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SO-CALLED “NATURAL” DISASTERS Part I. OverviewJames S. Henry

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For the second year in a row, December comes to a close with a dramatic reminder of the precariousness of daily life in the developing world -- and the continuing failure of the international community to provide adequate early warning systems, pre-crisis funding,  and rapid, effective global relief for the victims of so-called “natural disasters”  -- most of which are actually quite predictable, at least in the aggregate.

This year, on December 26, 2004, it was the 9.0_Rs earthquake off the western coast of northern Sumatra, Indonesia’s second largest island, the fifth largest earthquake recorded since 1900.

One year ago to the day, on December 26, 2003, the disaster in question was the 6.6_Rs earthquake that devastated the city of Bam in southeast Iran, at a cost of  26,500 lives, 25,000 injured and 80,000 homeless.

The death toll from this year's Sumatra quake is likely to exceed 150,000, with thousands of people still missing, several hundred thousand who have been seriously injured,  and more than five million -- most of whom were impoverished to begin with -- suffering from thirst, hunger, homelessness, lost employment,  and the threat of mass epidemics.

Furthermore, as we were also reminded in Bam, among the worst consequences of such catastrophic events are the longer-term traumas associated with disease, losing friends,  family, fellow citizens, livelihoods, communities, and whole ways of life. 

As usual -- and as was true in the case of 9/11, for example --   much of the initial media coverage of this Sumatra tsunami has focused on body counts, other dire visible consequences, and the massive relief effort that has followed.

That is to be expected. But before our attention span drifts too far off in the direction of some other new Third World calamity, it may be helpful to step back and examine some of the systematic factors that contribute to the high costs of such mishaps over and over again, and the extraordinary costs of this "natural" tsunami disaster in particular. 

Our overall theme is that there is really no such thing as a “natural disaster” per se. This is not to say that man-made forces were responsible for Saturday’s tsunami.  But, as discussed below, the degree to which any such event results in a social and economic “disaster” is often to a great extent under our control. 

In the case of this particular tsunami,  its high costs:

1. Were entirely foreseeable, at least in a “sometime soon” sense, based on both long-term and recent experience with tsunamis in the Indonesian arena;

2. Were actually foreseen by several geological experts, some of whom have been advocating (unsuccessfully) an Indian Ocean tsunami early warning system for years;

3. Could have been substantially mitigated if US, Japanese, and other scientists around the globe who monitor elaborate earthquake- and tsunami-warning systems, and had ample warning of this event, had simply shown a reasonable degree of human concern, imagination,  and non-bureaucratic initiative;

4. Might have been avoided entirely with a relatively modest investment in tsunami “early warning systems” for Indonesia and the Indian Ocean.

Furthermore, the global response to this horrific disaster has been long on the size of aid pledges, dignitary press conferences, and “oh – the horror” press coverage. 

It has been conspicuously short on actual aid getting through to the front lines. Today, almost a week after the disaster, aid efforts are well-funded, but they remain sluggish, disorganized, and ineffective, with at least as many additional lives in jeopardy right now for want of aid as perished in the original waves.

This is partly explained by the sheer difficulty of getting aid through to remote regions like northern Sumatra.  But, as explained below, it is also due to political factors, and the fact that the world community still runs its humanitarian relief efforts like a “pick-up” softball game. 

Fortunately, this particular crisis seems to have captured the attention of the world's donor community. At this point, with more than $2 billion in aid pledged by governments, multilateral institutions, and more than 50 private relief organizations,  the real problem is not money, but organization.

But we may want to demand that the UN, the US Government, the EU, and all these relief organizations get their acts together, and establish a permanent, well-run, well-funded global relief organization that can move more quickly the next time around. Along the way, they should also pay far more attention to preventive systems that can help save the future victims of such disasters, before all the relief becomes necessary.

