Month: April 2001

One Planet – April 25, 2001

Turks Take on the IMF

Turkey has what is usually called a “fledgling democracy.” This has nothing to do with how open or democratic the Turkish government is–in fact, most observers agree that the bloated Turkish military (the second largest military force in Europe) still runs the country. What the term “fledgling democracy” really means, in this case, is that the current Turkish government is in a lot of trouble because of bad advice from the IMF.

The problem started last year, when the Turkish banking industry began to collapse. The IMF had been pushing Turkey to privatize most of its state industries, and Turkish banks were on the front line to help out. However, lack of financial regulation (an IMF requirement) allowed Turkey’s private banks to make enormous, risky, largely unsecured loans to help finance some of these deals and several other idiotic financial schemes. In November, the house of cards tumbled when the government closed down 10 private banks, which left billions in unsecured debt in the hands of the government.

The IMF, however, assured Turkey that it would get a loan to cover its expenses.

In February, the banking scandal expanded to include three of Turkey’s largest banks. The outstanding debt balance grew to an astronomical $20 billion. Foreign investors fled Turkey’s stock market like rats deserting a sinking ship. The local currency, the lira, plunged to half its former value, which caused the prices of fuel, food, and consumer goods to double and, in some cases, triple. Naturally, wages remained depressed, which is a big draw for transnational corporations, but has plunged Turkey’s middle class into poverty overnight. Predictably, the IMF responded by urging Turkey to speed up its privatization scheme, not slow it down.

And so began the street protests.

Turkey’s “fledgling democracy” has created a large underclass of people who live in shanty towns surrounding its major cities. These folks are peasants and members of ethnic minorities (including Kurds) uprooted because of civil strife, military repression, lack of infrastructure, and economic problems in the countryside. In addition, the new currency devaluation has hit small, urban, family businesses (which still make up the majority of Turkey’s economy) particularly hard. In the past year, nearly 14,000 family-owned small businesses have gone under. And these people know who’s benefiting from the crisis: bankers (who are getting a full government bailout) and big businesses. And they know who’s responsible.

“The IMF wants everything done too quickly,” said Erhan Erkan, a 32-year-old taxi driver. “We are already poor people who are working hard and trying to make a living. I was very depressed watching the dollar go up and the lira go down. If you have savings, you lose money without even spending it. And now there will be price increases and new taxes.”

In late March, the street protests began in earnest. By the first week of April, they were a daily occurrence in Ankara, the capital city. They gained momentum after a small businessman–the owner of a florist shop–met Prime Minister Bulent Ecevit in the street and threw an empty cash register at him. On April 11th, 70,000 people–mostly shop owners and small tradesmen–were in the streets of Ankara, attempting to push through police lines and get into the parliament building to force Ecevit and his coalition government to resign. Perhaps they were inspired by the success of the Serbian demonstrations that unseated Milosevic.

The Turkish middle class doesn’t, however, have the military’s support (as the Serbian demonstrators did). Turkish police turned water cannons, tear gas, and finally riot clubs on the demonstrators, injuring over 200 people.

Ankara’s mayor placed a month-long ban on demonstrations. Yet union leaders organized demonstrations that drew over 40,000 people into the streets of Istanbul, the country’s financial center, three days later. The protests continue, as the Turkish government scurries to find an answer to its economic problems. The most obvious answer has already been suggested by Turkish newspapers: dump the IMF austerity program. Will they? We’ll see.

The Richest Scum in America

Every April Fortune Magazine produces its “Fortune 500” issue, which lists the largest corporations in the US and provides handy tables that show which companies and industries are most profitable. In previous years, automobile manufacturers have dominated the list, but this year GM and Ford have slipped in favor of–yes, you guessed it–oil companies.

