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Greetings from Global Policy Forum and Happy New Year!
As the old year ended, one of the major stories in the media concerned the scandal of former German Chancellor Helmut Kohl. While in office, Kohl accepted large amounts of cash for secret political slush-funds in contravention of German law. It seems that he and some of his subordinates accepted millions of marks in cash from wealthy persons and corporations. Kohl has claimed that he was doing no wrong, only trying to protect the anonymity of persons making contributions to the election campaigns of the Christian Democratic Union. This alone was illegal. But allegations now go much further. Millions may have been stashed away in personal accounts in Switzerland, carried across the border in suitcases stuffed with large-denomination bills.
The secret funds also appear to have been connected to a number of lucrative business deals. A French oil company paid millions in slush-money and then bought a large state-owned refinery in Leuna for a very favorable price (official records of the deal have mysteriously disappeared). Also a German businessman won a large state contract soon after paying a hefty sum to the Chancellor. Many millions may have found their way into personal accounts. The new leader of the Christian Democratic Party, Wolfgang Schäuble, has also admitted to taking a paper bag stuffed with money from another "contributor."
When we were last in Berlin, in September 1999, we distinctly remember a German television program in which it was being argued that the German government should reduce its regulatory controls over banks so that Germany could become more "competitive" with Switzerland and Britain in the banking sector, especially "private banking." Such a step, would obviously ease the burden on corrupt officials (among others), who now must drive all the way to Switzerland with their hot money! The Kohl scandal will hopefully block such changes. In fact, it should be a stimulus for far greater financial oversight at the European level and internationally -- not "voluntary" controls by the banking industry, but controls established by regional and international public authorities.
When learning the sordid details of the Kohl scandal, we thought about our exchange with a high German Foreign Ministry official, as reported in our list-serv in September. His casual attitude towards Western responsibility for corruption in Russia surely reflects a rot in the higher reaches of the German civil service and government. We also thought of our friend Peter Eigen, Chairman of Transparency International, a Berlin-based international NGO that campaigns against corruption. Thanks to Peter's leadership, the German government recently outlawed the practice of paying bribes to foreigners for business contracts, an expense that formerly (under Kohl's government) was not only legal but tax deductible. We can only hope that Transparency will now propose new steps to check the cancer of corruption in Germany itself.
Corruption seems rampant everywhere, eroding public confidence in government (we have established a special area of the GPF web site to monitor this). In Italy not long ago, the dominant Christian Democratic Party was so tainted by corruption that it has virtually disappeared. The United Kingdom, Ireland, Belgium, and Holland have all been racked by corruption scandals in the recent past. In the Czech Republic, citizens recently marked the tenth anniversary of the Velvet Revolution by a massive protest against official corruption, demanding the immediate resignation of the discredited government. In "market democracy," it seems that one of the most lively markets is in public officials. Great states, that prefer to give lessons in "governance" and civic virtue, offer as sordid a picture as banana republics.
On Friday, December 17, the United Nations Security Council finally voted on Resolution 1284, the new comprehensive resolution on Iraq. This, too, proved a sorry spectacle, after more than six months of secret maneuvers and Byzantine diplomacy among the permanent members. In the end, the lengthy resolution failed to win the support of three permanent members (Russia, China and France) as well as Malaysia, who all chose to abstain. The resolution passed, but with weak authority. British ambassador Sir Jeremy Greenstock, president of the Council, insisted that all members now have a responsibility to implement the agreement. But privately, few observers think the resolution will "stick" or that Iraq will agree to its terms. The resolution relaxes somewhat the previous draconian restrictions on Iraqi trade, but leaves firmly in place a deep humanitarian and political crisis, greatly worsened by the sanctions. Amid all the fulminations in the Western press about Russian perfidy and French "commercial interests," few commentators took the trouble to examine the global oil interests based in the United States and the United Kingdom and how they might have influenced the outcome.
For the past hundred years, the core international business interests of the US and the UK have been in the petroleum sector and these far-flung oil empires have always depended on raw military power for their defense against international competitors and local threats. We were reminded of the enormous influence of the US-UK multinationals the other day when we read a table in Le Monde Diplomatique (posted this week on the site), showing that among the world's fifty top corporate giants, thirty-eight are based in the US and the UK (76%), representing 81% of market capitalization. Somewhat surprisingly, Japan is fourth on this list (after Switzerland), followed by Germany and France. By every measure, the US-UK firms are also the most profitable.
It should be no surprise that these vast companies are claiming a new authority at the United Nations and that desperate UN officials are holding the door wide open in welcome. Secretary General Kofi Annan has made his corporate-friendly policies clear enough, but his policies appear downright cautious by comparison to the new Administrator of UNDP, Mark Malloch Brown, whose unrestrained enthusiasm for corporate partnerships and corporate-friendly policies has shocked and embarrassed his staff and scandalized the ambassadors from the G-77, the grouping of poor countries that UNDP is supposed to serve. UNDP, in its comprehensive new policy document states that its "brand name" has "lost value." It is time, says the report, for UNDP to reinvent itself, to "relaunch the brand" and take on new priorities, notably promoting "good governance" in the world's poor countries. In light of the Kohl scandal, the Czech corruption, and the government-by-money of the rich countries, the project of instructing the world's poor countries on how best to govern themselves seems at once laudable and monstrously cynical.
If the governments of the North are to give instructions in democracy, we should also consider the anti-democratic nature of the Bretton Woods institutions (that the Northern governments, especially the United States, control). And we should consider the message the BWI policies convey to the governments of poor countries -- "Our way, or else!" Joseph Steiglitz, outgoing Vice President and Chief Economist of the World Bank, published a blistering article criticizing this approach in the most recent issue of The Economic Journal, a publication of the Royal Economic Society in London. He said that the poor countries "must make the decisions themselves" on their economic policy. He confessed to the lack of democratic controls over the Bretton Woods Institutions. And he made it clear that he thought debate, dissent and democratic differences were a good thing "though they may be uncomfortable to those wishing to ensure that their views prevail, but that is one of the 'prices' we pay for democracy."
For these words (and other statements against Bretton Wood autocracy), Steiglitz came under increasing pressure from World Bank President James Wolfensohn. At the end of November, he finally decided to resign, only months before the end of his contract. "It has become obvious to me," Steiglitz said, "that it would be difficult to continue to speak out as forcefully and publicly as I have on a variety of issues and still remain as chief economist. Rather than muzzle myself, or be muzzled, I decided to leave."
In our upcoming list-serv, we will provide further information about Steiglitz's critiques, as well as the latest from the UN and comments on the biggest ever megamerger of transnational corporations.
Til then, we send readers warmest wishes from Global Policy Forum for a happy, humane and democratic New Year!
