May 15, 1991 — Dean Henderson
The International Capitalist Economy
Development decisions, whether made by public administrators in Montana or in the Third World are presently made within the parameters allowed for by the international capitalist economy. The structure of this economy allows for absentee land owners, transnational processors and their creditors to exploit resources and labor on a global scale. Local people who produce actual wealth with their labor are forced into price competition with workers half way around the globe and are left in poverty by those who control the means of production, processing and marketing of the goods they produce.
The rise of the multinational corporation (MNC) created a global factory. Where once sovereign North nations colonized certain South nations, MNCs with no particular allegiance to any national emblem are now free to plunder any area of the globe where labor happens to be cheap, where a local government is conciliatory and/or where resources are abundant. Though in general a North/South dichotomy of rich and poor nations still prevails, certain areas lying within Northern regions of the globe, such as Montana, have suffered exploitation of resources and labor similar to that of Southern nations.
In the absence of significant international labor unions, MNCs are able to utilize their great mobility to manipulate the vast global labor pool. If cane workers in the Dominican Republic become disgruntled with the low wages and dangerous conditions on a Gulf & Western sugar plantation and demand fair play, G&W can simply hire desperate Haitian immigrants to replace them. Disparity in the value of national currencies also plays into the hands of the MNCs. Countries where currencies are undervalued- a common IMF/World Bank prescription for Third World debtor nations- offer extremely cheap labor to the MNCs. In this climate of MNC blackmail and coercion, workers in neighboring countries are often found competing for meager wages. Governments attempting to provide employment opportunities for their restless people are often subservient to MNC demands, including generous tax holidays and subsidies.
Multinational corporations and international banks led by the World Bank and IMF have historically promoted an export-led path to development for Third World nations. Often one or two commodities, exported in raw form, come to provide the backbone of Third World economies. The beneficiaries of this strategy of “development” are MNC shippers, processors, packagers and marketers who depend on South-South competition to create continual surpluses of all commodities, thus driving down world market prices for these commodities, which provide MNC middle-men with cheap factory stock. A handful of local elites are cut into this scheme to ensure continued compliance by the producer nation.
The power and influence over Third World economies by MNCs can be illustrated by the history of United Fruit Company (now United Brands) in Latin America. Until very recently the company held a complete monopoly over banana exports from Honduras, El Salvador, Nicaragua, Guatemala, Costa Rica, Panama, Columbia and Ecuador. United Brands also monopolized the shipping of these bananas to the US and Europe, as well as importation and distribution of the fruit in the North nations. (Galeano, 114) In 1928 United Fruit goons gunned down striking peasants on the largest latifundio in Columbia, then took the plantation over. During the 1930’s the company massacred thousands of Salvadoran peasants in what became known as La Matanza. In 1954 it provided planes and funding for the CIA overthrow of the democratically-elected Arbenz government in Guatemala after Arbenz attempted to buy up the company’s vast landholdings (only 8% of which were even under cultivation) for redistribution to landless campesinos. (Galeano, 123) Following the 1979 Sandinista revolution in Nicaragua United Brands executive Francisco Urcuyo briefly stepped in as President after his friend Anastacio Somoza was forced to flee to Costa Rica. Until the 1980’s, United Brands virtually governed Honduras.
The company’s influence is so great that they operate outside the purview of Customs in these countries. A DEA report cited United Brands banana boats entering Baltimore harbor as suppliers of one-half of all US bound cocaine during the 1970’s. The company still exerts enormous power in Central America, where much of its previous holdings have been sold to wealthy local contract farmers who agree to sell their bananas to United Brands. In this manner, the farmer takes on all risk associated with weather, pests, disease and nationalization; while United Brands is ensured a steady stream of cheap bananas. Honduras remains an exception to this rule. Here the company still owns vast tracts of land and is frequently caught bribing government officials.
