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George Monbiot: Why do governments subsidize the rush by fishermen to destroy unowned ocean fisheries?

July 9th, 2008 No comments

In the context of the latest fuel strikes by European fishermen, George Monbiot has an excellent piece in the July 8th Guardian that explores the role of governments in subsidizing the destructive “tragedy of the commons” that is ocean fisheries.

It is, however, a shame that Monbiot makes no reference to what many observers are starting to realize:  that the solution to solving over-fishing lies in getting the government out of the business of political management of the resources that fishermen depend on, and putting responsibility, control and incentives to invest in resource management back in the hands of fishermen. 

Although government interference in resource markets has been a resounding failure (witness the destruction of the US salmon fisheries), a light at the end of the tunnel has appeared in the form of privatization through “ITQs” or Individual Transferable Quotas, as noted by:

Ron Bailey, science correspondent of Reason, in “How to Save New England’s Fishing Villages; If only the fishers will allow it” (September 28, 2005) and in”Pick Your Poissons; Economic and ecological diversity for fisheries“(August 25, 2006); and by

Birgir Runolfsson, in Cato’s Regulation, in “Fencing the Oceans A Rights-Based Approach to Privatizing Fisheries” (vol. 20, no. 3, 1997).

Further, Jonathan Adler, law prof at Case Western Reserve University, has a very interesting discussion of how the enforcement of antitrust laws have frustrated cooperative fishery management  (March 2002).

While these materials focus on domestic marine fisheries, similar strategies are needed at regional levels.

 

 

Whales and fisheries – "standing up to Japan", or managing/enclosing the commons?

February 15th, 2008 2 comments

Dave Neiwert, a thoughtful voice on the left and with an experienced, informed view on America’s right-wing racist fringe, has a rather confused post up on whaling on his blog, Orcinushttp://dneiwert.blogspot.com/2008/02/standing-up-to-japan.html.

Neiwert sends a mixed message by saying we need to “stand up to Japan”, by prominently posting recent footage of a whale’s death struggles at the hands of Japan’s “scientific” whaling fleet, and then by calling for the need to build bridges and networks over physical confrontation – but doesn’t really begin to explain why whales have become so politicized or the best way to turn deadlock into a desperately needed victory for management of the ocean commons

Copied below are my comments to his post (edited and emphasis added):

Gravatar Dave, with you and others thoughtlessly feeding the political grandstanding, it’s hard to see how the bridge- and coalition-building that is needed to tackle whaling – or the much more serious and pressing global fisheries – issues is ever going to get off the ground.

As others have noted, the Japanese came late in the whaling game, mainly after WWII (with US encouragement) and after the stocks were already starting to crash after a 150 years of western industrialized whaling pressure.

The Japanese persist in pelagic whaling [which is obviously non-traditional] despite the damage it does to their international reputation and long-term national interests because Westerners have done a great job of stiffening the spines of conservative politicians – so much so that while Japan’s private industry has completely abandoned the hunt, whaling persists as a wholly government-owned (and loss-making) endeavor!

Have you ever spent any time wonder WHY we care so much more about a Japan’s ‘scientific’ catch of a few whales now (which make no noticeable impact on growing populations, and a return to commercialized whaling under the IWC nowhere to be seen) than we do about the millions of very intelligent pigs, and less intelligent cattle etc. that we slaughter annually? The answer is simple, of course – though we should care about how humanely animals are killed to satisfy our wants, we have our greatest political battles over resources that NOBODY owns and for which unrestrained take can obviously imperil their very existence and lead to extinction. Because there are no ownership rights, political action has been needed.

But politics may often simply feed rancor and provide opportunities for grandstanding by politicians and others interested in protecting or using the resource – at our long-term detriment. Japan should be an obvious ally in preventing the crashing of global fisheries and ensuring their sustainability, but it lets itself be caught up in this emotional nonsense. So while environmentalists should care about building coalitions to rationally manage the oceans as a whole, they choose instead to fight what should be one of their greatest natural allies – a nation which ought to care greatly about the sustainability of the fish harvests they consume – because the partisan battles provide such a rush and keep those contributions rolling in.

There are obvious solutions on whales, that would allow some take of abundant species while protecting others. Establishing property rights of the kind that are now being seen as the solution for managing fisheries (‘catch shares’ or ITQs) is one, and one that would allow environmentalists to directly express their preferences by owning and managing their own stocks, and buying rights from others.

But it’s time to start realizing that the current terms of discussion about whales are not only unproductive, but actually imperil much more important issues about fisheries.

Oct. 17, 2019 Petition filed by Carlos Ghosn’s lawyer for Dismissal of Prosecution

