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Prison Labor Exposed: From Starbucks to Microsoft - A sampling of what US prisoners make & for whom
May 21, 2013
Tens of thousands of US inmates are paid from pennies to minimum wage—minus fines and victim compensation—for everything from grunt work to firefighting to specialized labor.
The breaded chicken patty your child bites into at school may have been made by a worker earning twenty cents an hour, not in a faraway country, but by a member of an invisible American workforce: prisoners. At the UnionCorrectional Facility, a maximum security prison in Florida, inmates from a nearby lower-security prison manufacture tons of processed beef, chicken and pork for Prison Rehabilitative Industries and Diversified Enterprises (PRIDE), a privately held non-profit corporation that operates the state’s forty-one work programs. In addition to processed food, PRIDE’s website reveals an array of products for sale through contracts with private companies, from eyeglasses to office furniture, to be shipped from a distribution center in Florida to businesses across the US. PRIDE boasts that its work programs are “designed to provide vocational training, to improve prison security, to reduce the cost of state government, and to promote the rehabilitation of the state inmates.”
And Each month, California inmates process more than 680,000 pounds of beef, 400,000 pounds of chicken products, 450,000 gallons of milk, 280,000 loaves of bread, and 2.9 million eggs (from 160,000 inmate-raised hens).Starbucks subcontractor Signature Packaging Solutions has hired Washington prisoners to package holiday coffees (as well as Nintendo Game Boys). Confronted by a reporter in 2001, a Starbucks rep called the setup “entirely consistent with our mission statement.”
Texas inmates produce brooms and brushes, bedding and mattresses, toilets, sinks, showers, and bullwhips.
In Texas, prisoners make officers’ duty belts, handcuff cases, and prison-cell accessories. California convicts make gun containers, creepers (to peek under vehicles), and human-silhouette targets.
A stitch in time: California inmates sew their own garb. In the 1990s, subcontractor Third Generation hired 35 female South Carolina inmates to sew lingerie and leisure wear for Victoria’s Secret and JCPenney. In 1997, a California prison put two men in solitary for telling journalists they were ordered to replace “Made in Honduras” labels on garments with “Made in the usa.”
Open wide: At California’s prison dental laboratory, inmates produce a complete prosthesis selection, including custom trays, try-ins, bite blocks, and dentures.
Constructive criticism: Prisoners in for burglary, battery, drug and gun charges, and escape helped build a Wal-Mart distribution center in Wisconsin in 2005, until community uproar halted the program. (Company policy says, “Forced or prison labor will not be tolerated by Wal-Mart.”)
On call: Its inmate call centers are the “best kept secret in outsourcing,” Unicor boasts. In 1994, a contractor for gop congressional hopeful Jack Metcalf hired Washington state prisoners to call and remind voters he was pro-death penalty. Metcalf, who prevailed, said he never knew.
Federal Prison Industries, a.k.a. Unicor, says that in addition to soldiers’ uniforms, bedding, shoes, helmets, and flak vests, inmates have “produced missile cables (including those used on the Patriot missiles during the Gulf War)” and “wiring harnesses for jets and tanks.” In 1997, according to Prison Legal News, Boeing subcontractor MicroJet had prisoners cutting airplane components, paying $7 an hour for work that paid union wages of $30 on the outside.
U.S. seeks inspiration in Basque cooperative model Mondragón. An article in Time magazine praises the economic model of the industrial group MCC, which has become a benchmark in several US declined areas.
May 20, 2013
When companies all over the world are struggling to fight crisis, and while every country has an eye on the United States to find out when the depression will end, it follows that outstanding North American businessmen are seeing the light through the Arrasate-Mondragón cooperatives.
According to an article appeared in the latest issue of Time magazine, executives in charge of enterprise planning and union leaders of the previously buoyant and today depressed industrial belt of Cleveland, Ohio, are seeking inspiration in the economic, industrial and social model of the Arrasate-Mondragón area.
The magazine included a report which analyzed the origins of the current corporation founded by the Arizmendiarreta priest, whose success is supported, according to the publication, by the fact that nowadays, MCC is the seventh state’s industrial group and one of the most profitable.