Many IMF/World Bank-funded projects involve the mono-cropping of luxury crops for export to the North. The owners of these plantations are either local elites allied with MNCs or the MNCs themselves. In the Dominican Republic, for example, Gulf & Western controls the La Romana Free Zone, an export processing zone set up under the David Rockefeller-funded Caribbean Basin Initiative where workers are paid $.34/hour to harvest G&W sugar. (Barnet, III) Much of the foreign exchange which G&W claims to be providing the country by exporting its sugar actually ends up being blown on G&W tourist schemes or is exported back to the US to purchase equipment for G&W operations. (Moore Lappe, 231)
In the Philippines MNCs control 75% of all agricultural exports. Most of these are luxury crops with pineapple being the most important. In 1926 Del Monte seized peasant lands on the Philippine island of Mindanao to establish their first pineapple plantation in the country. When the angry peasants resisted, the company called in the Tad Tads, a group of right-wing religious fanatics, who hacked the peasants to bits with machetes. (Miller, 32)
By 1929 US investment is Chile exceeded $400 million. Most of that was in the copper industry, which was controlled by two giant MNCs- Kennecott and Anaconda. In 1969 Anaconda alone garnered a $79 million profit from its Chilean mines or 80% of the company’s global profit for the year. (Galeano, 161) When Salvador Allende was elected President of Chile a short time later he moved to nationalize the copper mines held by Kennecott and Anaconda. Under pressure from Anaconda owner David Rockefeller and his long-time lieutenant and then-Secretary of State Henry Kissinger, President Nixon ordered the assassination of Allende by the CIA in 1973. General Augusto Pinochet seized power and provided protection for MNC interests while embarking upon a reign of terror against the Chilean left.
The Rockefellers had purchased Anaconda with their Standard Oil monopoly in 1899. That year the tiny town of Anaconda, Montana became home to the world’s largest ore smelter and Montana soon produced 23% of the world’s copper. Anaconda Company, which has since been purchased by ARCO (now itself part of BP Amoco), still owned seven out of the fourteen daily newspapers in Montana as of 1959. The company’s history of violence against striking Butte mineworkers is legendary and culminated in the assassination of IWW leader Joe Hill. The company also controlled vast tracts of Montana timberlands until the late 1970’s, when they sold the lands to another MNC- Champion International. The Anaconda Company’s influence on Montana underdevelopment cannot be understated.
Another giant mineral cartel with tentacles in both Montana and the Third World is American Smelting & Refining (ASARCO). In addition to mines in Mexico, Bolivia and Chile; ASARCO, which is also controlled by the Rockefeller fortune, owns Southern Peru Copper Corporation and Corporacion Minera Nor Peru SA in Peru, now a leading world exporter of copper. In Montana ASARCO owns the biggest copper mine in the US- the Rock Creek Mine just outside of Troy, MT. It also owns numerous smelters, including the massive East Helena lead smelter, which is far and away the leading polluter in Montana. Leukemia is rampant among children living in East Helena. Ninety percent of all the lead processed at the smelter comes from Peru.
Joe Drexler, an international organizer for the United Mine Workers who organizes at the Troy mine sums up ASARCO’s Montana-Third World connection succinctly, “What good is a company that cripples its workers, exports the wealth and leaves a mess? During strikes against ASARCO in Peru union leaders were killed. Here we are being treated like the Third World!”
Exporting Jobs & Profits
By hitching its wagons to corporate-controlled extractive industry, Montana has coalesced to its own underdevelopment. Raw materials are exported at rock bottom world market prices and the revenue goes into out-of-state corporate bank accounts. Copper is only one example of this neo-colonialism.
In 1864 Northern Pacific Railroad received nearly 40 million acres of free land throughout the West in return for building a railroad to transport settlers into the new frontier. The company later merged with Great Northern Railroad to form Burlington Northern. The merger was financed with junk bonds issued by J. P. Morgan and it wasn’t until 1988 that BN settled with Morgan’s heirs. (Josephson, 417) BN diversified its interests into natural resources, purchasing Glacier Park Inc., Meridian Oil, Meridian Minerals and Plum Creek Timber. Plum Creek currently operates on the 900,000 acres of free Montana timberland which the railroad came to control, despite the fact that it never fulfilled its agreement to build the railroads it said it would. In 1989 fully one-half of all Plum Creek timber harvested was exported as raw logs to Asia. (Porterfield, 7)
The two arguments presented by Plum Creek to show that their colonial extraction is good for Montana are that they provide an important tax base and that they provide jobs. Yet in 1988 the company paid $0 in taxes to the state of Montana, while neither Plum Creek nor BN paid any federal taxes, due to reorganizations that made them limited partnerships and thus exempt under new Reagan tax loopholes. The jobs argument is equally transparent. US timber firms export 4 billion board feet of raw logs to Japan each year. This represents a loss of 10,000 jobs/year for American sawmill workers. (Porterfield, 8) Mechanization of Plum Creek mills has also cost the state of Montana jobs.