                            © James S. Henry, Submerging Markets™, January 05

”WHERE’S WARREN?” Bhopal’s 20th Anniversary

Today marks the twentieth anniversary of the deadly December 3, 1984, chemical gas leak at an Indian pesticide plant in the very  center of Bhopal, a city of 90,000 – just a little larger than Danbury, Connecticut -- in the state of Madhya Pradesh, in central India.  At the time the plant was owned by Union Carbide India, Ltd. (UCIL), an Indian company whose majority (50.9%) shareholder was Danbury-based Union Carbide Corporation (UCC) which was acquired by Dow Chemical in 2001.

This anniversary provides us with an opportunity to reflect on “lessons learned” from this disaster – including the need to make sure that the globalization of trade and investment is also accompanied by the globalization of justice for the victims of transnational corporate misbehavior.

Download WhereIsWarren12032004.pdf

THE COSTS

As a recent report by Amnesty International details, this industrial accident, perhaps the worst in history, killed more than 7,000 to 10,000 people in the first few days,  including many children.

There were also serious long-term injuries to up to 570,000 others who were exposed to the fumes.

At least 15,248 of these survivors have already died because of their injuries – in addition to the 7,000 to 10,000 initial victims.

Up to 570,000 others continue to suffer from a wide range of serious health problems, including birth defects, cancer, swollen joints, lung disease, eye ailments,  neurological damage, and many other painful, long-term illnesses.

Thousands of animals also died, and many people lost their homes, jobs, income, and access to clean water.

WHO WAS TO BLAME?    

U

nion Carbide’s ultimate “parent authority” for this accident is very clear. In the middle of the night, a cloud of lethal gas caused by the leak of at least 27 tons of “methyl isocyanate” (MIC), a high-toxic odorless poison,  and another 13 tons of “reaction products” began wafting through the city center. The gas spread without warning throughout the town. The leaks continued for more than two hours before any alarms were sounded.

All six of the plant’s alarm systems failed.  It was later shown that the company management had systematically tried to cut corners  on safety and warning equipment – by, for example, failing to equip the plant with adequate safety equipment and trained personnel to handle bulk MIC storage; failing to apply the same safety standards that it used in the US; and failing to insure that there was a comprehensive plan to warn residents of leaks. 

In fact,  company staff and many others were aware of the risks created by this situation. In June 1984, six months before the accident, an Indian journalist had written an article about them: “Bhopal – On the Brink of Disaster.” But nothing was done – partly, according to Amnesty, just to cut costs.   

The result was that shortly after midnight on December 3, 1984, Bhopal’s families woke up screaming in the dark, unable to breathe, their eyes and lungs on fire from the poison, choking on their own vomit. By daybreak there were already hundreds of bodies on the ground, with scores of funeral pyres burning brightly.

In addition, long before the 1984 accident, there had been a series of leaks at the site that management was well aware of, and which caused serious pollution – contamination that continues to this day.

All told, as the Amnesty report makes clear, this amounts not only to an health and environmental disaster, but a serious infringement of the human rights of thousands of Indian citizens. 

CONTINUING IMPUNITY

All this was bad enough.  But the other key part of Bhopal’s injustice has to do with the fact that key actors like Dow Chemical/Union Carbide, the Indian Government, and the individual US and Indian senior executives and other officials who were responsible for the accident have managed to avoid  liability for the full costs of the “accident,” as well as personal accountability. 

This impunity was underscored this week when the BBC fell victim to a hoax perpetrated by someone who pretended to be a Dow Chemical executive. He concocted a false statement that the company was reversing its denial of all responsibility for Bhopal, and was establishing a E12 billion fund for 120,000 victims.   

In fact,

·          Union Carbide (UCC) and Dow Chemical,   UCC's new owner since it purchased the company for $10.3 billion in 2001,  have consistently denied any liability for the disaster.  They have argued, for example, that UCC was a “domestic” US company, with no “operations” in India. Supposedly it was also not responsible for UCIL’ actions, because UCIL was just an “independent” Indian company.

·          In fact, while UCC disposed of its interests in UCIL in 1994, until then, UCC maintained at least 51 percent ownership in UCIL. Furthermore, according to the Amnesty report, UCC played an active role in UCIL’s management and board activities, and was responsible for the detailed design, senior staffing, and on-going operating procedures and safety at the Bhopal plant.

