Felix Rohatyn’s PPP Swindles:
The Mussolini Model for Infrastructureby Marcia Merry Baker
“In early November, the latest big-deal PPP (public-private partnership) in the United States was announced: Morgan Stanley won the bid for a 99-year lease, with full fee-collection rights, on four Chicago municipal parking garages, in exchange for an up-front payment of $563 million to the city. In Pennsylvania, home to the nation’s first turnpike system, Gov. Ed Rendell (D) and others are floating the idea of gaining $10-30 billion by granting a private concession to their public highways. New Jersey and Delaware have similar proposals. On Nov. 15, Indiana Gov. Mitch Daniels (R) was given an award by the National Council for Public Private Partnerships, for his leadership in selling off state assets, such as the $3.85 billion sale of a 75-year private lease for the northern Indiana toll road, in June 2006.
These recent events headline the fact that a swarm of financial deal-makers are right now fanned out across the United States, making the pitch to local and state officials, and especially sub-agencies of all kinds (transportation, water, museums, parks, and social services facilities), that the only salvation for revenue-short governments, is to sell off public works to private interests. The momentum for this campaign, comes from the fact that the financial system is in an end-phase of speculative blowout. Powerful interests are in a search-and-grab mode for ready loot and political control.
Why would any lawmaker dare to fall for such an obvious flim-flam as the “PPP”? Apart from corruption and stupidity—Sen. George Allen (R-Va.) went so far as to create a Congressional PPP Caucus in 2005—most officeholders, like ordinary citizens, have not thought through how an economy works. They have not conceptualized that government has power to create credit, build infrastructure, foster economic activity, and create a tax-revenue base in the process.
Plus, most Boomer-age leaders are not even aware of the FDR precedents for how to handle a breakdown crisis. So they are vulnerable to the PPP pitch, that “private sourcing is the only way you can get the funds to have your infrastructure and keep your government functions going.”
In direct opposition, the LaRouche Political Action Committee is circulating draft Federal legislation for an economic recovery (See accompanying article). As for succumbing to the inducement to sell public assets on the PPP flea market, Lyndon LaRouche reminds officeholders: “These projects were built with public funds. They can not be privatized. And anyone who does it, is going to be accused of theft….”
In reviewing the Midwest highway sell-offs this Summer, he added, “No one should pay tolls on privatized public highways. They shouldn’t pay them. They should defy the tolls! This was paid for by the public. It’s public property. You can not sell public property in this way. it is immoral. It is illegal. No one should pay a toll on a privatized public highway.”
Several cases of such theft show up in the last 20 years of PPP episodes: especially, the 1990s “highway robbery” in Mexico; the current Cross City Tunnel scandal in Sydney, Australia; and the Dulles-Greenway toll road in Northern Virginia. Nonetheless, the United States itself is now a focus of financial predators, since it has been slower to go the PPP route than Europe, Australia, New Zealand, and certain other locations. As of Summer 2006, about half the 50 states have changed their laws, to permit private sell-offs of public assets. The rush is on.
Rohatyn: Chief Thief
The chief thief is Felix Rohatyn, longtime Lazard, and now Lehman Brothers banker. He is personally culpable for deindustrialization and government-asset looting schemes, while at the same time, he presents himself as “Mr. Infrastructure.” Heading up a sub-group of the Center for Strategic and International Studies, called the Commission on Public Infrastructure, founded in 2004, Rohatyn works a circuit of mayors and officials, proclaiming the glories of infrastructure, but stipulating that the only means governments have to finance projects must come from new, privatized arrangements—i.e., private investments and the sine qua non: private control.
Rohatyn wrote the book on PPPs—the infamous case of the Municipal Assistance Corporation in New York City. In 1975, Big MAC, as it was called, was authored by Rohatyn, on behalf of globalized private banking interests, and rammed through the City Council and Albany legislature over June to September, under threat of the City going bankrupt. The gist of the PPP was this: In the name of dealing with the City budget and revenue problems (caused by the national economic downshift to de-industrialization), Big MAC arranged new funding from bond sales, in exchange for the government agreeing to turn over all decisions on infrastructure and budget expenditures to a Big MAC private Financial Control Board. The Board immediately drastically downsized infrastructure of all kinds: hospitals, fire houses, water maintenance, etc., and remained in charge for years.
