Exporting the Facade

excerpted from the book

The Democratic Facade

by Daniel Hellinger and Dennis R. Judd Brooks

Cole Publishing Company, 1991, paper

Exporting the Facade

A Mirror

As Noam Chomsky has pointed out, the policies of an imperial power toward the nations within its sphere of influence reveal the character of its own politics and culture:

We naturally look to the Central America-Caribbean region...if we want to learn something about ourselves, just as we look to Eastern Europe or the "internal empire" if [we] want to learn about the Soviet Union.

In the Caribbean and in Central and South America, the United States has acted as an imperial power for more than a century, and during that time U.S. political and business elites have exerted a guiding influence in the establishment of political systems. The portrait that comes into focus through the lens of empire reveals that the elites who manage U.S. foreign policy have no attachment to democracy except as a device to legitimate their political and economic domination. For this purpose the symbols of democracy are useful indeed, and this explains why elections in the nations south of the U.S. border have been sponsored by the United States both as instruments for managing client states and as a means to influence American public opinion. Such elections are carefully staged media events designed to "demonstrate" the worthiness of U.S.-supported regimes.

The overriding concern of U.S. elites has been the construction and maintenance of a system of governments that will protect inequality and class privilege at least as effectively as in the United States. When President Reagan said in 1982, "What I want to see above all else is that this country remains a country where someone can always get rich and stay rich-that's the thing we have that must be preserved," he was expressing in unusually candid terms a sacred tenant of America's political tradition. The nations within the orbit of the empire have been subjected to devastating doses of violence coordinated by U.S. corporations and government officials when they have failed to demonstrate allegiance to the same principle.

In 1935, Major General Smedley D. Butler reminisced about his career in the Marine Corps during this period. He spoke of the intimate relationship between military intervention and corporate investment:

I spent 33 years and 4 months in active service as a member of our country's most agile military force-the Marine Corps....I spent most of my time being a high-muscle man for Big Business, for Wall Street and for the bankers. In short, I was a racketeer for capitalism...

Thus I helped make Mexico...safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in....I helped purify Nicaragua for the International banking house of Brown Brothers in 1909-12. I brought light to the Dominican Republic for American sugar interests in 1916. I helped make Honduras "right" for American fruit companies in 1903.

New Styles of Intervention

As the rhetoric used to justify American domination over Latin America shifted from the building of empire to the Red Menace, the style of intervention changed accordingly. Frequent invasions and prolonged military occupations gave way to efforts to install governments that would act as surrogates protecting U.S. economic and political interests. From one country to another, these governments acted in remarkably consistent ways: They freely used terror and repression against their own citizens.

In the Dominican Republic, the dictator Rafael Trujillo provided a model for the sort of government favored by U.S. elites. Trujillo had risen through the ranks of Dominican society and military during the U.S. Marine occupation of 1912 to 1924. Described by U.S. military officers as "one of the best in service," he was promoted to the rank of general and put in charge of the country's police force, which became the National Army in 1927. By 1930, having eliminated all of his rivals by means of bullets or exile, Trujillo became president through an election in which he was the only remaining candidate. Until 1962, Trujillo controlled Dominican society through his military, which he "welded into a machine of terror which he refined over the years":

Thousands of his political enemies, automatically called "Communists," died in secret police dungeons, many of them after suffering hideous tortures perpetrated with electrical devices, nail extractors, decapitation collars, and leather-thonged whips. Young ladies who spurned his advances were found dead in "accidents." Even those who fled abroad lived in constant dread of kidnapping and death at the hands of Trujillo agents who, after performing their murderous tasks were themselves marked for extinction. In 1937 he supervised the massacre of from 15,000 to 35,000 Haitian squatters in two days.

