Antony Loewenstein’s latest book explores the corrupt and destructive alliances between governments and multi-national corporations. Loewenstein labels this vulture capitalism, where unaccountable corporations are more powerful than states and politicians are lobbied and bought, resulting in rampant privatisation and deregulation.
Drawing on Naomi Klein’s book The Shock Doctrine, Loewenstein argues that vulture capitalists exploit and may encourage social crises to “fuel industries in which they have a financial stake”. For example corporations were quick to move in following Haiti’s 2010 earthquake, often inflating the extent of damage and destruction to boost the value of contracts rebuilding infrastructure and providing medical assistance. However little of the money ended up with ordinary Haitians due to corruption and the poor quality of infrastructure built.
Closer to home, Loewenstein speaks to an Iranian refugee formerly detained in Curtin Detention Centre, who explains that ACM, the company that ran the centre under Howard: “realised that they could take financial advantage of the emotional distress in the centre…[they] could ask for more guards and deliberately not manage the problem. The Howard government would then offer more funds for support.” He describes how ACM guards often got drunk, and beat and abused detainees.
The book is structured around six case studies—Curtin and Christmas Island Detention Centres, the shelved James Price Point $40 billion gas project, mining in Papua New Guinea, the war economy in Afghanistan and Pakistan, and Haiti after its 2010 earthquake.
Privatised detention centres
The first two chapters focus on Australia’s privately-run refugee detention system. Privatisation has been justified as being more efficient. However the real gain for the government is that it can disassociate itself from the woeful conditions in detention centres. As political scientist Matthew J Gibney explains, “When something goes wrong – a death, an escape – the government can blame it on a kind of market failure instead of an accountability failure”.
Detention centres are also specifically built in isolated areas such as Christmas Island to escape attention. Serco actively limits media access and, combined with the dominance of the conservative Murdoch press, there is little public debate about what goes on inside detention centres.
Unsurprisingly, private companies have a rotten history including asylum seeker abuse by guards, mental and psychological trauma, and illegal detentions and deportation. Cost cutting to boost profits leads to low standards of care, understaffing, and poor conditions.
Yet they are often rewarded with new contracts and face little government scrutiny. For example GSL’s management of the centres received a number of damning reports and it was forced to pay compensation to asylum seekers abused by guards. In 2006 Howard announced he would not extend GSL’s contract. Despite this Labor kept GSL and G4S, which bought GSL in 2008, in charge till 2009.
Serco received control of the detention centres under a $370 million contract in 2009. The increase in boat arrivals thereafter led to a rapid expansion in facilities, detained asylum seekers, and costs. In 2012 a $1 billion contract was signed, and in 2013 a $1.86 billion contract. Although the contracts established standards for Serco to meet, no independent audit was required to enforce them.
Loewenstein interviews a contact within Serco management who explains that Serco always says it can manage the new numbers even when it can’t “because we’re in the human warehousing business”. Serco’s net profits rose in 2012 from $49 million to $128 million. Rising revenue has not been matched with increased hiring, and training for staff is kept at a minimum. Privatised detention is highly expensive. A Canadian study found community processing of refugees to cost the equivalent of $10-12 a day, yet Australia’s privatised detention system costs at least $179 a day.
Powerless states?
Throughout the book, Loewenstein repeats the popular argument that, “the corporation is now fundamentally more powerful than the nation state, and often dictates terms to the latter—a profound shifting of authority that has taken place over the last half-century”.
He cites a former WA Chief Prison inspector who believes Serco is one example. However this obscures the ways in which the government and corporate media have used refugees as a scapegoat for the failures of market reform and neo-liberal policies. They have constructed a pseudo crisis through over-hyping the number of boat arrivals, labelling them illegal and linking them to overstretched services and unemployment.
This is a strategy led by politicians and the state.
States continue to be vital to the functioning of capitalism and corporations continue to depend on them. They remain necessary for managing class conflict and inequality, providing the welfare and legal systems and articulating much of the system’s ideological justification.
The state still has considerable economic clout. According to the Heritage Foundation and the Wall Street Journal in 2011 Australian government’s expenditure was equal to 34.3 per cent of national GDP. In other countries such as the US it is higher. Whilst sections of the economy have been de-regulated and privatised, states continue to be highly interventionist. Over the neo-liberal period the state has constantly intervened to avert crisis through bail-outs and nationalisation. The round of bail-outs since 2008 is only the most recent.