According to figures provided by the writer, MCC is a multidisciplinary group that brings together 256 companies and employs more 100,000 people. Anyway, the interest is focused on the original basis of making the employees members of the enterprise. Those members often have a close association with the company as producers or consumers of its products or services, or as its employees.
Therefore, Time stresses that MCC holds its commitment “to one-worker, one-vote democratic governance through a complex, carefully honed organizational structure in which the corporation serves as a kind of meta-cooperative for the individual companies.”
The article presents the broad spectrum of companies of the Basque group, which ranges from manufacturing equipment, bicycles, and electronics, to an university and its own savings bank, Caja Laboral. Time says that, while many people look to cooperatives as activities at a “hippie small scale,” Mondragón is a consolidated and successful business whose revenue, in spite of the full depression of the Spanish economy, grew by 6 % last year.
According to the magazine, some companies in the Ohio state want the workers to get involved in the capital and the management of the company, and seek more balanced development patterns with a philosophy of reinvesting profits. This would be one of the hallmarks of MCC: instead of “flowing into the pockets of executives and outside investors, a company’s profits are distributed in a precise, democratic way; set aside as seed money for new cooperatives; distributed to regional nonprofits; or pooled into shared institutions like the university and research center.”
But the Mondragón template goes further and Time quotes a bakery cooperative in the Bay Area of San Francisco, California. Its four partners -soon to be six-, have chosen a particular name for their brand: Arizmendi Association of Cooperatives.
How the US turned three pacifists into ‘multiple felony saboteurs’
May 20, 2013
In just ten months, the United States managed to transform an 82 year-old Catholic nun and two pacifists from non-violent anti-nuclear peace protesters accused of misdemeanor trespassing into federal felons convicted of violent crimes of terrorism. Now in jail awaiting sentencing for their acts at an Oak Ridge, TN nuclear weapons production facility, their story should chill every person concerned about dissent in the US.
Here is how it happened.
In the early morning hours of Saturday June 28, 2012, long-time peace activists Sr. Megan Rice, 82, Greg Boertje-Obed, 57, and Michael Walli, 63, cut through the chain link fence surrounding the Oak Ridge Y-12 nuclear weapons production facility and trespassed onto the property. Y-12, called the Fort Knox of the nuclear weapons industry, stores hundreds of metric tons of highly enriched uranium and works on every single one of the thousands of nuclear weapons maintained by the U.S.
Describing themselves as the Transform Now Plowshares, the three came as non-violent protestors to symbolically disarm the weapons. They carried bibles, written statements, peace banners, spray paint, flower, candles, small baby bottles of blood, bread, hammers with biblical verses on them and wire cutters. Their intent was to follow the words of Isaiah 2:4: “They shall beat their swords into plowshares and their spears into pruning hooks; nation shall not lift up sword against nation, neither shall they learn war any more.”
Sr. Megan Rice has been a Catholic sister of the Society of the Holy Child Jesus for over sixty years. Greg Boertje-Obed, a married carpenter who has a college age daughter, is an Army veteran and lives at a Catholic Worker house in Duluth Minnesota. Michael Walli, a two-term Vietnam veteran turned peacemaker, lives at the Dorothy Day Catholic Worker house in Washington DC.
In the dark, the three activists cut through a boundary fence which had signs stating “No Trespassing.” The signs indicate that unauthorized entry, a misdemeanor, is punishable by up to 1 year in prison and a $100,000 fine.
No security arrived to confront them.
So the three climbed up a hill through heavy brush, crossed a road, and kept going until they saw the Highly Enriched Uranium Materials Facility (HEUMF) surrounded by three fences, lit up by blazing lights.
Still no security.
So they cut through the three fences, hung up their peace banners, and spray-painted peace slogans on the HEUMF. Still no security arrived. They began praying and sang songs like “Down by the Riverside” and “Peace is Flowing Like a River.”
When security finally arrived at about 4:30 am, the three surrendered peacefully, were arrested, and jailed.
The next Monday July 30, Rice, Boertje-Obed, and Walli were arraigned and charged with federal trespassing, a misdemeanor charge which carries a penalty of up to one year in jail. Frank Munger, an award-winning journalist with the Knoxville News Sentinel, was the first to publicly wonder, “If unarmed protesters dressed in dark clothing could reach the plant’s core during the cover of dark, it raised questions about the plant’s security against more menacing intruders.”