Using such means he was able to provide the Aluminum Corporation of America (ALCOA) and United Fruit, among other American corporations the stable environment and docile work force they desired. Government and business leaders in the United States hailed Trujillo as the "man responsible for the great work of Dominican progress, the man who brought trade between the Republic and the other American nations to a peak.'' American public relations firms worked diligently for Trujillo, placing full-page newspaper advertisements designed to sell the dictator to the American public as "their friend and best ally in the fight against communism ,,~5

With a combination of direct and tacit approval from the United States, similar dictators proliferated throughout Latin America: Jorge Ubico in Guatemala, Tiburcio Carias Andino in Honduras, Maximiliano Hernandez in El Salvador, and Anastasio Somoza Garcia in Nicaragua. Loyal only to the United States and supported by a small privileged elite within their own countries, the dictators became firmly entrenched by sharing with the multinational corporations the benefits of maintaining a receptive environment for U.S. investment. Washington supplied arms and financed and trained military officers and police forces in counterinsurgency strategies and methods of torture to be used against civilian populations. In most cases, the United States built modern military and police organizations from the ground up because in most Latin American countries they were badly organized and armed, and thus not sufficiently adept at maintaining oligarchic control.

Post-War Capital Penetration

Citizens of the United States are bombarded with an official government propaganda that promotes the notion that America is the leader of a free world dedicated to spreading democracy, protecting freedom where it exists, and advancing freedom where it is denied. Hand in hand with this rhetoric is a language of capitalism that extols the value of free trade and free enterprise as the only means of bringing economic well-being to the people living in the world's underdeveloped countries. Guided by such an ideology, investments abroad have served as a vital source of capital accumulation for U.S. corporations. These investments have returned huge profits, with a consistently higher return for dollars committed than investments made domestically. This unusually high rate of return has been ensured by a history of military intervention to protect the property and autonomy of U.S. investors and corporations, and by policies that have always placed "good business climate" above all other goals.

Beginning in the late 1940s, a new wave of investment washed over Latin America. Investment in banking, manufacturing, tourism, and service industries added to the already well-established markets in agriculture (mostly bananas and sugar), mining, and lumber, thus expanding the total volume of direct corporate investment in Latin America from $3 billion in 1946 to $8 billion by 1961. The formation of the Central American Common Market (CACM) in 1961 spurred yet another frenzy of multinational investment. The United Nations Economic Commission originally conceived the idea of the CACM as a way to promote development throughout Central America. Formulated to benefit the less developed economies of Honduras, Nicaragua, and Costa Rica, the CACM established a gradual process to eliminate trade barriers between these countries, thus expanding the markets for their local goods to the whole of Central America.

The notion of a planned market system linking these countries was abhorrent to U.S. elites, because it might compete with or even sometimes exclude U.S. trade and investment. By offering a $100 million grant to establish the CACM, the United States replaced the United Nations as the sponsor and ignored its mechanisms for regional planning. The remodeled CACM and the Agency for International Development (AID) provided the technical and financial assistance to multinational corporations to speed the flow of U.S. capital into Central America. Although the large U.S. corporations of Castle and Cooke, R. J. Reynolds, Gulf+Western, United Brands, and Hershey continued in agricultural production, most companies diversified their holdings into other areas such as food processing plants, plastic plants, cement plants, breweries, gambling casinos, and tourist hotels. Banks and financial institutions such as Citicorp, Bankamerica, and Chase Manhattan sprinkled branches through the region to make both private and public loans. By 1981, finance-related investment amounted to about 40 percent of all U.S. direct investment.

The rapid expansion of the fast food industry in the United States during the 1960s and 1970s opened a huge market for cheap Central American beef. Investments in livestock mushroomed when the Latin American Agribusiness Development Corporation-which included as members Goodyear Tire and Rubber Company, Borden Inc., Caterpillar Tractor Company, and Chase Manhattan Overseas Banking Corporation, among others-poured $75 million into livestock investment and deforestation in Guatemala, Costa Rica, Honduras, and Nicaragua. Seventy-five million dollars in loans from the World Bank, AID, and the Inter-American Development Bank underwrote beef production projects in Costa Rica alone. Beef exports from Central America increased from 13.7 thousand tons in 1960 to over 114 thousand tons in 1970. At the same time, beef consumption fell by 41 percent in Costa Rica, by 38 percent in E1 Salvador, and by 13 percent in Guatemala and Nicaragua, because the cattle being raised were reserved for export. A study published in 1981 concluded that one-third of the forest land in Costa Rica and 250 square miles of forest land each year in Nicaragua (until the Sandinistas took power in 1979) had been converted to pasture for cattle grazing for markets controlled by multinational corporations.