January 5th, 2020 No comments
Note: The below is an English version of a Petition for Dismissal of Prosecution that was filed by Hiroshi Kawatsu, a member of Carlos Ghosn’s legal team, with the Tokyo District Court on October 17, 2019.
It was posted in the “NBR’s_Japan_Forum” email forum. I have edited the formatting to improve readability. At this point, I have not seen the Japanese original.
The attorney who apparently wrote this is Hiroshi Kawatsu, who is a partner in the Kasumigaseki-sogo Law Office (for twenty years) and is the Director of the Research Office for Criminal Affairs of the Japan Federation of Bar Associations. More on his background here:
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To: Tokyo District Court, 17th Criminal Division Department 2019 Toku (Wa) No.14 Companies Act Violation Criminal Case Defendant: Carlos Ghosn Bichara
Lead Defense Counsel:
Intended Claims Document
I. Petition for Dismissal of Prosecution
October 17, 2019
Hiroshi Kawatsu
The prosecution of this case is based on an extremely illegal and prejudicial investigation, and is an abuse of the official authority of criminal prosecution for unfair purposes against a backdrop of discrimination against Mr. Carlos Ghosn’s race, nationality and social standing. This prosecution should be dismissed.
1. Background — the Nissan-Renault integration “crisis”
Mr. Carlos Ghosn, from the time that he became the COO of Nissan in June 1999, understood that the key to the success of the alliance was mutual respect of each company’s autonomy and culture. With a deep understanding of Nissan’s history and corporate culture, Mr. Ghosn spearheaded the “Nissan Revival Plan.” In just 2 years, Mr. Ghosn was able to turn Nissan, which had an interest-bearing debt of more than 2 trillion yen and was on the verge of bankruptcy, back to being a profitable company and grow into one of the world’s leading automakers. Mr. Ghosn was consistent in his stance of protecting Nissan’s corporate identity. Even after he became the CEO of both Nissan and Renault in April 2005, thereby becoming responsible to the shareholders
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of not just Nissan but also Renault, his attitude, based on his management beliefs, never changed. Renault’s largest shareholder, the French government, occasionally began to talk about building the closeness of the alliance between the two companies, referring to it as “irreversible integration.” In 2015, Minister of Economy, Industry and the Digital Sector, Emmanuel Macron, increased the French government’s shareholding ratio of Renault, and then applied the Florange Law to Renault which doubles the voting rights of long-term shareholders. This enabled the French government to reinforce its voice with Nissan through Renault which owns 43.3% of Nissan stock. Even so, Mr. Ghosn did not change his policy. He made the French government recognize that Nissan was going to maintain its autonomy. He loved the company that is Nissan. Mr. Ghosn became the Director Chairman in April 2017, and Mr. Hiroto Saikawa (hereafter, “Mr. Saikawa”) replaced him as CEO. When Macron became President the same year, the pressure from the French government to move towards “irreversible integration” became stronger. Mr. Ghosn’s position to take a stand against the French government to protect Nissan’s autonomy did not change. However, at the same time, Mr. Ghosn came to think that there is no choice but to restructure the strategic partnership of the alliance in a way that can be explained to Nissan’s largest shareholder, Renault (the French government). Each company of the alliance would be placed under the umbrella of a newly incorporated holding company, and each company would get a say based on their performance. The French government ought to be satisfied with this new structure. Mr. Ghosn began to explain this idea to some of the directors
of Nissan as well.
Those in Mr. Ghosn’s inner circle, as well as other officers of the Company began to sense Renault’s (the French government’s) yearning for an integration with Nissan, and the subtle changes in Mr. Ghosn’s way of thinking. In particular, some of Nissan’s Japanese officers believed that the new structure of the alliance would essentially mean the “integration” of Nissan and Renault.
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Nissan is one of the group companies of the “Nissan Konzern [Conglomerate]” which was a newly-rising zaibatsu [family-run conglomerate] of the pre-war era, and has been manufacturing cars under the Datsun brand since before the war. The founder, Yoshisuke Ayukawa’s lineage is one of a father who was a feudal warrior of the Choshu domain and a mother who was the niece of former senior statesman Kaoru Inoue during the Meiji period. Ayukawa was a powerful entrepreneur and politician who also served after the war as a member of the House of Councilors and as Supreme Economic Advisor in the Kishi Cabinet. The company name “Nissan” derives from one of the group companies, “Nihon Sangyo” [Japanese Industry]. Some also believed that Nissan’s integration with Renault would mean that a company with the history of having a role in Japan’s key industry would pass over to the hands of foreigners. This belief was shared not only among the directors of Nissan, but also among key figures in the Japanese government, beginning with the Ministry of Economy, Trade and Industry.
2. Collusion between Nissan and the Task Force of the Tokyo District Public Prosecutors Office
After Mr. Ghosn stepped back as CEO in April 2017, Nissan’s business performance noticeably declined. Along with this, remarks by Renault (French Government), the largest shareholder, began to attract attention. The “integration” of Nissan and Renault became a realistic crisis to succeeding CEO, Mr. Saikawa, and other Japanese officers of Nissan.
Around January 2018, the French government informed the Japanese government that it intended to integrate the management of Nissan and Renault. In response, the [Japanese] Ministry of Economy, Trade and Industry (METI) sent a letter of opposition to the French Ministry of the Economy and Finance. Talks were held among the METI (Director-General Akihiro Tada, Manufacturing Industries Bureau), the French Ministry of the Economy and Finance (Director General Faure), the Agence des participations de l’État (APE) [French state holding agency] (Director Vial), among others, but no progress was made.
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In February of the same year, Renault’s Board of Directors passed a resolution reappointing Mr. Ghosn as CEO until 2022. Nissan’s Japanese officers believed that the “integration” has increasingly become more realistic. Around March of the same year, Senior Managing Executive Officer Hitoshi Kawaguchi, Statutory Auditor Hidetoshi Imazu, and former Vice-Minister for International Affairs, Ministry of Economy, Trade and Industry Masakazu Toyoda (who became a director of Nissan in June of the same year), with others, led a top-secret effort to form a group to investigate the “improper acts” of Mr. Ghosn. Their aim was to prevent the integration of Nissan and Renault by finding Mr. Ghosn’s “improper acts” and ousting him from Nissan. So as to absolutely ensure that non-Japanese officers including Mr. Ghosn and Mr. Greg Kelly would not find out, they went through a former prosecutor with the Tokyo District Public Prosecutors Office’s Task Force, Akihide Kumada and others, to consult with the prosecutors of the Tokyo District Public Prosecutors Office’s Task Force, and while receiving their instructions, conducted a top-secret investigation to search for “improper acts” that could be established as a criminal case against Mr. Ghosn.
They asked Senior Managing Executive Officer in charge of Legal and Compliance, Mr. Hemant Kumar Nadanasabapathy (hereafter, “Mr. Hari Nada”), and attorneys of one of Nissan’s legal advisers, the law firm of Latham & Watkins (L&W), to conduct an investigation of the companies affiliated with the alliance, not just in Japan but worldwide. Mr. Hari Nada and the attorneys at L&W sent out letters to the management of affiliate companies worldwide to cooperate with the investigation, to appear at the Tokyo District Public Prosecutors Office and comply with the interrogations by the prosecutors, and which outlined that related expenses, etc. would be borne by Nissan, etc. Mr. Hari Nada and L&W were deeply involved in the events that were the subject of the investigation in the first instance. Investigative activities led by them are a conflict of interest, and lack impartiality. They, who were themselves in charge of the investigation, cast a blind eye to their own “improper acts” as well as those of Mr. Saikawa and
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other Japanese executives, while single-mindedly searching for “improper acts” by Mr. Ghosn. The purpose of this unjust and biased investigation was to restructure the relationship between Nissan and Renault (French government) by unseating Mr. Ghosn and preventing the “integration” of the two companies.
The investigative team of the Tokyo District Public Prosecutors Office accepted the results of such unfair and biased investigation and commenced their criminal investigation. Furthermore, as described below, they also engaged in illegal investigative activities in Lebanon, Brazil, France, etc. using Nissan and its attorneys at its beck and call.
3. Illegal plea bargaining
(1) Illegality of the objective
The Public Prosecutors state that they reached an agreement with Mr. Hideaki Ohnuma (head of Nissan’s Secretariat Office; hereafter, “Mr. Ohnuma”) and Mr. Hari Nada (in charge of Nissan’s Legal Division) under the consultation and agreement program (the Japanese version of plea bargaining) of the 2016 Amended Code of Criminal Procedure to, in exchange for not indicting these two individuals, have them make witness statements and submit evidence to the prosecutors about the criminal charges against Mr. Ghosn who is believed to be an “accomplice.” However, this consultation and agreement (plea deal) was reached with the objective of ousting Mr. Ghosn from his position of Chairman and CEO of the Nissan- Renault-Mitsubishi Alliance based on discussions that were held between METI officials and the Japanese senior management executives of Nissan.
The objective is completely different from the intended purpose of the program, which is to, in cases where it is difficult to uncover the truth by conventional methods, offer accomplices advantageous prosecutorial treatment in exchange for cooperation with the investigation and prosecution of the case, so as to uncover the truth and prosecute the case appropriately.
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(2) The actual party is Nissan
The prosecutors claim that of the criminal charges that have been alleged against Mr. Ghosn, consultations were held and an agreement reached with Mr. Ohnuma and Mr. Hari Nada regarding only the Financial Instruments and Exchange Act violations case (falsification of securities reports), and that as a result of plea bargaining on matters related only to those charges, those charges were dropped against these two individuals, but nothing could be further from the truth. First, these two individuals are not the actual parties in the plea bargain. It was the attorneys that were hired by the corporate entity of Nissan and its Japanese senior management executives that brought the case to the Tokyo District Public Prosecutors Office, cooperated with prosecutors, and reached an agreement. These attorneys were hired by Nissan for the purpose of searching for “improper activities” that would make Mr. Ghosn a suspect and, together with attorneys from L&W, communicated with the Tokyo District Public Prosecutors Office and conducted an “investigation” — the search for something with which to charge Mr. Ghosn.
As a result of the “investigation,” Nissan and the Tokyo District Public Prosecutors Office determined that Mr. Hari Nada and Mr. Ohnuma could potentially be charged as accomplices in the case involving violations of the Financial Instruments and Exchange Act and the case involving violations of the Companies Act, and decided to adopt a scheme in which Mr. Hari Nada and Mr. Ohnuma would be made the parties to a plea deal. Mr. Hari Nada and Mr. Ohnuma did not take the initiative on their own, nor make the decision on their own will, to cooperate with the prosecution of Mr. Ghosn. They were persuaded by Nissan — the Japanese senior management executives and Nissan’s attorneys — and merely signed the written agreement in obeyance of basically what was a “Company order.” This kind of application of the consultation and agreement program goes against its intended purport, and is illegal.
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(3) Legal procedures were not carried out for crimes that were subject to plea bargaining
The content of the written agreements with Mr. Ohnuma and Mr. Hari Nada (Kou Exhibit 147, Kou Exhibit 148) in which the prosecutors demanded the examination of evidence state that an agreement was reached regarding the case involving violations of the Financial Instruments and Exchange Act, but there is no reference to the case involving violations of the Companies Act which is also a charge of the action — that an agreement was executed with Shinsei Bank that switched the party to swap agreements to Nissan (the charged facts in relation to the swap agreements), that payment of 14.7 million dollars was made to Khaled Juffali (the charged facts in relation to KJC), and that payment of 5 million dollars was made to Suhail Bahwan Automobiles (SBA) (the charged facts in relation to SBA). However, both Mr. Ohnuma and Mr. Hari Nada have provided witness statements regarding the case involving violations of the Companies Act (e.g. Kou Exhibits 40 through 44, Kou Exhibits 149, Kou Exhibits 174, Kou Exhibits175 of the Companies Act violation case).
With Mr. Ohnuma and Mr. Hari Nada, the prosecutors have engaged in plea deals in an informal manner, not based on the provisions of the law (to have accomplices make statements that implicate others in a crime by inducing them with advantages). It is illegal to engage in virtual plea bargaining without following the legal procedures, and it is not permissible to allow the resulting statements and evidence.
(4) An “under-the-table deal” was made
It was neither Mr. Ohnuma, the individual, nor Mr. Hari Nada, the individual, that brought up the idea of a plea deal with the prosecutors. It was Nissan, the company, its Japanese senior management executives, and the attorneys they hired, that proposed the criminal prosecution [of Mr. Ghosn] to the Task Force of the Tokyo District Public Prosecutors Office, and
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proactively promoted the transaction consisting of providing evidence and witness testimony from those involved in exchange for not prosecuting them. As a result, consultations and agreements were effectively carried out between Nissan CEO Mr. Saikawa and multiple other individuals at Nissan, and the prosecutors of the Tokyo District Public Prosecutors Office’s Task Force regarding the provision of testimony and evidence disadvantageous to Mr. Ghosn in exchange for the dropping of criminal charges against such individuals.
In particular, Mr. Saikawa is a submitter of the Annual Securities Reports said to contain “misstatements” in relation to Mr. Ghosn’s director compensation in the Financial and Instruments Exchange Law violation case. Furthermore, he himself is the person who approved and decided the payment from the “CEO reserve” in the Companies Act violation case. It is clear that he was investigated as a suspect in these cases, and that the Tokyo District Public Prosecutor’s Office did not prosecute him in exchange for providing testimony and evidence that is disadvantageous to Mr. Ghosn. However, the Toyo District Public Prosecutor’s Office has not revealed whether a consultation and agreement has been made with Mr. Saikawa, and has refused to respond to requests for disclosure of evidence regarding this.
There are numerous other directors and employees of Nissan other than Mr. Saikawa that were involved in the acts stated in the prosecutors’ charges in this matter. Facing threats displayed by Nissan and the prosecutors that they may be subject to criminal prosecution, they were pressured to make statements in accordance to the wishes of Nissan and the prosecutors – statements that Mr. Ghosn behaved like a “dictator,” and that because they couldn’t defy his authority, they had no choice but to take part knowing it was wrong. It was based on this kind of an extensive “under-the-table deal” and unjust inducements that the indictment was carried out.
4. Illegal search and seizure
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(1) Seizure of attorney Mr. Fadi Gebran’s personal computer and HDD, etc.
Mr. Ghosn’s personal residence that is also used as an office located in Beirut is managed by a local company called Phoinos, and Ms. Amal Abou Jaoude who was the representative of Phoinos was in charge of managing its affairs. Her salary and other expenses were paid by Nissan Middle East. Ms. Amal Abou Jaoude had at one time worked as a secretary of attorney Fadi Gebran, who passed away in August 2017, and managed the computer and other items he had left behind, as well as took care of his remaining affairs.
On November 19, 2018 (Beirut time), attorneys from L&W stole attorney Fadi Gebran’s PC and HDD which Ms. Amal managed, from her in Beirut. This PC and HDD contained a large amount of personal information such as email exchanges between attorney Fadi Gebran and his clients. The so-called evidence that prosecutors say they have obtained in this case as a result of analyzing the emails of attorney Fadi Gebran, etc. (for example, Kou Exhibit 182 forward of the Companies Act violation case) were discovered from the PC and HDD that the attorneys from L&W and others took without permission at this time.
They raided Ms. Amal Abou Jaoude’s office, and invaded Mr. Ghosn’s empty home while consulting with the Tokyo District Public Prosecutors Office in advance, and stole the PC, HDD and the contents saved therein without the consent of the proprietors, such as attorney Fadi Gebran’s surviving family and his clients. Acting as the hands and feet of the Tokyo prosecutors, they committed crimes of stealing data from other’s PC and HDD. The use by an investigator of a private citizen to carry out a search and seizure in order to circumvent the requirements of the warrant system (Article 35 of the Japanese Constitution) is, in itself, a serious illegal act that effaces the principles of the warrant system. It is also illegal and impermissible that the investigation authorities of the Japanese government use a private citizen, circumventing the formal legal process to gather information abroad where its investigative authority does not reach.
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Furthermore, an enormous volume of communications with clients and documents prepared for clients was saved in attorney Gebran’s PC and HDD. These [communications and documents] are strongly protected as attorney-client privilege, not only within Lebanon, but around the world by international human rights laws, domestic constitutions and domestic laws. If this were not the case, one would not be able to solicit [services] from attorneys overseas with respect to international matters. The Tokyo District Public Prosecutor’s Office, as well as the L&W attorneys, seized these being fully aware that they contained a large amount of information subject to the attorney-client privilege.
