starting with the initial assumption --- "owners are supposed to control what they own" --- we don't need to delve very deep into statistics or evaluate complicated data to see that the story of agriculture since the first settlers came to the New World that there has been the constant effort by a few to control and thereby own the land of the many. By denying family farmers a fair price for what they produce while at the same time forcing them into perpetual debt. corporations have all but completely removed the "culture" from agriculture and replaced it with "business."

In solidifying the business of producing and processing food and thus providing people with the food they eat these "merchants of greed" have established corporate agribusiness as one of the biggest and most important industries in the nation, if not the world. Thus, they have qualified, as Nader points out, as one of larger industries and companies that have become "too big to fail" and have therefore demanded "that Uncle Sam serve as their all-purpose protector, providing a variety of public guarantees and emergency bailouts."

The way much of corporate agribusiness has managed to successfully create itself is another capitalistic contradiction as Nader notes. "Capitalism is supposed to exhibit a consensual freedom of contract --- a distinct advance over a feudal society." Yet that is precisely what has been happening to family farm agriculture. By first enslaving the men, women and children who grow, harvest and process our food, corporate agribusiness has more recently been embarking on adopting  "contracts of adhesion," as the lawyers call them, on family farmers which become ever more intrusive, as fruit and vegetable farmers and meat and poultry producers can well certify. In the process these "merchants of greed" have reduced many areas of rural America into their feudal fiefdoms.

Nader also reminds us that "capitalism requires a framework of law and order: The rules of the economic game are to be conceived and enforced on the merits against mayhem, fraud, deception and predatory practices." Yet, long before the Enron's and the WorldCom's became the part of our daily news diets, family farmers recognized that the terms "fraud, deception and predatory practices" were but synonyms for Archer Daniels Midland ("The Nature of What's to Come"), IBP and their corporate ilk.

Finally, one of the supposed fundamentals of capitalism is that enterprises are expected to compete on an even playing field. On the contrary, corporations like Cargill, the nation's largest private corporation, and Tyson Foods, the nation's largest producer of meat and poultry, through their corporate lobbyists and abundant cash for political campaigns, have developed a "corporate state" where, as Nader charges, "government lavishes subsidies, inflated contracts, guarantees and research and development and natural resources giveaways" on such big businesses --- "while denying comparable benefits to individuals and family businesses. We have a government of big business, by big business and for big business . . ."

As he concludes: "`Corporate socialism' --- the privatization of profit and the socialization of risks and misconduct --- is displacing capitalist canons. This condition prevents an adaptable capitalism, served by equal justice under law, from delivering higher standards of living and enlarging its absorptive capacity for broader community and environmental values. Civic and political movements must call for a decent separation of corporation and state."

But "corporate socialism" is not new to corporate agribusiness, indeed one could argue justifiably that corporate socialism in these United States has indeed been in large measure "farm led, farm fed."
 

"CORPORATE SOCIALISM":
STRIVING TO TRANSFER ITS COSTS
OF MISDEEDS  AND RECKLESSNESS
ONTO THE LARGER CITIZENRY

RALPH NADER, THE WASHINGTON POST: The relentless expansion of corporate control over our political economy has proven nearly immune to daily reporting by the mainstream media. Corporate crime, fraud and abuse have become like the weather; everyone is talking about the storm but no one seems able to do anything about it. This is largely because expected accountability mechanisms --- including boards of directors, outside accounting and law firms, bankers and brokers, state and federal regulatory agencies and legislatures --- are inert or complicit.

When, year after year, the established corporate watchdogs receive their profits or compensation directly or indirectly from the companies they are supposed to be watching, independent judgment fails, corruption increases and conflicts of interest grow among major CEOs and their cliques. Over time, these institutions, unwilling to reform themselves, strive to transfer the costs of their misdeeds and recklessness onto the larger citizenry. In so doing, big business is in the process of destroying the very capitalism that has provided it with a formidable ideological cover.

Consider the following assumptions of a capitalistic system:

1) Owners are supposed to control what they own. For a century, big business has split ownership (shareholders) from control, which is in the hands of the officers of the corporation and its rubber-stamp board of directors. Investors have been disenfranchised and told to sell their shares if they don't like the way management is running their business. Nowadays, with crooked accounting, inflated profits and self-dealing, it has proven difficult for even large investors to know the truth about their officious
managers.