·          Furthermore, as UCC’s CEO at the time, Warren Anderson, bragged before the US Congress in 1984, Union Carbide had 100,000 employees around the world. At the same time, another senior UCC executive, Jackson Browning, said that UCC’s “international operations represented 30 percent of sales,” and that “India was one of three dozen countries where the company has affiliates and business  interests.” 

·          After the spill, according to the Amnesty report, UCC officials (1) tried to minimize MIC’s toxicity, (2) withheld vital information about its toxicity and the reaction products, which they treated as trade secrets; and (3) refused to pay interim relief to the victims.

·          The Indian Government and the State Government of Madhya Pradesh also bear grave responsibility for the disaster itself, and then for striking an irresponsible private settlement with the perpetrators. As the Amnesty report makes clear, environmental regulations were very poorly enforced against UCIL. Then,  having sued for $3 billion in damages in 1988, the Indian Government settled for just $470 million in 1989,  without adequate participation from victims. The Indian Government has also discontinued medical research on the impact of the gas leak, and failed to publish its interim findings.

In October 2003, it was disclosed that  by then, some 15,298 death claims and 554,895 claims for other injuries and disabilities had been awarded by the Madhya Pradesh Gas Relief and Rehabilitation Department – five times the number assumed in the settlement calculations by the Indian Supreme Court.

·          UCC’s insurance paid that paltry amount in full. But then the Indian Government was very slow to pay out the money to victims. As of July 2004, $334.6 million had been paid out, while $327.5 million was still sitting in Indian government custody.  At that point, 20 years after the disaster, the Indian Supreme Court finally ordered that the remaining money be paid out to some 570,000 registered victims – an average of $575 apiece. Even these payments won’t all get to the victims;  a significant portion is reportedly consumed by India’s notorious bribe-ridden state bureaucracy.     

·          Local authorities in Bhopal filed criminal charges against both UCC its former CEO Warren M. Anderson in 1991-2. Anderson was charged with “culpable homicide (manslaughter),” facing a prison term of at least 10 years. He failed to appear, and is still considered an “absconder” by the Bhopal District Court and the Supreme Court of India.

However, despite the existence of a US-India extradition treaty,  the Indian Government has failed to pursue a request for Anderson’s extradition vigorously.

The 82-year old Anderson, who is still subject to an Indian arrest warrant, has a very nice home with an unlisted number in Bridgehampton, New York, and another in Vero Beach, Florida.

Meanwhile, while the Indian Government has been willing to hold local Indian companies that operate hazardous businesses strictly liable for damages caused by them, it has been reluctant to apply this rule to transnational companies -- perhaps because it is more worried about attracting foreign investment than insuring that foreign investors manage their activities responsibily.

SUMMARY – GLOBALIZING JUSTICE

Overall, twenty years after the original incident, Bhopal remains a striking example of transnational corporate misconduct, an incredible case of the negligent mishandling of a true “chemical  weapon of mass destruction.”

This behavior may not have been as culpable, perhaps, as the willful use of toxic weapons against innocent civilians by former dictators like Saddam and Syria's Assad. But it was no less deadly. 

As we saw above, Bhopal was also an example of the incredible loopholes that still apply to leading companies in globalized industries.

Especially in corruption-ridden developing countries like India, they have often been able to take advantages of lax law enforcement, weak safety regulations, clever holding company structures that limit liability, and the sheer expense of bringing them to justice.

Evidently the globalization of investment and trade is not sufficient. Economic globalization needs to be augmented by the globalization of justice. Among other things, that means that it is high time for transnational corporations to be subject to an enforceable code of conduct, back up by an International Court for Corporate Responsibility.   

èèè

                        © James S. Henry,  SubmergingMarkets™, 2004

Democracy in America and Elsewhere:Part II: Recent Global Trends Toward Democracy

James S. Henry and Caleb Kleppner

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Most Americans are probably used to thinking about their own political system as a shining example of “representative democracy” – not only one of modern democracy’s original pioneers, but also a contemporary role model for other emerging democracies around the globe.

