dittologica

In his book “The Conservative Nanny State” Dean Baker, co-director of the Center  for  Economic  and  Policy  Research [link], explodes the old stereotype that says liberals support government intervention in the economy while conservatives believe in letting market forces prevail. Baker dissects the many ways in which, contrary to myth, conservatives rely upon the state and its laws to redistribute wealth upwards in society. He refers to these welfare-for-the-rich conservatives as “nanny state conservatives.” In the conclusion of his compelling book, Baker writes, “The nanny state conservatives have largely been running the political show in the United States over the last quarter century.” However, true as this is, it doesn’t go far enough.

First of all, nanny state liberals, who also make a virtue of forking over the preponderance of national wealth to the already-wealthy, take turns running the political show with their conservative brethren. Secondly, it should be empahasized that this is the case not just in the United States, but around the world in what are referred to as “liberal democracies” or “market economies”.

Finally, politicians don’t run the show by themselves. Managing the corporate welfare state is a job that has to be done from inside and outside the political establishment. The phenomenon of the “revolving door” between government and industry is well known, but there is also an “open window”. The politicians on the inside are responsible for creating and maintaining a political climate which is “business friendly” and for passing the benefits through the window to their business buddies on the outside. Politicians may have the harder job because they have to keep the general population happy enough to continue voting them into office, but they get plenty of help with their campaigns and media profiles from their friends on the outside. If the effort to appear to be democratically accountable begins to take over and the politicians stray from the path of sole devotion to business, business interests and their mouthpieces in the media go to great lengths to put them back on track.

This vital work of the corporate welfare state has been going on for as long as there have been corporations and states. Examples can be seen in the media every day, and these examples only scratch the surface. In this article I have chosen three examples from recent news stories to illustrate the case.

Defenders of the realm
First, there is the story of the British arms industry, which has been threatened with what they consider insufficient increases in the amount of their taxpayer funded entitlements. The New Labour Government of Gordon Brown has promised an increase of 1.5% per year, for the next three years, over the current £31 billion military budget. This is in addition to the off-the-books discretionary £2 billion per year being pumped into the Iraq and Afghanistan wars. This insultingly small increase, according to the captains of the British arms industry, threatens not just national security but the very foundations of the British economy.

The Telegraph newspaper, reporting on a meeting of the Defence Management Board  ( the UK defence policy body, which includes military brass and oil company executives), notes that “fears have been raised”. “Industry chiefs … warned that economic stability and manufacturing jobs would be jeopardised if military projects are cut.” [link]

Obviously, no responsible government would want to risk the nation’s security and economic stability to save a paltry few billions of pounds. The Telegraph story ends on a more optimistic note with a quotation from a Ministry of Defence spokesman, who reassuringly promises that “no firm decisions have been made.” In other words, economic threats and blackmail by defence industry chiefs may yet succeed in upping the size of their slice of the budget pie.

Al Yamamah
But this example of corporate blackmail pales in comparison to the Al Yamamah scandal, one of the more dramatic recent cases of corporate welfare cheating. In fact, to call it welfare cheating doesn’t do it justice. This is government/corporate criminality on a grand scale.

In 1985 Margaret Thatcher’s government signed an ongoing agreement with Saudi Arabia to supply and service British-made fighter aircraft. The commercial beneficiary of this deal is BAE Systems (formerly British Aerospace). The deal is worth £42 billion and is reputed to be the largest commercial deal in UK history.

In order to secure the agreement with the Saudis the British government secretly agreed to fork over £30 million to Saudi prince Bandar every 3 months, apparently for the life of the agreement. The funds were paid out of a secret government account to BAE Systems, which laundered the money through an account in the Riggs Bank in Washington DC. The funds were then drawn by Prince Bandar from the Riggs account.

This cozy little deal went on for over 20 years, during which period the British government paid out over £1 billion ($2 billion) to Bandar in order to keep the BAE deal alive and well.