By the late 1980s, investment in Latin America accounted for 80 percent of all U.S. direct investment in Third World countries, with $5.3 billion of it in Central America. In the Caribbean Basin, where Rockefeller family corporations dominate investment in resorts, oil, and banking, $16.9 billion was invested in banking and finance. Sixty-seven of the top 100 U.S. corporations and one-third of the top 500 corporations did business in Central America, and over 500 firms provided services needed by Central American businesses.

The U.S. Development Model

Between 1950 and 1965, corporations invested $3.8 billion in Latin America and earned $11.3 billion in profits. This compares to a $8.1 billion investment in Europe that returned $5.5 billion in profits during the same period. The Department of Treasury has estimated that two dollars is returned to the United States for every one dollar that the United States puts into the World Bank. Ronald Reagan's 1981 Caribbean Basin Initiative made the business climate even better by eliminating tariff barriers, allowing U.S. manufacturers to treat the area as an extension of the American economic system while still paying Central American workers one-eighth of the average wage rates paid in the United States for the same work.

Numerous studies show that capital investment in Third World countries has led to income concentration favoring a few and a deterioration in the quality of life for the vast majority of citizens. Economists Irma Adelman and Cynthia Morris report a decline in per capita personal income of up to 60 percent in Third World countries experiencing rapid economic growth as a result of outside investment. Their findings suggest "no automatic or even likely trickling down of the benefits of economic growth to the poorest segments of society." A 1982 United Nations study reached the same conclusion: Although multinational corporate investment sometimes contributes to high rates of growth in "host" countries, the benefits flow "to domestic elites associated with foreign interests" and "basic needs of the population such as food, health, education, and housing" are ignored.

While corporations reap huge profits from their investments in the Caribbean and Latin America, the social and economic well-being of the masses can best be described as desperate. The annual income of 90 percent of Haitians is less than $ 120 and the poorest 20 percent of the people in E1 Salvador earn $46 annually. Malnutrition, which affects over half the Central American population, causes mental retardation in 80 percent of children born in rural Honduras. Dysentery, tuberculosis, and parasites thrive in the crowded conditions of slums and squatter settlements of Latin American cities.

Throughout Latin America, growth has occurred but development has not. For example, in Brazil, whose growth rate in the 1960s and 1970s was labeled an "economic miracle," 52 percent of the population was considered malnourished in 1970. Infant mortality grew by 45 percent between 1960 and 1973.29 In Mexico, 1 percent of workers earn 66 percent of the nation's total income; the majority of workers are unable to earn enough to meet their most basic needs. In the 1980s, declining per capita income has contributed to the further deterioration of an already desperate situation. Two development economists have advised that the "only hope of significantly improving the income distribution in these countries lies in a transformation of the institutional setting." This is precisely what U.S. foreign policy is designed to prevent.

The intimate connection between politics and the climate for U.S. corporate investment was noted in 1972 by David Rockefeller, when he observed during his Latin American tour that "often the more democratic the country, the more hostile it is to foreign investment." In the same year, Frank Zingaro of Caltex called attention to the opposite side of the same coin when he noted that in the Philippines, the imposition of "Martial law has significantly improved the business climate."

The important features of a "good" business climate are: a tractable, low-paid labor force; an absence of worker-controlled unions; weak or nonexistent environmental protection laws; lax health and safety regulations in the workplace; tax concessions and government subsidies for business; the use of public money to provide the infrastructure necessary for the functioning of business; and laws permitting tax-free repatriation of corporate profits back to the United States. Because political revolutions commonly arise in reaction to such a system of exploitation, the control of the political system is inseparable from a "good" business climate. One of America's largest corporations, Gulf+Western, once boasted that it was a "model for American companies in Latin America." A company spokesman told the Committee on Foreign Affairs in 1982 that "our experience has shown that free enterprise can work for the benefit of the developing world." Indeed, Gulf+Western's experience was extensive and it had been able to fine-tune its model for development, especially in the Dominican Republic.

