Bush's Post 911 Allure Fading
Fast-Enron & Argentina

MANILA, PHILIPPINES
January 21, 2002

Enron implosion and Argentina collapse: Debacles of globalization
By WALDEN BELLO

It is said that in politics and in war, fortune smiles all too briefly.
After allowing it to briefly savor the success of its Afghanistan campaign,
history, cunning and inscrutable as usual, has suddenly dealt the Bush
administration two massive body blows: the Enron implosion and the
Argentine collapse.

These towering twin disasters threaten to push the global elite back
to the crisis of legitimacy that was shaking its hegemony globally prior
to September 11.

Enron forcefully reminds us that free market rhetoric is a corporate con
game. Neoliberalism loves to couch itself in the language of efficiency and
the ethics of the greatest good for the greatest number, but it is really
about promoting corporate power.

Enron loved to extol the so-called merits of the market to explain its
success, but in fact, its path to becoming the US' seventh largest
corporation was paved not by following the discipline imposed by the
market but by strategically deploying cold cash, lots of it.

Enron literally bought its way to the top, throwing around hundreds of
millions of dollars in less than a decade to create what one businessman
described to the New York Times as the "black hole" of deregulated energy
markets in which its financial shenanigans could thrive unchecked.
To make sure government would look the other way and allow the "market" to
have its way, Enron was generous with those willing to serve it, and few
earned more Enron dollars than George W. Bush, who received some $623,000
for his political campaigns in both Texas and nationally from his friend
Kenneth Lay, Enron CEO.

The deep enmeshing of Bush and a number of his key lieutenants --
Vice-President Dick Cheney, Attorney General John Ashcroft, US Trade
Representative Robert Zoellick, top presidential economic adviser Larry
Lindsey, to name just the most prominent -- in Enron's corporate web has
shaken off George W.'s post-September 11 image of being president of all
Americans and brought back the reality of his being the chief executive
officer of corporate America.

The Enron scandal pulls Americans right back to the bitter sozialepolitik of
the nineties when, as Bush himself put it in his inaugural speech, "it seems
we share a continent but not a country."

It brings back the ideological context of the landmark electoral campaign of
2000, when Bush's fellow Republican, John McCain, made an almost successful
bid to become the presidential standard bearer by focusing on one issue:
that the massive corporate financing of elections that had transformed US
democracy into a plutocracy was gravely undermining its legitimacy.
Corporate-driven globalization, we have always held, is a process that is
marked by massive corruption, and one that is deeply subversive of
democracy. Shell was a good case study in Nigeria. Scores of TNCs and the
World Bank were implicated with the Suharto political economy in Indonesia.
Now Enron strips the veil from what Wall Street used to call the "New
Economy," which showered rewards on sleazy financial operators like Enron
while sticking the rest of the world with the costs, not least of which is
what is shaping up to be the worst global downturn since the 1930's.
Which is why we have always told World Bank types who want to lecture
us on good governance that they should first tell Washington to get its house in
order. Corporate corruption is central to the US political system, and the
fact that it is legal and assumes the form of "campaign finance" funneled to
pols by "political action committees" does not somehow make it less immoral
than crony capitalism of the Asian variety.

Indeed, corruption of the Washington variety is much more damaging, because
momentous decisions purchased with massive cash outlays have not only
national but global consequences. Corrupt Third World politicians ought to
be hung, drawn, and quartered, but let's face it, the amounts of cash and
the quotient of power they deal in are peanuts compared to the scale of
influence peddling in Washington.

If Enron illustrates the folly of deregulation cum corruption, Argentina
underlines that of another facet of the corporate globalist project: the
liberalization of trade and capital flows. Some $140 billion in debt to
international institutions, its industry in chaos, and an estimated 2000
people daily falling below the poverty line, Argentina is in a truly
pitiable state.

Argentina brought down its trade barriers faster than most other countries
in Latin America. It liberalized its capital account more radically. And in
the most touching gesture of neoliberal faith, the Argentine government
voluntarily gave up any meaningful control over the domestic impact of a
volatile global economy by adopting a currency board, that is, pegging the
peso to the dollar.

Dollarization, some technocrats promised, was right around the corner, and
when that happened, the last buffers between the local economy and the
global market would disappear and the nation would enter the nirvana of
permanent prosperity. Now all of these measures were taken either at the
urging of or with the approval of the US Treasury Department and its
surrogate, International Monetary Fund.

In fact, in the wake of the Asian financial crisis, when capital account
liberalization was increasingly seen by most observers as the villain of the
piece, Larry Summers, then Secretary of the Treasury, extolled Argentina's
selling off of its banking sector as a model for the developing world:
"Today, fully 50% of the banking sector, 70% of private banks, in Argentina
are foreign-controlled, up from 30% in 1994. The result is a deeper, more
efficient market, and external investors with a greater stake in staying
put."

The Argentine technocrats seemed determined to outdo their Chilean rivals in
their obeisance to the market-interestingly enough, just as the Chileans
were beginning to question its efficacy in the volatile area of capital
flows.

As the dollar rose in value in the mid-1990s, so did the peso, making
Argentine goods uncompetitive both globally and locally. Raising tariff
barriers against imports flooding in was regarded as a no-no.

Borrowing heavily to fund the dangerously widening trade gap, Argentina
spiralled into debt, and the more it borrowed, the higher the interest rates
rose as creditors grew increasingly alarmed at the consequences of the
unbridled market freedom they had benefited from initially.

Foreign control of the banking system was no help, contrary to the Summers'
doctrine. In fact, foreign control simply facilitated the outflow of much
needed capital by banks that became increasingly reluctant to lend to both
government and local businesses. With no credit, small and medium
enterprises, and not a few big ones, closed down, throwing thousands out of
work.

Cap in hand, Argentina went to its mentor, the IMF, for a multibillion
dollar loan to meet payments on the $140 billion external debt coming due.
The Fund refused unless the government made cuts in public expenditures and
imposed a tight money policy.

As Joe Stiglitz has noted, this was precisely the mistake the IMF made in
Asia in the wake of the financial crisis: instead of reflating the economy,
you impose an inflation-fighting program that accelerates the contraction of
the economy. It seems that the Fund seems institutionally -- and
intentionally -- incapable of learning from its mistakes, and Argentina is
one more reason for why it should be abolished.

Reginald Dale, the doctrinaire free-market columnist at the International
Herald Tribune worries that the Argentine debacle may have negative
consequences beyond Argentina, chief of which are the erosion of the
legitimacy of the globalization project and a resurgence of populism, making
it impossible for the Bush administration to bring to a successful
conclusion Washington's projected Free Trade Area for the Americas (FTAA).
It is up to the movement against corporate-driven globalization to prove
Dale and the Wall Street-Washington-Houston mafia right, and not only in
Latin America.

The debacles of Enron and Argentina are so clear in their causes and so
easily explained to ordinary people throughout the world that they provide
the perfect handle with which the movement can regain globally the momentum
it lost on September 11.

As they say in Texas, "let's git em buzzards."
(Dr. Walden Bello is executive director of Focus on the Global South and
professor of sociology and public administration at the University of the
Philippines.)