Uncovering the Racket

An introduction to Matt Kennard’s new book The Racket: A Rogue Report versus the Masters of the Universe.

Investigative journalist Matt Kennard’s book The Racket is an exposé of the murky collusions between global high-finance and the militarised US state in the post-World War II era. Kennard traces the expansion of US corporate power across the globe, using case studies from Palestine, Haiti, Honduras, Mexico and elsewhere to illustrate the pernicious and far-reaching impact of Washington DC’s ‘imperial mindset’. A former Financial Times journalist, Kennard identifies the US government as the primary actor in enforcing what he terms ‘the racket’, the system whereby capitalist elites are buttressed through the violent suppression of labour unions, social movements and political groups in selected US satellite states.

Nowhere is this more evident than in the US’ so-called ‘backyard’ of Latin America. Kennard explores in eminently readable prose the self-evident brutality and futility of the professed ‘War on Drugs’ in Honduras, links between US multinationals, Colombian paramilitaries and right-wing governments, and the dynamic resistance presented by anti-imperialists such as the Bolivian President Evo Morales and his Movimiento al Socialismo party.

Contextualising the ascent of this racketeering, Kennard details how a worldwide recession in the early 1980s, along with the rise of neoliberal privatisation, caused the forced indebtedness of developing countries via the International Monetary Fund’s ‘structural adjustment programmes’. In order to repay debts, developing countries were forced to privatise and open their economies up to transnational corporations. The extractive industries – ‘a particularly vicious arm of the global racket’ – boomed as a result. In his former role at the Financial Times, Kennard had prolonged access to the individuals heading these multi-billion dollar mining industries. Their power is colossal. The annual turnover of mining companies often exceeds that of the countries within which they operate and from which they extract valuable resources.

In the extract below, Kennard presents Bolivia as a locus of change in the way that developing countries manage their natural resources. Known for its robust rejection of western imperialism, Bolivia has been a tenacious thorn in the side of the US government’s plans for the region. Struggling for autonomy against the global capitalist forces seeking to consolidate its economic dependency, Bolivia has taken control of its lucrative lithium mines and resisted the encroachment of multinational extractive corporations to stand at the helm of recent anti-imperial resistance in Latin America.

A programme of continuing resource extraction nevertheless raises uncomfortable questions over sustainability and environmental degradation. The balancing of economic development of the resource-rich global south, in countries such as Bolivia, with the protection of the planet remains one of the greatest challenges we face. An exploration of debates around this is something that remains beyond the scope of Kennard’s fascinating book, which focuses instead on expertly and accessibly outlining forces of reaction and resistance in the world today.

******

Our Lithium

Evo Morales, the president of Bolivia, is at the forefront of a change in the attitude among developing-world leaders toward foreign – or, more specifically, western – mining companies. His country owns half the world’s deposits of lithium, which could be hugely lucrative if developed. But his government is reluctant to let western companies in. Mining minister Luis Alberto Echazu has said: “We will not repeat the historical experience since the 15th century: raw materials exported for the industrialization of the West, which has left us poor.” Instead, Bolivia has bucked conventional developmental economics – which outsources development and production to foreign companies expert in the field and with reserves of capital – and has endeavored to develop its deposits with state-owned companies, rebuffing the overtures of countless western companies. Morales needs to raise $800 million to construct the mines and processing plants needed for this approach. In an industry report, Bolivian mining was reported to have grown 13 percent in 2009.

In 2012, I went to see the Bolivian ambassador to the UK to find out what was behind this new way of doing things. She told me she doesn’t get many requests for media interviews. When financial news outlets in the West write about Latin America, it’s inevitably an article lauding the “economic miracle” of its Brazilian neighbor or a scaremongering editorial about the Red Menace of Venezuela. But a look at the media elsewhere – specifically emerging markets in East Asia – and the story isn’t so monochrome. In fact, China’s state news agency, Xinhua, covers pretty much every statement made by Bolivian President Evo Morales. Why? It’s quite simple: a soft, silver-white metal called lithium. This landlocked country of 9 million people, which is the poorest in South America, has the world’s largest reserves of a mineral that could become one of the most sought-after of the century. It’s needed to make the batteries that will power the electric car revolution that many are waiting for, particularly in China.