Of course we are also very proud of our free markets, our relative affluence, and our occasional ambitions -- at the moment perhaps a bit muted -- to provide equal opportunities for all our citizens.

However, when we try to market our country’s best features to the rest of the world, or teach our children to be proud of their country, it is not the economy that we brag about.

Even self-styled “conservatives” usually lead, not with glowing descriptions of perfect markets and opportunities for unlimited private gain, but with our supposedly distinctive commitment to defending and expanding political democracy and human rights at home and abroad.

Indeed, one of the most important official justifications for recent US forays into the Middle East, as well as our many other foreign interventions, has been to help bring “democracy” to supposedly backward, undemocratic societies like Iraq and Afghanistan (…and before that, Haiti, Colombia, Panama, Nicaragua, Grenada, Panama, the Dominican Republic, Cuba, Guyana, Guatemala, Iran, Laos, Vietnam, the Philippines, etc. etc. etc.)

Even though, time and again, this noble commitment has turned out to be pure rhetoric, it provides such an elastic cover story for all our many transgressions that it keeps on being recycled, over and over and over again.

THE EMERGING DEMOCRACY GAP

Whatever the truth about US motives for such interventions, it may come as a surprise to learn that in the last two decades, the United States itself has actually fallen behind the rest of the democratic world in terms of “best democratic practices” and the overall representativeness of our own domestic political institutions.

Meanwhile, many developing countries have recently been making very strong progress toward representative democracy, without much help from us.

Indeed, in some cases, like South Africa, this progress was made in the face of opposition from many of the very same neoimperialists who have lately voiced so much concern about transplanting democracy to the Middle East.

While we have been resting on our democratic laurels, or even slipping backwards, the fact is that emerging democracies like Brazil, India, and South Africa, as well as many of our First World peers, have been adopting procedures for electing governments that are much more democratic at almost every stage of the electoral process than those found in the US.

The institutions they have been developing include such bedrock elements of electoral democracy as the rules for:

• (1) Apportioning geographic boundaries for congressional districts;


• (2) Selecting candidates and conducting campaigns;


• (3) Qualifying and registering voters;


• (4) Establishing effective controls over campaign finance;


• (5) Providing equitable access to the public airwaves for campaign advertising;


• (6) Encouraging voter turnout;


• (7) Preventing outright vote fraud;


• (8) Insuring that votes are accurately and quickly counted – and, if necessary, recounted;


• (9) Insuring that voter preferences are fairly and proportionately represented in the legislative and executive branches of government; and


• (10) Enforcing other helpful provisions, like run-off and recall provisions.

Of course effective democracy has many other crucial elements beside electoral processes alone. These include (1) the relative influence of legislative, executive, and judicial branches; (2) the concrete opportunities that ordinary citizens have -- as compared with highly-organized special interests and professional lobbyists -- to influence government decisions between elections; (3) the respective influence of private interests, religious groups, and the state; (4) the degree to which the rule of law prevails over corruption and "insider" interests; and (5) the overall degree of political consciousness and know-how.

However, fair and open electoral processes are clearly a necessary, if not sufficient, condition for effective democracy -- all these other elements simply cannot make up for their absence.

We hope that increasing the recognition of this “electoral democracy gap” between the US and the rest of the democratic world will be helpful in several ways:

• It may make Americans more modest about our own accomplishments, and less patronizing toward other countries;
• It may spur us to consider that we may actually have something to learn about democracy from other countries.
• It may provide an antidote for the recent revival of anti-democratic doctrines in the US, some of have acquired a disturbing level of influence among our political elites.
• It may help to show how our own idiosyncratic version of democracy is exerting a profound influence on this year’s profoundly dissatisfying Presidential race.

DEMOCRATIC PRAXIS - WHAT CAN WE LEARN FROM THE THIRD WORLD?

One useful place to start is with an assessment of best practices among the growing number of democracies around the globe.

This used to be much easier than it is now. As of the early 1970s, there were only about 40 countries that qualified as “representative democracies,” and most were First World countries.