According to the Montana Bureau of Business and Economic Research, between 1979-1986 2,000 jobs were lost in the state due to mechanization and raw log exports. An estimated 3,000 more will be lost by year 2000. Meanwhile industry wages have decreased by 13%, labor costs are down 53%, output per worker is up 80% and total production is up 30%. Mechanization and lack of value-added production also put a severe strain on Montana’s ecosystem. More trees can now be cut in less time and with less workers. And more trees are required to keep Plum Creek’s retooled high-tech mills running at full capacity.
Similar patterns of mechanization haunt Third World workers and resources. In Columbia a group calling itself the Farm Mechanization Working Group has formed the School of Agricultural Mechanization to promote the use of high-tech Western machinery and chemical fertilizers by Latin American farmers. Behind the group are powerful MNCs such as Caterpillar, John Deere, Fiat, FMC, Massey Ferguson, Mitsui, BP & Shell. (Moore Lappe, 176)
Mechanization in and of itself is not necessarily negative. But when Western technologies are promoted as a fix-all for Third World problems, it has more to do with capitalist venture than with sincere attempts at development. Montana, like the Third World, must develop its own technologies, ones that suit our particular needs. This will decrease dependency on imports of spare parts, machinery and chemicals which are very costly.
Another barrier which stands in the way of development in both Montana and the Third World is the trend towards increased urbanization of the populations. As people are forced off their land by the economic hardship caused chiefly by the low world commodity prices which MNCs promote, they relocate to urban areas where they lose their ability to feed themselves and become more dependent on the international capitalist system. Much of the rural flight in Eastern Montana and many Third World nations can be attributed to a consolidation of economic power in the world food system and to government policies which have legitimized this consolidation.
In 1963 Melvin Middents met with President Kennedy to propose the Middents Plan. The plan, which was adopted immediately under heavy lobbying pressure from agribusiness interests, proposed subsidizing US farmers. In reality the ensuing government price supports for commodities which the plan called for helped international grain conglomerates most. By forcing the governments of countries to pay farmers a subsidy for grain, the MNCs get away with paying the farmers a lower market price. It was no coincidence that Middents was a grain trader at the world’s largest grain company, the Minneapolis-based titan Cargill, which controls a full 25% of the global grain trade. (Morgan, 173) Cargill and five other giant firms- Continental, Bunge, Mitsui/Cook, Louis Dreyfus and Andre- have controlled the global grain trade since the 19th century and today account for 85% of the world’s grain flows. All but Mitsui/Cook are privately held by aristocratic families. At Cargill 33 members of the Cargill and MacMillan families and a handful of senior executives own virtually all the company’s stock. (Wessel, 104)
These firms are also vertically integrated. Cargill, for example, is the 2nd largest flour miller in the US, owns the largest US cattle feedlot operation, is the world’s leading crusher of soybeans and rates second in global animal feed production. They are the #2 US beef packer, the #3 US pork packer, the #3 US turkey producer, the #4 US egg producer and the leading exporter of Brazilian orange juice. They own a huge fleet of container ships through their Panamanian Tradax subsidiary and grain terminals at most major world ports.
These food oligopolies have wiped out and swallowed up much of their competition, leaving small producers in Montana and the Third World little choice but to sell their various commodities at whatever price they can get from these MNCs. Many farmers have been run out of business by the low prices offered by the grain traders. Others survive only because of government subsidies and massive bank debt. Those who leave farms move to growing urban centers. Sioux Falls, South Dakota is the largest city in that farming state. In 1980 its population was 72,000. By 1989, after a decade of economic hardship for the state’s farmers, its population eclipsed 100,000. Population influx into urban centers is even more pronounced in the Third World. It is estimated that by year 2000 the population of Mexico City, for example, will swell to over 20 million.
