Thursday, July 11, 2013

“Operation Lionfish” Highlights the Caribbean’s Comparative Advantage
July 11, 2013

1887In economic textbooks the theory of comparative advantage is regarded as a fundamental cornerstone of how economies are organized. Plainly stated, comparative advantage occurs when one country (or in this case a group of countries) specialize in the production of a particular product due to the fact it can produce this product more efficiently than its competitors. Thus, with each country specializing in a particular industry or product it is assumed that all countries will become better off.

This was the assumption guiding the decision by the World Trade Organization to put an end to the Caribbean’s protected trade with several European nations because it undermined the fundamental principles of free trade. With the distortions in the market eliminated by the adoption of free trade, it was assumed that the Caribbean would be able to specialize in other industries, particularly tourism and offshore banking.
Due to a few fundamental errors in the theory of comparative advantage—such as the assumption that the resources (eg. land, labor, and machinery) used in one industry can be absorbed by another and that there are no negative consequences of the shift (ie. externalities)—the experience of the Caribbean stands as an important case study as to why theory does not always bear out in reality.

Firstly, the new shifts in global trade prioritized highly educated workers in the new offshore financial sector—jobs which were out of reach for the newly displaced farmers. Secondly, tourism is highly dependent on imported goods, with an estimated 80% of the food served in Caribbean hotels being imported. Thus, the lack of opportunities for the many farmers throughout the Caribbean resulted in an increase of unemployment, urban migration, and reduced government revenues. To paraphrase what I have been told by several economists on the topic “So what, that is capitalism, economies change and people have to retrain and find new jobs.” This is the so what.

On July 3, it was announced that Interpol conducted an operation known as “Operation Lionfish,” which seized nearly 30 tons of cocaine, heroin, and marijuana with an estimated street value of nearly one billion dollars. The operation was conducted across the Caribbean and Central America, spanning 34 countries and territories and involving the World Customs Organization (WCO) and the Caribbean Customs Law Enforcement Council (CCLEC) with assistance from the French Coastguard, the Royal Canadian Mounted Police (RCMP), and Europol.

While the seizure is being portrayed as a great success for hemispheric law enforcement cooperation, it also highlights the failure of alternative and realistic sources of employment to emerge in the region since the shift away from protected trade. While blame certainly can be shared among Caribbean leaders, the United States, International Financial Institutions, and multinational corporations—the reality is that the forced reformation of Caribbean economies away from agriculture without adequate resources to prepare for the socio-economic fallout set up the region for a nearly impossible challenge.

Now during times of across-the-board austerity and reduced revenues, Caribbean governments are being expected to help the United States win its “War on Drugs” with increased law enforcement spending. At the same time, this funding is shifting away from much needed social programs, education, healthcare, and infrastructure projects. The sad truth is that remittances and the drug trade (the drug trade in Jamaica is estimated at having a value of nearly 80% of the legitimate economy) have played a significant role in preventing many Caribbean economies from imploding—but at the steep cost of a social breakdown.

It is this growing violence associated with the drug trade and rising inequality which are the “externalities” which are not calculated into the cost of reorganizing national economies. The tragic story is the same when it comes to Haiti’s experience with rice and Mexico’s experience with corn—it was assumed that sweatshops would absorb those displaced from farming.

Contrary to the ideas of the United States, the War on Drugs cannot be won by simply trying to shoot one’s way out of it. There are deep structural causes which provide a steady stream of foot soldiers into the drug trade; many young people are growing up without a source of hope or opportunity. Thus, it is in this situation where Caribbean leaders need to take a look at how their economies are developing and who is being left out—and the subsequent consequences of these changes.

Caribbean leaders have implemented the prescriptions of the economic experts, and they have failed to bring about increased prosperity in the region. Regional leaders need to stand united and state that they are seeking to put the priorities of their people first and are not willing to be bullied by capital anymore. Whether it will happen is another matter entirely. It will reveal to the people of the Caribbean whether or not Caribbean leaders and their supposed “partners” such as the United States or the International Financial Institutions want to address the root of the problem or if they are happy with the Caribbean’s current comparative advantage. It is a status quo which has failed the people of the Caribbean both in theory and in practice.

Thursday, July 4, 2013

Revisiting the Cincinnati Enquirer vs. Chiquita
July 4, 2013

1882Given the ongoing debate surrounding Edward Snowden and Bradley Manning—and whether or not they committed a crime or acted in the public good—it is fitting to revisit a case that showed how the “illegitimate” gathering of evidence was considered a more serious crime than that of engaging in widespread murder, bribery, arms trafficking, and knowingly poisoning the environment of communities throughout Latin America. It is the story of the Cincinnati Enquirer vs. Chiquita Banana.

