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Michael Likosky Headshot

Corporations as Foreign Policy Organs, NGOs as Instruments of Accountability

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We use our companies as foreign policy organs. The recent report, Hard Lessons, by the Special Inspector General for Iraq Reconstruction is a sobering reminder that we do not always do this so well. The election of President Obama is an opportunity to bring a fresh breath of accountability to this basic tenet of US overseas affairs.

On February 17th, the federal government settled a lawsuit with Friends of the Earth, Greenpeace, Boulder, Colorado and three California cities. This landmark global warming settlement was brought against two US executive agencies that we might all be excused for not knowing even existed--the Export-Import Bank (Ex-Im Bank) and the Overseas Private Investment Corporation (OPIC). These Obama administration executive agencies offer subsidies, e.g. loans and insurance, to American firms investing overseas in infrastructure, oil, gas and energy projects. The plaintiffs argued with some success that these agencies were subsidizing companies pursuing projects that dramatically aggravated global warming.

The settlement means that the Ex-Im Bank will now take projected carbon emissions into account when deciding whether to subsidize American firms. OPIC agreed to a goal of reducing the emissions of the projects that it finances by 20 percent before 2019. The incorporation of carbon concerns into their decision-making represents a broadening of what is considered in the American public interest.

These are significant settlements. Our government has subsidized companies for ages with these agencies without such environmental oversight. The Ex-Im Bank was created by FDR during the Great Depression as a way of promoting international commercial engagement at a time when nationalistic protectionism reigned. Although OPIC came into being in 1971, its origins lay in the Marshall Plan government insurance policies that helped encourage American companies to reconstruct Europe. This post-War public insurance policy was the brainchild of a committee chaired by the head of Chase Bank.

However, it was not until the 1980s and 1990s that these agencies became so important in devising how our firms would pursue foreign policy goals. It was the onset of privatization and its worldwide promotion under President Reagan and his bipartisan successors that put the wheels into motion. They have only accelerated since. As we helped governments transfer public services--roads, rails, ports, airports, power stations, oil and gas--into the private sector around the world, these agencies helped American firms compete for the opportunities to deliver these services that opened up.

From Latin America to Asia to Africa, we subsidized our firms to promote development abroad which is rightly in the American public interest. However, while our government agencies excelled at ensuring that our companies competed effectively for these opportunities against foreign firms, we often did not scrutinize carefully enough whether the opportunities themselves were in the public interest. Nor, did we closely monitor whether our subsidized companies carried out their mission effectively. Instead, we focused mainly on bankability; that is, ensuring that our firms found it profitable to pursue these opportunities abroad.

Importantly, the recent carbon victory points to the central role that NGOs have played in holding American firms accountable to the public interest; that is, the principles that justify the government subsidies in the first place, i.e. the advancement of foreign affairs goals such as overseas development. For the last twenty-five years, NGOs have carefully monitored these subsidy programs. When companies have displaced communities, harmed indigenous groups or undermined wages, NGOs have campaigned to have our government live up to our public interest ideals. As a result of their persuasive powers, we now have rules in place to limit damage to vulnerable groups and the environment.

For this reason, with a new administration, it might be useful for us to debate the ways in which our corporate subsidies should be designed to advance the public interest. Moreover, under the ancien regime, we regrettably often focused on how NGOs lacked accountability. We might instead turn the page on this and focus rather on how many NGOs are some of our most effective instruments of accountability.