July, 2003: Publius

By Greg Rushford

Published in the Rushford Report

This might seem like a strange time to sing the praises of corporate America . After all, for several years American business has taken a well-deserved publicity beating for arrogance and misconduct in a depressingly long string of financial scandals and stories of outrageous greed.  

            Still, when it comes to international trade and investment, the bottom line on U.S. multinationals is that they deserve respect for being the cleanest operators in corrupt Third World countries. If you are in search of elements in these societies who are making tangible contributions toward advancing the rule of law while also practicing humane, western-style employment practices, you are going to find the American business community.

            Corporate critic Ralph Nader, a leader in the anti-globalist movement, doesn’t understand this. The late Mike Jendrzejczyk of Human Rights Watch -- certainly no knee-jerk corporate cheerleader -- did. To quickly get the basic idea of what Jendrzejczk saw, and what Nader still doesn’t want to see, just look at the contribution that the American business community is making in just two representative samples of developing countries, China and the Philippines.

            But first, a reality check. 

            Briefly recall some of the excesses and outrages that were reported just last month:            

            ** The San Jose Mercury News railed against the head of Siebel Systems, Tom Siebel, for his "Me-First" attitude regarding money. In an editorial, the paper noted that Siebel is the highest paid executive in Silicon Valley , raking in $34.6 million in 2002 and almost $362 million in the last five years. That’s "a jarring sum for shareholders of a company whose stock price has fallen 84 percent in just three years," the editorial noted tartly.

            ** Former Rite Aid Corp. CEO Martin Grass pleaded guilty and got eight years for fraud associated with a major accounting scandal. Grass admitted that he had conspired to obstruct a criminal investigation into a $1.6 billion overstatement of Rite Aid profits.

            ** EndoVascular Technologies, Inc., a subsidiary of Guidant Corp., pleaded guilty and was fined $92.4 million for covering up its knowledge that 12 people died due to malfunctions in a device used to treat bulges in arteries.

            ** Freddie Mac, the mortgage finance company, fired its president, David Glenn, for his role in dubious accounting practices that are now under criminal investigation.

            ** Former WorldCom CEO Bernie Ebbers — who presided over an estimated $11 billion accounting scam, the biggest ever — "was aware" that there was "financial gimmickry" going on around him, according to a report written by Wilmer, Cutler & Pickering. Another probe of the WorldCom disaster, written by former Attorney General Richard Thornburgh, provided new details showing that Ebbers wasn’t the only high executive who knew what was going on, and kept silent.

            Ralph Nader must have loved June 2003. That single month provided him with reams of well-documented examples of corporate excess to rail about on the college lecture circuit for years. Still, that’s not the end of the story, as Mike Jendrzejczyk  understood.

            Jendrzejczyk, the energetic and thoughtful Washington director of the Asia division of Human Rights Watch, died suddenly on May 1 age 53. This was a wonderful man. He had many friends and admirers, of which I was proud to have been one. In his (too-short) life, Jendrzejczyk had seen a lot of the darker side of the world. He had seen a China where scholars were detained, pro-democracy advocates were harassed and jailed, labor organizers were thrown in labor camps, religious practitioners hounded mercilessly, and much more. Jendrzejcyk spent his days working to bring China ’s sorry human rights record to public light (and those of other Asian rights abusers). But somehow Jendrzejcyk saw more than evil. 

            Part of this, no doubt, was due to the man’s character. But I think that another important reason for Jendrzejcyk’s good humor and patience was that he also saw a China that is clearly modernizing, however imperfectly. And he also saw that American businesses were playing a helpful role in moving China along the path toward a society based on the rule of law. We talked about this many times in the past decade.

            Jendrzejcyk, unlike Nader, supported China ’s accession to the World Trade Organization. This could be very good for Beijing ’s human rights situation, Jendrzejcyk believed. To the patient Jendrzejcyk, working with China to develop a legal and judicial system that would honor business contracts was one important step along the road toward developing the rule of law. After all, he often pointed out, the International Covenant on Economic, Social and Cultural Rights, of which China had become a party to, was also a contract.

            "The demands of the WTO will give those inside China arguing for fundamental legal and judicial reforms additional leverage," Jendrzejcyk reasoned in one commentary as the WTO’s ministers prepared to convene in Seattle in late November 1999. "It is a step towards China ’s integration into the international system regulating not only trade relations but also governments’ treatment of their own citizens." Jendrzejcyk was always looking for a chance to make something positive happen.

            Nader’s negative contribution to the now-famous Battle of Seattle in late 1999 was to go to the streets. The city was trashed. On Dec. 2, I caught up with Nader as he was leading a band of noisy young ragamuffins through the streets near the Pike Place Market. Small businesses, including women who had been trying to sell sweaters hand-knitted in Latin America, were so frightened of the tough-looking marchers that they locked their doors and closed for the afternoon. When I confronted him about this, Ralph couldn’t have cared less about the money that those women stood to lose that afternoon. To Nader, his rights to go around in the streets shouting about American multinationals were more important. 