Between 1989 and 1992 the National Audit Office, the accounting watchdog of the British government, conducted an investigation into reports of bribery associated with the Al Yamamah deal, but the investigation was quashed by the government for fear of “upsetting” the Saudis.

Reports by whistleblowers in 2001 and 2004 resulted in a new investigation, this time by the UK government’s Serious Fraud Office. But in 2006 Tony Blair, against the advice of his attorney general, personally ordered the termination of the investigation. Among the excuses given: potential damage to commercial relations with Saudi Arabia, loss of British jobs and damage to intelligence cooperation between the two countries, placing Britain at greater risk of terrorist attacks. This last item attains new heights in the art of corporate welfare blackmail. In the background, a new deal was lurking for the sale of Eurofighters to the Saudis, a windfall for BAE which the government was loath to put at risk.
 
At the end of 2006 The Corner House [link], a London-based non-profit advocacy organization mounted a legal challenge to the government’s order to drop the investigation. The judicial proceedings brought some interesting documents to light, such as the confidential memorandum by BAE to the attorney general stating that the investigation was against public and commercial interests and urging its termination. Note that BAE Systems, a potential suspect in a criminal investigation, was suggesting to the investigator the advisability of stopping the enquiry. When the attorney general didn’t cave in to the blackmail, the Prime Minister weighed in and halted the investigation.

In the meantime, the U.S. Justice Department is pursuing its own investigation of BAE, which has major military contracts in the U.S. It would not be surprising to find that the action of the U.S. government, no stranger to corrupt deals, is being propelled  by the interests of BAE’s U.S. competitors, Boeing and Lockheed Martin.

But at least BAE and their UK and Saudi government surrogates had a sense of humor: “al yamamah”, the name of one of the biggest weapons contracts in history, means “dove” in Arabic.

Moody’s: the Federal Department of Blackmail Services
In terms of shear audacity and scale, however, another recent news item goes beyond even the Al Yamamah deal. In this corporate blackmail scenario the main players are the Bush administration and Moody’s Investment Services.

The investment community looks to ratings issued by Moody’s to assess the credit worthiness of bond issues. Moody’s assigns a score ranging from “AAA”, representing the least risky investment, to “C”, which is the lowest “junk bond” rating. Moody’s rates the risk of investing in companies, cities, states, and even countries.

Enter the Bush administration. Bush and his cronies have made Medicare (a Federally funded health care program mainly for older people) and social security programs for pensioners the target of periodic attacks. Contrary to the wishes of most U.S. citizens, Bush wants to take the limited national healthcare provisions of Medicare and privatize them. He wants to do the same with the nation’s social security fund, turning it over, at least in part, to the private sector to use for their speculative ventures.

This past January, Moody’s issued a threat against the U.S. people: either stop public funding of necessary spending increases for Medicare and social security or face a  downgraded rating of the entire nation’s creditworthiness. When Moody’s issues a rating investors listen, and a downgrade of U.S. securities would make them much less attractive to foreign investors. Given the fact that the U.S. economy is currently being propped up largely by foreign investment the consequences could be devastating.

It is highly unlikely that this blackmail by Moody’s, exactly coinciding with Bush’s agenda to axe “excessive” spending on social programs, is coincidental. Like the “War on Terror”, this is a coordinated campaign by the combined forces of government and industry to defraud the public. The objective is nothing less than the direct transfer of public wealth from social welfare programs into corporate welfare programs.

As mentioned earlier, the three examples outlined above are in no way exceptional. The deals that are made to deliver public money into private hands, to the detriment of the public, are the very essence of “free market” economies. As we have seen, a Labour government in Britain is no less likely than a neo-conservative Republican government in the U.S. to conduct affairs of state in this way.

The answer to the question “Who’s running the show?” is: not the public who dutifully go to the polls to elect their leaders. Rather, it is the business interests whose ability to freely spend money outweighs the citizens’ power to freely select their representatives.