In 1998, Mike Gallagher and Cameron McWhirter, two investigative reporters from the Cincinnati Enquirer, published an 18-page expose which revealed that Chiquita banana (headquartered in Cincinnati) was engaged in wide ranging human rights abuses and environmental crimes. The journalists had worked with Chiquita lawyer George Ventura, who provided access to Chiquita’s internal voicemail system. They were able to obtain confidential information about Chiquita’s role in widespread criminal activity by monitoring internal communications.

Shortly after the publication of the story, the Cincinnati Enquirer had to issue both a retraction and apologize not for the acts being untrue—but for the way in which Gallagher and McWhirter gained their information. In addition to the apology and retraction, the Cincinnati Enquirer was forced to pay Chiquita a settlement of over $10 million for damages. Both Gallagher and Ventura were convicted of stealing Chiquita’s internal voicemails—with Gallagher being immediately fired from the paper. The ruling was a clear statement that investigations of corporate wrongdoing was subject to severe punishment and should be discouraged by the example set by the Cincinnati Enquirer. While the articles were retracted, they are still available here on the WikiLeaks website.

Clearly with the case of Chiquita, it did not learn its lesson—as the damaging reports from 1998 did nothing to stop it from admitting to paying Colombian right wing death squads in 2003. Represented by current Attorney General Eric Holder, Chiquita claimed that they were being extorted by the groups and had to pay the money in order to protect their workers. Mario Iguaran, the Attorney General of Colombia claimed otherwise, bluntly stating that "this was not payment of extortion money. It was support for an illegal armed group whose methods included murder."

Simply, the attempt by the court system to erase any wrongdoing from Chiquita’s record allowed it to continue with the status quo and terrorize communities throughout Latin America. According to Iguaran, Chiquita's payments to the AUC paramilitaries (an organization listed as a terrorist organization by the U.S. State Department) led to the murder of 4,000 civilians in the banana growing regions of Colombia and funded the growth of paramilitary organizations throughout the country. Additionally, court documents have shown that a shipment of 3,000 AK-47 assault rifles and 5 million rounds of ammunition from Nicaragua to Colombia in 2001 was invoiced to Chiquita.

This shows the double standard that exists between the people on one side and corporations and the government on the other. In the Snowden controversy, the Obama administration has defended the actions of the National Security Agency by stating that their monitoring of the civilian population allowed them to prevent terrorist attacks—thus Snowden is a criminal and the government was seeking to protect the public. In the case of Chiquita, Gallagher, McWhirter, and Ventura exposed the criminal activities of a multinational corporation with close ties to the United States and Colombian governments in addition to terrorist organizations—yet they were the ones who were punished. It was only five years later in 2003 that Chiquita was forced to pay a $25 million fine for their criminal activities throughout Latin America—with none of the money going to the affected communities.

Despite the U.S. Justice Department stating that Chiquita's payments to the paramilitaries ''were reviewed and approved by senior executives of the corporation, to include high-ranking officers, directors and employees,'' they did not list specific names to avoid wider measures of accountability. What the Cincinnati Enquirer revealed about Chiquita Banana was the stranglehold that corporations have over the legal system and the double standard regarding the application of justice. The courts deemed that the crime committed by Gallagher, McWhirter, and Ventura was more serious than the multitude of crimes committed by Chiquita.
In the end, the issue of whistleblowing and the government's response is dictated by unequal relationships of power. Actions which challenge the status quo and shed light of matters regarded as inconvenient by governments and multinational corporations will be portrayed as illegal or unethical, while those which seek to further cement the legitimacy of everyday criminal activity by the powerful is applauded. Eventually, in July of 2012, Gallagher had his record expunged by the courts, but not after having his career destroyed and his courageous work silenced.

One glimmer of hope regarding Chiquita being held accountable for its criminal activities is the ongoing lawsuit in a Florida court brought about by thousands of Colombians, who are the relatives of victims, in seeking to hold the company accountable for murder, torture, and environmental destruction. Villagers allege that the death squads used “random and targeted violence in exchange for financial assistance and access to Chiquita’s private port for arms and drug smuggling.” Furthermore, over 5,500 pages of documents contradicting Chiquita’s claim that it was extorted by Colombian paramilitaries have been released and are available online here. Chiquita’s continued involvement in criminal activity highlights how large and influential corporations feel as if they are above the law. Openly lying to the court and paying a relatively small fee in proportion to the damage they have caused across Latin America is not evidence of justice—it is blatant evidence of corruption which go up to the highest levels of government.