Part Four - Wealth Redistribution in Disasters

Lest we forget, a primer on capitalism.

MeanMesa takes a longer look at a suspiciously obscured reality.  This is the fourth of series of postings on illicit wealth redistribution in a free market system.

Wealth Redistribution Following Natural Disasters

Part Three of this series dealt with illicit wealth distribution in times of economic disaster.  However, we know that all disasters do not originate from economic manipulation, some begin as natural phenomena.  The point in this post is that, while these latter cases may begin with earthquakes, tsunamis or volcanoes, they become interludes of remarkable economic opportunity as the damage is repaired.

The discussion, for this reason, settles on observations and conclusions of the rather dated concept of "the commons."  Although a favorite line of discussion on Thom Hartmann's radio show (The Thom Hartmann Show, AM1350 KABQ, Albuquerque, 10AM - 1PM weekdays), the precise concept derives from the historical period when the possibility of publicly owned infrastructure emerged from the previous system where the nobility owned everything.

The new system which arose from these changes was one which relied upon public resources to construct such things as road and bridges, and included the idea that access to such things was conveyed to the public by certain rights.  We can see why such a development required such a long time.  The old aristocracy was not immediately enthusiastic about such fundamental changes.

Further, it would be something of a misinterpretation to characterize this change as exclusively a political or ideological matter.  Its major impetus arose from tax paying middle class folks wanting to increase the amount of public infrastructure beyond the level previously sponsored by the wealthy elite. 

All they needed to add was to create a government sufficiently free of corruption which could offer the prospect that their tax payments -- or, at least most of them -- would wind up in construction projects for things they wanted and could use.  Once such improvements were in place, the local economy, now hosted by such advances in infrastructure,  exploded.

Yes, "exploded" in the sense that there occurred a valid wealth redistribution downward to the growing middle class.  The social culture of the times quickly came to rely on this process to continually improve the physical infrastructure  and, hence, the new opportunities -- which supported its growth.

A "natural disaster" can be coarsely defined as one which damages the public infrastructure.  Recent examples are plentiful.  Katrina, the Indonesian earthquake and tsunami, the Indus flooding in Pakistan, various hurricanes, droughts, and most recently, the damages in Japan which not only included an earthquake and tsunami but also a subsequent nuclear infrastructure disaster.

The "Commons" 

However, when viewed through the frame of "the commons," infrastructure damage and repair moves quickly to the issue of illicit wealth distribution.  A week before the disaster, we found oligarchic interests benefiting from the infrastructure while paying essentially no taxes to fund its creation or maintain it afterwards.  MeanMesa visitors know, by now, that this serendipitous coincidence is fundamentally the result of the corporatist penchant for  "controlling" ("lobbying") the government's tax funding.

The "Commons" - an old idea? (image source)

A week after the disaster wrecks the infrastructure, subsequent chapters of the same story begin to unfold.  It will be middle class tax money which funds the reconstruction.  On the side lines -- and in the back rooms -- it will be advantages to the oligarch class which will govern the new design.  It will be well connected corporations which will supply the materials for reconstruction, and it will be equally well connected contractors who turn out to be the only viable choices in the "bidding" process to do the work, if there is one.

The recovery process will be an arena where "anti-union" values become persuasive attributes of companies seeking contracts.  Further, while lower class tax money is being spent in largess to support the mutilated contracts, the oligarch's public relations campaign will shift into high gear embedding the idea that whatever work will be done is too expensive, even though its sponsors will be paying basically no part of the cost, anyway.

Finally, cynical "side agendas" will emerge as the project proceeds.  For example, in the carefully crafted "rehabilitation" of New Orleans 9th Ward, a huge block of Democratic voters wound up -- more or less permanently -- in FEMA trailers in Arkansas while a major voting block of the party contested city miraculously migrated to the Republican side of the future election results.  Prior property ownership enters a carefully designed Draconian bureaucratic labyrinth with predictable results.

Idealistic Altruism or Just More Looting?

MeanMesa's point here is that it seems we almost entirely abandon the idealistic possibility of actually helping disaster victims recover in favor of a rampage of extracting every possible profit advantage from the ensuing chaos and misery.  The illicit wealth redistribution crowd starts salivating when the first trees fall or the first trash cans are hurled down the street by the wind.  After this stage, the question of "to loot or not to loot" is not a matter of police action around the electronics store.  It is the orgiastic frenzy of plutocrat lobbyists in the back rooms of the Senate.

