Country Club PERCs

Political Economy Researchers Preach Laissez Faire

illustration by Doug Potter

For two days, in a plush conference room just down the hallway from Jim Bob's bar at the Barton Creek Resort, representatives from the Political Economy Research Center (PERC) in Bozeman, Montana, extolled the virtue of market-based solutions to environmental problems. For example, in areas with water shortages, PERC suggests that there be a market for water and water rights. Those who can pay more for the water will use it in the most efficient manner. The same holds true, they insist, for other environmental issues, including endangered species and parks. In short, explained PERC executive director Terry Anderson, "free market environmentalism is privatization wherever possible." The solution, he says, is to codify property rights that can be traded, bought, and sold. And make whoever wants to use the park, see the endangered species, or drink the water, pay for their privilege.

But the folks from PERC were quick to acknowledge that market-based solutions don't always work. That was particularly interesting given that the conference, held on Jan. 31 and Feb. 1, was conducted at the Barton Creek Resort, which lies at the geographic and political epicenter of the debate over land use in the Barton Springs watershed. The resort is surrounded by land owned by New Orleans-based Freeport-McMoRan, which has been battling the city for years over the development of their property. Jim Bob's, which was used during the conference for some small group discussions, is named for Freeport CEO Jim Bob Moffett. (PERC officials said they were told during the planning of the conference that the locale would cause some controversy, but they said there wasn't another place in Austin where they could hold the event.)

Market incentives may work when selling water, but protecting that same water from pollution is another matter. Richard Stroup, a senior associate at PERC, was asked if there are market incentives that can convince companies not to pollute. The answer: There aren't any. "You just have to say stop," said Stroup. So preventing pollution from a power plant, oil well, or mining operation cannot be done any other way, he explained, except through the police powers granted to government.

Over a fine lunch, in a dining room overlooking the hyper-green golf courses of Barton Creek Country Club, Anderson was asked what can be done to protect Barton Creek, Barton Springs, and the Barton Springs Salamander. Are there market incentives to save those resources from damage caused by development in the Barton Springs watershed? Once again, the short answer was: No.

Using PERC's terminology, then, the clear, clean water in Barton Springs, and the salamander that lives there, are property rights owned by the citizens of Austin. And the only way to protect that property right from contamination by upstream residents is to require local, state and federal governments to use their authority to prevent pollution from occurring. We don't have to ask nicely. In fact, we have to demand, repeatedly, in a rather loud voice, that they may not, under any circumstances, pollute our water.

The PERC conference was attended by about 25 journalists from central and south Texas. And aside from a few rather odd pronouncements from Stroup, including his belief that companies should not have to reveal the pollutants they discharge from their plants -- it's an issue of privacy, he said -- the conference was interesting. To read essays such as "Environmental Protection: The New Socialism" and "Community-Run Fisheries: Avoiding the Tragedy of the Commons," visit PERC's web site:

Rough times for OPIC

It's been a tough 18 months for the Overseas Private Investment Corporation (OPIC). They got hammered by Freeport-McMoRan after cancelling a $100 million political risk insurance policy they carried on the company's vast Grasberg gold copper and silver mine in Indonesia. Now the once-obscure federal agency finds itself the target of an odd alliance between environmentalists and budget hawks. The agency is also being scrutinized by Congressional investigators who are looking into fundraising activities by the Clinton Administration.

In the wake of cuts made last year to social welfare programs, OPIC and other federal programs that benefit corporate interests are a politically appealing target. And a coalition that runs across the political spectrum -- from the conservative Competitive Enterprise Institute to the Friends of the Earth -- are claiming that OPIC is one of a dozen programs ranging from energy research to highway construction that will cost federal taxpayers more than $11 billion over the next five years. Axing OPIC alone, they claim, will save taxpayers $281 million over that time period.

Launched in 1971, OPIC provides loans, loan guarantees, and political risk insurance to American companies operating in 140 countries around the world. Until recently the agency, which employs 180 people, enjoyed relative obscurity. But two years ago, environmentalists began criticizing OPIC for its financial support of projects that include logging in the forests of eastern Russia, large-scale fishing ventures in the North Pacific, and gold mining in Indonesia and South America.