Since then, however, there has been a real flowering of democratic institutions in the developing world. This was partly due to the collapse of the Soviet Empire in the late 1980s. But many more people were in fact “liberated” by the Third World debt crisis, which undermined corrupt, dictatorial regimes all over the globe, from Argentina, Brazil, and Chile to Indonesia, the Philippines, South Africa, and Zaire.
Voting in the Philippines, 2004

Assessments of the degree of “freedom” of individual regimes by organizations like Freedom House or the UN Development Program’s Human Development Indicators, are notoriously subjective. However, while there is plenty of room for disagreement about specific countries, there is little disagreement on the overall trend. (See Table 3.)

By 2004, about 60 percent, or 119, of the nearly 200 countries on the planet could be described as “electoral democracies,” compared with less than one-third in the early 1970s. Another 25-30 percent have made significant progress toward political freedom.

Voting in South Africa, 1994

Indeed, notwithstanding our present challenges in Iraq and Afghanistan, from the standpoint of global democracy, this has been a banner year. As of September 2004, 32 countries had already held nationwide elections or referenda, with 886 million people voting. (See Table 4.) By the end of 2004, another 33 countries will join the US in doing so – nearly three times as many national elections as were held each year, on average, in the 1970s.

All told, this year, more than 1.7 billion adults – 42 percent of the world’s voter-age population -- will be eligible to vote in national elections, and more than 1.1 billion will probably vote. That that will make American voters less than 10 percent of the global electorate.

Of course, some of these elections will be held in countries where democratic institutions and civil liberties are still highly imperfect. And some developing countries like Russia and Venezuela have recently been struggling to find a balance between democracy and national leadership, partly to undo the effects of neoliberal policies in the 1990s, or in response to terrorist threats.

But the good news is that democracy is clearly not a “luxury good.” The demand for it is very strong even in low-income countries like Bolivia, Bangladesh, Mozambique, Guatemala, and Botswana. And while self-anointed dictators, military rulers, and one-party elites or theocracies are still clinging to power in 50-60 countries that have more than 2.4 billion residents, such regimes are more and more anachronistic. (See Table 5.)

Interestingly, Asian dictatorships, especially China and Vietnam, now account for more than three-fifths of the portion of the world’s population that still lives under authoritarian rule. While several Islamic countries appear on the list of authoritarian countries, they account for just one fifth of the total. Furthermore, by far the most important ones happen to be close US “allies” like Pakistan, Egypt, Morocco and Saudi Arabia.

Evidently the simple-minded neoconservative “clash of cultures” model, which pits supposedly democratic, pluralist societies against an imaginary Islamic bloc, doesn’t have much explanatory power.

Furthermore, the US also clearly faces some very tough choices, if it is really serious about promoting non-discriminatory, secular democratic states that honor the separation between church and state among its Islamic allies, as well as in Palestine, and, for that matter, Israel.
Voting in East Timor. 2001

A more encouraging point is that many developing countries are already providing useful lessons in democratization. Indeed, as we will see in Part III of this series, there is much to learn from the experiences of new democracies like Brazil and South Africa.

These countries are undertaking bold experiments with measures like free air time for candidates, “registration-free” voting, direct Presidential elections, electronic voting, proportional representation, and the public finance of campaigns. While not all these experiments have worked out perfectly, the fact these countries have already demonstrated a capacity to innovate in “democratic design” is very encouraging.

Of course there is a long-standing tension between the US dedication to Third World democracy and its tolerance for the independence that democratic nationalism often brings. By renewing and deepening our own commitment to democracy at home, we will also protect it abroad -- even though (as in Venezuela, Russia, Iran, and perhaps eventually also Iraq) it does not always produce governments that we agree with.

(Next: Part III: "Brazil Vs. the US -- And the Winner Is....")

***

©James S. Henry and Caleb Kleppner, SubmergingMarkets™, 2004

"Farmingville"A New Film About Agro-Business, Globalization, and Poor Mexican Farmers

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This week marks the television premier of Farmingville, an outstanding documentary on the devastating impact that a really quite lethal combination of globalization plus First World farm subsidies is having on developing countries like Mexico.