2) Under capitalism, businesses are supposed to sink or swim, which is still very true for small business. But larger industries and companies often have become "too big to fail" and demand that Uncle Sam serve as their all-purpose protector, providing a variety of public guarantees and emergency bailouts. Yes, some wildly looted companies that are expendable, such as Enron, cannot avail themselves of governmental salvation and do go bankrupt or are bought. By and large, however, in industry after industry where two or three companies dominate or presage a domino effect, Washington becomes their backstop.

3) Capitalism is supposed to exhibit a consensual freedom of contract --- a distinct advance over a feudal society. Yet the great majority of contracts for credit, insurance, software, housing, health, employment, products, repairs and other services are standard-form, printed contracts, presented on a take-it-or-leave-it basis. Going across the proverbial street to a competitor gets you the same contract. Every decade, these "contracts of adhesion," as the lawyers call them, become more intrusive and more
insistent on taking away the buyers' constitutional rights to access to courts in favor of binding arbitration or stipulate outright surrender of basic rights and remedies. The courts are of little help in invalidating these impositions by what are essentially private corporate legislatures regulating millions of Americans.

4) Capitalism requires a framework of law and order: The rules of the economic game are to be conceived and enforced on the merits against mayhem, fraud, deception and predatory practices. Easily the most powerful influence over most government departments and agencies are the industries that receive the privileges and immunities, regulatory passes, exemptions, deductions and varied escapes from responsibility that regularly fill the business pages. Only those caught in positions of extreme dereliction ever have reason to expect more than a slap on the wrist for violating legal mandates.

5) Capitalist enterprises are expected to compete on an even playing field. Corporate lobbyists, starting with their abundant cash for political campaigns, have developed a "corporate state" where government lavishes subsidies, inflated contracts, guarantees and research and development and natural resources giveaways on big business --- while denying comparable benefits to individuals and family businesses. We have a government of big business, by big business and for big business, even if more of these businesses are nominally moving their state charters to Bermuda-like tax escapes.

"Corporate socialism" --- the privatization of profit and the socialization of risks and misconduct -- is displacing capitalist canons. This condition prevents an adaptable capitalism, served by equal justice under law, from delivering higher standards of living and enlarging its absorptive capacity for broader community and environmental values. Civic and political movements must call for a decent separation of corporation and state.

In 1938, in the midst of the Great Depression, Congress created the Temporary National Economic Committee to hold hearings around the country, recommend ways to deal with the concentration of economic power and promote a more just economy. World War II stopped this corporate reform momentum. We should not have to wait for a further deterioration from today's gross inequalities of wealth and income to launch a similar commission on the rampant corporatization of our country. At stake is whether civic values of our democratic society will prevail over invasive commercial values.
 

SO THEY SAY !!!

MARC FISHER, "THE LEADERS WHOSE VALUES AREN'T EVEN IN THE BALLPARK," THE WASHINGTON POST

" . . . . . The American miracle is the great American myth of mobility, the deep belief that we can all get there someday. So we usually don't resent our betters. We vote and behave as if we really might be in their shoes someday. So a tax cut for the rich doesn't seem nearly as outrageous as it might to a European who grows up in an entrenched class system. And a president who puts his corporate buddies first seems all right to us, because if we play our cards right and catch some breaks, maybe we too can get to be insider traders someday.

"But every dream comes to an end, and we're teetering too close to our breaking point in too many areas of life. Sure, baseball is just a game, but our attitudes toward it reflect our views toward everything else --- government, business, work, religion. The disconnect between the government and the governed, between the CEOs and the shareholders, between the owners and players and the fans who pay their way, is growing, and one day you wakeup and the only question you have is: Who's going to fleece us today? . . . ."

--- July 11, 2002

KEVIN PHILLIPS, "THE CYCLES OF FINANCIAL SCANDAL," THE NEW YORK TIMES:

" . . . . Near the peak of the great booms, old economic cautions are dismissed, financial and managerial operators sidestep increasingly inadequate regulations and ethics surrender to greed. Then, after the collapse, the dirty linen falls out of the closet. Public muttering usually swells into a powerful chorus for reform --- deep, systemic changes designed to catch up with a whole new range and capacity for frauds and finagles and bring them under regulatory control.