On Wednesday August 1, all nuclear operations at Y-12 were ordered to be put on hold in order for the plant to focus on security. The “security stand-down” was ordered by security contractor in charge of Y-12, B&W Y-12 (a joint venture of the Babcock and Wilcox Company and Bechtel National Inc.) and supported by the National Nuclear Security Administration.
On Thursday August 2, Rice, Boertje-Obed, and Walli appeared in court for a pretrial bail hearing. The government asked that all three be detained. One prosecutor called them a potential “danger to the community” and asked that all three be kept in jail until their trial. The US Magistrate allowed them to be released.
Sr. Megan Rice walked out of the jail and promptly admitted to gathered media that the three had indeed gone onto the property and taken action in protest of nuclear weapons. “But we had to — we were doing it because we had to reveal the truth of the criminality which is there, that’s our obligation,” Rice said. She also challenged the entire nuclear weapons industry: “We have the power, and the love, and the strength and the courage to end it and transform the whole project, for which has been expended more than 7.2 trillion dollars,” she said “The truth will heal us and heal our planet, heal our diseases, which result from the disharmony of our planet caused by the worst weapons in the history of mankind, which should not exist. For this we give our lives — for the truth about the terrible existence of these weapons.”
“You don’t stick a knife in a man’s back nine inches and then pull it out six inches and say you’re making progress … No matter how much respect, no matter how much recognition, whites show towards me, as far as I am concerned, as long as it is not shown to everyone of our people in this country, it doesn’t exist for me.” - Malcolm X (May 19, 1925 - February 21, 1965)
‘Global Capitalism: A Monthly Update’ published on May 15, 2013
Economics Professor Richard Wolff publishes these monthly updates on developments relevant to capitalism around the world. His analysis is really on point. It’s long but it’s worth watching, listening to & learning from.
- Professor Wolff’s website
- Professor Wolff’s podcast
- Democracy at Work (an organization co-founded by Richard Wolff)
If politics be the language of hate…the age of the petition
Submission (by Evelyn Roberts)
May 17, 2013
Is activism the language of love? Do individuals standing up & making their voice heard, expressing an opinion, sharing thoughts & images on social media, signing petitions from the comfort of their computer chair, etc. make a difference to the world? Does caring enough do enough, or should we be out there “strutting our stuff” as well?
Of course there is nothing like plagiarism and if you are going to plagiarize, you may as well start off with a classic quote and completely dismantle it until there is but a hint of the original flavor…apologies to Will Shakespeare if he is reading this from the astral plane, but he has triggered a train of thought that needed following.
The dichotomy of today’s world
We seem to live in a world fueled by hate; but from where many of us stand, this destructive rhetoric seems to emanate almost entirely from governments around the globe, with a good seasoning of extremist groups to complement the basic recipe. This is one side of a yawning chasm, while on the other are the millions of human beings who, as individuals and groups, have managed to outgrow the confines of regarding life in terms of geographical and political boundaries, social, religious and cultural differences; and have taken the time and effort to educate themselves in a language spoken by a common humanity. The world is in schism between these two forces and you could be forgiven for wondering whether activism has any chance of overcoming the corruption and self-interest of politics and big business.
In a global society where individuals are waking up to the illusion and are choosing to open their minds, explore, learn and then take action based on their new understanding, the ‘Age of the Petition’ has arrived big time. It isn’t so very long since people who either could not or would not step outside their front door to support the cause for positive change were somewhat derisively referred to as “armchair activists”; their contribution to any meaningful outcome overlooked. Education has changed enormously over the last few decades and we are no longer the parochial society that we were. With so much information at our fingertips, the explorer’s playground of the internet at our disposal, where we can see in intricate detail locations we have never visited, walk down streets we will never see, learning has become an expanding universe.