Often the same MNC grain traders end up owning the fleeing farmer’s land. In 1971 Bud Antle, a subsidiary of Mitsui/Cook, along with the World Bank and German Development Bank, bought a huge tract of land in Senegal for production of lettuce to be exported to Europe in winter. Much of the land was simply taken from peasant farmers, most of whom ended up migrating to the crowded streets of Dakar. (Moore Lappe, 286)
As urbanization gains steam, people become more dependent on the imported food handled by the grain giants. In 1973 Continental Grain built a flour mill on the Congo River near the Zairian capital of Kinshasa. Since the dictator Mobutu-Sese-Seiko had come to power following the CIA assassination of Congolese nationalist Patrice Lumumba, wheat imports had steadily increased. What started out as PL 480 US food aid soon became a gold mine to the grain oligopolies as Mobutu and his MNC cronies seized peasant lands and Kinshasa’s population swelled. These dispossessed farmers, with help from Continental, soon developed a taste for bread. This process of bread substitution was praised by the US attache in Zaire, who noted that bread was, “winning the war against chilwanga (manioc) at the breakfast table”. (Barnet, I)
Similar dependencies were fostered by Cargill in formerly rice-eating South Korea and by Ralston Purina and Quaker Oats in Columbia, where 407,550 acres of peasant lands in the Sabana de Bogota Valley were forced out of production due to these companies’ US government subsidizes cheap wheat imports. (Moore-Lappe, 374)
The barriers I have presented above are all components of a neo-colonialism carried out by the global oligarchy at the expense of the majority global poor. Political borders are not as important as class lines in this analysis. Solutions are actually quite obvious. Development is not an insurmountable task. It is a matter of our leaders possessing the political will necessary to alienate the minority rich class (a class to which most of them belong due to the insidious intersection of money and politics), while embracing the needs of the majority. Each of the following three proposals represent moves towards self-reliance, local autonomy and redistribution of wealth:
(1 Increase domestic manufacturing, processing and technological research
(2 Encourage small-scale rural based projects and development
(3 Increase and enforce taxation of MNCs
Focus on Domestic Manufacturing
In both Montana and the Third World it is necessary for governments to increase manufacturing, processing, packaging and transport of raw materials. Primary to this task is the funding of value-added research at the university level. Simultaneous to this research, people should be trained in the implementation of these schemes so that reliance on outside “experts” is reduced. Value-added processing reduces capital flight and increases revenues which the state/country earns from its raw materials, while at the same time providing needed jobs. By adding value to raw materials prior to export, less raw material needs to be harvested, thus lessening negative impacts on the local ecosystem.
Types of manufacturing and research will depend on the state/country’s raw material resources. In Western Montana universities, value-added processing of logs, mineral ores and petroleum/natural gas should be studied; while at Eastern Montana universities the emphasis should be on grain milling technologies and the clean processing of coal. In Ghana research would focus on nickel processing and chocolate factories, while in Jamaica the universities would focus on producing aluminum from the country’s rich reserves of bauxite. Currently these manufacturing processes are closely held as trade secrets by the MNC and technology transfer to host governments has not been forthcoming.
At the same time domestic manufacturing is increased, import substitution should be discouraged. Tax breaks should be given to farmers who use organic fertilizers such as manure instead of expensive chemicals which keep the farmer in debt, while poisoning the ecosystem. Likewise, loggers who use horses to skid logs rather than buying expensive imported machine skidders should receive tax breaks. Credit should be readily available from a state-owned bank at low interest rates for those who buy local materials since this stimulates the local economy. Private banks should be required to invest a certain percentage of their earnings and deposits in-state/country. At the same time imports of luxury items, MNC plant machinery and other expensive capital intensive debt-trap imports should be heavily taxed to discourage dependency on transnational capital.
Conversely, raw material exports should be discourages through heavy taxation. Highly strategic industries such as mining, food processing and oil refining should be nationalized or state-owned. Other industries such as farming and forestry should be focused on a more bioregional and local level. Local milling and value-added processing can produce products which can then be packaged for export as a finished good. In this manner, the state/country receives the maximum amount of revenue, while providing high-paying technical jobs for local residents. An example of this would be the establishment of a “Montana-made” furniture industry, which could cater to wealthy Japanese and East Coast customers. Such a labor intensive industry would provide more jobs with less timber harvested and would bring more money into state coffers.
