Good Article, Thanks
REH
----- Original Message -----
Sent: Saturday, June 28, 2003 2:38
PM
Subject: [Futurework] C for
capitalism
For those who think (like me) that the Carlyle
Group is a bunch of rather nasty people, the following review of Briody's book
in the Economist will be of interest. John Major, the previous prime minister
of England, resigned from Carlyle some months ago and soon afterwards gave a
speech against the American invasion of Iraq. No doubt Major thought that,
having resigned from one bunch of nasties closely connected with Bush senior,
he might as well speak out against the bunch of nasties closely connected with
Bush junior. ----- The Iron Triangle Inside the Secret World of the
Carlyle Group By Dan Briody (Wiley; 240 pages; $24.95 and
£17.50) ----- C FOR CAPITALISM
The secretive Carlyle Group gives
capitalism a bad name. But dismantling the whole system may be slightly over
the top
On the day Osama bin Laden's men attacked America, Shafiq bin
Laden, described as an estranged brother of the terrorist, was at an
investment conference in Washington, DC, along with two people who are close
to President George Bush his father, the first President Bush, and James
Baker, the former secretary of state who masterminded the legal campaign that
secured Dubya's move to the White House. The conference was hosted by the
Carlyle Group, a private equity firm that manages billions of dollars,
including, at the time, some bin Laden family wealth. It also employs Messrs
Bush and Baker.
In the immediate aftermath of the attacks, when no one
was being allowed in or out of the United States, many members of the bin
Laden family in America were spirited home to Saudi Arabia. The revival of
defence spending that followed greatly increased the value of the Carlyle
Group's investments in defence companies.
The Carlyle Group is a
godsend for conspiracy theorists who are convinced that the world is run by,
and on behalf of, a shadowy network of wealthy men. Sure enough, it was not
long before Cynthia McKinney, a Democrat member of Congress, pointed a finger
at Carlyle, noting in an interview that persons close to this administration
are poised to make huge profits off America's new warand that, despite
numerous warnings, they did not alert the people of New York who were
needlessly murdered. What, she asked, do they have to hide?
You need
not be a conspiracy theorist, though, to be concerned about what lies behind
Carlyle's success. Can a firm that is so deeply embedded in the iron triangle
where industry, government and the military converge be good for democracy?
Carlyle arguably takes to a new level the military-industrial complex that
President Eisenhower feared might endanger our liberties or democratic
process. What red-blooded capitalist can truly admire a firm built, to a
significant degree, on cronyism; surely, this sort of access capitalism is for
ghastly places like Russia, China or Africa, not the land of the free
market?
Named after the luxurious New York hotel favoured by the firm's
founders, Carlyle even got started by exploiting a tax loophole, a legitimate
capitalistic activity, if not an honourable one. This particular loophole
bizarrely allowed profitable American firms to enjoy a large tax break by
buying the losses incurred by Eskimo-owned companies in Alaska. In 1987, this
opportunity brought together a flamboyant dealmaker, Stephen Norris, who left
Carlyle in 1995, with David Rubenstein, a former aide to President Carter and
still the brains behind the firm.
After this initial success, though,
the going got tougher. Carlyle missed out on several attractive deals while
completing some duff ones, including buying a stake in Caterair International,
a company that later collapsed under the weight of its junk-bond financing.
Still, it did introduce them to a man who became well worth knowing George W.
Bush, a director of Caterair.
Carlyle really only took off after it
hired Frank Carlucci, a former secretary of defence and deputy director of the
CIA, in 1989. Mr Carlucci was able to open doors in Washington that had
hitherto been closed to the firm, allowing it to participate in many lucrative
deals.
Although Dan Briody's book is useful reading for anybody
interested in American politics today, it tells Carlyle's story in the style
of a Tom Clancy or John Grisham novel. This is rather a shame. Instead of
expanding in an unrelenting tone of shocked disapproval, the author could have
offered a serious view on a number of difficult questions.
For
instance, if privatisation can increase the efficiency of the notoriously
inefficient defence sector, how should the inherent political and security
risks best be managed? Given that the rewards for success in the private
sector so far exceed those for public service, how can talented people be
persuaded to enter public service without their former private-sector
activities becoming a source of suspicion?
While some former presidents
are happy to play golf, others may feel they can still earn a decent living.
What rules should govern the commercial activities of former President Bush;
or, for that matter, former British prime minister, John Major; or former
South Korean prime minister, Park Tae-joon -- all of whom have taken the
Carlyle nickel? Mr Bush senior receives private intelligence briefings that
are not available to ordinary investors. Does his inside knowledge of, and
possible influence over, the administration's political strategy towards, say,
North Korea and Saudi Arabia directly benefit Carlyle? If so, does that
constitute an unacceptable conflict of interest?
Perhaps there would be
less reason to worry about Carlyle if there were rival clubs of ex-political
heavyweights competing within the iron triangle. Alas, this firm seems to be
an aspiring monopolist, hoovering up former public officials from across the
political divide and, increasingly, from across the world. It is becoming more
ambitious in Europe, and keenly eyeing China. Perhaps there would be less
reason to worry if Carlyle's activities were more open -- but as a private
equity firm, it has largely escaped America's recent efforts to improve the
governance and transparency of companies, which is unfortunate. At a time when
America is aggressively promoting democracy and capitalism abroad, including
by military means, it would be helpful if its politicians and businesses were
regarded as cleaner than clean. Shrouded in secrecy, Carlyle calls capitalism
into question.
The Economist 26 June
2003 >>>>
Keith Hudson, 6 Upper Camden Place,
Bath, England
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