Activism is no big deal
As a more enlightened fraternity in today’s world, we recognize that all action, no matter how small, makes a difference. The evidence is all around us – not in mainstream media, which for the most part attempts (or is directed) to ignore the voice of the people – but in the vast hinterland of dialogue taking place on the internet. It could be perceived that activism 30 years ago was limited to what were then considered rather eccentric minority groups of people, who chained themselves to trees or camped outside military bases in protest. Today, we all have a responsibility to do our part in raising the profile of issues which affect the planet, the global community and ultimately ourselves, as individuals. Online petitions are an enormously important step into activism for many people and make a real difference. Because the threshold of engagement is easy to achieve, it encourages the individual to cross it. We might be tempted to consider that petition activism has no measurable effect, but even in those instances where petitions do not have a major impact, they can promote awareness of issues, act to alert mainstream media to stories they should be leading on (or at least giving space to) or catalyze fundraising efforts to address crises and injustice happening anywhere around the world. Raising the profile of any issue, whether it be human or animal rights or environmental, undoubtedly has a positive impact.
Every signature on every petition is another voice joining the throng to make our views known to those elected representatives, who are supposedly administering on our behalves, but seem more commonly to be following their own agenda. Not only are petitions a gentle invitation into an arena of action to change our environment and society for the better, but independent research has shown that individuals who sign a petition linked to a non-profit were 7 times more likely to donate to that organization. In addition, this simple first step to becoming responsible world citizens invariably leads to taking other action as we become more aware and motivated to participate further. Sign on you crazy cubic zirconia!
Outraged against austerity, students & teachers in Philadelphia resist the machine of capitalism
May 17, 2013
Dozens to hundreds of Philadelphia students, teachers and school staff protested outside one of the city’s premiere high schools in an effort to fight proposed budget cuts to the district.
Wearing signs and handing out pamphlets to drivers, members of the Philadelphia Federation of Teachers lined the sidewalk outside the Philadelphia High School for the Creative and Performing Arts along South Broad Street Friday morning. The teachers are fighting a series of severe budget cuts proposed by the district to close a more than $300 million funding gap. The proposed cuts include ending arts and music programs, sports and cutting auxiliary staff like secretaries, librarians and counselors.
“With the austere budgets schools have received, schools will not be able to provide a high-quality education for Philadelphia’s children,” said Jerry Jordan, president of the Philadelphia Federation of Teachers. Jordan says the teacher’s union has been discussing labor concessions with the district. However, he says a concession that results teachers taking a pay cut is a non-starter.
“The school district is asking for salary cuts for all PFT members of anywhere between 5, 10 and 13-percent,” he said. “I don’t think that you’ll find employee in the school district and the PFT…who are going to tell you that they can afford to take that kind of pay cut.”
The teacher protest is just the first of many demonstrations planned Friday over the funding flap.
Students from Philadelphia public schools around the city have also walked out of class and are marching on the School District of Philadelphia and Philadelphia City Hall. Similar walkouts were organized last week by students, who also marched on the same spots.
District spokesman Fernando Gallard says staff will not stop students from walking out, but says officials have asked principals remind students that leaving early will results in being marked as cutting. “Schools will follow the district’s attendance policy and will take the appropriate action which triggers at least a phone call to parents to notify them of the student’s absence, a request for a parent conference at the school, or after school detention,” he said.
Students are using Twitter to organize and document their protests. The group Philly Student Union is promoting the hashtag #walkout215 as a digital rally point during the event.
Farmers protest against corporate power plant & corrupt government partnership hits 1000th day
May 17, 2013
“Lathi maar maar ke utha lehale anshan wahe/ daktar sahib soochna pahuchain naye mukhyamantri se bataiye da/ hum aapan zamin na dewai/ hame na chahi kuch tumhara.” (Translated: Police beat protesting farmers and remanded them/ We heard a new CM is coming to hear us/ Tell him we won’t give up our land/ We want nothing from you.)
These defiant lines in a created mix of Bhojpuri and Hindi are few of the many composed and sung by Anarkali (52), over the last three years. Her songs are meant to inspire a few hundred fellow farmers, who sit attentively with their farming tools each day, listening to her after the day’s work. On Friday, they assembled at Kachari village in the Trans-Yamuna region of this district, for the 1000th consecutive day. A maha-panchayat of villages was held to mark the occasion.
Under the Purnvas Kisan Kalyan Sahayta Samiti (PKKSS), these farmers have been protesting the proposed 1980 MW Karchhana power plant. Through songs, slogans and speeches about government corruption & corporate land development, the farmers wish to keep up the momentum for their daily assemblage. “We apprise them of their rights, how the government cheated us. They are encouraged not to fall for bribes or be intimidated by threats. This is not compulsory yet the farmers come daily,” said Raj Bahaur Patel, president, PKKSS.
