TCS Daily

Creeping Activism

By Roger Bate - April 10, 2003 12:00 AM

Once again debt-relief demanding activist groups, such as Britain's Jubilee Debt Campaign, have demonstrated they know nothing about how the institutions of a free society work. These groups, which have demanded for the past decade that governments and multilateral institutions such as the World Bank write-off debt to impoverished nations, are now demanding that corporations should forgive past wrongs, including outright theft.

Groups, which also include Oxfam and Amnesty International, have done well when they identified despotic rulers (such as Nigeria's Abache or Zaire's Mobuto) who stole state assets and locked them away in Swiss Bank vaults. These groups demand the return of the money to the people of these countries and embarrass the lenders as well, who are more likely to be careful in the future. But the recent attack on corporations is a mistake. Some companies are folding, just to get the do-gooders off their backs. The long-run effect of such actions will be bad, not good.

As international corporate shakedowns go, the recent attack by Jubilee Debt Campaign on British frozen food chain Iceland was relatively small beer. The seizing of the company's mills in the South American country (formerly British colony) Guyana in the 1970s led to recent demands from Iceland for $20 million compensation. The Economist magazine estimates that these mills are worth a billion dollars, so asking for $20 million doesn't seem outrageous. But Jubilee threatened a publicity campaign of letter-writing, store protests and other activities against core middle-class shoppers. And concerned for the probable loss of goodwill and business, and definite confrontation with activists, Iceland withdrew its demands from Guyana.

Shell recently pulled its staff out of Ogoniland in Nigeria because of concerns for their employees' safety due to tribal unrest.

Shell has been pressured for more than a decade by Western human rights activists for not doing enough to protect the Ogoni people. The company's response was that it had "discussions with" the government about its human rights record but could do little if a nation state oppressed its own people. Company executives wanted to do more but were always afraid they would be thrown out of the country, or worse.

Interestingly the human rights complaints didn't get enough media attention to embarrass Shell internationally. So the human rights groups joined with green groups to pressure Shell on its role in an alleged environmental catastrophe brought on by oil exploration. This story was considered important by the newly environmentally-conscious media of the 1990s, and it ran with this story for weeks after the state-backed murder of activist Ken Saro-Wiwa.

When I visited the site in 1996, I found that the oil spills from pipes were far worse (by over 70 percent) in the most environmentally precarious areas. This seemed strange since one would expect Shell to be most careful in these locations. But it was not so strange after all. The damage was not due to Shell's negligence. It was because the pipes were being spiked by those who could sell the story to the media and obtain massive amounts of compensation for their tribal leaders and family.

No doubt, when Shell returns this time, they will again find oil will have despoiled the Ogoni Delta, and the company will probably get bad publicity as a result, and again be persuaded to pay tribal elders significant compensation.

This constant game of extortion has only been tolerated because of the large profits Shell could make. And Shell has only escaped the fate of Iceland because the former despotic rulers of Nigeria have been sensible enough to realize that they were incapable of extracting oil as effectively as Shell or the French, Italian and American companies working there. Still, the pressure groups, rather than cleaning up the environment are only helping an extortion racket despoil it by, in effect, abetting the tribal leaders in their shake down.

Meanwhile, food giant Nestle has run into trouble, too, recently. The Marxist Mengistu regime of 1970s' Ethiopia "nationalized" Nestle's assets worth hundreds of millions of dollars. Nestle's long-standing claim against Ethiopia was dropped earlier this year when the aid-and-debt pressure group Oxfam threatened bashing the company in the media.

Neither Oxfam nor Jubilee Debt Campaign explained to the media that the claims of Nestle and Iceland were about government theft of their assets. They lumped inadvisable government-to-government or World Bank-to-government loans into the same category as theft of corporate assets. The companies challenged this inaccuracy, but Western left-wing media bought the story, some knowing the truth, and denounced the companies as greedy and keen to see poor countries further impoverished. Both companies decided that any legal victory in an international arbitration court was likely to be symbolic only, and not backed by the more meaningful compensation they sought, so they backed down - the pressure groups claimed victory.

But there is no victory for the poor of Ethiopia, Guyana or even Nigeria, who have suffered and will continue to suffer from lower investment as a result.

Pressure groups look at the world as though it were in stasis where none of their actions have long run consequences. They ignore that the real world is one of dynamic interactions.

Corporations that go into bankruptcy maintain some respect and even admiration when they pay off some of their debts. As an investor it is better to get 15 cents on the dollar than nothing. And if these impoverished nations acted in this way, offering the companies some compensation - even 10 percent, it would show understanding that what happened before was wrong, and that now they respect the rule of law and contract.

Paying lip-service is not enough, without a demonstrable effort on the parts of these governments they will never get the inward investment they so badly crave and their people so badly need. Business leaders have a responsibility to shareholders - who often include foundations that fund the pressure groups, as well as public and private pension funds - to put their money where it will receive an honest return, and not be stolen.

The Economist considers that the tactics of the pressure groups "suggest that they are more concerned about creeping capitalism than with the needs of the desperately poor." I couldn't agree more.

Dr Roger Bate is a fellow of the International Policy Network and a TCS columnist.

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