The admissibility of evidence obtained as a result of such an illegal investigation must, of course, be denied. However, the illegality of the investigation and prosecution in this case is not something that can be straightened by simply excluding part of the evidence.
(2) Invasion of home/office in Rio de Janeiro
Mr. Ghosn’s personal residence that is also used as an office located in Rio de Janeiro is managed by a company called Hamsa, and Ms. Vania Rufino was in charge of managing its affairs. On November 19, 2018 (local time), an employee of Nissan Brazil made an unannounced visit to Ms. Ruffino’s office and questioned her asking such things as, “Did you do personal work for Carlos Ghosn?” In addition to a cell phone, PC, etc., all documents were also seized, and without providing any reason, Ms. Rufino was ordered to take a leave of absence. After that, the employee of Nissan Brazil proceeded to lock Mr. Ghosn’s house so that Mr. Ghosn or any of his family could not enter the home.
This, too, was nothing other than an illegal search and seizure that was conducted upon discussion between the Japanese prosecutorial authorities and Nissan.
(3) Search and Seizure in Tokyo on April 4, 2019
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Early in the morning around 5:50 am on April 4, 2019, the Task Force of the Tokyo District Public Prosecutors Office arrested Mr. Carlos Ghosn on charges of violation of the Companies Act. At the time of his arrest, the Task Force also confiscated a personal computer, 3 smartphones, and a passport (issued by the country of Lebanon) that belonged to Mr. Ghosn’s wife, Mrs. Carole Ghosn, who was at the restricted residence where Mr. Ghosn was arrested. Mrs. Carole Ghosn who was shaken with fear was then intimidated and made to say the passwords on the smartphones.
The prosecutors claim that this seizure was a legitimate seizure carried out on the basis of a legally obtained search and seizure warrant. However, that warrant covered Mr. Ghosn’s belongings inside of his home, not Mrs. Carole Ghosn’s. The prosecutors deceived the court by lying that Mrs. Carole Ghosn’s PC, smartphones and passport were Mr. Ghosn’s possessions. The prosecutors and administrative officers of the Tokyo District Public Prosecutors Office who were involved in this search and seizure seized Mrs. Carole Ghosn’s PC, smartphones and the like having full knowledge of this.
Mrs. Carole Ghosn’s PC and smartphones that were seized based on this illegal search and seizure also included many e-mails and other communications between her and her lawyers. This is clearly an infringement of Mrs. Carole’s attorney-client privilege.
The PC and smartphones seized from Mrs. Carole also included data that related to communications between Mr. Ghosn and his lawyers. Furthermore, the notebook that Mr. Ghosn used while he was detained in the Tokyo Detention House to exchange information with his lawyers was also seized. Needless to say that this is illegal and a violation of Mr. Ghosn’s right to consult with his lawyers (Article 34 of the Constitution, Article 39, Paragraph 1 of the Criminal Procedure Code).
This illegal search and seizure should result of course in the exclusion of evidence; however, beyond that, this illegal [act], coupled with the other illegal [acts], invalidates the entirety of the
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prosecution in this case.
5. Infringement of the right to a speedy trial
It was from around the Spring of 2018 that the Tokyo District Public Prosecutors Office, together with Japanese top management officials at Nissan, began investigating Mr. Ghosn’s “improper activities” as well as engaged in investigative activities related to the violations of the Financial Instruments and Exchange Act and the Companies Act which became the causes of action. Yet, they broke up the facts that were the subject of the investigation into small pieces and detained Mr. Ghosn repeatedly. With respect to the Financial Instruments and Exchange Law violation case, they even repeated arrests for every fiscal year. With respect to the Companies Act violation case as well, irrespective of the fact that they had obtained statements from Nissan directors by the beginning of 2019, they delayed the timing of his arrest. Moreover, they arrested Mr. Ghosn for the fourth time for violation of the Companies Act just as he was about to start preparing for trial for the case he was released on bail and indicted. As a result, Mr. Ghosn was held in custody for as many as 130 days.
Even with regard to the pretrial conference procedures, the prosecutors took as many as 4 months to submit the facts that they sought to prove. Also, the prosecutors delayed their answers to requests that were made by Mr. Ghosn’s attorneys for the disclosure of evidence, and failed to make clear when the evidentiary disclosure period would end. Furthermore, the prosecutors are engaging in illegal acts, violating legal requirements such as by limiting the disclosure to viewing by Mr. Ghosn’s attorneys only and by deleting electronic data subject to disclosure at Nissan’s request. They are returning evidence seized at Nissan’s request, ignoring Mr. Ghosn’s attorneys’ request for disclosure of evidence. As a result, the Companies Act violation case is still remiss, and similarly with respect to the Financial Instruments and Exchange Law violation case for which [Mr. Ghosn] was indicted in December 2018, the disclosure of evidence has not been
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completed, nor is there even an outlook for completion.
In this way, the defense’s preparations have been obstructed and delayed, while on the other hand, the prosecutors continue to this day to conduct “supplementary investigations” by obtaining statements and evidence from involved persons residing overseas based on investigational assistance from the relevant foreign governments. They are still continuing the investigation that should have been completed prior to indictment. Even now, after more than 10 months since the initial indictment, there is no timeline for the start of a trial.
Mr. Ghosn’s right to a speedy trial (Article 37, Paragraph 1 of the Japanese Constitution; Article 14, Paragraph 3(C) of the International Covenant on Civil and Political Rights) has already been seriously infringed.
6. Illegal interference with personal life
From around March 6, 2019, ever since Mr. Ghosn was released on bail, Mr. Ghosn and his family have been followed by police officers or their affiliates. They are not inconspicuous in the way that they follow Mr. Ghosn and his family members, and in fact, linger around them in plain sight. This constant monitoring of Mr. Ghosn and his family even after his release has caused them mental anguish in their daily lives. This is a violation of Mr. Ghosn’s right to privacy and right to a peaceful everyday life.
Mr. Ghosn is not a terrorist, nor a member of an organized crime group. He is an international company executive. There is no legitimate reason, anywhere, for having to monitor him for the safety of the local community. Under this situation where Mr. Ghosn and his family are subject to regular psychological persecution by the investigational and prosecutorial authorities, Mr. Ghosn clearly cannot engage sufficiently in his defense activities. Mr. Ghosn’s right to a fair trial (Article 14, Paragraph 1 of the International Covenant on Civil and Political Rights; Article 37, Paragraph 1 of the Japanese Constitution) is also being compromised.
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7. Information leaks and comments about guilt
The prosecutors told some members of the media in advance about the pending arrest of Mr. Ghosn before his actual arrest, thereby enabling them to report on the scene of his arrest at Haneda Airport. The prosecutors then repeatedly leaked one-sided and arbitrary information about their investigation to the media, such as that there is an abundance of evidence that shows Mr. Ghosn’s guilt: that agreements with Mr. Ghosn pertaining to his compensation had been obtained from those involved at Nissan (Asahi Shimbun Newspaper, November 27, 2018, evening edition), that there is evidence that future payments of compensation had already been fixed (Asahi Shimbun Newspaper, November 29, 2018, morning edition), or that “there are documents outlining payment methods” (Asahi Shimbun Newspaper, December 11, 2018), thereby giving the impression that there was abundant evidence of Mr. Ghosn’s guilt. The prosecutors, even though they still to this day have not proven anything, continued to leak information one after the next to suggest there was ample evidence to support the suspicion of aggravated breach of trust, such as that: a total of 14.7 million dollars was remitted in 4 installments from a subsidiary of Nissan to an acquaintance in Saudi Arabia (Asahi Shimbun Newspaper, December 22, 2018, morning edition); “funds in excess of 5 billion yen were caused to be disbursed from Nissan to the companies of 2 acquaintances in the Middle East” (Nihon Keizai Shimbun Newspaper, January 4, 2019); an executive of a sales distributor in Oman to which 3.5 billion yen was disbursed from a “CEO discretionary reserve” that is “under the direct jurisdiction” of Mr. Ghosn “paid approximately 1.6 billion yen as payment for a cruiser” that was purchased by a company in which Mr. Ghosn is involved (Nihon Keizai Shimbun Newspaper, January 11, 2019); “There is suspicion that Nissan funds were funneled to former Chairman Ghosn through GFI” (Asahi Shimbun Newspaper, April 4, 2019, morning edition), etc.
The prosecutors continued to make one-sided comments that assumed Mr. Ghosn’s guilt such
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as that: “there was a cover-up to hide executive compensation” (Asahi Shimbun Newspaper, December 2, 2018, morning edition); “the Saudi business man [Juffali] has no actual business entity” (Asahi Shimbun Newspaper, December 26 2018); “falsifications were made to make it appear as though approval of the Board of Directors was obtained for the switching [of contract parties]” (Asahi Shimbun Newspaper, December 30, 2018); based on e-mails and the like that remained in a personal computer at the offices of a lawyer in Beirut, “it has been determined that the suspect, Ghosn, essentially owned GFI and allocated Nissan funds for private use” (Sankei Shimbun Newspaper, April 9, 2019, morning edition), etc. Based on these arbitrary and one- sided comments by the prosecutors, the media incessantly painted Mr. Ghosn as a villain who exploited the company for personal gain.
Meanwhile, the prosecutors also provided information about the investigation to the media that was in line with the interests of Nissan and its Japanese senior management executives such as that: Shinsei Bank demanded that the approval of the Board of Directors of Nissan be obtained, but Mr. Ghosn rejected it (Asahi, December 23, 2018, morning edition); Charges have been dropped against President and CEO Hiroto Saikawa who was accused of violating the Financial Instruments and Exchange Act due to “lack of evidence” (Asahi Shimbun Newspaper, May 18, 2019, morning edition), etc.
The media outlets competed in continuing coverage that was based on such information from the prosecution and in line with their intensions. As a result, Mr. Ghosn’s public reputation did a 180 from being the “’savior’ and ‘charismatic management executive’ who ‘saved Nissan which was in crisis on the brink of bankruptcy, and growing it into a world-class company’” to “a dictator that exploited the company to fatten his own wallet.” By now, his “improper activities” are treated as unquestionable facts, and the focus has moved onto “recurrence prevention.” In such an environment, there is no denying that it will be a virtual impossibility to have a fair trial in which Mr. Ghosn is afforded his right to a presumption of innocence and his right to an
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adequate defense.
Be that as it may, the prosecutors’ frequent leaks of information about the investigation while the prosecution of the case has been ongoing as well as comments made by them that assume the guilt of Mr. Ghosn are in and of themselves occupational crimes by the prosecutors, or comparable illegal acts.
The act of a prosecutor leaking information about the investigation to the media is “an act of leaking secrets that were learned in an official capacity on the job” (Article 100, Paragraph 1 of the National Public Service Act), which is itself a crime (Article 109, Item 12 of the National Public Service Act). As explained above, in this case, due to such crimes committed by the prosecutors, Mr. Ghosn has been denied of his right to receive a fair criminal trial (Article 14, Paragraph 1 of the International Covenant on Civil and Political Rights; Article 37, Paragraph 1 of the Japanese Constitution) which is a basic human right.
In this case, even though Mr. Ghosn has not been found guilty through a trial, he has repeatedly been publicly assumed guilty through the media at the hands of the prosecutors who are national public servants. This is a violation of another basic right of Mr. Ghosn, the right to be presumed innocent (Article 14, Paragraph 2 of the International Covenant on Civil and Political Rights; Article 11, Paragraph 1 of the Universal Declaration of Human Rights).
8. A cozy relationship with Japanese officers at Nissan and the Ministry of Economy, Trade and Industry
In Japan, prosecutors, who have a monopoly of authority over criminal prosecution, and furthermore, who are “given a broad range of discretionary power” in exercising said authority (Judgment of the Supreme Court of Japan, December 17, 1980, 1st Petty Bench Decision, Criminal Procedure Code precedent 34-7-672, p. 675) are not permitted to act simply as a unilateral party in a lawsuit. Prosecutors are not allowed to be a servant to some, or an advocate
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for a private benefit, and must carry out their functions impartially and avoid all discrimination as to race, nationality, etc. (Article 13 (A) of the United Nations Guidelines on the Role of Prosecutors), “in representation of the public interest” for the purpose of demanding “the proper application of the law in court” (Article 4 of the Public Prosecutor’s Office Act).
In this case, the prosecutors of the Task Force of the Tokyo District Public Prosecutors Office ignored this most basic of professional obligations of a prosecutor, and acted as a tool for realizing the objectives of the Ministry of Economy, Trade and Industry and Nissan’s Japanese senior management executives to prevent Nissan from becoming a French company. The prosecutors aided the objective to oust Mr. Ghosn by searching for “improper activities” committed by him and to building a criminal case against him, and used tax money to help them to that end. The prosecutors held discussions with Nissan’s Japanese senior management executives and the attorneys that represented them, and abused the “consultation and agreement (plea bargaining) system” so as to give one-sided consideration to Nissan’s interests. The prosecutors circumvented the requirement of obtaining a warrant and infringed on national sovereignty by using Nissan’s employees and attorneys as tools for carrying out their investigation overseas. The prosecutors, in order to shift the public’s focus away from these one-sided and unfair investigational prosecutorial activities and to gain the support of public opinion, committed the crimes of violating confidentiality and repeatedly leaking information about the investigation. The prosecutors, when asked during the pretrial conference procedure about their information leaks asserted that, “We believe there hasn’t been something like this,” which is factually impossible. And the prosecutors have delayed the disclosure of evidence to defense counsel, and moreover refused the disclosure itself in response to Nissan’s requests.
9. Prosecution based on an illegal investigation
This indictment could not have been realized without the egregiously illegal investigation
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involving white-collar crimes by public servants as described thus far, and constitutes “a case in which the illegal nature of investigative procedures is material, where the indictment would have been impossible or extremely difficult unless the illegal procedures were predicated, and in that sense, is a case in which the two situations are closely related and inseparable” (Judgment of the High Court of Sendai, October 17, 1967, High Court Decision Criminal Procedure Code precedent 20-5-699, p. 706).
Therefore, this case must be dismissed (Id.).
10. Arbitrary and discriminatory exercise of the authority of prosecution
This investigation originated with the Ministry of Economy, Trade and Industry and the Japanese senior management executives of Nissan who wanted to prevent the “irreversible integration” of Nissan and Renault and stop Nissan from becoming a French company, and with the aim of ousting Mr. Ghosn who, as CEO of Renault, was working to facilitate the integration of Nissan and Renault, searched for “improper activities” on the part of Mr. Ghosn, and bring criminal charges against Mr. Ghosn for such activities, requested the cooperation of the Tokyo District Public Prosecutors Office by way of conducting an investigation that included plea bargaining. The Task Force of the Tokyo District Public Prosecutors Office complied with this request and commenced an investigation into this matter. In carrying out their investigation, as described above, the prosecutors only took Nissan’s interests into account and worked collusively with Nissan and its attorneys. In this case, there is no doubt that Mr. Ghosn has been discriminated against based on his race, nationality and/or social status. This investigation and prosecution is a case of “the defendant being treated unfairly and unfavorably in an investigation compared to general cases because of their ideology, religion, social status, lineage, etc.” (Judgment of the Supreme Court of Japan, 2nd Petty Bench decision, June 26, 1981, Criminal Procedure Code precedent 35-4-426, p. 429, Akasakicho Case). This is a violation of Article 14 of the Japanese
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Constitution, and is also in violation of Article 13(A) of the United Nations Guidelines on the Role of Prosecutors.
As explained above, this criminal prosecution has been based on extremely illegal investigation activities that constitute professional crimes. In addition, the prosecution itself cannot be said to have been carried out “in representation of the public interest” for the purpose of demanding “the proper application of the law in court” (Article 4 of the Public Prosecutor’s Office Act). This prosecution falls under the category of “an extreme case in which the prosecution of the case itself constitutes a professional crime” (Judgment of the Supreme Court of Japan, 1st Petty Bench, December 17, 1980, Criminal Procedure Code precedent 34-7-672, p. 676, Chisso-Kawamoto Case).
Therefore, this prosecution is unconstitutional, illegal, and invalid.
II. Statute of Limitations
