Wednesday, June 25, 2008

Business Management: Disaster Capitalism

Levee Maintenance as a Real Estate and Redistricting Strategy
Finding Business Opportunities in "Natural" Disasters 34

“Okay, class. Let’s get started. This is Management 102, Principles of ‘Levee Maintenance as a Real Estate and Futures Strategy.’ I assume that all of you were in the Management 101 section last semester ‘Levee Maintenance as a Real Estate and Political Redistricting Strategy.’ This second section builds on the redistricting successes on New Orleans with an enlarged study of the implications of managed levee maintenance in the mid-west.”

“In the first semester we studied the opportunities for political redistricting and consolidation made possible by various disasters, perhaps most notably, Hurricane Katrina. The relocation of large numbers of minority Democrats from the New Orleans political landscape has rehabilitated that area into a much more favorable electoral profile based on the higher income Republican voters whose real estate assets, generally located on higher ground, retained their full pre-storm value through the storm surge flooding.”

“As we hinted early on during this opportune disaster, phase two of Katrina is beginning to unfold literally as we speak here today. Capital opportunities to acquire abandoned real estate are opening up daily. Other properties, those with ownership now clouded by the financial collapse of the previous owners, are now on the market at extremely discounted prices, making them very attractive real estate acquisitions.”

“To recap semester one’s presentation, those with sufficient capital resources to profit from the economic collapse of the previous property owners will now find themselves able to expand their property portfolios with greatly discounted real estate prices in a community environment controlled by conservative forces willing to limit what had become, essentially, an out-of-control welfare state. Semester one’s exploration of disaster capitalism is a necessary prerequisite to semester two’s analysis of the many faceted opportunities made possible by similar levee failures in the midwest.”

“The opportunity arising from the flooding in Iowa and Missouri indicates a marked difference in preparation from the more simple case we saw in New Orleans. In the Katrina case, capital was able to enjoy its advantage as an enduring resource that, so to speak, either escaped or outlasted the destructive aspect of the disaster. Of course, the value of the discounted real estate purchases made possible by the misfortune of the previous owners was enhanced by the harvesting of federal resources to rehabilitate the levees. Naturally, a similar ‘extra’ windfall will become available to the opportunists working in the midwest.”

“However, the Iowa and Missouri business model maximizes itself in a number of other, quite notable ways, all ultimately falling to the advantage of its planners. Contrary to the Louisiana model where capital need to be already in place when the disaster opportunity developed, the Iowa and Missouri model actually generated its own venture capital as an intrinsic element of the disaster when considered as a whole picture.”

“So, let’s examine exactly what was the design of this brilliant disaster investment mechanism that functioned so profitably in the case of the midwestern flooding. A seemingly coincidental structure of economic conditions had been carefully groomed prior to the actual disaster opportunity to make its outcome into a ‘perfect storm.’ I think it is safe to say that all of you as students would have to agree that it was, in fact, one of the most outstanding market manipulations since the days of the Robber Barons.”

“What were these exceptional conditions which enabled our disaster opportunists to make such an astounding profit? Referring to your class handout, you can follow the items on the list provided.”

First, of course, was the necessity of having in place unmaintained levees. Unlike other, more provocative advantages, the Federal oversight failure of this particular feature was neither very visible to the public nor representative of any sort of priority, even from those who would be most effected by its failure. Those substandard levees, literally waiting to fail, can be considered a ‘feed stock resource’ in the grander scheme of things. They were literally just sitting there quietly waiting to become a magnificent profit maker in the right setting.

“There was some legislative influence required to sustain these inadequate levees as an unavoidable consequence of rational spending policy with respect to infrastructure. Other than that minor expense, knee jerk neo-con economics had reduced the levee maintenance funding to such a low level that little else was needed.

Second, there was an additional passive resource available even before the flooding. The largest corporate agricultural concerns already held huge corn stockpiles from their routine business operations. Adding to this potential resource, the financial side of these same agribusiness giants had a higher than usual position in the commodity futures thanks largely to the growing ethanol industry, world wide food prices in general and as a hedge against the constantly devaluing dollar.”

Any opportunity to increase the tangible value of these resources would amount to an immediate profit for these corporations. Because, unlike the Katrina opportunity, the midwestern flooding was a disaster arriving much more gradually (although quite predictably), the financial resources of the large corporations could be directed at, for example, placing corn futures in a synchronous profit posture at the exact same time the water began to rise.”

Third, thanks largely to the beginning effects of Global Warming, UN and other purchasers of famine relief commodities had already driven prices very high as they attempted to counter drought impacts in a large number of global populations. In this, a valuable asset of previous legislative influence, wisely purchased in the Congress by agribusiness lobbyists several decades ago, required that American contributions to such a relief effort be purchased at prevailing prices on the domestic market. Since that time global starvation has consistently remained a very positive influence on domestic grain commodity futures possibilities.”

Fourth, the result of aggressive corporate agricultural competition in the market had already left many of the farms destined to be inundated at the very brink of failure even without the disaster. The economic impact of the flooding disaster was very correctly seen as an opportunity to apply the large capital advantage gained from participating in the grain futures market directly to the purchase of these discounted real estate assets which became available as the previous owners failed.”

“Once again, as was the case in the post-disaster real estate harvest following Katrina, any interested parties with sufficient financial resources encountered an opportunity to purchase real estate at a discounted price, an ‘extra’ benefit of the initial disaster.”

Fifth, once the disaster had been realized by the population, the Congress could be easily persuaded to spend significant Federal resources to rebuild the levees, possibly even adequately, but in any event, far more adequately than before. This reconstruction and improvement, all financed at Federal expense, began to raise agricultural land values even before the water had receded. As the new owners of this real estate, the corporate profit was further enhanced.”

“And, there we have it. By capitalizing on these five well defined areas of opportunity, all made possible by prevailing conditions and the flood disaster itself, corporate agricultural interests once again were able to maximize the financial opportunities of what we call ‘disaster capitalism.’ The obvious expertise of the current administration in orchestrating such subtle advantages for their corporate sponsors speaks very highly to their business acumen in an unregulated or Federally irresponsible disaster opportunity.”

“There are domestic voices which are quite critical of the ‘meat handed’ approach this same government has taken with respect to energy opportunities. However, we must differentiate manipulations in places such as Iraq in favor of oil interests from the more direct disaster opportunities we have been discussing. The Iraqi adventure required the resources to create the opportunity for a disaster opportunity by first creating the disaster. Although very profitable and productive for the oil interests, these examples from the midwest show the opportunities inherent in other, more spontaneous disasters.”

“The assignment for tonight is to describe a potential disaster opportunity and, applying these same principles, formulate a means to profit from it. Points will be given for extensive use of premeditated Federal infrastructure neglect, and points will be deducted for humanitarian considerations which adversely effect the net capital profits. Confusing or misleading media management will be a plus.”

“Class dismissed.”

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