"Great job, Brownie!" (image source)

US disaster relief in foreign country's ravaged by natural catastrophes too often takes the same turn.  Materials and contracts arrive via "American altruism" but they have been purchased and shipped at monumental costs compared to what more rational purchases from local or near by vendors might have been.  The corporate media floods the domestic "news" channels with "feel good" footage while the illicit profits stream from the US general fund to  opportunistic, corporate, domestic  pockets.

Further, when some of the "profits from disaster" are left on the table when the American oligarchs are through looting the pile, select foreign elites get the next chance to make a few bucks.  Even after the food and medicine arrives where it is desperately needed, it too often winds up in warehouses temporarily on its way to markets where it will be sold to the victims.  Worse, political supporters too often find something to eat long before the unconnected or opposition plates are filled.

This has been the case with every disaster from the Christmas tsunami in Indonesia to the drought in sub-Saharan Africa.  The Obama government has done better with this with the Pakistan earthquake and Indus flooding and the Haitian calamity, both occurring during a more sincere effort already in progress to assist the development of local economies in both places, suggesting that the first thoughts of an "ex-community organizer" in such matters are refreshingly more effective than those of a "profit at any cost" autocrat.

MeanMesa was shocked when the W authorized serious financial aid to save the "AID's sinners" in Africa, but the old, hollow skepticism rushed back when Indian companies which had previously made generic (cost effective) anti-virals were prohibited from continuing the practice in favor of "sky-high priced" front line American pharmaceutical alternatives.

Our altruistic hearts may be in the right place for such undertakings, but we must rededicate ourselves to a new, far more committed state of idealistic diligence in the future.  The fortunes made on the backs of previous disasters have already flowed into the family coffers and trust funds of new aristocrats who will enjoy the lavish returns for generations.

We can -- and must -- do better in the future.  It begins with elections.

Business Management: Disaster Capitalism

Levee Maintenance as a Real Estate and Redistricting Strategy
Finding Business Opportunities in "Natural" Disasters 34


“Okay, class. Let’s get started. This is Management 102, Principles of ‘Levee Maintenance as a Real Estate and Futures Strategy.’ I assume that all of you were in the Management 101 section last semester ‘Levee Maintenance as a Real Estate and Political Redistricting Strategy.’ This second section builds on the redistricting successes on New Orleans with an enlarged study of the implications of managed levee maintenance in the mid-west.”

“In the first semester we studied the opportunities for political redistricting and consolidation made possible by various disasters, perhaps most notably, Hurricane Katrina. The relocation of large numbers of minority Democrats from the New Orleans political landscape has rehabilitated that area into a much more favorable electoral profile based on the higher income Republican voters whose real estate assets, generally located on higher ground, retained their full pre-storm value through the storm surge flooding.”

“As we hinted early on during this opportune disaster, phase two of Katrina is beginning to unfold literally as we speak here today. Capital opportunities to acquire abandoned real estate are opening up daily. Other properties, those with ownership now clouded by the financial collapse of the previous owners, are now on the market at extremely discounted prices, making them very attractive real estate acquisitions.”

“To recap semester one’s presentation, those with sufficient capital resources to profit from the economic collapse of the previous property owners will now find themselves able to expand their property portfolios with greatly discounted real estate prices in a community environment controlled by conservative forces willing to limit what had become, essentially, an out-of-control welfare state. Semester one’s exploration of disaster capitalism is a necessary prerequisite to semester two’s analysis of the many faceted opportunities made possible by similar levee failures in the midwest.”

“The opportunity arising from the flooding in Iowa and Missouri indicates a marked difference in preparation from the more simple case we saw in New Orleans. In the Katrina case, capital was able to enjoy its advantage as an enduring resource that, so to speak, either escaped or outlasted the destructive aspect of the disaster. Of course, the value of the discounted real estate purchases made possible by the misfortune of the previous owners was enhanced by the harvesting of federal resources to rehabilitate the levees. Naturally, a similar ‘extra’ windfall will become available to the opportunists working in the midwest.”

“However, the Iowa and Missouri business model maximizes itself in a number of other, quite notable ways, all ultimately falling to the advantage of its planners. Contrary to the Louisiana model where capital need to be already in place when the disaster opportunity developed, the Iowa and Missouri model actually generated its own venture capital as an intrinsic element of the disaster when considered as a whole picture.”