  1. With respect to the indictments stated in the Charging Sheet, dated January 11, 2019 (excluding, however, the one with payment date of March 27, 2012), the seven-year statute of limitations period (Article 250, Paragraph 2, Section 4 of the Code of Criminal Procedure) has passed, and the statute of limitations has expired. A judgment should therefore be rendered to dismiss them (Article 337, Paragraph 4 of the Code of Criminal Procedure).
  2. Article 255, Paragraph 1 of the Code of Criminal Procedure specifies that, “where the offender is outside Japan,” the statute of limitations shall be suspended during the period when the offender is outside Japan. In regard to this point, with respect to the meaning of “where the offender is outside Japan,” a judgment by the Supreme Court of Japan, 1st Petty Bench on October 20, 2009, Keishu Vol. 63, No. 8, p. 1052 (hereinafter, the “2009 judgment”) ruled that “according to Article 255, Paragraph 1 of the Code of Criminal
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Procedure, even in cases of temporary overseas travel, time during which an offender is outside Japan is interpreted as suspending the statute of limitations.” However, that ruling is not applicable to this case.
Rather, considering the legislative purpose and history of the system for suspending the statute of limitations, the interpretation of the requirement “where the offender is outside Japan” should be limited to not include overseas travel of less than two months.
  1. As an initial matter, this case is completely different from the 2009 judgment. Specifically, given that the purpose of Article 255, Paragraph 1 of the Code of Criminal Procedure concerns difficulty in the service of charging sheets, since the case of the 2009 judgment relates to Japanese nationals who were working in real estate brokerage, construction, and employment of foreign technical interns, it is believed to be a case where a “workplace” at which to effect service other than the defendant’s address or residence (Article 54 of the Code of Criminal Procedure, and Article 103, Paragraph 2 of the Code of Civil Procedure) could not be identified. In contrast, Mr. Ghosn was working consistently at Nissan’s main office, so service could have been effected at his workplace at any time, and there would have been no difficulty whatsoever in serving him charging sheets.
  2. In addition, considering the legislative purpose and history of the statute of limitations system, the ruling of the 2009 judgment is not applicable to this case.
(1) Given that the system for the statute of limitations exists, the benefit to defendants,
namely not being prosecuted after time has passed, is protected by law. As such, provisions depriving such benefits should be interpreted narrowly and in line with their substantial grounds.
(2) Furthermore, relative to when the 2009 judgment was made, new mutual legal assistance treaties with the E.U. and Russia have also come into effect, and there has actually been a marked increase in the number of cases where mutual assistance for investigations
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has been given. Therefore, there has also been a reduction in the degree of difficulty occurring in investigations when defendants are outside Japan.
(3) Considering the legislative history in the first place, given that the purpose of suspending the statute of limitations concerns difficulty in serving transcripts of charging sheets, since transcripts of charging sheets can be served in the event of temporary overseas travel, and in light of the aforementioned reduction in the difficulty of investigation, etc., there is scant substantial reason at this point to deprive this benefit.
Thus, cases where an individual who has a residence and workplace in Japan engages only in temporary overseas travel (specifically, overseas travel of less than two months, which is specified as the period to serve charging sheets (Article 271, Paragraph 2 of the Code of Criminal Procedure)) should be interpreted as not suspending the statute of limitations. Accordingly, in relation to Mr. Ghosn, who has a residence and workplace in Japan, the statute of limitations is not suspended for periods of overseas travel in which he re-entered Japan within two months from the date he left the country.
  1. Calculated excluding overseas travel of less than two months, of the [indictments] in Charging Sheet No. 2, dated January 11, 2019, the end date for the statute of limitations for the one with payment date of March 9, 2011, is August 7, 2018. Therefore, at the time of the indictment, the statute of limitations had already expired.
    Among the indictments stated in this Charging Sheet, the statute of limitations has also similarly
    expired for those acts that were completed on March 9, 2011, or earlier.
  2. Thus, among the indictments concerning Mr. Ghosn, the statute of limitations has expired for the indictments stated in the Charging Sheet, dated January 11, 2019 (excluding, however, the one with payment date of March 27, 2012). A judgment should therefore be
    rendered to dismiss them (Article 337, Paragraph 4 of the Code of Criminal Procedure).
III. Charged facts regarding the swap contracts
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1. Mr. Ghosn is innocent.
  1. (1)  There is no recognizable act committing an aggravated breach of trust in executing the novation agreement in this case because the act is not one that gave rise to an actual risk that Nissan would incur a “financial loss” (Company Act, Article 960 (1)).
  2. (2)  No “financial loss” (Company Act, Article 960 (1)) was inflicted on Nissan whatsoever.
  3. (3)  No intent (Criminal Code, Article 38 (1)) can be recognized either, because Mr. Ghosn
    was unaware of and did not affirm inflicting “financial loss” on Nissan.
  4. (4)  It is also not recognizable that the purpose of executing the novation agreement in this case was in contemplation of “his own interests or the interests of a third party”
    (Companies Act, Article 960 (1)) because the purpose contemplated the interests of Nissan.
2. (1) In 1999, Mr. Ghosn came to Japan and became a director to turn Nissan around. Because Mr. Ghosn’s family resided in the U.S. and their living costs were generally based on U.S. dollars, he asked to be paid in U.S. dollars; however, Nissan refused to do so. Therefore, from around 2002, Ghosn entered into foreign exchange swap agreements with financial institutions to periodically sell Japanese yen and purchase U.S. dollars.
(2) At the recommendation of a representative at Shinsei Bank, who stated that U.S. dollars can be purchased at favorable rates, Mr. Ghosn entered into the swap agreements between Canayany and Shinsei Bank. The purpose of the swap agreements was to exchange the yen that Mr. Ghosn received as remuneration from Nissan into dollars, and Shinsei Bank created the agreements based on Mr. Ghosn’s current and future yen cash flow. While the swap agreements provided that a certain amount of dollars will have to be purchased at a below-market exchange rate when the dollar/yen exchange rate was 100 yen or 80 yen or below per dollar, from 1999 (when Mr. Ghosn came to Japan) until 2007, not once did the
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dollar drop below 100 yen.
(3)  The bankruptcy of Lehman Brothers in September 2008 triggered a worldwide financial crisis. Because of the rapid appreciation of the yen, and at the same time the drastic decline of stock prices, the collateral Mr. Ghosn had offered Shinsei Bank based on the swap agreements became insufficient. After October 24, 2008, the person in charge at Shinsei Bank requested Mr. Ghosn for an immediate increase in collateral, or to terminate and pay penalty fees. In the midst of the financial crisis, it was not possible for Mr. Ghosn to procure the collateral required by Shinsei Bank in just a few days, and in order to terminate the contract and pay the penalty fees, Mr. Ghosn’s only option was to resign from Nissan and apply the retirement allowance to the payment. However, leaving Nissan in the midst of the financial crisis would cause irreparable harm to the company, and was not an option that Mr. Ghosn could choose. Mr. Ghosn proposed guaranteeing the obligations himself under the swap agreements to Shinsei Bank but Shinsei Bank rejected the proposal, and the idea was presented that Nissan’s guaranty would be acceptable. In this context, the proposal of shifting the contractual status of the swap agreements to Nissan until Mr. Ghosn could gather the collateral was considered, under the condition that the shift would be at no cost to Nissan.
(4)  After consideration by Shinsei Bank and Nissan’s Legal, on October 31, 2008, Nissan’s Board of Directors passed a resolution giving Ohnuma, the General Manager of the Secretariat Office, the authority to sign current or future FX forward contracts for non- Japanese executive officers (including directors) at no cost for the company.
(5)  The resolution granted authority to the General Manager of the Secretariat Office to
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execute transactions to sell yen and buy a foreign currency for the benefit of non-Japanese executive officers in relation to their remuneration payment. The resolution presumed that losses caused by a transaction would be attributed to the executive officer and would be at no cost to Nissan. Therefore, as Nissan passed the resolution assuming the transaction was not a conflict of interest (Article 365, Paragraph 1 and Article 356, Paragraph 1, No. 3 of the Companies Act) and Shinsei Bank had the same understanding, on the same day, Nissan, Canayany and Shinsei Bank entered into a novation agreement to transfer the swap agreements from Canayany to Nissan.
(6)  As a result of the novation agreement, Nissan took over the right and obligation to sell yen and buy dollars on the exercise date every three months in relation to Shinsei Bank; however, as stated above, it was presumed that the losses would be attributed to Mr. Ghosn and that Nissan would not bear any responsibility. In fact, when a loss of 62,580,000 yen was incurred on January 30, 2009, from purchasing dollars under swap agreement, Mr. Ghosn paid the amount and Nissan did not bear any losses. The swap agreements were created based on Mr. Ghosn’s cash flow, so the agreements were to sell yen and buy dollars in relation to Mr. Ghosn’s payment. Therefore, Mr. Ghosn had the ability to bear any losses that arose in the future, and there was no risk that Nissan would bear the losses. Furthermore, along with Nissan’s termination of its retirement allowance program in June 2007, it had been decided that Mr. Ghosn would be paid a retirement allowance, and based on the amount of said allowance, it was sufficiently guaranteed that Nissan would not bear any losses.
(7)  Unlike Canayany, Nissan did not bear an obligation to Shinsei Bank to provide required collateral according to “fair market value” under the swap agreements. Therefore, while
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the “fair market value” under the swap agreements was negative “1,850,405,142 yen” at the time of the execution of the novation agreement, Nissan did not receive a demand from Shinsei Bank to provide a required amount of collateral, nor did it receive a demand to pay penalty fees because collateral could not be provided.
(8) After that, while the contractual status of the swap agreements was returned from Nissan to Canayany on February 20, 2009, following Mr. Ghosn’s procurement of collateral, Nissan suffered no “decrease in asset value” whatsoever during this time.
IV. Charged facts regarding KJC
1. Mr. Ghosn is innocent.
(1) Each of the remittances to Khaled Juffali Company (“KJC”) underwent appropriate approval procedures as compensation, including expenses, for services that KJC, which is managed by Khaled Juffali, provided to assist Nissan’s business in Saudi Arabia, so Mr. Ghosn has committed no “act in breach of his duty” (Article 960, Paragraph 1 of the Companies Act).
(2) The $14.7 million that Nissan paid KJC in total are compensation, including expenses, for services conducted by KJC to assist Nissan’s business in Saudi Arabia. Accordingly, no “financial damages” (Article 960, Paragraph 1 of the Companies Act) have been incurred by Nissan whatsoever.
(3) As Mr. Ghosn did not recognize or approve of any “financial damages” to be incurred by Nissan, no intent can be recognized either (Article 38, Paragraph 1 of the Penal Code).
(4) Each of these remittances was executed for the purpose of promoting Nissan’s interest, namely the development of Nissan’s business in Saudi Arabia, so there is no purpose of promoting “his own interest or the interest of a third party” that can be recognized either (Article 960, Paragraph 1 of the Companies Act). Both the remittances from ParkView to the securities
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account under the name of Tomanaga Holding Limited and the provision of the standby letter of credit have no relation to the purpose of the remittances from Nissan to KJC.
2. Mr. Juffali is a highly regarded businessperson from Saudi Arabia and Mr. Ghosn’s trusted friend.
Mr. Juffali is a highly regarded businessperson from Saudi Arabia. His predecessors in the Juffali family formed the “Juffali Group” conglomerate in the 1970s, and the Juffali family has been managing the largest corporate enterprise in Saudi Arabia, dealing in a broad variety of businesses including manufacturing, distribution and trade. Since becoming Vice Chairman of the Juffali Group, Mr. Juffali has utilized his own experience and abilities to develop ties with companies all over the world. Mr. Juffali has managed Khaled Juffali Company (KJC) since 2004.
Mr. Juffali has been Mr. Ghosn’s trusted friend for more than twenty years. When Mr. Ghosn met with Mr. Juffali occasionally during return visits to Lebanon and when attending international conferences, etc. such as the Davos conference, Mr. Ghosn sometimes sought Mr. Juffali’s advice with respect to business in the Gulf region.
In September 2008, the collapse of Lehman Brothers led to a global financial crisis. As a result, Mr. Ghosn faced a situation in which the collateral that he had provided to Shinsei Bank became insufficient based on swap contracts. Shinsei Bank required Mr. Ghosn to either immediately provide additional collateral or cancel the contracts and pay to settle the margin calls. In order to avoid having to resign from Nissan to settle the margin calls, Mr. Ghosn asked his trusted friend Mr. Juffali for help. Mr. Juffali cooperated with the issuance of a standby letter of credit for 3 billion yen to Shinsei Bank, but that action is unrelated to the purpose of the remittances of this case.
3. Nissan, whose business in Saudi Arabia was sluggish, sought KJC’s assistance.
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The Middle East region is an important market for Nissan, and it was a region that was forecast to be especially profitable within the automotive industry. More specifically, Saudi Arabia, which has shown marked economic development, was a particularly important market for Nissan in the Middle East. However, Nissan’s business results in the Middle East were faltering and had largely fallen behind other Japanese and Korean companies in the industry. In particular, sales results in Saudi Arabia were very sluggish for many years. In 1957, Nissan designated Al Hamrani United Company (AUC) as a national sales company (“NSC”) for Nissan in Saudi Arabia, and it was selling Nissan vehicles as a local dealer. However, AUC’s business performance was very bad and it regularly failed to meet its objectives for unit sales. Against that background, there were circumstances of internal divisions surrounding management rights among the Al Hamrani family that manages AUC. It was very difficult to build a relationship between the Al Hamrani family and the Japanese company Nissan, as well as its subsidiary Nissan Middle East, and there were no signs of improvement. Nissan was in a predicament because it had signed an exclusive sales distributor agreement with AUC and had no choice but to sell Nissan vehicles through AUC.
In September 2008, since before the financial crisis, Nissan considered breaking through such circumstances in Saudi Arabia. As a means of doing so, Nissan decided to seek assistance from Mr. Juffali, who had cultivated connections due to his performance and reputation in business. As a result of repeated meetings from around May 2008 between corporate officer Gilles Normand of Nissan Headquarters, Atsuo Kosaka of Nissan Middle East and Mr. Juffali, the decision was made to establish a limited liability company through joint investment by Nissan’s 100% owned subsidiary Nissan Middle East and Al Dahana FZCO, which is jointly managed by Mr. Nassar Watar, an influential businessperson in the Gulf region. Upon receiving approval from Nissan Headquarters’ Executive Committee on July 18, 2008, Nissan Gulf FZCO was established in Dubai (United Arab Emirates). Nissan Gulf’s purpose was to oversee the NSCs in four countries in the
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region, namely Saudi Arabia, Abu Dhabi (United Arab Emirates), Kuwait and Bahrain, and expand Nissan’s local market share.
Nissan asked KJC to assist Nissan’s business in Saudi Arabia by utilizing its business network and knowhow. Mr. Ghosn was receiving communications from Mr. Juffali regarding overall matters, and Colin Dodge and Mr. Normand were in contact with Mr. Juffali regarding local operations in Saudi Arabia.
The development of Nissan’s business in Saudi Arabia increased in importance due to the financial crisis. The financial crisis had a substantial impact on the Japanese economy, and the automotive industry in particular, which is a key sector in Japan, was deeply affected. Exports overseas declined because of the high yen and sales fell globally. Nissan was no exception. Mr. Ghosn took every measure to save Nissan from the financial crisis, and developing business in the Middle East, which was experiencing remarkable economic growth, particularly in the market of Saudi Arabia, was part of those measures.
4. KJC took initiatives and paid expenses on Nissan’s behalf to develop Nissan’s business in Saudi Arabia for the benefit of Nissan.
Starting in the second half of 2008, for the benefit of Nissan, KJC began providing services to develop Nissan’s business in Saudi Arabia and also paid expenses for those efforts on Nissan’s behalf.
For example, relying on his business network, Mr. Juffali conducted negotiations with the Al Hamrani family, which manages AUC, and improved the relationship between AUC and Nissan. As stated above, one of the reasons that sales of Nissan vehicles were stagnant in Saudi Arabia was that a dispute over management rights had unfolded within AUC, which led to their sales efforts being neglected. Nissan was considering terminating its distributor contract with AUC by declining to renew it. However, in that case, it was expected that doing so would result in litigation risk, an
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accompanying loss of brand strength, and a further decrease in sales. Mr. Juffali negotiated with the Al Hamrani family and succeeded in reaching an agreement on a business plan targeting sales volume of 50,000 units for fiscal year 2009, along with the rough contours of an interim plan targeting sales volume of 100,000 units for fiscal year 2013, five years later. Results were achieved where AUC significantly increased the sales volume of Nissan vehicles, generating a sales volume in fiscal year 2009 that greatly exceeded the target of 50,000 units. Due to AUC’s significant improvement in performance, Nissan decided to renew their exclusive distributor contract on July 31, 2009. As a result, Nissan avoided the litigation risk, etc. that was expected in the event of not renewing the contract with AUC.
