Peru and the condition of the developing country

What comes to mind when you think of Peru? Is it mountainous ruins? Is it fresh ceviche and cheap pisco sours? Or is it a façade of happiness set in place to mask the despair of being trapped in a developing country with very limited social mobility?

I spent four weeks in Peru on a service-learning program with my university, and during the course of my stay I volunteered at an all-girls orphanage, visited a small village on an island in Lake Titicaca, and stayed with a very hospitable local family in Cusco. Although my time was limited, I learned more in the month I was there than I would have during an entire semester at school.

What I want to focus on in this article is the economy of developing nations verses the economy of the United States. I’ve seen poverty in the last 28 days that would shock any member of my social class (the 10%) but what shocked me wasn’t the condition of Peru’s poor; It was the condition of their middle class. It appeared to be identical to the middle class of the United States!

I was fortunate enough to stay with families that were considered middle class by Peruvian standards, and what I realized during my stay was that the quality of life I was experiencing was virtually the same as the quality of life for many of my middle-class American friends. When I say quality of life, I’m referring to housing, transportation, food budget, and clothing. It was all the same as in the States.

So what does this mean? Has Peru improved so much over recent years that they have caught up to the American class structure? Or has the United States seen a decline in its middle-class so gradual that we’ve failed to notice the Third World countries whose standard of living we’re rapidly approaching? After my time in Peru, I’m convinced it is the latter.

Let me give you an example: In Peru, specifically in the city of Cusco, the poor and the middle class are mixed into the same neighborhoods. There is no clear physical divide between upper and lower income housing like there is in the U.S. No gated communities, no private neighborhoods, no guard houses to raise the mechanical arm that allows your car to pass through. It’s all so integrated because the position of the middle class in Peru is not far removed from that of the poor, again just like in the U.S.

In the United States, as with Peru, the line between the poor and the middle class is vanishing, and it has been for some time. The gated comminutes we see in America are not actually home to our middle class, they are home to our upper class.

This brings me to the sobering realization that I’ve come across during my time abroad: with the ever-widening wealth gap in the United States, we have gone from a nation of lower, middle, and upper, to a nation of poor and rich, with little to no in-between. Worse still, the poor outnumber the rich by a staggering ratio.

Below I’ve linked a video explaining the situation in detail. It’s well worth the six minutes it takes to watch.

https://www.youtube.com/watch?v=QPKKQnijnsM

What’s more, I learned from local guides and academics one of the primary reasons for Peru’s status as a developing country: The Spanish stripped the land of the vast majority of its gold and silver deposits during colonization. And judging by the advanced state of the Incan society around the period of Spanish arrival in Peru (1532) it’s fair to say that in all likelihood Peru would be a developed nation today had the Spanish never landed there.

So what has been going wrong for Peru lately? The Spanish were thrown out in 1824 and Peru has had nearly 200 years to reinvent itself as a thriving country. Well, the short answer is international corporations.

Perhaps the most important thing I learned during the program was the story of how big businesses take advantage of developing countries to boost their bottom line. Evidently, although the wealthy countries of the world give a total of about $130 billion in aid every year to developing countries, international corporations secure $900 billion annually by taking advantage of corporate tax loopholes.

By setting up shop in Peru and other developing nations, big businesses have been able to avoid paying massive amounts of taxes due to a form of tax avoidance called trade mispricing. So even though poor countries receive $130 billion annually from their wealthy counterparts, those same countries are losing nearly eight times that amount of money to corporations who take advantage of them. But that isn’t even the full extent of it.

Trade mispricing and multiple other factors such as debt service and trade rules lead to $2 trillion flowing from poor countries to rich countries every year. And the situation is getting worse. Rich countries are 80 times richer than poor countries today, while they were just three times richer 200 years ago.

This begs the question: Who’s developing who?

This concise and highly informative video brings the issue into focus. https://www.youtube.com/watch?v=uWSxzjyMNpU

A couple more discouraging facts about the injustices of global trade and business:

The systematic distruction of America’s electric trolley cars

A story many do not know is that of the early days of the light rail in the United States. The fact that it is uncommon knowledge is a shame, because the repercussions from what happened in those early days of public transportation can still be seen clearly on the streets of the U.S. to this day.

In the early 20th century, it was said that one could travel from New York to San Diego by simply hopping from one trolley to another. Unsurprisingly, competition was forming around the same time, in this case it was the bus lines.

Within a matter of years, wealthy bus line owners from all around the country bought up rail after rail and systematically destroyed all of the trollies. This was to ensure big oil’s grasp on the commuters of America by forcing them to ride oil-powered buses rather than electric street cars.

The result had a devastating effect on our environment and infrastructure. Millions of tons of CO2 from city buses has rocketed into the atmosphere and our roads have been clogged and eroded by the heavy, bulky machines.