Small-Scale Rural Development
To combat urbanization and its resultant dependencies, emphasis should be placed on rural development projects. To decentralize economic power these projects should necessarily be small-scale cooperative efforts, run by the people who live in the project area. Tax incentives should be provided for families who wish to de-urbanize. Rural education should be well-funded, as should rural health care. Both have been sorely neglected of late in the US in favor of urban education and health facilities. The value-added endeavors mentioned above should be located in the very rural areas from which the raw materials necessary for manufacture are derived. This will decrease transportation costs and serve as a disincentive towards further urbanization, possibly even reversing this negative trend.
Organic food cooperatives should be encouraged in food-producing areas through tax incentives, local market developmental assistance and even construction of centrally-located warehouses for storage. Banks should be forced to provide low-interest credit for such projects, while national chain store supermarkets which operate in the state/country should be forced to buy locally produced organic food.
In Montana we should utilize the state’s natural beauty to our advantage by keeping our ecosystems pristine and intact. Tourism and wildlife recreation related activities are currently the second leading revenue generators for the state. With proper promotion of our hunting and fishing outfitters, our hotels and bed & breakfasts, and our eco-tourism businesses; revenue can be increased further. Out-of-state hunting and fishing license rates should be dramatically increased, since the clientele is extremely wealthy and would be willing to pay much more for their Montana wilderness experience. These types of non-extractive industries should be rewarded with tax breaks and easy credit. Retraining and environmental education should be made available for extractive industry workers moving into the value-added, organic food or tourism sectors.
Cooperative milling ventures should be promoted for Eastern Montana’s farmers and cooperate slaughterhouses would help area ranchers break the meatpacking monopoly. The raising, processing and marketing of “Montana-raised organic beef” should be promoted with incentives since this value-added product could prove a boon to the state. Rural adult education programs should be conducted with special emphasis on career options, self-sufficient living and cross-cultural education. In Montana this would mean learning from our state’s seven Indian tribes. In Guatemala it would mean introductions to Quechua, Kachikkel and Mam cultures.
In urban areas recycling plants and garbage dumps should be run by the municipal government and alternative transportation systems should be researched to reduce pollution and dependency on imported oil. High-speed superconductor trains could not only provide city transportation, but could link regions in an efficient and ecologically friendly manner. Revenue from recycling and garbage facilities could channeled into a fund to enhance bike trails and construct public transportation networks.
Increase Taxes on MNCs
Since 1981 Montana’s tax base has been reduced by $128 million. As stated earlier, Plum Creek and Burlington Northern currently pay no taxes to the state. The same is true of numerous other MNCs, who also fail to pay taxes in many a Third World country in which they operate. Instead, they often receive tax credits just for showing up. In 1987 alone, Montana granted $38 million in valuable tax base to several coal mining companies. Just weeks ago Westmoreland Mining Co. was granted a million dollar tax break on its Eastern Montana coal operations. (Towe)
Taxes should be levied on a progressive sliding scale with the largest businesses paying the highest rates, since they have obviously benefited the most from society to have gotten so large in the first place. Gross income should be used as a basis, so that MNCs would pay the highest rates, while local businesses would pay much less. Such an increase in MNC taxation may well drive certain corporations to other locales, so this effort should be coordinated as much as possible with other governments. Some MNC assets should also be nationalized.
Still a look at US states reveals that a high corporate tax state such as Minnesota, while losing some jobs to low tax neighbors like South Dakota, has retained most corporate operations due to the high education level of its work force, a quality park system and a top-notch health care system; all of which were paid for by precisely the high corporate tax rate. In other words, MNCs are often willing to pay a higher tax rate for such benefits and the risk of corporate flight is exaggerated as a scare tactic.
If we are to develop this state’s economy we must dramatically raise taxes on these Wall Street businesses. This requires a rejection of the neo-colonial mindset of subservience to foreign capital which has been well-cultivated here by decades of colonial extraction of our many resources and exploitation of our workers. We should demand that corporations like Burlington Northern, Plum Creek, Champion, ASARCO, Noranda, Louisiana Pacific and Chevron pay their fair share of taxes as well as a fair price for our resources. If they refuse, they can leave and we can train local people to fill the void through more sustainable value-added industries. As former State Senator Thomas Towe stated, “Tax relief for natural resource exploration companies not only does not work, but it makes our colonial economy even more colonial.” If we fall short of implementing laws which transfer key industries to local control, then at least we should make Wall Street speculators and the idle rich pay dearly for our treasures.