Furthermore, starting in 2007 or earlier, the Saudi Arabian government solicited various automobile companies to construct automobile plants in the hopes of cultivating an alternative industry to the crude oil industry and generating domestic employment. Around April 2007, Nissan was contacted by the Saudi Arabian government regarding construction of an automobile plant. Mr. Ghosn expected an increase in demand for automobiles in the Middle East and Africa, and an increase in production volume. He thought proactively that if an automobile assembly plant were constructed as a production base in Saudi Arabia, then depending on the requirements, it could be profitable in the future. Mr. Ghosn established a unit at Nissan Headquarters and assembled experts in various fields to consider constructing such a plant from the perspectives of logistics, manufacturing, the supply chain, etc. Mr. Juffali actively assisted in the negotiations with government agencies such as the Saudi Arabian General Investment Authority (SAGIA) regarding the requirements, and assisted Nissan’s plan to construct an automobile plant. Over time, from 2008 through 2013, Nissan continued to consider a plan to construct an automobile plant. However, this plan was not ultimately realized because the requirements for sustainability and profitability were not met.
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Mr. Juffali also engaged in establishing a limited liability company for Nissan in Saudi Arabia. Mr. Juffali utilized the network he had cultivated in business and actively negotiated to establish the limited liability company for Nissan. As a result, a license to set up a limited liability company owned by Nissan and KJC was obtained from SAGIA around mid-2013. Nissan Saudi Arabia (Nissan KSA) was established in November 2014, 75% owned by Nissan and 25% owned by KJC, and Nissan has been able to sell its vehicles in Saudi Arabia from that point.
5. Nissan greatly benefited from Mr. Juffali’s business expertise in Saudi Arabia.
After conducting appropriate approval procedures, Nissan paid compensation, including expenses, to KJC for services to assist the business in Saudi Arabia.
After conducting proper approval procedures, Nissan paid compensation, including expenses, to KJC for services to assist the business in Saudi Arabia. When making those payments, allocations were made from the CEO Reserve budget, which is merely a line item, and special cash or bank account for the Reserve does not exist (see Section V. 5 for details). In addition, the strict procedures necessary for allocating the CEO Reserve budget have been followed completely.
In May 2009, based on an evaluation of KJC’s contribution and performance, Nissan decided to pay $3 million as compensation, including expenses.. This proposal was approved at the Executive Committee meeting held on May 21, 2009. An application for allocating the CEO Reserve budget to make that payment (Application for Budget Adjustment) was subsequently prepared on June 1, 2009 by Gilles Normand who was in charge of the Middle East. Signatures were given by Greg Kelly, who was in charge of the Office of the CEO, and Emmanuel Delay, who was the corporate officer in charge of accounting, finance and management planning, as well as Colin Dodge, the corporate officer in charge of overseas markets in general, and then finally by Mr. Ghosn. Further, a Decision Form Concerning Execution of Remittances (Decision
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Form C) was prepared, and in addition to Colin Dodge and Gilles Normand, who both had knowledge of the local operations, this was also signed by Steven Ma who is Controller of the region.
The payments for the compensation, including expenses, from 2010 to 2012 were all completely executed by going through the same procedures and were approved by either a corporate officer handling finance functions or the CFO (Chief Financial Officer), as well as Gilles Normand and/or Colin Dodge, who were in charge of managing business in the Middle East.
V. Charged facts regarding SBA
1. Mr. Ghosn is innocent.
(1)  Mr. Ghosn has committed no “aggravated breach of trust” (Article 960, Paragraph 1 of the Companies Act). Of the July 25, 2017 payment of $5,000,000, approval for the payment of $2,500,000 was granted by Mr. Saikawa, not Mr. Ghosn. Additionally, the July 30, 2018 payment of $5,000,000 was granted by Mr. Saikawa, not Mr. Ghosn. For both of these amounts, there weren’t any “payments to be obtained by [Mr. Ghosn himself].” Both of these payments were made for the benefit of Nissan. There is no basis in fact that money was transferred, directly or indirectly, from SBA to Mr. Ghosn or his family.
(2)  No “financial damage” was inflicted on Nissan (Article 960, Paragraph 1 of the Companies Act).
(3)  Since Mr. Ghosn does not recognize or acknowledge that “financial damage” was inflicted on Nissan, intent cannot be recognized (Article 38, Paragraph 1 of the Penal Code).
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(4) Because the payments in this case were made for the purpose of Nissan’s interests, they cannot be recognized as made for the purpose of “[Mr. Ghosn’s] own interest or the interest of a third party” (Article 960, Paragraph 1 of the Companies Act).
By offering incentives such as sales incentives to regional dealers, automakers maintain and increase market share, so sales incentives are an essential sales strategy for increasing vehicle sales volume.
Nissan is a global company that has production and sales bases around the world. In terms of sales bases, Nissan has Regional Headquarters, which are mainly wholly owned subsidiaries, in North America, Central and South America, Africa, Asia, the Middle East, etc., and the Regional Headquarters sell Nissan automobiles to National Sales Companies (NSC), which are local dealers that form the foundation of sales in each country or region. When a Regional Headquarters receives orders for sales from an NSC, it procures the Nissan automobiles from production sites around the world and sells (exports) them to the NSC.
Needless to say, NSCs are necessary for selling Nissan automobiles around the world, and they act as the front line in competing with other companies’ brands. The NSCs’ market share, sales volume and revenue are directly connected with Nissan Headquarters’ business performance in their countries and regions. Consequently, since Nissan Headquarters provides the NSCs of each region with sales incentives, preferential treatment on the terms of payment, etc. through the local Regional Headquarters, those NSCs continue to be Nissan dealers (without switching over to Toyota or Hyundai) and they are encouraged to give their best efforts at expanding the market share and sales volume of Nissan automobiles.
Incentives such as sales incentives are not necessarily fueled by past or expected sales performance by an NSC. The level of achievement toward numerical targets is an important factor, but is not everything. Various factors are considered when determining incentives, for
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example the importance of that NSC’s existence as a Nissan regional dealer, its relationship with Nissan up to that point, and strategies for expanding Nissan’s market share and sales.
The Middle Eastern Gulf region is very attractive for Japanese automakers such as Toyota and Nissan for the following reasons.
1) The quality of Japanese and Asian-made automobiles, in particular the air- conditioners, engines, etc. which are highly durable in high temperatures and harsh climates, is highly regarded in the Middle East.
2) Profitability is higher than in other regions.
3) There is great potential as a developing market. For example, Toyota’s market
penetration is tremendous, which contributes to Toyota’s overall business
performance. Nissan also has room to recover the market share that it lost in the past. Nissan’s Regional Headquarters in the Middle Eastern Gulf countries is Nissan’s wholly owned subsidiary, Nissan Middle East F.Z.E. (NMEF). The following companies are representative NSCs in the region.
Arabian Automobiles Co. (AAC) (Dubai)
Saleh Alhamad Almana Co. (Almana) (Qatar)
Suhail Bahwan Automobiles LLC (SBA) (Oman) Rasamny Younis Motor Co. S.A.L. (RYMCO) (Lebanon) Al Masood (Abu Dhabi)
Bustami & Saheb Co. (Jordan)
Arata International (part of the SBA Group) (Iraq)
3. SBA was an essential NSC in Oman and other Gulf countries for expanding market share.
Suhail Bahwan Automobiles (SBA) is an automobile dealer belonging to Suhail Bahwan
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Group Holdings (SBGH), the largest conglomerate group in Oman. SBGH’s founder, Suhail Salim Bahwan Al Mukhaini, is a very well-known and respected businessman not only in Oman but also in the Middle East and other parts of the world. When he was 15 years old, he started a business by loading up a dhow sailing vessel with date fruits, spending 40 days travelling to India, purchasing rice, oil and clothing, and returning to sell them in the town of Sur. Bahwan used the money he gained as capital to open a shop selling construction materials and fishing nets. He became a distributor for Toshiba and Seiko of Japan, and subsequently expanded into various areas such as electric appliances, watches, construction, telecommunications, food products and transportation. He served as consul general of Sweden, head of the Omani chamber of commerce, etc. His eldest son Mr. Ahmed Suhail Bahwan Al Mukhaini, studied auto industry management in the U.S. and subsequently took over SBA and then afterwards he formed his family group under the name of Bahwan International Group Holdings (BIGH) which now holds the shares of SBA. During his time at the helm, Ahmed has poured substantial financial resources into all of his auto-related businesses.
SBA became a Nissan NSC in the Gulf region in 2004. SBA sold Nissan automobiles not only in Oman but also through an affiliate (Arata International Trading F.Z.C.; Arata) in Iraq, Libya, Saudi Arabia and China.
In the early 2000s, Nissan’s market share in the Gulf region began to fall, and was considerably behind Toyota and Hyundai. The Middle Eastern region, with its high rate of population growth, high young population rate and the anticipated increase of the middle class population, was a region with growth potential for auto manufacturers. From around the time of the financial crisis until today, the strategy to expand the market in the Middle Eastern region continues to be Nissan’s key issue.
In FY2004 when SBA became Nissan’s NSC, SBA purchased a little over than 2000
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automobiles with sales under $33 million. From that point on, its performance improved dramatically year on year, reaching sales of more than 23,000 automobiles for $400 million in FY2008. However, during the FY09, due to the effects of the global slowdown from the financial crisis sparked by the collapse of Lehman Brothers, sales failed to reach 20,000 automobiles. Both sales volume and revenue continued to pick apace after that year, reaching over 31,500 automobiles for $1 billion in FY2018.
SBA received awards practically every year granted to outstanding NSCs that significantly increased sales results for Nissan.
4. Changes to the terms of payment: usance
The financial crisis sparked by the collapse of Lehman Brothers that occurred in Fall of 2008 negatively affected auto sales throughout the world. The effects also extended to the Middle Eastern Gulf region.
Initially, SBA paid NMEF according to letters of credit (L/C) payable at sight. Around January 2009, SBA asked Nissan to make the terms of payment more flexible to achieve the double purpose of mitigating the effects of the crisis and supporting an aggressive sales strategy. Changes to the terms of payment cannot be made at the sole discretion of the Regional Headquarters. It needs to be approved by numerous people on various levels of responsibility and governance in accordance with Nissan’s strict internal procedures. In other words, the changes to the terms of payment will be approved when (1) the person in charge of sales at NMEF makes a proposal, (2) gets approval from the person in charge of NMEF Finance Department, (3) the head of said Department, (4) and from the President (MD) of NMEF, (5) is then reviewed by the department in charge of sales at Nissan Headquarters, (6) and subsequently by the Accounting Department, (7) and lastly, obtains final approval from either the Global Treasurer or the CFO at Headquarters. It is not possible for the CEO to make
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changes to the terms of payment at his sole discretion.
Procedures to review and approve were conducted from January to February 2009 by NMEF and Nissan Headquarters. Over 10 people, including NMEF President Toru Hasegawa, Accounting Department Deputy General Manager Takahiko Ikushima at Nissan Headquarters and Nissan Headquarters CFO Alain Dassas, participated in the review and approval process. Starting from the first half of FY2009, a change of the terms of payment were approved so that the payment deadline would be 210 days after issuance of an L/C (the so called “usance”) and so that 3.0% interest would be paid during that period for yen- denominated L/C and 5.0% interest for dollar-denominated L/C.
After that, SBA’s terms of payment continued to change. All of the changes were made after a strict review and approval process, and implemented after NMEF, through the President, proposed them to Nissan Headquarters and after they were approved by the CFO and the Accounting Department General Manager at Headquarters by following the approval procedures according to the internal company rules. Mr. Ghosn has never arbitrarily eased SBA’s payment terms. He has never instructed or approved a decision to ease SBA’s payment terms beyond the solid corporate governance processes involving the above mentioned Nissan officers.
5. Payment of sales incentives to SBA from the CEO Reserve
The CEO Reserve is not “money that can be freely used by the CEO.” There is no special cash or savings account. The CEO Reserve is a line item in the yearly Nissan global budget which serves to support various types of Nissan expenditure and investments during a given year. The CEO Reserve is not a system set up only for paying sales incentives. It is normally used for unexpected expenses or investments that occur during the fiscal year. For example, it is used for the following purposes.
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  •  Payments to hire talented executives
  • Emergency measures against unexpected product defects
  • Ad hoc measures to make synergistic or organizational improvements, engage in mergers, etc.
All payments and/or allocations from the CEO Reserve are duly recorded in the financial statements under the corresponding field which reflects the nature and type of payment, and is naturally subject to internal audit. In order to disburse company funds from the CEO Reserve, it is necessary to carry out special procedures for application/approval/final decision.
In the case of allocation and payment of sales incentives, first, the proposer must prepare a proposal containing the reasons why the disbursement is necessary, the date and amount of disbursement, etc., and then must present the proposal in front of the appropriate members of the Executive Committee (EC). The application/approval documents must be filled out with all necessary information, and the CEO, who is the decision maker of disbursements, ultimately approves after consent is received from Executive Committee members, the CFO and others. After such approval is granted, application/approval documents to actually pay the funds are prepared, and payments will be made after final approval from the vice president in charge (CVP or SVP). Whether it is the “CEO Reserve” or something else, and whether it is at Nissan Headquarters or Regional Headquarters, it is not possible for the CEO to disburse company funds at his own discretion.
From June 2012 to July 2018, sales incentives were paid to SBA by NMEF from the CEO Reserve expense item a total of ten times.
June 10, 2012: $3 million
October 18, 2012: $2 million
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June 20, 2013: $4.5 million
July 2, 2014: $2.5 million
March 11, 2015: $2 million
June 17, 2015: $3 million
December 30, 2015: $2 million
January 9, 2017: $3 million
July 25, 2017: $5 million
July 30, 2018: $5 million
These payments were generally determined and executed in the following way. In the beginning of each year, NMEF and SBA would check the sales results from the previous fiscal year and whether the numerical targets established in the previous year were achieved. They then would establish the numerical targets to be achieved for the current year and the conditions for payment of the incentive.
The General Manager of the Middle East at Nissan Headquarters (CVP or SVP) prepared an approval application for the use of the CEO Reserve (Application for Budget Usage). Final approval was received from the CEO after consent was obtained from the CFO, related EC members, the executive officer in charge of the office of the CEO and others.
After the approval is granted, the General Manager of the Middle East at Nissan Headquarters prepares a document to approve the disbursement (Decision Form C), and after review by the General Manager of the Accounting Department, the General Manager of the Middle East (CVP or SVP) makes the final decision.
Based on the approval process and final decision within Nissan, NMEF and SBA would enter into a Memorandum of Mutual Understanding (MoU) between them, and NMEF’s President and SBA’s President or Chairman would sign the MoU. NMEF would make
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payments to SBA based on Nissan’s decision and following the signature of the MoU.
Of the July 25, 2017, payment of $5,000,000, which is the basis of the charge in this case, approval for the payment of $2,500,000 was granted in March 2017 when Mr. Ghosn was still CEO. However, the payment of the remaining $2,500,000 was approved by Mr. Saikawa, who was CEO at the time. In addition, Mr. Saikawa also approved the July 30, 2018 payment of $5,000,000.
From FY2011, which is the fiscal year before 2012 when these incentive payments started, to FY2017, SBA’s automobile purchases averaged 35,000 vehicles per fiscal year with a yearly average of procurement value of $807,000,000. The ratio of the average amount of yearly cash incentives ($4.28 million) to the yearly procurement value amount ($807,000,000) was 0.53%.
In this way, payments of the sales incentives were determined and executed following stringent internal company procedures. The amounts were also appropriate and reasonable as management strategy for Nissan to maintain and expand its market share in the Middle Eastern Gulf region.
END
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Some comments (2006) to Chris Mooney about anti-Malthusian Ron Bailey on doomsayers, extinctions and DDT