The project was conceived in 2007 under the Bahujan Samaj Party government and about 2,500 bighas of land was acquired from 2,286 farmers in eight villages — Devari, Kachari, Katka-Medhra, Dehli, Dohlipur, Bagesar, Kachara and Bhitar. However, the project, handed over to an undertaking of Jaypee Group in 2009, could never take off due to consistent protests by farmers over compensation, leaving one farmer murdered by police repression.
Last April, the Allahabad High Court allowed the farmers’ writ petitions and stalled the project. The Court stipulated that farmers who had received compensation for their land should either return the money and take back the land or willingly hand over the land for the project. Around 140 farmers did not accept compensation. Those who did are in no condition to repay the amount, causing an impasse which the administration is struggling to break through. Ever since the initial violence gripped the area, the protests have been peaceful, but the farmers complain they are being intimidated by local goons and officials to give up their land and discontinue the protests.
“We will shoot you and your family. Just let the power plant come up you will be taught a lesson, they tell us,” says Sukhdevi, 65, one of the many protesters.
Many of these threats also come from petty politicians, says Mr. Patel. “They approached us for a compromise, first with bribes. When we declined, they have resorted to fear tactics.” Consequently, the farmers have written to the Prime Minister’s Office and the Chief Minister’s Office, listing their apprehensions and demands. Also, in two letters dated August 8, 2012 and October 10, 2012, the farmers mentioned the threats to their lives, while also promising that they were ready to return the compensation but in installments and on their terms.
When Mr. Patel was called in to receive the response on April 15, the special land acquisition officer O.P Singh only inquired about the land possession of each farmer, completely ignoring the threats to the farmers’ lives. The Hindu has a copy of the document.
The farmers have been demanding: restoration of the fertility of their lands, compensation for the loss of farming over the last five years and losses suffered at the hands of police action during protests, an official inquiry into the violence & threats made against them.
Despite Chief Minister Akhilesh Yadav announcing that the government would quash all FIRs filed against protesting farmers, eight criminal cases registered against farmers in Karchhana still stand. The farmers, who also reported that their land was wrongfully claimed to be barren, have filed an RTI into it. However, they have received no response yet.
Unlike previous years, when the farmers abandoned farming on the proposed site, they have engaged in some cultivation this season. Yet they remain fearful of violent retribution by goons and intermediaries. “We live in uncertainty. What if they destroy our crops and start the plant? We cannot afford further losses,” says a farmer.
The proposed land includes a large portion of the common property resources in the villages, like the ponds, rearing grounds, connecting paths and grain storage houses.
Notably, the region is turning into a hot-bed for famers’ protests against power plants. In Bara, while farmers have given up on their demands for higher compensation, they are on the verge of launching a movement against the excess extraction of water from the Yamuna.
The farmers have also demonstrated that “men of authority” are trying to create a rift among them to break down their movement. “They are creating false news that there is in-fighting among the farmers,” says Mr. Patel, citing a news report in a highly circulated Hindi daily.
A new “Buycott” application allows consumers to boycott all products tied—even indirectly—to companies like Monsanto or the Koch Brothers
May 17, 2013
According to Forbes, Ivan Pardo, a 26-year-old based in Los Angeles, is the main person behind the app, which can be downloaded on the iPhone or Android.
Consumers can “scan the barcode on any product and the free app will trace its ownership all the way to its top corporate parent company, including conglomerates like Koch Industries.” The app also allows users to “join user-created campaigns to boycott business practices that violate your principles rather than single companies.”
A keynote speaker at last year’s Netroots Nation gathering pitched a similar app. According to Forbes, Darcy Burner “figured the average supermarket shopper had no idea that buying Brawny paper towels, Angel Soft toilet paper or Dixie cups meant contributing cash to Koch Industries through its subsidiary Georgia-Pacific” or “purchasing a pair of yoga pants containing Lycra or a Stainmaster carpet meant indirectly handing the Kochs your money.”
California Domestic Workers Demand Bill of Rights
An Indonesian court has ruled indigenous people have the right to manage forests where they live, a move which supporters said prevents the government from handing over community-run land to businesses.