The history is as follows: Corporate giants Mack Truck, Firestone, Phillips, General Motors and Standard Oil banded together in the 1930’s and 40’s to make a “secret company” who’s task was to buy all the passenger cars and trolley lines. In the documentary Pump, author Edwin Black who wrote about this topic at length in Internal Combustion,  gave a chilling summary of what happened next.

“… the rails were pulled up, the trolley cars themselves were burned in public bonfires, and they replaced them with smelly, oil-consuming motor buses. Eventually, the federal government discovered that this was a conspiracy to subvert mass transit. All five corporations were indicted, they were tried, they were found guilty. A corporate conspiracy was responsible for destroying the trolleys in America.”

http://www.culturechange.org/issue10/taken-for-a-ride.htm

The word “conspiracy” always insights skepticism among those who hear it used to describe major historical events, but unlike in most cases, the conspiracy to destroy America’s electric rail system is well-supported by documented evidence. And it all starts with a company called National City Lines.

First, a little background:

National City Lanes was founded in Minnesota in 1920 as a modest local transport company operating two buses. Part of the operations were reorganized into a holding company in 1936 and expanded about two years later with funding from General Motors, Firestone Tire, Standard Oil of California, and Phillips Petroleum.

The five companies involved NCL in their pocketbooks for the sole purpose of acquiring local transit systems throughout the United States. This eventually became known as the General Motors streetcar conspiracy.

The plan was as merciless as it was intricate. When National City Lines would acquire a transit system, the trolley rails would be ripped up, the overhead wires would be cut down, and the system would be converted to buses within 90 days.

General Motors scrapped electrically powered streetcars and trolley-buses, which they did not make, and substituted them with gasoline powered buses that they manufactured. This way, every aspect of supply and demand was tilted in their favor. The cars and busses that GM designed and manufactured would burn Standard Oil gasoline and roll on Firestone rubber tires.

http://www.brooklynrail.net/NationalCityLinesConspiracy.html

The man behind all this? Alfred P. Sloan, Jr., a highly intelligent man who studied at MIT and was hired by General Motors to expand auto sales and maximize profits by eliminating streetcars.

The statistics on public transit at the time are truly awe-inspiring, and one can almost see why Mr. Sloan might have felt threatened enough to take such drastic action.  At the time, 90 percent of all trips were by rail, chiefly electric rail; only one in 10 Americans owned an automobile.

There were 1,200 separate electric street and interurban railways, a thriving and profitable industry with 44,000 miles of track, 300,000 employees, 15 billion annual passengers, and $1 billion in income. Virtually every city and town in America of more than 2,500 people had its own electric rail system, but not for long.

As the largest depositor in the nation’s leading banks, GM enjoyed financial leverage over the electric railways, which relied heavily on these banks to supply their capital needs. According to U.S. Department of Justice documents, officials of GM visited banks used by railways in Philadelphia, Dallas, Kansas City and other locations, and, by offering them millions in additional deposits, persuaded their rail clients to convert to motor vehicles.

And where rail systems were publicly owned and could not be bought, like the municipal railway of St. Petersburg, Florida, GM bribed officials to get their way. According to FBI files, General Motors provided complimentary Cadillacs to railway officials who converted to bus-based systems.

http://www.lovearth.net/gmdeliberatelydestroyed.htm

The punishment:

In 1936 National City Lines and General Motors was found guilty of subverting public transit by a federal court. The two were fined $5,000 apiece, while their management staff were fined $1 each.

However, later Justice Department investigations got nowhere because by 1932 GM had created the National Highway Users Conference, a powerful Washington lobby to push for more freeways and silence discussion of diesel or gasoline pollution. Alfred P. Sloan headed the conference for 30 years until another GM man took over. Today, the commission is headed by Greg Cohen, President and CEO of the NHUC.

In 1949, National City Lines were again convicted in Federal court (and in 1951 the conviction was upheld) for destroying the electrified rail and electric bus transit systems in 44 American cities.

E.J. Quinby, president and founder of the Electric Railroader’s Association, bravely persuaded the government to bring the lawsuit against GM and its powerful automotive allies.

Despite these convictions, the government refused to punish the automotive giants beyond the small symbolic fines described above.

http://www.brooklynrail.net/NationalCityLinesConspiracy

Yet still, more attempts to hold the guilty companies accountable were made. In 1972, then U.S. Senator Ted Kennedy called for a Federal investigation into G.M.’s alleged conspiratorial destruction of the U.S. rail industry and public mass transit industry, in order to facilitate the sale of automobiles.

This led to Senate Bill 1167 of 1974 “The Industrial Reorganization Act” and the now little known Ground Transportation Hearings of April 1974 – which were sidetracked by the resignation of then U.S. President Richard Nixon on August 8, 1974.