January 6th, 2015 No comments
Here are some comments that I sent to Chris C. Mooney in response to his June 2, 2006 blogpost, “Some Ron Bailey Writings.”

Chris, in addition to the comments I’ve already given, let me note the following:

1. On Club of Rome and the Malthusian issue generally, the doomsayers were right to perceive problems that are still with us, but they failed to understand how market supply and demand work to call forth new supplies and technologies. Now we use sand [glass fiber] instead of copper for our telecommunications. They were very wrong on commodity prices, but what were the consequences? We adapted, so it can hardly be said to be one of the “worst” abuses of science (in any case the projections were not an abuse of science, but mistaken modelling).

In the big picture, Club of Rome was exactly right about a point on which we are still struggling – like any other species, humanity is a part of its environment and we must be concerned about our impact on the environment. Without the proper feedback mechanisms – which are provided now soleyl by disease, war and properly functioning markets – we will expand up to the Earth’s carrying capacity, overshoot and crash, as we have from time to time in the past, as Jared Diamond points out (but Diamond doesn’t understand environmental problems as market-failure problems either).

Are all the feedback mechanisms working properly worldwide? There is still lots of misery and starvation in the third world, and where markets don’t work we have internecine slaughter like in Rwanda and constant instability in Haiti. Global ecosystems and environmental services are still at severe risk, and regional resources like Asian and South American tropical forests, tropical reefs and oceanic fisheries, and wild species everrywhere, precisely for reasons that Ron Bailey understands well – because markets do not work well where property rights – private or communal – are not clearly defined or not effectively enforced.

On this, I recommend that you take a look at Ron’s piece last year on the problems and solutions for New England fisheries: How to Save New England’s Fishing Villages – If only the fishers will allow it. The solution? Creation of private rights that allow a market to function; here, “Individual transferable quotas” (ITQs) that are exactly the same as taken for SO2 trading in California under the Clean Air Act and the GHG emissions permits now trading under Kyoto. These tragedy of the commons issues persist globally and must be addressed, unless we wish to see ineffectively owned resources destroyed.

It’s also worth pointing out that the Malthusians have been wrong only becuase our technological ingenuity has enabled us to wrest more and more from nature. Nature may be getting a break in the West, but it’s due not only to fossil fuels (and a AGW cost that is not being paid) but also because we’re sourcing more and more from the developing world – the oceans are being strip-mined, the Amazon being converted to soybeans and the Asian tropics to palm plantations, and the second/third worlds are definitely converting forests to food. Environmental services are not costed into the moder economy.

I also recommend you look at the Business Rountable’s policy paper on how to help the developing world improve their economies and prepare for climate change – in particular recommendations 2 (kleptocracy – “public” resources are not protected but exploited to line the pockets of elites) and 5 (lack of effective propertty rights) specifically point out that these institutional failures lie at the core of the third world’s problems.

http://www.businessroundtable.org/pdf/20040616000ClosingtheTechnologyGap.pdf

2. I think there is more recent information about one in seven of all bird species being threatened. Whatever the rate is, it is huge, and just like fisheries, it’s entirely due to the lack of effective property rights. The bright spots are where landowners have figured out that they can get a good income from using and protecting wild resources. We’re still fighting about whales, even though we have obvious solutions such as ITQs being applied to other fisheries in NZ and AK.

Ron can argue with you about the numbers of species, but he really can’t disagree that the loss of this genetic information is a disgrace many worse than the burning of the library of Alexandria, and certainly is a result of failed markets that should be fixed.

Since libertarians like Ron and others on the right actually know all about the problems of market failure, where is the big effort being made to fix these problems?

3. On DDT, I imagine you know that Tim Lambert at Deltoid already has all of the answers handy.

4. This isn’t one of your questions, but I think it is fair to note that the failures of the left relating to science have really been failures to understand the institutional reasons for problems and so failures to propose the right solutions. Those on the left who have been saying that we need to change human nature or abandon capitalism have been saying so because they simply don’t know otherwise how to “fix” capitalism’s flaws.

But as I imagine you know, the misuse of science the right, on the other hand, has been entirely intentional, cynical and venal, and designed to allow favored interests (rent-seekers) to continue to pay cheap for dear public resources (including using the atmosphere as a GHG dump), for the financial and partisan benefit of those running the government. See John Baden, a grandfather of libertarian, free-market environmentalism for his take on the corrupt Republicans: http://www.free-eco.org/articleDisplay.php?id=488.

Good luck!

Regards,

Tom

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Stop, Thief! Historian Peter Linebaugh on commoning and our rich tradition of resistance to attacks on the commons

November 12th, 2014 1 comment

Guest essay, courtesy of the Creative Commons license, borrowed from the April 14, 2014 post of the same title at On The Commons magazine/website.

This essay, penned on the 4th of July 2011, is from Peter Linebaugh‘s new book Stop Thief! The Commons, Enclosures and Resistance— a compilation of his recent writing on the commons covering everything from Thomas Paine to Occupy Wall Street. Linebaugh–a leading scholar of radical possibilities who coined the word commoning–offers an insightful introduction to the commons and the roots of resistance to protect what rightfully belongs to all of us. —Jay Walljasper

We’re losing the ground of our subsistence to the privileged and the mighty. With the theft of our pensions, houses, universities, and land, people all over the world cry, Stop Thief! and start to think about the commons and act in its name.

But what is the commons? Its 21st century meaning is emerging from the darkness of centuries past.

Primers were once prayer books for the laity. Usually the primer refers to the elementary book used to teach children to read. In another meaning of the word the primer is that which ignites the blasting powder in the old, revolutionary flintlock rifles.

So, here is a primer on the commons and commoning. It does not contain prayers though the matter here is solemn enough. Finally, if this primer leads to action, detonating greater energy or exploding for the common good, why so much the better.

This short primer notes eighteen of the common places in this discussion (food, health, &c.) .

Food: The potluck, the principle of B.Y.O., the C.S.A. or community supported agriculture, the kitchen, are the profoundest human expressions of commoning. The extra seat at the table, the principle of hospitality, are inseparable from human community. The meal is at the heart of every religion. Our daily bread. Food was “rations” on the unhappy ship; on the happy one, food was the sailor’s commons.

Health: Public health, exercise, sports, prevention of accidents and disease, access to hospitals are dire needs. There was a time when hospitals were places of reception for guests, for strangers, for travellers. The practice of the hospital was the embodiment of the principle of hospitality. Salus publica populi romani referred to the goddess of health and well-being, “the public health of the Roman people.” Surely, her worship in our day has fallen on evil times, as medical, pharmaceutical, and insurance companies in league with government strangle her in their coils. Once the woodlands were a common pharmacopeia not the private property of Big Pharm.

Security: Militarism and money do not safeguard us. On 9/11 the most expensive military in the world failed to protect the American people or even its own HQ. Instead, citizen passengers after twenty-three minutes of deliberation and voting were able collectively to disarm United Airlines flight 93. A sacrificial collective was formed for the common good. As for the Pentagon, the conclusion is obvious. Our protection is our mutuality.

Housing: Squatting, the group house, intentional communities, the hobo’s jungle, the boarding house, the homeless camps are rarely anyone’s idea of utopia yet they meet real needs, they arise from direct actions, they are actual mutualism, they enliven dead spaces, they are cooperative.

Gender: Birth, nurturance, neighborhood, and love are the beginnings of social life. The commons of the past has not been an exclusively male place. In fact, it is one very often where the needs of women and children come first. And not “needs” only but decision-making and responsibility have belonged to women from the neighborhoods of industrial “slums” to the matriarchy of the Iroquois confederation to the African village.

Public Space: Look! Look at Tahrir Square. Look at the popular mobilizations in Spain. People are creating spaces in the urban environment where it becomes possible to engage in the conversation and debate that is essential to commoning. The barber-shop, the corner grocery, the church basement, the ice-cream parlor, the local co-op may not be available. The town hall has gone and the town square has become a parking lot. So, the first step in commoning is to find a locale, a place, and if one is not easily to hand, then to create one. The emerging geography of the future requires us actively to common spaces in our factories and offices.

Knowledge: The commons grows without copyright, lighting your candle from mine does not diminish me or put my candle out. As Thomas Jefferson said, “He who receives an idea from me, receives instruction himself without lessening mine; as he who lites his taper at mine, receives light without darkening me.” Conversation and just talk, or rapping, was once the people’s Internet. Common sense arises from the web of family and neighborhood relationships. But we need a place to meet! How about the school? Rage, rage against the dying of the light.

Semantics: The gigantic Oxford English Dictionary has four to five pages on the word “common” beginning with this, “belonging equally to more than one.” We get some of our most powerful words from the commons, such as community, communal, commonage, commonality, commune, communion–with their social, political, and spiritual overtones and histories. Etymologically, these words are the offspring, so to speak, of two Latin parents, com meaning together, and munis meaning some kind of obligation.

Of course we don’t need to stay with English and Latin. In the Andes mountain range, for instance, the allyusis the key word; in Mexico the ejido was the key word. The word “commons” can be tricky, subject to double-talk or the forked tongue, as when it is used for its opposite, as in the privatized housing tract (gated community) or the privatized market (the mall) which will call themselves “the common” but which are actually based on exclusivity unless you possess the do re me!