But the Movimiento al Socialismo (MAS) has been in government since 2005 and it is pioneering a new development model, which, if successful, could become the norm across the developing world. What may worry multinational mining companies and their backers is that it takes no heed of the International Monetary Fund (IMF) and World Bank orthodoxy, which has traditionally advocated minimal regulation on foreign direct investment. “I know that they are in some discussions with France, Korea and Japan about working in Bolivia to develop lithium, but we don’t want to be only raw material exporters. We want to create added value in the country,” said Ambassador Maria Beatriz Souviron, as she sat in the Bolivian embassy in Eaton Square. By “added value” Ms Souviron means building factories in Bolivia to manufacture the batteries within the country, rather than sending the metals abroad once they are out of the ground. It’s an idea that has an increasing number of proponents all over the world of emerging markets. In an interview in 2011, Nigeria’s State Commissioner for Agriculture and Natural Resources, Akin Akinnigbagbe, said of his country’s cocoa exports: “We are equally embarking on what I will call value addition to the business of cocoa. This will take the form of processing it at home before selling into the international market. This will equally assist the farmers to get higher profit unlike in the past, when cocoa beans are exported directly to the international market; with the farmers having no control on the price.” It could mean a harder time for western companies. “The policy of my government is to retain sovereignty over the investments made in the country,” said Souviron. “So if the people that want to invest in my country and follow that rule of value-added, then it’s fine. If not we’ll do it ourselves.” And the challenge to orthodox development models has so far been a success. The Bolivian government has managed to run a current account surplus of 12.1 percent of GDP in 2007, 11.6 percent in 2008, and 3.4 percent in 2009 as the government spent to keep the country from recession. Along with Venezuela and Argentina, Bolivia was the only country in the whole of Latin America and the Caribbean to be forecast a current account surplus by the IMF in 2010. So far the Morales administration has “inked” a Memorandum of Understanding with the South Koreans to develop the lithium after the president was happy with Korea’s ‘efforts to use clean technology’ and its willingness to abide by the new endogenous growth model Bolivia is seeking.

The advent of the Chinese is also changing how business is done. The miner Bellzone, for example, agreed a deal with China for investment in its iron ore project in Guinea that stipulated funding infrastructure in return for mineral supplies. The iron ore project at Kalia in the West African country is substantial. It has a defined resource of 2.4 billion tonnes and the company is aiming for 50 million tonnes of production a year. With an eye on its insatiable appetite for steel, the China International Fund (CIF) agreed to spend about $3 billion on building the infrastructure needed for the project. Chinese companies are increasingly offering to build transport and energy infrastructure for mining companies in return for deals to buy the minerals produced, or off-take agreements. “It’s a new form of pragmatism,” Tim Williams, analyst at Ernst & Young, told me. “They don’t want to bother with outright control, so they won’t buy a majority stake, but will plough money into infrastructure.” He added: “You’ve got companies with good assets but no money and no project finance. Most of the equity markets are still weak, so they have to look at something else.” The Bolivians have gone into projects with the Chinese, reporting that they treat them like equals, in a way the Americans never have done.

This is an extract from The Racket: A Rogue Reporter vs the Masters of the Universe by Matt Kennard, published by Zed Books (2015)

www.zedbooks.co.uk

This article was originally published in Alborada magazine issue one (Spring/Summer 2015)

An introduction to Matt Kennard’s new book The Racket: A Rogue Report versus the Masters of the Universe.

Investigative journalist Matt Kennard’s book The Racket is an exposé of the murky collusions between global high-finance and the militarised US state in the post-World War II era. Kennard traces the expansion of US corporate power across the globe, using case studies from Palestine, Haiti, Honduras, Mexico and elsewhere to illustrate the pernicious and far-reaching impact of Washington DC’s ‘imperial mindset’. A former Financial Times journalist, Kennard identifies the US government as the primary actor in enforcing what he terms ‘the racket’, the system whereby capitalist elites are buttressed through the violent suppression of labour unions, social movements and political groups in selected US satellite states.

Nowhere is this more evident than in the US’ so-called ‘backyard’ of Latin America. Kennard explores in eminently readable prose the self-evident brutality and futility of the professed ‘War on Drugs’ in Honduras, links between US multinationals, Colombian paramilitaries and right-wing governments, and the dynamic resistance presented by anti-imperialists such as the Bolivian President Evo Morales and his Movimiento al Socialismo party.

Contextualising the ascent of this racketeering, Kennard details how a worldwide recession in the early 1980s, along with the rise of neoliberal privatisation, caused the forced indebtedness of developing countries via the International Monetary Fund’s ‘structural adjustment programmes’. In order to repay debts, developing countries were forced to privatise and open their economies up to transnational corporations. The extractive industries – ‘a particularly vicious arm of the global racket’ – boomed as a result. In his former role at the Financial Times, Kennard had prolonged access to the individuals heading these multi-billion dollar mining industries. Their power is colossal. The annual turnover of mining companies often exceeds that of the countries within which they operate and from which they extract valuable resources.

In the extract below, Kennard presents Bolivia as a locus of change in the way that developing countries manage their natural resources. Known for its robust rejection of western imperialism, Bolivia has been a tenacious thorn in the side of the US government’s plans for the region. Struggling for autonomy against the global capitalist forces seeking to consolidate its economic dependency, Bolivia has taken control of its lucrative lithium mines and resisted the encroachment of multinational extractive corporations to stand at the helm of recent anti-imperial resistance in Latin America.

A programme of continuing resource extraction nevertheless raises uncomfortable questions over sustainability and environmental degradation. The balancing of economic development of the resource-rich global south, in countries such as Bolivia, with the protection of the planet remains one of the greatest challenges we face. An exploration of debates around this is something that remains beyond the scope of Kennard’s fascinating book, which focuses instead on expertly and accessibly outlining forces of reaction and resistance in the world today.