To date there has not been another attempt to prosecute the five companies involved with taking down America’s light rail and electric trolley systems.

http://www.coastalpost.com/97/9/16.htm

What seems overwhelmingly clear is not only were we as Americans robbed of the opportunity to have efficient public transit on the same level as other developed nations, but we were also robbed of the opportunity to have less polluted air and less congested roads. The good news is even if our government cant adequately punish companies for their crimes, the past does not have to remain the status quo.

If we come together as a society and make it known that we care enough about this issue to do something about it, we can re-instate the rail systems, reduce the number of buses in use across the country, build more trollies and light rail systems throughout cities, and maybe even reclaim the day when it could be truthfully uttered that one can travel from New York to San Diego by light rail simply my switching trains again and again.

Photo source: http://www.fuelfreedom.org

The TSA: an illusion of security

Some of you may have heard the reports about the Transportation Security Administration’s failure to pass surprise inspections that tested their effectiveness at stopping threats. If you haven’t, allow me to fill you in.

What’s significant here is the scope of their failure. According to ABC news, the TSA allowed 67 out of 70 possible threats to sneak by their airport checkpoints unnoticed. That’s a 95 percent failure rate. But how can the TSA be so ineffectual at what is literally their only job? That’s what we’re here to find out.

http://abcnews.go.com/US/exclusive-undercover-dhs-tests-find-widespread-security-failures/story?id=31434881

Homeland Security personnel dressed as civilians walked into dozens of airports all over the country and were able to smuggle everything from mock explosives to weapons past the security checkpoints. These “red teams” were part of Homeland Security’s push to identify the TSA’s most serious weak points.

The TSA claims that the numbers in reports like these never look good out of context, with some officials even going as far as to claim the Homeland Security agents were “super terrorists” who pushed every aspect of the TSA’s operation to the limit.

But isn’t that the point?

In fairness, the TSA say they’ve already corrected some of the security lapses that led to their procedural failings, but it’s very unfeasible that they have already corrected all or even most of them.

A look through the TSA’s website reveals that they’ve installed new equipment such as the Advanced Imaging Technology scanner. They’ve also expanded their new two-lane checkpoints to 2,640 square feet, which the agency says will create more space for both passengers and security personnel.

However, these improvements were only made at the Charlottesville Albemarle Airport, with no mention in the press release of similar improvements being made in any other locations. There are no speech transcripts, testimonies, or press releases available on the TSA’s website from the month the story broke that address their security failures.

https://www.tsa.gov/news/latest-news

Peter Neffenger, Ambassador for the TSA, told the House Committee on Homeland Security he was “greatly disturbed” by the TSA’s failure rate on the undercover tests. Neffenger cited DHS Secretary Johnson’s ten-step plan to improve the TSA’s methods and increase their effectiveness.

According to the transcript of Neffenger’s testimony to congress, “The assessments are designed to determine the proximate root causes of these failures and provide effective system-wide solutions.” When the testimony was given, Neffenger promised a “systemic review” to identify vulnerabilities across the aviation security system as a whole.

https://www.tsa.gov/news/testimony/2015/07/29/testimony-tsa-aviation-security-challenges

The rhetoric coming from TSA brass may sound reassuring, but the agency’s actions in response to its security lapses have been baffling. The TSA spent nearly $50,000 on an app that splits waiting passengers into two lines with a simple right swipe/left swipe function – a job that could easily have been done without the assistance of an iPad.

According to Politico, fewer passengers are going to be funneled through the less-invasive PreCheck lines in an effort to be more thorough, but many criticize this plan as slowing down an already slow process. There has also been talk of increasing the presence of drug-sniffing dogs and bomb-residue detecting hand swabs.

Representative Bennie Thompson of the House Homeland Security Committee told Politico that he supports adding more manual screening and increasing the selectiveness of expedited treatment, but he’s also worried about how this shift would look in the wake of the TSA’s efforts to speed the screening process for the millions of passengers they see every day.

It has become clear that we as a nation are going to have to make the choice between spending more time in airport lines, and increasing the risk of someone dangerous getting through the checkpoints.

While submitting to more screenings may not seem ideal, it’s hard not to argue that something must be done about the TSA’s security lapses. If the TSA are going to change up their act in an effort to improve, it’s up to us as passengers to be ready for it.

An effort to reach the TSA at Phoenix’s Sky Harbor Airport for comment was unsuccessful.

Photo source: fox9.com

The Panama Papers: following the money

The reason why the Panama Papers are more than just a news story is because of their tie to history. Financial scandals may not be as sexy as those relating to war, but the fact of the matter is the Panama Papers are much larger in size and scope than the Pentagon Papers ever were.