"Even so, correction is difficult, in part because the big wealth momentum booms leave behind a triple corruption: financial, political and philosophic. Besides the swindles and frauds that crest with the great speculative booms, historians have noted a parallel tendency: cash moving into politics also rises with market fevers. . . . . . "

--- July 17, 2002

KATE JENNINGS, "THE HYPOCRISY OF WALL STREET CULTURE," THE NEW YORK TIMES

" . . . . One paradox was hard to miss: When I crossed the thresholds of those downtown skyscrapers, I went from a one-person, one-vote democracy --- messy, noisy, infuriating, but democratic --- to a netherworld where fear was the primary management tool and dossiers, censorship, misinformation and various forms of surveillance were standard practice. To me, corporations seemed not merely autocratic but totalitarian; the engines of America's fabled democratic society are anything but.

"To heap paradox on paradox, because I worked with investment bankers I was surrounded by free-market fundamentalists who roamed the globe preaching a triumphant gospel of deregulation from which all freedoms would flow, yet returned to a bureaucratic roost perfectly Soviet in its rigidity. . . . . . "

--- July 14, 2002

ROBIN BROMBY, AUSTRALIAN FINANCIAL REVIEW

"At 2:32 Wednesday, New York time, something extraordinary happened at the corner of Wall and Broad streets. The New York Stock Exchange's Dow Jones industrial index --- struggling since the opening bell after the World Com fraud revelations --- threw off its problems.  From an intraday low of 8926.6, the Dow shot skywards to its high of 9160 at 3:29 PM . . . Could it be the work of the much talked about, but never seen, Plunge- Protection Team? There is a belief fast gaining ground that this team represents a powerful and secretive hand that is ready to act at any time the Dow looks ready to tank big-time.

"It is reputed to consist of Fed chairman Alan Greenspan, the U.S. Treasury Secretary, and select insider Wall Street brokerages, including Goldman Sachs and Merrill Lynch along with bankers like Citigroup. When needed, so the theory goes, funds are pumped into stocks and futures to derail any market panic. Such a group's existence first came to light in The Washington Post five years ago. The paper reported that after the October
1987 crash president Ronald Reagan signed an executive order authorizing a working group on financial markets aimed at coming up with strategies dealing with stock market crises. No one heard much more about it --- that is, until January 1997 when Dr. Greenspan made a speech saying the government would directly intervene in the market in `rare circumstances.' .

" . . . . . Last January popular online brokerage The Street wrote: `That may investors believe a so-called "plunge-protection" team exits may be as important as whether it's fact or myth. Such beliefs may explain why many investors rode the markets down in the past 22 months., and why most continue to have faith in the stock market, and in Greenspan.' The New York Post reported in October 2000 that when the Dow dropped 400 points the previous day, Goldman Sachs, Merrill and others saved the market through heavy futures purchases . . . London's Observer newspaper last October reported it had information the plunge team was preparing to spend `billions of dollars' to avert a repeat of 1929 and 1987. . . . "

--- July 4, 2002

PAUL KRUGMAN, "THE INSIDER GAME," NEW YORK TIMES

" . . . . . how about reporting on the story of Mr. Bush's extraordinarily lucrative investment in the Texas Rangers, which became so profitable because of a  highly incestuous web of public policy and private deals? As in the case of Harken, no hard work is necessary; Joe Conason laid it all out in Harper's almost two years ago.

"But the Harken story still has more to teach us, because the S.E.C. investigation into Mr. Bush's stock sale is a perfect illustration of why his tough talk won't scare well-connected malefactors.

"Mr. Bush claims that he was `vetted' by the S.E.C. In fact, the agency's investigation was peculiarly perfunctory. It somehow decided that Mr. Bush's perfectly timed stock sale did not reflect inside information without interviewing him, or any other members of Harken's board. Maybe top officials at the S.E.C. felt they already knew enough about Mr. Bush: his father, the president, had appointed a good friend as S.E.C. chairman. And the general counsel, who would normally make decisions about legal action, had previously been George W. Bush's personal lawyer --- he negotiated the purchase of the Texas Rangers. I am not making this up. . . . . "

--- July 12, 2002

NICHOLAS D. KRISTOF, "BUSH AND THE TEXAS LAND GRAB," NEW YORK TIMES

"Democrats and media hounds are baying under the wrong tree. The point in President Bush's business career where he took outrageous shortcuts was not at Harken Energy, but rather when he was grabbing land for a new baseball stadium in Arlington for his Texas Rangers baseball team.

"Mr. Bush broke no laws. Neither do the overwhelming majority of corporate executives. The cloud over the business world comes not so much from law-breaking as from avaricious bruising of the public interest. The challenge is not catching criminals but injecting public scrutiny into a culture of cronyism in which executives, accountants, regulators and `independent' board members all ooze empathy for each other.