Produced and directed by fellow Long Islanders Carlos Sandoval (Amagansett, NY) and Catherine Tambini (Hampton Bays, NY), Farmingville won this year’s “Special Award for Documentary” at the Sundance Festival, and it has also received many other prestigious awards. (For those of you in Long Island, it will also be shown on Thursday June 24 on Ch. 21, accompanied by a discussion with Sandoval and several of the film’s participants, moderated by OLA’s outstanding local leader, Isabel Spevedula de Scanlon.)

The social crisis described by Farmingville is a striking example of one of neoliberalism’s more disturbing patterns – the combination of “socialism for the rich” with “free trade for the poor.” Each year the US government provides more than $10 billion in subsidies to American corn farmers in politically-influential states like Iowa, Minnesota, Nebraska, and Kansas. From a political standpoint, these subsidies are usually justified in the name of preserving the “American family farm.” In fact the vast bulk of the subsidies goes to a handful of incredibly rich US agro-conglomerates, such as Cargill and Archer Daniels, Midlands (“ADM”).Together, these corporate giants now account for more than 70 percent of domestic US corn production.

These subsidies have not saved America’s family farmers, who continue to disappear at a rapid rate. But the $10 billion a year in subsidies has the giants to overproduce, resulting in surpluses that have been dumped onto world markets at artificially-low prices.

As documented in Farmingville, combined with the “free trade” policies adopted by the US and Mexico in the last decade, these surpluses have devastated family farmers throughout Mexico.

Of course Mexican farmers were the original source of “corn” – they’ve been growing it for at least 10,000 years. Until recently, corn accounted for at least half of the acreage they planted. In fact corn is not just a product in Mexico; it is also at the core of a whole cuisine and culture.

Since the adoption of the North American Free Trade Treaty (NAFTA) in 1993, however, the real price of corn has dropped more than 70% in Mexico. even as domestic non-labor production costs have risen dramatically.

Most of the price declines are due to escalating US corn imports. Recent estimates by an Oxfam study of “The Mexican Corn Crisis,” for example, show that US corn is dumped in Mexico at between $105m to $145m a year less than the cost of US production.

As a result, many campesinos are being forced out of business -- the country has lost the majority of its corn farmers in just the last 10 years. This has caused havoc in the entire rural economy, produced mass unemployment and forcing a mass migration to Mexico’s already overstuffed cities. And that, in turn, has accelerated emigration, with thousands of desperate, hungry people trying to leave Mexico every day, and dozens of them literally dying in the desert wastelands along the border, trying to get to
“El Norte.”

Indeed, according to the latest statistics from the US Bureau of Immigration and Naturalization, illegal immigration along the Mexican border is now at an all-time high.

Meanwhile, US agricultural conglomerates like ADM and Cargill have become more profitable than ever. They are using their fat profits to extend their dominance abroad. For example, Cargill now owns 30 percent of Maseca, the giant Mexican food distributor that dominates the Mexican tortilla market.

As Oxfam’s recent report on this neoliberal debacle concludes,

"The Mexican corn crisis is yet another example of world trade rules that are rigged to help the rich and powerful, while destroying the livelihood of millions of poor people.”

Indeed, the story that Farmingville relates is an especially graphic example of the perverse consequences that neoliberal policies can have once powerful interests get hold of them -- when US corporate giants are able to have their way with free trade, wide-open capital markets, lavish government subsidies, political leaders on both sides of the border, and poor farmers all at once.

Obviously this is tough time for leading US politicians to take on the powerful farm lobby, much less propose policies that might trim US exports at a time of massive trade deficits. But are there no US or Mexican political leaders with longer-term vision, willing to tackle this grossly-inequitable, morally-reprehensible situation?

***

© James S. Henry, Michael O'Neill, SubmergingMarkets™, 2004

Third (and First) World Ferry Accidents – “Tragic Misfortunes” or Predictable Consequences?

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News Flash! - Another Tragic Ferry Accident in the Congo! - Hundreds Missing!
Ferry Accident on Zambezi Claims 18 Lives!
Flash! - Ferry Mishap in Bangladesh, 300 Feared Dead!