The state has an interest in maintaining corporate profitability in order to generate its own taxation revenue and to maintain employment levels.
Much of the neo-liberal transformation was actually led by the state against opposition from corporations in particular industries, in the interests of improving profitability across the economy as a whole. Privatisation, the removal of tariff protection, and deregulation saw many corporations, such as in the manufacturing sector in Australia, the US and the UK, hit the wall. Those that survived did so through job cuts, wage depression, casualisation, and technological and organisational change.
We should not fall into the illusion that state regulation provides a real alternative. The state is not neutral, its regulation reflects its commitment to running capitalism.
Challenging fossil fuel companies
The third chapter looks at the campaign against Woodside’s proposed $40 billion Liquified Natural Gas plant at James Price Point in WA. Mining is an example of “disaster capitalism” as it is predicated on environmental destruction that has mainly benefited a minority of investors and mining capitalists, such as Gina Rinehart.
Loewenstein emphasises how the competition for resources leads to militarisation and the use of force. The Australian Defence 2013 White Paper supported expanding the deployment of troops in WA to protect resources. Woodside has hired private security companies to intimidate protestors opposed to the plant, and has also funded more police for the region.
To deal with indigenous owners of the area, Woodside promised 300 jobs for indigenous people, and $1.3 million a year in educational programs. On top of this the government offered $1.5 billion over 30 years.
However resource development has never led to sustained improvement for Indigenous people. A 2005 ANU study in Karratha, where Woodside began, stated, “Despite 40 years of sustained economic development in the Pilbara region, the labour force status of Indigenous Pilbara residents has barely altered”.
In April 2013 Woodside scrapped the plan due to protests and a fall in global LNG prices. However Woodside, Shell, and other companies continue to look at developing this site in the future.
Haiti, NGOs, and imperialism
In 2010 a massive earthquake hit the island of Haiti. To this day its capital Port-au-Prince looks like a “war zone”. The death toll was estimated to be as high as 316,000 with a million more made homeless. As revealed by Wikileaks, a month after the tragedy, the US ambassador to Haiti titled a cable “The Gold Rush is On” and stated that “As Haiti digs out from an earthquake, different companies are moving in to sell their concepts, products and services”.
Loewenstein sketches the bloody history of Haiti from a slave colony to the US invasion and support for dictatorships under Francois Duvalier and then his son from 1957 to 1986. After a popular movement forced out Duvalier’s son the US staged another coup in 2004.
One of the big developments since the earthquake is the opening up of industrial parks run on low wage labour. Loewenstein speaks to female workers who say they earn US $4 a day, half of which goes on transport and food. On average workers are earning less than under the previous dictatorship.
Foreign NGOs have become a substitute for building up locally run and democratically accountable institutions, such as an adequate welfare and health system.
A grassroots activist for affordable housing tells Loewenstein that, “international NGOs, years after the quake, are still providing weak shelters. It’s ridiculous. Some local organisations, with only US$11,000 are able to build a good house…It shows that there’s no will for foreign groups to really help us when they’ve spent millions of dollars and we don’t see anything. The international private sector come here to make money. It’s a big business for them.”
Disaster capitalism or just capitalism?
Loewenstein’s focus on the excesses of vulture or disaster capitalism suggests a more benign form of capitalism is possible. But the political influence of capital, and the state’s dependence on maintaining profitability above other social concerns is built into the system. This cannot be solved through regulation.
Capitalism has always created disasters—whether world war, nuclear war, and now climate change, inequality, and renewed militarisation. This is displayed in Loewenstein’s chapter on Haiti where crisis and predatory practices occur throughout Haiti’s history, first through slavery, then through a US led coup and dictatorship.
Loewenstein stresses the need for transparency on corporate practices. However even with further knowledge of capitalism’s corruption and vulture like qualities, political movements are required to challenge them. Some glimpses of such movements are shown in the campaign against James Price Point and in Haiti.
But the book is enjoyable, easy to read, and its case studies reveal much about the workings of modern capitalism.
By Eliot Hoving
Profits of Doom: How Vulture Capitalism is swallowing the World
By Antony Loewenstein, Melbourne Uni Press, $32.99
