What are these phantasmagoric money machines that they call "private-equity firms?" They're much in the news these days, because a fellow who was a private-equity magnate is presently running for president. Mitt Romney piled up a quarter-billion-dollar personal fortune through his Wall Street equity outfit, Bain Capital, and he now claims that, because of his success in that business, he knows how to "fix" our economy.
Before you clear that, note that private equity whizzes are all about The Fix — not necessarily a good thing. They operate by borrowing big piles of cash at high interest rates from rich speculators to buy out XYZ Corp. Then, to meet the interest payments owed to the speculators (and to siphon off a financial killing for themselves), the fixers do two things: One, they plunder XYZ's assets, selling the profitable chunks of the corporation; and two, they severely downsize the XYZ workforce, firing as many workers as possible and demanding deep wage cuts and benefit givebacks from the employees they keep.
It's a raw redistribution-of-wealth scheme, shifting XYZ's wage payments from its many workers to a handful of wealthy high-rollers. The process downsizes America's middle class, while creating no real economic value. Nothing equitable about it.
But the fix also includes a set of very special partners, few of whom are even aware that they're in on the deal: taxpayers. The private-equity business model is not structured on old-fashioned, free-enterprise principles, but on a skewed system of tax loopholes punched into federal law by these financiers' lobbyists and the lawmakers who do Wall Street's bidding.
For example, the equity funds are able to load up on such heavy debt to finance their corporate takeovers only because all of the interest they must pay to speculators for that borrowed money is tax-deductible. In other words, our government directly subsidizes private-equity plundering by covering their huge interest payments.
To add to their fun, many of these tax-code scammers grab such big debt deductions each year that they end up paying zero corporate income taxes, even though they rake in millions in profit.
To put a name to this financial flimflammery, let me tell you a corporate morality tale that I call "The Shame of Shamu."
Actually, Shamu is not the cause of the shame.
After all, that's just the generic name given to the killer whales kept in captivity as the star attraction at all three theme parks operated by SeaWorld, Inc. The shame belongs to the corporation, which not only profits from its exploitation of the whales, but also manages to dodge paying even a penny in national or state income taxes. Based in Orlando, Fla., this sprawling entertainment conglomerate pocketed record profits of $380 million last year but paid zero taxes on it.
This is because SeaWorld is owned by Blackstone Group, a multibillion-dollar private equity giant that specializes in acrobatic accounting and spectacular twistings of our tax laws.
For example, Blackstone structured its 2009 takeover of SeaWorld so that it could immediately begin grabbing tax deductions under the law's convoluted depreciation rules. Also, the Wall Street group paid 60 percent of the $2.5 billion purchase price with high-level-interest loans from wealthy speculators — yes, that makes the huge interest payments on that debt totally deductible from Blackstone's tax bill.
Thus — Shazam Shamu! — this bit of Wall Street hocus-pocus let's SeaWorld pull big profits out of its hat, while the taxes owed by SeaWorld's private equity owner — Poof! — disappear. Well, admitted a corporate spokesman, that's true, but the group "operates entirely within the letter and spirit" of the law.
Of course they do! That's an easy trick for them. Blackstone is a whale in America's political pool, funneling millions of dollars a year into lobbyists and politicians to rig the law. It has already spent $7.3 million lobbying the current Congress and another $1.3 million (so far) on campaign donations for this year's elections.
Those donations include $173,000 to back Mitt Romney — who promises if elected to make tax laws even more favorable to money manipulators like Blackstone. The moral is that you don't need magic if you're wired to power.
National radio commentator, writer, public speaker, and author of the book, Swim Against The Current: Even A Dead Fish Can Go With The Flow, Jim Hightower has spent three decades battling the Powers That Be on behalf of the Powers That Ought To Be - consumers, working families, environmentalists, small businesses, and just-plain-folks.
For little Sayef, there will be no Arab Spring. He lies, just 14 months old, on a small red blanket cushioned by a cheap mattress on the floor, occasionally crying, his head twice the size it should be, blind and paralysed. Sayeffedin Abdulaziz Mohamed – his full name – has a kind face in his outsized head and they say he smiles when other children visit and when Iraqi families and neighbours come into the room.
But he will never know the history of the world around him, never enjoy the freedoms of a new Middle East. He can move only his hands and take only bottled milk because he cannot swallow. He is already almost too heavy for his father to carry. He lives in a prison whose doors will remain forever closed.
It's as difficult to write this kind of report as it is to understand the courage of his family. Many of the Fallujah families whose children have been born with what doctors call "congenital birth anomalies" prefer to keep their doors closed to strangers, regarding their children as a mark of personal shame rather than possible proof that something terrible took place here after the two great American battles against insurgents in the city in 2004, and another conflict in 2007.
After at first denying the use of phosphorous shells during the second battle of Fallujah, US forces later admitted that they had fired the munitions against buildings in the city. Independent reports have spoken of a birth-defect rate in Fallujah far higher than other areas of Iraq, let alone other Arab countries. No one, of course, can produce cast-iron evidence that American munitions have caused the tragedy of Fallujah's children.