Gulf+Western came to the Dominican Republic in 1966, two years after an invasion by U.S. Marines. Aided by major tax concessions granted by President Balaguer to foreign investors, economic penetration of the country quickly followed U.S. military and political intervention. With loans from Chase Manhattan Bank, Gulf+Western gained a foothold in the island's economy with its purchase of the South Puerto Rico Sugar Company. By 1976, its investment had grown to $300 million in sugar, meat, citrus, tourism, and tobacco. Other transnational corporations also operated in the Dominican Republic, but Gulf+Western dominated the economy as the country's largest landowner, employer, and exporter. Because the yearly revenues of Gulf+Western were greater than the Dominican Republic's Gross National Product, it could accurately be called "a state within a state." 5

Immediately on entering the country, Gulf+Western broke the sugarcane workers' union, Sindicato Unido. Denouncing the union as communist controlled, the corporation fired the entire union leadership, annulled its contracts, and sent in police to occupy the plant while the American Institute for Free Labor Development (an agency financed in part by the CIA) formed a new union that obtained immediate acceptance from the Dominican president. The possibility of free unions on Gulf's sugar plantations disappeared (along with dozens of labor leaders), with the result that of the country's 20,000 cane cutters, only one out of ten is Dominican. Most of the cane workers are Haitian immigrants paid $1.50 to $3.00 a day to do what Dominicans call "slave work."

Gulf+Western set up the first of the industrial free zones that thrive in the Dominican Republic. Often called "runaway shops" (because businesses relocate there from U.S. communities) or "export platforms," such zones offer a low-wage labor force, government subsidies, and freedom from taxes and environmental regulations. Unions are not permitted in these zones, and thus in the mid- 1980s 22,000 workers earned an average of 65 cents per hour working in factories surrounded by barbed wire and security guards. Dominican Law 299 grants corporations a 100 percent exemption from Dominican taxes and also provides them a 70 percent government subsidy of plant construction costs to set up business in the zones. Bestform, Esmark, Milton Bradley, Ideal Toys, Fisher Price, and North American Phillips are among the U.S. corporations that take advantage of the free zones to assemble and manufacture their products for export back to the United States.

Because investment benefits a tiny upper class in the Dominican Republic the living conditions of Dominicans are grim. In 1985, 90 percent of Dominicans suffered from malnutrition and 20 percent lived in "absolute poverty." Illiteracy stood at 54 percent, with 1 million school-age children not attending school. The Dominican Bishops' Conference issued a report stating that 63 percent of Dominicans received an income of less than $58 a month and that within the country 400,000 Haitians worked under a system of "virtual slavery."

Advertisements in U.S. newspapers have long extolled the benefits of investing in a beautiful Caribbean Basin atmosphere free of any government regulation. A nineteen-page supplement designed to lure investors to the Dominican Republic appeared in the New York Times on January 28,1973. A photograph showed President Joaquin Balaguer and Teobaldo Rosell, General Director of Gulf+Western, locked in an embrace above the caption "cooperation between government and industry." The supplement promoted the La Roomona Free Zone as a haven for investors. Tax breaks were featured under a headline that read, "Tourist Law Offers Incentives":

Foreigners enjoy the full protection of the law (and indeed the Dominican Republic has never in all its history confiscated any foreign owned property). The law extends even to apartments, hotels, condominiums, discotheques.... Benefits include 100 percent freedom from income taxes for 10 years with provisions for a possible additional five years...exemptions on construction formation of the corporation, licenses, municipal taxes, tariff duties, and import duties on equipment, furnishings and anything else necessary for the creation of business...even duty-free liquor-an unusual measure.

Another headline urged, "Industrialists Dream of Chances Like These":

...both government and labor organizations traditionally combine to cooperate with capital in attracting and keeping industry profitable....The federal minimum in most categories of skilled and semi-skilled labor is 25 cents per hour.

With the help of repressive governments, corporations in countries within the orbit of the Monroe Doctrine operate using the Gulf+Western model (though Gulf+Western sold its Dominican holdings in 1984, when sugar prices fell). In El Salvador, women at the Maidenform assembly plant earn $4 a day stitching bra cups to straps. Bras are among El Salvador's ten leading nonagricultural exports to the United States. In Haiti, with its "tradition of respect for private property and foreign ownership," women working for Rawlings Sporting Goods for $2.70 a day sew all of the baseballs used by the two major leagues in the United States. With over $60 million in annual sales from Haiti, Rawlings is the third largest corporation operating in that country.