Let’s start off with the basic facts: Eleven-point-five million documents were leaked from the law firm Mossack Fonseca, the world’s fourth largest offshore law firm, incriminating 143 politicians and 12 world leaders both former and current in the hiding of personal assets in offshore tax havens.

I admit the numerical details can be incredibly dry. Simply put,  finance isn’t sexy. But its implications are. Vladimir Putin himself was implicated in the hiding of two billion dollars in offshore funds, and the Icelandic Prime Minister Sigmundur Davíð Gunnlaugsson resigned his post within hours of the story breaking. Gunnlaugsson stepped down due to his failure to disclose companies controlled by he and his wife that were being overseen by the Icelandic government.

http://www.cnn.com/2016/04/05/europe/panama-papers-iceland-pm/

Here’s where the story goes from numbers to consequences. When we start to see high-level change in the world of politics, you can be sure that there is something more going on besides some accounting  tom-foolery. And this is a story that is sure to be breaking not only this week, but over the next few months and possibly years.

I know it may be easy for many people to ask “Why should I care?” but it’s important to remember that wrongdoing, no matter how benign it may seem, is still wrong. And the committers of those wrongdoings need to be held accountable, especially if they’re elected officials.

Forty years of records were leaked, more than two terabytes of data, all vetted by a coalition of approximately 100 professional journalistic organizations. This massive professional partnership has led some to speculate whether the days of “amateur” leaks, such as the Wikileaks scandal, are behind us.

What’s truly amazing however, is the sheer number of people implicated in the documents. In addition to Putin and Gunnlaugsson, the papers contain information on Pakistan’s prime minister, the President of Ukraine, Argentina’s president, the King of Saudi Arabia, six members of the UK’s House of Lords, eight families associated with the supreme ruling body in China and dozens of Brazilians, according to The Guardian.

http://www.theguardian.com/news/commentisfree/2016/apr/05/panama-papers-leak-activism-leaktivism

Digging deeper into this story revealed another layer of information. According to the International Consortium of Investigative Journalists, the documents also name at least 33 people and companies “blacklisted by the U.S. government.” Among the list of names are people that do business with terrorist organizations and Mexican drug lords. And it isn’t just people that were identified in the documents. Countries such as North Korea and Iran were also implicated.

http://www.forbes.com/sites/kellyphillipserb/2016/04/04/what-are-the-panama-papers/#3e79f9f07508

We know the names and positions of some of the key players in this story, but what exactly did they do? Let’s break down the involvement of four people named in the list earlier in the article.

Pakistan’s prime minister, Nawaz Sharif:

According to the Wall Street Journal, three of Sharif’s children were linked to offshore companies. They were either owners of the companies or had the right to authorize transactions for them. The records indicated the family owned London real estate in prime locations and that the companies used the properties as collateral to secure a loan worth millions of pounds.

http://www.wsj.com/articles/pakistan-prime-minister-sharif-grapples-with-fallout-from-panama-papers-1459949486

President of Ukraine, Petro Poroshenko:

RT.com reports that Poroshenko set up a secret offshore company, Prime Asset Partners Ltd., in the British Virgin Islands. To make matters worse, these dealings took place during the period of conflict between Ukraine and Russia that left many Ukrainian solders dead. According to the documents, Poroshenko was listed as the only shareholder of Prime Asset Partners Ltd.

https://www.rt.com/op-edge/338675-ukraines-petro-poroshenko-biggest-loser/

Argentina’s president, Mauricio Macri:

Reports from the BBC show Mr. Macri was listed as director of an offshore company in the Bahamas. Fleg Trading, the company in question, was under his control from 1998 until 2009. Macri kept the company off his books as Mayor of Buenos Aires in 2007, and then again as president in 2015. His office released word Tuesday saying Mr. Macri’s family did in fact own a offshore business group, the acquisition of which was facilitated by the Panamanian law firm Mossack Fonseca.

http://www.bbc.com/news/world-latin-america-35991155

King Salman of Saudi Arabia:

An article on telesurtv.net reported that King Salman used an offshore British Virgin Island company to take out mortgages on London-based luxury homes. In total, the mortgages for those homes totaled $34 million. Now to be clear, the papers do not mention King Salman’s specific role in the scandal, but the mortgages are mentioned to be “in relation to” him and his assets.

http://www.telesurtv.net/english/news/Saudi-King-UAE-President-at-the-Center-of-the-Panama-Papers-20160404-0024.html

This crisis is truly global, with over 200 countries and territories being identified in the leak. According to the ICIJ’s website, Mossack Fonseca is involved in Africa’s diamond trade, provides services to Middle Eastern royalty, and has dealings in the international art market along with other businesses that thrive on secrecy. While most of their clients and transactions are law abiding, it’s clearly worth highlighting the few that are not.

https://panamapapers.icij.org/20160403-panama-papers-global-overview.html

 

 

 

 

 

 

 

 

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