Working class: The Supreme Court has ruled against class action by women workers. Let us, the entire working class, employed and unemployed, men and women, rise from our slumbers and show that we do not wait on the Supreme Court for permission to act as a class!

Some say the precariate has replaced the proletariat. This simply means that life for us, the common people, has become more insecure, more uncertain, and more precarious. Whether we are old or whether we are young, whether we are poor or getting by, the institutions that used to help us have disappeared and their names have become bad words, like “welfare” or “social security.” As we have learned from our experiences of Katrina or the mortgage crisis, neither government nor corporations are able to abate the situation. As the disasters accumulate we are left more and more to our own devices and find we must dig deeper. The remembered commons of old as well as the spontaneous commons of now need to be available when need arises. Who runs the workplaces anyway?

Being: The commons refers neither to resources alone nor to people alone, but to an intermixture of them both. The commons is not only “common pool resources” nor is the commons purely, “the people.” In other words it is not a thing but a relationship. In medieval Europe the forests, the hills, the coasts, the estuaries were locations of commoners who were respectively foresters, shepherds, fishers, and reed people. The commoner was the person who commoned in such lands, and one parish to another parish intercommoned, and the bullying giants of legend, the lords and ladies, discommoned. In this struggle our landscapes were formed, even our human “nature,” as well as Nature herself.

Knowing: Often you don’t know of the commons until it is taken away. The neighborhood without sidewalks, the water fountain that has gone dry, the land that once your family could use, the fresh air that used to renew your spirit – gone! They are taking liberties with what we took for granted. No more! Stop, thief!

Politics: The commons is outside the government. Commons provides its own security. Custom, or habit and socialization, rather than police force, regulate relations, as anyone knows who has organized a neighborhood soft-ball game or football in the street. In English history politics began as a negotiation between lords and commoners. This is why there is a House of Lords and a House of Commons.

Law: Generally custom, rather than law, safeguards and defines commons. Custom is local, it is held in memory, and the elders are the keepers of community memory. From Africa and Latin America we learn that this may be another guise of patriarchy and privilege. Thus while we respect custom we do not romanticize it.

Economy: The commons is often outside of the realm of buying and selling or the realm of the commodity; it is where life is conducted face to face. The commons is neither a gift economy nor potlatch. No, not everything is free, but yes, everything may be shared. It is a place of reciporicities. This economy is not grounded in those triplets of evil named by Dr. Martin Luther King, jr., namely, militarism, racism, and consumerism. The Industrial Revolution was neither. Quite the contrary. In England mechanization was actually counter-revolutionary and what it produced, besides soot and grime, was the opposite of industry: misery for workers and idleness for the rulers. Talk about oxymorons!

History: The commons is old and it is all over, from Iraq to Indiana, from Afghanistan to Arizona. It is associated with indigenous people and it has many recent modifications.

History is not a story of simple progress along a straight line of stages or up the rungs of a ladder. There have been many stages, overlapping, returning, leap-frogging, if never actually disappearing. Beneath the radar there have been many communities, commoning along. Besides, progress for whom?

Religion: The good Samaritan, the principle of all things in common. The Franciscans say juri divino omni sunt communia, or by divine law all things are common. The Christian New Testament reports that the early Christians held all things in common. Marie Chauvet, the Haitian novelist and observer of voudou, writes, “Someone touched the calabash tree, my Lord God! … someone touched the calabash tree … someone touched the calabash tree…. You cut down all the trees, and the earth is no longer protected. Look, she’s going away and shows you her teeth in revenge.”

Poets and Writers: Our poets and theorists, our revolutionaries and reformers, have dreamt of it. Henry David Thoreau, Walt Whitman, Maya Angelou, Thomas Paine, Karl Marx, Peter Kropotkin, Claude McKay, Tom McGrath, Marge Piercy… oh, the list goes on and on, from the mystics to the romantics to the transcendentalists, from the democrats to the anarchists, from the socialists to the communitarians, from the wobblies to the reds, from the folkies to the rockers.

England: Some associate the commons with England’s so-called ‘green and pleasant land’ and are apt to quote the following as an ancient bit of wisdom.

The law locks up the man or woman

Who steals the goose from off the common

But lets the greater villain loose

Who steals the common from the goose.

True enough, certainly prisons and the loss of the commons went together in English history, though it was an Irishman who composed this bit of wit. Who are the geese in today’s world? In England at the time of the enclosures of commons and prison construction in the 1790s, the Romantic Revolt poured out a huge expression of opposition. Samuel Coleridge writing at the time gave us a few spiritual lines which we can quote as a take away.

Return, pure Faith! Return, meek piety!

The kingdoms of the world are yours: each heart

Self-governed, the vast Family of Love

Rais’d from the common earth by common toil,

Enjoy the equal produce …

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I’m not focussed on abolishing the state as an objective because . . . it’s turtles all the way down anyway

October 30th, 2014 No comments

I’m not focussed on abolishing the state as an objective because:

(1) it is a distraction from other ways to recreate/revitalize community and “Zomia”;

(2) I see it as impractical in any event — while splitting up states and decentralizing are real options, any stateless/ungoverned areas that may arise are soon claimed by states; and

(3) I’m afraid it’s turtles all the way down anyway, in terms of brigands, great bands of brigands, and roving corporate bandits:

http://tokyotom.freecapitalists.org/?s=pirates
http://tokyotom.freecapitalists.org/?s=avatar
http://tokyotom.freecapitalists.org/?s=fishing
http://www.government.se/content/1/c6/12/11/81/d99cc30a.pdf

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The Bundys, the BLM and the fruits of Govt-owned “property”

April 17th, 2014 No comments

[cross-posted from The Anti-Establishment Center Community on Facebook]

A few thoughts on the notion of Govt-owned “property”, in connection with the radical misanthropes who have been ranching in Nevada for 100+ years on “Federal land”.

I’m afraid it’s turtles all the way down, with respect to corrupt “Govt ownership,” particularly with respect to the politics and special interests relating to the Bundy Ranch and Gold Butte:

http://www.infowars.com/breaking-sen-harry-reid-behind-blm-land-grab-of-bundy-ranch/

Also, please consider the corrupt mining of coal, oil, gas and hard rock minerals, our forests and offshore resources, including fisheries — from BP/Gulf to Alberta’s oil sands.

Then consider the corrupt railroad grants and payments, the creation of ‪#‎LimitedLiability‬ corporations, and the granting to them of pollution permits and use of Govt eminent domain powers.

Finally, don’t ignore all the ridiculous, expensive and environmental Federal hankypanky/”Defense” activities — including decades of open-air nuclear bomb testing — that are possible because the Govt asserted territorial claims over vast resources in which natives, Mexicans and tens of thousands of Americans had already “homesteaded” and lived in one way or another. The Feds have long been and continue to be agents for wealthy private interests to take control of land already used by others.

The destruction of the Appalachians is a long historical example of rich men using government to take land from others who were there first, and using state-made corporations to hide behind the thugs they hired:

http://www.dailyyonder.com/what-happens-when-you-dont-own-land/2009/07/03/2205
http://www.encyclopedia.com/doc/1G2-2536601159.html
http://wesscholar.wesleyan.edu/cgi/viewcontent.cgi?article=2148&context=etd_hon_theses

The story continues, and hopefully the Bundy ranch dispute can be a trigger for people seeing a bigger picture.

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IF the Planet's First-Ever Human-Precipitated Mass-Extinction is Underway, So What? || A dialogue between Libertarians

January 31st, 2013 No comments

I just stumbled across an old post and comment thread, that I thought some might find worth pondering, so am cross-posting it here.

*   *   *

Planet’s First-Ever Mass-Extinction Precipitated by Humans

Should we be alarmed at the current massive die-offs being noted in the animal and plant kingdoms? After all, new species arise and old species die off all the time. Its just nature taking its course, right? Not necessarily. What’s different about this die-off is that this is the only such event precipitated by a biotic agent: humans.

read more | digg story

9 Comments:

Blogger James Rothfeld said…

Wrong. One of the largest extinctions in the history of our earth was when oxygen from photosynthetic life forms began to reach levels that were toxic for anaerobic life forms. Granted, the victims were mostly bacteria and some other simple life forms, but – extinction is extinction.

So, humans are not the first biotic agent to lead to massive extinctions.

4/23/2009 01:43:00 AM
Blogger TokyoTom said…

James, thanks for honoring me with a visit and comment.

Of course, I mainly blog at LVMI – http://mises.org/Community/blogs/tokyotom/ – and I`m not really quite sure what I did that caused this post (which is the intro to a longer piece that I didn`t write) to go up, but in any case I appreciate the engagement.

You have a valid point about the great switch from anaerobic to aerobic life, which many people seem to forget about, but:

– obviously the main comparison is which other great extinction events (caused by meteors/ volcanic/ climate events) that affected complex vertebrate and other life, not archaea or bacteria;

– the event you speak of actually CONTRIBUTED to the development of more complex life;

– there is plenty of anaerobic life still around and being discovered (even in rocks miles down), and we really have very little idea as to whether the switch to aerobic life caused any kind of massive loss of anaerobic species; and

– what we are now doing to the oceans – via “dead zones” resulting from fertilizer run-off and further changes expected from warming and pH changes will result in areas not “dead”, but occupied by less complex anaerobic bacterial communities.

4/23/2009 03:20:00 AM
Blogger James Rothfeld said…

Now you are weaseling out, Tom! You did not specify that you were only referring to complex vertebrae, but only seemed to talk about extinctions in general. I think this is arbitrary and obfuscates the point: the point is that extinctions are caused by all kinds of events, and at the time of the event, they are not horrible for most life forms (horrible being a function of going extinct).

The argument that the aerobic extinction contributed to more complex life forms does not really get us anywhere, since there is no reason to assume that higher life could not emerge out of anaerobic life. What can be said is that the aerobic extinction contribute to the emergence of complex aerobic life, but that’s simply proving the assumption, or whatever logical fallacy we are dealing with here. The likely reason anaerobic life is rather simple these days is that it is forced to live in rather confined environs, including the gut of aerobic life.

The world’s oceans seem to have passed through a number of anoxic events, and those life forms that made it through the malaise probably did quite nicely as competition was greatly reduced. I’m sure life as such will make it quite nicely through the next one as well. Whether we humans will make it through it remains to be seen, though I am actually quite optimistic (pessimistic??) that they will. In smaller numbers, but nonetheless.

I think it is too early to judge whether or not the current extinction will in fact be a disaster. I am in fact not even convinced we are really going through a particularly dramatic extinction – the claim about dozens or even hundreds of species going extinct is based on some pretty speculative reasoning.

As far as I know, there have only been about 300 or so documented extinctions in the last few centuries. I also don’t think the the extinction of species limited to very small local habitats should really be counted: if the only place you can find a particular animal is a small island or a specific mountain, I suggest the species is done for no matter what.

I also don’t think that anybody has yet established a relationship between species extinction and human survival (and don’t start with the buffalos – the populations at First Contact were human artifacts).

But, back to the dead-zones in the oceans: I am amused that few ecologists have yet made the link between agricultural subsidies and fertilizer run-off. The link is so blatant and in your face, this oversight is almost telling.

In any case, I came by your blog because that’s where clicking on your name at Crash Landing gets me.

Best,

JR

4/23/2009 06:32:00 AM
Blogger TokyoTom said…

James, I was not weaselling out, but expanding on a point that you also acknowledged: “Granted, the victims were mostly bacteria and some other simple life forms.”

The fact that remains that if there is a wave of extinctions underway as a result of the rise of opportunistic and technological man (with various man-related extinctions starting millenia ago), this is clearly different from prior catastrophic extinctions, which resulted from external physical impacts on the planet. That`s the comparison being made, and reference to the initial shift to oxic life forms is interesting, but irrelevant.

“there have only been about 300 or so documented extinctions in the last few centuries. “

This of course tells us little, since even now we have no comprehensive catalog of life.

“I also don’t think the the extinction of species limited to very small local habitats should really be counted: if the only place you can find a particular animal is a small island or a specific mountain, I suggest the species is done for no matter what.”

I fear you are right as to the “no matter what”, but your conclusion that the extinction of localized species “shouldn`t count” is a value judgment. Good Austrians will recognize that others have equally valid preferences. Biologists and others familiar with the dimishing diversity of life express a deep sense of loss.

4/23/2009 11:50:00 AM
Blogger James Rothfeld said…

Tom – I was just teasing about the weaseling in any case. What I am trying to get at is your last point: whether or not any of this is good or bad is in the eye of the beholder. Every activity has externalities – whether good or bad depends on the judgment of those affected, physically or otherwise, including emotionally.

So, yes, localized species extinction is certainly not good for the species affected or those who care about them. Maybe the world would be a better place with dodos and woolly mammoth in it, but maybe not. Who can tell?

I’m sure nomads think settled societies with their strict geographic borders stink, but farmers have little sympathy for dirty herders and their stomping herds.

Will the world be worse off if the only life forms to survive are those that serve human needs? Aesthetically, I would say no, but then again, those who will live in such a world will hardly miss what they have never known.