"When Asia had its economic crisis in 1997-98, Americans properly trashed its `crony capitalism.' But we suffer from the same affliction ourselves, and President Bush will not address the issue seriously because cronyism has been his way of life --- the Bushes call it loyalty. . . . . "

--- July 16, 2002
 

U.S. "SOFT POWER" AS MEASURE
OF NATION'S GLOBAL INFLUENCE
BADLY ERODED BY CRONY CAPITALISM

DAVID E. SANGER, THE NEW YORK TIMES: Throughout much of the 1990's, Washington had a  standard --- and somewhat preachy --- message to the rest of the world: In an era when markets rule and military might is of limited use, a nation's influence rises and fall largely on its financial credibility.

That was easy to say when the country's markets were rising, its biggest companies were trusted to report the facts each quarter and the rest of the world wanted to look like America. But now that a chunk of that 90's success has been exposed as mythical --- and markets have staggered back to pre-boom levels --- a sobering question is settling over Washington.

If America's corporate prowess and clean markets were as much a source of its superpower status as its military might, could corporate abuses erode a key element of national power? Is America going to pay a diplomatic price for crony capitalism, as so many other countries have?

"There's no question it undercuts us," said Joseph S. Nye Jr., the Harvard professor who coined the phrase "soft power" to describe the non-military sources of American global influence. "We had a model that looked like it worked better than the European model, certainly better than the Japanese model --- and it stood for no-crony capitalism. Now, that model is damaged, and, with it, so is a bit of our credibility."

Just how much is open to debate. But history shows there is a strong connection between a nation's attractiveness as a place to invest and its ability to shape the world in its own image. Ask the Japanese. So more than the fate of the Dow may be riding on the quality of the reforms that Congress and Mr. Bush agree upon in coming weeks.

"If you step back and look at the 90's, American prestige was enhanced by our fiscal strengths --- the dollar was strong, the markets were strong, no one doubted that we were the safest place to invest," said Robert D. Hormats, a former senior State Department official who is an investment banker at Goldman, Sachs. "Now there is good reason to wonder whether we will be as generous with foreign aid" --- which President Bush announced just a few months ago he wants to increase by 50% in the next few years --- "and whether we will try to stave off imports, always a temptation in downturns."

If so, the rest of the world would see more of the hard edge of America, the America of pre-emptive strikes against its potential enemies, and less of the open economy the country hailed as a model for the world.

What the effects of that might be are hard to predict. The United States has not been through a major downturn since it emerged as the great winner of the age of globalization. So it has never felt the sting of what happens when the global investing herd stampedes out of the country. After all, until now America has been the undisputed gold standard, the safe haven in world storms.

Many in Washington argue that it still is. American clout hinges on far more than just the reliability of profit-and-loss statements --- the power of its ideas, its culture and the astounding reach of its military are all part of the mix. This was a point President Bush underscored . . . .when he escaped questions about corporate America's troubles, and his own behavior as a private investor, to travel to Fort Drum, New York, to bask in the reflected glory of the 10th Mountain Division, whose troops chased Al Qaeda through the caves in Afghanistan.

But just as traditional American power is resurgent, the quality of its soft power is subject to more doubt than any time in recent history. Short-term effects are obvious. Even as Alan Greenspan assured the world that America's long-term prospects are good, foreigners pulled money out of the American market, sending the dollar spinning down. A single Euro, the European currency, is now worth slightly more than a dollar for the first time in two and a half years --- and that's not because Europe's economic prospects have improved.

"It's a sign that we have lost the moral high ground," said Lael Brainard, a former international economic adviser to President Bill Clinton who drafted some of the speeches on good corporate governance. "We were in the awkward position of lecturing all the countries on regulation, bankruptcy procedures, international accounting standards. In an ideal world, we would now admit we had a lot of problems of our own and welcome some ideas from the rest of the world."

Mr. Bush's aides may not agree and, when asked about the diplomatic impact of recent woes, they insist it will be next to nil. "There may be some lectures to our trade negotiators," one senior official said. "Maybe some more resistance the next time the World Bank and the I.M.F. hand out prescriptions to the Argentinas of the world, or to Indonesia. But that's around the edges. It doesn't affect the central issues we're facing."

The official is probably right in the broadest sense: it's hard to imagine the French or the Saudis invoking Enron as they push back at Mr. Bush's insistence that it is time to depose Saddam Hussein. But that is about brute power, not subtle influence. And influence is harder to measure, partly because its accumulation and erosion are harder to detect.