May 17, 2013
Disputes between indigenous groups and companies have become increasingly tense in recent years, as soaring global demand for commodities like palm oil has seen plantations encroach on forests. In Thursday’s ruling, Constitutional Court judges said that a 1999 law should be changed so it no longer defines forest that has been inhabited by indigenous groups for generations as “state forest”, according to court documents.
“Indigenous Indonesians have the right to log their forests and cultivate the land for their personal needs, and the needs of their families,” judge Muhammad Alim said as he handed down the ruling, state news agency Antara reported.
While environmentalists welcomed the ruling, they warned it could unintentionally lead to an upsurge in disputes between authorities and communities over the classification of indigenous land. In March, seven villagers were shot in northern Sumatra, where a dispute over a forest claimed by both the community and government has been simmering since 1998.
The National People’s Indigenous Organisation filed the challenge to the 1999 law, which has let officials sell permits allowing palm oil, paper, mining and timber companies to exploit their land. The group said Friday’s ruling affected 40 million hectares (98 million acres) of forest - slightly larger than Japan, and 30 per cent of Indonesia’s forest coverage. Despite their living there, the area was legally classified as “customary forest”, a term that describes forests that have been inhabited by indigenous people for a long time.
“About 40 million indigenous people are now the rightful owners of our customary forests,” said the group’s chief Abdon Nababan.
Stepi Hakim, Indonesia director of the Clinton Climate Initiative, said the ruling would give legal grounds for indigenous communities to challenge businesses operating in their forests, but this could lead to a string of new disputes. “As soon as this policy is delivered, local governments have to be ready to mitigate conflicts,” he said.
Anti-capitalist protesters are taking inspiration from Mexican revolutionaries ahead of the G8 summit
May 17, 2013
No one can accuse the anti-capitalist protesters planning to disrupt the runup to next month’s G8 meeting in Northern Ireland of not being thoroughly up to date. The online call has gone out for a carnival against capitalism – curiously illustrated by a century-old photo of Mexican revolutionaries in sombreros, sitting on horseback – in London on 11 June. It’s some way away from Fermanagh where the world leaders will actually be gathering, but that isn’t going to stop them: a map pointing out “the dens of the rich” in central London has helpfully been published to assist the anti-capitalist activists in finding their way around the capital. It includes Buckingham Palace, Fortnum & Mason, “supermarket of the ruling class”, Mahiki, “cocktail bar of the feral rich” and the headquarters of Vogue magazine on the map for telling women how to look and act.
Chinese artist Ai Weiwei has unveiled his latest work, a map of China made from baby formula tins, in response to fears surrounding milk safety in China
May 17, 2013
Weiwei, whose 81 days of detention in 2011 sparked international outcry, has regularly criticized the government for ignoring the rule of law and the rights of Chinese citizens.
In his latest work, the dissident artist has arranged more than 1,800 large tins of milk powder from seven popular brands in the shape of a huge map of China.
Fears about milk safety were reignited in 2008 when at least six children died and 300,000 fell ill after drinking milk formula laced with industrial melamine.
Since the scandal many Chinese parents have taken to importing milk powder from foreign countries.
Weiwei said: “A country like this can put a satellite into space but it can’t put a safe bottle teat into a child’s mouth. I think it’s extremely absurd. This is a most fundamental assurance of food, but people actually have to go to another region to obtain this kind of thing. I think it’s a totally absurd phenomenon.”
The “milk map” has gone on display in Hong Kong, which had to restrict the amount of milk powder brought back to mainland China after parents flocked to the former British colony to stock up.
More than 30 million mainland Chinese visited Hong Kong last year, almost four times the city’s population, causing concern about the ability of the city’s infrastructure to cope. Complaints of milk powder shortages and rocketing prices were also reported.
Speaking in response to the Chinese “run” on Hong Kong’s milk supply, Weiwei said: “I have heard of drug trafficking before, but when a country has milk powder smuggling instead of drug smuggling, I think this is a devastating sign.”
The Chinese government has tried to reassure people that milk powder and dairy products in China are now safe and rigorously tested, but lax regulatory enforcement remains a problem.