Evidently January 31st is not the best day of the year to take a ferry ride. This marks the 50th anniversary of one of the worst ferry disasters in the UK’s history – the 1953 sinking of the Princess Victoria, a British Rail car ferry that was caught out in unusually stormy seas in the Irish Sea, with the loss of 130 lives. And just today (1/31/2004), in northwest Congo, an overloaded ferry caught fire and sank on the Congo with the loss of at least 200 lives.

Such ferry mishaps have long been a staple item of disaster news all over the globe. With few exceptions, most conventional media coverage presents them -- and of course all the damage done by mudslides, forest fires, and earthquakes as well -- as "tragic accidents," the almost-unavoidable byproducts of happenstantial factors like overcrowding, bad weather, crew mistakes, fires, and collisions that are (ala Les Liason Dangereux)"beyond our control."

However, a closer look reveals that more systemic factors are also at work, not only in the Third World, but also in the First.

STATEN ISLAND “MISHAP”?

The Staten Island Ferry, the US’ second most popular, is normally safe and reliable. It carries an average of 70,000 people back and forth each day to Manhattan. So New Yorkers were suitably shocked last October when the 3335-ton ferry plowed into the docks on Staten Island at 17 knots, killing 11 people and injuring at least 42.

As a result, financially-strapped New York City has already been sued for more than $3 billion in damages, and has had to ask a court to invoke a maritime statute that may limit its liability to the value of the vessel -- a paltry $14.4 million.

But this limitation could depend on where the blame is ultimately placed. Initially the City tried to place it entirely on individual crew members – for example, a possible medication-induced blackout by the pilot, the alleged absence of the ferry’s captain from the wheelhouse, and the possibility that other crew members may have been playing cards rather than keeping watch.

However, since Federal prosecutors and the US Department of Transportation’s (DOT’s) National Transportation Safety Board have entered the investigation, it seems that other more systemic contributing factors are emerging. These include the Port Captain’s alleged failure to distribute and enforce safety rules, the absence of state-of-the-art navigational equipment and warning systems that are routinely used, for example, on Seattle’s ferries, and inadequate training programs for crew members. There also appears to be a general pattern of nepotism and corruption in the management of the entire Staten Island ferry system.

While it is premature to reach final conclusions about the relative influence of these various factors, it is already clear that the "pure accident" theory of this event -- the worst accident in Staten Island Ferry history -- is inadequate.

THIRD WORLD FERRY “ACCIDENTS”?

The residents of sub-Saharan Africa, as well as countries like Bangladesh, the Philippines, Indonesia, and China, are intimately familiar with all these pathologies. They must have marveled at the attention that was showered on the comparatively small Staten Island accident by the global media. After all, these countries routinely suffer ferry accidents that take hundreds and even thousands of lives.

We’ve already noted the latest Congo River mishap. A cursory review of other accident reports shows that in 2003 alone, another Congo ferry “accident” claimed 163 lives, one in Bangladesh claimed “hundreds,” and there were others in Tanzania, Somalia, Zambia, and Burundi that took an average of fifty lives each. In 2002, yet another Bangladesh ferry “accident” claimed 300 lives, one in Indonesia took 60, and in Senegal, a ferry loaded with 1800 people, twice its capacity, flipped over, with no survivors. There have been literally hundreds of other such sinkings. The all-time record appears to have been a Philippines sinking in 1987 that claimed 4,341 lives – the greatest number of ocean fatalities in nautical history.

Of course any one of these incidents, taken in isolation, may be understood as a “tragic mishap.” But from a slight distance, what is most striking is how repetitive they are – not only in terms of the specific countries involved, but also the very same locations in the rivers and oceans, the very same ferry owners, the same regulatory authorities, and in some cases even the same (salvaged) vessels.

(Indeed, in the case of the Staten Island Ferry, the most recent 2003 incident had similar, though much less costly, precursors in 1998, 1992, 1978, and perhaps others.)

All this suggests that, as is now coming to light in Staten Island, what we have here are not just random accidents and errors, but recurrent market and regulatory failures.