            When I was a reporter for Legal Times from the late 1980s until launching this publication in 1995, I used to talk to Nader fairly regularly. I remember in particular writing some news reports that were critical of Procter & Gamble for lobbying Congress to pass a special law extending its U.S. patent on Olestra (the stuff that makes for fat-free potato chips.) P&G hadn’t done anything remotely illegal, or even unethical, and even had some merit to its case. Still, lobbying for a private patent to benefit a single company is the classic definition of special-interest legislation, and should always raise eyebrows. My articles quoted Nader, who — Ralph being Ralph — raised his voice as well.

            Later, I asked Nader if he would agree that U.S. multinationals like P&G, despite his criticisms, were nevertheless among the most decent forces in corrupt Third World countries. I had just been in Manila , a city that I have known well for more than three decades. I knew that P&G’s Philippine operations had always been very respected for being clean, profitable, and environmentally progressive. Above all, P&G had a reputation for treating its Filipino workforce far more decently than local (corrupt) elites treated their own people. That explained why the local workforce had long been crazy to work for the Americans, especially during the dark days of the dictatorship of Ferdinand Marcos.

            F. Sionil Jose, the great Philippine novelist, patriot, and a man who has spent his life writing about the exploitation of the poor by the rich-and-indifferent, had told me how he would rather work any day for an American multinational than for one of his own country’s oligarchs. It was the difference between being treated fairly, and being abused, Jose explained.

            But when I told Nader about Procter & Gamble’s good reputation in Manila , and what Jose had related, he didn’t want to hear it. He gave me a canned lecture on how American multinationals go to poor countries to exploit cheap labor, and

otherwise generally rape and pillage.

            I thought of Nader again when I was in Manila in March 2002. One morning, I saw dozens of young men and women lining up in Makati to get temporary, minimum-wage work with a Philippine-owned retail outlet called Shoemart. They were resigned to the unpleasant fact that Shoemart’s rich owner would fire them about one day short of six months, thus avoiding having to comply with Philippine laws providing benefits associated with long-term employment. These poor Filipinos hoped that then they might at least sign on for another six-month stint at another Shoemart branch, before they would be fired again. They told me that their dream was to somehow land a job with AOL, Cargill, Colgate, Intel, P&G, Unocal, or some other American outfit where they would have a real chance to get world-class training and experience, and better their hard lives. I felt proud to be an American that day.

            Note to potential investors in the Philippines : Before you take the plunge and trust your stockholders’ money to the whims of a post-colonialist society where the rule of law is often a tentative proposition, there are four men you should talk to: Robert Sears, Robert Blume, John Forbes, and Steven Rood. Sears is the executive director of the American Chamber of Commerce of the Philippines . Blume is the American desk officer at the Board of Investments. Forbes chairs AmCham’s legislative committee, and Rood is the Asia Foundation’s man in Manila (the Asia Foundation has been active in promoting the rule of law for decades). If it were up to these men, the Philippines would already have reached its potential to become rich.

            In March, the four Americans published a detailed 97-page document called The Roadmap to More Foreign Investment. This is a thorough, gutsy, often blunt, much-needed analysis that calls for "more forceful actions by Filipinos" to get serious about economic growth.           

            A few representative quotes from the wake-up call should dispel any notions that the American business community in the Philippines isn’t serious about advocating what’s right for the country:

            ** "The Philippines entered the 21st century with a population of 80 million with high levels of poverty and an economy, which would have negative per capita income growth without inward remittances. Business costs, especially bureaucracy, electricity, labor, and transport are higher than regional competitors. Foreign direct investment inflow is fast declining, and the departure of long-time investors is a growing possibility. Recent global surveys reveal that Philippine competitiveness is eroding."

            ** "The neglect of transportation infrastructure must cease."

            ** "The current Congress is the least productive in a decade."

            ** "AmCham surveyed 17 business sectors. While the overall business climate was judged as fair, the trend of a majority of sectors was judged to be deteriorating, rather than improving."

            ** "Public sector corruption severely undermines the state’s ability to promote the welfare of all citizens, condemning much of the population to poverty. As much has been wasted in corruption as provided to the country in

foreign aid."

            ** "Principal concerns were widespread corruption, poor infrastructure, personal security, outdated laws and

regulations and an unstable political system."

            ** "Weak governance,

corruption, poor infrastructure, the loss of English and uncontrolled population growth are the most serious challenges."

            Rather than being the heartless exploiters that anti-globalist naysayers like Ralph Nader think they are, it quite often seems that American business representatives who live in Third World countries care more than the local governing classes.

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