The Chinese, once the greatest economic power, understand that, or seem to. That is why they overcame domestic opposition to join the World Trade Organization, in hopes that they would not only attract foreign capital, but extend their influence in Asia.

The Japanese learned the lesson the hard way: they have seen great influence wane as the world lost confidence first in their companies, then in their government. As investors decided the Japanese islands were sinking in a sea of debt and deception, Japan's diplomatic influence around Asia and the world diminished markedly. And when pressed to reform, they passed weak measures and calle them a solution --- a cautionary tale for the Congress.

No one is predicting the same for America --- the Japanese, for example, had no military to make up for their loss of economic influence. America's culture continues to have a uniquely potent export power. And the American model of capitalism, however flawed, still seems to beat the alternatives.

"It will be hard for the Europeans and the Japanese to argue that their systems are better at stopping these kinds of abuses," says Walter Russell Mead, author of a new book examining the spread of American ideas. "But all these events are bound to have some indirect influence on foreign policy. This is a serious crisis for the Republican Party, and the Bush administration, and that means it weakens the administration's authority a bit. And there are risks."

Perhaps none of that will happen; perhaps these past months will prove to be just another ugly blip in American capitalism. But this is the first major American downturn since the country emerged as the winner of the globalization sweepstakes. The fact remains that when global success and global influence are commodities, it hurts when the world yells "sell."
 

UPDATED AND STREAMLINED
CORPORATE AGRIBUSINESS RESEARCH PROJECT
WEB SITE INITIATES RENEWED SUPPORT EFFORT

It is rather curious that as more and more people from literally around the world request
to regularly receive THE AGRIBUSINESS EXAMINER, lavish in their much
appreciated praise for the work it seeks to do, fewer and fewer people seem willing to
financially contribute to its support.

Those handful of regular contributors who have earned the editor's undying gratitude
over the past four years and the few other occasional welcome individual supporters
stand in marked contrast to those many who obviously have believed during that time
that their aid could be better applied elsewhere, particularly when it comes farm and
rural  organizations. Such neglect, however, when it comes to rural concerns is
recognized  from this desk as not uncommon in our modern affluent and well fed
society.

Since the AGRIBUSINESS EXAMINER first appeared some 175 issues ago it has been
the publisher's intent to make the work of the Corporate Agribusiness Research Project
(CARP) and the monitoring of corporate agribusiness from a public interest perspective
available to the widest possible audience, seeing that those few and available publications
that still concern themselves with corporate agribusiness are so prohibitively expensive,
to say nothing of their pro-corporate bias.

But, because there is a more a need today than ever before to make corporate
agribusiness more accountable to the common good, it is the wish and hope of THE
AGRIBUSINESS EXAMINER to continue to play a major role in that effort. Your
contributions will go far in helping to perpetuate that hope. Such contributions may be
sent to the editor at the above address.

As part of a major effort to keep those committed to bringing economic and political
democracy to rural America informed, educated and updated the Corporate
Agribusiness  Research Project is happy to point out that its web site has been updated
and  streamlined.
http://www.ea1.com/CARP/

Among the sites many features are:

> A complete index of THE AGRIBUSINESS EXAMINER'S  first 162 issues with a
"Search" engine to provide easy access to the subject matter of each edition.

> new edition of THE AGBIZ TILLER, the progeny of the one-time printed
newsletter, featuring the essay "The Merchants of Greed," an in-depth essay dealing with
today's corporate agribusiness. Likewise the "Search" engine is also available for past
editions of THE AGBIZ TILLER.

> In "Between the Furrows," besides a modern "Search" engine, there is a wide range
of  pages designed to inform and educate readers on the inner workings of corporate
agribusiness. They include:

* CARP's "Mission Statement," "Overview" and THE AGRIBUSINESS
EXAMINER'S  Editor\Publisher's "Resume."

*  "Fact Miners," an effort to assist the reader in the necessary art of researching
corporations

*  "Quotable Quotes" pertaining to agribusiness and corporate power

*  "Links," a page which allows the reader to survey various useful public interest,
government and corporate web sites;

* "Feedback" an opportunity for reader input:

* The Corporate Reapers: The Book of Agribusiness, a page where readers can order
directly the editor's 1992 published book from Essential Books.

The CARP web site was designed and produced by ElectricArrow of Seattle,
Washington.
http://www.electricarrow.com

Simply by clicking on the address below all the aforementioned features and information
are yours  to enjoy, study, absorb and sow.

http://www.ea1.com/CARP/