In particular, the fact is that, especially (but not exclusively) in the developing world, ferry owners – whether public or private -- almost never face any substantial civil liabilities or criminal sanctions for such mishaps after the fact, and the safety and training regulations that they implement before the fact are often wanting. Furthermore, as in the case of New York City’s efforts to limit liability, lawsuits in these countries may not afford any adequate relief where ferries are state-owned. And pursuing them is also often beyond the means of the victims' families.

Given this after-the-fact impunity, there is little incentive for ferry owners or managers to enforce restrictions against overcrowding, or to invest in adequate crew screening, training, and drug testing, as well as up-to-date navigational and safety equipment. New Yorkers, be warned….

The implication is that unless such conditions change, those of us who relish a regular diet of “tragic ferry accidents,” especially from the Third World, are unlikely to be disappointed. “Oh, the horror…..”

***

© James S. Henry, 2004. SubmergingMarkets.Com

Microsoft's Getting FLOSSED - The Growing Spector of Open Source Software in the Third World

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What do the following events have in common? First, Microsoft's shares traded down sharply this week, despite the fact that its quarterly earnings report, released after the bell on October 23, generally exceeded analysts' expectations.

Second, Lula (Luis Ignacio da Silva), Brazil's feisty left-leaning President, suddenly got invited this month by Bill Gates to visit him in Seattle. And on October 10, 2003, the Government of Brazil released a letter of intent that it had recently signed with IBM, declaring "a common interest in concentrating their efforts and resources to develop technology based on open standards, such as Linux."

The fact is that a new spector is stalking Microsoft. This is not some Halloween ghoul, or even First World antitrust laws, though these continue to provide a few scary moments and hefty legal bills for Redmond. Rather, it is "FLOSS" -- the European Commission's acronym for for "Free/Libre Open Source Software," especially the freeware operating system Linux -- that has lately been giving Microsoft nightmares. (See the EC-sponsored report on FLOSS. See also the June 2003 study of the benefits of FLOSS for developing countries published by the Foreign Ministry of Finland, the original home of Linux kernal developer Linus Torvalds.).

Indeed, as Microsoft's top managers admitted this week - spooking investors, and causing a sell-off in the whole US technology sector -- they face a growing markeplace threat from such "Open Source" alternatives, especially Linux.

Of course Linux was originally the 1990s invention of independent, not-for-private-profit software developers like Torwalds and MIT's Richard Stallings, plus a global army of unpaid coders around the globe. But in the last five years it has gained momentum in the "real business" world, winning support from First World IT vendors like IBM, HP, and (begrudgingly) Sun Microsystems, and also making inroads among First World business and government customers. For them, the value proposition was not just cost but security. Microsoft's proprietary operating systems like Windows 98, NT, and XP, developed behind closed doors with no public access to the "source code," have all turned out to be full of glaring security bugs, as anyone who uses them and is inundated with MS "security fix updates" can testify. Indeed, several US government agencies that are most concerned about security, like the National Security Agency, have adopted Linux as their de facto standard. And many financially-strapped states, like Massachusetts, California, Texas, and Oregon, have lately also been debating whether or not FLOSS software might not only enhance security but save them money.

However, the real news is in the developing world, especially in leading "mid-level" like South Korea, Taiwan, and Malaysia, and emerging "markets of the future" (knock wood) like Brazil, China, South Africa, and India, and more troubled markets like Peru, Colombia, and Argentina. Here there is a growing movement, not only to adopt Linux for government applications, but also to use it for commercial services as well, and even to develop home-grown software applications that run on top of Linux and substitute for Microsoft's suite of Office applications.

Of course, as this post indicates, Bill Gates is not taking this lying down. Indeed, one of his many tactics has apparently to use his foundations to offer donations to schools projects in countries like Peru and South Africa, on the condition -- of course -- that they play ball. This is not a story that we expect to see covered in Slate Magazine , but we will continue to follow it here with great interest.

(c) James S. Henry, 2003. Not for reproduction or other use with express consent of the author.