On March 27 of this year, Rohatyn announced a national Big MAC-style plan for U.S. infrastructure, at a National Press Club briefing for his Public Infrastructure Commission, which included his co-chairman, Warren Rudman.
On April 25-26, Rohatyn again promoted this at an “Infrastructure Crisis Conference” held in Washington, D.C., by the American Society of Civil Engineers. The ASCE News (May, Vol. 31, No. 5) wrote up his appearance with extreme understatement: “As chairman of the Municipal Assistance Corporation in the late 1970s, Rohatyn managed the negotiations that enabled New York City to weather a financial crisis. In his remarks he described a legislative proposal he has been developing that would create a national investment corporation for infrastructure. ‘We can certainly finance it if we have the political will and it’s properly constructed,’ said Rohatyn, who is the president of Rohatyn Associates, LLC, of New York City….”
In party politics terms, Rohatyn pushes his anti-nation plans on the Democratic side, and his Republican counterpart is George Shultz, former Secretary of State. For example, the two of them appeared together in 2004, at an Oct. 9 conference on, “The Privatization of National Security,” held at Middlebury College, and sponsored by Shultz’s Princeton Project on National Security. The two plugged the desirability of privatizing government defense functions. Their common trait is that they are both against the very system of sovereign nation-states. They are the “Economic Hit Men” of the popular book of that title, by John Perkins (Confessions of an Economic Hit Man).
With the newly elected Congress, and similar shifts on the state level, the battle is now joined for how citizens and their representatives will act to reject the Rohatyn-Shultz menace, and instead act to preserve government sovereignty, by facing the economic-breakdown crisis head-on, and taking emergency measures to restore economic functioning and needed infrastructure growth.
This very issue showed up in the November Ohio gubernatorial race, for example. The hands-down winner, Ted Strickland (D), trounced incumbent Ken Blackwell (R)—not simply from voter revulsion at Bush-Cheney Republican Party local corruption—but expressly on the issue of Strickland opposing Blackwell’s call for selling off the Ohio Turnpike. Blackwell spoke of gaining billions for the state budget. Strickland likened it to, “selling your birthright for a bowl of potage.” There are others sounding the alarm.
We here summarize the scope of the PPP assault against nations, and give highlights of the opposition; plus provide a few of the most spectacular scandals. First however, look briefly at the nature of the threat and those behind it.
Mussolini Model
In essence, the PPP recourse is the “Mussolini Model” for public works. The 1920s-30s “Il Duce” Benito Mussolini period was characterized by the most extreme privateering of bridges, ports, housing, and every kind of public works. Today’s form is simply cloaked in such code phrases as, “PPPs,” PPIs (Public Private Initiatives), or other jargon terms, put into use because “privatization” got such a bad name since the 1980s Margaret Thatcher period. The very latest lingo, is “P3s.”
The major players in the buy-out schemes for government infrastructure internationally, are part of a small circle of banks, funds, and principal construction operations, including Morgan Stanley, Goldman Sachs, Lehman Bros., Lazard, and especially the leader of the pack, Macquarie Bank/Macquarie Infrastructure Group, based in Australia, but originating in London. Macquarie often partners with another big player, the Cintra Concesiones de Infraestructuras de Transporte S.A., of Spain. Macquarie/Cintra did this year’s Indiana Toll Road PPP deal; also the 2005 Chicago Skyway; and Macquarie now has the Dulles Greenway in Northern Virginia, the third PPP owner in 11 years of the 15-mile private tollway.
In turn, the pedigree of this network goes back continuously, to some of the very same financial circles involved in the 1930s fascist “corporatist” economics in Europe behind Hitler and Mussolini, called at the time, “synarchist.”
The asset-grab deals themselves, besides having different names, vary in particulars. But they are all thefts. The quickest rip-off is for the PPP outfit to gain the rights to fees and tolls from already-built infrastructure such as highways, bridges, water systems, and the like. These PPPs are politely praised as “mature” investment opportunities. Example: the sell-off of the Chicago Skyway to Macquarie/Cintra, finalized in January 2005, was for a 99-year lease, in exchange for $1.82 billion. Goldman Sachs cadged $9 million for advising on the deal.”