I don’t lose sleep because there are no more Aurochs, even though I think they were really amazing animals. I also don’t miss the dinosaurs, though other might differ.

In the end, it’s all a question of preference – and who am I to say that my preferences are any more worthwhile than those of others.

Here’s another question I was wondering about, by the way, and it’s serious – if a change in technology would bring about economic ruin for a particular region and its population, simply because it would make their only product useless, would the inventor/users of this technology have to compensate the people who were damaged? Would the users of word processing software have to compensate print employees for lost jobs? Would users of the internet have to compensate newspaper workers for lost jobs? I’m not being funny, it’s an important question that is directly relevant for the question of property rights in the context of environmental change. I am sure you see the relevance. I have no real answer to this (except gut opinion). Any thoughts?

4/24/2009 05:48:00 AM
Blogger TokyoTom said…

“Maybe the world would be a better place with dodos and woolly mammoth in it, but maybe not. Who can tell?”

I agree completely that this is a question of human judgment. However, we should acknowledge that we are bumping some species off the planet and squeezing others drastically (and many to a completely unknown degree).

“Will the world be worse off if the only life forms to survive are those that serve human needs?”

Are you confident that the species that don`t survive don`t serve human needs? Many we simply have no clue about, while others, such as whales, dodos, passenger pigeons, Steller sea cows and numerous crashed/crashing fisheries have been extinguished and are threatened not because of lack of utility, but simply because nobody owned them.

How much more shall we destroy, for want of investment in property rights/commons management?

” would say no, but then again, those who will live in such a world will hardly miss what they have never known.”

Only partly true, as some of the world that we have been losing has been and will be documented.

“would the inventor/users of this technology have to compensate the people who were damaged?”

Not in a libertarian order. But I fail to see the relevance to “environmental” problems, either those that involve activities that damage the persons or property of others, or damage resources that are communally owned or are owned under regimes that fail to protect the resources. Care to clarify?

5/19/2009 01:04:00 PM
Blogger James Rothfeld said…

My basic point is that every action has effects at least one person would perceive as injurious to their well-being, and would prefer that it rather not happen. If we were to refrain from all such actions, we would probably lose the freedom to act at all. Fundamentally, I want to argue that a ‘negative externality’ that cannot be dealt within a libertarian order has to be simply accepted as a given along the lines of ‘shit happens’.
If we cannot find a non-libertarian solution to an environmental problem, than so be it. That’s my only point. Nothing more, nothing less. Which is why I agree that in a libertarian order it’s your tough luck that you lose your job because somebody else is smarter. It also means that if, for example, people using a specific aquifer cannot agree on a libertarian solution to its management simply have to suck it up. Or that if I live on a nice piece of land with a pretty view, and my neighbor erects an ugly building with garish design elements spoiling my aesthetic enjoyment, I’ll have to suck it up – unless the two of us can agree on a solution.
I think some environmental problems have no libertarian solution. I don’t know which they are, but maybe we simply have to accept that.
For example, there may be no libertarian solution to fighting asteroids about to hit our planet. Maybe we could collectively deal with it, but maybe not enough people can be bothered – or believe in it – and so the few who care simply have to deal with the fact that they will die, well-knowing that a solution was at hand.

To repeat the point: in my hierarchy of needs, freedom comes before security. If the price of freedom is to live in a world that will experience dramatic changes in climate, and if the only way to avoid is were to give up my personal freedom – then I’ll accept the dramatic changes in climate.

That’s my only point.

5/20/2009 09:55:00 AM
Blogger TokyoTom said…

Thanks for the clarifications, James.

I`m not so far away from you, but come to different conclusions: where there are obvious commons problems, those who care about the problem should obviously work to resolve them.

This includes libertarians who are personally most interested in individual freedom, freedom that is imperilled by the state-heavy “solutions” that often underlie the problem (to the benefit of entrenched insiders) in the first place.

Far from leaving the field of battle to others, libertarian ought to be proactively trying to mediate, lest what they value most highly be trampled.

5/20/2009 10:51:00 AM
Blogger James Rothfeld said…

Seems we ran out of disagreements 🙂

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David Brooks echoes Hayek’s warnings on ‘Market Morals’ in an observant piece on our crumbling order

December 2nd, 2011 No comments

David Brooks has an excellent op-ed piece in the December 1 New York Times that speaks to the very worrisome and ongoing destruction of crucial social capital – what Hayek called “market morals“, and what Brooks calls the “spirit of enterprise”.

I excerpt liberally from the op-ed (emphasis added):

Why are nations like Germany and the U.S. rich? It’s not primarily because they possess natural resources — many nations have those. It’s primarily because of habits, values and social capital.

It’s because many people in these countries, as Arthur Brooks of the American Enterprise Institute has noted, believe in a simple moral formula: effort should lead to reward as often as possible.

People who work hard and play by the rules should have a fair shot at prosperity. Money should go to people on the basis of merit and enterprise. Self-control should be rewarded while laziness and self-indulgence should not. Community institutions should nurture responsibility and fairness.

This ethos is not an immutable genetic property, which can blithely be taken for granted. It’s a precious social construct, which can be undermined and degraded.

Right now, this ethos is being undermined from all directions. People see lobbyists diverting money on the basis of connections; they see traders making millions off of short-term manipulations; they see governments stealing money from future generations to reward current voters.

The result is a crisis of legitimacy. The game is rigged. Social trust shrivels. Effort is no longer worth it. The prosperity machine winds down.

Yet the assault on these values continues, especially in Europe.

Over the past few decades, several European nations, like Germany and the Netherlands, have played by the rules and practiced good governance. They have lived within their means, undertaken painful reforms, enhanced their competitiveness and reinforced good values. Now they are being brutally browbeaten for not wanting to bail out nations like Greece, Italy and Spain, which did not do these things, which instead borrowed huge amounts of money that they are choosing not to repay.

The estimated costs of these bailouts vary enormously and may end up being greater than the cost of German reparations after World War I. Germans are being browbeaten for not wanting to bail out Greece, where even today many people are still not willing to pay their taxes. They are being browbeaten for not wanting to bail out Italy, where future growth prospects are uncertain.

They are being asked to bail out nations with vast public sectors and horrible demographics. They are being asked to paper over fundamental economic problems with a mountain of currency.

It’s true that Germans benefited enormously from the euro zone and the southern European bubble, and that German and French banks are far from blameless. It’s true that the consequences for the world would be calamitous if the euro zone cracked up. It’s true that, in a crisis, you do things you wouldn’t otherwise do; you do things that violate your everyday values.

But our sympathy should be with the German people. They are not behaving selfishly by insisting on structural reforms in exchange for bailouts. They are not imprisoned by some rigid ideology. They are not besotted with some semi-senile Weimar superstition about rampant inflation. They are defending the values, habits and social contract upon which the entire prosperity of the West is based.

The scariest thing is that many of the people browbeating the Germans seem to have very little commitment to the effort-reward formula that undergirds capitalism. On the one hand, there are the technicians who are oblivious to values. For them anything that can’t be counted and modeled is a primitive irrelevancy. On the other hand, there are people who see the European crisis through the prism of some cosmic class war. What matters is not how people conduct themselves, but whether they are a have or a have-not. The burden of proof is against the haves. The benefit of the doubt is with the have-nots. Any resistance to redistribution is greeted with outrage.

The real lesson from financial crises is that, at the pit of the crisis, you do what you have to do. You bail out the banks. You bail out the weak European governments. But, at the same time, you lock in policies that reinforce the fundamental link between effort and reward. And, as soon as the crisis passes, you move to repair the legitimacy of the system.

That didn’t happen after the American financial crisis of 2008. The people who caused the crisis were never held responsible. There never was an exit strategy to unwind the gigantic debt buildup. The structural problems plaguing the economy remain unaddressed. As a result, the United States suffers from a horrible crisis of trust that is slowing growth, restricting government action and sending our politics off in strange directions.

Europe’s challenge is not only to avert a financial meltdown but to do it in a way that doesn’t poison the seedbed of prosperity. Which values will be rewarded and reinforced? Will it be effort, productivity and self-discipline? Or will it be bad governance, now and forever?

Brooks’ insights are incomplete; he fails to note how government-establish deposit insurance underwrote and capital standards (most government bonds enjoy a 0% risk-weighting under BIS standards) encouraged the irresponsibility of German and other EU banks in lending to Greek and other national governments in the first place.

Right now, the Japanese government only funds 40-45% of its budget from taxes, and so is quietly looting its citizens’ banking, pension and insurance assets for the shortfall. US citizens are more fortunate, because our dollar hegemony has meant that our government has largely been looting foreign bond purchasers and their customers instead.

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(I’m irked and encouraged by the) anger and confusion, even among libertarians, over ‘Capitalism’

June 19th, 2011 2 comments

Yesterday I stumbled across a blog post by Joel S. Hirschhorn, a self-described libertarian who is author of Delusional Democracy, the Chair of the Independent Party of Maryland and co-founder of Friends of the Article V Convention (www.foavc.org), one of the first of the growing movements to rally citizens at the state level to seek to check excesses by the federal government.

While I think Joel is right to be angry about the state of ‘capitalism’ and of our politics, he doesn’t quite have his finger on the problem and thus his proposed solutions seem quite a bit off.

Joel’s post is here: Two Capitalisms; he urges that we learn from Germany; I abjur. I quote below key passages:

Maximizing financial returns to reward corporate bigwigs and stockholders even though the actions greatly harm the US economy and society results from US companies practicing bad, immoral capitalism. Think of this development as the conquest of Wall Street over Main Street, of those who make money over those who create and make products, of those who promote economic inequality over those who value the middle class.

The power elites that have succeeded in perverting capitalism have also succeeded in making much of the American public so dumb and distracted that they no longer function as informed and effective citizens, which has allowed the government to be hijacked by the rich and powerful through a two-party plutocracy.

Selfish capitalism was exemplified by the role of Fannie Mae in creating the economic disaster by perverting the housing market, as conservative David Brooks correctly concluded; he noted “the leadership class is fundamentally self-dealing;” it practiced “shameless self-enrichment” which produced disastrous results.

To be clear, the conflict is not between capitalism and socialism, the way right wing ideologues talk, but between the good and bad kinds of capitalism, which those on the left need to learn how to talk about. Bad, greed-driven, too-big-to-fail capitalism has ruined the US for all but the rich which have sucked off much of the nations wealth.

A fine analysis by Harold Meyerson on the difference between the highly successful German economy and the dismal US one drives home the crucial differences between the two forms of capitalism. The need is for the US to learn from the more successful German, good form of capitalism and develop policy reforms that could rejuvenate the US economy by curbing the bad form of capitalism. The ideas that Republicans keep advocating are all wrong because all they want to do is promote bad capitalism, which only serves the interests of the rich and powerful, not ordinary Americans, not the middle class, and not workers. Peter Coy has also assembled great information on what can be learned from other nations.

The German economy makes the US one look like it is on its deathbed. The German tripartite system has business, labor and government working together. Faced with the same competition from low wage developing countries and the entire globalization condition, Germany has a booming manufacturing sector that constitutes almost twice the share of the economy than that in the US. And even in the current global economic recession German unemployment is 7 percent. The tripartite system has kept German labor unions strong and, therefore, protects the middle class whose pay has risen at roughly the same rate as top incomes. This is in stark contrast to the rich-getting-richer and unionbusting situation in the US. Indeed, the top 1 percent in the US are seeing their proportion of total income rise dramatically, even as their German counterparts are seeing their share of total income shrink. German corporate boards are required by law to have an equal number of management and employee representatives. By law! Germany’s stakeholder capitalism benefits the many unlike the US where selfish capitalism benefits the upper class and brutalizes everyone else. Corporate power has not captured the German government the way it has hijacked the US government.

While I agree with Hirschorn that corporations (shareholders and executives) have slipped from responsibility to the communities  in which they operate and have captured government, this is a consequence of initial favors given by governments to corporate shareholders, and subsequent and consistent pressure both by corporations and those whom they affect for greater central controls on corporations. In smaller societies like Germany, Singapore and Japan, a sense of strong social responsibility by corporations remains, but the broader US market has allowed gamesmanship and moral hazard to flourish (with the ultimate game of using government to build barriers to entry, guarantee markets, and to shift risks to shareholders and society as a whole).

Our answers cannot lie in more government, but on rolling back the government interventions that insulate corporations (and their shareholders and executives) from markets, communities, and from the adverse consequences of their behavior. What interventions?

  • The whole regulatory state, which substitutes political battles and micro-management for stricter enforcement of private and community property rights;
  • Public company regulations, which raise barriers to capital markets (and thus barriers to entry) and which substitue a busybody by inept and corruptible government for shareholder vigilance;
  • Deposit insurance, that substitutes a card-house of prudential government regulations – that encourage moral hazard and games by bankers, traders, investment bankers and rating agencies rather than prudence – for oversight by depositors and their proxies; and
  • The initial government grant of limited liability to shareholders, which not only encourages shareholders not to worry to closely about the risks that ‘corporate’ actions pose to third parties, but has fuelled the growth of the regulatory state and external pressure by advocates of the ‘precautionary principle’.

Anger over our perverted ‘capitalism’ is perfectly fine and appropriate – nay, essential. But let’s have some clearer thinking, please.

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