When Democracy Is Unacceptable

Democratically elected governments founded on principles of social justice, land reform, and national independence have sometimes emerged in the countries encompassed by the Monroe Doctrine. When that has happened, the U.S. elites have consistently decided that democracy is inimical to their own interests. The Dominican Republic, Guatemala, and Chile provide three examples of how U.S. elites regard popular democracy.

In 1962, with 59 percent of the popular vote, Juan Bosch won the Dominican Republic's first free election ever held. Only seven months later, he was overthrown by military officers and forced into exile. In 1965, however, with support from the poor, the urban working classes, and the professional middle classes, Bosch was again elected, and he announced plans to restore the 1963 constitution. The United States intervened by sending 23,000 Marines to topple his government. An estimated 2,500 civilians were killed in the weeks following the invasion. The Marines remained in the Dominican Republic through June 1, 1966, "pacifying" the population while the U.S. government organized elections to legitimate a government that would meet with its approval.

President Lyndon Johnson initially justified the invasion to the American public as a rescue operation. Unless the United States intervened, he claimed, "American blood will run in the streets." Other justifications soon crept into the president's speeches. On April 30, 1965, he stated that the invasion was undertaken "to preserve law and order." By May 1, he was explaining, "Our goal in the Dominican Republic...is that the people of that country must be permitted freely to choose the path of political democracy, social justice, and economic progress." On the following day, he argued, "Communist leaders, many of them trained in Cuba, seeing a chance to increase disorder, to gain a foothold, joined the revolution. They took increasing control. And what began as a popular democratic revolution...very shortly moved and was taken over and really seized and placed into the hands of Communist conspirators."

From the day he was elected, U.S. foreign policy elites regarded Bosch as anathema. Like other parties on the democratic left struggling to exist in Latin America, Bosch's Dominican Revolutionary Party sought to gain both economic and political independence from the United States. Bosch was opposed by the estimated 7 percent of the population that made up the privileged classes of Dominican society.

His support came mainly from the 93 percent of Dominicans who, collectively, were 70 percent illiterate and 30 percent unemployed, and who received an average annual income of less than $150.49 Bosch promised at his 1962 inauguration: "We are changing our image-the moral, political and economic image of the country....We are changing it into a revolutionary democracy."

Though the seven months of his presidency was too brief to realize extensive social reforms, Bosch made significant moves toward establishing economic independence from the United States and restructuring Dominican society. Although he did not nationalize corporate holdings, Bosch placed some restrictions on property owned by foreigners, forced foreign investors to share profits with local firms and workers, and imposed a tax on sugar profits. To break the stranglehold that the United States had imposed on the Dominican economy, Bosch traveled to Europe to secure a $150 million loan from a bank in Zurich. Under the land reform program guaranteed by the 1963 constitution, 1,400 families were given state-owned lands. Schools were established to educate the peasants in the organization and management of farm cooperatives. To finance his social reforms, Bosch cut the salaries of the military and the bureaucracy in half, including his own, which he reduced from $2,400 a month to $1,500 a month.

With the reestablishment of a right-wing military government after the 1965 coups, foreign investment, which had slowed to a trickle, once again flowed. During the military junta's first few months, $175 million in new foreign investment flooded in, two contracts for U.S. oil refineries were signed, six private U.S. banks made loans totaling $30 million, and the World Bank granted a $1.7 million loan for a hydroelectric study.

Joaquin Balaguer was elected president in U.S.-sponsored elections held in 1966. From the moment President Johnson reacted to the CIA's recommendation that Balaguer be elected president by urging, "Get this guy in office down there!" the outcome of the Dominican election was assured. It is hardly surprising that the U.S.-backed candidate won in a country occupied by U.S. troops, where an estimated 300 members of the opposition party were assassinated during the election campaign. While the U.S. media applauded the triumph of Dominican democracy, a fresh reign of terror was unleashed on the Dominican people. With financial backing from the United States, death squads targeted political dissidents for torture and murder. By 1971, over 1,000 people had been killed.

All Latin American governments face the reality that the U.S. government stands ready to unleash a reign of terror if governments are installed that seek independence from international corporations and U.S. imperial ambitions. This lesson was brought home to Guatemala in unmistakable terms in 1954, and to Chile in 1973.