In 2004, at least 13 babies in the central Anhui province died after drinking fake milk powder that had no nutritional value. A government health probe in 2008 showed 20 per cent of dairy companies had produced batches of milk containing melamine, an industrial chemical added to milk to seem like it has a higher protein content. In 2011, three children died and 35 people became ill after drinking nitrite-tainted milk in China’s northwestern Gansu province.
Obama student loan policy reaping… wait for it… $51 billion profit
May 14, 2013
The Obama administration is forecast to turn a record $51 billion profit this year from student loan borrowers, a sum greater than the earnings of the nation’s most profitable companies and roughly equal to the combined net income of the four largest U.S. banks by assets.
Figures made public Tuesday by the Congressional Budget Office show that the nonpartisan agency increased its 2013 fiscal year profit forecast for the Department of Education by 43 percent to $50.6 billion from its February estimate of $35.5 billion.
Exxon Mobil Corp., the nation’s most profitable company, reported $44.9 billion in net income last year. Apple Inc. recorded a $41.7 billion profit in its 2012 fiscal year, which ended in September, while Chevron Corp. reported $26.2 billion in earnings last year. JPMorgan Chase, Bank of America, Citigroup and Wells Fargo reported a combined $51.9 billion in profit last year.
The estimated increase in the Education Department’s earnings from student borrowers and their families may cause a political firestorm in Washington, where members of Congress and Obama administration officials thus far have appeared content to allow students to line government coffers.
The Education Department has generated nearly $120 billion in profit off student borrowers over the last five fiscal years, budget documents show, thanks to record relative interest rates on loans as well as the agency’s aggressive efforts to collect defaulted debt. A spokesman from the Education Department did not respond to a request for comment. A Congressional Budget Office spokesman could not be reached for comment after normal business hours.
The new profit prediction comes as Washington policymakers increasingly focus on soaring student debt levels and the record relative interest rates that borrowers pay as a potential impediment to economic growth. Regulators and officials at agencies that include the Federal Reserve, Treasury Department, Consumer Financial Protection Bureau and Federal Reserve Bank of New York have all warned that student borrowing may dampen consumption, depress the economy, limit credit creation or pose a threat to financial stability.
At $1.1 trillion, student debt eclipses all other forms of household debt, except for home mortgages. It’s also the only kind of consumer debt that has increased since the onset of the financial crisis, according to the New York Fed. Officials in Washington are worried that overly indebted student borrowers are unable to save enough to purchase a home, take out loans for new cars, start a business or save enough for their retirement.
Policymakers also are worried about the effect that high interest rates on outstanding student debt may have on the broader economy. Congress sets interest rates on federal student loans, with rates fixed on the majority of loans at 6.8 and 7.9 percent.
But as the Federal Reserve attempts to lower borrowing costs for everyone from households and small businesses to large corporations and Wall Street banks, student borrowers have not been able to benefit.
Compared to a benchmark interest rate — what the U.S. government pays to borrow for 10 years — student borrowers have never paid more, increasing the burden of their student debt as wage increases and yields on investments and bank accounts fail to keep up with the relative increase in student loan interest payments.
President Barack Obama recently asked Congress to tie federal student loan interest rates to the U.S. government’s borrowing costs. In a possible sign of congressional intent, leading Democratic senators on Tuesday proposed legislation that would keep existing interest rates on some student loans for the neediest households fixed at 3.4 percent, rather than allowing them to revert back to their original 6.8 percent rate.
The legislation, dubbed the “Student Loan Affordability Act” and proposed by Senate Majority Leader Harry Reid (D-Nev.), Sen. Patty Murray (D-Wash.), Sen. Jack Reed (D-R.I.), and Sen. Tom Harkin (D-Iowa), aims to help a small subset of future student borrowers who take out loans over the next two years. The bill does nothing for existing student debtors.
“Today’s figures from the CBO underscore the urgent need for Congress to prevent the July 1 interest rate hike and address the crushing debt placed on students,” said Tiffany Edwards, spokeswoman for Democrats on the House Education and Workforce Committee.
Rohit Chopra, the Consumer Financial Protection Bureau official overseeing the regulator’s student debt efforts, has warned policymakers to not focus solely on future borrowers.