Last fall, when OPIC submitted a five-year reauthorization package to Congress, environmental groups teamed with fiscal conservatives, including Rep. John Kasich (R-Ohio), chairman of the powerful House Budget Committee, to oppose the agency's measure. OPIC ended up getting reauthorized for just one year, and it must push another reauthorization bill through Congress by September 30 to continue operating.

Jim Sheehan, a research associate at the Competitive Enterprise Institute, a conservative Washington-based think tank, says American taxpayers shouldn't help fund corporate ventures. "These corporations are large and profitable," he said. "They ought to be able to get credit on the private market."

For their part, environmentalists believe OPIC has been too secretive about its activities. Doug Norlen of the Pacific Environment and Resources Center in Washington, DC, said, "If OPIC can't operate in an open, mature manner, then we ought to be questioning their basic existence."

But eliminating OPIC may not solve anything. Critics of the environmentalists say that if OPIC is dissolved, American environmental groups will have limited ability to monitor American ventures overseas. And instead of dealing with OPIC, companies will go to similar organizations in other countries, like Australia's Export Finance and Insurance Corporation or Canada's Export Development Corporation. Or worse, companies will get their insurance and financing from the private sector, which has no environmental standards at all. A better alternative: harmonize environmental standards among bilateral and multinational lending agencies. That way, the World Bank, OPIC, and other lending institutions would follow the same environmental guidelines when insuring or financing a project.

Congressional investigators are currently scrutinizing OPIC's ties to James Riady of the Lippo Group -- which is in the spotlight after giving big donations to the Clinton administration -- and Freeport. For instance, investigators are looking at OPIC's decision to reinstate Freeport's insurance in April of 1996. OPIC had apparently prevailed over Freeport in arbitration, and the company was ready to concede defeat. But according to documents obtained by the Chronicle under the Freedom of Information Act, OPIC president Ruth Harkin sent a hand-written note to Freeport CEO Jim Bob Moffett on April 8 that read, "I'd like to meet with you once again to see if we might find some alternate solution." Eleven days later, the two announced that OPIC was reinstating Freeport's insurance. Why?

Well, Indonesia happens to be the hottest gold play in the world right now. The recent discovery of the Busang deposit on the island of Borneo (see "Naked City"), could translate into at least $25 billion worth of gold, and companies from around the world are flocking to Indonesia. Apparently, Indonesian dictator Suharto pressured the Clinton Administration to reinstate Freeport's insurance because it could have caused difficulties for other miners moving into Indonesia.

According to sources close to OPIC, after the agency reinstated Freeport's insurance, Harkin bragged that she had convinced Moffett to contribute $100,000 to the Democratic National Committee. According to Federal Election Commission documents, Freeport-McMoRan gave the DNC $40,000 on August 26. On September 6, the wives of Freeport's top executives, Chief Financial Officer Richard Adkerson, vice chairman Rene Latiolais, and chief investment officer Charles Goodyear, wrote checks to the DNC totalling $35,000. Four days later, Moffett's wife Louise wrote a check to the DNC for $2,500. That's $77,500 of the $100,000.

And here's another twist: Sources in Washington say that Congressional investigators are looking into Clinton's decision to designate a large national monument in southern Utah. The area contains vast amounts of coal that would have competed with Indonesian coal from the island of Borneo. Riady's Lippo Group would have lost money if the Utah coal came on line. Stay tuned. This story keeps getting bigger.

Free booklets on rainwater harvesting. A spiffy new book on rainwater harvesting can be had for the asking from the Texas Water Development Board. The 62-page book offers all kinds of info on rainwater catchments, from tank tips to rainfall patterns. To get one, write to: Conservation Section, TWDB, Box 13231, Austin, 78711-3231. You can also get a video on rainwater harvesting by contacting the Center for Maximum Potential Building Systems, which co-produced the book with TWDB, by calling 928-4786.

A note to readers: Bold and uncensored, The Austin Chronicle has been Austin’s independent news source for almost 40 years, expressing the community’s political and environmental concerns and supporting its active cultural scene. Now more than ever, we need your support to continue supplying Austin with independent, free press. If real news is important to you, please consider making a donation of $5, $10 or whatever you can afford, to help keep our journalism on stands.

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