The newly-merged behemoth Exxon Mobil is number 1 with $210 billion in revenue and profits of $17.7 billion. Other energy companies place high on the list, too, with Enron at number 7 ($13.5 billion in profits), Texaco at 16 ($2.5 billion), Duke Energy at 17 ($1.7 billion), and Chevron at 20 ($5 billion). GM and Ford, naturally, are at 3 and 4, confirming our nation’s continuing love affair with sport utility vehicles, the most efficient mass-produced global warming devices in the world.

A look at the accompanying tables confirms which industries have skimmed the most wealth from the American populace. “Fastest-Growing Companies” lists them in order: Energy, Pipelines, Mining & Crude Oil Production, Petroleum Refining, and Utilities rank 1, 2, 4, 5, and 7 respectively on this list. The categories are a bit arbitrary. Companies listed under “Pipelines”–Enron and Dynegy, for example–are also major players in the energy and utilities industries. A reasonable person would group all of these companies together under one broad “Energy” category, which would show how obscenely powerful this entire industry is. For example, the table “1 Year Growth in Profits” lists the top three industries as Mining & Crude Oil Production (473.9% growth), Petroleum Refining (148%), and Pipelines (73.2%). Most of the other industries had well below 20% growth last year.

It’s important at this point to remember that oil and energy companies were the largest contributors to George Bush Jr.’s presidential campaign last year. They could obviously afford to buy a presidency and they did.

As we all know by now, what really makes or breaks a company is what’s commonly called “Shareholder Rate of Return,” a term for what a company pays its shareholders in dividends, plus the amount its stock has increased in value during the year. Number 1 and 2 on this list are no surprise: “Wholesale” Health Care Services and Health Care Services, both passing on enormous wealth to their investors–102% and 89.2% respectively. Again the separation of companies into these two categories seems arbitrary; combining them makes more sense. And somehow, Pharmaceutical Companies (number 8) and Drug Stores (number 18) are always listed separately, as if medicines are not part of the nation’s health care system.

Skipping down the list we find Pipelines, Energy, and Utilities at number 3, 4, and 5, passing on rates of return to their shareholders of 88.6%, 67.3%, and 48.9%, well above the negative rates of return of at least half the industries on the list.

As we delve into the companies listed within each category, we find that some of the most profitable are the ones who cashed in big on the California energy crisis. Enron and Duke Energy appear on just about every list tracking profitability and fast growth. Last year Enron had 151% growth and Duke Energy 126.8% growth in revenues. Dynegy shows a 5-year growth in revenues of 51.7%, while Reliant Energy’s 5-year growth rate is 46.2%. Dynegy is number 3 on the list of “Best Investments,” producing an obscene 220% total return to its shareholders–a huge chunk of which is money paid by the government of California to bail out its bankrupt utilities.

If, for example, we wanted to take a reasonable approach to cure the “energy crisis,” (as opposed to Bush’s unreasonable approach that would pour more money into the pockets of the most profitable companies in the US) and we decided to nationalize these vital industries for “national security reasons,” exactly how much value would we receive by seizing their assets? (I can dream, can’t I?)

Enron has $65.5 billion in assets with nearly $101 billion in annual revenues. Duke Energy has $58 billion in assets and Dynegy $21.4 billion. Reliant Energy, another major supplier to the California market, owns $32 billion in assets. And these are just the little guys. Exxon Mobil, the giant energy octopus, has assets of $149 billion.

Somehow we’re supposed to believe that privatization makes products cheaper, but the past year has shown clearly that this is not true. While power prices have surged all over the West Coast, oil and gas prices have also climbed, and natural gas prices have skyrocketed. As more companies merge (like Exxon and Mobil), there are fewer and fewer players in each industry. A small number of enormous companies can easily control price levels and withhold supply, if necessary, to get the price they want.

George Bush’s moves to increase supply–particularly by providing tax credits to oil and gas companies and opening the Arctic National Wildlife Refuge and other public lands to oil and gas exploration–will do absolutely nothing to lower energy prices. Not a single, damn thing. Only breaking the backs of these giant monopolies and reversing California’s energy privatization plan will do it.

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