There are many similarities between the economy of Montana and that of a Third World South nation. Both struggle against the tyranny of absentee robber barons who have, in large part, even rewritten the histories of their various colonial jewels, so as to mask reality. We must first admit the unpleasant aspects of our history if we are to make future change. We must face our colonial masters squarely with courage and without delusion. For only when we finally comprehend the global reach of these money powers will we be able to plot a course for sustainable development, while feeling solidarity with our South brothers and sisters, who struggle against different tentacles of the very same beast. Working together, we can help one another liberate our respective regions from the shackles of neo-colonial underdevelopment.
Development Administration 463, Final Individual Project, U of Montana, Dean Henderson, Spring 1991
The rich man is always sold to the institution which makes him rich. Absolutely speaking, the more money, the less virtue; for money comes between man and his objects and obtains them for him-
Henry David Thoreau, On the Duty of Civil Disobedience, 1849
David Rockefeller is the conspicuous representative of the ruling class, a multinational fraternity of men who shape the global economy and manage the flow of capital-
Bill Moyers, The World of David Rockefeller
What we call progress is a mysterious marriage of creativity and plunder. Civilizations have flowered when humans have devised ingenious ways to organize production. This has historically been accomplished with stolen goods- Richard Barnet, A Reporter at Large: The World’s Resources
Barnet, Richard J. “A Reporter at Large: The World’s Resources”. New Yorker. 3 parts.
Galeano, Eduardo. The Open Veins of Latin America: Centuries of the Pillage of a Continent. Monthly Review Press. New York. 1973.
Miller, Brad. “Land Grab in the Philippines: US Corporations Make Their Own Law”. Progressive. 11-89.
Moore Lappe, Francis & Joseph Collins. Food First: Beyond the Myth of Scarcity. Ballantine. New York. 1978.
Morgan, Dan. Merchants of Grain. Penguin Books. New York. 1980.
Josephson, Matthew. The Robber Barons. Harvest/HBJ. New York. 1962.
Porterfield, Andrew. “Railroaded: The LBO Trend on Wall Street is Playing Havoc with the Nation’s Forests”. Transitions. 2-90.
Schumacher, E. F. Small is Beautiful: Economics as if People Mattered. Harper & Row. New York. 1975.
Torrie, Jill. Banking on Poverty: The Global Impact of the IMF and the World Bank. Between the Lines. Toronto. 1983.
Towe, Thomas. “It’s Time Montana Stop Selling Itself Down the River”. Missoulian editorial. 6-18-90.
Wessel, James. Trading the Future: Farm Exports & the Concentration of Economic Power in our Food System. Institute for Food & Development Policy. San Francisco. 1983.
About the author:
Dean Henderson was born in Faulkton, South Dakota. He earned an M.S. in Environmental Studies from the University of Montana, where he edited The Missoula Paper and was a columnist for the Montana Kaimin. His articles have appeared in Multinational Monitor, In These Times, Paranoia and several other magazines.
A life long political activist and traveler to fifty countries, Henderson co-founded of the University of Montana Green Party and the Ozark Heritage Region Peace and Justice Network. He is former Vice-President of the Central Ozarks Farmer’s Union and former President of the Howell County Democrats.
In 2004 he won the Democratic nomination for Congress in Missouri’s 8th District.
Dean’s Books Available in print and e-book formats:
Big Oil & Their Bankers in the Persian Gulf…
The Grateful Unrich: Revolution in 50 Countries
Dean Henderson is the author of Big Oil & Their Bankers in the Persian Gulf: Four Horsemen, Eight Families & Their Global Intelligence, Narcotics & Terror Network and The Grateful Unrich: Revolution in 50 Countries.
His Left Hook blog is at http://deanhenderson.wordpress.com/category/left-hook-columns/
Dean Henderson is a frequent contributor to Global Research. Global Research Articles by Dean Henderson: http://www.globalresearch.ca/index.php?context=listByAuthor&authorFirst=Dean&authorName=Henderson