******

Our Lithium

Evo Morales, the president of Bolivia, is at the forefront of a change in the attitude among developing-world leaders toward foreign – or, more specifically, western – mining companies. His country owns half the world’s deposits of lithium, which could be hugely lucrative if developed. But his government is reluctant to let western companies in. Mining minister Luis Alberto Echazu has said: “We will not repeat the historical experience since the 15th century: raw materials exported for the industrialization of the West, which has left us poor.” Instead, Bolivia has bucked conventional developmental economics – which outsources development and production to foreign companies expert in the field and with reserves of capital – and has endeavored to develop its deposits with state-owned companies, rebuffing the overtures of countless western companies. Morales needs to raise $800 million to construct the mines and processing plants needed for this approach. In an industry report, Bolivian mining was reported to have grown 13 percent in 2009.

In 2012, I went to see the Bolivian ambassador to the UK to find out what was behind this new way of doing things. She told me she doesn’t get many requests for media interviews. When financial news outlets in the West write about Latin America, it’s inevitably an article lauding the “economic miracle” of its Brazilian neighbor or a scaremongering editorial about the Red Menace of Venezuela. But a look at the media elsewhere – specifically emerging markets in East Asia – and the story isn’t so monochrome. In fact, China’s state news agency, Xinhua, covers pretty much every statement made by Bolivian President Evo Morales. Why? It’s quite simple: a soft, silver-white metal called lithium. This landlocked country of 9 million people, which is the poorest in South America, has the world’s largest reserves of a mineral that could become one of the most sought-after of the century. It’s needed to make the batteries that will power the electric car revolution that many are waiting for, particularly in China.

But the Movimiento al Socialismo (MAS) has been in government since 2005 and it is pioneering a new development model, which, if successful, could become the norm across the developing world. What may worry multinational mining companies and their backers is that it takes no heed of the International Monetary Fund (IMF) and World Bank orthodoxy, which has traditionally advocated minimal regulation on foreign direct investment. “I know that they are in some discussions with France, Korea and Japan about working in Bolivia to develop lithium, but we don’t want to be only raw material exporters. We want to create added value in the country,” said Ambassador Maria Beatriz Souviron, as she sat in the Bolivian embassy in Eaton Square. By “added value” Ms Souviron means building factories in Bolivia to manufacture the batteries within the country, rather than sending the metals abroad once they are out of the ground. It’s an idea that has an increasing number of proponents all over the world of emerging markets. In an interview in 2011, Nigeria’s State Commissioner for Agriculture and Natural Resources, Akin Akinnigbagbe, said of his country’s cocoa exports: “We are equally embarking on what I will call value addition to the business of cocoa. This will take the form of processing it at home before selling into the international market. This will equally assist the farmers to get higher profit unlike in the past, when cocoa beans are exported directly to the international market; with the farmers having no control on the price.” It could mean a harder time for western companies. “The policy of my government is to retain sovereignty over the investments made in the country,” said Souviron. “So if the people that want to invest in my country and follow that rule of value-added, then it’s fine. If not we’ll do it ourselves.” And the challenge to orthodox development models has so far been a success. The Bolivian government has managed to run a current account surplus of 12.1 percent of GDP in 2007, 11.6 percent in 2008, and 3.4 percent in 2009 as the government spent to keep the country from recession. Along with Venezuela and Argentina, Bolivia was the only country in the whole of Latin America and the Caribbean to be forecast a current account surplus by the IMF in 2010. So far the Morales administration has “inked” a Memorandum of Understanding with the South Koreans to develop the lithium after the president was happy with Korea’s ‘efforts to use clean technology’ and its willingness to abide by the new endogenous growth model Bolivia is seeking.

The advent of the Chinese is also changing how business is done. The miner Bellzone, for example, agreed a deal with China for investment in its iron ore project in Guinea that stipulated funding infrastructure in return for mineral supplies. The iron ore project at Kalia in the West African country is substantial. It has a defined resource of 2.4 billion tonnes and the company is aiming for 50 million tonnes of production a year. With an eye on its insatiable appetite for steel, the China International Fund (CIF) agreed to spend about $3 billion on building the infrastructure needed for the project. Chinese companies are increasingly offering to build transport and energy infrastructure for mining companies in return for deals to buy the minerals produced, or off-take agreements. “It’s a new form of pragmatism,” Tim Williams, analyst at Ernst & Young, told me. “They don’t want to bother with outright control, so they won’t buy a majority stake, but will plough money into infrastructure.” He added: “You’ve got companies with good assets but no money and no project finance. Most of the equity markets are still weak, so they have to look at something else.” The Bolivians have gone into projects with the Chinese, reporting that they treat them like equals, in a way the Americans never have done.

This is an extract from The Racket: A Rogue Reporter vs the Masters of the Universe by Matt Kennard, published by Zed Books (2015)

www.zedbooks.co.uk

This article was originally published in Alborada magazine issue one (Spring/Summer 2015)

2017-08-04T11:18:42+00:00 19/May/2015|Categories: Articles, Book Extracts, Books|Tags: , , , , |
Olivia Arigho Stiles is a contributing editor of Alborada and Alborada magazine. Twitter: @OliviaArigho