“The whole student loan problem is a problem that should be of deep concern to this body,” said Richard Cordray, CFPB director, during testimony last month before the Senate Banking Committee. “These are young people that we should care a great deal about.”
“They’re the ones with the ambition, aspirations and dreams, and they’re getting saddled with debt that they don’t understand,” Cordray said of student borrowers. “It’s holding them back and it’s making them unable to rise and succeed and become leaders in our society.”
He added: “It’s a significant problem and we’re going to be doing everything that we can to address it at the bureau.”
The CFPB has been focusing on helping existing borrowers refinance high-rate debt or modify the terms of their loans. In a report earlier this month, the CFPB lamented that borrowers are unable to refinance their obligations after they have graduated from college and secured well-paying jobs.
“Corporate entities, homeowners, and many others have been able to refinance debt at quite low rates, and student loan borrowers are wondering why they can’t do the same,” Chopra said.
The CFPB suggests that increased concentration in the student loan market may inhibit refinancings and debt workouts. Lenders and the Education Department profit when borrowers pay higher rates than they otherwise would in a normally-functioning market.
Unlike traditional lenders, though, the Education Department’s profits are barely dented by loan defaults. For loans made in 2013 that eventually default, the department estimates it will recover between 76 cents and 82 cents on the dollar. Bankruptcy rarely discharges student debt.
The Education Department’s collection efforts are aided by loan default specialists, including NCO Group Inc., a company owned by JPMorgan.
Walmart opts out of Bangladesh safety agreement
May 15, 2013
Walmart has confirmed it will not sign up to a legally binding agreement on worker safety and building regulations in Bangladesh supported by retailers including H&M, Zara, Primark, Tesco, Sainsbury’s, Marks and Spencer, Next, C&A and several others.
However, the US retail giant has created its own agreement, which it claims goes beyond the current accord that was drafted by labour groups and campaigners.
The company, which also owns the UK’s third biggest supermarket, Asda, said the deal signed by its rivals was “unnecessary to achieve fire and safety goals” and questioned the “governance and dispute-resolution mechanisms”.
Instead, Walmart has agreed its own deal to inspect all 279 factories it uses in Bangladesh within six months, and has promised to publish the findings immediately.
Bosses claim this goes beyond the UNI Global Union and IndustriALL deal, pointing out the agreement requires 65% of inspections instead of 100% inspections taking place and argue its own deal means results are published straight away rather than within 45 days.
However, the Walmart deal is not legally binding, does not require the company to offer financial support for fire and safety regulations and blacklist factories unwilling to comply.
The agreement has been criticised by campaigners as a “business as usual” approach, which fails to address the core problems that led to the Rana Plaza factory collapse.
Sam Maher from Labour Behind the Label, said: “Walmart’s so-called new programme is simply more of the same ineffective auditing that failed to prevent the Rana Plaza disaster, or the deaths of 112 workers at Tazreen, who were producing Walmart goods.
“The changes demanded by the IndustriALL accord, include ensuring that factories are provided with the incentives and investment needed to actually make factories safe and are essential for any real change to occur. What Walmart are demanding is business as usual: a business that has cost lives of over 1,300 workers in the last six months alone.”
Walmart has also refused to clarify whether it sourced clothes from the Rana Plaza building, saying only that it had no “authorised” production at the site.
A statement from Walmart said: “The company, like a number of other retailers, is not in a position to sign the IndustriALL accord at this time.
“While we agree with much of the proposal, the IndustriALL plan also introduces requirements, including governance and dispute resolution mechanisms, on supply chain matters that are appropriately left to retailers, suppliers and government, and are unnecessary to achieve fire and safety goals.”
Several major UK retailers have declined to sign the agreement, including Arcadia group, the company behind brands including Topshop, Bhs and Dorothy Perkins; Debenhams; River Island; Matalan and Peacocks.
However, late on Tuesday night Next, the UK’s second biggest clothing retailer, did agree to sign.
Walmart’s decision leaves George at Asda, the supermarket’s clothing brand, at odds with its own position as a founding member of the Ethical Trading Initiative.
The ETI, the UK’s biggest alliance of businesses, trade unions and voluntary organisations, has recommended its members sign up to the accord.
Once more: “What Walmart are demanding is business as usual: a business that has cost lives of over 1,300 workers in the last six months alone.”