Sayef lives – the word is used advisedly, perhaps – in the al-Shahada district of Fallujah, in one of the more dangerous streets in the city. The cops – like the citizens of Fallujah, they are all Sunni Muslims – stand with their automatic weapons at the door of Sayef's home when we visit, but two of these armed, blue-unformed men come inside with us and are visibly moved by the helpless baby on the floor, shaking their heads in disbelief and with a hopelessness which his father, Mohamed, refuses to betray.
Fallujah: A history
The first battle of Fallujah, in April 2004, was a month-long siege, during which US forces failed to take the city, said to be an insurgent stronghold. The second battle, in November, flattened the city. Controversy raged over claims US troops had deployed white phosphorus shells. A 2010 study said increases in infant mortality, cancer and leukaemia in Fallujah exceeded those reported by survivors of the atomic bombs dropped on Hiroshima and Nagasaki.
"I think all this is because of the use by the Americans of phosphorous in the two big battles," he says. "I have heard of so many cases of congenital birth defects in children. There has to be a reason. When my child first went to the hospital, I saw families there with exactly the same problems."
Studies since the 2004 Fallujah battles have recorded profound increases in infant mortality and cancer in Fallujah; the latest report, whose authors include a doctor at Fallujah General Hospital, says that congenital malformations account for 15 per cent of all births in Fallujah.
"My son cannot support himself," Mohamed says, fondling his son's enlarged head. "He can move only his hands. We have to bottle-feed him. He can't swallow. Sometimes he can't take even the milk, so we have to take him to hospital to be given fluids. He was blind when he was born. In addition, my poor little man's kidney has shut down. He got paralysed. His legs don't move. His blindness is due to hydrocephalus."
Mohamed holds Sayef's useless legs and moves them gently up and down. "After he was born, I got Sayef to Baghdad and I had the most important neurosurgeons check him. They said they could do nothing. He had a hole in his back that was closed and then a hole in his head. The first operation did not succeed. He had meningitis."
Both Mohamed and his wife are in their mid-thirties. Unlike many tribal families in the area, neither are related and their two daughters, born before the battles of Fallujah, are in perfect health. Sayef was born on 27 January, 2011. "My two daughters like their brother very much," Mohamed adds, "and even the doctors like him. They all take part in the care of the child. Dr Abdul-Wahab Saleh has done some amazing work on him – Sayef would not be alive without him."
After at first denying the use of phosphorous shells during the second battle of Fallujah, US forces later admitted that they had fired the munitions against buildings in the city. Independent reports have spoken of a birth-defect rate in Fallujah far higher than other areas of Iraq, let alone other Arab countries.
Mohamed works for an irrigation mechanics company but admits that, with a salary of only $100 a month, he receives financial help from relatives. He was outside Fallujah during the conflict but returned two months after the second battle only to find his house mined; he received funding to rebuild his home in 2006. He watches Sayef for a long time during our conversation and then lifts him in his arms.
"Every time I watch my son, I'm dying inside," he says, tears running down his face. "I think about his destiny. He is getting heavier all the time. It's more difficult to carry him." So I ask whom he blames for Sayef's little calvary. I expect a tirade of abuse against the Americans, the Iraqi government, the Health Ministry. The people of Fallujah have long been portrayed as "pro-terrorist" and "anti-Western" in the world's press, ever since the murder and cremation of the four American mercenaries in the city in 2004 – the event which started the battles for Fallujah in which up to 2,000 Iraqis, civilians and insurgents, died, along with almost 100 US troops.
But Mohamed is silent for a few moments. He is not the only father to show his deformed child to us. "I am only asking for help from God," he says. "I don't expect help from any other human being." Which proves, I guess, that Fallujah – far from being a city of terror – includes some very brave men.
How do we know this? Nestlé has declared both its Pure Life brand of bottled water and infant formula as “Popularly Positioned Products” (PPP) that target “less affluent consumers in emerging markets”. Two weeks ago, we mentioned Nestlé’s report outlining this strategy in this blog. For some reason, the report is no longer available on Nestlé’s site without the requisite log-in information. But we’ve reposted the document here.
Our executive director, Wenonah Hauter, released this statement in response to Nestlé’s purchase of Pfizer’s infant nutrition unit:
This renewed focus on growing the market for its infant formula products is troubling given the corporation’s track record of using dubious practices to market infant formula in developing countries, where it is often prepared in unhygienic conditions with unsafe water….Surely, it is no coincidence that many mothers will prepare the formula with bottled water—which will no doubt benefit Nestlé’s emerging market strategy.
Selling bottled water to poor people, and pushing infant formula on poor but otherwise healthy mothers who may not have access to safe drinking water is doing what Nestlé does best: undermining public health in the name of profit.
Darcey Rakestraw is communications director at Food & Water Watch. She has over 10 years of experience in media relations and communications, working on a variety of global issues in non-profit, for-profit, and governmental organizations.