In 1951, Jacobo Arbenz Guzman became president of Guatemala through free elections. Arbenz desired to implement reforms that would ameliorate desperate social conditions in his country. Following United Nations recommendations, he expropriated lands that were held by the United Fruit Company, offering to pay what United Fruit had claimed the lands were worth when it filed its taxes. Though Arbenz sought to enact reforms within a capitalist framework, he aimed to break the economic domination that the United States had asserted over his country since the early twentieth century.

U.S. foreign policy elites went into a frenzy, labeling Guatemala as a "beachhead of international communism," "a threat to the oil wells of Texas," and a "danger to the Panama Canal." In 1954, the Arbenz government was overthrown by a mercenary army trained by the CIA on a United Fruit plantation in Honduras. U.S. pilots bombed Guatemala City as the mercenaries quickly seized power. A new president chosen by U.S. foreign policy personnel was flown to Guatemala in an embassy plane. He became the first of a line of dictators that crushed Guatemalan resistance to U.S. domination. Between 1954 and 1982, 90,000 persons were killed in Guatemala.

As part of the platform that he was elected on in 1971, Salvador Allende Gossens nationalized Chile's major industries in an attempt to use the nation's resources for internal development. Allende's program worked-unemployment dropped and salaries rose for the masses. For U.S. corporations, that was unacceptable. In October of 1971, executives of ITT, Anaconda, Ford, and other U.S. corporations were personally assured by Secretary of State William Rogers that "the Nixon Administration is a business administration. Its mission is to protect business." A three-pronged strategy was developed to destabilize the Allende government, which involved strangling the Chilean economy by eliminating loans and trade agreements, strengthening the Chilean military, and exacerbating social tensions by means of CIA covert activities. In 1973, Allende was killed in a coup d'etat coordinated by U.S. military and CIA personnel. In the year following the coup, more than 30,000 people were assassinated by Chile's government. This heavy dose of terrorism was an omen of things to come. For more than sixteen years, Chile was ruled by one of Latin America's most repressive military regimes, presided over by General Augusto Pinochet. He finally was replaced by a civilian president in an election held on December 14, 1989, though Chile's constitution continues to guarantee the independence of the armed forces from civilian rule. Before relinquishing the presidency, Pinochet indicated that any attempt to investigate the years of human rights violations would trigger a military coup.

A Disturbing Image

By the 1980s, there were signs of a diminishing effectiveness in campaigns to engineer consent in support of foreign policy goals. The Vietnam Syndrome lingers in expressed public opposition to the use of American troops in any international conflict that might arise in the 1980s. ABC and Washington Post polls conducted in 1982 revealed a 79 percent to 18 percent opposition to sending U.S. troops to aid the Salvadoran government. Sixty-five percent of those polled said they perceived the war to be "much like the war in Vietnam," and a 51 percent majority said "they would support young men who refused to go to E1 Salvador if the United States were drafting soldiers and sending them to fight there."

The American public's current unwillingness to support direct intervention in Third World affairs has not changed the U.S. policy commitment to maintain a system of client states by force and terror. During the Reagan administration alone, at least 150,000 Central Americans died as a result of U.S.-sponsored terrorist forces. In E1 Salvador over 50,000 people have died since the mid- 1950s, and in Guatemala almost 100,000 people have been killed by government forces. In Nicaragua the number of civilians killed by contra attacks during the Reagan administration totaled 30,000.

By the end of 1988, it appeared that the contra war had failed in its objective of overthrowing the Sandinistas. U.S. officials expressed fear that "its failure is going to have long-term costs for us. In E1 Salvador, Haiti, Honduras, Guatemala, Chile, and countries outside the hemisphere, U.S.-sponsored repression feeds revolutionary fires. Perhaps U.S. elites fear that mass-based democracies in these countries might set a bad example for American citizens. For elites, it is essential that democracy invests them with legitimacy; and it is equally critical that democracy not be captured by populist movements. Elites "sponsor" elections within the U.S. in a manner similar to the way they "sponsor" them abroad: to legitimate rule by the rich and well born and to preserve a system of class privilege. If elections are used for any other purpose, they are labeled as fraudulent and heavy doses of terrorism are frequently applied to nullify their results. Elites have not employed these tactics within the United States-that is, they have not overturned democratic institutions and processes, as they have so often done elsewhere. They have not found it necessary to do so because elections within their own country have never escaped their control.

The Democratic Facade

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