“So, let’s examine exactly what was the design of this brilliant disaster investment mechanism that functioned so profitably in the case of the midwestern flooding. A seemingly coincidental structure of economic conditions had been carefully groomed prior to the actual disaster opportunity to make its outcome into a ‘perfect storm.’ I think it is safe to say that all of you as students would have to agree that it was, in fact, one of the most outstanding market manipulations since the days of the Robber Barons.”

“What were these exceptional conditions which enabled our disaster opportunists to make such an astounding profit? Referring to your class handout, you can follow the items on the list provided.”

“First, of course, was the necessity of having in place unmaintained levees. Unlike other, more provocative advantages, the Federal oversight failure of this particular feature was neither very visible to the public nor representative of any sort of priority, even from those who would be most effected by its failure. Those substandard levees, literally waiting to fail, can be considered a ‘feed stock resource’ in the grander scheme of things. They were literally just sitting there quietly waiting to become a magnificent profit maker in the right setting.”

“There was some legislative influence required to sustain these inadequate levees as an unavoidable consequence of rational spending policy with respect to infrastructure. Other than that minor expense, knee jerk neo-con economics had reduced the levee maintenance funding to such a low level that little else was needed.”

“Second, there was an additional passive resource available even before the flooding. The largest corporate agricultural concerns already held huge corn stockpiles from their routine business operations. Adding to this potential resource, the financial side of these same agribusiness giants had a higher than usual position in the commodity futures thanks largely to the growing ethanol industry, world wide food prices in general and as a hedge against the constantly devaluing dollar.”

“Any opportunity to increase the tangible value of these resources would amount to an immediate profit for these corporations. Because, unlike the Katrina opportunity, the midwestern flooding was a disaster arriving much more gradually (although quite predictably), the financial resources of the large corporations could be directed at, for example, placing corn futures in a synchronous profit posture at the exact same time the water began to rise.”

“Third, thanks largely to the beginning effects of Global Warming, UN and other purchasers of famine relief commodities had already driven prices very high as they attempted to counter drought impacts in a large number of global populations. In this, a valuable asset of previous legislative influence, wisely purchased in the Congress by agribusiness lobbyists several decades ago, required that American contributions to such a relief effort be purchased at prevailing prices on the domestic market. Since that time global starvation has consistently remained a very positive influence on domestic grain commodity futures possibilities.”

“Fourth, the result of aggressive corporate agricultural competition in the market had already left many of the farms destined to be inundated at the very brink of failure even without the disaster. The economic impact of the flooding disaster was very correctly seen as an opportunity to apply the large capital advantage gained from participating in the grain futures market directly to the purchase of these discounted real estate assets which became available as the previous owners failed.”

“Once again, as was the case in the post-disaster real estate harvest following Katrina, any interested parties with sufficient financial resources encountered an opportunity to purchase real estate at a discounted price, an ‘extra’ benefit of the initial disaster.”

“Fifth, once the disaster had been realized by the population, the Congress could be easily persuaded to spend significant Federal resources to rebuild the levees, possibly even adequately, but in any event, far more adequately than before. This reconstruction and improvement, all financed at Federal expense, began to raise agricultural land values even before the water had receded. As the new owners of this real estate, the corporate profit was further enhanced.”

“And, there we have it. By capitalizing on these five well defined areas of opportunity, all made possible by prevailing conditions and the flood disaster itself, corporate agricultural interests once again were able to maximize the financial opportunities of what we call ‘disaster capitalism.’ The obvious expertise of the current administration in orchestrating such subtle advantages for their corporate sponsors speaks very highly to their business acumen in an unregulated or Federally irresponsible disaster opportunity.”

“There are domestic voices which are quite critical of the ‘meat handed’ approach this same government has taken with respect to energy opportunities. However, we must differentiate manipulations in places such as Iraq in favor of oil interests from the more direct disaster opportunities we have been discussing. The Iraqi adventure required the resources to create the opportunity for a disaster opportunity by first creating the disaster. Although very profitable and productive for the oil interests, these examples from the midwest show the opportunities inherent in other, more spontaneous disasters.”

“The assignment for tonight is to describe a potential disaster opportunity and, applying these same principles, formulate a means to profit from it. Points will be given for extensive use of premeditated Federal infrastructure neglect, and points will be deducted for humanitarian considerations which adversely effect the net capital profits. Confusing or misleading media management will be a plus.”

“Class dismissed.”